KAYDAV GROUP LIMITED - Unaudited interim results for the six months ended 30 June 2018

Release Date: 05/09/2018 09:50
Code(s): KDV
 
Wrap Text
Unaudited interim results for the six months ended 30 June 2018

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")


UNAUDITED INTERIM RESULTS
For the six months ended 30 June 2018

- Revenue R465 million, up 7%

- Headline earnings per share 4.1 cents, up from the prior year headline loss per
  share of 0.7 cents


CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
                                                       Unaudited      Unaudited             Audited
                                                    30 June 2018   30 June 2017    31 December 2017
                                                               R              R                   R
ASSETS
Non-current assets                                   108 075 596    103 124 525         104 833 852
Property, plant and equipment                         81 557 603     76 516 664          78 014 855
Goodwill                                              26 361 344     26 361 344          26 361 344
Deferred taxation                                        156 649        246 517             457 653
Current assets                                       318 567 631    331 511 183         345 030 889
Inventories                                          153 218 945    174 171 930         177 863 712
Trade and other receivables                          131 625 531    125 792 293         107 502 053
Cash and cash equivalents                             28 870 096     27 490 786          57 295 167
Taxation                                               4 853 059      4 056 174           2 369 957

Total assets                                         426 643 227    434 635 708         449 864 741
EQUITY AND LIABILITIES
Capital and reserves                                 217 307 912    195 920 414         207 350 985
Share capital                                                173            173                 173
Share premium                                        126 615 503    126 615 503         126 615 503
Accumulated profit                                    90 692 236     69 304 738          80 735 309
Non-current liabilities                               35 063 611     33 345 371          32 695 780
Instalment sale liabilities                           21 701 916     17 566 434          18 230 241
Interest-bearing liabilities                          10 900 625     15 337 662          13 177 679
Deferred taxation                                      2 461 070        441 275           1 287 860
Current liabilities                                  174 271 704    205 369 923         209 817 976
Trade and other payables                              92 170 456    129 370 029         132 993 998
Short-term portion of instalment sale liabilities      9 606 927      7 684 121           8 284 729
Short-term portion of interest-bearing liabilities     4 422 096      3 948 110           4 186 100
Bank overdraft                                        63 551 616     59 840 105          59 471 344
Taxation                                                       -              -             235 968
Provisions                                             4 520 609      4 527 558           4 645 837

Total equity and liabilities                         426 643 227    434 635 708         449 864 741
Shares in issue at period end                        172 751 585    172 751 585         172 751 585
Net asset value per share (cents)                          125.8          113.4               120.0
Net tangible asset value per share (cents)                 110.5           98.2               104.8


CONSOLIDATED STATEMENTS OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
                                                                 Unaudited          Unaudited               Audited
                                                          six months ended   six months ended            year ended
                                                              30 June 2018       30 June 2017      31 December 2017
                                                                         R                  R                     R
Revenue                                                        464 649 829        434 757 555           945 021 732
Cost of sales                                                 (340 553 761)      (313 798 607)         (686 927 172)
Gross profit                                                   124 096 068        120 958 948           258 094 560
Other income                                                       857 054            631 100             1 436 647
Operating expenses                                            (111 774 014)      (119 500 032)         (237 690 294)
Operating profit                                                13 179 108          2 090 016            21 840 913
Investment income                                                   17 155             18 401                22 117
Finance costs                                                   (2 872 324)        (3 517 529)           (7 169 177)
Profit/(loss) before taxation                                   10 323 939         (1 409 112)           14 693 853
Taxation                                                        (3 033 037)           351 997            (4 320 397)
Profit/(loss) for the year                                       7 290 902         (1 057 115)           10 373 456
Other comprehensive income                                               -                  -                     -
Total comprehensive income/(loss) attributable
to equity holders of the parent                                  7 290 902         (1 057 115)           10 373 456
Reconciliation between earnings and
headline earnings
Earnings/(loss)                                                  7 290 902         (1 057 115)           10 373 456
(Profit)/loss on disposal of plant and equipment                  (367 837)          (111 978)             (103 824)
Taxation on profit/loss from disposal of
plant and equipment                                                102 994             31 354                29 071
Headline earnings/(loss) attributable to equity holders          7 026 059         (1 137 739)           10 298 703
Weighted average number of shares in issue                     172 751 585        172 751 585           172 751 585
Basic and diluted earnings/(loss) per share (cents)*                   4.2               (0.6)                  6.0
Headline and diluted headline earnings/(loss)
per share (cents)*                                                     4.1               (0.7)                  6.0

*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 2018        30 June 2017    31 December 2017
                                                                      R                   R                   R
Cash flows from operating activities
Operating cash before working capital movements              16 814 901           6 489 139          30 352 279
Working capital movements                                   (36 430 084)        (11 655 800)          7 162 614
Cash (utilised)/generated by operations                     (19 615 183)         (5 166 661)         37 514 893
Investment income                                                17 155              18 401              22 117
Finance costs                                                (2 872 324)         (3 517 529)         (7 169 177)
Taxation paid                                                (4 277 893)         (6 072 294)         (8 187 053)
Net cash (outflow)/inflow from
operating activities                                        (26 748 245)        (14 738 083)         22 180 780
Cash flow from investing activities
Investment in property, plant and equipment                    (612 318)           (405 860)         (2 197 709)
Proceeds on disposal of property,
plant and equipment                                           2 107 705             635 678           1 696 894
Net cash inflow/(outflow) from
investing activities                                          1 495 387             229 818            (500 815)
Cash flow from financing activities
Repayment of instalment sale liabilities                     (5 211 427)         (4 631 648)         (8 724 739)
Repayment of interest-bearing liabilities                    (2 041 058)         (3 083 228)         (5 005 225)
Net cash outflow from financing activities                   (7 252 485)         (7 714 876)        (13 729 964)
Net (decrease)/increase in cash and cash equivalents        (32 505 343)        (22 223 141)          7 950 001
Net cash and cash equivalents at the
beginning of the period                                      (2 176 177)        (10 126 178)        (10 126 178)
Net cash and cash equivalents at the
end of the period                                           (34 681 520)        (32 349 319)         (2 176 177)


CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
                                                                 Unaudited                 Unaudited                  Audited
                                                          six months ended          six months ended               year ended
                                                              30 June 2018              30 June 2017         31 December 2017
                                                                         R                         R                        R
Balance at the beginning of the period                         207 350 985               196 977 529              196 977 529
IFRS 9 adjustment - provision for bad debts                      2 666 025                         -                        -
Total comprehensive income for the period                        7 290 902                (1 057 115)              10 373 456
Balance at the end of the period                               217 307 912               195 920 414              207 350 985




SEGMENTAL ANALYSIS
                                                                 Unaudited                Unaudited                 Audited
                                                          six months ended         six months ended              year ended
                                                              30 June 2018             30 June 2017        31 December 2017
                                                                         R                        R                       R
Segmental revenue
Board Distribution and Adaptation                              423 457 241              398 270 023             868 459 371
Packaging                                                       42 567 916               37 833 829              79 366 558
Internal revenue (Packaging)*                                   (1 375 328)              (1 346 297)             (2 804 197)
Net revenue                                                    464 649 829              434 757 555             945 021 732
Segmental results
Board Distribution and Adaptation                                9 813 473               (1 370 955)             14 680 027
Packaging                                                        3 365 635                3 468 126               7 185 920
Other                                                                    -                        -                 (25 034)
Unrealised profit on internal revenue                                    -                   (7 155)                      -
Operating profit before interest                                13 179 108                2 090 016              21 840 913
Operating assets
Board Distribution and Adaptation                              377 442 092              378 214 359             375 355 604
Packaging                                                       30 846 298               30 287 968              33 767 655
Other                                                            4 345 789                4 298 018              18 831 633
Internal balances                                              (17 362 004)              (8 828 672)             (7 279 104)
                                                               395 272 175              403 971 673             420 675 788

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

Segment assets consist of property, plant and equipment, inventory, trade and other receivables and operating cash and excludes
taxation assets, investments and intangible assets.

Operating liabilities
                                                                       Unaudited                    Unaudited                   Audited
                                                                six months ended             six months ended                year ended
                                                                    30 June 2018                 30 June 2017          31 December 2017
                                                                               R                            R                         R
Board Distribution and Adaptation                                    152 383 013                  176 329 169               176 521 490
Packaging                                                              3 369 390                    6 957 738                 7 409 769
Other                                                                 68 483 847                   63 815 784                64 337 780
Internal balances                                                    (17 362 004)                  (8 828 672)               (7 279 104)
                                                                     206 874 246                  238 274 019               240 989 935

Segment 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 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.

APPLICATION OF IFRS 9 AND IFRS 15

Stakeholders should note that the Group applied the provisions
of IFRS 9 (Financial Instruments), which is effective for year-ends
beginning on or after 1 January 2018, from 1 January 2018. This
involved the application of a provision matrix to calculate the
expected credit losses contained in gross trade receivables
in order to calculate an appropriate impairment allowance.
Accordingly, a historical loss ratio for each trade receivable
aging period, in 30-day increments, was calculated and was
then adjusted for forward-looking factors in order to arrive at
an expected loss ratio per aging period. This provision matrix
was then used to calculate expected credit losses. Comparative
information was not restated but the change in the impairment
allowance relating to prior periods, a reduction of R2.7 million,
was adjusted for by increasing opening accumulated profit. In
respect of the consolidated statement of profit or loss and other
comprehensive income for the six months ended 30 June 2018,
the application of IFRS 9 resulted in an earnings increase of
R0.5 million as compared to what the situation would have been,
had we applied our previous methodology.

IFRS 15 (Revenue from Contracts with Customers) is effective for
year-ends beginning on or after 1 January 2018. The application
of this standard did not result in any adjustments.

FINANCIAL RESULTS

KayDav was able to achieve earnings and headline earnings per
share of 4.2 cents and 4.1 cents respectively during the first six
months of its 2018 financial year, notwithstanding the prevailing
tough trading conditions. This performance is a significant
improvement on the loss per share and headline loss per share
of 0.6 cents and 0.7 cents respectively of the prior comparative
period. The improvement was driven by a reduction in the bad
debt expense of R8 million when compared against that of the
six months ended 30 June 2017. The remainder of operating
expenses remained on par with that of the prior comparative
period, which is a reduction in real terms.

The Group was able to grow revenue by 7% to R465 million and
gross profit by 3% to R124 million. Management will continue to
work on improving gross profit margins.

The capital structure of the Group remains sound with a
debt-to-equity ratio of 21% (30 June 2017: 23%) and a net
asset base of R217.3 million at 30 June 2018 (30 June 2017:
R195.9 million).The Group's current ratio at 30 June 2018 was 1.8
(30 June 2017: 1.6). The net overdraft position at 30 June 2018
of R34.7 million (30 June 2017: R32.3 million) was the result
of paying a large supplier earlier than its normal trading terms
require in return for additional settlement discount, resulting in a
relatively low creditor funding position at period end.

KayDav acquired plant and equipment and motor vehicles at
a cost of R9.4 million (30 June 2017: R5.4 million) during the
reporting period, of which R8.8 million (30 June 2017: R5 million)
was financed by instalment sale liabilities. Plant and machinery and
motor vehicles with a carrying value of R1.7 million (30 June 2017:
R0.5 million) were sold for R2.1 million (30 June 2017: 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.
While the normal seasonal upswing will occur as usual, low
business confidence levels and consumer caution will continue
to constrain year-on-year growth. While it is unclear when the
general economy will improve, with the benefits it will bring to
KayDav, management will continue to deal with factors within
its control including improvement of our service and product
offering to customers, containment of costs and strong working
capital management.

Packaging

Strong revenue and profit growth occurred at our Johannesburg
operation during the first six months of 2018 and we expect the
strong growth to continue. However, our Cape Town operation
experienced tougher trading conditions with the drought affecting
agricultural output. When agricultural production and general
economic activity in the Western Cape return to pre-drought
levels, profitable growth will return.

DISTRIBUTION TO SHAREHOLDERS

The KayDav board of directors has decided that no distribution to
shareholders will be made for the six months ended 30 June 2018.

CHANGES TO DIRECTORATE

There has been no change in the directorate during the six
months ended 30 June 2018.

SUBSEQUENT EVENTS

No material change has taken place in the affairs of the Group
between the end of the interim financial period and the date of
this report, which requires adjustment or disclosure.

BASIS OF PREPARATION

The unaudited interim financial statements for the six months
ended 30 June 2018 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 pronouncement 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 interim financial
statements are consistent with those presented in the annual
financial statements for the year ended 31 December 2017,
except as set out above under the heading "Application of IFRS 9
and IFRS 15". These interim financial statements have not been
reviewed or reported on by KayDav's auditor, 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
Wednesday, 5 September 2018


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

Facsimile:
086 519 2014

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

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