Summarised unaudited interim results for the six months ended 30 June 2017 KAYDAV GROUP LIMITED Incorporated in the Republic of South Africa Registration number 2006/038698/06 JSE share code: KDV ISIN: ZAE000108940 ("KayDav" or "The Group") SUMMARISED UNAUDITED INTERIM RESULTS for the six months ended 30 June 2017 - Revenue R435 million (down 5%) - Headline loss per share 0.7 cents (down 109%) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Unaudited Unaudited Audited 30 June 2017 30 June 2016 31 December 2016 R R R ASSETS Non-current assets 103 124 525 96 539 819 101 948 746 Property, plant and equipment 76 516 664 70 178 475 75 460 258 Goodwill 26 361 344 26 361 344 26 361 344 Deferred taxation 246 517 - 127 144 Current assets 331 511 183 322 538 383 324 127 465 Inventories 174 171 930 163 234 286 168 668 440 Trade and other receivables 125 792 293 132 192 991 114 674 817 Cash and cash equivalents 27 490 786 26 421 769 40 782 429 Taxation 4 056 174 689 337 1 779 Total assets 434 635 708 419 078 202 426 076 211 EQUITY AND LIABILITIES Capital and reserves 195 920 414 182 854 329 196 977 529 Share capital 173 173 173 Share premium 126 615 503 126 615 504 126 615 503 Accumulated profit 69 304 738 56 238 652 70 361 853 Non-current liabilities 33 345 371 32 123 183 34 402 592 Instalment sale liabilities 17 566 434 17 027 825 16 400 952 Interest-bearing liabilities 15 337 662 14 571 597 17 374 230 Deferred taxation 441 275 523 761 627 410 Current liabilities 205 369 923 204 100 690 194 696 090 Trade and other payables 129 370 029 120 642 620 124 880 933 Short-term portion of instalment sale liabilities 7 684 121 8 680 931 7 976 911 Short-term portion of interest-bearing liabilities 3 948 110 5 711 571 4 994 771 Bank overdraft 59 840 105 64 495 051 50 908 607 Taxation - 523 827 2 064 387 Provisions 4 527 558 4 046 690 3 870 481 TOTAL EQUITY AND LIABILITIES 434 635 708 419 078 202 426 076 211 Shares in issue at period end 172 751 585 172 751 585 172 751 585 Net asset value per share (cents) 113.4 105.8 114.0 Net tangible asset value per share (cents) 98.2 90.6 98.8 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Unaudited Unaudited Audited six months ended six months ended year ended 30 June 2017 30 June 2016 31 December 2016 R R R Revenue 434 757 555 458 877 335 967 752 148 Cost of sales (313 798 607) (329 964 292) (703 367 040) Gross profit 120 958 948 128 913 043 264 385 108 Other income 631 100 491 851 953 317 Operating expenses (119 500 032) (107 819 864) (220 435 250) Operating profit 2 090 016 21 585 030 44 903 175 Investment income 18 401 5 529 7 622 Finance costs (3 517 529) (3 064 506) (6 425 087) (Loss)/profit before taxation (1 409 112) 18 526 053 38 485 710 Taxation 351 997 (5 315 033) (11 151 490) (Loss)/profit for the period (1 057 115) 13 211 020 27 334 220 Other comprehensive income - - - Total comprehensive (loss)/income attributable to equity holders of the parent (1 057 115) 13 211 020 27 334 220 Reconciliation between earnings and headline earnings (Loss)/earnings (1 057 115) 13 211 020 27 334 220 (Profit)/loss on disposal of plant and equipment (111 978) 23 799 79 193 Taxation on (profit)/loss from disposal of plant and equipment 31 354 (6 664) (22 174) Headline earnings attributable to equity holders (1 137 739) 13 228 155 27 391 239 Weighted average number of shares in issue 172 751 585 172 751 585 172 751 585 Basic and diluted (loss)/earnings per share (cents)* (0.6) 7.6 15.8 Headline and diluted headline (loss)/earnings per share (cents)* (0.7) 7.7 15.9 * The company has no dilutive instruments in issue CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited Unaudited Audited six months ended six months ended year ended 30 June 2017 30 June 2016 31 December 2016 R R R Cash flows from operating activities Operating cash before working capital movements 6 489 139 25 586 631 52 451 089 Working capital movements (11 655 800) (35 798 581) (19 314 590) Cash (utilised)/generated by operations (5 166 661) (10 211 950) 33 136 499 Investment income 18 401 5 529 7 622 Finance costs (3 517 529) (3 064 506) (6 425 087) Taxation paid (6 072 294) (5 499 302) (9 131 137) Net cash (outflow)/inflow from operating activities (14 738 083) (18 770 229) 17 587 897 Cash flow from investing activities Investment in property, plant and equipment (405 860) (879 240) (2 519 839) Proceeds on disposal of plant and equipment 635 678 60 022 535 021 Net cash inflow/(outflow) from investing activities 229 818 (819 218) (1 984 818) Cash flow from financing activities Distribution to shareholders - (9 501 337) (9 501 337) Repayment of instalment sale liabilities (4 631 648) (4 731 054) (9 403 871) Proceeds from interest-bearing liabilities - - 391 565 Repayment of interest-bearing liabilities (3 083 228) (2 628 310) (5 592 480) Net cash outflow from financing activities (7 714 876) (16 860 701) (24 106 123) Net decrease in cash and cash equivalents (22 223 141) (36 450 148) (8 503 044) Net cash and cash equivalents at the beginning of the year (10 126 178) (1 623 134) (1 623 134) Net cash and cash equivalents at the end of the period (32 349 319) (38 073 282) (10 126 178) CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Unaudited Unaudited Audited six months ended six months ended year ended 30 June 2017 30 June 2016 31 December 2016 R R R Balance at the beginning of the period 196 977 529 179 144 646 179 144 646 Distribution to shareholders - (9 501 337) (9 501 337) Total comprehensive (loss)/income for the period (1 057 115) 13 211 020 27 334 220 Balance at the end of the period 195 920 414 182 854 329 196 977 529 SEGMENTAL ANALYSIS Unaudited Unaudited Audited six months ended six months ended year ended 30 June 2017 30 June 2016 31 December 2016 R R R Segmental revenue Board Distribution and Adaptation 398 270 023 432 275 289 905 481 498 Packaging 37 833 829 28 240 556 67 100 354 Internal revenue* (1 346 297) (1 638 510) (4 829 704) Net revenue 434 757 555 458 877 335 967 752 148 Segmental results Board Distribution and Adaptation (1 370 955) 18 997 054 38 479 331 Packaging 3 468 126 2 600 248 6 449 432 Other - - (25 588) Unrealised profit on internal revenue (7 155) (12 272) - Operating profit before interest 2 090 016 21 585 030 44 903 175 Operating assets Board Distribution and Adaptation 378 214 359 369 446 628 373 609 186 Packaging 30 287 968 29 618 527 27 674 702 Other 4 298 018 1 719 714 1 447 130 Internal balances (8 828 672) (8 757 348) (3 145 074) 403 971 673 392 027 521 399 585 944 *Internal revenue relates to sales from the Packaging segment to the Board Distribution and Adaptation segment 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 shop fitting 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 The Group made a loss and headline loss per share of 0.6 cents and 0.7 cents respectively for the six months ended 30 June 2017 compared to earnings and headline earnings per share of 7.6 cents and 7.7 cents respectively for the prior comparative period. Adverse domestic economic conditions lead to a contraction in demand which was acutely felt in the Board Distribution and Adaptation segment which accounts for 92% of Group revenue. Sales in this segment decreased by 8% from R432.3 million for the six months ended 30 June 2016 to R398.3 million for the six months ended 30 June 2017. Consequently, Group gross profit of R121.0 million (30 June 2016: R128.9 million) dropped by R8 million when compared to the prior comparative period. The effect of this on earnings was compounded by a significant increase in the bad debt expense to R9.7 million (30 June 2016: R5.0 million) as a result of specific bad debts written off and increased provisions to cater for long outstanding debtors. Operating expenses were 7% higher than that of the six months ended 30 June 2016 when the bad debt expense is excluded. This increase primarily represents inflationary cost increases. The capital structure of the Group remains in line with the previous period, with a debt to equity ratio of 23% (30 June 2016: 25%) and a net asset base of R195.9 million at 30 June 2017 (30 June 2016: R182.9 million). The GroupÕs current ratio at 30 June 2017 was 1.6 (30 June 2016: 1.6). The significant net overdraft position at 30 June 2017 of R32.3 million (30 June 2016: R38.1 million) was the result of paying a large supplier earlier than its normal trading terms required for this month only and was the same arrangement which existed on 30 June 2016. The effect on net cash thus reversed during the following month. KayDav acquired plant and equipment and motor vehicles at a cost of R5.4 million during the reporting period of which R5.0 million was financed by instalment sale liabilities. Motor vehicles with a carrying value of R0.5 million were sold for R0.6 million. PROSPECTS BOARD DISTRIBUTION AND ADAPTATION The wood-based panel industry is seasonal with the majority of revenue and profits made during the second half of the year. This, in conjunction with management's expectation that the bad debt expense for the second half-year will be significantly lower than that of the first half-year, leads management to expect that the Group will be profitable for the year ended 31 December 2017. During this challenging period, where low business confidence levels continue to suppress demand, our focus is on weathering the storm. For KayDav this implies strong working capital management and continuing to improve our service and product offering to customers. Management however continues to operate the Group for the long term and therefore decisions are being made to improve profitability and sustainability beyond this economic downturn. PACKAGING The Group's Packaging segment, while still relatively small, grew revenue by 34% and operating profit before interest by 33%, when compared to the prior comparative period. We are confident that this segment has sufficient opportunities for strong growth during the short and medium term. DISTRIBUTION TO SHAREHOLDERS KayDav has resolved not to make any distributions to shareholders until the Group has returned to an acceptable level of profitability. CHANGES TO DIRECTORATE There was no change in the directorate during the six months ended 30 June 2017. 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 that requires adjustment or disclosure. BASIS OF PREPARATION The summarised unaudited interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), the South African Institute of Chartered Accountants Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council (FRSC). The requirements of IAS 34 (Interim Financial Reporting) and the requirements of the South African Companies Act and the JSE Listings Requirements. The accounting policies applied in preparing these summarised interim financial statements are consistent with those presented in the annual financial statements for the year ended 31 December 2016. 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 IH Stern GF Davidson Chairperson Chief Executive Officer Cape Town Tuesday, 22 August 2017 CORPORATE INFORMATION KAYDAV GROUP LIMITED 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 Company secretary: CIS Company Secretaries (Pty) Ltd Executive directors: GF Davidson (CEO), M Slier (CFO) Non-executive directors: IH Stern (Chairperson), B Tlhabanelo, S van Niekerk, F Davidson Auditor: Grant Thornton Johannesburg Partnership Transfer secretaries: Link Market Services South Africa (Pty) Ltd Sponsor: Java Capital Website: www.kaydav.co.za Date: 22/08/2017 01:15:00 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.