Wrap Text
Summarised consolidated financial results for the six months ended 31 March 2019
Nampak Limited
(Registration number 1968/008070/06)
(Incorporated in the Republic of South Africa)
Share code: NPK
ISIN: ZAE 000071676
(Nampak or the Group)
Summarised consolidated financial results
for the six months ended 31 March 2019
Salient features - continuing operations
Revenue of R8.5bn down by 4%
Trading profit R1.0bn down by 18%
Earnings per share 127.1c reduced by 2%
HEPS 119.7c down by 9%
Cash transferred R1.8bn improved by 44%
BEE rating improvement from Level 6 to Level 4 - further
improvements expected
Loan covenants met, financial position remains strong
The first half of 2019 has been tough for a number of key businesses at
Nampak. Significant currency volatility and concomitant adverse macro-
economic conditions particularly in Angola have significantly held back
performance. Pedestrian growth in other African countries, most notably
South Africa, has depressed consumer demand and volume growth. The
significant exception to this trend is Nigeria, where beverage can
volumes have grown significantly, continuing a trend that has prevailed
after the floating of the Nigerian naira.
In South Africa, Bevcan has successfully navigated the growing beverage can
market amid increased competition by delivering on increased line speeds,
greater efficiencies and good overhead cost control. The Paper business
continues to grow across Africa driven by revitalised demand as a result of
active marketing campaigns. The turnaround in the SA Plastics business has
picked up pace and the business has successfully defended market share in
a very competitive environment.
Nampak CEO, Andre de Ruyter
Commentary
Overview
Nampak continues to navigate various macro-economic pressures and increased
competition in South Africa to maintain and where possible grow its base
business. The Metals business, being the key contributor, has strong market
positions in South Africa, Angola and Nigeria. South African beverage can
market volumes continued to grow at higher than the GDP growth-rate and
Bevcan SA has cemented its place as a reliable supplier to customers with
its technical competence and support. A number of innovations are being
pursued to grow beverage can pack share by introducing the can as a
substitute pack format for beverages packed in other substrates. The
high recycle rates achieved by Bevcan SA afford a unique opportunity to
grow the addressable market by positioning beverage cans against plastic,
particularly for water. Pleasingly, beverage can volumes in Nigeria are at
a record high, demonstrating this business's resilience. In Angola, however,
volumes were negatively impacted due to the impact of the local currency
devaluation on local consumption, which reduced profits from this country.
This is being mitigated by swift cost containment measures, including a
20% reduction in headcount. Demand in Angola should recover over the next
12 to 18 months once wage inflation has an effect. This is in line with
previous trends experienced in the Nigerian market post the significant
devaluation of the Naira. Volumes in Zimbabwe have continued to grow, and
these operations are self-sustaining across the various substrates, with
no new facilities being made available from outside Zimbabwe to fund
operations.
Nampak has continued to optimise its portfolio in Nigeria. Nigeria
Cartons' major customer had communicated its intention of rationalising
its global supplier base and with the potential threat of its existing
contract not being renewed at the end of its remaining two-year term,
a decision was made to dispose of the business. Considering these risks,
the disposal of 100% of the business for an enterprise value of
EUR26 million protected shareholder value and was considered a pleasing
outcome. The proceeds will be used to reduce US dollar denominated debt.
Negotiations on the disposal of the Glass division are ongoing and
all parties remain fully committed to the conclusion of this
transaction. The bidder, a South African majority black owned business,
has secured funding for 100% of the anticipated divestiture value.
The process has, however, taken longer than anticipated due to the
complexities of a transaction of this nature. The transaction if
concluded, will be subject to competition authorities' approval.
Broad-based black economic empowerment is fundamental to ensuring
that Nampak is a responsible corporate citizen and is strategically
positioned in its South African market to deal with increased
competition. This has been a development area for Nampak for some
time and pleasingly, a recently completed group initiative has
resulted in the Group B-BBEE rating improving from Level 6 to Level
4, with a firm plan to deliver a Level 2 rating in the short term
without the requirement for a further equity transaction.
Group performance for continuing operations
R million H1 2019 H1 2018 % change
Revenue 8 454 8 845 (4)
Trading profit 959 1 164 (18)
Net abnormal losses (57) (121) 53
Operating profit 902 1 043 (14)
Profit before tax 749 957 (22)
Profit for the period 795 871 (9)
Earnings per share (cents) 127.1 129.4 (2)
Headline earnings per share (cents) 119.7 132.0 (9)
Revenue
Revenue was 4% lower largely due to a decline in volumes in Angola
from softer demand as the Kwanza devalued by 49% since 31 March 2018
and to a lesser extent the entry of two competitors in this country
for Bevcan SA. This was mitigated by a strong double digit growth
in volumes by both Bevcan Nigeria and the general metals packaging
business, 3% revenue growth by DivFood, robust volume growth by the
Paper and Plastics operations in Zimbabwe and high single-digit
growth in the Paper business in Nigeria.
Trading profit
Trading profit was negatively impacted by lower volumes in Angola,
cost and other pressures at DivFood and the Plastics businesses in
both SA and the UK, partially offset by improved trading profit in
Zimbabwe. Overall trading margin reduced to 11.3% for continuing
operations from 13.2% in the prior period primarily as a consequence
of the decline in the Metals division's margins to 13.1% from 15.8%,
partially offset by an improvement in the Paper division's margin
to 15.3% from 12.9%. The overall Plastics margins remained in line
with the prior period.
Abnormal items
Net abnormal losses reduced by 53% to R57 million attributable to
significantly higher capital profits from the sale of assets. The
81% reduction of net impairment losses on plant and equipment to
R5 million also compared favourably to R27 million in the prior
period. Net devaluation losses were similar to the prior period
and related primarily to Zimbabwe in the current period, with
losses in the prior period due to Angola and Nigeria.
Profit before tax
Net finance costs increased to R151 million from R89 million
primarily due to the inclusion of IAC Angola tax of R70 million
on the capital profits on the US dollar-linked Kwanza bonds that
is required to be classified as a finance cost with no such cost
in the comparative period. Excluding this tax, net interest paid
has decreased by 8% to R82 million due to lower interest costs
attributable to debt repayments. Finance income also fell 31% to
R66 million as interest costs hedging and associated with cash
transfers from Angola and the new requirement to cash fund all
letters of credit for imported goods in a cativo account on which
no interest was paid by the Government for the period 1 October
2018 to 28 February 2019, after which a floating interest rate
averaging 5% for the period was earned compared to interest of
7% previously earned on US dollar-linked Kwanza bonds.
The resulting profit before tax was lower by 22% due to lower
operating profit and the inclusion of the Angola investment
income tax in net finance costs.
Profit for the period
Profit for the period has decreased by 9% partly assisted by
an income tax credit in the period compared to an expense in
the prior period. The taxation credit primarily results from
the recognition of the future tax deductibility of the
unrealised foreign exchange losses in Angola. In addition, the
tax rate was also positively impacted by the foreign tax rate
differential on the rates that apply to different countries. The
tax rate reduction was partially offset by the loss after interest
in Angola not providing a tax shield post the tax holiday which
ended on 30 April 2019, due to the losses that arose from the
additional interest charge not being carried forward for tax
purposes. The increase in withholding and other foreign taxes
paid is mainly due to the withholding tax on the additional
interest levied on Angola. This was partially offset by the
loss after interest in Angola not providing a tax shield post
the tax holiday which ended on 30 April 2019. Certain foreign
exchange translation losses in Zimbabwe do not provide a tax
shield and accordingly increased the effective tax rate.
Earnings
Basic earnings of R820 million and basic earnings per share
of 127.1c both declined by 2%. Headline earnings per share
of 119.7c, was down 9% due to net gains versus net losses in
the prior period primarily caused by a significantly higher
net profit on the disposal of assets.
Financial position
The Group's covenants were well managed and were within the
covenant limits with net debt: EBITDA of 2.7 times, below the
3 times threshold and the interest cover of 7.0 times providing
significant headroom above the 4 times requirement. It should be
noted that all cash balances held in Zimbabwe and 50% of the US
dollar-linked Kwanza bonds held in Angola are excluded from cash
balances, but 45 days working capital in Angola is included for
the purposes of the covenants. Accordingly, policy developments
announced in February 2019 in Zimbabwe do not impact debt
covenants but did impact the Group's gearing.
Nampak's historic maturing debt profile was refinanced in
September 2018 through the securing of a R12.5 billion long-term
committed revolving credit facility and term loans (RCF). 45%
of these facilities have been utilised to date with the balance
of 55% providing a platform for future growth and the settlement
of other US dollar facilities on maturity.
Gearing is closely managed and as at 31 March 2019 Nampak had a
net gearing ratio of 52%, compared to 37% at September 2018. Net
gearing remains within the target range of 40% to 60%. The net
gearing ratio has been adversely impacted by the currency
devaluation in Zimbabwe. This has resulted in a charge of
R1.2 billion against equity, through other comprehensive income,
inclusive of a devaluation of R738 million in the cash balances
held in Zimbabwe. The combination of the aforementioned has
increased gearing by 12%.
Liquidity and cash transfers in the Rest of Africa
Nampak has seen continued foreign currency liquidity in Angola
and Nigeria. Cash balances in these two countries reduced to
R1.7 billion from R2.6 billion at the end of September 2018.
R1.8 billion was transferred during the period representing a
cash transfer rate of 68% of the opening cash balance, an
improvement of 44% from the prior period's R1.25 billion cash
transfer. R1.1 billion and R0.7 billion was transferred from
Angola and Nigeria respectively. There is currently no restriction
on the transfer of cash from Nigeria. Kwanza availability is at
times constrained in the Angolan economy, particularly when US
dollars are made available by in country banking partners, but
insufficient Kwanza are available at the dates on which the US
dollar-linked Kwanza bonds either mature or can be converted to
cash ahead of maturity dates.
Of the Rand equivalent of R1.5 billion cash balance in Angola,
49% remains hedged and protected against further devaluations
through US dollar-linked Kwanza bonds. The new Angolan
requirements for letters of credit supporting future imports to
be cash backed in country have led to higher in-country cash
balances and a reduction in the cash levels hedged by US dollar-
linked Kwanza bonds. The changed import laws have, however,
ensured that foreign exchange for such imports is secured before
the importation of such goods, with no additional build-up of
in-country cash relative to unsettled imports expected. Whilst
lower cash balances are hedged, the majority of the devaluation
is deemed to have already occurred, confirming the effectiveness
of the Group's hedging strategy as it protected against a R1.6
billion loss in FY2018. The bonds have a medium-term maturity
profile to protect against further currency adjustments as the
Kwanza finds a new stable level.
The Rand value cash balances in Zimbabwe more than halved to
R466 million compared to R1.2 billion at the end of September
2018 due to the introduction of the RTGS dollar with an exchange
rate of 2.5 to the US dollar, which led to a 60% devaluation in
the currency against the US dollar. The Group has adopted the
RTGS currency as its functional currency compared to the US
dollar used in the prior year.
A sovereign hedge of USD57 million was arranged in Zimbabwe
in November 2018 in terms of which an amount of USD57 million
owing on a trade account by Nampak Zimbabwe (NZL) to Nampak
International (NIL, a direct subsidiary of Nampak Limited)
will be settled in quarterly payments over a three-year period
from a US dollar denominated non-resident account established
for the benefit of NIL. This represents approximately two thirds
of the amount owing by NZL to NIL. Despite the aforementioned
the Group has made the election under IAS21: The Effects of
Changes in Foreign Exchange Rates to include all its US dollar
loans to its Zimbabwe operations as part of its net foreign
investment.
The availability of foreign currency in Zimbabwe remains
challenging and only R27 million or 2% of the opening cash
position was transferred from Zimbabwe for the period. Raw
materials are being funded by dollars provided by customers
as well as export sales. No increased facilities or unfunded
goods have been made available by Nampak entities to Nampak
Zimbabwe during the period.
Limited
liquidity
31 March 2019 Angola Nigeria Sub-total Zimbabwe Total
Cash on hand - 30 Sep 2018
(Rm) 2 307 300 2 607 1 190 3 797
Cash on hand (Rm) 1 474 215 1 689 4663 2 155
Hedged cash (Rm) 717 -2 717 -4 717
% cash hedged 49 -2 42 -4 33
Cash transferred (Rm) 1 105 663 1 768 27 1 795
Cash transfer rate (%)1 48 221 68 2 47
Limited
liquidity
30 September 2018 Angola Nigeria Sub-total Zimbabwe Total
Cash on hand (Rm) 2 307 300 2 607 1 190 3 797
Hedged cash (Rm) 2 166 -2 2 166 -4 2 166
% cash hedged 94 -2 83 -4 57
Cash transferred (Rm) 1 807 1 574 3 381 87 3 468
Cash transfer rate (%)1 83 190 112 13 94
Limited
liquidity
31 March 2018 Angola Nigeria Sub-total Zimbabwe Total
Cash on hand - 30 Sep 2017
(Rm) 2 188 828 3 016 654 3 670
Cash on hand (Rm) 2 748 410 3 158 816 3 974
Hedged cash (Rm) 2 622 -2 2 622 -4 2 622
% cash hedged 95 -2 83 -4 66
Cash transferred (Rm) 275 952 1 227 23 1 250
Cash transfer rate (%)1 13 115 41 4 34
1 Cash transfer rate is the amount of cash transferred compared to cash
on hand at the end of the previous reported period.
2 Cash balances in Nigeria are no longer considered restricted as a
consequence of the liquidity that has been provided by the introduction
of the NAFEX market.
3 Net of a devaluation adjustment amounting to R738 million due to the
introduction of the RTGS dollar.
4 USD57 million hedge secured (representing approximately 67% of
30 September 2018 balance) before new Monetary Policy announcement
was made on 20 February 2019. This amount has now been transferred to
a non-resident account.
Foreign exchange rate movements
Nampak has sizeable operations outside of South Africa and is exposed to
various foreign currency movements.
The Nigerian naira remained fairly stable while the Angola kwanza, devalued
by 8.4% for the period. The Zimbabwean RTGS dollar devalued by >100% in
February 2019 and as a result Nampak experienced foreign exchange losses
upon adoption of the RTGS dollar for reporting purposes from the US dollar
used in previous periods. The Group has made an election under IAS 21 to
include its US dollar loans to Zimbabwe operations as part of its net
foreign investment.
US dollar functional currency operations in the Rest of Africa have
benefitted from an on average 10.7% weakening in the average exchange
rate for the period. US dollar denominated debt has been adversely affected
by 2.5% weakening since September 2018 and a 22% weakening since March 2018.
Average rates Closing rates
31 Mar 31 Mar Change 30 Sep 31 Mar 30 Sep Change 31 Mar
2019 2018 % 2018 2019 2018 % 2018
Currency
ZAR/GBP 18.32 17.35 5.6 17.61 18.90 18.43 2.6 16.62
ZAR/EUR 16.11 15.36 4.9 15.58 16.27 16.41 (0.9) 14.57
ZAR/USD 14.15 12.78 10.7 13.11 14.50 14.14 2.5 11.86
NGN/USD 362.50 359.75 0.8 360.61 360.23 362.79 (0.7) 360.00
AOA/USD 315.40 189.76 66 222.09 326.11 300.72 8.4 218.64
ZWL/USD 2.54 1.00 >100 1.00 3.01 1.00 >100 1.00
Divisional performance
Revenue Trading profit Trading margin (%)
R million H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 H1 2018
Metals 5 543 5 849 725 925 13.1 15.8
Plastics 2 297 2 393 114 121 5.0 5.1
Paper 614 603 94 78 15.3 12.9
Corporate services - - 26 40 - -
Continuing operations 8 454 8 845 959 1 164 11.3 13.2
Discontinued operation:
Glass 764 720 89 (55) 11.6 (7.6)
Group total 9 218 9 565 1 048 1 109 11.4 11.6
Continuing operations
Metals
Revenue and trading profit fell mainly as a result of lower volumes in
Bevcan Angola, cost and other pressures at DivFood and Bevcan Nigeria
to a lesser extent. Bevcan SA offset some of these pressures and
maintained its trading margin due to improved efficiencies and tight
cost management.
The South African beverage can market continues to grow and advanced 2%
for the six month period to the end of March 2019 relative to March 2018.
Bevcan SA volumes declined by 9% as expected, as customers began
allocating volumes to the new entrant, which commenced delivering to
customers in late 2018. Bevcan SA also rebased its cost structure by
removing an old tin plate line located in Epping, Western Cape, which
was largely used for peak demand and thereby lowered its name plate
capacity by 11%. Savings from this restructuring began flowing in the
second half of 2018 and the full benefit of lower operating costs has
begun being experienced for 2019 and will be sustained at an annual
level of R60 million per annum going forward.
DivFood experienced mixed demand for the period. Food can volumes grew
marginally driven by market share gains. Fruit, fish and meat can
volumes were stable. Aerosols and paint can volumes in the diversified
business declined on the previous year driven by poor consumer demand.
Margins were negatively impacted due to product mix and a very competitive
marketplace impacting on pricing. As a consequence, the business made a
marginal trading loss for the period.
The Rest of Africa produced varying results - in Nigeria volumes grew
ahead of expectations, while the devaluation of the Kwanza led to
significantly softer demand for the period in Angola.
Bevcan Nigeria achieved 17% volume growth for the half year period and
record annual sales volumes since 2016, driven by the malt and beer
categories, as well as growth in the underlying market for beverage cans.
Nampak's market share has now increased from 45% to an estimated 50% of
the total beverage can market in Nigeria. The beverage can line is now
approaching full utilisation and the second line is being considered if
demand continues to be buoyant. This plant is running extremely well and
is approaching 3 million incident-free hours - a major milestone at such
high utilisation rates, while costs remain firmly under control. General
metals packaging volumes in Nigeria also improved in line with positive
consumer demand trends. Revenue grew 19% assisted by a weakened Rand
against the US dollar, although margins were under pressure due to higher
cost of sales for both diversified and beverage cans. Nampak remains
bullish about this market and recent market studies have further reinforced
the opportunities in growing the can pack share for beverages and food
cans demand. The R100 million project to install a food can line in Nigeria
is progressing satisfactorily, and it is anticipated that commercial
production will commence in the first quarter of 2020.
Bevcan Angola volumes decreased by 37% and revenue by 33% as result of the
lower demand, driven by lower wages relative to producer price index
inflation in Angola. The devaluation of the Kwanza in excess of 49% in
Angola since 31 March 2018 heavily impacted consumer demand. Demand is
expected to be constrained until wage inflation is reflected in new
salaries and wages where after demand is expected to recover. Management
has responded promptly to these changes and have adjusted the cost base
to reflect current demand. In order to manage overhead costs and actively
manage and alleviate the impact on margins in the second half of the
financial year, 20% of the staff component were retrenched in April 2019.
Plans to convert the steel line to an aluminium line in Angola are
progressing, which reflects expected future demand forecasts.
Plastics
Revenue reduced due to lower demand in Plastics SA and Plastics UK.
Zimbabwean operations mitigated this and grew both revenue and margins,
and stabilised overall trading margins for the Plastics division at 5.0%.
Plastics SA was characterised by lower volumes for rigids partly being
offset by volume growth in the cartons business. Rigid volumes were down
following lost customer allocations for bottles and crates as well as
overall softer market conditions in South Africa. Operational
inefficiencies as a result of lower volumes, disruptions from load
shedding, the impact of restructuring within our plants and stock write-
offs led to lost margin and revenue declined 10% for rigids. Cartons
revenue remained stable for the period and various initiatives and product
launches are being investigated with customers requesting alternatives to
traditional packaging for staples such as milk and juice. This is expected
to drive volume growth in the near future.
Plastics in the Rest of Africa largely comprises of Zimbabwean operations,
viz. Megapak and CMB. Robust volume demand continued at these operations
bolstered by increasing exports to neighbouring countries and revenue grew
10% and margins in multiples of revenue growth. The impact of the new
currency dispensation implemented on 20 February 2019 on margins and volume
is being closely monitored to ensure that costs and inventories are
tightly controlled.
Plastics UK volumes continue to be impacted by reduced demand resulting
from backward integration by a key customer. An overall weaker dairy market
and the start-up costs of new projects led to a loss for the first half.
Paper
Demand at Hunyani in Zimbabwe remains strong supported by regional exports
and revenue was relatively stable for the period. Trading profit improved
and significantly contributed to raising the trading margin of the Paper
division to 15.3% from 12.9%. While liquidity is an ongoing challenge,
robust trading is expected to continue as long as US dollar funding for
raw materials by our customers can be sourced from the market. Availability
of foreign currency to source raw materials is dependent on exports for
producers as well as tobacco sales for customers.
Carton volumes in Nigeria in the half year have remained strong and
revenue grew 9% and trading profit by double digits. Customer inventory
levels and possible legislation changes may dampen volumes in the second
half of the year. As previously mentioned, negotiations for the disposal
of this business were concluded on 2 April 2019 with the signing of an
agreement with AR Packaging Group subject to normal conditions precedent.
In the absence of this agreement, there was a high risk of a supply
agreement with a key customer being terminated in two years' time, and
consequently the sale of the business for an enterprise value of
EUR26 million is a satisfactory value unlock.
Volumes in Zambia and Malawi have improved, driven by growing consumer
demand. Revenue grew by double digits. Bullpak in Kenya has put in a
commendable performance in spite of softer market conditions.
Discontinuing operation
Glass
Sales volumes for Glass have remained relatively flat, constrained by
production output. Revenue is up 6% due to acceptable price increases
and a better mix of higher volumes of flavoured alcoholic beverages.
Beer bottle demand remains extremely strong while demand for spirits
and wine bottles has been muted. While cost containment initiatives and
operational improvements have delivered positive results, the improved
trading margin of 11.6% is fundamentally due to the reduction in
depreciation for this business as it has been classified as a
discontinuing operation and accordingly on consolidation depreciation
ceases. A further R137 million relating to property, plant and equipment
was impaired for this asset, for the period.
Electricity supply from Ekurhuleni had started to improve after the
plant experienced ongoing fluctuations and supply disruptions throughout
2018. The recent load shedding experienced in the past four months has
once again changed this. While the plant itself has not been load shed,
the impact on the quality of electricity (voltage fluctuation) with load
shedding in the surrounding areas has been significant on energy costs
for the period. The rotary uninterruptible power supply system has been
instrumental in mitigating any impact of these issues to date, which has,
however, increased energy costs as more diesel has been consumed.
As previously mentioned the Glass business is in the advanced stages of
being disposed and negotiations are ongoing with the preferred bidder.
Trading performance by region is as follows:
Revenue Trading profit Trading margin (%)
R million H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 H1 2018
South Africa 5 092 5 208 432 527 8.5 10.1
Rest of Africa 2 790 2 973 573 608 20.5 20.5
Europe 572 664 (72) (11) (12.6) (1.7)
Corporate services - - 26 40 - -
Continuing operations 8 454 8 845 959 1 164 11.3 13.2
Discontinued operation:
South Africa (Glass) 764 720 89 (55) 11.6 (7.6)
Group total 9 218 9 565 1 048 1 109 11.4 11.6
Outlook
The outlook in key markets and businesses remains largely driven by macro-
economic factors.
South Africa has recently released its election results which were in
line with expectations. Pedestrian economic growth rates are expected
for 2019. The entry of a third manufacturer in the beverage can market
in the second half of the 2019 calendar year is expected to put pressure
on Bevcan SA's volumes, but management has implemented mitigating
initiatives to deal with resulting lower volumes. During the prior year
the steel Bevcan Epping line was taken out of production and disposed
of in the current period, withdrawing an approximate 600 million can
capacity from the market in anticipation of the new entrants into the
South African market. Continued growth of the beverage can market also
serves as a mitigating factor as supply from the additional entrants
will be naturally absorbed. DivFood may be impacted by lower allocations
by a key customer in the second half.
Robust demand for beverage cans and the general metal packaging businesses
in Nigeria are expected to continue in the second half in light of the
emerging recovery of that economy.
Lower consumer demand is expected to continue in Angola until such a time
that spending power is restored when wage inflation converges to producer
price inflation. This transitionary adjustment period is expected to last
between 12 to 18 months based on our experience in Nigeria. As a result,
demand in the short to medium term is expected to remain soft.
Demand in Zimbabwe remains robust for most of Nampak's businesses and
customers will continue to be supplied to the extent they are able to
pay for raw materials and through foreign currency they secure and from
US dollars derived from Nampak's sales. Since April 2018, no further
credit extension by any Nampak entity has been provided to Nampak's
businesses in Zimbabwe.
Overall, growing consumer consumption shifts towards more environmentally
friendly and sustainable packaging is expected to drive volume growth
of the Paper business.
Nampak will continue to assess its business and consolidate its footprint
where considered appropriate to serve territories collectively and sharpen
its focus on key contributors in order to improve Group profitability.
Directors
Following the retirement of Mr RC Andersen and Prof. PM Madi with effect
6 February 2019, two new directors, CD Raphiri and SP Ridley have been
appointed to the board of the company as independent non-executive directors
with effect from 1 March 2019. Ms MMF Seleoane, Group human resources director,
also resigned during the period, effective 28 February 2019.
Dividend
The board has decided not to resume dividends to shareholders until the
sustainability of cash transfers from Zimbabwe is assured and the disposal
of the Glass business is finalised. The board is evaluating the various
options available with a view to enhancing shareholder value.
Shareholders are advised that the financial information contained in this
announcement has not been audited, reviewed or reported upon by Nampak's
external auditors.
On behalf of the board
PM Surgey AM de Ruyter GR Fullerton
Chairman Chief executive officer Chief financial officer
Bryanston
30 May 2019
Condensed Group statement of comprehensive income
Restated*
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar Change 30 Sep
R million Notes 2019 2018 % 2018
Continuing operations
Revenue 8 454.4 8 845.3 (4) 17 309.8
Operating profit 4 901.7 1 043.5 (14) 1 522.9
Finance costs 5 (217.6) (184.3) (465.2)
Finance income 5 66.2 95.5 244.3
Share of net (loss)/profit
from associates and joint
venture (0.9) 2.3 5.8
Profit before tax 749.4 957.0 (22) 1 307.8
Income tax benefit/(expense) 6 46.0 (86.0) (139.5)
Profit for the period from
continuing operations 795.4 871.0 (9) 1 168.3
Discontinued operation
Loss for the period from
discontinued operation 7 (105.0) (107.1) (599.2)
Profit for the period 690.4 763.9 (10) 569.1
Other comprehensive
(expense)/income, net of tax
Items that may be
reclassified subsequently
to profit or loss
Exchange differences on
translation of foreign
operations 8 (1 090.4) (664.5) 217.4
(Loss)/gain on cash flow
hedges (7.2) 88.0 51.7
Items that will not be
reclassified to profit or
loss
Net actuarial gain from
retirement benefit
obligations - - 34.4
Other comprehensive
(expense)/income for the
period, net of tax (1 097.6) (576.5) (>100) 303.5
Total comprehensive
(expense)/income for the
period (407.2) 187.4 (>100) 872.6
Profit/(loss) attributable to:
Owners of Nampak Limited 714.6 725.7 (2) 489.2
Non-controlling interests in
subsidiaries (24.2) 38.2 79.9
Total 690.4 763.9 (10) 569.1
Total comprehensive income/
(expense) attributable to:
Owners of Nampak Limited 204.9 205.6 - 769.9
Non-controlling interests in
subsidiaries (612.1) (18.2) 102.7
Total (407.2) 187.4 (>100) 872.6
Earnings/(loss) per share
Basic (cents per share)
Continuing operations 127.1 129.4 (2) 169.2
Discontinued operation (16.3) (16.6) (93.2)
Total 110.8 112.8 (2) 76.0
Diluted (cents per share)
Continuing operations 126.6 129.0 (2) 168.4
Discontinued operation (16.2) (16.6) (92.7)
Total 110.4 112.4 (2) 75.7
*Refer note 2.
Condensed Group statement of financial position
Restated*
Unaudited Unaudited Audited
31 Mar 31 Mar 30 Sep
R million Notes 2019 2018 2018
ASSETS
Non-current assets
Property, plant, equipment and
investment property 7 738.0 7 650.6 8 177.0
Goodwill and other intangible assets 3 754.6 3 143.5 3 708.0
Joint venture, associates and other
investments 25.3 22.8 35.3
Deferred tax assets 651.7 25.6 173.5
Liquid bonds and other loan
receivables 10 746.6 1 832.0 1 787.9
12 916.2 12 674.5 13 881.7
Current assets
Inventories 3 261.2 3 010.3 3 205.6
Trade and other current receivables 2 980.6 2 417.7 3 071.0
Tax assets 21.7 19.9 14.1
Liquid bonds and other loan
receivables 10 11.9 882.8 450.6
Bank balances and deposits 1 966.2 1 844.2 2 844.8
8 241.6 8 174.9 9 586.1
Assets classified as held for sale 7 2 685.6 2 589.4 2 446.3
Total assets 23 843.4 23 438.8 25 914.1
EQUITY AND LIABILITIES
Capital and reserves
Share capital 35.5 35.5 35.5
Capital reserves (61.1) (65.3) (70.3)
Other reserves (309.7) (604.5) 200.0
Retained earnings 10 620.6 10 215.1 9 975.1
Shareholders' equity 10 285.3 9 580.8 10 140.3
Non-controlling interests (160.1) 351.3 472.2
Total equity 10 125.2 9 932.1 10 612.5
Non-current liabilities
Loans and other borrowings 7 683.0 3 225.1 8 023.1
Retirement benefit obligation 1 473.2 1 465.2 1 478.4
Deferred tax liabilities 130.2 283.1 168.1
Other non-current liabilities 93.6 57.3 98.6
9 380.0 5 030.7 9 768.2
Current liabilities
Trade payables, provisions and other
current liabilities 3 339.2 3 125.1 4 195.3
Tax liabilities 118.8 33.9 45.5
Loans, other borrowings and bank
overdrafts 287.9 5 165.6 990.0
3 745.9 8 324.6 5 230.8
Liabilities directly associated with
assets classified as held for sale 7 592.3 151.4 302.6
Total equity and liabilities 23 843.4 23 438.8 25 914.1
*Refer note 2.
Condensed Group statement of changes in equity
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million Notes 2019 2018 2018
Opening balance 10 612.5 9 681.1 9 681.1
Adjustment to opening equity -
adoption of new standard 2 (89.2) - -
Net shares issued during the period - 5.6 6.5
Share-based payment expense 9.1 9.1 4.0
Share grants exercised - (5.7) (6.5)
Treasury shares disposed - 54.6 54.9
Total comprehensive (expense)/income
for the period (407.2) 187.4 872.6
Dividends paid - - (0.1)
Closing balance 10 125.2 9 932.1 10 612.5
Comprising:
Share capital 35.5 35.5 35.5
Capital reserves (61.1) (65.3) (70.3)
Share premium 268.9 268.0 268.9
Treasury shares (515.7) (515.8) (515.8)
Share-based payments reserve 185.7 182.5 176.6
Other reserves (309.7) (604.5) 200.0
Foreign currency translation reserve 1 067.1 766.9 1 569.6
Financial instruments hedging
reserve 49.2 92.7 56.4
Recognised actuarial losses (1 412.7) (1 447.1) (1 412.7)
Share of non-distributable reserves
in associate 3.7 - 3.7
Other (17.0) (17.0) (17.0)
Retained earnings 10 620.6 10 215.1 9 975.1
Shareholders' equity 10 285.3 9 580.8 10 140.3
Non-controlling interests (160.1) 351.3 472.2
Total equity 10 125.2 9 932.1 10 612.5
Condensed Group statement of cash flows
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million Notes 2019 2018 2018
Cash generated from operations
before working capital changes 11.1 1 101.3 1 435.4 2 127.0
Working capital changes 11.1 (924.5) (859.7) (676.9)
Cash generated from operations 11.1 176.8 575.7 1 450.1
Net interest paid (228.6) (221.8) (458.1)
Income tax paid (68.9) (78.2) (170.8)
Cash flows from operations (120.7) 275.7 821.2
Dividends paid - - (0.1)
Net cash (utilised)/generated from
operating activities (120.7) 275.7 821.1
Capital expenditure (359.7) (206.0) (536.4)
Replacement (301.4) (139.3) (359.8)
Expansion (58.3) (66.7) (176.6)
Post-retirement medical aid buy-out - - (1.8)
Decrease/(increase) in liquid bonds
for hedging purposes 1 461.5 (994.4) (6.9)
Other investing activities 146.4 14.6 47.8
Net cash generated/(utilised) before
financing activities 1 127.5 (910.1) 323.8
Net cash (repaid in)/raised from
financing activities (235.3) 118.4 1 659.7
Net increase/(decrease) in cash and
cash equivalents 892.2 (791.7) 1 983.5
Net cash and cash equivalents/
(overdraft) at beginning
of period 1 836.8 (168.8) (168.8)
Translation of cash in foreign
subsidiaries (754.8) (222.5) 22.1
Net cash and cash equivalents/
(overdraft) at end of period 11.2 1 974.2 (1 183.0) 1 836.8
Notes
1. Basis of preparation
The condensed interim financial statements are prepared in accordance
with the requirements of the JSE Limited Listings Requirements for
interim reports, and the requirements of the Companies Act of South Africa
applicable to condensed financial statements. The Listings Requirements
require interim reports to be prepared in accordance with and contain the
information required by IAS 34 Interim Financial Reporting, as well as the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and the Financial Pronouncements as issued by the Financial
Reporting Standards Council. The interim financial statements have been
prepared under the supervision of the chief financial officer,
GR Fullerton CA(SA).
2. Accounting policies
The accounting policies adopted and methods of computation used are
consistent with those applied for the Group's 2018 annual financial
statements.
New and revised International Financial Reporting Standards in issue
and effective for the current financial year
The Group adopted all amendments or improvements to standards or
interpretations that became effective during the current financial
year including the following:
IFRS 9: Financial Instruments
The standard became effective in the current reporting period
requiring the Group to change its accounting policies and make
adjustments to retained earnings as a result of adopting the
standard.
The impact of the adoption of this standard and the new accounting
policy is disclosed below.
IFRS 9: Financial Instruments replaces IAS 39: Financial Instruments:
Recognition and Measurement for annual periods beginning on or after
1 January 2018, bringing together all three aspects of the accounting
for financial instruments: classification and measurement, impairment,
and hedge accounting.
The Group has applied IFRS 9 retrospectively, with the initial
application date of 1 October 2018 with no adjustments to comparative
information for the period beginning 1 October 2017.
The effect of adopting IFRS 9 resulted in a R89.2 million gross
decrease in opening equity balances.
The change did not have a material impact on the Group's operating,
investing and financing cash flows.
(a) Classification and measurement
Under IFRS 9, debt instruments are subsequently measured at fair value
through profit or loss, amortised cost, or fair value through other
comprehensive income. The classification is based on two criteria:
the Group's business model for managing the assets; and whether the
instruments' contractual cash flows represent 'solely payments of
principal and interest' on the principal amount outstanding.
The assessment of the Group's business model was made as of the date
of initial application, 1 October 2018, and then applied
retrospectively to those financial assets that were not derecognised
before 1 October 2018. The assessment of whether contractual cash flows
on debt instruments are solely comprised of principal and interest was
made based on the facts and circumstances as at the initial recognition
of the assets. Liquid bonds, trade receivables and other loan receivables
previously classified as loans and receivables are held to collect
contractual cash flows and give rise to cash flows representing solely
payments of principal and interest. These are now classified and
measured as debt instruments at amortised cost.
There are no changes in classification and measurement for the
Group's financial liabilities.
In summary, upon the adoption of IFRS 9, the Group had the following
required or elected reclassifications:
Fair
value
through
IAS 39 profit IFRS 9
R million measurement or loss measurement
Liquid bonds and other
loans receivables* 1 787.9 - 1 720.8
Trade receivables* 2 578.5 - 2 558.4
*The change in carrying amount is a result of additional impairment
allowance. See the discussion on impairment below.
(b) Impairment
The adoption of IFRS 9 has fundamentally changed the Group's accounting
for impairment losses for financial assets by replacing IAS 39's incurred
loss approach with a forward-looking expected credit loss (ECL) approach.
IFRS 9 requires the Group to recognise an allowance for ECLs for all debt
instruments not held at fair value through profit or loss and contract
assets.
Upon the adoption of IFRS 9, the Group recognised additional impairment
on of R89.2 million, predominately relating to the expected credit loss
on Angolan kwanza bonds. This resulted in a gross decrease in equity of
R89.2 million as at 1 October 2018.
Set out below is the reconciliation of the closing impairment allowances
in accordance with IAS 39 to the opening loss allowances determined in
accordance with IFRS 9:
Expected
Impairment credit
provision loss
under under
IAS 39 IFRS 9
as at as at
30 Sep 1 Oct
R million 2018 Remeasurement 2018
Loans and receivables (IAS
39)/financial assets at amortised
cost (IFRS 9) 47.4 89.2 136.6
*The change in carrying amount is a result of additional impairment
allowance. See the discussion on impairment below.
IFRS 15: Revenue From Contracts With Customers
On 1 October 2018 the Group implemented IFRS 15: Revenue from Contracts with
Customers which replaced IAS 18: Revenue. Revenue comprises the consideration
received or receivable on contracts entered into with customers in the
ordinary course of the entity's activities. Revenue is shown net of taxes,
cash discounts, settlement discounts and rebates given to customers. Revenue
is recognised as the amount of the transaction prices allocated to each
performance obligation and this is determined at the amount that depicts
the consideration to which the entity expects to be entitled in exchange
for transferring the goods and services promised to the customer.
Revenue is recognised on the sale of goods when control is transferred to
the customer. Revenue from providing services is recognised when the service
has been performed.
The Group aligned its measurement and recognition principles of revenue with
that of IFRS 15 upon adoption. There is no material impact on the measurement
and recognition of revenue.
New and revised International Financial Reporting Standards in issue but not
yet effective for the current financial year
At the date of authorisation of these financial statements, the following
standard was in issue but not yet effective for the current year and has not
been early adopted:
IFRS 16: Leases
The standard is effective for years commencing on or after 1 January 2019. The
standard will be adopted by the Group for the financial reporting period
commencing 1 October 2019.
IFRS 16 requires the lessee to recognise a right of use asset and lease
obligations for all leases except for short term leases, or leases of low
value assets which may be treated similarly to operating leases under the
current standard IAS 17 Leases if the exceptions are applied. A lessee
measures its lease obligation at the present value of future lease payments,
and recognises a right of use asset initially measured at the same amount as
the lease obligation including costs directly related to entering into the
lease. Right of use assets are subsequently treated in a similar way to other
assets such as property, plant and equipment or intangible assets dependent
on the nature of the underlying item.
The Group has assessed the majority of its significant lease agreements, in
particular those relating to property rentals, and the preliminary assessment
indicates that material adjustments to non-current assets, non-current
liabilities and EBITDA are to be expected as a result of the new standard.
The current estimate of the impact of adopting IFRS 16 on the March 2019
reported numbers is as follows:
* increase in net assets: R379.0 million;
* increase in EBITDA: R103.0 million;
* decrease in profit for the period: R12.0 million.
Management continues to assess the implications of the remaining
individually insignificant lease agreements in which the Group is the
lessee which may cause the final impact to differ from the estimates
provided above.
The Group is still to make a decision on the transition method to be
applied or the application of exceptions related to short term and low
value asset leases.
Change in accounting estimate
During the year, the Group reassessed the residual values of its property,
plant and equipment as required by IAS 16: Property, Plant and Equipment in
light of a recent disposal of production equipment. The residual values of
the assets were increased as the adjusted residual values reflect more
appropriately the pattern of the consumption of the future economic
benefits embodied in the assets concerned. In accordance with IAS 16:
Property, Plant and Equipment, this reassessment represents a change in an
accounting estimate and is therefore applied prospectively in terms of IAS
8: Accounting Policies, Changes in Accounting Estimates and Errors. The
impact of the change in applying increased residual values for the half-
year ended 31 March 2019 is a decrease in the depreciation expense of
R55.0 million, inclusive of R11.0 million relating to the half year ended
31 March 2019 and a decrease in the depreciation expense of R22.0 million
expected annually in the future.
Reclassification of prior year intragroup finance costs
The comparatives to the Group statement of comprehensive income (March
2018) have been restated for intragroup finance costs incurred by Nampak
Glass of R86.0 million which was included in finance income and has been
more appropriately deducted from finance costs.
Reclassification of prior year intragroup receivable balances
The comparatives to the Group statement of financial position (March 2018)
have been restated for intragroup royalties receivable of R209.1 million
that were presented with trade and other current receivables and have
been reclassified to trade and other payables where the matching intragroup
royalties payable were presented.
3. Critical judgements
3.1 Change of functional currency - Nampak Zimbabwe Limited
With effect 1 October 2018, the functional currencies of all the entities
in the Nampak Zimbabwe Limited Group were changed from US dollar to Real
Time Gross Settlement (RTGS) dollar in terms of IAS 21: The Effects of
Changes in Foreign Exchange Rates. This change was brought about by a review
of the indicators set out in this standard and the conclusion reached was
that the RTGS dollar represents the economic effects of the underlying
transactions. events and conditions pertaining to these entities more
appropriately.
3.2 Net investment in a foreign operation
Management continually reviews the recoverability of amounts receivable by
Nampak International Limited (NIL) in terms of intragroup loans to its
operations. NIL is the main holding company for the African operations and
is based in the Isle of Man. Where NIL has decided that it will not seek
repayment of loans in the foreseeable future, the outstanding balance is
considered to be and is recognised as being part of NIL's net investment
in these operations in accordance with the application of IAS 21: The
Effects of Changes in Foreign Exchange Rates (paragraph 15). Consequently,
any exchange differences on translation of such loans are recognised in
profit or loss in the separate financial statements of the operation
concerned, while on consolidation such exchange differences are recognised
in other comprehensive income.
At 31 March 2019, the directors have determined that the amounts receivable
by NIL from Nampak Zimbabwe Limited are not expected to be settled in the
foreseeable future and are therefore recognised as part of the net investment
in this entity.
3.3 Classification of disposal Groups held for sale
The classification of the Nampak Glass division and the Megapak Crates and
Drums businesses as disposal Groups held for sale involves determining whether
the criteria for such recognition as indicated in IFRS 5: Non-current Assets
Held for Sale and Discontinued Operations continue to be met.
These criteria include: the directors are committed to a plan to sell the
disposal groups in question, the disposal group is available for sale, an
active programme to locate a buyer has been initiated, the sale is highly
probable within 12 months of classification as held for sale, the disposal
group is being marketed for sale at a sales price that is reasonable in
relation to its fair value and actions required to complete the plan
indicate that is unlikely that the plan will be significantly changed
or withdrawn.
After an assessment of the transactions in terms of the above criteria,
the directors have determined that despite the delay in concluding these
transactions due to matters outside management's control, the
classification and disclosure of the above disposal groups as held for
sale continues to be appropriate as they remain committed to concluding
these transactions. Negotiations for the disposal of Glass are at an
advanced stage with both parties committed to the transaction.
3.4 Deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that
taxable income will be available in future against which they can be
utilised. Future taxable profits are estimated based on business plans
which include estimates and assumptions regarding economic growth,
interest, inflation and taxation rates, and competitive forces.
Deferred tax assets recognised in the period relate mainly to foreign
exchange losses incurred in Nampak Bevcan Angola Limitada. These assets
are expected to be recovered against profits of this entity in the
foreseeable future.
3.5 Impairment of assets
The market capitalisation and net asset value of the Nampak Limited
Group at 30 September 2018 was R10.6 billion. The Nampak Limited Group
market capitalisation declined to R7.2 billion at 20 May 2019. The
directors are in the process of assessing the potential cause of this
decline and whether this is of a temporary or permanent nature to
establish whether any Group assets should be impaired in terms of
IAS 39: Impairment of Assets. At 31 March 2019, no permanent diminution
of net asset value was indicated.
4. Included in operating profit for continuing operations are:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Depreciation 209.5 284.1 545.9
Amortisation 13.4 10.8 23.1
Net translation loss/(profit) recognised on
financial instruments 132.0 245.0 (76.7)
Net loss arising from Angolan, Nigerian and
Zimbabwean exchange rate movements 94.0 96.5 126.6
Net loss/(profit) arising from normal
operating activities 38.0 148.5 (203.3)
Reconciliation of operating profit to
trading profit1
Operating profit 901.7 1 043.5 1 522.9
Net abnormal losses2 57.0 120.7 447.1
Cash transfer and liquid bond disposal
losses 48.4 - 73.0
Net impairment (reversals)/losses on plant,
equipment and loan receivables (43.4) 26.6 7.0
Retrenchment and restructuring costs 23.3 8.3 95.6
Net devaluation loss arising from Angolan,
Nigerian and Zimbabwean exchange rate
movements 94.0 96.5 126.6
Onerous contract and related losses - - 99.7
Remediation and related activities
pertaining to sale and leaseback properties - - 63.9
Gain on acquisition of investment - - (6.0)
Net profit on disposal of property (65.3) (11.3) (12.4)
Other - 0.6 (0.3)
Trading profit 958.7 1 164.2 1 970.0
1 Trading profit is the main measure of profitability used for segmental
reporting purposes.
2 Abnormal losses/(gains) are defined as losses/(gains) which do not arise
from normal trading activities or are of such a size, nature or
incidence that their disclosure is relevant to explain the performance
for the period.
5. Net finance costs
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Finance costs as reported (217.6) (184.3) (465.2)
Angolan capital enforcement tax 69.8 - 64.8
Finance costs excluding Angolan capital
enforcement tax (147.8) (184.3) (400.4)
Finance income as reported 66.2 95.5 244.3
Net finance costs excluding Angolan
capital enforcement tax (81.6) (88.8) (156.1)
6. Tax rate reconciliation
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
% 2019 2018 2018
Statutory tax rate 28.0 28.0 28.0
Foreign tax rate differential (15.2) (7.8) (8.6)
Withholding and other foreign taxes paid 0.2 2.3 4.3
Disallowed expenses and other 1.0 (2.0) (3.7)
Tax rate before adjustments 14.0 20.5 20.0
Withholding tax on Angolan interest 6.0 - -
Tax rate before unusual items 20.0 20.5 20.0
Losses not protected - Angola 12.5 - -
Zimbabwe exchange losses 6.4 - -
Recognition of deferred tax asset on
current and past unrealised exchange
losses (45.0) (11.5) (9.3)
Effective tax rate (6.1) 9.0 10.7
7. Discontinued operation and disposal groups held for sale
7.1 Discontinued operation - Nampak Glass division
On 16 February 2018, the Nampak Limited board took a decision to dispose
of the Nampak Glass division (Nampak Glass). The Group met the criteria
of IFRS 5: Non-current Assets Held for Sale and Discontinued Operations as
at 31 March 2018 and therefore classified the business as held for sale
and as a discontinued operation as at that date. Exploratory discussions
were held with a number of strategic players resulting in the Group entering
into an exclusivity arrangement with the preferred bidder. The process is
on track with a view to concluding a sale and purchase agreement by
June 2019. The transaction, if concluded, will be subject to conditions
precedent that are customary for a transaction of this nature. Nampak Glass
is the only operation in the Glass operating segment.
An impairment loss of R136.8 million (March 2018: Nil; September 2018:
R665.0 million) was recognised for the period on these assets in
consideration of their fair value less expected realisation costs
at this date.
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Results of the discontinued operation
Revenue 764.4 720.2 1 456.5
Operating expenses other than
depreciation, amortisation and
impairment
expenses (675.5) (651.0) (1 313.7)
EBITDA1 88.9 69.2 142.8
Depreciation and amortisation2 - (124.8) (124.8)
Impairment of plant, goodwill, other
intangible assets and assets
classified as held for sale (136.8) (7.0) (677.3)
Net finance costs (98.1) (86.1) (173.4)
Loss before tax (146.0) (148.7) (832.7)
Attributable income tax benefit 41.0 41.6 233.5
Loss for the period from discontinued
operation (105.0) (107.1) (599.2)
1 EBITDA is calculated before net impairments.
2 Depreciation and amortisation ceased on classification of Nampak Glass
as a discontinued operation and disposal group held for sale.
Cash flows of the discontinued operation
Net cash flows from operating activities 89.5 70.7 89.2
Net cash flows from investing activities (57.7) (44.4) (91.7)
Net cash flows 31.8 26.3 (2.5)
The major classes of assets and liabilities
of the discontinued operation at the end
of the period are as follows:
Property, plant and equipment 999.5 1 749.1 1 125.6
Intangible assets 2.5 4.9 2.5
Inventories 714.8 587.2 631.1
Trade and other current receivables 306.2 248.2 310.4
Assets classified as held for sale 2 023.0 2 589.4 2 069.6
Trade and other current payables 188.3 151.4 202.5
Liabilities directly associated with
assets classified as held for sale 188.3 151.4 202.5
7.2 Disposal groups held for sale - Megapak Crates and Drums businesses
On 30 May 2018, the board took a decision to dispose of the Megapak
business consisting of the Drums and Crates businesses. The Group met
the criteria of IFRS 5: Non-current Assets Held for Sale and Discontinued
Operations for the Drums and Crates disposal groups as at 30 May 2018 and
31 July 2018 respectively, and therefore classified these businesses as
disposal groups held for sale at those dates. Discussions have been held
with a number of packaging industry players in terms of a formal corporate
finance disposal process that is in progress. It is expected that the
sale agreements on these disposals will be concluded by no later than
the end of the 2019 financial year.
The Crates and Drums businesses are not recognised as discontinued
operations in accordance with the above standard as they neither
represent a separate major line of business or geographical area of
operations.
The major classes of assets and liabilities of the disposal groups at the
end of the period are as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Property, plant and equipment 121.4 - 133.9
Inventories 70.6 - 75.2
Trade and other current receivables 68.4 - 167.6
Assets classified as held for sale 260.4 - 376.7
Trade and other current payables 98.2 - 100.1
Liabilities directly associated with
assets classified as held for sale 98.2 - 100.1
7.3 Disposal groups held for sale - Nampak Cartons Nigeria and Nampak
Properties Nigeria
On 5 February 2019, the board took a decision to dispose of its entire
interests in Nampak Cartons Nigeria Limited (Nampak Cartons) and Nampak
Properties Nigeria Limited (Nampak Properties). The Group met the
criteria of IFRS 5: Non-current Assets Held for Sale and Discontinued
Operations for both businesses as at 31 March 2019, and therefore
classified these businesses as disposal groups held for sale at that
date. The board resolved to approach several packaging industry players
to invite proposals for the disposal of the businesses. Negotiations
were concluded on 2 April 2019 with the signing of an agreement with
the AR Packaging Group. The sale is subject to normal conditions
precedent that are appropriate in a transaction of this nature and
consequently completion has not yet taken place.
The Nampak Cartons and Nampak Properties businesses are not recognised
as discontinued operations in accordance with the above standard as
they neither represent a separate major line of business or
geographical area of operations.
The major classes of assets and liabilities of the disposal groups
at the end of the period are as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Property, plant and equipment 120.5 - -
Inventories 85.1 - -
Trade and other current receivables 132.2 - -
Cash and cash equivalents 64.4 - -
Assets classified as held for sale 402.2 - -
Deferred tax 1.6 - -
Trade and other current payables 304.2 - -
Liabilities directly associated with
assets classified as held for sale 305.8 - -
8. Exchange (loss)/gain on translation of foreign operations
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Translation of net assets of
foreign operations excluding
Nampak Zimbabwe Limited 119.2 (536.8) 170.9
Translation of net assets of Nampak
Zimbabwe Limited (1 209.6) (127.7) 46.5
Total (1 090.4) (664.5) 217.4
9. Determination of headline earnings and headline earnings per share
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Continuing operations
Profit attributable to equity holders of
the company for the period 819.6 832.8 1 088.4
Less: preference dividend - - (0.1)
Basic earnings 819.6 832.8 1 088.3
Adjusted for:
Net impairment losses on plant and
equipment 4.8 26.6 7.0
Gain on acquisition of investment - - (6.0)
Net profit on disposal of property,
plant, equipment and intangible assets (71.6) (9.9) (9.4)
Tax effects and non-controlling interests 18.7 (0.6) 5.7
Headline earnings for the period 771.5 848.9 1 085.6
Headline earnings per ordinary share
(cents) 119.7 132.0 168.7
Diluted headline earnings per share
(cents) 119.1 131.5 168.0
Continuing and discontinued operations
Profit attributable to equity holders of
the company for the period 714.6 725.7 489.2
Less: preference dividend - - (0.1)
Basic earnings 714.6 725.7 489.1
Adjusted for:
Net impairment losses on plant and
equipment 141.6 33.6 684.3
Gain on acquisition of investment - - (6.0)
Net profit on disposal of property,
plant, equipment and intangible assets (71.6) (9.9) (9.4)
Tax effects and non-controlling interests (19.6) (2.6) (183.9)
Headline earnings for the period 765.0 746.8 974.1
Headline earnings per ordinary share
(cents) 118.7 116.1 151.4
Fully diluted headline earnings per share
(cents) 118.1 115.7 150.7
10. Liquid bonds and other loan receivables
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Liquid bonds1 697.7 2 621.9 2 165.8
Equipment sales receivables2 39.2 54.4 46.0
Other loan receivables 21.6 38.5 26.7
Total liquid bonds and other loan
receivables 758.5 2 714.8 2 238.5
Less: Amounts receivable within one year
reflected as current 11.9 882.8 450.6
Liquid bonds - 871.3 435.3
Equipment sales receivables 9.9 6.9 9.0
Other loans receivables 2.0 4.6 6.3
Non-current liquid bonds and other loan
receivables 746.6 1 832.0 1 787.9
1 Liquid bonds relate to US dollar indexed Angolan kwanza bonds. As at
31 March 2019 the Angolan kwanza equivalent of US$49.4 million (March
2018: US$221.2 million; September 2018: US$ 153.1 million) had been
hedged through these bonds in order to protect the Group against further
Angolan kwanza devaluation. Interest rates earned are between 7.0% and
7.8%.
2 Equipment sales receivables are repayable from 2019 to 2025. Interest
rates earned are between 7.0% and 13.4%.
11. Condensed Group statement of cash flows analysis
11.1 Reconciliation of profit before tax to cash generated from
operations (continuing and discontinued operations)
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Profit before tax 603.4 808.3 475.1
Continuing operations 749.4 957.0 1 307.8
Discontinued operation (146.0) (148.7) (832.7)
Adjustment for:
Depreciation and amortisation 222.9 419.7 693.8
Net profit on disposal of property,
plant, equipment and intangible assets (71.6) (9.9) (9.4)
Financial instruments fair value
adjustment 7.9 39.7 (45.7)
Net defined benefit plan expense 50.8 33.6 86.1
Impairment losses 141.6 35.6 723.4
Reversal of impairment losses (48.2) (2.0) (39.1)
Share of loss/(profit) in associates and
joint venture 0.9 (2.3) (5.8)
Share-based payment expense 12.6 12.6 5.5
Net finance costs 249.5 174.9 394.3
Gain on acquisition of investment - - (6.0)
Retirement benefits, contributions and
settlements (68.5) (74.8) (145.2)
Cash generated from operations before
working capital changes 1 101.3 1 435.4 2 127.0
Net working capital changes (924.5) (859.7) (676.9)
(Increase)/decrease in inventories (260.5) 206.6 106.7
Increase in trade and other current
receivables (403.7) (78.4) (637.2)
Decrease in trade and other current
payables (260.3) (987.9) (146.4)
Cash generated from operations 176.8 575.7 1 450.1
11.2 Net cash and cash equivalents/(overdraft)
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Bank balances and deposits* 1 966.2 1 844.2 2 844.8
Bank overdrafts (56.4) (3 027.2) (1 008.0)
Bank balances classified as held for sale 64.4 - -
Total 1 974.2 (1 183.0) 1 836.8
* Included in bank balances and deposits are balances relating to Nampak
Zimbabwe Limited of R467.0 million (March 2018: R819.0 million; September
2018: R1.2 billion) which is regarded as having limited transferability.
12. Carrying amount of financial instruments
The carrying amounts of financial instruments as presented on the statement
of financial position are measured as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
At fair value - level 2
Financial assets
Derivative financial assets1 139.0 84.8 81.7
Financial liabilities
Derivative financial liabilities1 22.6 19.3 22.6
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
At amortised cost
Financial assets 5 891.7 6 959.6 8 307.4
Non-current liquid bonds and
other loan receivables 746.6 1 832.0 1 787.9
Trade and other current receivables2 3 102.6 2 400.6 3 224.1
Current liquid bonds and other loan
receivables 11.9 882.8 450.6
Bank balances and deposits 2 030.6 1 844.2 2 844.8
Financial liabilities 11 460.5 11 445.7 13 089.6
Non-current loans and other borrowings 7 683.0 3 225.1 8 023.1
Trade and other current payables3 3 489.6 3 055.0 4 076.5
Current loans, other borrowings and bank
overdrafts 287.9 5 165.6 990.0
1 Derivative financial assets and liabilities consist of forward exchange
contracts and commodity futures. Their fair values are determined using
the contract exchange rate at their measurement date, with the resulting
value discounted back to the present value.
2 Excludes derivative financial assets (disclosed separately) and
prepayments. Includes trade and other current receivables presented as
part of assets classified as held for sale.
3 Excludes derivative financial liabilities (disclosed separately) and
provisions. Includes trade and other current payables presented as part
of liabilities directly associated with assets classified as held
for sale.
13. Capital expenditure, commitments and contingent liabilities
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Capital expenditure 359.7 206.0 536.4
Expansion 58.3 66.7 176.6
Replacement 301.4 139.3 359.8
Capital commitments 625.6 318.9 478.6
Contracted 153.3 83.2 128.1
Approved not contracted 472.3 235.7 350.5
Lease commitments (including sale and
leaseback transaction) 2 984.6 3 212.4 3 071.8
Land and buildings 2 964.0 3 179.9 3 031.9
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
R million 2019 2018 2018
Other 20.6 32.5 39.9
Contingent liabilities - customer claims
and guarantees 6.5 5.0 11.4
14. Share statistics
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
2019 2018 2018
Ordinary shares in issue (000) 689 812 689 767 689 812
Ordinary shares in issue - net of
treasury shares (000) 644 729 644 671 644 723
Weighted average number of ordinary
shares on which basic earnings and
headline earnings per share are based
(000) 644 727 643 367 643 374
Weighted average number of ordinary
shares on which diluted basic earnings
and diluted headline earnings per share
are based (000) 647 650 645 501 646 297
15. Key ratios and exchange rates
15.1 Key ratios
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
2019 2018 2018
EBITDA1 - continuing operations R million 1 081.2 1 365.0 2 098.9
Net gearing % 52 39 37
Current ratio times 2.5 1.3 2.2
Current ratio (including non-
current portion of liquid
bonds2) times 2.7 1.5 2.5
Acid test ratio times 1.8 0.9 1.6
Acid test ratio (including non-
current portion of liquid
bonds2) times 1.9 1.1 1.9
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
2019 2018 2018
Net debt: EBITDA (debt
covenants) times 2.7 2.3 2.3
EBITDA: Interest cover (debt
covenants) times 7.0 7.6 8.0
Return on equity - continuing
operations % 16.5 17.2 11.2
Return on net assets -
continuing operations % 13.9 17.1 14.3
Net worth per ordinary share3 cents 1 595 1 486 1 573
Tangible net worth per ordinary
share3 cents 1 013 999 998
1 EBITDA is calculated before net impairments.
2 Calculated as the non-current portion of liquid bonds can be converted
back into cash within three months.
3 Calculated on ordinary shares in issue, net of treasury shares.
15.2 Exchange rates
Key currency conversion rates used for the periods concerned were as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
31 Mar 31 Mar 30 Sep
2019 2018 2018
Rand/UK pound
Average 18.32 17.35 17.61
Closing 18.90 16.62 18.43
Rand/Euro
Average 16.11 15.36 15.58
Closing 16.27 14.57 16.41
Rand/US dollar
Average 14.15 12.78 13.11
Closing 14.50 11.86 14.14
Naira/US dollar
Average 362.50 359.75 360.61
Closing 360.23 360.00 362.79
Kwanza/US dollar
Average 315.40 189.76 222.09
Closing 326.11 218.64 300.72
RTGS dollar/US dollar
Average 2.54 1.00 1.00
Closing 3.01 1.00 1.00
16. Related party transactions
Group companies, in the ordinary course of business, entered into various
purchase and sale transactions with associates and other related parties.
The effect of these transactions being not significant, is included in the
financial performance and results of the Group.
17. Events after the reporting date
The are no events after the reporting date to note.
Administration
Independent non-executive directors
PM Surgey (appointed Chairman with effect from 10 October 2018), E Ikazoboh,
RJ Khoza, J John, NV Lila, IN Mkhari, CD Raphiri (appointed with effect
from 1 March 2019), SP Ridley (appointed with effect from 1 March 2019)
Executive directors
AM de Ruyter (Chief executive officer), GR Fullerton (Chief financial
officer)
Company Secretary
IH van Lochem
Registered office
Nampak House, Hampton Office Park, 20 Georgian Crescent East, Bryanston,
Sandton, 2191, South Africa
(PO Box 69983, Sandton, 2021, South Africa) Telephone +27 11 719 6300
Share registrar
Computershare Investor Services (Pty) Limited, Rosebank Towers, 15 Biermann
Avenue, Rosebank, 2196, South Africa
(PO Box 61051, Marshalltown, 2107, South Africa) Telephone +27 11 370 5000
Sponsor
UBS South Africa (Pty) Limited
Website http://www.nampak.com
Disclaimer
Forward-looking statements: Certain statements in this document are not reported
financial results or historical information, but forward-looking statements. These
statements are predictions of or indicate future events, trends, future prospects,
objectives, earnings, savings or plans. Examples of such forward-looking statements
include, but are not limited to, statements regarding volume growth, increases in
market share, exchange rate fluctuations, shareholder return and cost reductions.
Forward-looking statements are sometimes, but not always, identified by their use
of a date in the future or such words as believe, continue, anticipate,
ongoing, expect, will, could, may, intend, plan, could, may, and endeavour.
By their nature, forward-looking statements are inherently predictive,
speculative and involve inherent risks and uncertainties, because
they relate to events and depend on circumstances that may or may not occur in
the future.
If one or more of these risks materialise, or should underlying assumptions prove
incorrect, our actual results may differ materially from those anticipated. There
are a number of factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking statements.
These factors include, but are not limited to: changes in economic or political
conditions and changes to the associated legal, regulatory and tax environments;
lower than expected performance of existing or new products and the impact thereof
on the Group's future revenue, cost structure and capital expenditure; the Group's
ability to expand its portfolio; skills shortage; changes in foreign exchange rates
and a lack of market liquidity which holds up the repatriation of earnings;
increased competition, slower than expected customer growth and reduced customer
retention; acquisitions and divestments of Group businesses and assets and the
pursuit of new, unexpected strategic opportunities; the extent of any future
write-downs or impairment charges on the Group's assets; the impact of legal or
other proceedings against the Group; uncontrollable increases to legacy defined
benefit liabilities and higher than expected costs or capital expenditures.
When relying on forward-looking statements to make investment decisions, you
should carefully consider both these factors and other uncertainties and events.
Forward-looking statements apply only as of the date on which they are made, and
we do not undertake any obligation to update or revise any of them, whether as a
result of new information, future events or otherwise.
Date: 30/05/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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