All commentary is based on continuing operations except where otherwise indicated.
Growth in emerging markets has been revised downwards across most countries. While sub-Saharan Africa is expected to grow by 3.6% next year, South Africa will be below this average and is now forecast to grow at 0.5% in 2019 (lower than the 0.6% forecast by the South African Reserve Bank) compared to the 1.5% expected in February. Growth is projected to slowly rise to 1.7% in 2022, supported by household consumption and private-sector investment. The South African 2019 Medium-Term Budget Policy Statement also highlighted an expected revenue shortfall in the 2019/2020 fiscal year versus the 2019 budget, reflecting a poor employment statistics, reduced profitability in a difficult trading environment for corporates, resulting in lower-than-expected corporate income tax collections, reducing personal income tax collection and weaker household consumption. Growth in advanced economies is expected to slow, in part due to trade tensions and the Brexit uncertainty. As reported by SA Treasury.
The group has remained resilient in some challenging market conditions with subdued growth in South Africa, a strong recovery in demand in Nigeria and a significant decline in demand in Angola due to wage inflation lagging the currency devaluation. Zimbabwe traded well despite challenging economic conditions and have been self-funding since April 2018 with no further funding provided by the group. Revenue was impacted by increased competition in South Africa and a low business confidence index coupled with high unemployment and a lack of consumer spending. Angola's revenue contribution declined due to a significant devaluation in the kwanza which adversely impacted consumer spending. In addition, the effect of increased competitor activity in South Africa impacted market shares. Despite increased competition in the South African beverage can market Bevcan South Africa's performance was pleasing. A large contractual volume loss in the DivFood business has led to the need for significant labour force and overhead restructuring which will take place in the 2020 financial year.
Key financial features
During the prior year the group made the strategic decision to dispose of Nampak Glass and consequently it has been disclosed as a non-current asset held for sale and a discontinued operation. This transaction has culminated in the conclusion of a successful sale of business agreement and submission to the Competition Commission. In addition, a decision was taken by the Nampak Limited board on 28 August 2019 to dispose of Nampak Plastics Europe. This business has struggled in the plastics market in the UK for some time now with the added complexity of the defined benefit pension fund liability. This transaction is progressing according to plan and is expected to conclude in the second half of the 2020 financial year.
A highlight of the year was the improvement in the group's B-BBEE rating from an expected level 7 contributor to level 4 contributor during the current year rating procedure and a level 2 contributor during the most recent rating concluded in November 2019. Group finance took accountability for B-BBEE during the year and due to careful reconsideration of the B-BBEE management tool, improved collection of specific data required as part of the BEE rating process and participation in the YES4Youth initiative were able to fundamentally change the group's competitive edge and advantageously reposition the group's rating.
|Focus area||How we did in 2019|
|Headline earnings per share growth|
|Disposal of non-core entities|
|Cash repatriation and hedging:|
|Balance sheet management|
|B-BBEE level 2|
|Working capital management|
|Capital expenditure management|
|Good progress made||Some progress, more to come||Disappointing performance|
|Revenue||14 642||–||14 642||15 963||(8)|
|Trading profit||1 558||–||1 558||1 968||(21)|
|Net abnormal losses||(267)||–||(267)||(393)||32|
|Operating profit before Zimbabwe impact||1 291||–||1 291||1 575||(18)|
|Net devaluation in Zimbabwe||(1 037)||1 037||–||–||–|
|Net foreign exchange losses in Zimbabwe operations||(1 945)||1 945||–||–|
|Monetary adjustment for hyperinflation – Zimbabwe||832||(832)||–||–|
|Gain on recognition of RBZ financial instrument||795||(795)||–||–|
|Expected credit loss provision on RBZ financial instrument||(719)||719||–||–|
|Operating profit||254||1 037||1 291||1 575||(18)|
|Net finance costs||(246)||–||(246)||(224)||10|
|Share of net (loss)/profits in associates and joint venture||(2)||–||(2)||5||(140)|
|Profit before tax||6||1 037||1 043||1 356||(23)|
|Income tax expense||(396)||(481)||(877)||(139)||531|
|(Loss)/profit for the year from continuing operations||(390)||556||166||1 217||(86)|
The group continues to experience difficulty in delivering revenue growth. The effects of reduced consumer spending and competitor activity continue to suppress the ability to obtain growth on the revenue line.
Despite a good operating result delivered by Bevcan South Africa, revenue from the Metals segment declined 4% most significantly impacted by the reduced revenue from Angola, where wage inflation lags consumer inflation resulting in reduced disposable income in the hands of consumers in that economy. DivFood had a tough year and lost a significant contracted volume which impacted their performance.
The 13% decline in the plastics segment's revenue is attributable mainly to the Zimbabwe operations which have been adversely affected by hyperinflation but is still performing well despite the significant downturn in that economy. A new management team in Rigids SA is focused on securing volume growth and improved efficiencies.
The Paper segment has struggled across the board with revenue down 29%.
Revenue from South Africa was down 2% affected by the poor performing economy, low business confidence, a lack of consumer demand and increased competitor activity. The Rest of Africa revenue is down 19% impacted adversely primarily by Angola and buoyed by better performance in Nigeria.
Trading profit in the Metals segment is down 21% due to lower revenue but most significantly impacted by a reduction in trading margins which declined from 15.7% to 12.9%. The Plastics segment has performed well on a trading profit level with good contributions coming from Zimbabwe and improved trading margins being achieved. Improved margins boosted trading profit by 6%. The Paper segment's trading profit declined by 30% adversely impacted by lower revenue levels.
Geographically, South African contributed 67% (2018: 63%) to revenue but only 41% (2018: 44%) to trading profit. The Rest of Africa contributed 33% (2018: 37%) to revenue and 70% (2018: 66%) to trading profit. The corporate cost has reduced by 8% as a result of cost savings remaining a head office priority. These benefits were offset by lower forex gains than in the prior year.
Constant currency revenue and trading profit
Key issues during the current year:
- The average rand/dollar exchange rate for 2019 of R14.3452 was 9% weaker than the comparative rate of R13.1073 positively impacting the translation of the trading results from foreign operations on consolidation. The impact of the weaker average rand was R676 million on group revenue for the year.
- In US dollar terms we earned more in 2019 than in 2018.
|Revenue (R million)||Trading profit (R million)|
Trading profit in the Rest of Africa increased in dollar terms and was positively impacted by R112 million in 2019.
The table below provides a high level analysis of significant abnormal items:
|Abnormal forex loss||212||127|
|Cash repatriation and liquid bond disposal losses||48||73|
|Restructuring and retrenchment cost||44||64|
|Reversal of impairments||–||(33)|
|Profit on sale of property, plant and equipment||(67)||(12)|
|Onerous contract (reversal)/provision||(118)||100|
Abnormal forex losses emanate from Angola where the currency continues to devalue and all letters of credit supporting imports are required to be cash backed resulting in cash positions being exposed to devaluation. While this new Angolan law secures funding for all imports and creates certainty of cash transfers it has exposed a portion of the group's cash held in Angola to devaluations in the kwanza. In total, US$50 million (71%) remains hedged in US dollar-linked kwanza bonds. These bonds will be held to maturity and have proven to be highly effective hedges with all bonds being honoured on time and in full by the Angolan government on maturity.
Impairments largely relate to the impairment of the Angola line ahead of conversion to aluminium and the impairment of the assets involved in the fire at Orange Grove Dairy. These assets are under claim from the insurers and the pay-out is currently under review. So far, R35 million of the potential claim of approximately R120 million has already been settled. Only the portion of the insurance claim received in cash has been accounted for in the results for the year.
Impacts of Zimbabwe
The group results are impacted by the significant currency devaluation between the Zimbabwe dollar (ZWL) and South African rand (ZAR) and the application of the provisions of IAS 29. The Zimbabwe entities have applied hyperinflationary accounting from 1 October 2018 to 30 September 2019. The results, net assets and cash flows were translated from ZWL into ZAR at a closing rate of ZWL1 to ZAR0.99.
In February 2018 management initiated discussions with merchant banks to consider the potential restructuring of the funding provided to Nampak Zimbabwe Limited (NZL). In April 2018, management informed NZL that Nampak Limited (the group) would no longer extend any credit to NZL in view of the liquidity issues experienced in Zimbabwe. In order to protect shareholder interests in the investment in Zimbabwe, management secured an agreement with the Reserve Bank of Zimbabwe (RBZ) on 26 September 2019 in terms of which the RBZ has undertaken to repay US$67 million in equal quarterly repayments of US$5.6 million over a period of five years, commencing on 31 March 2021 with an initial two-year payment holiday.
Given that the abovementioned agreement with the RBZ was concluded on 26 September 2019 and was intended to facilitate repayment of the US dollar funding owing by NZL, this funding is regarded by IFRS as repayable and therefore cannot be treated as part of the group's net investment in a foreign operation. Accordingly, the foreign translation loss is accounted for in profit or loss and not other comprehensive income.
The (Loss)/profit for the year table above sets out the financial impacts of the net devaluation in Zimbabwe.
Net finance costs
Net finance costs in 2019 have increased by 10% to R246 million compared to R224 million in 2018. This is mostly due to a 46% reduction in finance income due to changed Angolan laws that require cash-backed letters of credit for all imports. Finance costs decreased by 19% for the year. Interest rates have been marginally higher during the year due to the average cost of the revolving credit facility. The effective interest rate for the group for the period was slightly higher at 6.0% in 2019 compared to 5.6% in 2018.
In line with the group's strategic intent to increase its long-term funding, a committed revolving credit facility of R12.8 billion was successfully implemented in September 2018 to address the group's maturing debt profile. With the implementation of the revolving credit facility the group's effective interest rate has risen to 6.0% with the sound funding structure providing a platform for future growth. This facility was implemented on 28 September 2018 and therefore did not have an impact on the interest cost in the prior year.
Cash repatriation and hedging
|30 September 2019
|Opening cash on hand||2 307||300||2 607||1 190||3 797|
|Cash on hand||1 041||217||1 258||57||1 315|
|Net unhedged cash||299||217||516||57||573|
|Cash extracted||1 747||1 458||3 205||43||3 248|
|Cash extraction rate (%)*||76%||486%||123%||4%||86%|
|% of cash on hand hedged||71%||–||59%||–||56%|
|30 September 2018
|Opening cash on hand||2 188||828||3 016||654||3 670|
|Cash on hand||2 307||300||2 607||1 150||3 797|
|Hedged||2 166||–||2 166||–||2 166|
|Net unhedged cash||141||300||441||1 190||1 631|
|Cash extracted||1 807||1 574||3 381||87||3 468|
|Cash extraction rate*||83%||190%||112%||13%||94%|
|% of cash on hand hedged||94%||–||83%||–||57%|
The naira exchange rate to the US dollar was relatively stable and has hardly fluctuated during the year. Cash extractions have been unconstrained with the in-country cash balance declining from the rand equivalent of R300 million to R217 million. Overall cash repatriations of R1.5 billion from Nigeria were pleasing representing a cash transfer rate of 486% with no further restrictions impacting the operation. All cash generated during the period was therefore also repatriated. This continues to be a pleasing outcome given the previous concerns regarding devaluation and cash being traded affecting trade.
The Angolan operation had very pleasing transfers of cash from Angola back to Nampak International Limited and repayments of accounts payable to Bevcan South Africa for ends exported to Angola. The continued successful cash transfers during the year of R1.7 billion along with the R1.8 billion in the prior year was satisfying. The cash extraction rate of 76% in the year as well as the rate of 83% in the comparative period was pleasing and achieved through active management. In total, R742 million or 71% of the remaining cash balance of R1.0 billion is hedged using US dollar-linked kwanza bonds which have proven to be highly effective hedging instruments. The remaining R299 million is required for day-to-day working capital requirements consistent with Bevcan Angola's operational requirements. The exposure to Angola remains consistent with 2018 at reduced levels. The kwanza continues to devalue with a 30% devaluation from AOA300.721 in 2018 to AOA389.485 in 2019. The current rate of exchange has devalued to AOA478.220 which is a further 23% devaluation. The cash extraction from Angola has been adversely impacted by a new requirement to have cash-backed letters of credit for all imports. The group continues to hedge its foreign exchange exposures in Angola. These hedges have proven to be highly effective.
Cash in Zimbabwe has significantly devalued with this devaluation adversely affecting the foreign currency translation reserve. An agreement has been reached with the RBZ to repay legacy debt of US$67 million on a one-to-one basis over a period of five years in quarterly payments commencing on 31 March 2021. In essence, the contract is intended to provide the Nampak shareholders with a R0.9 billion hedge as at 30 September 2019. Zimbabwe has been self-funding since April 2018 and continues to trade well with customers being required to provide the required dollar funding before raw materials are sourced from international suppliers. Despite a legally binding contract having been entered into with the RBZ for the repayment of this debt, the group has taken a conservative stance with a 85% ECL provision raised at 30 September 2019. In future, on settlement of this obligation under the said contract the provision will reverse.
Total cash extraction levels remain pleasing at 86% in the current year. The consistent extraction of cash from Nigeria and Angola remains encouraging and every effort continues to be made to ensure that cash is transferred timeously.
The effective tax rate for the year ended is depicted below:
|Tax rate reconciliation||2019
|Statutory tax rate||28.0||28.0|
|Tax rate differential||(13.9)||(8.6)|
|Withholding and other foreign taxes||6.2||4.1|
|Deferred tax assets raised||–||(9.0)|
|Prior year adjustments||(6.5)||(2.6)|
|Effective tax rate – continuing operations before Angola||13.5||10.3|
|Angola losses not shielded during tax holiday||8.3||–|
|Angola forex losses capped at 7%||25.0||–|
|Effective tax rate – continuing operations before Zimbabwe impacts||46.8||10.3|
|Zimbabwe – impairment of loan receivable||2 477.9||–|
|Zimbabwe – gain on loan receivable||2 738.9||–|
|Zimbabwe – NIL foreign exchange losses||6 702.7||–|
|Effective tax rate – continuing operations||6 488.5||10.3|
The increase in effective tax rate of the group resulted from abnormal foreign exchange losses in Zimbabwe which had a significant impact in reducing the profit before tax to a low base. If the impact of these abnormal items is eliminated, the effective tax rate of the group is normalised at 46.8%. This effective tax rate is higher compared to the prior year due mainly to a change in tax law in Angola which limits the deductibility of foreign exchange losses on loans to only 7% and due to the Angolan operation making losses with no tax shield in the remaining period of the tax holiday which ended on 30 April 2019. If the effect of the impact of Zimbabwe and Angola is ignored, the effective tax rate on continued operations for the group increases to 13.5% which is up from 10.3% in the prior year.
EPS and HEPS were down 76% and 69% respectively primarily impacted by the effects of the foreign exchange loss on Zimbabwe intergroup payables on translation partially offset by the Zimbabwe RBZ agreement of a net gain of R76 million.
The normal trading impacts of the forex losses experienced in Angola and Zimbabwe, a poor performance from DivFood, reduced profitability in Angola coupled with Angolan forex losses given the requirement to have cash-backed letters of credit for imports and a significantly higher tax rate due to a change in Angolan tax law have resulted in these declines. The significant devaluation in the kwanza has adversely impacted consumer demand with the downturn in the Angolan economy in the second half of the year being more severe than expected.
In the current year the Plastics business in the UK has been classified as a discontinued operation and continues to perform below expectations with the results impacted by the slower than anticipated completion of the new operational site in Livingston near Edinburgh which is expected to significantly reduce future transport costs to service the Scottish and northern England markets. This business is in advanced stages of a disposal process.
|Capital expenditure (R million)|
Capital expenditure has reduced markedly over the past five years. Significant replacement and expansionary capital expenditure experienced in 2015 has been scaled back and has now reached a level acceptable to management, not exceeding R0.5 billion in the past three years for continuing operations. The capital assurance committee continues to allocate capital to capital expenditure prudently without compromising the integrity or productive capacity of the group's property, plant and equipment.
Capital projects are evaluated by a multi-skilled capital assurance committee that sets clearly defined hurdle rates of 1.5 times the in-country weighted average cost of capital. Capital requests are scrubbed in order to ensure that capital is allocated efficiently with operational management from other divisions being co-opted onto this committee to provide their insights into the evaluation process.
Capital expenditure has been well managed reflecting a moderate increase of 37% from R536 million in 2018 to R735 million in 2019. In total, 70% of total capital expenditure was for replacement capex marginally up from 67% in the prior year.
Cash flow and working capital
Cash generated from operations
|Cash generated from operations before working capital changes||1 846||2 272|
|Net working capital changes||(705)||(677)|
|(Increase)/decrease in inventories||(384)||107|
|Increase in trade receivables and other current assets||(158)||(637)|
|Decrease in trade payables and other current liabilities||(163)||(147)|
|Retirement benefits, contributions and settlements||(143)||(145)|
|Income tax paid||(228)||(171)|
|Cash generated from operations||264||821|
Cash generated from operations before working capital changes declined by 19% primarily due to a significant reduction in profitability in our Angolan and DivFood operations. The planned conversion of the tinplate line in Angola to aluminium has required Angolan inventories to be increased. This conversion will take several months with completion planned at the end of March 2020. Inventories are therefore expected to normalise in the future as this excess inventory position is absorbed by market demand. Inventory holdings have also been adversely impacted by port congestion in Nigeria.
Improved management of trade receivables is pleasing against the prior year where the year-end fell on a Sunday adversely impacting receipts from customers. There has been a reduction in trade payable as operations are focusing on rightsizing ordering patterns given the change demand patterns.
Higher net cash interest costs are primarily due to the requirement for cash-backed letters of credit for Angolan imports which has resulted in a 46% reduction in finance income. Other finance costs have been well managed. The Glass business continued to absorb cash pushing up total cash interest paid.
There has been a higher cash tax payment during the year due to a settlement reached in one of the Rest of Africa economies.
The reduction in cash generated from operations is reflective of challenging trading conditions with the higher absorption of cash in the working capital cycle in the main for the planned line conversion in Angola. Operational performances require improvements with continued focus on working capital management in changing market conditions particularly where imported raw materials have long lead times.
Cash flows from investing activities
|Disposal of property, plant, equipment and investments||145||28|
|Decrease/(increase) in liquid bonds||1 469||(7)|
|Decrease in other non-current financial assets and other||(46)||18|
|Cash flows from investing activities||833||(497)|
|Cash generated before financing activities||1 097||324|
|Cash and cash equivalents at end of year||1 358||1 837|
Capital expenditure has been well managed during the year and is in line with the budget with 70% being represented by replacement expenditure up from 67% in the prior year. The capital assurance committee remains highly effective. A tinplate line beverage can line was sold during the year. Cash flows were augmented by the inflow of R1.5 billion from maturing US dollar-linked Angolan bonds. These bonds continue to be honoured in full and on-time and have proven to be highly effective hedges. The R833 million net inflow from investing activities is pleasing.
In addition, the cash generated before financing activities have increased to over a billion rand in 2019.
|Return on net assets (%)||Return on invested capital (%)|
The return on net assets has been adversely impacted by the reduction in profitability in Angola and DivFood with the return of 11.3% declining from 14.6% in the prior year. Despite the decline this still exceeds the groups weighted average cost of capital.
ROIC remains disappointingly below the weighted average cost of capital due to pressure on profitability and underutilisation of the groups' operating capacity and asset base.
|Net gearing (%)||Current ratio (times)||Acid-test ratio (times)|
Covenants and gearing
2019 has been characterised by changing demand patterns in certain of our markets. There has been a higher than normal investment in net working capital despite good management of trade receivables. Long lead times where raw material are sourced from foreign markets impact flexibility and have increased inventory holdings at the year-end in cases where there has been a sudden decrease in demand. The group is striving to operate a working capital funding model that funds inventory holdings through trade payables with the group therefore only funding its high-quality trade receivables book. There has been a significant focus on moving towards this model with success in various operations. However, inventory holdings at the year-end have been adversely impacted by the requirement to build higher than normal inventories in Angola ahead of the conversion of the tinplate line to aluminium. This position has been exacerbated by the sudden downturn in demand in Angola in the second half of the year as a consequence of the significant devaluation in the kwanza and concomitant reduction in consumer demand due to lagging wage inflation. The group continues to look for opportunities to reduce the absorption of cash and manage the working capital cycles optimally. With the balance sheet well-structured this is a focus area and is receiving significant attention with operations focusing on variable demand in markets that have presented unusual demand patterns. Net gearing has increased from 37% to 68% primarily due to the impacts of equity adjustments stemming mainly from Zimbabwe. Borrowings have been well managed with the focus in the future being on reducing dollar-denominated interest-bearing debt. Short-term liquidity ratios remain strong but have been adversely impacted by the USPP repayment on the seven-year term funding now classified as a current liability as this is repayable during 2020. This is a temporary impact as this dollar-denominated debt will be settled utilising a specifically designated term facility created within the RCF facility and accordingly will be classified as long-term funding in the 2020 financial year thereby improving the group's short-term liquidity ratios.
Significant focus has been placed on cash transfers from Angola and Nigeria and capital expenditure management with positive results. Working capital remains a key focus area.
The group actively manages its treasury with significant focus on the compliance with its banking covenants. A volatile rand/dollar exchange rate during the year impacts the translation of the group's dollar-denominated debt at the two measurement periods of March and September. Net interest-bearing debt is translated to rand at the spot rate at the measurement period with the EBITDA translated at the average rand/dollar exchange rate for the period. The group is exposed to a sudden weakening of the rand/dollar exchange rate at the reporting dates which may result in a dislocation between the spot rate and the average rand/dollar exchange rate for the period. Should this weakened rate continue this would impact the future average rate with positive impacts on the translation of foreign earnings in subsequent measurement periods. It should be noted that despite a weakening of the spot rate towards the end of the reporting period without this movement materially impacting the average rate, the group has managed its covenant positions well and remains within its covenants.
|Net debt/EBITDA (times)||EBITDA/interest cover (times)|
Broad-based black economic empowerment
The improvement in the group's BEE rating has been identified as a strategic imperative with the group being challenged by our customer base to improve its rating. The group was facing a level 7 forecast B-BBEE rating when the decision was made to place the scorecard under the control of group finance and establish a B-BBEE office with the sole focus of running and optimising the scorecard. The decision was made by the B-BBEE steering committee, as advised by group finance, to move to a systematic computation and measurement of the scorecard which led to the implementation of a predictive software model that assisted the committee to understand key focus areas for improvement and to action a plan to address these issues. This focused team delivered on its mandate with an immediate amendment to the scorecard from a level 6 to a level 4 at the time of the 2018 audit. In line with the strategic plan the B-BBEE office has focused on all areas of the scorecard with additional work being performed to secure B-BBEE ownership points associated with previous empowerment transactions.
These actions together with a further decision to participate in the YES4Youth initiative effectively resulted in an improvement of a further two levels on the scorecard resulting in the Nampak group receiving a level 2 contributor status under the B-BBEE codes. As a group we are extremely proud to have embraced the requirements of the B-BBEE scorecard and to present a level 2 contributor to our customers, significantly addressing our customers' concerns.
Glass and Nampak Plastics Europe (NPE) disposal
On 31 March 2018 the Nampak board resolved to dispose of Glass due to challenges in leveraging economies of skill and scale and the significant capital requirements of this operation. This decision was made in order to free up cash for potential growth, dollar-denominated debt reduction and to enhance free cash flow. On 28 August 2019 the Nampak board decided to dispose of Nampak Plastics Europe, following a protracted period of continued poor performance and cash consumption which has culminated in a significant loss being reported for the year. In addition this business has the added difficulty and funding requirements associated with its defined benefit pension plan. The complexity of this business, the requirement for significant future capital expenditure, declining milk volumes in the United Kingdom and its non-core nature has led to a decision to dispose of the business with it being classified as held for sale and a discontinued operation. A formal disposal process is being managed by appointed suitable independent professional advisers in the United Kingdom and is at advanced stages with multiple indicative offers being received for the business. It is expected that both the Glass and NPE transactions will be completed by the second half of the 2020 financial year.
In 2019 the decision not to pay a dividend was upheld as the group continues to transfer funds from territories that have previously not had funds readily available. The key focus of the group in the short to medium term will be to pay down dollar-denominated interest-bearing debt utilising the proceeds from the disposal of Glass and Nampak Cartons Nigeria. The group's restructuring process continues with active plans now in place to address the group's cost base during the 2020 financial year to improve the group's competitive positioning and profitability. The board will evaluate the various options available with a view to enhancing shareholder value.
Events after the reporting date
Subsequent to the year-end, there has been a further significant devaluation of the Angolan kwanza.
The group's strategic imperatives in descending order are as follows:
|1.||Reduce its dollar-denominated borrowings utilising proceeds from the disposal of its Glass and Cartons Nigeria businesses|
|2.||Consider a share buy-back at what is considered to be an attractive share price|
|3.||Consider the resumption of a dividend from accessible cash flows based on a moderate dividend cover|
|4.||Focus on growth initiatives|
The group will continue to prudently allocate capital expenditure with a specific focus on growth projects complementing necessary replacement expenditure. The capital assurance committee and cash management committee will continue to perform their respective roles.
The optimisation of operating costs to further improve the group's competitive positioning and enhance profitability will be key themes for the 2020 financial year. The group will continue in its drive to optimise its working capital cycle with the focus being to fund inventory holdings with trade payables and to increase the velocity in the working capital cycle.
The refinancing of the group's balance sheet in September 2018 continues to provide more than adequate funding for the group and a platform for future growth initiatives. Corporate governance will remain a key focus area with the requisite structures and committees in place in this regard.
I would like to thank the finance team for their diligence and resourcefulness in what has been an extremely complex year from an accounting point of view and a challenging year from a trading perspective. In addition, I would like to thank the board, the group committees and our providers of capital for their continued support during the year.
We look forward to meeting the challenges and harnessing the opportunities in the year ahead.
Chief financial officer
26 November 2019