KAYDAV GROUP LIMITED - Summarised audited consolidated results for the year ended 31 December 2017

Release Date: 22/03/2018 16:32
Code(s): KDV
 
Wrap Text
Summarised audited consolidated results for the year ended 31 December 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 company" or "the Group")

Summarised audited consolidated results for the year ended 31 December 2017
- Revenue (down 2%)
- Headline earnings per share 6.0 cents (down 62%)


Consolidated statements of profit or loss and other comprehensive income

                                                  Audited year       Audited year
                                                         ended              ended
                                              31 December 2017   31 December 2016
                                                             R                  R
Revenue                                            945 021 732        967 752 148 
Cost of sales                                     (686 927 172)      (703 367 040) 
Gross profit                                       258 094 560        264 385 108 
Other income                                         1 436 647            953 317 
Operating expenses                                (237 690 294)      (220 435 250)
Operating profit                                    21 840 913         44 903 175 
Investment income                                       22 117              7 622 
Finance costs                                       (7 169 177)        (6 425 087)
Profit before taxation                              14 693 853         38 485 710 
Taxation                                            (4 320 397)       (11 151 490)
Profit for the year                                 10 373 456         27 334 220 
Other comprehensive income                                   -                  -   
Total comprehensive income attributable to 
equity holders of the parent                        10 373 456         27 334 220 

Reconciliation between earnings and headline
earnings
Earnings                                            10 373 456         27 334 220 
(Profit)/Loss on sale of plant and equipment          (103 824)            79 193 
Taxation on sale of plant and equipment                 29 071            (22 174)
Headline earnings                                   10 298 703         27 391 239 
Weighted average number of shares in issue         172 751 585        172 751 585
Basic and diluted earnings per share (cents)*              6.0               15.8
Headline and diluted headline earnings per 
share (cents)*                                             6.0               15.9

* The company has no dilutionary instruments in issue.


Consolidated statements of financial position

                                                  Audited year       Audited year
                                                         ended              ended
                                              31 December 2017   31 December 2016
                                                             R                  R
ASSETS
Non-current assets                                 104 833 852        101 948 746 
Property, plant and equipment                       78 014 855         75 460 258 
Goodwill                                            26 361 344         26 361 344 
Deferred taxation                                      457 653            127 144 
Current assets                                     345 030 889        324 127 465 
Inventories                                        177 863 712        168 668 440 
Trade and other receivables                        107 502 053        114 674 817 
Cash and cash equivalents                           57 295 167         40 782 429 
Taxation                                             2 369 957              1 779 
TOTAL ASSETS                                       449 864 741        426 076 211 

EQUITY AND LIABILITIES
Capital and reserves                               207 350 985        196 977 529 
Share capital                                              173                173 
Share premium                                      126 615 503        126 615 503 
Accumulated profit                                  80 735 309         70 361 853 
Non-current liabilities                             32 695 780         34 402 592 
Instalment sale liabilities                         18 230 241         16 400 952 
Interest-bearing liabilities                        13 177 679         17 374 230 
Deferred taxation                                    1 287 860            627 410 
Current liabilities                                209 817 976        194 696 090 
Trade and other payables                           132 993 998        124 880 933 
Short-term portion of instalment sale liabilities    8 284 729          7 976 911 
Short-term portion of interest-bearing liabilities   4 186 100          4 994 771 
Bank overdraft                                      59 471 344         50 908 607 
Taxation                                               235 968          2 064 387 
Provisions                                           4 645 837          3 870 481 
TOTAL EQUITY AND LIABILITIES                       449 864 741        426 076 211 

Shares in issue at year-end                        172 751 585        172 751 585
Net asset value per share (cents)                        120.0              114.0
Net tangible asset value per share (cents)               104.8               98.8


Summarised consolidated statements of changes in equity

                                                  Audited year       Audited year
                                                         ended              ended
                                              31 December 2017   31 December 2016
                                                             R                  R
Balance at the beginning of the year               196 977 529        179Ê144 646
Total comprehensive income for the year             10 373 456         27 334 220
Distribution to shareholders                                 -         (9 501 337)
Total equity                                       207 350 985        196 977 529


Consolidated statements of cash flows

                                                  Audited year       Audited year
                                                         ended              ended
                                              31 December 2017   31 December 2016
                                                             R                  R
Cash flows from operating activities
Operating cash before working capital movements     30 352 279         52 451 089 
Working capital movements                            7 162 614        (19 314 590)
Cash generated by operations                        37 514 893         33 136 499 
Investment income                                       22 117              7 622 
Finance costs                                       (7 169 177)        (6 425 087)
Taxation paid                                       (8 187 053)        (9 131 137)
Net cash inflow from operating activities           22 180 780         17 587 897 

Cash flow from investing activities
Investment in property, plant and equipment         (2 197 709)        (2 519 839)
Proceeds on disposal of property, plant 
and equipment                                        1 696 894            535 021 
Net cash outflow from investing activities            (500 815)        (1 984 818)

Cash flow from financing activities
Distribution to shareholders                                 -         (9 501 337)
Repayment of instalment sale liabilities            (8 724 739)        (9 403 871)
Proceeds from interest-bearing liabilities                   -            391 565 
Repayment of interest-bearing liabilities           (5 005 225)        (5 592 480)
Net cash outflow from financing activities         (13 729 964)       (24 106 123)

Net increase/(decrease) in cash and 
cash equivalents                                     7 950 001         (8 503 044)

Net cash and cash equivalents at the beginning 
of the year                                        (10 126 178)        (1 623 134)
Net cash and cash equivalents at the end 
of the year                                         (2 176 177)       (10 126 178)


Segmental analysis
                                                  Audited year       Audited year
                                                         ended              ended
                                              31 December 2017   31 December 2016
                                                             R                  R
Segmental revenue
Board Distribution and Adaptation                  868 459 371        905 481 498 
Packaging                                           79 366 558         67 100 354 
Internal revenue                                    (2 804 197)        (4 829 704)
Total revenue                                      945 021 732        967 752 148 

Internal revenue relates to sales from the 
Packaging segment to the Board Distribution 
and Adaptation segment.

Segmental results
Board Distribution and Adaptation                   14 680 027         38 479 331 
Packaging                                            7 185 920          6 449 432 
Other                                                  (25 034)           (25 588)
Operating profit before interest                    21 840 913         44 903 175 

Operating assets
Board Distribution and Adaptation                  375 355 604        373 609 186 
Packaging                                           33 767 655         27 674 702 
Other                                               18 831 633          1 447 130 
Internal balances                                   (7 279 104)        (3 145 074)
Total operating assets                             420 675 788        399 585 944 

Operating liabilities
Board Distribution and Adaptation                  176 521 490        168 454 239 
Packaging                                            7 409 769          5 812 876 
Other                                               64 337 780         55 284 851 
Internal balances                                   (7 279 104)        (3 145 074)
Total operating liabilities                        240 989 935        226 406 892 

Segment assets consist of property, plant and equipment, inventory, trade and 
other receivables and operating cash and exclude taxation assets, investments 
and intangible assets. Segmental liabilities include trade and other payables, 
bank overdraft, provisions, instalment sale liabilities and interest-bearing 
liabilities and exclude taxation liabilities.


Commentary

Introduction
KayDav comprises a group of businesses involved in the distribution of wood-based 
panels as well as packaging and packaging 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 those 
products and machines which cater for a wide variety of packaging requirements 
in the industrial, agricultural and commercial sectors.

Financial results
The Group had a challenging 2017 financial year.
 
Revenue dropped by 2% to R945.0 million (2016: R967.8 million) due to a 4% 
contraction in revenue from the Board Distribution and Adaptation segment, 
which was offset to an extent by strong growth in the much smaller Packaging 
segment. The Board Distribution and Adaptation segment makes up 92% of Group 
revenue. In this segment poor GDP growth negatively affected consumer and business 
demand and with the industry already suffering from excess supply capacity, 
sustained downward pressure on selling prices occurred, which compounded the 
effect of lower volume demand. The Group's gross profit margin for the year ended 
31 December 2017 was 27.3%, which is the same as that of the previous financial 
year. Despite the decrease in revenue, operating expenses increased by 8%, 
including a large negative impact from an increase in the bad debt expense 
from R5.8 million for the year ended 31 December 2016 to R10.1 million for the 
year ended 31 December 2017. When bad debts are excluded, the increase in 
operating expenses year-on-year is 6% and is mainly caused by annual increases 
in staff costs, which makes up more than 50% of operating expenses, with other 
overhead expenses also reflecting inflationary increases. Consequently, earnings 
dropped from R27.3 million for the year ended 31 December 2016 to R10.4 million
for the year ended 31 December 2017. Earnings per share and headline earnings
per share were 6.0 cents compared to earnings per share of 15.8 cents and 
headline earnings per share of 15.9 cents for the year ended 31 December 2016. 

At 31 December 2017, the Group had a net tangible asset base of R181.0 million
(2016: R170.6 million) with a net debt:equity ratio of 22% (2016: 29%) and a 
current ratio of 1.6 (2016: 1.7). 

Prospects
In the Board Distribution and Adaptation segment our industry has experienced
eroding operating profit margins as cost inflation outruns selling price 
inflation. This is the result of supply exceeding demand. Structurally this 
problem can be corrected by economic growth or by a decrease in manufacturing 
and wholesale capacity. Since we have little control over the structural industry
issues, management is focusing on cost efficiency while developing new product
lines to augment revenue. The expansion of our product range responds to the 
needs of our customers and potential customers while providing opportunities for 
sales and profit growth.

The Packaging segment continues to provide opportunities for growth, being a 
relatively small player in a large industry. 

Changes to capital structure
There has been no change in KayDav's capital structure during the year ended 
31 December 2017.

Distributions to shareholders
The KayDav board of directors ("the board") has decided that no distribution 
to shareholders will be made at this time. The board considers it prudent to 
conserve cash in light of the high-risk macroeconomic environment in which 
the Group operates. This decision will be revisited at the time of publishing 
the Group's interim financial statements during August 2018.

Subsequent events
No material changes have taken place in the affairs of the Group between the 
end of the financial year and the date of this report that require adjustment 
or disclosure.

Basis of preparation
The summarised audited consolidated financial statements 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 audited 
consolidated financial statements are consistent with those presented in the 
annual financial statements for the year ended 31 December 2016. 

The annual financial statements were prepared under the supervision of the CFO, 
Martin Slier, CA(SA).

Directorate
There have been no changes to the directorate during the year ended 
31 December 2017.

Audit report
The external auditor, Grant Thornton Johannesburg Partnership 
("Grant Thornton"), has issued an unmodified opinion on the Group's 
consolidated financial statements for the year ended 31 December 2017. 
The audit was conducted in accordance with International Standards on 
Auditing. The auditor responsible for the audit is K T Kuhn. An unmodified audit
opinion has been issued on the consolidated financial statements.

These summarised audited consolidated results for the year ended 
31 December 2017 have been extracted from the audited annual financial 
statements, but are not themselves audited. The audit report does not 
necessarily cover all the information included in this announcement. 
Shareholders are therefore advised that in order to obtain a full understanding 
of the nature of the auditor's engagement they should obtain a copy of the 
auditor's report together with the underlying financial information from 
the company's registered office. The directors take full responsibility for 
the preparation of these summarised audited consolidated results and confirm 
that the financial information has been correctly extracted from the underlying 
audited results for the year ended 
31 December 2017.

Posting of integrated annual report and notice of annual general meeting
Shareholders are advised that the integrated annual report containing the annual 
financial statements will be posted on or before 31 March 2018. KayDav's annual 
general meeting will be held at 10:00 on Thursday, 17 May 2018 at the offices of 
Grant Thornton, 52 Corlett Drive, Wanderers Office Park, Illovo, 2196, Gauteng. 
The last day to trade in order to be eligible to participate in and vote at the 
annual general meeting is Tuesday, 8 May 2018 and the record date for voting 
purposes is Friday, 11 May 2018.

Appreciation
The board extends its appreciation to our management and staff for their efforts 
during this reporting period. We also thank our shareholders, customers and 
suppliers for their continued support.

On behalf of the board

I H Stern                 G F Davidson
Chairperson               Chief Executive Officer 

22 March 2018


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: 021 704 2082
Executive directors: G F Davidson (CEO), M Slier (CFO)
Independent non-executive directors: I H Stern (Chairperson), B Tlhabanelo, 
S van Niekerk, F Davidson
Company secretary: CIS Company Secretaries Proprietary Limited
Auditor: Grant Thornton
Transfer secretaries: Link Market Services South Africa Proprietary Limited
Sponsor: Java Capital
Website: www.kaydav.co.za

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