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KELGRAN LIMITED - RESULTS FOR THE YEAR ENDED 30 JUNE 2004
KELGRAN LIMITED
Dimension Stone Specialists
Reviewed results for the year ended 30 June 2004Incorporated in the Republic of
South Africa Registration Number 1975/004595/06 Code KLG
ISIN ZAE000003885
RESULTS FOR THE YEAR ENDED 30 JUNE 2004
Income statement for the year ended 30 June 2004
2004 2003
R`000 R`000
Revenue 182 501 343 935
Cost of sales (215 590) (367 546)
Gross loss (33 089) (23 611)
Other operating income 83 634 6 533
Other operating expenses (100 742) (47 003)
Operating loss (50 197) (64 081)
Net finance cost (10 846) (4 749)
Loss before taxation (61 043) (68 830)
Taxation 66 (19 473)
Loss from ordinary activities (60 977) (88 303)
Minority interest 113 (94)
Net loss attributable to ordinary (60 864) (88 397)
shareholders
Reconciliation between basic loss
and headline loss:
Loss per income statement (60 864) (88 397)
Loan account written off 4 985 -
Impairment of associate 16 398 -
Profit on dilution of ownership (47 928) -
in subsidiary
Profit on sale of property, (123) (416)
plant and equipment
- Gross amount (123) (594)
- Taxation - 178
Headline loss (87 532) (88 813)
Loss per share (cents)
- Basic (64,7) (94,0)
- Diluted (64,7) (94,0)
- Headline (93,1) (94,4)
Dividends paid per share (cents)
- Interim - -
- Final - -
Weighted average number of shares 94 034 94 034
(`000)
Number of shares in issue (`000) 94 034 94 034
Fully dilutive number of shares 94 034 94 034
(`000)
Cash flow statement for the year ended 30 June 2004
2004 2003
R`000 R`000
Cash flows utilised in operating
activities
Cash generated by/(utilised in) 6 736 (2 148)
operations
Net finance cost (10 846) (4 749)
Taxation received/(paid) 136 (8 603)
Net cash outflow from operating (3 974) (15 500)
activities
Cash flows from investing
activities
Proceeds on disposal of property, 491 2 735
plant and equipment
Acquisition of property, plant (2 581) (1 855)
and equipment
Disposal of subsidiaries 69 496 -
Decrease in loans to contractors 10 309 7 019
Net cash inflow from investing 77 715 7 899
activities
Net increase/(decrease) in cash 73 741 (7 601)
and cash equivalents
Cash and cash equivalents at the (73 597) (65 996)
beginning of the year
Cash and cash equivalents at the 144 (73 597)
end of the year
Balance sheet as at 30 June 2004
2004 2003
R`000 R`000
ASSETS
Non-current assets 27 300 54 982
Property, plant and equipment - 48 919
Deferred taxation - 128
Financial assets 27 300 -
Loans to contractors - 5 935
Current assets 144 192 473
Inventories - 107 729
Trade and other receivables - 70 230
Current portion of contractors` - 6 165
loans
Prepaid taxation - 749
Bank and cash 144 7 600
Total assets 27 444 247 455
EQUITY AND LIABILITIES
Capital and reserves 27 375 88 426
Minority interest - 427
Non-current liabilities - 13 596
Rehabilitation and closure cost - 12 203
obligations
Post-retirement medical benefits - 1 393
obligations
Current liabilities 69 145 006
Trade and other payables 69 63 475
Current tax liabilities - 334
Short-term borrowings - 15 000
Bank overdraft - 66 197
Total equity and liabilities 27 444 247 455
Net asset value per share (cents) 29,1 94,0
Statement of changes in equity for the year ended 30 June 2004
Share Share Non- Retained Total
Capital Premium distributable earnings/ R`000
R`000 R`000 Reserves (accumulated
R`000 loss)
R`000
Balance 1 881 71 572 6 065 97 305 176 823
at 1 July
2002
Net loss (88 397) (88 397)
for the
year
Balance 1 881 71 572 6 065 8 908 88 426
at 30
June 2003
(187) (187)
Movements
during
the year
Net loss (60 864) (60 864)
for the
year
Balance 1 881 71 572 5 878 (51 956) 27 375
at 30
June 2004
Comments
DISPOSAL OF CONTROL OF KELGRAN`S OPERATIONS
It was announced on 13 August 2003 that Kelgran had entered into a transaction
regarding the proposed disposal of Kelgran`s operations.
The agreement became binding, subsequent to the fulfilment of the last
suspensive conditions on 30 June 2004, at which date JVK S.r.l. obtained the
power to govern the operating and financial decisions of the Group. The
shareholding of Kelgran Investments (Pty) Ltd now consists of:JVK S.r.l. -
51%Kelgran Limited - 49%
In terms of the restructuring scheme, Kelgran Limited acquired a Put Option to
sell 49% of the equity in Kelgran Investments (Pty) Ltd to JVK S.r.l., after 12
months, for the greater of R30 million or the fair value of Kelgran Investments
(Pty) Ltd at the time of exercising the option.
This option has been valued at R27,3 million.
NATURE OF BUSINESS
Kelgran Limited has a 49% shareholding in Kelgran Investments (Pty) Ltd whose
subsidiaries mine granite on Group-owned and leased land. The major portion of
production is sold for export. Some of the granite blocks produced are processed
by the Kelgran Investments Group`s tile factory.As these activities comprise an
integrated operation, it is regarded as a single primary business segment, on
which all information is disclosed in this announcement.
RESULTS
Revenue decreased by 47% from R343,9 million to R182,5 million, mainly as a
result of 63% of the sales done on a Free at Quarry basis (2003: 15%) and the
balance on a Cost, Insurance and Freight (`CIF`) basis, as well as a
substantially stronger Rand versus the US Dollar. Although the demand for
granite remained fairly stable during the period under review, sales volumes
were 10% lower than the previous year. Competition from new entrants in South
Africa negatively affected both sales volumes and pricing. The substantial
increase in freight charges midway through the financial year hampered sales.
The Group incurred an operating loss of R50,2 million compared to an operating
loss of R64,1 million in the previous year, including a profit of R47,9 million
on the dilution of ownership in a subsidiary as well as a fair value gain of
R27,3 million in respect of available-for-sale financial assets arising from the
options as per the Shareholders` Agreement. The investment in associate of R16,4
million has been fully impaired. Inventory adjusted to net realisable values in
line with the stronger Rand and the write-off of old stock, amounted to R20,0
million.The Barracuda tile factory performed below expectations mainly due to
the stronger Rand resulting in pricing becoming less competitive, especially
against products from China. In view of the above, the future of this operation
is being reviewed.
ACCOUNTING POLICIES
The preliminary results report has been prepared on a basis consistent with the
accounting policies applied in the prior year and in accordance with the South
African Statement of Generally Accepted Accounting Practice applicable to
interim financial reporting, and the requirements of the Companies Act in South
Africa.
REVIEW BY THE INDEPENDENT AUDITORS
The results have been reviewed by KPMG Inc and their unqualified report is
available for inspection at Kelgran`s registered office.
PROSPECTS
The focus of the Group in the short term will be on greater synergy between
production and marketing, which is an integral part of managing working capital.
At the current strong level of the Rand versus foreign currencies, sales margins
will remain under pressure.
The Board of Directors is evaluating various options to broaden Kelgran
Limited`s activity base in view of its continued listing.
RELATED PARTIES
In terms of the Agreement, JVK S.r.l. will purchase from the Kelgran Investment
Group or procure the purchase of, all granite produced at the Group`s
operational quarries which are suitable for the export market, up to the
production quantities agreed, on a Free at Quarry basis.
DIVIDEND
The Directors have resolved not to declare a dividend. By order of the Board
VITTORIO DI CAPUA
Chief Executive Officer 28 October 2004Registered Office: 4 Homestead
Avenue, Bryanston, Sandton 2196
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg 2001
Sponsor: Bridge Capital Services (Pty) Ltd
Executive Directors: V di Capua** (Chief Executive Officer and Executive Deputy
Chairman), Dato` Choo Eng Guan* and FP van WykNon-executive Directors: Dato` Yap
Yong Seong* (Chairman), Dato` Murad Mohamed Hashim*, Yap Wee Keat* and Yap Wee
Chun*
*Malaysian ** Italian
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