JSE-listed KAP Industrial Holdings grew its revenue by 16% to R13.29-billion in the interim period to the end of December, up from R11.48-billion during the first half of 2018, the company reported on Tuesday.
The diversified industrial firm, however, posted lower headline earnings of R612-million, compared with R738-million a year earlier, mainly owing to the impact of a R194-million non-cash broad-based black economic empowerment (B-BBEE) transaction.
The noncash cost relates to the B-BBEE transaction concluded in September, whereby 45% of logistics division Unitrans Supply Chain Solutions was disposed of.
Core headline earnings, which excludes the B-BBEE cost, increased by 6% year-on-year to 30.1c a share.
KAP reported that the implementation of its strategy had produced solid results for the period, despite the challenging and uncertain economic environment, particularly with regard to cash generated from operations, which increased by 83% to R877-million.
Strong cash generation resulted in interest-bearing debt decreasing by R773-million to R6.687-billion. The debt-to-earnings before interest, tax, depreciation and amortisation (Ebitda) ratio and the Ebitda to interest cover ratio remained within target levels at 1.6 times and 5.5 times respectively.
In previous financial periods, the group had embarked on a number of significant expansion projects at its operations and concluded a number of acquisitions, resulting in the investment of R7.8-billion over the 24 months to June 30, 2018.
“In view of the scale and complexity of these investments, the strategy set by the board for the 2019 financial year was to ensure the completion of the expansion projects and the effective integration of the acquisitions into the group, with the focus on market share growth, extraction of value and generation of cash. Management have made good progress during the period in this regard,” the company said.
KAP stated that the macroeconomic and political environment in South Africa was expected to remain challenging and uncertain during the second half of the financial year in the lead-up to the national elections in May.
The company noted that various new capacity expansion projects and technology investments had been initiated that would be commissioned during the 2020 financial year and that management would continue to seek out further capacity expansion opportunities, in line with the group’s strategy.
Acquisition opportunities that meet the group’s strategic requirements and create shareholder value remain a key element of the growth objectives of management, it added.