Unaudited interim results for the six months ended 30 June 2013 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 30 JUNE 2013 Revenue R299 million (up 18%) Headline earnings per share 5.5 cents (up 12%) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Unaudited Unaudited Audited At At At 30 Jun 2013 30 Jun 2012 31 Dec 2012 R R R ASSETS Non-current assets 69 445 850 50 904 867 68 695 759 Plant and equipment 53 871 648 32 808 533 52 619 029 Goodwill 14 302 804 14 302 804 14 302 804 Deferred taxation 1 271 398 3 793 530 1 773 926 Current assets 206 623 324 174 094 014 165 011 970 Inventories 106 132 485 77 395 540 71 733 983 Trade and other receivables 82 962 536 82 087 847 71 365 557 Cash and cash equivalents 16 695 824 11 617 596 20 841 337 Taxation 832 479 2 993 031 1 071 093 Total assets 276 069 174 224 998 881 233 707 729 EQUITY AND LIABILITIES Capital and reserves 126 458 401 127 623 384 129 133 100 Share capital 173 173 173 Share premium 157 710 689 180 168 412 169 803 300 Accumulated loss (31 252 461) (52 545 201) (40 670 373) Non-current liabilities 27 906 069 20 135 314 30 194 513 Instalment sale liabilities 10 642 850 5 052 675 9 926 850 Interest-bearing liabilities 16 958 130 15 082 639 19 955 251 Deferred taxation 305 089 - 312 412 Current liabilities 121 704 704 77 240 183 74 380 116 Trade and other payables 75 674 540 40 127 274 48 983 495 Short-term portion of instalment sale liabilities 4 610 183 4 234 389 4 547 748 Short-term portion of interest-bearing liabilities 5 842 430 4 766 144 5 538 192 Bank overdraft 32 597 326 23 449 994 12 644 240 Taxation - 57 251 - Provisions 2 980 225 4 605 131 2 666 441 Total equity and liabilities 276 069 174 224 998 881 233 707 729 Shares in issue at period-end 172 751 585 172 751 585 172 751 585 Net asset value per share (cents) 73.2 73.9 74.8 Net tangible asset value per share (cents) 64.9 65.6 66.5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Jun 2013 30 Jun 2012 31 Dec 2012 R R R Revenue 298 819 038 253 182 787 550 919 804 Cost of sales (209 662 441) (173 193 853) (381 974 757) Gross profit 89 156 597 79 988 934 168 945 047 Other income 138 886 291 303 1 365 064 Operating expenses (74 522 242) (67 400 179) (139 476 746) Operating profit 14 773 241 12 880 058 30 833 365 Investment income 151 266 37 166 178 733 Finance costs (1 788 909) (1 124 819) (2 540 847) Profit before taxation 13 135 598 11 792 405 28 471 251 Taxation (3 717 687) (3 316 699) (8 120 717) Profit for the period 9 417 911 8 475 706 20 350 534 Other comprehensive income - - - Total comprehensive income for the period attributable to equity holders of the parent 9 417 911 8 475 706 20 350 534 Reconciliation between earnings and headline earnings Earnings 9 417 911 8 475 706 20 350 534 Loss/(profit) on disposal of plant and equipment 25 304 (49 453) (523 302) Taxation on loss/(profit) on disposal of plant and equipment (7 085) 13 847 146 525 Headline earnings attributable to equity holders 9 436 130 8 440 100 19 973 757 Weighted average number of shares in issue 172 751 585 172 751 585 172 751 585 Basic and diluted earnings per share (cents) 5.5 4.9 11.8 Headline earnings per share (cents) 5.5 4.9 11.6 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Jun 2013 30 Jun 2012 31 Dec 2012 R R R Cash flows from operating activities (5 981 543) (13 992 981) 28 191 996 Cash flows from investing activities (463 782) (990 310) (7 935 217) Cash flows from financing activities (17 653 274) 6 470 262 (8 740 313) Net (decrease)/increase in cash and cash equivalents (24 098 599) (8 513 029) 11 516 466 Net cash and cash equivalents at the beginning of the period 8 197 097 (3 319 369) (3 319 369) Net cash and cash equivalents at the end of the period (15 901 502) (11 832 398) 8 197 097 CONDENSED STATEMENTS OF CHANGES IN EQUITY Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Jun 2013 30 Jun 2012 31 Dec 2012 R R R Balance at the beginning of the period 129 133 100 119 147 678 119 147 678 Distribution to shareholders (12 092 610) - (10 365 112) Total comprehensive income for the period 9 417 911 8 475 706 20 350 534 Balance at the end of the period 126 458 401 127 623 384 129 133 100 SEGMENTAL ANALYSIS Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 Jun 2013 30 Jun 2012 31 Dec 2012 R R R Segmental revenue Board distribution 291 256 916 244 938 218 532 957 540 Manufacturing 18 810 339 21 036 987 46 495 481 Internal revenue (11 248 217) (12 792 418) (28 533 217) Net revenue 298 819 038 253 182 787 550 919 804 Internal revenue relates to sales from the manufacturing segment to the board distribution segment. Segmental results Board distribution 14 581 686 12 793 242 29 806 990 Manufacturing 191 555 86 816 1 026 375 Operating profit before interest 14 773 241 12 880 058 30 833 365 Operating assets Board distribution 244 512 177 191 527 379 202 530 128 Manufacturing 18 358 545 18 929 944 16 267 026 Other 961 811 1 059 051 1 288 801 Internal balances (4 170 040) (7 606 857) (3 526 049) 259 662 493 203 909 517 216 559 906 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 R299 million grew by 18.0% compared to the previous corresponding period. The Group continued to experience margin pressure with the gross profit percentage for the six months ended 30 June 2012 of 31.6% dropping by 1.8 percentage points to 29.8% for the six months ended 30 June 2013, thereby muting the effect of strong revenue growth and resulting in gross profit increasing by 11.5% over the previous corresponding period. Operating expenses were 10.6% higher than the six months ended 30 June 2012 as a result of the increased activity. Total comprehensive income increased by 11.1% while earnings and headline earnings per share increased from 4.9 cents for the six months ended 30 June 2012 to 5.5 cents for the six months ended 30 June 2013. The net overdraft at 30 June 2013 of R16 million is as a result of significant investment in inventories for strategic reasons over and above that required to service turnover growth. Inventories of R106 million at 30 June 2013 exceeded that of 30 June 2012 by R29 million and that of 31 December 2012 by R34 million. The Group had a net asset base of R126 million at 30 June 2013 (December 2012: R129 million) after a capital distribution to shareholders of 7 cents per share amounting to R12 million. The Group believes that this net asset base together with a sound capital structure provides a solid base for future expansion. KayDav is pleased with the further improvement in its financial results considering the continued challenging trading conditions in the industry. PROSPECTS Activity levels in our 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 strong 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, all of which are expected to negatively affect consumer demand. On a micro level management is focused on increasing market share at acceptable gross margins and to this end the Group established a new outlet in Durban which is performing in line with management's expectations. In addition, management continues to ensure effective cost and working capital control. While selling price inflation has lagged behind operating cost inflation for a number of years we are now seeing signs that the cycle may be turning. This, together with the earnings growth during the first six months of the financial year ending 31 December 2013, bodes well for the second half of the financial year which normally generates the greater contribution to operating profits. DISTRIBUTIONS TO SHAREHOLDERS The Group made a capital distribution of 7 cents per share to shareholders on 22 April 2013. CAPITAL COMMITMENTS At 30 June 2013 the Group committed to and contracted for the acquisition of production machinery at a cost of Eur252 186 which will be financed by instalment sale liabilities. In addition, the Group committed to acquire an additional production machine at a cost of R500 000 which will be internally financed. 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, 2008 of South Africa. 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 2012. 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 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 22 August 2013 CORPORATE INFORMATION Registration number: 2006/038698/06 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: Probity Business Services (Pty) Limited Transfer secretaries: Link Market Services South Africa (Pty) Limited Sponsor: Java Capital Website: www.kaydav.co.za Date: 22/08/2013 03:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 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