Kap Limited · JSE:KAP
Kap — FY2023 Earnings Presentation
33 slides from Kap's earnings presentation, August 2023
Slide 1: Audited Results for the Year Ended 30 June 2023
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023 AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
Slide 2: Agenda
INTRODUCTION Patrick Quarmby OPERATIONAL REVIEW Gary Chaplin FINANCIAL REVIEW Frans Olivier GROUP OUTLOOK Gary Chaplin Q&A Gary Chaplin/Frans Olivier 2 AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
Slide 3: Introduction
INTRODUCTION PATRICK QUARMBY INDEPENDENT NON-EXECUTIVE CHAIRPERSON AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
Slide 4: Operational Review
OPERATIONAL REVIEW GARY CHAPLIN CHIEF EXECUTIVE OFFICER AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
Slide 5: Salient Features of the FY23 Results
SALIENT FEATURES OF THE FY23 RESULTS Lowlights Highlights • Domestic demand lower than expected, particularly • Exports supplemented domestic sales, enabling production in 3Q FY23, impacting sales volumes and margins efficiencies and normalising inventories • Raw material and operating cost escalati
Slide 6: Operating Environment
OPERATING ENVIRONMENT Subdued South African Continued political instability macroeconomic environment Global supply chains and uncertainty, both in with higher inflation and interest settling at a new normal South Africa and globally rates, and generally softer consumer demand Escalated electricity
Slide 7: Group Revenue Analysis
GROUP REVENUE ANALYSIS* 4 000 (Rm) > 100% 29 628 27% 1% 3 500 3% 3 000 2% 10% 2 500 27 979 2 000 1 500 1 000 500 0 FY22 PG Bison Safripol Unitrans Feltex Restonic Optix # FY23 * From continuing operations # DriveRisk was acquired on 1 December 2021. The group changed the name of the DriveRisk divisi
Slide 8: Group Operating Profit Analysis
GROUP OPERATING PROFIT ANALYSIS* 1 200 (Rm) 102 (636) 2 936 1 000 800 600 (193) 175 12 (29) 2 367 400 200 0 FY22 PG Bison Safripol Unitrans Feltex Restonic Optix # FY23 * From continuing operations # DriveRisk was acquired on 1 December 2021. The group changed the name of the DriveRisk division to O
Slide 9: Segmental Analysis
SEGMENTAL ANALYSIS Revenue* PG Bison – 18% PG Bison – 17% Safripol – 34% Safripol – 36% Unitrans – 33% Unitrans – 34% FY23 FY22 Feltex – 8% Feltex – 6% Restonic – 5% Restonic – 6% Optix – 2% Optix – 1% Operating profit PG Bison – 39% PG Bison – 28% Safripol – 32% Safripol – 48% Unitrans – 17% Unitra
Slide 10: PG Bison
PG BISON Good performance supported by competitive positioning and increased capacity Revenue Operating profit Operating margin R5 349 million R933 million 17.4% up 10% up 12% from 17.0% • Robust domestic demand in 1H23, softened in the third quarter as the frequency of loadshedding beyond Stage 4 i
Slide 11: Safripol
SAFRIPOL Lower-than-expected performance largely due to PP margin contraction and softer domestic demand Revenue Operating profit Operating margin R10 310 million R764 million 7.4% up 2% down 45% from 13.8% • Lower domestic demand, exacerbated by higher stages of loadshedding • Total sales volumes d
Slide 12: Unitrans
UNITRANS Disappointing performance following contract loss Revenue Operating profit Operating margin R10 052 million R385 million 3.8% up 3% down 33% from 5.9% • Revenue impacted by reduced activity, but supported by cost recoveries • Decline in operating profit largely attributable to Food and Agri
Slide 13: Feltex
FELTEX Improved performance supported by automotive sector recovery Revenue Operating profit Operating margin R2 301 million R211 million 9.2% up 27% up > 100% from 2.0% • Good recovery in the automotive industry following disruptions in prior year: • Automotive assembly volumes increased by 32% • L
Slide 14: Restonic
RESTONIC Initial benefits from restructuring of operations realised Revenue Operating profit Operating margin R1 632 million R81 million 5.0% up 1% up 17% from 4.3% • Consumer demand weaker than prior year: • Impact of higher interest rates and inflation • Retail trade disruption due to loadshedding
Slide 15: Financial Review
FINANCIAL REVIEW FRANS OLIVIER CHIEF FINANCIAL OFFICER AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
Slide 16: Salient Features of the FY23 Results
SALIENT FEATURES OF THE FY23 RESULTS Revenue EBITDA Operating profit up 6% to R29.7 billion down 11% to R3.9 billion down 19% to R2.4 billion Operating profit margin Headline earnings per share Earnings per share down 250 bps to 8.0% down 43% to 42.7 cents down 76% to 16.7 cents Cash generated from
Slide 17: Financial Analysis: Income Statement
FINANCIAL ANALYSIS Income statement FY23 FY22 Price increases offset raw From continuing operations Rm Rm Variance material cost escalations Revenue 29 628 27 979 6% Insurance income EBITDA 3 864 4 340 (11%) of R343 million: Depreciation and amortisation (1 497) (1 404) 7% – Safripol R216 million –
Slide 18: Financial Analysis: Capital Items
FINANCIAL ANALYSIS Capital items FY23 FY23 Unitrans Other Gross Net * R713 million Rm Rm Rm Rm non-cash impairments Impairments 787 26 813 641 of trademarks and goodwill relating Goodwill 51 – 51 51 to Unitrans Trademarks 662 – 662 519 – South Africa’s Property, plant and equipment 74 23 97 69 muted
Slide 19: Financial Analysis: Tax Rate Reconciliation
FINANCIAL ANALYSIS Tax rate reconciliation FY23 FY22 Impairment of goodwill From continuing operations % % and intangible assets Statutory tax rate 27.0 28.0 of R704 million Impairment of goodwill and intangible assets 6.2 0.9 In the prior year: Change in corporate tax rate* – (3.9) – Change in corp
Slide 20: Financial Analysis: Balance Sheet
FINANCIAL ANALYSIS Balance sheet 30 Jun 23 30 Jun 22 Significant investment Rm Rm in operating assets Property, plant and equipment 15 094 14 130 Intangible assets Right-of-use assets 390 426 lower due to Unitrans Intangible assets 1 728 2 363 impairment Goodwill 662 683 Capital work in progress Bio
Slide 21: Financial Analysis: Working Capital Breakdown
FINANCIAL ANALYSIS Working capital breakdown Significant focus on working capital management 1 350 (Rm) Inventory impacted by raw material 83 (120) and cost escalations, mitigated through 1 150 63 higher inventory turn 2 462 2 488 Receivables include R258 million for insurance 950 claims; R77 millio
Slide 22: Financial Analysis: Cash Flow
FINANCIAL ANALYSIS Cash flow FY23 FY22 EBITDA decreased Rm Rm by 11% EBITDA 3 864 4 340 Continued efforts Net revaluation of biological assets (24) 77 to normalise working Discontinued operations – 10 capital throughout the year Other non-cash adjustments 37 117 Cash generated from trading 3 877 4 5
Slide 23: Financial Analysis: Cash Flow (continued)
FINANCIAL ANALYSIS Cash flow (continued) FY23 FY22 Continued investment Rm Rm in capital projects Cash flow from operating activities 2 606 2 758 FY22: Acquisition of Investing activities (2 298) (2 736) Optix (R379 million) Expansion capex* (1 326) (1 127) Free cash flow Replacement capex^ (871) (1
Slide 24: Investment to Drive Growth and Efficiency Benefits
FINANCIAL ANALYSIS Investment to drive growth and efficiency benefits Capital expenditure (Rm) Material and strategic items PG Bison 2 500 MDF expansion Boksburg value-add expansion (MFB & gloss) 2 194 2 197 of R1 875 million of R197 million 1 127 1 326 FY22: R152 million Pre-FY22: R31 million 2 000
Slide 25: Treasury Activity: Movement in Net Debt
TREASURY ACTIVITY Movement in net interest-bearing debt Investing activities 4 950 (Rm) of R2.3 billion 240 8 027 4 450 2 300 27 (29) (9) 43 Dividends of R751 million 7 459 (2 004) paid in relation to FY22 3 950 Decrease of R1.9 billion 3 450 since 31 December 2022 2 950 2 450 1 950 1 450 950 450 -5
Slide 26: Treasury Activity: Debt Funding Activities
TREASURY ACTIVITY Significant debt funding activities for the year The following significant funding activities were concluded during the year: Corporate bonds issued with three-year tenures: Large maturities intentionally replaced by smaller, more • KAP026 – Listed: R340 million frequent issuances
Slide 27: Treasury Activity: Debt Serviceability Ratios
TREASURY ACTIVITY Debt serviceability ratios Net debt: EBITDA 30 Jun 23 30 Jun 22 target < 2.5 times Gross interest-bearing debt (Rm) 9 480 9 189 EBITDA: interest cover Net interest-bearing debt (Rm) 8 027 7 459 target > 4.5 times Equity excluding non-controlling interest (Rm) 11 428 11 531 Gearing
Slide 28: Treasury Activity: Debt Maturity
TREASURY ACTIVITY Net interest-bearing debt maturity as at 30 June 2023 Maturities for FY24 (Rm) will be refinanced 5 000 4 253 4 000 Available facilities Cash and cash equivalents, net of overdrafts 3 000 Debt repayments Vehicle and asset finance 2 000 Leases 1 000 0 (101) -1 000 (980) -2 000 (1 63
Slide 29: Group Outlook
GROUP OUTLOOK GARY CHAPLIN CHIEF EXECUTIVE OFFICER AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
Slide 30: Group Outlook
GROUP OUTLOOK • Current challenging macroeconomic environment expected to persist • Our divisions will focus on: • Domestic market share gains and further growth in export markets, at favourable margins • Further price adjustments required to recover cost escalations • Targeted cost reductions • Con
Slide 31: Q&A
Q&A AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
Slide 32: Appendix
APPENDIX AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2023
Slide 33: Group Margin Analysis
GROUP MARGIN ANALYSIS* KAP operating profit margin decreased 250 bps to 8% PG Bison Safripol Unitrans Unitrans Africa FY23 17.4% FY23 7.4% FY23 3.8% FY23 1.2% FY22 17.0% FY22 13.8% FY22 5.9% FY22 2.2% FY21 14.7% FY21 5.7% FY21 7.4% FY21 10.5% FY20 10.1% FY20 2.2% FY20 8.1% FY20 11.5% FY19 20.0% FY19