KAP reports growth across all major operational areas

Johannesburg - Diversified industrial group, KAP Industrial Holdings [JSE:KAP], which incorporates logistics and industrial businesses, reported growth across all major areas of operations in the group’s interim results announcement for the six months ended 31 December 2016.

KAP reported a 10% increase in revenue for the first half of its 2017 financial year to R9.0bn (H1:2016 – R8.2bn) and a 24% improvement in operating profit to R1.1 billion (H1:2016 – R898 million), which resulted in operating margins continuing to improve to 12.3% from the previous year’s 11%.

During the period under review cash flow from operations increased by 27%, supported by earnings growth and improved working capital management.
 
“The results for the period under review reflect disciplined execution of the group’s strategy by our management teams,” says Gary Chaplin, chief executive officer of KAP.

“These results were driven primarily by organic growth and market share gains which are the result of recent technology investments, improved efficiencies and increased integration across the group.”

In line with its growth strategy, KAP successfully concluded three acquisitions in the period under review. Effective 1 July 2016, KAP acquired a controlling stake in Xinergistix, a logistics company which provides complementary services to those of Unitrans.

And on 1 September 2016, the group acquired 100% of Lucerne, also a logistics company whose operations are complementary to those of Unitrans in terms of bulk liquid tanker transport.
 
With an effective date subsequent to the reporting period, 1 January 2017, KAP acquired 100% of Safripol, for R4.1 billion in what Chaplin explains as “a game changing transaction for KAP in terms of scale and in terms of establishing KAP in the Chemical sector”.

Safripol manufactures polypropylene and high density polyethylene used to manufacture plastic injection and blow moulded products.

“Safripol is similar to our Hosaf operations in terms of its business model and the products manufactured by Safripol are complementary to those produced by Hosaf,” explains Chaplin.

The group raised R1.5bn equity through a fully subscribed rights issue, a further R1.4bn through a combination of private and public bond issuances and R2.8bn of new term debt facilities.

“By maintaining our focus on the group’s strategy to improve efficiencies and reduce costs, while simultaneously optimising and expanding existing operations, we aim to grow market share in all areas of operation," said Chaplin.

"The acquisition and integration of Lucerne as well as the increased shareholding in Xinergistix have already produced exciting new growth opportunities for our Diversified Logistics segment, while as mentioned, the Safripol acquisition is a real game changer for the Industrial division. We are optimistic about the prospects for KAP, the environment is challenging, however, KAP is well positioned to successfully navigate these challenges.”