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TRANSPACO LIMITED - Reviewed provisional condensed consolidtaed results for the year ended 30 June 2019 and dividend announcement.

Release Date: 20/08/2019 16:28
Code(s): TPC     PDF:  
 
Wrap Text
Reviewed provisional condensed consolidtaed results for the year ended 30 June 2019
and dividend announcement.

TRANSPACO LIMITED
Registration number 1951/000799/06
ISIN: zae000007480
Share code: TPC
("Transpaco" or "the group")

REVIEWED PROVISIONAL CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2019 
AND DIVIDEND ANNOUNCEMENT

HIGHLIGHTS
- Net asset value per share 1 940 cents
- HEPS down 42% to 172,3 cents
- Total dividend per share 80 cents

INTRODUCTION
2019 has been a challenging year for Transpaco.

A stagnant economy compounded by the three-month plastic industry strike resulted in the 41,3% decline in 
the group's performance. Operating profit fell by 35,4% notwithstanding an increase in revenue of 15,3%. 
The increase in revenue was attributable to the inclusion of Future Packaging for the full year compared 
to the four months in the previous year.

Poor trading conditions due to the state of the economy and reduced consumer spend prevented the recovery 
of increased costs and did not allow for expected turnover growth.

The strike occurred during Transpaco's busiest period negatively affecting three operations directly and 
several others indirectly. 

The demand for post-consumer recycled material remains flat and has been adversely affected by international
market forces. 

Despite stringent cost control, continued focus on sales and marketing and sound working capital management, 
the operating margin decreased to 4,5% (June 2018: 8,1%).

Future Packaging is a high-turnover, low-margin trading business. As a consequence this contributed to the 
reduction in the group's operating margin. 

The anti-plastic debate continues and in particular the unfavourable sentiment towards retail plastic bags. 
Transpaco is actively engaging with all interested parties, including the Department of Environmental Affairs,
retail shopping mall landlords, retailers and environmental bodies, in an effort to dispel misconceptions 
related to the overstated impact retail plastic bags have on the environment.

The paper division including general packaging was also negatively impacted by economic difficulties.

FINANCIAL RESULTS
                                                                                   %    
                                                    June         June      increase/    
                                                    2019         2018      (decrease    
Revenue (R'm)                                    1 985,1      1 721,9           15,3    
Operating profits (R'm)                             89,9        139,2          (35,4)   
Total comprehensive income (R'm)                    57,2         97,5          (41,3)   
Headline earnings (R'm)                             56,7         97,0          (41,6)   
Earnings per share (cents)                         173,9        298,8          (41,8)   
Headline earnings per share (cents)                172,3        297,4          (42,0)   
Diluted headline earnings per share (cents)        172,3        297,4          (42,0)   
Net asset value per share (cents)                1 940,0      1 886,0            2,9    

The weighted average number of shares in issue in calculating EPS and HEPS was 32 886 000 
(June 2018: 32 629 000). 

Cash generated from operations decreased to R124,4 million (June 2018: R125,7 million). Cash and cash 
equivalents at year-end were R36,7 million (June 2018: R60,4million). Efficient working capital 
management minimised net interest paid and resulted in Transpaco's net interest-bearing debt-to-equity 
position being restricted to 10,5% (June 2018: 11,6%) while maintaining a robust balance sheet. 

PROSPECTS 
The South African trading environment remains difficult.

Management will continue its proven business strategy of maintaining strict financial control and 
generating revenue growth.

Transpaco Cores and Tubes has entered the paper straw market with the establishment of a dedicated 
paper straw production facility. 

Transpaco has commenced manufacturing retail shopping bags produced from compostable materials as an 
alternative solution to traditional retail plastic bags.

Further, we are exploring the viability of establishing a retail bag production facility to manufacture 
bags from two alternate materials. 

Strategic acquisition opportunities when identified, will be pursued.

TRANSFORMATION
Transpaco's ninth independent accreditation process in respect of Black Economic Empowerment (BEE) 
reflected a Level 4 value added contributor, which has improved on the previous year's rating 
(June 2018: Level 6) due to increased transformation spend and attention to all scorecard categories. 
Transpaco has registered for the YES programme and employed 60 youth in its Back to School operation. 
We are expecting a substantial improvement in our BEE level at the next evaluation as a result of 
the initiative. 

DIVIDEND
The board has declared a final gross cash dividend out of income reserves of 50,0 cents per share, resulting 
in total dividends of 80,0 cents per share for the year ended 30 June 2019 (June 2018: 135,0 cents per share). 
After applying the dividend withholding tax of 20%, a net final dividend of 40,00000 cents per share will 
be paid to those shareholders who are not exempt from the dividends tax. The issued shares at the date of 
declaration is 32 886 359 ordinary shares. The Income Tax reference number is 9975/112/71/6.

The salient dates for the dividend are as follows:
Last date to trade shares cum dividend                  Tuesday, 10 September 2019
Shares trade ex dividend                              Wednesday, 11 September 2019
Record date                                              Friday, 13 September 2019
Payment date                                             Monday, 16 September 2019

Share certificates may not be dematerialised or rematerialised between Wednesday, 11 September 2019 and 
Friday, 13 September 2019, both days inclusive.

BASIS OF PREPARATION AND ACCOUNTING POLICIES
The group's annual financial results have been prepared in accordance with the recognition and measurement 
criteria of International Financial Reporting Standards (IFRS) issued by the International Accounting 
Standards Board (IASB), its interpretations issued by the IFRS Interpretations Committee, the SAICA Financial 
Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as 
issued by the Financial Reporting Standards Council, the JSE Listings Requirements and the Companies of 
South Africa. The principal accounting policies are consistent in all material respects with those applied 
in the preparation of the group's annual financial statements for the year ended 30 June 2018, except for 
the new standards adopted as detailed below. The group has not early adopted any other standard, 
interpretation or amendment that has been issued but is not yet effective. 

The condensed consolidated financial statements do not include all the information and disclosures 
required in the annual financial statements and should be read in conjunction with the group's annual 
financial statements for the year ended 30 June 2019. The presentation and disclosure complies with 
International Accounting Standard (IAS) 34.

The fair value of the assets and liabilities approximate the carrying amounts largely due to the short-term 
maturities of these instruments. Interest-bearing borrowings are not materially different from their calculated 
fair values due to market-related rates embedded into the terms of these borrowings.

The adoption of certain new standards, which became effective in the current period, has resulted in minor 
changes to accounting policies and disclosure, none of which have had a material impact on the financial 
position or performance of the group.

IFRS 9: FINANCIAL INSTRUMENTS
The group adopted IFRS 9 with effect from 1 July 2018 using the modified retrospective approach and comparative
information has not been restated.

Classification and measurement
IFRS 9 requires all financial assets to be classified and measured on the basis of the group's business 
model for managing the financial assets and the contractual cash flow characteristics of the financial 
assets. Management have assessed the business models which apply to the financial assets held by the group 
and the financial instruments have been classified into the appropriate IFRS 9 categories. The group's 
financial assets comprise trade receivables and cash and cash equivalents. These assets are measured at 
amortised cost under both IFRS 9 and IAS 39.

Impairment
The adoption of IFRS 9 has 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. 

For trade and other receivables, the group has applied the standard's simplified approach and has calculated 
ECLs based on lifetime expected credit losses. The group calculates ECL on an individual debtor basis based 
on the group's historical credit loss experience, adjusted for forward-looking factors specific to the 
debtors and the economic environment.

There is no material impact from the application of IFRS 9.

IFRS 15: REVENUE FROM CONTRACTS WITH CUSTOMERS
The group adopted IFRS 15 with effect from 1 July 2018 using the modified retrospective approach and comparative
information has not been restated.

The group's revenue from contracts with customers arises from its principal activities of sales of goods. 
This generally includes one performance obligation. 

The group has concluded that revenue from sale of goods should be recognised at the point in time when 
control of the items is transferred to the customer, generally at the point of sale. Therefore, the adoption 
of IFRS 15 did not have a material impact on the timing of revenue recognition.

IFRS: 16 LEASES 
IFRS 16 introduces significant changes to lessee accounting as it removes the distinction between operating and
finance leases under IAS 17 and requires a lessee to recognise a right-of-use asset and a lease liability at 
commencement for all leases, except for short-term leases and leases of low value assets. IFRS 16 will be 
effective for the group for the financial year commencing 1 July 2019. 

IFRS 16 will impact most significantly the group's leases relating to property, plant, equipment and vehicles. 
The group has elected to apply IFRS 16 using the modified retrospective approach. 

The transition will relate to the capitalising of property, plant and onto the statement of financial position 
in the form of a right of use asset, together with the corresponding lease liability. Changes to the statement 
of comprehensive income will result in the current operating lease costs being replaced by an amortisation 
of the right-of-use asset and calculated lease finance costs on the interest line. Other areas of the 
statutory metrics that will be impacted by the adoption of the standard include operating profit, EBITDA 
and earnings per share. We will provide first time disclosure in the publication of our 2019 annual 
financial statements.

Review by independent auditors
The group's auditors, Ernst & Young Inc., have reviewed the provisional condensed consolidated financial 
information for the year. The unmodified review report is available for inspection at Transpaco's 
registered office. The review was performed in accordance with ISRE 2410: Review of Interim Financial 
Information Performed by the Independent Auditor of the Entity. Any reference to future financial 
performance included in this announcement has not been reviewed or reported on by the group's 
external auditors.

Approval and preparation
These provisional condensed consolidated financial results have been prepared under the direction and 
supervision of the Financial Director, L Weinberg CA(SA). 

On behalf of the board

DJJ Thomas                     PN Abelheim              L Weinberg
Non-executive Chairman         Chief Executive          Financial Director

Date: 20 August 2019

STATEMENT OF COMPREHENSIVE INCOME                                    
                                                                       Reviewed                      Audited           
                                                                      12 months           %        12 months          
R'000                                                                 June 2019      change        June 2018          
Revenue^                                                              1 985 139        15,3        1 721 876          
Cost of sales                                                        (1 325 883)                  (1 095 588)         
Profit before operating costs and depreciation                          659 256         5,3          626 288          
Operating costs                                                        (525 951)                    (446 423)         
Depreciation                                                            (43 437)                     (40 656)         
Operating profit                                                         89 868       (35,4)         139 209          
Finance income                                                            1 284                        3 237          
Finance costs                                                           (12 345)                      (7 404)         
Profit before taxation                                                   78 807       (41,6)         135 042          
Taxation                                                                (21 619)                     (37 556)         
Profit for the year                                                      57 188                       97 486          
Other comprehensive income                                                    -                            -          
Total comprehensive income for the year                                  57 188       (41,3)          97 486          
Weighted average ranking number of shares in issue ('000)                32 886                       32 629          
Diluted weighted average ranking number of shares in issue ('000)        32 886                       32 629          
Earnings per share (cents)                                                173,9       (41,8)           298,8          
Diluted earnings per share (cents)                                        173,9       (41,8)           298,8          
Headline earnings per share (cents)                                       172,3       (42,0)           297,4          
Diluted headline earnings per share (cents)                               172,3       (42,0)           297,4          
Dividend per share (cents)*                                                80,0       (40,7)           135,0          
*Includes interim dividend of 30 cents (June 2018 - 45 cents) and a  
dividend declared after the period of 50 cents (June 2018 - 90 cents 
Reconciliation of headline earnings (R'000)                                                                           
Basic earnings                                                           57 188                       97 486          
Profit on disposal of property,plant and equipment                         (512)                        (462)         
Headline earnings                                                        56 676       (41,6)          97 024          
^Refer to segmental analysis


STATEMENT OF CHANGES IN EQUITY
                                      Share         Share          Other       Distributable                           
R'000                               capital       premium       reserves             reserve           Total          
Balance at 30 June 2017                 328        11 019          4 005             545 873         561 225          
Profit for the year                       -             -              -              97 486          97 486          
Other comprehensive income                -             -              -                   -               -          
Total comprehensive income                -             -              -              97 486          97 486          
Transfer                                  -             -         (4 005)              4 005               -          
Dividend paid                             -             -              -             (38 580)        (38 580)          
Balance at 30 June 2018                 328        11 019              -             608 784         620 131          
Profit for the year                       -             -              -              57 188          57 188          
Other comprehensive income                -             -              -                   -               -          
Total comprehensive income                -             -              -              57 188          57 188          
Dividend paid                             -             -              -             (39 463)        (39 463)          
Balance at 30 June 2019                 328        11 019              -             626 509         637 856          


STATEMENT OF FINANCIAL POSITION                                                                             
                                                                               Reviewed              Audited           
                                                                              12 months            12 months           
R'000                                                                         June 2019            June 2018          
ASSETS                                                                                                                
Non-current assets                                                              435 852              432 831          
 Property, plant and equipment                                                  349 713              347 019          
 Intangibles                                                                     17 855               17 855          
 Goodwill                                                                        64 182               64 182          
 Deferred taxation                                                                4 102                3 775          
Current assets                                                                  641 346              649 978          
 Inventories                                                                    215 718              259 846          
 Trade and other receivables                                                    375 858              328 796          
 Taxation receivable                                                              1 872                  888          
 Cash and cash equivalents                                                       47 898               60 448          
                                                                 
TOTAL ASSETS                                                                  1 077 198            1 082 809          
EQUITY AND LIABILITIES                                                                                                
Capital and reserves                                                            637 856              620 131          
 Issued share capital                                                               328                  328          
 Share premium                                                                   11 019               11 019          
 Distributable reserve                                                          626 509              608 784          
Non-current liabilities                                                         117 249              158 362          
 Interest-bearing borrowings                                                     75 597              113 811          
 Deferred income                                                                  9 071               11 053          
 Deferred taxation                                                               32 581               33 498          
Current liabilities                                                             322 093              304 316          
 Trade payables and accruals                                                    251 234              250 464          
 Provisions                                                                      28 242               32 145          
 Current portion of interest-bearing borrowings                                  28 152               18 790          
 Deferred income                                                                  2 009                2 103          
 Taxation payable                                                                 1 241                  814          
 Bank overdraft                                                                  11 215                    -          
                                                                 
TOTAL EQUITY AND LIABILITIES                                                  1 077 198            1 082 809          
Number of shares in issue ('000)                                                                                      
Number of shares (net of treasury shares)                                        32 886               32 861          
Net movement in treasury shares                                                       -                   25          
Ranking number of shares                                                         32 886               32 886          
Salient features                                                                                                      
Net asset value per share (cents)                                                 1 940                1 886          
Operating margin %                                                                  4,5                  8,1          
Net interest-bearing debt-to-equity ratio %                                        10,5                 11,6          


CAPITAL COMMITMENTS
                                                                               Reviewed              Audited           
                                                                              12 months            12 months           
R'000                                                                         June 2019            June 2018          
Capital expenditure authorised and contracted                                                                         
Property, plant and equipment                                                     6 146               12 812          


STATEMENT OF CASH FLOWS
                                                                               Reviewed              Audited           
                                                                              12 months            12 months           
R'000                                                                         June 2019            June 2018          
Cash flow from operating activities                                                                                   
 Cash generated from operations                                                 124 451              125 713          
 Dividends paid                                                                 (39 463)             (38 580)         
 Finance income received                                                          1 284                3 237          
 Finance costs paid                                                             (12 345)              (7 404)         
 Taxation paid                                                                  (23 420)             (35 409)         
Net cash inflow from operating activities                                        50 507               47 557          
Cash flow used in investing activities                                                                                
 Proceeds on disposal of property, plant and equipment                            1 617                1 418          
 Acquisition of business                                                              -              (96 571)         
 Expansion and replacement of property, plant and equipment                     (47 037)             (38 737)         
Net cash outflow from investing activities                                      (45 420)            (133 890)         
Cash flow used in financing activities                                                                                
 Proceeds from borrowings                                                        64 775               66 434          
 Repayment of borrowings                                                        (93 627)             (19 187)         
Net cash (outflow)/inflow from financing activities                             (28 852)              47 247          
Net movement in cash for the year                                               (23 765)             (39 086)         
Cash and cash equivalents at the beginning of the year                           60 448               99 534          
Cash and cash equivalents at the end of the year                                 36 683               60 448          


SEGMENTAL ANALYSIS
                                                                        Paper      Properties                         
                                                       Plastic      and Board       and Group          Total          
R'000                                                 Products       Products        Services          Group          
Revenue from customers - 2019                        1 102 473        882 666               -      1 985 139          
Revenue from all customers                           1 182 391        938 566               -      2 120 957          
Less revenue from internal customers                    79 918         55 900               -        135 818          
Revenue from customers - 2018                        1 126 945        594 931               -      1 721 876          
Revenue from all customers                           1 182 480        637 172               -      1 819 652          
Less revenue from internal customers                    55 535         42 241               -         97 776          
Operating profit - 2019                                 35 495         36 904          17 469         89 868          
Operating profit - 2018                                 83 980         43 214          12 015        139 209          
Profit before tax - 2019                                32 237         36 394          10 176         78 807          
Profit before tax - 2018                                81 242         42 073          11 727        135 042          
Capital expenditure - 2019                              27 662         10 425           8 950         47 037          
Capital expenditure - 2018                              26 044          7 660           5 033         38 737          
Assets - 2019                                          582 899        341 887         152 412      1 077 198          
Assets - 2018                                          562 791        365 469         154 549      1 082 809          
Liabilities - 2019                                     202 878        130 899         105 565        439 342          
Liabilities - 2018                                     210 443        134 141         118 094        462 678          


DIRECTORS
DJJ Thomas (Chairman)*; PN Abelheim (Chief Executive); L Weinberg (Financial Director); HA Botha?; 
SR Bouzaglou; B Mkhondo?; SP van der Linde (Lead Independent Director)? 
*non-executive    ?independent non-executive

Auditors
Ernst & Young Inc. 

Company Secretary 
HJ van Niekerk 

Sponsor 
Investec Bank Limited 

Registered office
331 6th Street, Wynberg, Sandton 

Transfer secretaries 
Computershare Investor Services (Pty) Limited,
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg 

Website www.transpaco.co.za

https://senspdf.jse.co.za/documents/2019/jse/isse/TPC/prelims.pdf


Date: 20/08/2019 04:28:00
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