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Unaudited interim results for the 6 months ended 30 June 2014
KAYDAV GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/038698/06)
JSE code: KDV * ISIN: ZAE000108940
("KayDav" or "the Group" or "the Company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 3O JUNE 2014
- Revenue R342 million (up 14%)
- Headline earnings per share 5.9 cents (up 7%)
- Board distribution segment operating profit (up 31%)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
R R R
Revenue 341 866 047 298 819 038 666 218 405
Cost of sales (242 606 640) (209 662 441) (468 870 730)
Gross profit 99 259 407 89 156 597 197 347 675
Other income 109 024 138 886 507 320
Operating expenses (83 677 012) (74 522 242) (161 313 907)
Operating profit 15 691 419 14 773 241 36 541 088
Investment income 77 363 151 266 166 891
Finance costs (1 773 059) (1 788 909) (3 557 933)
Profit before taxation 13 995 723 13 135 598 33 150 046
Taxation (3 938 607) (3 717 687) (9 439 202)
Profit for the period 10 057 116 9 417 911 23 710 844
Other comprehensive income - - -
Total comprehensive income for the
period attributable to equity holders
of the parent 10 057 116 9 417 911 23 710 844
Reconciliation between earnings and
headline earnings
Earnings 10 057 116 9 417 911 23 710 844
Loss on disposal of plant and equipment 79 446 25 304 27 058
Taxation on loss on disposal of plant
and equipment (22 245) (7 085) (7 576)
Headline earnings attributable to
equity holders 10 114 317 9 436 130 23 730 326
Weighted average number of shares in issue 172 751 585 172 751 585 172 751 585
Basic and diluted earnings per share (cents) 5.8 5.5 13.7
Headline and diluted headline earnings per
share (cents) 5.9 5.5 13.7
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
At At At
30 Jun 2014 30 Jun 2013 31 Dec 2013
R R R
ASSETS
Non-current assets 79 072 676 69 445 850 73 245 308
Property, plant and equipment 63 841 185 53 871 648 57 005 752
Goodwill 14 302 804 14 302 804 14 302 804
Deferred taxation 928 687 1 271 398 1 936 752
Current assets 239 245 109 206 623 324 184 990 190
Inventories 121 630 065 106 132 485 87 957 081
Trade and other receivables 100 358 080 82 962 536 76 305 832
Cash and cash equivalents 15 828 971 16 695 824 20 710 093
Taxation 1 427 993 832 479 17 184
Total assets 318 317 785 276 069 174 258 235 498
EQUITY AND LIABILITIES
Capital and reserves 137 852 175 126 458 401 140 751 333
Share capital 173 173 173
Share premium 144 754 416 157 710 689 157 710 689
Accumulated loss (6 902 414) (31 252 461) (16 959 529)
Non-current liabilities 29 037 514 27 906 069 26 118 763
Instalment sale liabilities 17 575 099 10 642 850 12 288 476
Interest-bearing liabilities 11 238 242 16 958 130 13 830 287
Deferred taxation 224 173 305 089 -
Current liabilities 151 428 096 121 704 704 91 365 402
Trade and other payables 88 217 218 75 674 540 40 701 296
Short-term portion of instalment
sale liabilities 8 371 573 4 610 183 5 708 338
Short-term portion of interest-bearing
liabilities 5 738 310 5 842 430 6 124 965
Bank overdraft 45 174 815 32 597 326 34 834 452
Taxation 645 317 - 890 319
Provisions 3 280 863 2 980 225 3 106 032
Total equity and liabilities 318 317 785 276 069 174 258 235 498
Shares in issue at period-end 172 751 585 172 751 585 172 751 585
Net asset value per share (cents) 79.8 73.2 81.5
Net tangible asset value per share (cents) 71.5 64.9 73.2
CONDENSED STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
R R R
Balance at the beginning of the period 140 751 333 129 133 100 129 133 100
Distribution to shareholders (12 956 274) (12 092 610) (12 092 611)
Total comprehensive income for the period 10 057 116 9 417 911 23 710 844
Balance at the end of the period 137 852 175 126 458 401 140 751 333
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
R R R
Cash flows from operating activities 3 944 523 (5 981 543) 2 410 780
Cash flows from investing activities (354 122) (463 782) (1 129 274)
Cash flows from financing activities (18 811 886) (17 653 274) (23 602 962)
Net decrease in cash and cash equivalents (15 221 485) (24 098 599) (22 321 456)
Net cash and cash equivalents at the
beginning of the period (14 124 359) 8 197 097 8 197 097
Net cash and cash equivalents at the
end of the period (29 345 844) (15 901 502) (14 124 359)
SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
R R R
Segmental revenue
Board distribution 335 041 900 291 256 916 648 861 028
Manufacturing 18 020 807 18 810 339 41 713 661
Internal revenue (11 196 660) (11 248 217) (24 356 284)
Net revenue 341 866 047 298 819 038 666 218 405
Internal revenue relates to sales from
the manufacturing segment to the board
distribution segment.
Segmental results
Board distribution 19 125 302 14 581 686 37 932 997
Manufacturing (3 433 883) 191 555 (1 391 909)
Operating profit before interest 15 691 419 14 773 241 36 541 088
Operating assets
Board distribution 285 172 646 244 512 177 221 385 702
Manufacturing 20 908 010 18 358 545 22 592 112
Other 999 333 961 811 695 262
Internal balances (5 421 687) (4 170 040) (2 694 318)
301 658 302 259 662 493 241 978 758
Segment assets consist of property, plant and equipment, inventory, trade receivables
and operating cash and exclude taxation assets, investments and intangible assets.
COMMENTARY
Introduction
KayDav Group Limited ("KayDav" or "the Group") specialises in the distribution and
adding of value to wood-based panels, which are products manufactured through the
compression of wood waste into a solid panel. Wood-based panels are used for a variety
of purposes in the construction, furniture manufacturing and shopfitting industries.
Financial results
Revenue of R342 million grew by 14% compared to the previous corresponding period.
The strong revenue growth of 14% did not fully carry through to the gross profit line,
with gross profit growing by 11% to R99 million for the six months ended 30 June 2014
from the previous corresponding period. Sustained pressure on the gross margin
resulted in a decrease of this ratio from 29.8% for the six months ended 30 June 2013
to 29.0% for the six months ended 30 June 2014.
Operating expenses were 12% higher than that of the six months ended 30 June 2013 as
a result of the increased activity and inflation.
Total comprehensive income increased by 7% while earnings and headline earnings per
share increased from 5.5 cents for the six months ended 30 June 2013 to 5.8 cents and
5.9 cents respectively for the six months ended 30 June 2014. The growth in total
comprehensive income and earnings and headline earnings per share were negatively
influenced by a poor performance in the manufacturing segment which consists of one
operation which made an operating loss of R3.4 million for the six months ended
30 June 2014 (30 June 2013: operating profit of R190 000). As a result the board of
directors decided to restructure and relocate the operation from Epping to Ottery,
operating under the management of the Group's Ottery outlet, to ensure a return to
profitability. It is estimated that the relocation cost will amount to R1.6 million
which will be incurred during the second half of the financial year. Operating expenses
for the six months ended 30 June 2014 include an amount of R400 000 provided for
retrenchment and building repair costs in respect of the restructuring and relocation.
During the six months ended 30 June 2014 the Group acquired plant and equipment and
motor vehicles at a cost of R9.6 million which was financed by instalment sale
liabilities. Of this amount R8.5 million relates to delivery vehicles and related
principally to the replacement and acquisition of vehicles previously leased.
KayDav's capital structure remains sound with a debt to equity ratio of 31%
(30 June 2013: 27%) and a net asset base of R138 million at 30 June 2014
(31 December 2013: R141 million) after a capital distribution to shareholders of
7.5 cents per share, amounting to R13 million. The Group's current ratio at
30 June 2014 was 1.6 (30 June 2013: 1.7).
While KayDav is pleased with the operating profit growth in the board distribution
segment of 31% we are disappointed that this was largely off-set by the loss in the
manufacturing segment. We are confident that the restructuring and relocation of the
manufacturing operation will contribute to profitability from the 2015 financial
year onwards.
Prospects
Activity levels in the wood-based panel industry are determined by consumer demand
which is affected by consumers' personal debt levels, employment and willingness and
ability of financial institutions to extend credit.
On a macro level it appears that the Group will continue to face headwinds in the
short to medium term with the current high consumer debt levels, the negative
employment outlook and possible increased inflation and interest rates which all
negatively affect consumer demand. On a company-specific level KayDav management
remains focused on increasing its market share at acceptable gross profit margins
while exercising effective cost and working capital control.
A component of the Group's strategy is to enter other industries of scale via
acquisition of smaller businesses. This provides a low-risk entry into an opportunity
for high growth. KayDav's relatively small size when compared to most other listed
companies means that the impact of small acquisitions still register meaningfully in
respect of earnings growth from inception, but the main objective is to establish a
platform for growth. In the first step towards execution of this strategy, KayDav, via
its wholly-owned subsidiary Sign and Seal Trading 154 (Pty) Ltd acquired a small
packaging distribution business on 1 August 2014 at an initial purchase price of
R12.3 million. This price can increase or decrease according to net profit after tax
achieved for the period 1 March 2014 to 28 February 2015, with a maximum purchase
price of R15.2 million. The business, which trades as Packit Packaging Solutions,
is primarily involved in the distribution of packaging materials and to a lesser
extent in the sale of packaging machinery. The business has characteristics which
are very similar to those of KayDav's existing businesses, namely:
- The nature of operations is wholesale and retail distribution.
- Marketing is done business to business via sales representatives.
- Working capital management is a key driver of success.
- Gross profit and net profit margins are similar.
KayDav believes this acquisition provides an appropriate entry into the packaging
distribution industry.
Distributions to shareholders
The Group made a cash distribution of 7.5 cents per share to shareholders on
12 May 2014.
Capital commitments
At 30 June 2014 the Group was committed to and contracted for the acquisition of a
property consisting of a warehouse and office space, previously rented from a third
party, to facilitate the expansion of the Group's Brackenfell outlet at a cost of
R3 000 000 which will be financed by a combination of a bank loan secured by a
mortgage bond over the property and internal funds.
Subsequent events
No material change has taken place in the affairs of the Group between the end of the
financial period and the date of this report, which requires adjustment or disclosure.
Basis of preparation
The interim financial statements have been prepared in accordance with International
Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the requirements of IAS 34: Interim Financial
Reporting and in compliance with the JSE Listings Requirements and the Companies Act,
No. 71 of 2008 as amended.
The accounting policies applied in preparing these interim financial statements are
consistent with those presented in the annual financial statements for the year ended
31 December 2013. These interim financial statements have not been audited or reviewed
by the KayDav auditors, Grant Thornton (Jhb) Inc. This interim report was prepared by
the financial director, Martin Slier CA(SA).
Appreciation
The board of directors extends its appreciation to our management and staff for their
efforts during this reporting period. We also thank our customers and suppliers for
their continued support.
On behalf of the board
IH Stern GF Davidson
Chairman Chief Executive Officer
Cape Town
26 August 2014
CORPORATE INFORMATION
Incorporated in the Republic of South Africa
Registration number: 2006/038698/06
JSE share code: KDV
ISIN: ZAE000108940
Income tax reference number: 9154/477/16/1
Registered address: 105 Bamboesvlei Road, Ottery 7800
Postal address: PO Box 272, Ottery 7808
Telephone: 021 704 7060
Facsimile: 086 519 2014
Executive directors: GF Davidson (CEO), M Slier (CFO)
Independent non-executive directors: IH Stern (Chairman), J Hertz, B Tlhabanelo
Company secretary: CIS Company Secretaries (Pty) Ltd
Transfer secretaries: Link Market Services South Africa (Pty) Ltd
Sponsor: Java Capital
www.kaydav.co.za
Date: 26/08/2014 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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