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KDV - Kaydav Group Limited - Audited results for the year ended 31 December 2010 KAYDAV GROUP LIMITED Incorporated in the Republic of South Africa Registration number: 2006/038698/06 JSE code: KDV * ISIN: ZAE000108940 ("KayDav" or "the Group") Audited results for the year ended 31 December 2010 - Headline earnings per share 3.9 cents (up 70%) - Net tangible asset value per share 55.2 cents (up 17%) Consolidated statement of comprehensive income Audited year Audited year ended 31 ended 31
December 2010 December 2009 R R CONTINUING OPERATIONS Revenue 460 837 937 440 121 613 Cost of sales (328 430 134) (299 630 462) Gross profit 132 407 803 140 491 151 Other income 1 227 431 500 486 Operating expenses (116 709 971) (122 739 316) Operating profit 16 925 263 18 252 321 Investment income 465 486 807 314 Finance costs (2 737 521) (2 031 557) Profit before taxation 14 653 228 17 028 078 Taxation (20 470) (6 303 138) Profit for the year 14 632 758 10 724 940 Other comprehensive income - - Total comprehensive income attributable to equity holders of the parent from continuing operations 14 632 758 10 724 940 DISCONTINUED OPERATION Loss for the year from discontinued operation before disposal (6 921 631) (4 219 552) Loss on disposal of discontinued operation (1 125 326) - Loss for the year from discontinued operation (8 046 957) (4 219 552) Other comprehensive income - - Total comprehensive loss attributable to equity holders of the parent from discontinued operation (8 046 957) (4 219 552) Total comprehensive income attributable to equity holders of the parent from continuing and discontinued operations 6 585 801 6 505 388 Reconciliation between earnings and headline earnings Earnings 6 585 801 6 505 388 (Profit)/loss on sale of plant and equipment (4 186) 50 034 Taxation on (profit)/loss on sale of plant and equipment 1 172 (14 009) Loss on sale of business 1 125 326 - Headline earnings 7 708 113 6 541 413 Weighted average number of shares in issue 198 961 975 279 416 077 Basic and diluted earnings per share (cents) 3.3 2.3 Headline earnings per share (cents) 3.9 2.3 Consolidated statement of financial position Audited year Audited year ended 31 ended 31
December 2010 December 2009 R R ASSETS Non-current assets 51 525 170 52 291 161 Plant and equipment 31 349 411 35 542 939 Goodwill 14 302 804 14 302 804 Deferred taxation 5 872 955 2 445 418 Current assets 151 879 798 142 731 681 Inventories 61 237 708 62 177 403 Trade and other receivables 66 122 323 69 506 096 Cash and cash equivalents 22 747 360 9 491 221 Taxation 1 772 407 1 556 961 TOTAL ASSETS 203 404 968 195 022 842 EQUITY AND LIABILITIES Capital and reserves 115 650 549 125 842 799 Share capital 184 236 Share premium 194 850 351 211 628 350 Accumulated loss (79 199 986) (85 785 787) Non-current liabilities 15 605 553 6 535 603 Instalment sale liabilities 4 248 936 6 018 822 Interest bearing liability 11 242 494 - Deferred taxation 114 123 516 781 72 148 866 62 644 440 Current liabilities Trade and other payables 56 057 241 50 664 350 Short-term portion of instalment sale liabilities 3 215 677 2 552 466 Short-term portion of interest bearing liability 2 707 832 - Bank overdraft 8 034 017 7 689 783 Provisions 2 134 099 1 737 841 TOTAL EQUITY AND LIABILITIES 203 404 968 195 022 842 Shares in issue at year end 183 637 373 236 186 273 Net asset value per share (cents) 63.0 53.3 Net tangible asset value per share (cents) 55.2 47.2 Condensed consolidated statement of changes in equity Balance at the beginning of the year 125 842 799 137 186 672 Total comprehensive income for the year 6 585 801 6 505 388 Share repurchases (16 778 051) (17 849 261) Total equity 115 650 549 125 842 799 Condensed consolidated statement of cash flows Audited year Audited year ended 31 ended 31
December 2010 December 2009 R R Cash flows from operating activities 11 750 263 28 102 830 Cash flows from investing activities 5 096 041 (3 898 234) Cash flows from financing activities (3 934 399) (21 975 461) Net increase in cash and cash equivalents 12 911 905 2 229 135 Net cash and cash equivalents at the beginning of the year 1 801 438 (427 697) Net cash and cash equivalents at the end of the year 14 713 343 1 801 438 Sale of business Plant and equipment 4 062 960 - Inventories 4 855 567 - Trade and other receivables 5 356 673 - Cash and cash equivalents 1 404 346 - Trade and other payables (5 945 323) - Provisions (22 722) - Net assets sold 9 711 501 - Costs related to the disposal of business 2 413 825 - 12 125 326 -
Loss on disposal (1 125 326) - Consideration received 11 000 000 - Cash sold (1 404 346) - Cash realised on sale of business 9 595 654 - Audited year Audited year ended 31 ended 31 December 2010 December 2009 Segmental analysis Segmental revenue Board distribution 449 403 208 429 014 760 Manufacturing 62 870 866 51 597 968 Other - - Internal revenue (21 622 472) (19 376 381) 490 651 602 461 236 347 Segmental results Board distribution 16 660 984 19 393 767 Manufacturing (8 394 199) (5 348 830) Other 1 758 273 (642) Operating profit before interest 10 025 058 14 044 295 Discontinued operation - manufacturing 6 900 205 4 208 026 Loss for the year from discontinued operation 6 921 631 4 219 552 Net finance charges from discontinued operation (21 426) (11 526) Operating profit before interest from continuing operations 16 925 263 18 252 321 Commentary Introduction KayDav 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 shop fitting industries. Financial results Revenue for the year ended 31 December 2010 from continuing operations was 5% above that of the previous corresponding period. The Group experienced significant pressure on its gross margin however, which resulted in gross profit of R132.4 million from continuing operations being 6% below gross profit of R140.5 million for the previous period. Intermittent periods of price deflation brought about by an oversupply of the products sold was the major factor in the erosion of the Group`s gross profit. The bad debt expense for the year ended 31 December 2010 of R6.1 million was well below the R15.7 million of the previous period. This decrease was the largest contributor to the reduction in operating expenses of continuing operations from R122.7 million for the 2009 financial year to R116.7 million for the year ended 31 December 2010. A previously unrecognised deferred tax asset of R2.1 million was recognised during the year ended 31 December 2010. The recognition of this deferred tax asset reduced the taxation expense to R20 470 resulting in an effective tax rate of 0.003%. The Group sold the Castle Timbers business on 15 December 2010 after this business failed to achieve profitability. The Castle Timbers business suffered a loss for the 2010 financial year of R6.9 million. While the business was sold at a loss of R1.1 million, the sale yielded a cash inflow of R9.6 million for the year ended 31 December 2010. Costs related to the sale of R2.4 million were paid subsequent to the year end. Headline earnings per share of 3.9 cents for the year ended 31 December 2010 is up 70% from the 2.3 cents for the previous corresponding period. The Group`s net tangible asset value at 31 December 2010 was R101.3 million (2009: R111.5 million) after the company repurchased 52 548 900 KayDav ordinary shares during the 2010 financial year. Net interest bearing borrowings, after adjusting for cash resources, was 7% of net tangible asset value at 31 December 2010. The repurchase of KayDav ordinary shares was funded by a medium term loan from KayDav`s bankers. The loan of R15 500 000 is repayable over five years and carries interest at 1 percentage point above the prime overdraft rate. At 31 December 2010 the outstanding balance on this loan was R13 950 326. The interest on the loan reduced basic and diluted earnings per share as well as headline earnings per share for the year by 0.4 cents. The Group is operating at a current ratio of 2.1 (2009: 2.3) with a sound financial position to provide a platform for future growth. Prospects Selling prices for wood based panels have increased at the beginning of the 2011 financial year. Manufacturers of wood based panels, who are by and large the price makers in the industry, are exposed to current cost push factors which have the potential to reverse the trend experienced during the 2010 financial year, when operating expense inflation exceeded selling price inflation by a significant margin. This has positive implications for the gross profit margins and nominal profitability of the Group. The global and local economic environment remains uncertain however and management is therefore cognisant of the potential for economic volatility. The Group expects moderate growth for the 2011 financial year. Management is continuing its focus on increasing its market share and profitability while maintaining and improving working capital efficiency. Changes to capital structure KayDav repurchased 52 548 900 KayDav ordinary shares during the 2010 financial year. These repurchases reduced the number of ordinary shares in issue to 183 637 373. Share capital and share premium were reduced by R16.8 million as a result of these repurchases and related costs. Of the total number of shares repurchased, 51 600 000 KayDav ordinary shares were repurchased on 12 and 13 April 2010 through a specific buy back under specific authority from shareholders. The shares were acquired at a price of 30 cents per share. A further 948 900 ordinary shares were acquired during October and November 2010. These shares were acquired on the open market at a price of 35 cents per share under a general authority from shareholders. Dividend No dividends were declared or paid during the year under review Subsequent events No material change has taken place in the affairs of the Group between the end of the financial year and the date of this report, which require adjustment or disclosure. Basis of preparation The condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, the AC 500 series of interpretations the requirements of IAS 34 (Interim financial reporting) and in compliance with the JSE Listings Requirements and the Companies Act of South Africa. The accounting policies applied in preparing these condensed consolidated financial statements are consistent with those presented in the annual financial statements for the year ended 31 December 2009. Directorate As announced on 24 August 2010, Geoffrey Davidson and Jay Katz resigned from the KayDav board on 23 August 2010 so as to achieve a balance between executive and non executive directors. Audit report These condensed consolidated financial results have been audited by KayDav`s auditors, PKF (Jhb) Inc, whose unqualified audit report is available for inspection at KayDav`s registered office. Annual report Shareholders are advised that the annual report containing the financial statements will be posted on or before 31 March 2011. Appreciation The board 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 I H Stern G F Davidson Chairman Chief Executive Officer 25 March 2011 Corporate information Executive Directors: G F Davidson (CEO), M Slier (CFO) Non-executive Directors: I H Stern (Chairman), J Hertz Registration Number: 2006/038698/06 Registered Address: 105 Bamboesvlei Road, Ottery, 7800 Postal Address: PO Box 272 Ottery 7808 Telephone: 021 704 7060 Facsimile: 021 704 2082 Company Secretary: Probity Business Services (Proprietary) Limited Transfer Secretaries: Link Market Services South Africa (Proprietary) Limited Sponsor: Java Capital 28 March 2011 Date: 28/03/2011 17:07:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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