Unaudited interim results for the six months ended 30 June 2015 KAYDAV GROUP LIMITED Incorporated in the Republic of South Africa Registration number: 2006/038698/06 Share code: KDV * ISIN: ZAE000108940 ("KayDav" or "the Group") Unaudited interim results for the six months ended 30 June 2015 - Revenue R392 million (up 15%) - Headline earnings per share 6.8 cents (up 15%) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Unaudited Unaudited 6 months 6 months Audited ended ended year ended 30 Jun 2015 30 Jun 2014 31 Dec 2014 R R R Revenue 392 327 718 341 866 047 761 739 077 Cost of sales (281 954 185) (242 606 640) (544 059 207) Gross profit 110 373 533 99 259 407 217 679 870 Other income 486 531 109 024 147 248 Operating expenses (91 728 148) (83 677 012) (174 400 706) Operating profit 19 131 916 15 691 419 43 426 412 Investment income 102 500 77 363 102 689 Finance costs (2 862 717) (1 773 059) (4 594 484) Profit before taxation 16 371 699 13 995 723 38 934 617 Taxation (4 630 816) (3 938 607) (11 118 641) Profit for the period 11 740 883 10 057 116 27 815 976 Other comprehensive income - - - Total comprehensive income attributable to equity holders of the parent 11 740 883 10 057 116 27 815 976 Reconciliation between earnings and headline earnings Earnings 11 740 883 10 057 116 27 815 976 (Profit)/loss on disposal of plant and equipment (43 430) 79 446 355 990 Taxation on (profit)/loss from disposal of plant and equipment 12 160 (22 245) (99 677) Impairment of plant and equipment - - 158 290 Taxation on impairment of plant and equipment - - (44 322) Headline earnings attributable to equity holders 11 709 613 10 114 317 28 186 257 Weighted average number of shares in issue 172 751 585 172 751 585 172 751 585 Basic and diluted earnings per share (cents) 6.8 5.8 16.1 Headline and diluted headline earnings per share (cents) 6.8 5.9 16.3 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Unaudited Unaudited Audited 30 Jun 2015 30 Jun 2014 31 Dec 2014 R R R ASSETS Non-current assets 93 466 543 79 072 676 91 259 337 Property, plant and equipment 66 661 702 63 841 185 64 492 411 Goodwill 26 361 344 14 302 804 26 361 344 Deferred taxation 443 497 928 687 405 582 Current assets 275 858 564 239 245 109 246 726 035 Inventories 134 805 981 121 630 065 113 181 728 Trade and other receivables 112 213 598 100 358 080 89 893 263 Cash and cash equivalents 27 553 183 15 828 971 42 922 052 Taxation 1 285 802 1 427 993 728 992 Total assets 369 325 107 318 317 785 337 985 372 EQUITY AND LIABILITIES Capital and reserves 158 714 343 137 852 175 155 611 036 Share capital 173 173 173 Share premium 136 116 840 144 754 416 144 754 416 Accumulated profit/(loss) 22 597 330 (6 902 414) 10 856 447 Non-current liabilities 37 176 562 29 037 514 38 892 969 Instalment sale liabilities 16 613 252 17 575 099 15 327 764 Interest-bearing liabilities 20 218 782 11 238 242 22 896 413 Deferred taxation 344 528 224 173 668 792 Current liabilities 173 434 202 151 428 096 143 481 367 Trade and other payables 96 493 943 88 217 218 93 241 500 Short-term portion of instalment sale liabilities 9 337 363 8 371 573 8 407 221 Short-term portion of interest-bearing liabilities 5 211 888 5 738 310 6 260 622 Bank overdraft 58 444 083 45 174 815 31 514 358 Taxation 175 858 645 317 972 386 Provisions 3 771 067 3 280 863 3 085 280 Total equity and liabilities 369 325 107 318 317 785 337 985 372 Shares in issue at period-end 172 751 585 172 751 585 172 751 585 Net asset value per share (cents) 91.9 79.8 90.1 Net tangible asset value per share (cents) 76.6 71.5 74.8 CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY Unaudited Unaudited 6 months 6 months Audited ended ended year ended 30 Jun 2015 30 Jun 2014 31 Dec 2014 R R R Balance at the beginning of the period 155 611 036 140 751 333 140 751 333 Distribution to shareholders (8 637 576) (12 956 274) (12 956 273) Total comprehensive income for the period 11 740 883 10 057 116 27 815 976 Balance at the end of the period 158 714 343 137 852 175 155 611 036 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Unaudited Unaudited 6 months 6 months Audited ended ended year ended 30 Jun 2015 30 Jun 2014 31 Dec 2014 R R R Cash flows from operating activities (25 836 473) 3 944 523 47 084 040 Cash flows from investing activities 471 994 (354 122) (8 250 925) Cash flows from financing activities (16 934 115) (18 811 886) (13 301 062) Net (decrease)/increase in cash and cash equivalents (42 298 594) (15 221 485) 25 532 053 Net cash and cash equivalents at the beginning of the period 11 407 694 (14 124 359) (14 124 359) Net cash and cash equivalents at the end of the period (30 890 900) (29 345 844) 11 407 694 SEGMENTAL ANALYSIS Unaudited Unaudited 6 months 6 months Audited ended ended year ended 30 Jun 2015 30 Jun 2014 31 Dec 2014 R R R Segmental revenue Board distribution and adaptation 371 572 007 341 866 047 746 506 296 Packaging 21 467 488 - 15 232 781 Internal revenue (packaging) (711 777) - - Net revenue 392 327 718 341 866 047 761 739 077 Segmental results Board distribution and adaptation 16 791 127 15 691 419 41 447 577 Packaging 2 340 789 - 1 978 835 Operating profit before interest 19 131 916 15 691 419 43 426 412 Operating assets Board distribution and adaptation 324 134 122 306 080 656 300 114 312 Packaging 18 920 800 - 12 357 651 Other 955 539 999 333 1 431 886 Internal balances (2 775 997) (5 421 687) (3 414 394) 341 234 464 301 658 302 310 489 455 COMMENTARY INTRODUCTION KayDav comprises a group of businesses involved in the distribution of wood-based panels and packaging consumables and machinery. Wood-based panels are manufactured through the compression of wood waste into solid panels. These panels have a variety of applications in the construction, furniture manufacturing and shopfitting industries. Packaging consumables and machinery are products and machines which cater for a wide variety of packaging requirements in the industrial, agricultural and commercial sectors. FINANCIAL RESULTS Revenue of R392 million (30 June 2014: R342 million) grew by 15% compared to the previous corresponding period with gross profit of R110 million (30 June 2014: R99 million) growing by 11%. Revenue growth in the board distribution and adaptation segment of 9% was satisfactory considering the difficult economic environment. However, its effect on gross profit was eroded by a decrease in the gross margin from 29% for the six months ended 30 June 2014 to 28% for the six months ended 30 June 2015. Selling prices in the wood-based panel industry will remain under pressure until local production capacity is withdrawn or significant growth in demand occurs so as to achieve a closer balance between demand and supply. Operating expenses were 10% higher than that of the six months ended 30 June 2014, but only 3% higher when the new packaging segment is excluded. This was primarily due to savings resulting from the actions taken during 2014 when the Davidsons Manufacturing operation was relocated and integrated with the Group's Ottery outlet. KayDav is pleased to report that despite the current economic climate and difficult trading conditions, earnings grew by 17% from the previous corresponding period. Consequently earnings and headline earnings per share increased from 5.8 cents and 5.9 cents respectively for the six months ended 30 June 2014 to 6.8 cents for the six months ended 30 June 2015. The increase in earnings was driven primarily by the Davidsons Manufacturing savings mentioned above and by the performance of the packaging segment which was only acquired after 30 June 2014 and which contributed operating profit of R2.3 million during the current reporting period. During the six months ended 30 June 2015 the Group acquired plant and equipment and motor vehicles at a cost of R6 million which was financed by instalment sale liabilities. The significant net overdraft position at 30 June 2015 of R31 million (30 June 2014: R29 million) was the result of paying a large supplier earlier than its normal trading terms require for this month only and is the same arrangement which existed on 30 June 2014. The effect was reversed in the following month. KayDav's capital structure remains sound with a debt to equity ratio of 32% (30 June 2014: 31%) and a net asset base of R159 million at 30 June 2015 (31 December 2014: R156 million) after a distribution to shareholders of 5 cents per share amounting to R9 million. The Group's current ratio at 30 June 2015 was 1.6 (30 June 2014: 1.6). In the report of the previous corresponding period the segment report included the manufacturing segment. This segment has been fully integrated with the then board distribution segment at the Group's Ottery premises and includes common use of assets, premises, staff and other resources to the extent that expenses, assets and liabilities are no longer separately distinguishable and consequently therefore this segment is no longer separately reported on. The board distribution and adaptation segment now combines both activities with the packaging segment reported separately. PROSPECTS In the packaging segment immediate opportunities exist in the introduction and development of new product lines as well as in the expansion of its Johannesburg operation. KayDav has introduced new product lines with early success and we look forward to building on this momentum. The board distribution and adaptation segment continues to be negatively affected by slow macroeconomic growth. The Group remains focused on increasing its market share profitably by being customer-centric and sales focused while maintaining and improving working capital efficiency. DISTRIBUTIONS TO SHAREHOLDERS The Group made a cash distribution of 5 cents per share to shareholders on 18 May 2015. CHANGES TO DIRECTORATE Shane van Niekerk was appointed as independent non-executive director on 1 August 2015 to fill the vacancy left by the resignation of Jonathan Hertz, who resigned with effect from 31 July 2015. As a result of these changes Boitumelo Tlhabanelo was appointed as chairman of KayDav's audit and risk committee and Shane van Niekerk as member thereof and as chairman of KayDav's remuneration committee. Shareholders are referred to the Group's SENS announcement of 29 July 2015 in respect of these changes for more information. 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 2014. These interim financial statements have not been reviewed or reported on by the KayDav auditors, Grant Thornton. 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 I H Stern G F Davidson Chairman Chief Executive Officer Cape Town 24 August 2015 CORPORATE INFORMATION KAYDAV GROUP LIMITED Incorporated in the Republic of South Africa Registration number: 2006/038698/06 Share code: KDV ISIN: ZAE000108940 ("KayDav" or "the Group") 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: G F Davidson (CEO), M Slier (CFO) Independent non-executive directors: I H Stern (Chairman), B Tlhabanelo, S van Niekerk Auditor: Grant Thornton Company secretary: CIS Company Secretaries (Pty) Ltd Transfer secretaries: Link Market Services South Africa (Pty) Ltd Sponsor: Java Capital www.kaydav.co.za Date: 24/08/2015 03:00:00 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. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.