Kardan NV published its second-quarter report. The income statement here is the less important side.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
A note before the figures: Kardan NV is a Dutch company and reports in euros. All amounts here are denominated in euros, not shekels.
The Quarter
| EUR millions | The quarter |
|---|---|
| Revenue | 2.9 |
| Gross profit | 2.2 |
| Operating loss | -0.3 |
| Pre-tax loss | -62.3 |
| Net loss | -62.3 |
| Basic loss per share | -EUR 2.53 |
| Balance sheet total | 139.1 |
| Shareholders' equity | -239.6 |
The Line That Defines the Report
Kardan NV's shareholders' equity is minus EUR 239.6 million.
And this is a term worth understanding precisely, because it sounds abstract and is not.
Shareholders' equity is the difference between assets and liabilities. When it is positive, something remains for shareholders after liabilities are covered. When it is negative, liabilities exceed assets.
Here: assets of EUR 139.1 million, and equity of minus EUR 239.6 million. That means liabilities come to about EUR 378.7 million - almost three times the assets.
The accounting meaning is simple: had all the assets been sold today at their recorded value, they would not have covered the liabilities, and the shortfall is about EUR 239.6 million.
This is not a position that arose in one quarter. A loss of EUR 62.3 million in the quarter deepens it, but does not explain it.
And the Loss Itself: Almost All of It Below the Operating Line
This is a point worth being precise about, because it changes how the quarter reads.
| Operating loss | only EUR 0.3 million |
| Pre-tax loss | EUR 62.3 million |
| The difference | about EUR 62.0 million |
That is, the activity itself is close to breakeven. What created the loss sits below the operating line.
At a company in this position, that item typically includes two things: financing costs on large debt, and impairments of assets or of investments in held companies.
The structured quarterly filing does not separate them, so I do not assert the share of each. What is clear: the order of magnitude - roughly 200 times the operating loss - is not consistent with ordinary running financing costs at a company whose revenue is EUR 2.9 million a quarter.
And the Gross Margin, Which Offers No Comfort
Gross profit of EUR 2.2 million on revenue of EUR 2.9 million - a margin of 74.8%.
A high margin, and at this scale it has no practical significance. EUR 2.2 million of gross profit covers nothing against a balance sheet of EUR 139.1 million and liabilities of EUR 378.7 million.
And that is a useful reminder: a margin is a ratio, and a ratio does not measure size. A company can show an excellent margin on activity that is negligible relative to its balance sheet.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
This report is a case where the ordinary reading habits simply do not apply.
In every other report this week I looked for the same things: what the margin is, how much of operating profit survives to the bottom, what the tax rate is, how much goes to the minority. None of those questions describes this company's position.
What describes it is one line in the balance sheet: liabilities of about EUR 378.7 million against assets of EUR 139.1 million.
And what I think should be said explicitly is what the report does not say. Negative equity is an accounting fact, and it does not on its own determine what happens next. Companies have been in it and come back - through debt restructuring, an equity injection or asset sales - and others have not. The structured quarterly filing contains no information about the debt structure, maturity dates or negotiations with creditors, and without those there is no basis for saying where this goes.
So I stop at what is known: the activity is close to breakeven, the loss comes from below the operating line, and equity is negative by EUR 239.6 million. Anything beyond that is in the full accounts and the immediate filings, not here.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
