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KIR
KIR
KIR - Kairos - Abridged Audited Results For The Year Ended 28 February 2009
KAIROS INDUSTRIAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/002927/06)
JSE code: KIR & ISIN: ZAE000011284
("Kairos", "the group" or "the company")
Abridged audited results for the year ended 28 February 2009
COMMENTARY
Overview of results
Basis of preparation
The audited condensed consolidated financial statements for the year ended 28
February 2009 have been prepared in compliance with International Financial
Reporting Standards (IFRS), IAS 34 and the Companies Act of South Africa, 1973.
The financial statements are presented on a going concern basis on the
assumption that the group`s funding requirements will be met. The accounting
policies applied in preparation of these audited consolidated annual financial
statements are consistent with those applied in the group`s most recent audited
annual financial statements for the previous year ended 29 February 2008.
The condensed consolidated annual financial statements have been audited by the
group`s auditors, SAB&T Chartered Accountants. Their modified opinion is
available for inspection at the registered office of the company. They have
drawn attention to the note on going concern in the directors` report, which
indicate the company has an accumulated loss of R210,001 million for the year
ended 28 February 2009.
Financial highlights
Group revenue for the financial year under review remained relatively flat with
a small increase of 0,47% to R246,555 million compared to R245,398 million the
previous year.
Whilst the 2009 financial year was characterised by a relatively buoyant
economy, in recent months we have witnessed an economic downturn of unexpected
rapidity and severity - the full extent and duration of which still remains
uncertain. The effects of higher than expected inflationary increases on the
Group`s input costs, most notably steel, fuel and coal, and labour unrest in the
brick manufacturing operations, has resulted in a drastic decline at the
operating profit level and the Group has posted an operating loss for the year
of R8,743 million comparative to an operating profit of R5,777 million in the
previous year.
As a result of the operating loss and increased debt, the Group has reported a
net loss after taxation amounting to R1,583 million compared to a profit after
taxation in the previous year of R2,315 million. The Kairos BEE Employee Trust
was not consolidated in formulating the Group`s results for the year ended 29
February 2008. The effect of consolidating the trust retrospectively has
resulted in the profit after taxation for 2008 being restated and increasing by
R1,514 million to R2,315 million.
Headline earnings per share decreased by 598,0% to a loss per share of 5,1 cents
while the net asset value per share increased by 11,9% to 28,8 cents per share.
Review of activities of operational subsidiaries
Major operations
Witbank Brickworks (1961) (Pty) Ltd
The year under review has been a difficult one for the company. Following the
implementation of the Credit Act and the rising trend in interest rates, a
significant number of developments were put on hold, many of which were
subsequently cancelled. This resulted in an unprecedented shift in the demand
for bricks and both sales volumes and prices were at the lowest levels seen in
the company. The steep decline in revenue together with the increased input
costs of coal, electricity and fuel, continued to erode the company`s margins.
Production at the Tor facility was hampered during the year firstly by the
commissioning and installation of a new extruder and secondly by labour unrest
which resulted in the division losing manufacturing capacity for nine weeks.
Because of the lower demand for bricks, fierce competition has taken place which
has resulted in further pressure on margins because of the lower average selling
prices. To protect the company`s margins, management has throughout the year
continued to look at and implement cost cutting measures and have been
successful in managing down most of its major input costs. Headcounts at both
facilities have been cut wherever possible to meet the lower revenue levels.
As a result of the sharp decline in the industry and shrinkage in the company`s
markets, revenue for the year declined by 39% to R35,187 million with the
company recognising an operating loss of R7,744 million.
BroKrew Industrial (Pty) Ltd
Although revenue grew 12,4% from R187,033 million to R210,217 million, there was
a disappointing drop in the operating income from R8,743 million to R58,713
thousand. The slowdown in demand for commodities has had a major effect on the
prices of platinum, gold and other minerals, together with the continued threat
of electricity cuts or a reduced supply of electricity to the mines, which has
led to them cutting back on production, causing a decline in the revenue of the
company.
The steel price decreases, the largest input cost of the company, continue to
present pressure on the company`s margins because the fixed costs are recovered
from lower revenues.
The delay of the Medupi project has had a major impact on the company`s
performance because of reserved production capacity that remained unutilised for
four months. Significant costs were incurred in training up skilled staff for
the project and this labour remained idle waiting for the project to commence.
There were further costs incurred in the re-organisation of the factory to
accommodate this massive project which will only be recovered out of future
revenue streams.
Management continue to look to ways of adding value to the bouquet of services
it supplies to its customers and has identified further opportunities within the
power industry.
Minor operations
Coal Reserves
The exploration subsidiary, Kairos Coal & Exploration (Pty) Ltd contracted with
a mining subcontractor to mine its first coal reserve in Balmoral during January
2009. Although mining commenced late in January, the heavy summer rains hampered
production and revenues from this activity will only accrue during the following
financial year.
There remain further applications in regard to prospecting rights. Until such
time as the company has been able to evaluate all the reserves it has identified
to prospect, it is prudent to take a cautious view for the future.
Township Development
As previously reported the subsidiaries, Ten Cradock Avenue (Pty) Ltd and
Estlind Investments (Pty) Ltd remain the owners of prime development land
comprising more than 200 hectares in the township of Witbank, Mpumalanga. The
Group is currently considering its options on whether to develop the sites
internally where value add could be gained by the brick operations or to have
the land rezoned so that separate erven could be sold off into the market. The
development of the Kusile Power Station should provide opportunities in the
housing property market in Witbank with an anticipated 8 000 new jobs being
created.
Skills development
Training and development programmes are continuing, providing the necessary
skills training to all levels of staff.
Employment equity
The company remains compliant with the Employment Equity Act, 1998 and continues
to encourage the internal movement and promotion of employees.
Prospects
The company will continue with its existing strategy, in that it will focus its
efforts on its core revenue-producing businesses - Witbank Brickworks (1961)
(Pty) Ltd and BroKrew Industrial (Pty) Ltd ensuring that both the businesses are
optimised and any growth opportunities are exploited. Kairos Coal & Exploration
(Pty) Limited will become a strategic player within the group now that it has
commenced with its mining activities.
Appreciation
I wish to record my appreciation and thanks to all management, staff and
directors for their integral contribution, loyalty and support over the past 12
months.
Wouter L van Deventer
Chief executive
29 May 2009
Income statements
for the year ended 28 February 2009
Group Company
Restated Restated
Year Year Year Year
ended ended ended ended
28 Feb 29 Feb 28 Feb 29 Feb
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Revenue 246 555 245 398 300 300
Cost of sales (228 456) (214 879) - -
Gross profit 18 099 30 519 300 300
Other Income 686 718 26 -
Operating expenses (27 528) (25 460) (2 121) (713)
Operating (8 743) 5 777 (1 795) (413)
(loss)/profit
Investment revenue 3 908 4 880 - 770
Fair value 11 300 - - -
adjustments
Finance costs (10 600) (6 953) - (118)
(Loss)/profit before (4 135) 3 704 (1 795) 239
taxation
Taxation 2 552 (1 389) - -
(Loss)/profit for the (1 583) 2 315 (1 795) 239
year
Reconciliation of
headline earnings
Net (loss)/profit as (1 583) 2 315
above
Profit on disposal of (95) (21)
fixed assets
Fair value (11 300) -
adjustments
Goodwill impairment 1 565
Headline (11 413) 2 294
(loss)/earnings
Restated
2009 2008 Change % change
Headline (5,08) 1,02 (6,10) 598,0
(loss)/earnings per
share (cents)
Basic (loss)/earnings (0,70) 1,03 (1,73) (167,9)
per share (cents)
Balance sheets
at 28 February 2009
Group Company
Restated Restated
28 Feb 29 Feb 28 Feb 29 Feb
2009 2008 2009 2008
R`000 R`000 R`000 R`000
ASSETS
Non-current assets 85 391 57 671 - 1 007
Investment 23 000 11 700 - -
properties
Property, plant and 57 582 39 404 - -
equipment
Goodwill 2 309 3 874 - -
Intangible assets 2 500 2 500 - -
Investment in - 1 007
subsidiaries
Mining and - 193 - -
exploration assets
Current assets 104 755 80 243 173 962
Inventories 47 853 35 496 - -
Loan to group - 775
companies
Other financial 91 - 136 120
assets
Trade and other 51 547 38 974 35 48
receivables
Mining and 2 666 1 271 - -
exploration assets
Cash and cash 2 598 4 502 2 19
equivalents
Total assets 190 146 137 914 173 1 969
EQUITY AND
LIABILITIES
Stated capital 200 741 200 741 210 147 210 147
Reserve 13 395 6 075 - -
Accumulated loss (149 404) (148 965) (210 001) (208 206)
Total equity 64 732 57 851 146 1 941
Non-current 18 644 18 865 - -
liabilities
Other financial 5 476 10 103 - -
liabilities
Instalment sale 7 568 3 435 - -
agreements
Deferred taxation 5 600 5 327 - -
Current liabilities 106 770 61 198 27 28
Loan from 745 3 342 - -
shareholder
Other financial 24 392 16 562 - -
liabilities
Current taxation 138 102 - -
payable
Instalment sale 3 924 2 278 - -
agreements
Trade and other 64 262 33 012 27 28
payables
Provisions 4 573 5 458 - -
Loan payable - 444 - -
Bank overdraft 8 736 - - -
Total equity and 190 146 137 914 173 1 969
liabilities
Statement of changes in equity
for the year ended 28 February 2009
Con-
Reva- vertible in-
Share luation struments
capital reserve reserve
R`000 R`000 R`000
Group
Opening balance as previously 209 565 6 487 460
reported
Prior period adjustments (8 824) - -
Balance at March 1, 2007 as 200 741 6 487 460
restated
Changes in equity
Realisation of revaluation of - (19) -
assets sold
Realisation of revaluation - (853) -
reserve through use
Net income (expenses)
recognised
directly in equity - (872) -
Profit for the year - - -
Total recognised income and
expenses
for the year - (872) -
Total changes - (872) -
Opening balance as previously 209 565 5 615 460
reported
Prior period adjustments (8 824) - -
Balance at March 1, 2008 as 200 741 5 615 460
restated
Changes in equity
Revaluation of properties - 11 550 -
Deferred tax on revaluation of - (3 086) -
property
Realisation of revaluation of - (242) -
assets sold
Realisation of revaluation - (902) -
reserve through use
Net income (expenses)
recognised
directly in equity - 7 320 -
Loss for the year - - -
Total recognised income and
expenses
for the year - 7 320 -
Total changes - 7 320 -
Balance at February 28, 2009 200 741 12 935 460
Note 17 18
Accumu-
Total lated Total
reserves loss equity
R`000 R`000 R`000
Group
Opening balance as previously 6 947 (152 152) 64 360
reported
Prior period adjustments - - (8 824)
Balance at March 1, 2007 as 6 947 (152 152) 55 536
restated
Changes in equity
Realisation of revaluation of (19) 19 -
assets sold
Realisation of revaluation (853) 853 -
reserve through use
Net income (expenses)
recognised
directly in equity (872) 872 -
Profit for the year - 2 315 2 315
Total recognised income and
expenses
for the year (872) 3 187 2 315
Total changes (872) 3 187 2 315
Opening balance as previously 6 075 (150 477) 65 163
reported
Prior period adjustments - 1 512 (7 312)
Balance at March 1, 2008 as 6 075 (148 965) 57 851
restated
Changes in equity
Revaluation of properties 11 550 - 11 550
Deferred tax on revaluation of (3 086) - (3 086)
property
Realisation of revaluation of (242) 242 -
assets sold
Realisation of revaluation (902) 902 -
reserve through use
Net income (expenses)
recognised
directly in equity 7 320 1 144 8 464
Loss for the year - (1 583) (1 583)
Total recognised income and
expenses
for the year 7 320 (439) 6 881
Total changes 7 320 (439) 6 881
Balance at February 28, 2009 13 395 (149 404) 64 732
Note
Accumu-
Share lated Total
capital loss equity
R`000 R`000 R`000
Company
Balance at March 1, 2007 210 147 (208 445) 1 702
Changes in equity
Profit for the year - 239 239
Total changes - 239 239
Balance at March 1, 2008 as 210 147 (208 206) 1 941
restated
Changes in equity
Loss for the year - (1 795) (1 795)
Total changes - (1 795) (1 795)
Balance at February 28, 2009 210 147 (210 001) 146
Note 17
Segmental analysis
for the year ended 28 February 2009
Property &
Brick Mining investment
enterprises supplies divisions Group
R`000 R`000 R`000 R`000
BUSINESS SEGMENTS
2009
Turnover 35 187 210 216 1 152 246 555
Net (loss)/profit (9 693) 1 038 (88) (8 743)
before interest and
tax
Fair value - - 11 300 11 300
adjustments
Interest received 236 2 690 982 3 908
Finance costs (1 579) (7 794) (1 227) (10 600)
Income tax 2 444 1 856 (1 748) 2 552
(expense)/credit
Net (loss)/profit (8 592) (2 210) 9 219 (1 583)
for the year
Segment assets 38 357 120 291 26 689 185 337
Intangible assets - 4 809 - 4 809
Total assets 46 611 111 785 31 750 190 146
Total liabilities 15 235 99 505 10 674 125 414
Depreciation and 4 048 1 761 81 5 890
amortisation
Capital expenditure 5 637 8 276 179 14 092
2008
Turnover 57 737 187 033 628 245 398
Net (loss)/profit (3 928) 8 787 918 5 777
before interest and
tax
Interest received 45 4 601 234 4 880
Finance costs (850) (5 807) (296) (6 953)
Income tax 371 (1 915) 155 (1 389)
(expense)/credit
Net profit/(loss) (4 362) 5 666 1 011 2 315
for the year
Segment assets 38 044 72 123 21 873 132 040
Intangible assets 1 565 4 809 (500) 5 874
Total assets 38 044 76 932 22 938 137 914
Total liabilities 13 769 56 737 9 557 80 063
Depreciation and 3 838 1 232 83 5 153
amortisation
Capital expenditure 196 4 226 2 619 7 041
Cash flow statements
for the year ended 28 February 2009
Group Company
Restated Re-
stated
Year Year Year Year
ended ended ended ended
28 Feb 29 Feb 28 Feb 29 Feb
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Cash flows from
operating activities
Cash receipts from 237 807 237 514 - -
customers
Cash paid to suppliers (233 564) (230 383) (198) (334)
and employees
Cash generated 4 243 7 131 (198) (334)
by/(used in)
operations
Interest income 3 908 4 880 - -
Dividends received - - - 770
Finance costs (9 567) (6 413) - (118)
Tax paid (226) (314) - (238)
Net cash
(outflow)/inflow from
operating activities
to maintain operations (1 642) 5 284 (198) 80
Cash flows from
investing activities
Purchase of property, (14 092) (7 041) - -
plant and equipment
Sale of property, 1 669 30 - -
plant and equipment
(Purchase)/sale of (281) 74 (16) (6)
other financial assets
Mining and exploration (1 202) (1 271) - -
cost capitalised
Net cash outflow from (13 906) (8 208) (16) (6)
investing activities
Cash flows from
financing activities
Proceeds on other 3 203 1 479 - -
financial liabilities
Movement in loan (444) (1 249) - -
payable
Repayment/(proceeds) (2 597) 3 342 - -
of shareholders loan
Instalment sale 4 746 (380) - -
agreements
Proceeds from loans - - 355 -
from group companies
Repayment of loans - (2 936) (158) (62)
from group companies
Net cash 4 908 256 197 (62)
inflow/(outflow) from
financing activities
Total cash movement (10 640) (2 668) (17) 12
for the year
Cash at the beginning 4 502 7 170 19 7
of the year
Net (overdraft)/cash (6 138) 4 502 2 19
at end of the year
Directors:
JB Oosthuizen*#; WL van Deventer; JJ de W Mulder; WA Lombard; VD Mazibuko*;
* Non-executive; # Independent
Registered office:
1111 Church Street, Hatfield, Pretoria 0083,(PO Box 11328), Hatfield, Pretoria
0028.
Telephone +27 12 342-1980; Facsimile +27 12 342-1976
Sponsor:
Bridge Capital Advisors (Pty) Limited, 2nd Floor, 27 Fricker Road,
Illovo Boulevard, Illovo 2196, (PO Box 651010), Benmore 2010
Transfer Secretaries:
Computershare Investors Services (Pty) Limited, 70 Marshall Street, Johannesburg
2001, (PO Box 61051), Marshalltown 2107.
Website: www.kairos.co.za
Date: 29/05/2009 12:47:01 Produced by the JSE SENS Department.
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