Kaap Agri on normal growth path despite economic impact of pandemic, says CEO

• Over its interim reporting period Kaap Agri saw a reduction in debt and continued strong cash generation.
• Strategic initiatives over a number of years are culminating in exciting improvements in various parts of the business, says its CEO, Sean Walsh.
• Walsh remains cautious regarding the potential impact of further Covid-19 infection cycles in the country.

Kaap Agri has managed to pull through the Covid-19 pandemic relatively unscathed. 

Its 2021 interim performance aligns it with a normal growth path - despite the economic fallout of the coronavirus pandemic, the group said on Thursday.

The reduction in debt, effective working capital management and continued strong cash generation have contributed to strong growth in earnings and improved return on invested capital, according to its CEO, Sean Walsh. 

Kaap Agri specialises in trading in agricultural, fuel and related retail markets in southern Africa.

Over the interim period, the group's revenue grew by 15.6% to R5.7 billion. Recurring headline earnings grew by 25% and recurring headline earnings per share by 23.3% to 305.34 cents. Headline earnings per share increased by 24% to 299.96 cents. 

Revenue growth from the trade division accounted for 47.9% of total revenue growth, driven by a 15.4% increase in retail business and a 6.7% increase in agri business. An interim dividend of 40 cents per share has been declared for the period under review.

"The execution of strategic initiatives over a number of years are culminating in exciting improvements in various parts of the business. Our ongoing diversification strategy and resilience continue to yield strong revenue growth despite the current tough trading conditions," Walsh said in a statement. 

"The recovery in the non-agri retail [sector] was quicker, sooner and better than expected, and above pre-Covid-19 levels. Retailers with good supply chain systems have prevailed better than others during Covid-19. Our healthy retail sales growth and resilience in non-agri trade have been underpinned by robust distribution centre supply abilities."

Grain services benefitted from an improved wheat harvest and earlier realisation of income. The upcoming wheat season looks encouraging, although this is always weather-dependent. Fruit and vegetable production has largely been positive, but significant expansions and infrastructural spend have slowed, partly due to Covid-19-related cashflow curtailment.

Outlook

"As in previous years, the first six months' earnings will contribute more to full-year earnings than the second six months. We are positive regarding the performance of the business during the coming six-month period and remain committed to achieving our strategic medium-term growth targets," said Walsh.

"As a result of Covid-19, the business has adapted the way in which we interact with customers to ensure we continue to provide a relevant and sustainable offering in a responsible manner. We remain cautious regarding the potential impact of further Covid-19 infection cycles."

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