The board of directors report on the results for the six months ended 31 December 2007. Operating profit reduced by 29% from the prior period due to the effects of the strike in the automotive division, which ended in a three-year settlement for both OEMs and component manufacturers. Headline earnings per share decreased from 23,5 cents to 12,3 cents. Revenue for the period increased by 28% due largely to the inclusion of Brenner Mills.
Balance sheet and cash flow
The interest-bearing debt-to-equity ratio at the end of the reporting period remained stable at 43%. Capital expenditure of R53,2 million was incurred during the period, R10,7 million of which was incurred in Hosaf in respect of the capacity expansion, and R18,2 million of which was in the automotive division for the roll-out of the new vehicle models. With the exception of the Hosaf expansion, future capital expenditure is expected to be in line with depreciation.
Industrial segment
FELTEX AUTOMOTIVE
Operating margins came under pressure during the period, due to the strike affecting the automotive component manufacturers, and the slow introduction of the new Toyota Corolla and the Mercedes Benz C Class.
INDUSTRIAL FOOTWEAR
An improved performance by the Mossop division and continued demand for gumboots has resulted in a good performance by the division. Continued expansion of the construction and mining sections will ensure the future growth of this division.
HOSAF
Demand for PET has been sluggish due to continued cold weather affecting consumption of carbonated soft drinks, but has improved in early 2008. The announced increase in capacity is on track to be completed by December 2008.
Consumer segment
JORDAN & CO
Fashion footwear volumes have decreased due to the pressure on the retail sector of the economy, but ongoing attention to profitability and its strong brands will ensure that Jordan is well positioned in the market.
BULL BRAND FOODS
The cannery continued its good performance during the period. A continued focus on cost control and the loss of a key competitor in the fresh meat division should increase the demand for fresh meat.
BRENNER MILLS
Conditions for maize milling remain favourable. Cost reductions and increased motivation of staff has borne fruit in the Brenner results.
GLODINA
Demand was strong during the peak season, the plant is running efficiently at full capacity and there has been no downturn in revenue.
Corporate activity
There was no corporate activity during the period.
Distribution
In accordance with group policy, no interim distribution will be declared.
Corporate governance
The directors subscribe to the principles incorporated in the Code of Corporate Practices and Conduct as set out in the King Report on Corporate Governance (King II) and comply therewith.
Sustainability
The group recognises the impact of its operations on society and the environment, and is constantly striving to improve the well-being of all stakeholders in this regard.
Directors and officers
There were no changes to the directors and officers during the period.
Post balance sheet events
There have been no material events subsequent to 31 December 2007 and up to the date of this report that would require adjustment or disclosure.
Outlook
Demand for products in the consumer segment is likely to slow in the short term, but a sustained weaker exchange rate will have a positive effect on the results of the manufacturing operations.
For and on behalf of the board
| C E Daun | P C T Schouten |
| Chairman | Chief executive officer |
Paarl
Wednesday 5 March 2008
CORPORATE INFORMATION
Non-executive directors: C E Daun* (Chairman), M J Jooste, J B Magwaza, I N Mkhari, F Möller*, S H Nomvete, D M van der Merwe * German
Executive directors: P C T Schouten (CEO), J P Haveman (CFO)
Registration number: 1978/000181/06 Share code: KAP ISIN: ZAE000059564
Registered address: 1st Floor, New Link Centre, 1 New Street, Paarl, 7646
Postal address: PO Box 3639, Paarl, 7620.
Telephone: 021 872 8726. Facsimile: 021 872 8904
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
Address: 70 Marshall Street, Johannesburg, 2001
Postal address: PO Box 61051, Marshalltown, 2107
Telephone: 011 370 5000. Facsimile: 011 327 3003
Sponsor: PSG Capital (Proprietary) Ltd
