unaudited interim results for the six months · pdf filempact limited unaudited interim...

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 June 2017 and declaration of scrip distribution with a cash dividend alternative

MPACT LIMITED UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017

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UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017 AND DECLARATION OF SCRIP DISTRIBUTION WITH A CASH DIVIDEND ALTERNATIVESALIENT FEATURES• Revenue increased by 3.1% to R4.8 billion (June 2016: R4.7 billion)

• EBITDA of R433 million (June 2016: R552 million)

• Underlying operating profit of R169 million (June 2016: R322 million)

• Underlying earnings per share of 34.3 cents (June 2016: 95.2 cents)

• Return on Capital Employed (“ROCE”) of 10.6% (June 2016: 16.7%)

• Gearing at 36.3% (June 2016: 33.8%)

• Interim gross dividend of 15 cents per share (June 2016: 30 cents per share)

COMPANY PROFILEMpactisoneoftheleadingpaperandplasticspackagingbusinessesinsouthernAfrica,listedontheJSE’sMainBoardintheIndustrial-PaperandPackagingsector.TheGrouphasleadingmarketpositionsinsouthernAfricainrecoveredpapercollection,corrugatedpackaging,recycled-basedcartonboardandcontainerboard,polyethylene-terephthalate(“PET”)preformsandtrays,recycledPET(“rPET”),styrenetraysandplasticjumbobins.TheseleadingmarketpositionsallowMpacttomeettheincreasingrequirementsofitscustomersandachieveeconomiesofscaleandcosteffectivenessatthevariousoperations.

Mpacthas42operatingsites,ofwhich21aremanufacturingoperations,inSouthAfrica,Namibia,MozambiqueandBotswana.SalesinSouthAfricaaccountforapproximately89%ofMpact’stotalrevenueforthecurrentperiodwhilethebalancewaspredominantlytocustomersintherestofAfrica.

Asat30June2017Mpactemployed4,994people.(December2016:4,998people)

COMMENTARYMpact’sresultsforthesixmonthsended30June2017reflectchallengingtradingandmacro-economicconditions.Whencomparedtothesameperiodlastyear,profitabilitywasnegativelyimpactedbylowersalesvolumesinboththePaperandPlasticsbusinesses andhigherrecoveredpapercosts.Inaddition,thescheduleddowntimefortheR765millionFelixtonpapermillupgradeproject,whichisduetobecompletedasplannedduringthesecondhalfof2017,resultedinlostcontributionofR24millionfortheperiod.

GROUP PERFORMANCEGrouprevenueofR4.8billionwas3.1%higherthanthecomparableprioryearperiod.ExcludingRemade,whichwasacquiredinMay2016,Grouprevenueincreased0.3%withexternalsalesvolumesdeclining1.8%onthebackoflowerdomesticdemandandincreasedcompetition,partiallyoffsetbyincreasedexports.

Earningsbeforeinterest,tax,depreciationandamortisation(EBITDA)ofR432.6milliondeclinedby21.7%duetolowerdomesticsalesvolumesinthePaperandPlasticsbusinessesandhigherrecoveredpapercosts.

UnderlyingoperatingprofitofR169.1milliondeclinedby47.4%onthebackofhigherdepreciationwhencomparedtotheprioryearperiod.

ReturnonCapitalEmployed of10.6%(June2016:16.7%)reflectstheweakertradingenvironmentandrecentcapitalinvestmentswhichhavenotyetcontributedtoprofitability

Paper businessRevenueinthePaperbusinessgrew7.4%toR3.7billion. RevenueexcludingRemadeincreased3.7%whileexternalsalesvolumesdeclined1.7%.

A combinationofincreasedcompetition, theeffectsofdroughtonfruitpackagingandsubduedconsumerdemandresultedinlowerdomesticsalesvolumes comparedtotheprioryearperiod.Lowerdomesticcontainerboardsaleswereoffsetbyincreasedexports.

Higherinternationalrecoveredpaperpricesandincreasedlocaldemandresultedinhigherrecoveredpaper costswhichcouldnotberecoveredinthesellingpricesofcontainerboardorcartonboard.

UnderlyingoperatingprofitofR177.0millionwasdown39.4%,onthebackoflowerdomesticsalesvolumes,higherrecoveredpapercostsandR24millionlostcontributionrelatedtotheplannedprojectdowntimeattheFelixtonpapermill


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PlasticsbusinessRevenueinthePlasticsbusinessdecreasedby8.5%toR1.2billionduetolowersalesvolumesandloweraveragesellingprices.

Totalexternalsalesvolumesdeclined1.3%duetosubduedconsumerdemand,theclosureoftheZimbabweoperationinDecember2016andincreasedcompetition,particularlyinthetraysandfilmssector. PlasticConvertingbusinesssalesvolumesdeclined5%.DespiteMpactPolymers’throughputbeingconstrainedduringthefirstfivemonthsasaresultofinsufficientgrindingcapacity,3,896tonnesofSavukaTMPET(June 2016: 2,361 tonnes)weresoldduringthesixmonthsended30June2017ofwhich2,393tonneswastoexternalcustomers(June 2016: 643 tonnes).

UnderlyingoperatingprofitofR27.2milliondeclined61.0%fromthecomparableprioryear periodduetolowervolumesandaverageprices.

Net finance costsNetfinancecostsincreasedby9.7%toR99.7million(June2016:R90.9million)duetohigherinterestratesonhighernetdebtduringtheperiod.InterestcapitalisedonPhase2oftheFelixtonmillupgradeamountedtoR12.6million.

TaxTheeffectivetaxratefortheperiodwas29.8%(June2016:34.4%)whichishigherthanthestatutoryrateof28%,mainlyduetothenon-recognitionofdeferredtaxoncertaintaxlossesinMpactPolymers.

Inderivingtheeffectivetaxrate,MpacthasnotincludedanyrecognitionoftheSection12itaxincentiverelatingtotheFelixtonmillupgradeproject,whichisconditionaluponmeetingcertainrequirementsfollowingcommissioning.Itisestimatedthatoncerecognised,theSection12itaxincentivewouldincreaseearningspershareby70cents.Therecognitionofthesebenefitswillbereconsideredduringthesecondhalfofthefinancialyear.

Earnings per shareBasicandheadlineearningspersharefortheperiodwere34.3cents(June2016:95.2cents)and33.9cents(June2016:94.9cents),respectively.

Net debtNetdebtincreasedtoR2.3billion(June2016:R1.9billion)afterinvestingR411millioninproperty,plantandequipmentandutilisingR141milliontofundworkingcapital.Thegearingratiowas36.3%(June2016:33.8%).

MpacthassuccessfullyrefinancedR950millionofcommittedinterest-bearingborrowings,whichweretofalldueinDecember 2017,foranadditionalfouryears.

OUTLOOKPrevailingtradingconditionsindicatethatconsumerspendingwillremainsubduedforthesecondhalfofthereportingperiodandcompetitionwillremainintenseacrossmostoftheGroup’sproductsegments. TheeffectsoftheprolongeddroughtinseveralfruitgrowingregionswillalsocontinuetonegativelyaffecttheGroup’sfruitpackagingvolumes.

MpactPolymersisexpectedtoshowanimprovedfullyeartradingperformancecomparedtotheprioryearwithimprovedquality,increasedthroughputandproductswhicharewellacceptedinthemarket

TheR765 millionFelixtonpapermillupgradeprojectisprogressingwell.ThepapermachinewassuccessfullycommissionedasscheduledduringJuly 2017.Initialindicationsregardingquality,throughputandcostareencouragingwiththemill planningtorampuptofullcapacitybytheendof2018.ThefinalmajorconstructionconcernstheautomatedfinishedgoodswarehousewhichisplannedforcompletioninDecember2017.

TheGroupisnearingtheendofanextensivecapitalinvestmentprogramwithmanyoftheinvestmentsexpectedtoreflectpositivelyintheGroup’searningsandreturnsfrom2018.Weremainconfidentinourabilitytoweatherthestormandtorealiseprofitablegrowthoverthemediumterm.


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Scrip Dividend and Cash Dividend alternative1. Introduction

NoticeisherebygiventhattheBoardhasdeclaredaninterimdistributionforthesixmonthsended30June2017,bywayoftheissueoffully-paidMpactordinarysharesofnoparvalueeach(“theScripDistribution”)asascripdistributionpayabletoordinaryshareholders(“Shareholders”)recordedintheregisteroftheCompanyatthecloseofbusinessontheRecordDate,beingFriday,8September2017.

Shareholderswillbeentitled,inrespectofallorpartoftheirshareholding,toelecttoreceiveagrosscashdividendof15 centsperordinaryshareinsteadoftheScripDistribution,whichwillbepaidonlytothoseShareholderswhoelecttoreceivethecashdividend,inrespectofallorpartoftheirshareholding,onorbefore12h00onFriday,8September2017(“theCashDividend”).

TheCashDividendhasbeendeclaredfromincomereserves.Adividendwithholdingtaxof20%willbeapplicabletoallShareholdersnotexempttherefrom,afterdeductionofwhichthenetCashDividendis12 centsperMpactordinaryshare.

Thenewordinaryshareswill,pursuanttotheScripDistribution,besettledbywayofcapitalisationoftheCompany’sdistributableretainedprofits.

TheCompany’stotalnumberofissuedordinarysharesasat8August2017is170,882,251.Mpact’sincometaxreferencenumberis9003862175.

2. Terms of the Scrip Distribution

ThenumberofScripDistributionsharestowhicheachoftheShareholderswillbecomeentitledpursuanttotheScripDistribution(totheextentthatsuchShareholdershavenotelectedtoreceivetheCashDividend)willbedeterminedbyreferencetosuchShareholder’sordinaryshareholdinginMpact(atthecloseofbusinessontheRecordDate,beingFriday,8September2017)inrelationtotheratiothat15centsbearstothevolumeweightedaverageprice(“VWAP”)ofanordinaryMpactsharetradedontheJSEduringthe30-daytradingperiodendingonMonday,28August2017.DetailsoftheratiowillbeannouncedontheStockExchangeNewsService(“SENS”)oftheJSEinaccordancewiththetimetablebelow.

WhereaShareholder’sentitlementtonewMpactordinarysharescalculatedinaccordancewiththeaboveformulagivesrisetoafractionofanewordinaryshare,suchfractionofanewordinarysharewillberoundeddowntothenearestwholenumber,resultinginallocationsofwholeordinarysharesandacashpaymentforthefraction.

TheapplicablecashpaymentwillbedeterminedwithreferencetotheVWAPofanordinaryMpactsharetradedontheJSEonWednesday,6September2017,(beingthedayonwhichanordinaryMpactsharebeginstrading‘ex’theentitlementtoreceivetheScripDistributionortheCashDividendalternative),discountedby10%.

TheapplicablecashpaymentwillbeannouncedonSENSonThursday,7September2017.


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3. Circular and salient dates

AcircularprovidingShareholderswithfullinformationontheScripDistributionandtheCashDividendalternative,includingaFormofElectiontoelecttoreceivetheCashDividendalternativewillbepostedtoShareholdersonoraboutTuesday,15August2017.Thesalientdatesofeventsthereafterareasfollows:

2017

AnnouncementreleasedonSENSinrespectoftheratioapplicabletotheScripDistribution,basedonthe30-dayvolumeweightedaveragepriceendingonMonday,28August2017,by11h00on Tuesday, 29 August

AnnouncementpublishedinthepressoftheratioapplicabletotheScripDistribution,basedonthe30-dayvolumeweightedaveragepriceendingonMonday,28August2017on Wednesday, 30 August

LastdaytotradeinordertobeeligibletoreceivetheScripDistributionortheCashDividendalternative Tuesday, 5 September

Ordinarysharestrade“ex”theScripDistributionandtheCashDividendalternativeon Wednesday, 6 September

ListingandtradingofmaximumpossiblenumberofordinarysharesontheJSEintermsoftheScripDistributionfromthecommencementofbusinesson Wednesday, 6 September

AnnouncementreleasedonSENSinrespectofthecashpaymentapplicabletofractionalentitlements,basedonthevolumeweightedaveragepriceonWednesday,6September2017,discountedby10%,by11h00on Thursday, 7 September

LastdaytoelecttoreceivetheCashDividendalternativeinsteadoftheScripDistribution,FormsofElectiontoreachtheTransferSecretariesby12h00on Friday, 8 September

Record Date inrespectoftheScripdistributionandtheCashDividendalternative Friday, 8 September

ScripDistributioncertificatespostedandCashDividendpaymentsmade,CSDP/brokeraccountscredited/updated,asapplicable,on Monday, 11 September

AnnouncementrelatingtotheresultsoftheScripDistributionandtheCashDividendalternativereleasedonSENSon Monday, 11 September

AnnouncementrelatingtotheresultsoftheScripDistributionandtheCashDividendalternativepublishedinthepresson Tuesday, 12 September

JSElistingofordinarysharesinrespectoftheScripDistributionadjustedtoreflecttheactualnumberofordinarysharesissuedintermsoftheScripDistributionatthecommencementofbusinessonorabout Wednesday, 13 September

AlltimesprovidedareSouthAfricanlocaltimes.Theabovedatesandtimesaresubjecttochange.AnymaterialchangewillbeannouncedonSENS.

SharecertificatesmaynotbedematerialisedorrematerialisedbetweenWednesday,6September2017andFriday,8September2017,bothdaysinclusive.

ChANGE IN DIRECTORATETherehasbeennochangetotheBoardofdirectorsfortheperiodended30June2017.AJPhillips BWStrongChairman ChiefExecutiveOfficer

8August2017


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CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

Unaudited Six months

ended 30 June

2017

Unaudited Six months

ended 30 June

2016

Audited Year ended

31 December 2016

Notes Rm Rm Rm

Revenue 4 4,833.9 4,687.7 10,098.6Costofsales (3,118.3) (2,892.4) (6,281.4)

Gross margin 1,715.6 1,795.3 3,817.2Administrationandotheroperatingexpenditure (1,546.5) (1,473.6) (3,070.9)

Operating profit 5 169.1 321.7 746.3Shareofequityaccountedinvestees’profit 5.1 5.9 16.2Profitonsaleofequityaccountedinvestees’ – – 0.8

Profit from operations and equity accounted investees 174.2 327.6 763.3Netfinancecosts (99.7) (90.9) (191.0)

Finance costs 6 (104.2) (101.5) (209.4)Investmentincome 4.5 10.6 18.4

Fairvaluegain – – 7.2

Profit before tax 74.5 236.7 579.5Incometaxexpense (22.2) (81.5) (182.7)

Profit for the period 52.3 155.2 396.8

Other comprehensive income Items that will not be reclassified subsequently to profit or loss Actuarialgainsonpost-retirementbenefitschemes – – 3.6Taxeffect – – (1.0)Items that may be reclassified subsequently to profit or loss Effectofcashflowhedges (3.6) (16.1) (18.3)Taxeffect 1.0 4.5 5.1Exchangedifferencesontranslationofforeignoperations 1.3 (1.2) (5.6)

Other comprehensive income for the period net of tax (1.3) (12.8) (16.2)

Total comprehensive income for the period 51.0 142.4 380.6

Profit/(loss) attributable to: EquityholdersofMpact 58.0 157.8 391.1Non-controllinginterests (5.7) (2.6) 5.7

Profit for the period 52.3 155.2 396.8

Comprehensive income/(loss) attributable to: EquityholdersofMpact 56.5 144.8 374.3Non-controllinginterests (5.5) (2.4) 6.3

Total comprehensive income 51.0 142.4 380.6

Earnings per share (EPS) attributable to equity holders of Mpact 7 BasicEPS(cents) 34.3 95.2 234.6DilutedEPS(cents) 34.3 94.9 234.0


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CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

Unaudited As at

30 June 2017

Unaudited As at

30 June 2016

Audited As at

31 December 2016

Notes Rm Rm Rm

ASSET Non-current assets 4,922.8 4,625.4 4,763.6

Property,plantandequipment 3,652.4 3,368.5 3,489.0Goodwillandotherintangibleassets 1,119.3 1,132.3 1,126.1Investmentinequityaccountedinvestees 99.5 95.6 102.1Financialassetinvestments 41.4 15.0 41.5Deferredtaxassets 10.2 14.0 4.9

Current assets 3,664.9 3,811.4 3,948.6

Inventories 1,438.8 1,503.5 1,393.2Tradeandotherreceivables 2,082.3 1,932.6 2,103.1Derivativefinancialinstruments 1.1 5.7 2.9Currenttaxreceivable 34.0 9.8 30.9Cashandcashequivalents 104.8 359.8 405.7Disposalgroupasset 3.9 – 12.8

Total assets 8,587.7 8,436.8 8,712.2

EQUITY AND LIABILITIES Capital and reserves Stated capital 8 2,605.6 2,505.0 2,532.7Otherreserves 52.7 45.1 28.3Retainedearnings 1,285.8 1,167.8 1,346.3

EquityattributabletotheequityholdersofMpact 3,944.1 3,717.9 3,907.3Non-controllinginterests 116.4 98.3 113.3

Total equity 4,060.5 3,816.2 4,020.6

Non-current liabilities 1,838.9 1,791.4 1,844.5

Interestandnon-interest bearing borrowings 9 1,431.9 1,379.8 1,417.0Retirementbenefitobligations 52.7 54.4 51.6Deferredtaxliabilities 320.0 301.5 342.5Derivativefinancialinstruments 8.0 2.2 4.4Deferredincome 26.3 31.8 29.0Othernon-currentliabilities – 21.7 –

Current liabilities 2,688.3 2,829.2 2,847.1

Short-termportion of borrowings 9 963.7 923.0 990.0Tradeandotherpayables 1,691.7 1,874.4 1,772.1Derivativefinancialinstruments 0.7 12.7 8.6Short-termportionofdeferredincome 5.5 5.5 5.5Provisions 4.4 3.8 5.1Currenttaxliabilities 4.7 9.8 3.3Othercurrentliabilities 14.5 – 51.8Disposalgroupliability 3.1 – 10.7

Total equity and liabilities 8,587.7 8,436.8 8,712.2


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CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANgES IN EqUITy

Stated capital

Share-based

payments reserves

Cash flow hedge

reserves

Post-retirement

benefits reserves

Other reserves1

Retained Earnings

Total attributable

to equity holders of

Mpact

Non-controlling

interests Total

equity Rm Rm Rm Rm Rm Rm Rm Rm Rm

Balance at 31 December 2015 (audited) 2,426.2 33.8 10.0 12.7 (48.7) 1,170.8 3,604.8 107.0 3,711.8Dividendspaid2 78.8 – – – (0.6) (132.1) (53.9) – (53.9)Totalcomprehensiveincome – – (11.6) – (1.4) 157.8 144.8 (2.4) 142.4Shareschemechargesfortheperiod – 11.1 – – – – 11.1 – 11.1Dividendspaidtonon-controllingshareholders – – – – – – – (6.3) (6.3)Issue/exerciseofsharesoptions – (19.5) – – 59.3 (28.7) 11.1 – 11.1

Balance at 30 June 2016 (unaudited) 2,505.0 25.4 (1.6) 12.7 8.6 1,167.8 3,717.9 98.3 3,816.2Dividendspaid2 27.7 – – – – (50.3) (22.6) – (22.6)Totalcomprehensiveincome – – (1.6) 2.6 (4.8) 233.3 229.5 8.7 238.2Purchaseoftreasuryshares – – – – (25.0) – (25.0) – (25.0)Shareschemechargesfortheperiod – 12.0 – – – – 12.0 – 12.0Issue/exerciseofsharesoptions – – – – – 0.1 0.1 – 0.1Increaseinshareholdinginsubsidiary – – – – – – – 6.3 6.3Deferredsettlementcharge – – – – – (4.6) (4.6) – (4.6)

Balance at 31 December 2016 (audited) 2,532.7 37.4 (3.2) 15.3 (21.2) 1,346.3 3,907.3 113.3 4,020.6Dividendspaid2 72.9 – – – (0.6) (109.0) (36.7) – (36.7)Totalcomprehensiveincome – – (2.6) – 1.1 58.0 56.5 (5.5) 51.0Shareschemechargesfortheperiod – 13.4 – – – – 13.4 – 13.4Increaseinshareholdinginsubsidiary – – – – – – – 8.6 8.6Issue/exerciseofsharesoptions – (17.1) – – 30.2 (9.5) 3.6 – 3.6

Balance at 30 June 2017 (unaudited) 2,605.6 33.7 (5.8) 15.3 9.5 1,285.8 3,944.1 116.4 4,060.5

1 Other reserves consist of the option to equity holder reserves, revaluation reserves, foreign currency translation reserves and treasury shares.2 Dividends declared amounted to R109 million (30 June 2016: R132.1 million, 31 December 2016: R182.4 million) of which R72.9 million (30 June 2016:

R78.8 million, 31 December 2016: R106.5 million) related to a capitalisation issue, of which R0.6 million (30 June 2016: R0.6 million, 31 December 2016: R0.6 million) were issued to the Mpact Incentive Share Trust.


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CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

Unaudited Unaudited

Six months ended

30 June 2017

Six months ended

30 June 2016

Audited Year ended

31 December 2016

Notes Rm Rm Rm

Operatingcashflowsbeforemovementsinworkingcapital 431.8 568.7 1,275.6Netincreaseinworkingcapital (140.8) (147.2) (288.9)

Cash generated from operations 13 291.0 421.5 986.7Taxationpaid (47.1) (63.2) (142.3)Dividendsreceivedfromequityaccountedinvestees 7.7 2.0 5.6

Net cash inflows from operating activities 251.6 360.3 850.0

Investmentinproperty,plantandequipmentandintangibleassets (410.8) (444.8) (836.5)Acquisitionofbusiness 14 – (96.3) (89.8)Otherinvestingactivities 9.6 22.6 11.2

Net cash outflows from investing activities (401.2) (518.5) (915.1)

Purchaseoftreasuryshares – – (25.0)Netproceedsfromborrowings (1.0) 170.6 307.4Financecostspaid (113.2) (101.9) (212.7)DividendspaidtoMpactshareholders (36.7) (53.9) (76.5)Otherfinancingactivities – (6.3) (10.9)

Net cash (outflows)/inflows from financing activities (150.9) 8.5 (17.7)

Net decrease in cash and cash equivalents (300.5) (149.7) (82.8)Netcashandcashequivalentsatbeginningoftheperiod1 400.0 482.8 482.8

Net cash and cash equivalents at end of the period1 99.5 333.1 400.0

1Netcash and cash equivalents comprise of cash and cash equivalents of R104.8 million (30 June 2016: R359.8 million, 31 December 2016: R405.7 million) and bank overdrafts of R5.3 million (30 June 2016: R26.7 million, 31 December 2016: R5.7 million).


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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. BASIS OF PREPARATIONThecondensedconsolidatedinterimfinancialstatementshavebeenpreparedandpresentedinaccordancewithIAS34InterimFinancialReportingasissuedbytheInternationalAccountingStandardsBoard(IASB).ThecondensedconsolidatedinterimfinancialstatementsareincompliancewiththeJSELimited’sListingRequirements,theSouthAfricanCompaniesAct,2008,theSAICAFinancialReportingGuideasissuedbytheAccountingPracticesCommitteeandtheFinancialReportingPronouncementsasissuedbytheFinancialReportingStandardsCouncil.

ThecondensedconsolidatedinterimfinancialstatementsarepresentedinSouthAfricanRand,whichistheGroup’sfunctionalcurrency.

Thecondensedconsolidatedinterimfinancialstatementshavebeenpreparedonthehistoricalcostbasis,exceptforderivativefinancialsinstruments,financialinstrumentsatfairvaluethroughprofitorlossandavailableforsalefinancialassets.Theresultsoftheinterimperiodshouldbereadinconjunctionwiththeauditedfinancialstatementsfortheyearended31December2016.

ThepreparationoftheGroup’sconsolidatedresultsforthehalfyearended30June2017wassupervisedbytheChiefFinancialOfficer,BDV ClarkCA(SA).Theseresultsareunaudited.

2. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONSSignificant accounting policies

TheaccountingpoliciesandmethodsofcomputationusedareintermsofInternationalFinancialReportingStandards(IFRS)andareconsistentwiththoseappliedinthepreparationoftheannualfinancialstatementsfortheyearended31December2016.

Thefollowingrevisedaccountingstandards,whichhadnosignificantimpactontheGroup,wereadoptedinthecurrentperiod:

• IAS7–Statementofcashflows

• IAS12–Incometaxes

Thefollowingstandardswillbecomeeffectiveforthefinancialyearbeginningon1January2018exceptforIFRS16:Leaseswhichiseffectiveon1January2019:

IFRS 9 – Financial Instruments

Apreliminaryassessmenthasbeencompletedandnoimpactisexpectedinrespectofthemeasurementoffinancialinstruments.Therevisedfinancialinstrumentcategorieswillresultinsomechangesinclassificationandadditionaldisclosureswillberequired.

IFRS 15 – Revenue from Contracts with Customers

ApreliminaryassessmenthasbeencompletedandtheGroupdoesnotexpectanysignificantchangestothetimingandrecognitionofrevenue.Duringtheassessmentitwasnotedthatadditionalperformanceobligationswouldneedtoberecognised.Itisnotenvisagedthattherecognitionwillsignificantlyaffectthestatementofprofitorloss.AdditionaldisclosureswillberequiredonceIFRS15isadopted.

IFRS 16 – Leases

Apreliminaryassessmenthasbeencompleted.TheGroupenvisagethatallsignificantleaseagreementswillresultinanincreaseinnon-currentassetsandnon-currentliabilitiesastheseleaseswillbecapitalisedaswellasanincreaseinEBITDA,offsetbyanincreaseinamortisationchargeandfinancecosts.

Significant accounting judgements, estimates and assumptions

ThesignificantjudgementsmadebymanagementinapplyingtheGroup’saccountingpoliciesandthekeysourcesofestimationuncertaintywereconsistentwiththoseappliedtotheconsolidatedfinancialstatementsfortheyearended31December2016.

3. SEASONALITYSeasonaleffectsintheGroup’smarketshavehistoricallyresultedinhigherrevenueandoperatingprofitsforthesecondhalf,whencomparedtothefirsthalf.

4. SEGMENT INFORMATIONTheGroup’soperatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtotheGroup’sexecutivecommittee,beingthechiefoperatingdecision-makingbody.TheGrouphastworeportablesegmentsnamely,PaperandPlastics.

Managementhasregardtocertainoperatingsegmentmeasuresinmakingresourceallocationdecisionsandmonitoringsegmentperformance.TheoperatingsegmentmeasuresrequiredtobedisclosedunderIFRS8adheretotherecognitionandmeasurementcriteriapresentedintheGroup’saccountingpolicies.


xi

Unaudited Unaudited

Six months ended

30 June 2017

Six months ended

30 June 2016

Audited Year ended

31 December 2016

Rm Rm Rm

Group segment analysis Revenue Paper 3,720.3 3,462.5 7,425.0 Plastics 1,157.4 1,264.5 2,752.1

Revenuebeforeinter-segmentrevenue 4,877.7 4,727.0 10,177.1 Less:Inter-segmentrevenue (43.8) (39.3) (78.5)

Revenue 4,833.9 4,687.7 10,098.6

Operating segment underlying operating profit/(loss) Paper 177.0 292.1 664.1 Plastics 27.2 69.7 168.4 Corporate (35.1) (40.1) (48.1)

Operatingprofitbeforespecialitems 169.1 321.7 784.4 Specialitems1 – – (38.1) Shareofequityaccountedinvestee’sprofit 5.1 5.9 16.2 Netfinancecost (99.7) (90.9) (191.0) Fairvaluegain – – 7.2 Profitonsaleofequityaccountedinvestee – – 0.8

Profit before tax 74.5 236.7 579.5

Assets Paper 4,913.7 4,605.6 4,763.5 Plastics 1,992.2 1,989.4 2,009.2 Corporate2 1,681.8 1,841.8 1,939.5

Total assets 8,587.7 8,436.8 8,712.2

5. Operating profit Includedinoperatingprofitare: Amortisationofintangibleassets 6.8 5.1 11.9 Depreciationofproperty,plantandequipment 256.7 225.5 476.2 Impairmentofproperty,plantandequipment – – 15.9 Netforeigncurrencylosses 6.2 20.5 35.6

6. Finance costs Bankandotherborrowings 113.5 101.9 212.5 Definedbenefitarrangements 2.5 2.8 5.6 Interestcapitalisedtoqualifyingassets (12.6) (3.6) (10.3) Interestoncontingentpurchaseconsideration 0.8 0.4 1.6

104.2 101.5 209.4

7. Earnings per share Cents Cents Cents Earnings per share (EPS) BasicEPS 34.3 95.2 234.6 DilutedEPS 34.3 94.9 234.0 Underlying earnings per share3 BasicunderlyingEPS 34.3 95.2 252.7 DilutedunderlyingEPS 34.3 94.9 252.0 headline earnings per share4 BasicheadlineEPS 33.9 94.9 242.0 DilutedheadlineEPS 33.9 94.6 241.4

131 December 2016: Consist of impairment of PPE of R15.9 million and restructuring costs of R22.2 million.

2includes intangible and other non-operating assets

3Underlying EPS excludes the impact of special items.

4The presentation of Headline EPS is mandated by the JSE Listing requirements. Headline earnings has been calculated in accordance with Circular 2/2015, ‘Headline Earnings’, issued by the South African Institute of Chartered Accountants.


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Thecalculationofheadlineearnings,basedonbasicearningsisasfollows:

Unaudited Unaudited

Six month ended

30 June 2017

Six months ended

30 June 2016

Audited Year ended

31 December 2016

Rm Rm Rm

Profit for the period attributable to equity holders of Mpact 58.0 157.8 391.1 Impairmentofproperty,plantandequipment – – 15.9 Profitondisposaloftangibleandintangibleassets (1.0) (0.7) (1.1) Profitonsaleofequityaccountedinvestees – – (0.8) Relatedtax 0.3 0.2 (1.6)

headline earnings for the period 57.3 157.3 403.5

Number

of sharesNumberofshares

Numberofshares

Basic number of shares outstanding 169,106,287 165,721,399 166,734,753 Effectofdilutivepotentialordinaryshares 136,924 576,663 436,392

Dilutednumberofordinarysharesoutstanding1 169,243,211 166,298,062 167,171,145

Unaudited Unaudited

Six months ended

30 June 2017

Six months ended

30 June 2016

Audited Year ended

31 December 2016

Rm Rm Rm

8. Stated capital Authorised 217,500,000sharesofnoparvalue – – –

Issued

170,882,251shares(30June2016:167,657,426;31December2016:168,485,360)ofnoparvalue. 2,605.6 2,505.0 2,532.7

On 3 April 2017, 2,396,891 (20 April 2016: 1,678,807, 12 September 2016: 847,934) new ordinary shares were issued to shareholders who elected to receive capitalisation shares in terms of the capitalisation issue in lieu of a cash dividend.

9. Interest and non-interest bearing borrowings –Securedinterestbearingborrowings2 1,403.1 1,318.8 1,368.0 –Financeleaseliability 10.0 37.7 28.4 –Instalmentloanfacility 18.8 23.3 20.6

Non-current borrowings 1,431.9 1,379.8 1,417.0 –Securedinterestbearingborrowings2 900.0 800.0 902.7 –Unsecurednon-interestbearingborrowings 49.0 70.0 61.9 –Financeleaseliability 6.6 18.4 16.9 –Instalmentloanfacility 2.8 7.9 2.8 –Bankoverdraft 5.3 26.7 5.7

Current borrowings 963.7 923.0 990.0 Total borrowings 2,395.6 2,302.8 2,407.0

The Company’s borrowing powers are not restricted.

The current portion of borrowings is expected to be repaid from operational cash flow and other borrowings.

1Diluted EPS is calculated by adjusting the weighted average number of ordinary shares in issue, on the assumption of conversion of all potentially dilutive ordinary shares.

2The Group has pledged certain assets as collateral against certain borrowings.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED


xiii

Unaudited Unaudited

Six months ended

30 June 2017

Six months ended

30 June 2016

Audited Year ended

31 December 2016

Rm Rm Rm

10. Capital commitments –Contractedcapitalcommitments 286.1 561.2 361.9 –Approvedcapitalcommitments 517.8 530.5 572.5

Capitalcommitments 803.9 1,091.7 934.4

CommitmentsofR770.4million(30June2016:R733million;31December2016:R889.5million)willbespentinthenext12months.ThebalanceofR33.5million(30June2016:R358.7million;31December2016:R44.9million)willbespentin1to5years.

ThesecommitmentswillbemetfromexistingcashresourcesandborrowingfacilitiesavailabletotheGroup.

Unaudited Unaudited

Six months ended

30 June 2017

Six months ended

30 June 2016

Audited Year ended

31 December 2016

Rm Rm Rm

11. Fair value estimation

Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarket(forexample,over-the-counterderivatives)aredeterminedusingstandardvaluationtechniques.ThesevaluationtechniquesmaximisetheuseofobservablemarketdatawereavailableandrelyaslittleaspossibleonGroupspecificestimates.

ThesignificantinputsrequiredtofairvaluealloftheGroup’sfinancialinstrumentsareobservable.

Specificvaluationmethodologiesusedtovaluefinancialinstrumentsinclude:

• thefairvaluesofinterestrateswapsandforeignexchangecontractsarecalculatedasthepresentvalueofexpectedfuturecashflowsbasedonobservableyieldcurvesandexchangerates;and

• othertechniques,includingdiscountedcashflowanalysis,areusedtodetermine

thefairvaluesofotherfinancialinstruments. Financial instruments by category Financial assets Tradereceivables(Level2–Loansandreceivables) 2,082.3 1,932.6 2,103.1 Loansandreceivables (Level2–Loansandreceivables) 20.9 15.0 21.0 Available-for-saleinvestments(Level3–Availableforsale) 20.5 – 20.5 Derivativefinancialinstruments(Level2–Atfairvaluethroughprofitorloss) 1.1 5.7 2.9

Total 2,124.8 1,953.3 2,147.5

Financial liabilities Borrowings(Level2–Atamortisedcost) 2,395.6 2,302.8 2,407.0 Tradepayables(Level2–Atamortisedcost) 1,691.7 1,874.4 1,772.1 Derivativefinancialinstrument(Level2–Atfairvaluethroughprofitorloss) 8.7 14.9 13.0

Total 4,096.0 4,192.1 4,192.1

12. Net asset value per share

Netassetvaluepershareisdefinedasnetassetsdividedbythenumberofordinarysharesinissueasattheperiod-end.

Netassetvaluepershare(cents) 2,376.2 2,276.5 2,386.32


xiv

Unaudited Unaudited

Six months ended

30 June 2017

Six months ended

30 June 2016

Audited Year ended

31 December 2016

Rm Rm Rm

13. Cash generated from operations Profitbeforetaxation 74.5 236.7 579.5 Depreciation,amortisationandimpairments 263.5 230.6 504.0 Share-basedpayments 13.4 11.1 23.1 Netfinancecosts 99.7 90.9 183.8 Shareofequityaccountedinvesteeprofit (5.1) (5.9) (16.2) Decreaseinprovisions (6.8) (5.9) (1.7) Increaseininventories (47.5) (224.6) (115.5) Increase/(decrease)inreceivables 20.5 108.7 (75.3) Decreaseinpayables (113.6) (31.2) (98.1) Profitondisposaloftangibleassets (1.0) (0.7) (1.1) Fairvaluechangeontransactionsnotqualifyingashedges (6.2) 15.2 13.8 Othernon-cashitems 2.4 (0.6) (3.3) Amortisationofgovernmentgrant (2.8) (2.8) (5.5) Profitonsaleofequityaccountedinvestee – – (0.8)

Cash generated from operations 291.0 421.5 986.7

14. Business combinations

Properties

On1May2016,theGroupacquireda100%interestinsixpropertycompaniesatfairvalueforatotalcashpurchaseconsiderationofR38.6million.ThepropertiesacquiredaretobeheldforusefornormaltradingoftheGroup.

Remade Holdings Proprietary Limited

On1May2016,theGroupacquireda100%interestinRemadeHoldingsProprietaryLimitedforapurchaseconsiderationofR89.1million.TheacquisitionofRemadeHoldingsProprietaryLimitedcomplementsanumberofinitiativesbyMpactRecyclingtoexpanditsowncollectionsofpaper,plasticsandtoincreaserecyclingratesofthesematerialsinSouthAfrica.TheseinitiativesincreasethematerialavailablefortheFelixtonMill,MpactPolymersandtherecentlycommissionedliquidpackagingrecyclingplantattheSpringsPaperMill.

15. Contingent liabilities and contingent assets

a. ContingentliabilitiesfortheGroupcompriseaggregateamountsat30June2017ofR7.2million(30June2016:R7.9million;31December2016:R7.1million)inrespectofloansandguaranteesgiventobanksandotherthirdparties.

b. AGroupmillisthesubjectofalandclaim,whichshouldnothaveamaterialimpactonthefinancialpositionoftheGroup.

c. In2013,asettlementwasreachedinrespectofadisputerelatingtothevaluationofputoptionsinagroupsubsidiary.ThesettlementagreementprovidesforadeferredpaymentcontingentupontheachievementofcertainEBITDAandROCElevelsforthefinancialyears2017to2018,subjecttoamaximumamountofR1.9million.

d. TherewerenosignificantcontingentassetsfortheGroupat30June2017.

e. Asadvisedtotheshareholdersinthepriorfinancialyear,theCompanyissubjecttoaCompetitionCommissioninvestigation.Thedirectorsareunableatthisstagetodeterminewhattheoutcomeoftheinvestigationwillbe.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONTINUED


xv

16. Related parties

TheGrouphasarelatedpartyrelationshipwithnon-controllingshareholdersofsubsidiaries,itsassociates,jointventuresanddirectors.

TheGroup,intheordinarycourseofbusiness,enterintovarioussales,purchasesandservicestransactionswithjointventuresandassociatesandothersinwhichtheGrouphasamaterialinterest.Thesetransactionsareundertermsthatarenolessfavourablethanthosearrangedwiththirdparties.

DetailsoftransactionsandbalancesbetweentheGroupandrelatedpartiesaredisclosedbelow:

Unaudited Unaudited

Six months ended

30 June 2017

Six months ended

30 June 2016

Audited Year ended

31 December 2016

Rm Rm Rm

Salestorelatedparties 377.0 364.8 785.0 Purchasesfromrelatedparties 0.2 0.2 2.5 Interestexpenses 12.5 11.5 20.6 Minorityshareholderloans 292.1 290.2 292.6 Loanstorelatedparties 1.2 0.9 1.4 Receivablesduefromrelatedparties 207.4 192.9 244.1 Payablesduetorelatedparties 20.7 23.4 19.1

17 Subsequent events

Thedirectorsarenotawareofanymattersorcircumstancesarisingsubsequentto30June2017thatrequireanyadditionaldisclosureoradjustmenttotheinterimfinancialstatements.

DIRECTORS:Independent Non-Executive:AJPhillips(Chairman),NPDongwana,NBLanga-Royds,MMakanjee,TDARoss,AMThompson

Executive:BWStrong(ChiefExecutiveOfficer),BDVClark(ChiefFinancialOfficer)

COMPANY SECRETARY:MNSepuru

REGISTERED OFFICE:4thFloor,No.3MelroseBoulevard,MelroseArch,2196(PostnetSuite#179,PrivateBagX1,MelroseArch,2076)

TRANSFER SECRETARIES:LinkMarketServicesSouthAfrica(Proprietary)Limited13thFloor,RennieHouse,19AmeshoffStreet,Braamfontein,2001(POBox4844,Johannesburg,2000,SouthAfrica)

SPONSORS:RandMerchantBank(adivisionofFirstRandBankLimited)1MerchantPlace,cornerFredmanDriveandRivoniaRoad,Sandton,2196(POBox786273,Sandton,2146)

COMPANy INFORMATIONMpact Limited(IncorporatedintheRepublicofSouthAfrica) (Companyregistrationnumber2004/025229/06)Incometaxnumber:9003862175JSEShareCode:MPTJSEISIN:ZAE000156501(“Mpact”or“theGroup”or“theCompany”)


xvi

DisclaimerThisdocumentincluding,withoutlimitation,thosestatementsconcerningthedemandoutlook,expansionprojectsanditscapitalresourcesandexpenditure,maybeconsideredtobeforward-lookingstatements.Bytheirnature,forward-lookingstatementsinvolveriskanduncertaintyandalthoughMpactbelievesthattheexpectationsreflectedinsuchforward-lookingstatementsarereasonable,noassurancecanbegiventhatsuchexpectationswillprovetohavebeencorrect.Accordingly,resultscoulddiffermateriallyfromthosesetoutintheforward-lookingstatementsasaresultof,amongotherfactors,changesineconomicandmarketconditions,successofbusinessandoperatinginitiatives,changesintheregulatoryenvironmentandothergovernmentactionandbusinessandoperationalriskmanagement.WhileMpacthastakenreasonablecaretoensuretheaccuracyoftheinformationpresented,Mpactacceptsnoresponsibilityforanyconsequential,indirect,specialorincidentaldamages,whetherforeseeableorunforeseeable,basedonclaimsarisingoutofmisrepresentationornegligencearisinginconnectionwithaforward-lookingstatement.Thisdocumentisnotintendedtocontainanyprofitforecastsorprofitestimatesandhasnotbeenreviewedorreportedonbytheauditors.

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