For personal use only
Interim Financial Report as at 31 December 2021
Pages | 2-5 | Directors' Report |
Page | 6 | Consolidated Statement of Profit or Loss and Other Comprehensive Income |
Page | 7 | Consolidated Statement of Financial Position |
Page | 8 | Consolidated Statement of Changes in Equity |
Page | 9 | Consolidated Statement of Cash Flows |
Pages | 10-15 | Notes to the Financial Statements |
Page | 16 | Directors' Declaration |
Pages | 17-18 | Independent Auditor's Review Report |
Page | 19 | Auditor's Independence Declaration |
For personal use only
K&S CORPORATION LIMITED
ABN 67 007 561 837
Directors' Report
Your Directors present their report, together with the interim financial report of the Group comprising of K&S Corporation Limited (the "Company") and its subsidiaries (the "Group"), for the half-year ended 31 December 2021 and the review report thereon.
DIRECTORS
The names of the Company's Directors in office during the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.
Tony Johnson (Chairman - Non-executive Director)
Paul Sarant (Managing Director)
Legh Winser (Non-executive Director)
Graham Walters AM (Non-executive Director)
Sallie Emmett GAICD (Non-executive Director)
Robert Dalton (Non-executive Director) appointed 24th August 2021
CONSOLIDATED RESULTS
6 month period | 6 month period to | % | ||
Financial Overview | to Dec 2021 | Dec 2020 | Movement | |
Operating Revenue | $'000 | 370,415 | 341,750 | 8.4% |
Statutory profit after tax | $'000 | 8,474 | 17,150 | (50.6%) |
Statutory profit before tax | $'000 | 11,823 | 24,470 | (51.7%) |
Earnings before interest and tax (EBIT) | $'000 | 12,937 | 26,485 | (51.2%) |
Earnings before interest, tax and depreciation (EBITDA) | $'000 | 36,120 | 51,920 | (30.4%) |
Less JobKeeper income | $'000 | - | (16,235) | (100%) |
Less bad debts recovered | $'000 | (196) | (199) | (1.5%) |
Less other significant items | $'000 | 118 | 1,156 | (89.8%) |
Underlying profit before interest, tax & depreciation1 | $'000 | 36,042 | 36,642 | (1.6%) |
Underlying profit before interest & tax1 | $'000 | 12,859 | 11,207 | 14.7% |
Underlying profit before tax1 | $'000 | 11,745 | 9,192 | 27.8% |
Underlying operating profit after tax1 | $'000 | 8,418 | 6,442 | 30.7% |
Total assets | $'000 | 539,679 | 513,961 | 5.0% |
Net borrowings excluding lease liabilities | $'000 | 32,557 | 46,842 | (30.5%) |
Shareholders' funds | $'000 | 276,580 | 252,787 | 9.4% |
Finance costs | $'000 | 1,114 | 2,015 | (44.7%) |
Depreciation | $'000 | 23,183 | 25,435 | (8.9%) |
Dividend per share | cents | 4.5 | 3.0 | 50% |
Net tangible assets per share | $ | 2.1 | 2.0 | 5.0% |
Operating cash flow | $'000 | 30,166 | 40,479 | (25.5%) |
Return on assets | % | 2.1 | 4.8 | (56.3%) |
Gearing ratio (excluding lease liabilities) | % | 10.5 | 15.6 | (32.7%) |
Employee numbers | 1,872 | 2,052 | (8.8%) | |
Lost time injuries | - | 12 | (100%) | |
Lost time injuries frequency rate | 4.6 | 5.9 | (22.0%) |
- Underlying profits and earnings per share based on underlying profits are categorised as non-IFRS Financial information and therefore have been presented in compliance with ASIC Regulatory Guide 230- Disclosing non-IFRS information issued in December 2011. Underlying adjustments have been considered in relation to their size and nature and have been adjusted from the statutory information for disclosure purposes to assist readers to better understand the financial performance of the underlying business in each reporting period. These adjustments primarily include the Government wage subsidies received, bad debt recoveries, redundancies, asset impairment expenses and costs associated with the sale of Regal General Freight. The exclusion of these items provides a result which, in the Directors view, is more closely aligned with the ongoing operations of the Consolidated Group. The non-IFRS information has not been subject to audit or review by the auditor.
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For personal use only
K&S CORPORATION LIMITED
ABN 67 007 561 837
Directors' Report continued
REVIEW AND RESULTS OF OPERATIONS
Operating revenue for the period was $370.4 million, 8.4% higher than the prior corresponding period. The Group recorded an underlying profit before tax of $11.7 million for the period, 27.8% higher than the prior corresponding period. The underlying profit after tax of $8.4 million was 30.7% higher than the prior corresponding period. Statutory profit before tax was $11.8 million for the half-year ended 31 December 2021, 51.7% lower than the prior corresponding period. Statutory profit after tax was $8.5 million, down 50.6% on the previous year first half statutory profit after tax of $17.2 million.
The statutory result for the half-year ended 31 December 2021 includes two significant items amounting to $0.1m. The Group's statutory result for the prior corresponding period included $16.2 million (before tax) attributable to JobKeeper subsidies as well as $0.2 million of bad debt recovery and $1.2 million in restructuring and wage top up costs which were treated as significant items.
The underlying profit benefited from a number of cost savings measures, customer re-negotiations, and procurement initiatives as well as improved performance by the Australian Transport segment.
Operating cashflow for the current period was $30.2 million, $10.3 million lower than the prior corresponding period.
Australian Transport
Steel volumes from our major customers remained strong, increasing compared to the prior half year. Performance of the contract logistics business was sound. Contributions from our Western Australia based heavy haulage business also remained sound underpinned by the continued strength of the mining sector.
Our specialised aviation refuelling business, Aero Refuellers, again experienced the impacts of COVID-19 as well as low fire season activity.
Cost reduction strategies have continued to be implemented across the business, in particular, operational efficiencies, supplier re-negotiations, and the rationalisation and replacement of specific fleet. Ongoing cost reduction initiatives, coupled with customer re-negotiations, have continued to have a positive impact on the result for the first half of FY2022.
Fuels
The fuel trading business, K&S Fuels, saw revenue increase to the prior comparative period. The increase in revenue is attributable to increase in fuel prices.
K&S Fuels is currently expanding and enhancing its retail and convenience offering with the purchase of the Millicent roadhouse completed in December 2021 and plans also submitted for the re-development of the existing Millicent service station. K&S Fuels has also recently completed the implementation of a new ERP system and is currently undertaking a point of sale IT upgrade.
New Zealand
The New Zealand operation again had a strong performance, underpinned by the strength of the local economy.
Balance sheet and Funding
The Group maintains a strong focus on the balance sheet.
The Group's net debt increased from $26.6 million as at 30 June 2021 (the lowest net debt experienced since 2003) to $32.6 million as at 31 December 2021, with the Group's gearing ratio (excluding lease liabilities) also increasing from 9% to 10.5% over the same period. The Group has maintained strong disciplines around capital expenditure and the increase in net debt and gearing in the first half of FY22 is predominantly attributable to the purchase and development of the new High Wycombe site in Perth.
On 5 November 2021, the Group extended the maturity profile of its debt facilities and negotiated improved terms with its panel of lenders. The Group's debt facilities now comprise funding in three-year tranches totaling $124 million (inclusive of a $30 million bank guarantee facility) and five year tranches totaling $75 million. As part of that refinancing exercise, the Group also paid out its previous facilities with Bank of China and brought in ANZ as a new lender, in conjunction with existing lenders Westpac and NAB.
Safety
Safety remains a key priority for K&S. The Group's lost time injury frequency rate was 4.6 as at 31 December 2021, down 22% on the prior comparative period.
The lost time injury frequency rate in New Zealand was 5.8.
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For personal use only
K&S CORPORATION LIMITED
ABN 67 007 561 837
Directors' Report continued
Interim Dividend
A fully franked Interim Dividend of 4.5 cents per share (2020: 3.0 cents per share) has been declared by the Directors. The Interim Dividend will be paid on 1st April 2022, with the date for determining entitlements being 22nd March 2022.
The Dividend Reinvestment Plan (DRP) applies in respect of the interim dividend. The last election date for participation in the DRP is 23rd March 2022. The issue price for shares under the DRP is the volume weighted average price for K&S shares in the five business days ending on 22nd March 2022 (the record date for the interim dividend), less a discount of 2.5%.
Board Composition
Robert Dalton was appointed as a non-executive director with effect from 24th August 2021. Mr Dalton is considered by the board to be independent.
Mr Dalton has been a registered company auditor for over twenty-five years and is a former Managing Partner of the Ernst & Young Melbourne Accounting and Assurance Practice. Mr Dalton also has a wealth of entrepreneurial knowledge and experience having previously run Ernst & Young's entrepreneurship initiatives across the Oceania region as well as being a Regional Director of Ernst & Young's Asia Pacific Entrepreneur management team.
Mr Dalton has worked with a variety of public, private, and start up organisations advising on strategy, commercialisation and global expansion, as well as providing audit and assurance services. Mr Dalton is currently a non-executive director of ASX listed Helloworld Travel Limited and private company Kookaburra Sport. Mr Dalton has also held many volunteer director roles in the not for profit sector.
Mr Dalton's appointment continues a process of board renewal.
Outlook
Providing specific earnings guidance for the second half remains difficult, particularly having regard to the uncertainties created by COVID-19. We believe the business is well positioned for growth if economic conditions improve. It is not possible to predict with any certainty the extent or duration of COVID-19 related impacts on the Australian and New Zealand economies or upon the Group itself.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been nil significant changes in the state of affairs of the economic entity during the half-year under review.
EVENTS SUBSEQUENT TO BALANCE DATE
On 22nd February 2022, the Directors of K&S Corporation Limited declared an interim dividend on ordinary shares in respect of the 2022 financial year. The total amount of the dividend is $5,898,749 which represents a fully franked dividend of 4.5 cents per share. The dividend has not been provided for in the 31 December 2021 financial statements and is payable on 1st April 2022.
The Dividend Reinvestment Plan (DRP) applies in respect of the interim dividend. The issue price for shares under the DRP is the volume weighted average price for K&S shares in the five business days ending on 22nd March 2022 (the record date for the interim dividend), less a discount of 2.5%.
Other than the above matters, there has not arisen in the interval between the end of the financial period and the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.
ROUNDING
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 dated 24th March 2016 and in accordance with that legislative instrument, amounts in the Financial Report and Directors' Report have been rounded off to the nearest thousand dollars, unless otherwise stated. This interim financial report is presented in Australian dollars which is the Company's functional currency.
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For personal use only
K&S CORPORATION LIMITED
ABN 67 007 561 837
Directors' Report continued
AUDITOR INDEPENDENCE
The entity's auditor, Ernst & Young have provided the Group with an Auditors' Independence Declaration which is on page 19 of this report.
Dated at Melbourne this 22nd day of February 2022.
Signed in accordance with a resolution of the Directors.
Tony Johnson | Paul Sarant |
Chairman | Managing Director and CEO |
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K & S Corporation Limited published this content on 22 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 February 2022 05:40:04 UTC.