|Canaf Group Inc.(CAF.V) Q2 2018 Results. Financials + MD&A|
All information can be found at www.sedar.com
Common Shares: 47,426,195
Financials (All In US Dollars)
Trade Receivables: $3,604,555
Sales Tax Receivable: $3,091
Prepaid Expenses: $20,028
Property, Plant & Equipment: $953,801
Total Assets: $5,315,272
Trade & Other Payables: $2,296,780
Sales Tax Payable: $17,689
Income Tax Payable: $129,439
Bank Loan(Due Jan 2019): $271,611
Total Liabilities: $2,715,519
Asset/Debt Ratio: 1.96:1
Six Month Performance(Q1 & Q2 2018)
Net Income: $691,115 USD
Net Income for 2017(Q1-Q4): $541,808 USD
Earnings per share in 2018:
$691,115USD X 1.31 CAD(June 29th 2018) / 47,426,195 = $0.019 cents CAD
Earnings per share over 6 quarters:
$1,232,923 X 1.31 CAD /47,426,195 = $0.034 cent CAD
Revenues for the six months were $8,698,426 (2017 - $6,482,459) a 34% increase, and the Corporation continues to be profitable with gross profits of $703,169 (2017 - $684,905) a 2.7% increase and net income for six month period ended April 30, 2018 of $449,880 (2017 - $429,652) a $20,288, 4.7% increase. While revenues and gross margin have grown, increased cost of sales produced smaller gross margin percentages, 2018 8.1% (2017 10.6%).
The reduction in the gross margin is mainly due to a major maintenance project during the period. The Corporation expects to continue to operate profitably into Q3 and Q4, however Revenue is expected to drop, due to a reduction in demand caused primarily by one of Southern Coals main customers’ internal coke breeze coming back online.
The outlook and profitability of the Corporation remains strong and the Corporation expects to continue to generate positive free cash flow during the fiscal year-end 2018 and, as it accumulates cash and reduces its gearing and increases its efficiencies, will continue to look at investment in related business opportunities in South Africa and neighbouring countries.
The Corporation’s B-BBEE transaction for the sale of 30% of Quantum’s shares in Southern Coal remains on track to be completed during the current fiscal year. Following the termination of the initial agreement announced on 20 February 2018, a new B-BBEE partner has been identified and initial terms of the agreement, which will remain much the same as the previously agreed transaction, are expected to be announced during Q3.
Sales from the Corporation’s South African coal processing business are substantially derived from two customers and as a result, the Corporation is economically dependent on these customers. The Corporation’s exposure to credit risk is limited to the carrying value of its accounts receivable. As at April 30, 2018, trade receivables of $3,604,555 (October 31, 2017, $1,314,828) were due from these customers and were collected subsequent to period-end.
The bank loan bears interest at 10.25% per annum, matures on January 7, 2019, and is secured by the Corporation’s furnace acquired with the proceeds from the loan. The bank loan is repayable in blended monthly payments of Rand 391,624 ($32,359.89 translated at April 30, 2018 exchange rate)). During the six month period ended April 30, 2018, the Corporation incurred interest expense totaling $19,909 (April 30, 2017 – $29,658).
Expenses for the six months were $304,980 (2017 - $237,288) an increase of $67,692, 29%, primarily due to increased costs relating to the B-BBEE program
General administrative and finance expenses for the six month period were $285,071 (April 30, 2017 - $207,630) an unfavourable variance of $77,441, primarily due to increased involvement in South Africa’s B-BBEE program and increased activity resulting in higher management fees and office expenses. Additional detail of general and admin expenses can be found in the table below.