KAP to take a Covid-19 klap


KAP to take a Covid-19 klap

Published Date: 2020-06-29 | Source: Stephen Gunnion | Author: Stephen Gunnion

KAP to take a Covid-19 klap

The industrial group says most of its businesses were performing well until faced with Covid-19 and the lockdown.

KAP Industrial says its cash flow has remained positive throughout the lockdown despite the severe restrictions imposed on some of its operations and the general reduction in consumer spending. However, the group has warned the full-year earnings will be impacted. There won't be a dividend either after it took steps to reduce operating costs and optimise its cash flows to ensure it remained liquid during and after the lockdown.

In a pre-close update and trading statement, KAP said the resilience of its diversified industrial business model positioned it well for a post-Covid recovery. It has a wide spread of interests, ranging from integrated timber company PG Bison and automotive components business Feltex, to bedding company Restonic.

Prior to the lockdown, it said most of its divisions had performed well for the year, with most of them continuing to operate at reduced capacity since then. Automotive Components was most severely impacted by Covid-19 due to some international automotive assembly customers suspending operations before the official SA lockdown.

While it hadn't yet completed annual impairment testing of its operations, KAP said it was likely that earnings before interest, tax, depreciation and amortisation (EBITDA), seen as a key measure of profitability, would be 19% to 28% lower than last year. Operating profit before capital items would be 35-48% lower, while earnings and headline earnings per share would likely fall by at least 45% for the year to end-June.

The group said its financial forecasts showed it was unlikely to breach relevant covenant ratios and would have sufficient banking facilities and liquidity to settle a R500 million corporate bond, which matures in September.

In April, the group warned that it was highly unlikely it would declared a dividend for the year.

Its shares fell 1.2% to R2.50 on Friday. The update was released at the close of trade.

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