High dollar haunts K&S bottom line
Customers volumes lower due to harsher operating climate
By Rob McKay | February 23, 2011K&S Corporation is looking to disaster reconstruction to help reverse a decline in profits in the first half of the financial year.
Despite a 21.9 percent operating revenue rise, compared with the previous first half, to $264.7 million, K&S saw an 11.3 percent fall in operating profit to $8.1 million and a 30.4 percent fall in return on shareholders’ funds to $3.9 million.
Meanwhile, its gearing rose 83.6% to 26.8 percent.
Much of the pain was sourced back to the affects of the high dollar and tough conditions experienced by its customers.
"The lower result was foreshadowed in our trading update on 26 October 2010, where we outlined that our East Coast operations had experienced weaker trading conditions in the September quarter," the company says.
"This was largely driven by lower steel volumes on the back of reduced production, destocking and a change in product and distribution mix.
"We have also been negatively impacted by the closure of Wesleyvale and Burnie paper mills in Tasmania.
"The result also reflects a general softening of the economy with the majority of road and rail customer volumes lower than the previous year levels.
"The higher Australian dollar has reduced the demand for locally manufactured goods.
"The lower volumes of steel and paper products have impacted on our vehicle utilisation and our ability to double shift our equipment."
The outlook for the domestic economy was "far from certain with the high dollar and interest rates negatively impacting on Australian manufacturers".
"In the longer term we will see a pickup in demand for transport services as the re-building phase commences following the recent floods and cyclones in Queensland," the company says.
Despite this, K&S intends to grow organically and through acquisition, continuing an effort that saw it push into the Western Australian resources support market.
Last year’s purchase of Regal Transport Group was worth $41.85 million and followed its Pacific Transport buy.
Regal added $25.5 million in revenue and $2 million in profit to the group.
K&S Corporation Limited
ABN 67 007 561 837
141-147 Jubilee Highway West
Mount Gambier SA 5290
PO Box 567
Mount Gambier SA 5290
Australia
Ph (08) 87211700
Fax (08) 87211799
Website
www.ksgroup.com.au
News Release
23rd February 2011
K&S Corporation Results for Half Year Ended 31 December 2010
The Directors of K&S Corporation Limited today announced a net profit
after tax of $8.1 million, 11.3% lower than the corresponding period last
year.
Earnings per share were 10.9 cents per share.
Operating revenue for the first half was $264.7 million, an increase of
21.9% on the corresponding period.
The increase in operating revenues is due to the recent acquisitions of
Pacific Transport (January 2010), Regal Transport (July 2010) and the
strong performance of DTM. These acquisitions have performed in line
with our expectation.
Operating profit before interest, tax and depreciation was $29.0 million or
15.4% above the prior period.
On the 20 December 2010 we successfully completed a fully underwritten
one for six non-renounceable entitlement offer that raised $25.9 million.
These funds were used to retire debt.
Our gearing at the half was 26.8% which is in our target range.
K&S Corporation Limited
ABN 67 007 561 837
141-147 Jubilee Highway West
Mount Gambier SA 5290
PO Box 567
Mount Gambier SA 5290
Australia
Ph (08) 87211700
Fax (08) 87211799
Website
www.ksgroup.com.au
Interim Dividend
A fully franked interim dividend of 5.0 cents per share (last year 7.0 cents
per share) has been declared by the Directors.
The interim dividend will be paid on 31 March 2011, with the date for
determining entitlements being 17 March 2011.
The Dividend Reinvestment Plan (DRP) will apply to the interim dividend
and the issue price for the shares under the DRP will be based on the
weighted average trading price of K&S shares in the five trading days
ending 17 March 2011, less a discount of 2.5%.
Outlook
The outlook for the domestic economy is far from certain with the high dollar and interest rates negatively impacting on Australian manufacturers.
In the longer term we will see a pickup in demand for transport services as
the re-building phase commences following the recent floods and cyclones
in Queensland.
Our recent acquisitions will continue to provide the footprint for growth in
the sectors of oil and gas resources in Western Australia.
Our strategy has been, and continues to be, to grow the business through
carefully targeted acquisitions, organic growth and to competitively win
new tenders that deliver benefits to our Shareholders.
Further Information:
Mr Legh Winser Mr Bryan Walsh
Managing Director Chief Financial Officer
Ph: (0417) 885861 Ph: (0402) 899889
legh.winser@ksgroup.com.au bryan.walsh@ksgroup.com.au
Appendix 4D
Half Year report
Appendix 4D Page1
Appendix 4D
Half Year report
Name of entity
K&S Corporation Limited
ABN Half yearly
(tick)
Preliminary
final (tick)
Half year/financial year ended (‘current
period’)
67 007 561 837 ?
31st December 2010
Results for announcement to the market
$A’000
Revenues from ordinary activities Up / down 21.9% To 264,725
Profit (loss) from ordinary activities after tax attributable to
members
Up/down 11.3% To 8,113
Net profit (loss) for the period attributable to members Up/down 11.3% To 8,113
Dividends (distributions) Amount per security Franked amount per
security
Interim dividend 5.0c 5.0c
Previous corresponding period 7.0c 7.0c
Record Date for determining dividend Entitlements 17 March 2011
Date Dividend Payable 31 March 2011
Current Period Previous Corresponding
Period
Net tangible asset backing per ordinary security $1.61 $1.95
This half year report is to be read in conjunction with the most recent annual financial
report.
Interim Financial Report
as at
31 December 2010
Pages 2-3 Directors’ Report
Page 4 Statement of Comprehensive Income
Page 5 Statement of Financial Position
Page 6 Statement of Changes in Equity
Page 7 Statement of Cash Flows
Pages 8-15 Notes to the Financial Statements
Page 16 Directors’ Declaration
Pages 17-18 Independent Review Report
Page 19 Auditor’s Independence Declaration
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 2 -
Directors’ Report
Your Directors submit their report for the half-year ended 31 December 2010.
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)
Greg Boulton AM (Deputy Chairman – non executive)
Legh Winser (Managing Director)
Richard Nicholson (Non-executive Director)
Bruce Grubb (Non-executive Director)
Ray Smith (Non-executive Director)
CONSOLIDATED RESULTS
Financial overview 6 month
period to
Dec 2010
6 month
period to
Dec 2009 % change
Operating revenue $m 264.7 217.2 21.9
Operating profit before interest and tax $m 16.3 15.1 7.4
Operating profit after tax $m 8.1 9.2 (11.3)
Shareholders’ funds $m 210.5 163.1 29.1
Total assets $m 383.2 285.1 34.4
Earnings per share cents 10.9 13.1 (16.8)
Interim dividend per share cents 5.0 7.0 (28.6)
Net tangible assets per share cents 1.6 2.0 (20.0)
Return on Shareholders’ funds % 3.9 5.6 (30.4)
Gearing % 26.8 14.6 83.6
REVIEW AND RESULTS OF OPERATIONS
The consolidated net profit after tax of the economic entity for the half-year was $8.1 million, which is 11.3% lower than the
previous corresponding half-year.
Operating revenue for the first half was $264.7 million, which is 21.9% higher than the prior corresponding half year.
The increase in operating revenue is due to the recent acquisitions of Pacific Transport (January 2010) and Regal Transport (July
2010) and the strong performance of DTM. These acquisitions have performed in line with our expectation.
The lower result was foreshadowed in our trading update on 26 October 2010 where we outlined that our East Coast operations had
experienced weaker trading conditions in the September quarter. This was largely driven by lower steel volumes on the back of
reduced production, de-stocking and a change in the product and distribution mix.
We have been also negatively impacted by the closure of the Wesleyvale and Burnie paper mills in Tasmania.
The lower volumes of steel and paper products have impacted on our vehicle utilisation and our ability to double shift our
equipment.
Operating profit before interest, tax and depreciation was $29.0 million or 15.4% above the prior period.
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 3 -
Directors’ Report continued
The result also reflects a general softening of the economy with the majority of road and rail customer volumes lower than the
previous year levels. The higher Australian dollar has reduced the demand for locally manufactured goods.
We successfully completed a fully underwritten one for six non-renounceable entitlement offer that raised $26.4 million on 20
December 2010. The funds were used to repay debt. Our gearing at the half year is 26.8% (14.6% Dec 09), which is within our
target range.
A fully franked interim dividend of 5.0 cents per share (2009: 7.0 cents per share) has been declared by the Directors. The interim
dividend will be paid on 31 March 2011, with the date for determining entitlements being 17 March 2011. The Dividend
Reinvestment Plan (DRP) will apply to the interim dividend and the issue price for shares under the DRP will be based on the
weighted average trading price of K&S shares in the five trading days ending 17 March 2011, less a discount of 2.5%.
The outlook for the domestic economy continues to be uncertain. We expect that the second half of the current financial year will
remain challenging.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the economic entity during the half-year under review.
EVENTS SUBSEQUENT TO BALANCE DATE
On 22 February 2011, the Directors of K&S Corporation Limited declared an interim dividend on ordinary shares in respect of the
2011 financial year. The total amount of the dividend is $4,303,181 which represents a fully franked dividend of 5.0 cents per share.
The dividend has not been provided for in the 31 December 2010 financial statements and is payable on 31 March 2011.
The Dividend Reinvestment Plan (DRP) will apply to the 31 March 2011 interim dividend and the issue price for shares under the
DRP will be based on the weighted average trading price of K&S shares in the five business days ending on 17 March 2011 (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 consolidated entity, the results of those operations, or the state of affairs of the consolidated entity
in future financial years.
AUDITOR INDEPENDENCE
The entity’s auditor, Ernst & Young has provided the economic entity with an Auditors’ Independence Declaration which is on
page 19 of this report.
Dated at Mount Gambier this 22nd day of February 2011.
Signed in accordance with a resolution of the Directors.
A F Johnson J L Winser
Chairman Managing Director
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 4 -
Statement of Comprehensive Income
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
CONSOLIDATED
31 December 31 December
NOTE 2010 2009
$’000 $’000
Operating revenue 4(a) 264,725 217,174
Cost of goods sold (26,032) (24,884)
Gross profit 238,693 192,290
Other income 4(b) 2,769 2,421
Contractor expenses (82,628) (68,385)
Employee benefits expenses (74,620) (58,326)
Fleet expenses (45,026) (33,753)
Depreciation and amortisation expense 4(d) (12,788) (10,024)
Finance costs 4(c) (4,644) (2,542)
Other expenses (10,278) (9,091)
Share of profits/(losses) of associates 129 -
Profit before income tax 11,607 12,590
Income tax expense (3,494) (3,440)
Profit after income tax 8,113 9,150
Other comprehensive income
Foreign currency translation (706) 98
Other comprehensive income for the period, net of tax (706) 98
Total comprehensive income for the period 7,407 9,248
Earnings per share (cents per share)
? basic for profit for the period attributable to ordinary equity
holders of the parent 10.9 13.1
? diluted for profit for the period attributable to ordinary equity
holders of the parent 10.9 13.1
Dividends per share (cents per share) 6 5.0 7.0
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 5 -
Statement of Financial Position
AS AT 31 DECEMBER 2010
CONSOLIDATED
31 December 30 June
NOTE 2010 2010
$’000 $’000
ASSETS
Current assets
Cash and cash equivalents 5 9,161 12,042
Trade and other receivables 62,351 56,747
Inventories 2,900 2,696
Prepayments 6,423 4,809
Total current assets 80,835 76,294
Non-current assets
Receivables 1,908 2,093
Investments in associates 129 -
Property, plant & equipment 221,656 197,169
Intangibles 72,035 44,761
Deferred tax assets 6,606 5,776
Total non-current assets 302,334 249,799
TOTAL ASSETS 383,169 326,093
LIABILITIES
Current liabilities
Trade and other payables 45,491 44,596
Interest bearing loans and borrowings 15,591 16,462
Income tax payable 1,064 1,270
Provisions 12,989 11,190
Derivatives 934 1,123
Total current liabilities 76,069 74,641
Non-current liabilities
Other payables 4,620 4,340
Interest bearing loans and borrowings 70,540 47,889
Deferred tax liabilities 18,980 18,032
Provisions 2,498 2,122
Total Non-current liabilities 96,638 72,383
TOTAL LIABILITIES 172,707 147,024
NET ASSETS 210,462 179,069
EQUITY
Contributed equity 7 93,662 64,528
Reserves 24,389 25,095
Retained earnings 92,411 89,446
TOTAL EQUITY 210,462 179,069
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 6 -
Statement of Changes in Equity
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
Issued
capital
Retained
earnings
Asset
revaluation
reserves
Forex
translation
reserves
Total
equity
$’000 $’000 $’000 $’000 $’000
CONSOLIDATED
At 1 July 2010 64,528 89,446 26,270 (1,175) 179,069
Profit for period - 8,113 - - 8,113
Other comprehensive income - - - (706) (706)
Total comprehensive income for the half-year - 8,113 - (706) 7,407
Transactions with owners in their capacity as
owners
Issue of share capital 29,134 - - - 29,134
Dividends - (5,148) - - (5,148)
At 31 December 2010 93,662 92,411 26,270 (1,881) 210,462
At 1 July 2009 57,425 79,174 20,956 (1,326) 156,229
Profit for period - 9,150 - - 9,150
Other comprehensive income - - - 98 98
Total comprehensive income for the half-year - 9,150 - 98 9,248
Transactions with owners in their capacity as
owners
Issue of share capital 1,103 - - - 1,103
Dividends - (3,510) - - (3,510)
At 31 December 2009 58,528 84,814 20,956 (1,228) 163,070
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 7 -
Statement of Cash Flows
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
CONSOLIDATED
31 December 31 December
NOTE 2010 2009
$’000 $’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 296,065 242,484
Cash payments to suppliers and employees (261,292) (204,922)
Interest received 42 123
Borrowing costs paid (4,644) (2,542)
Income taxes paid (4,134) (3,104)
Net goods and services tax paid (7,536) (7,741)
Net cash provided by operating activities 18,501 24,298
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets 1,770 1,774
Acquisition of subsidiaries (39,185) -
Payments for property plant & equipment (10,497) (2,412)
Net cash (used) in investing activities (47,912) (638)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issue 25,870 351
Proceeds from borrowings 55,000 -
Repayments of borrowings (40,000) (9,000)
Lease and hire purchase liability repayments (9,753) (9,403)
Dividends paid (4,544) (3,200)
Net cash (used) in financing activities 26,573 (21,252)
Net increase/(decrease) in cash held (2,838) 2,408
Cash and cash equivalents the beginning of the financial period 12,042 14,717
Effects of exchange rate variances on cash (43) (2)
Cash and cash equivalents at the end of the financial period 5 9,161 17,123
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 8 -
Notes to the Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
1 CORPORATE INFORMATION
The financial report of K&S Corporation Limited for the half-year ended 31 December 2010 was authorised for issue in accordance with a
resolution of Directors on 22 February 2011.
K&S Corporation Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange.
The nature of the operations and principal activities of the Group are described in Note 3.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The general purpose financial report for the half-year ended 31 December 2010 has been prepared in accordance with AASB 134 Interim
Financial Reporting and Corporations Act 2001.
The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore
cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing
activities of the consolidated entity as the full financial report.
The half-year report should be read in conjunction with the Annual Report of K&S Corporation Limited as at 30 June 2010. It is also
recommended that the half-year financial report be considered together with any public announcements made by K&S Corporation Limited
and its controlled entities during the half-year ended 31 December 2010 in accordance with the continuous disclosure obligations arising
under the Corporations Act 2001.
Apart from the changes in accounting policies noted below, the accounting policies and methods of computation are the same as those
adopted in the most recent financial report.
Changes in accounting policies
The following amending Standards have been adopted from 1 July 2010. Adoption of these Standards did not have any effect on the
financial position or performance of the Group:
? AASB 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the disclosures required in respect of noncurrent
assets and disposal groups classified as held for sale or discontinued operations are only those set out in AASB 5. The
disclosure requirements of other Accounting Standards, only applies if specifically for such non-current assets or discontinued
operations.
? AASB 107 Statement of Cash Flows: States that only expenditure that results in recognising an asset can be classified as a cash
flow from investing activities. This amendment will impact amongst others, the presentation in the statement of cash flows of the
contingent consideration on the business combination completed in 2010 upon cash settlement.
? AASB 136 Impairment of Assets: The amendment clarifies that the largest unit permitted for allocating goodwill, acquired in a
business combination, is the operating segment defined in AASB 8 before aggregation for reporting purposes. The amendment
has no impact on the Group as the annual impairment test is performed before aggregation.
? AASB Interpretation 17 Distribution of Non-cash Assets to Owners: This interpretation provides guidance on accounting for
arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The
interpretation has no effect on either, the financial position or the performance of the Group.
The Group has not elected to early adopt any other new Standards or Interpretations that are issued but not yet effective.
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 9 -
Notes to the Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
3 OPERATING SEGMENTS
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management team
in assessing performance and in determining the allocation of resources.
The operating segments are identified by management based on the nature of the services provided, the identity of the service line manager
and the country of origin. Discrete financial information about each of these operating businesses is reported to the executive management
team on at least a weekly basis.
The reportable segments are based on aggregated operating segments determined by the similarity of the services provided and/or the
products sold, as these are the sources of the Group’s major risks and have the most effect on the rates of return.
The Group comprises the following main business segments, based on the consolidated entity’s management reporting system:-
? K&S Aust. – The provision of interstate and local logistical services to customers under the brand K&S in Australia.
? K&S Fuels - The distribution of fuel to fishing, farming and retail customers within the South East of South Australia.
? DTM - The provision of local logistical services to customers under the brand DTM.
? Regal - The provision of intrastate logistical services to customers under the brand Regal Transport.
? K&S NZ – The provision of logistical services to customers under the brand K&S in New Zealand.
Accounting policies and inter-segment transactions
The accounting policies used by the Group in reporting segments are the same as those contained in note 2 to the accounts and in the prior
period except as detailed below:
Inter-entity sales
Inter-entity sales are recognised based on an internally set transfer price. The price is set periodically and aims to reflect what the business
operations could achieve if they sold their output and services to external parties at arm’s length.
Corporate charges
Corporate charges are allocated to each operating segment on a proportionate basis linked to segment revenue so as to determine a
segmental result.
Segment loans payable and loans receivable
Segment loans are initially recognised at the consideration received excluding transaction costs. Intersegment loans receivable and loans
payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates.
It is the Group’s policy that if items of revenue and expense are not allocated to operating segments then any associated assets or liabilities
are also not allocated to segments. This is to avoid asymmetrical allocations within segments which management believe would be
inconsistent.
The following items and associated assets and liabilities are not allocated to operating segments as they are not considered part of the core
operations of any segment:
? Finance costs.
? Income tax expense.
? Fair value gains/losses on derivative classified as held for trading.
The following table presents revenue and profit information for reportable segments for the half-years ended 31 December 2010 and 31
December 2009.
K&S Aus Regal K&S Fuels DTM K&S NZ Total
$’000 $’000 $’000 $’000 $’000 $’000
Half-year ended 31 December 2010
Revenue
Sales to external customers 159,354 38,280 28,039 27,620 11,390 264,683
Inter-segment sales 299 207 18,860 269 - 19,635
Total segment revenue 159,653 38,487 46,899 27,889 11,390 284,318
Inter-segment elimination (19,635)
Interest revenue 42
Total revenue per Statement of
Comprehensive Income
264,725
Result
Segment net operating profit after tax 6,474 2,231 447 1,013 194 10,359
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 10 -
Notes to the Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
3 OPERATING SEGMENTS (continued)
K&S Aus Regal K&S Fuels DTM K&S NZ Total
$’000 $’000 $’000 $’000 $’000 $’000
Reconciliation of segment net profit
to net profit before tax
Income tax expense at 30% (2009:
30%)
4,440
Fair value gain on held for trading
derivatives
176
Net interest expense (4,601)
Net gain on disposal of property, plant
and equipment
1,233
Total net profit before tax per
Statement of Comprehensive Income
11,607
Segment assets
Segment operating assets 327,720 21,512 16,005 9,420 19,281 393,938
Inter-segment elimination (17,375)
Deferred tax assets 6,606
Total assets per the Statement of
Financial Position
383,169
Half-year ended 31 December 2009
Revenue
Sales to external customers 156,021 - 27,310 22,846 10,874 217,051
Inter-segment sales 99 - 16,903 284 - 17,286
Total segment revenue 156,120 - 44,213 23,130 10,874 234,337
Inter-segment eliminations (17,286)
Interest revenue 123
Total revenue per Statement of
Comprehensive Income
217,174
Result
Segment net operating profit after tax 7,915 - 495 694 191 9,295
Reconciliation of segment net profit
to net profit before tax
Income tax expense at 30% (2008:
30%)
3,978
Fair value gain on held for trading
derivatives
576
Net interest expense (2,419)
Net gain on disposal of property, plant
and equipment
1,160
Total net profit before tax per
Statement of Comprehensive Income
12,590
Segment assets
Segment operating assets 240,260 - 15,210 15,541 22,582 293,593
Inter-segment eliminations (14,293)
Deferred tax assets 5,801
Total assets per the Statement of
Financial Position
285,101
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 11 -
Notes to the Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
4 REVENUE, INCOME AND EXPENSES
CONSOLIDATED
2010 2009
$’000 $’000
Revenue
(a) Operating revenue
- Rendering of services 236,644 189,741
- Sale of goods 28,039 27,310
- Finance revenue 42 123
264,725 217,174
(b) Other income
- Net gains on disposal of property, plant and equipment 1,233 1,160
- Net gain on derivatives classified as held for trading 176 576
- Other 1,360 685
2,769 2,421
Expenses
(c) Finance costs
- Bank loans and overdrafts 2,733 946
- Finance charges payable under finance leases and hire purchase contracts 1,911 1,596
Total finance costs 4,644 2,542
(d) Depreciation and amortisation expense
Depreciation
- Buildings 915 850
- Motor vehicles 10,322 8,023
- Plant and equipment 1,349 1,151
Amortisation
- IT development costs 202 -
Total depreciation expense 12,788 10,024
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 12 -
Notes to the Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
5 CASH AND CASH EQUIVALENTS
CONSOLIDATED
31 Dec 2010 30 June 2010
$’000 $’000
For the purpose of the half-year statement of cash flows, cash and cash equivalents are
comprised of the following:
Cash 46 42
Cash deposits with banks 9,115 12,000
9,161 12,042
Cash at bank earns interest at floating rates based on daily bank deposit rates.
6 DIVIDENDS PAID AND PROPOSED
CONSOLIDATED
2010 2009
$’000 $’000
Declared and paid during the period:
Dividends on ordinary shares
Final franked dividend for the financial year ended 30 June 2010: 7.0 cents
(2009: 5.0 cents)
5,148 3,510
Proposed (not recognised as a liability as at 31 December):
Dividends on ordinary shares
Interim franked dividend for the half year ending 31 December 2010:
5.0 cents (2009: 7.0 cents)
4,303 4,957
9,451 8,467
Dividend Reinvestment Plan
The consolidated entity has a Dividend Reinvestment Plan under which holders of ordinary shares may elect to acquire additional shares
in lieu of cash dividends. Shares are issued at a discount of 2.5% (or as otherwise determined by the Board of Directors from time to
time) of their market value which is determined by referenced to the weighted average market price of K&S shares during the five trading
days up to and including the relevant dividend record date.
The last date for receipt of election notices for the Dividend Reinvestment Plan is 5pm on 17 March 2011.
K&S CORPORATION LIMITED
ABN 67 007 561 837
- 13 -
Notes to the Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
7 CONTRIBUTED EQUITY
CONSOLIDATED
31 Dec 2010 30 June 2010
$’000 $’000
Issued and paid-up share capital 93,662 64,528
(i) Ordinary shares
Fully paid ordinary shares carry one vote per share, either in person or by proxy, at a meeting of the Company and carry the right to receive
dividends as declared.
Thousands $’000
Movements in ordinary shares on issue
At 1 January 2010 70,309 58,528
Issued to acquire Pacific Transport
- 500,000 ordinary shares at $2.80 per share 500 1,400
Issued through Dividend Reinvestment Plan
- 165,955 ordinary shares at $2.75 per share 166 457
Issued through Share Purchase Plan
- 1,618,199 ordinary shares at $2.56 per share 1,618 4,143
At 30 June 2010 72,593 64,528
Issued to acquire Regal Transport
- 950,000 ordinary shares at $2.80 per share 950 2,660
Issued through Dividend Reinvestment Plan
- 225,552 ordinary shares at $2.68 per share 225 604
Issued through Rights Issue
- 12,295,560 ordinary shares at $2.15 per share, net transaction costs 12,296 25,870
At 31 December 2010 86,064 93,662
8 COMMITMENTS AND CONTINGENCIES
The only changes to the commitments and contingencies disclosed in the most recent annual financial report are specified below:
Legal claim
There are a number of minor legal actions pending against companies within the consolidated entity. Liability has not been admitted and
the claims will be defended. The Directors do not believe these actions will result in any significant cost to the consolidated entity.
9 EVENTS SUBSEQUENT TO BALANCE DATE
On 22 February 2011, the Directors of K&S Corporation Limited declared an interim dividend on ordinary shares in respect of the 2011
financial year. The total amount of the dividend is $4,303,181, which represents a fully franked dividend of 5.0 cents per share. The
dividend has not been provided for in the 31 December 2010 financial statements and is payable on 31 March 2011.
The Dividend Reinvestment Plan (DRP) will apply to the 31 March 2011 interim dividend and the issue price for shares under the DRP will
be based on the weighted average trading price of K&S shares in the five business days ending on 17 March 2011 (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 year 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 consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.
K&S CORPORATION LIMITED
ABN 67 007 561 837
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Notes to the Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
10 PROPERTY, PLANT AND EQUIPMENT
Acquisition and disposal
During the half-year ended 31 December 2010, the Group acquired assets, with a cost of $38,333,000 (2009: $5,469,000).
Assets with a net book value of $537,000 were disposed of by the Group during the half-year ended 31 December 2010 (2009: $614,000),
resulting in a gain on disposal of $1,233,000 (2009: $1,160,000).
11 INTEREST-BEARING LOANS AND BORROWINGS
During the half-year, the economic entity acquired property, plant and equipment with an aggregate fair value of $10,079,000 by means of
finance lease or hire purchase arrangements (2009: $3,057,000).
Stand by letters of credit
During the half-year ended 31 December 2010, the Group had the following amended guarantees:
? Bank guarantee of $11,216,000 (2009: $9,484,000) provided by the Westpac Banking Corporation to Comcare for the due
discharge of its liabilities to pay compensation and other amounts under the Safety Rehabilitation and Compensation Act 1988.
? Bank guarantee of $798,000 (2009: $1,150,000) provided by the Westpac Banking Corporation to Victorian Work Cover.
12 BUSINESS COMBINATIONS
On 8 July 2010, K&S Corporation Limited acquired the Perth based Regal Transport Group ("Regal"). The Regal Transport Group was
formed in March 2009 with the merger of N&L Transport and Strategic Transport Services Pty Ltd. At the time of acquisition, Regal
generated annual revenues of $50 million and employed over 120 people. The Regal acquisition will extend the footprint achieved by the
Pacific Transport acquisition to the oil & gas/resources sectors of Western Australia.
The consideration transferred was $41,849,000 and comprised an issue of equity instruments and cash. The Group issued 950,000 ordinary
shares with a fair value of $2.80 each. The provisional fair value of identifiable net assets is $14,100,000.
Key factors contributing to the $27,749,000 of goodwill are the synergies existing within the acquired business and synergies expected to be
achieved as a result of combining Regal Transport with Pacific Transport and the rest of the Group. The Regal acquisition will extend the
footprint achieved by the Pacific Transport acquisition to the oil & gas/resources sectors of Western Australia.
The provisional fair values of identifiable assets and liabilities is as follows:
Fair value at
acquisition date Carrying value
$’000 $’000
Cash and cash equivalents 20 20
Trade and other receivables 7,695 7,695
Plant and equipment 17,757 15,608
Prepayments 206 67
Deferred tax asset 269 -
25,947 23,390
Cash and cash equivalents (220) (220)
Trade and other payables (3,137) (3,137)
Interest bearing loans and borrowings (6,828) (6.828)
Income tax payable (80) (80)
Provision for employee entitlements (896) (747)
Deferred tax liability (690) -
11,851 11,012
Provisional fair value of identifiable net assets 14,096
Goodwill arising on acquisition 27,749
41,845
K&S CORPORATION LIMITED
ABN 67 007 561 837
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Notes to the Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2010
12 BUSINESS COMBINATIONS (continued)
Fair value at
acquisition date
$’000
Acquisition-date fair-value of consideration transferred
Shares issued 2,660
Cash paid 39,185
Consideration transferred 41,845
Direct costs relating to the acquisition 150
Cash outflow on acquisition is as follows:
Net cash acquired with the subsidiary (200)
Cash paid (39,189)
Net consolidated cash outflow (39,389)
The consolidated Statement of Comprehensive income includes sales revenue and net profit for the period ending 31 December 2010 of
$25,500,000 and $2,001,000 respectively, as a result of the acquisition of Regal Transport.
K&S CORPORATION LIMITED
ABN 67 007 561 837
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Directors’ Declaration
In accordance with a resolution of the Directors of K&S Corporation Limited, I state that:
In the opinion of the Directors:
(a) The financial statements and notes of the consolidated entity, are in accordance with the Corporations Act 2001,
including;
(i) Giving a true and fair view of the financial position as at 31 December 2010 and the performance for the
half-year ended on that date of the consolidated entity.
(ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations
Regulations 2001
(b) There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due
and payable.
On behalf of the Board
A F Johnson
Chairman
Mount Gambier, 22 February 2011
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