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YRK - The York Timber Organisation - Unaudited Interim Financial Results For The
Six Months Ended 31 December 2008
THE YORK TIMBER ORGANISATION LIMITED
No. 1916/004890/06
Share code: YRK
ISIN: ZAE000008108
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
Unaudited condensed consolidated interim income statement
For the six months ended 31 December 2008
Unaudited Reviewed Pro forma
31 Dec 2008 31 Dec 2007 31 Dec 2007
In thousands of Rands 6 months 12 months 6 months
Revenue 659 912 929 169 682 209
Cost of sales (271 555) (379 167) (214 667)
Gross profit 388 357 550 002 467 542
Other operating income 4 850 5 375 2 484
Insurance proceeds (business
interruption) 27 829 7879 7 879
Insurance proceeds (capital
expenditure) 50 224 - -
Distribution expenses (93 067) (78 142) (74 721)
Other expenses (271 553) (367928) (305 763)
Operating profit 106 640 117 186 97 421
Fair value adjustment -
Biological assets 5 381 239 943 239 943
Fair value adjustment - Hedge
derivative (11 095) - -
Write offs relating to the fire - (86 577) (86 577)
Net profit before finance costs 100 926 270 552 250 787
Finance income 11 835 5 867 5 092
Finance expenses (84 297) (85 310) (82 451)
Profit before tax 28 464 191 109 173 428
Income tax expense (6 970) (56 142) (50 616)
Profit for the period 21 494 134 967 122 812
Attributable to:
Equity holders of the parent 21 494 134 967 122 812
Preference equity holders - 2 722 1 765
Fully diluted earnings per
share - cents 26,5 323,8 169,5
Basic earnings per share - cents 27,4 335,4 173,9
Reconciliation of headline earnings Fully diluted Basic
2008 2008
Basic earnings per share - cents 26,5 27,4
Profit on sale of property, plant and
equipment (0,3) (0,3)
Headline earnings per share 26,1 27,2
Reconciliation of headline earnings Fully diluted Basic
12 months 2007 12 months 2007
Basic earnings per share - cents 323,8 335,4
Profit on sale of property, plant and
equipment (0,4) (0,4)
Headline earnings per share 323,4 335,1
Reconciliation of headline earnings Fully diliuted Basic
6 months 2007 6 months 2007
Basic earnings per share - cents 169,5 173,9
Profit on sale of property, plant and
equipment (0,4) (0,4)
Headline earnings per share 169,1 173,6
Unaudited condensed consolidated interim balance sheet
As at 31 December 2008
Unaudited Audited Reviewed
31 Dec 2008 30 Jun 2008 31 Dec 2007
In thousands of Rands
ASSETS
Total non-current assets 3 038 728 3 042 787 2 512 069
Property, plant and equipment 432 733 363 511 365 474
Biological assets 1 988 450 1 983 070 1 514 024
Goodwill 610 352 610 352 624 618
Investment property 4 920 4 920 7 400
Other investments 2 273 80 934 553
Total current assets 563 617 616 430 604 967
Inventories 255 649 197 908 165 537
Trade and other receivables 210 330 194 961 249 792
Cash and cash equivalents 96 615 222 538 189 638
Non-current assets held for sale 1 023 1 023 -
Total assets 3 602 345 3 659 217 3 117 036
EQUITY AND LIABILITIES
Issued capital 3 919 3 919 3 918
Share premium 1 002 622 1 002 622 1 002 740
Share based payment reserve 10 446 10 446 -
Retained earnings 558 534 638 681 235 261
Total equity attributable to
equity
holders of the parent 1 575 521 1 655 668 1 241 919
Total non-current liabilities 1 701 033 1 699 234 1 573 697
Interest bearing loans and
borrowings 1 091 049 1 128 545 1 153 163
Other long term financial
liabilities 31 498 - -
Retirement benefit obligation 18 256 17 431 17 431
Provisions 54 643 54 643 53 985
Deferred tax liabilities 505 587 498 615 349 118
Total current liabilities 325 791 304 315 301 420
Interest bearing loans and
borrowings 60 174 64 109 67 027
Trade and other payables 262 995 234 717 223 648
Income tax payable 2 622 5 489 10 745
Total equity and liabilities 3 602 345 3 659 217 3 117 036
Unaudited condensed consolidated interim statement of changes in equity
For the six months ended 31 December 2008
Adjust-
Ordinary ment
share Share for hedge
capital premium accounting
In thousands of Rands
Balance at 1 July 2007 552 1 713 -
Write off of share issue costs (20 390)
Issue of shares 3 366 1 021 417
Net profit for the period
Total recognised income
and expense for the period
Balance at 31 December 2007 3 918 1 002 740 -
Balance at 1 July 2008 3 919 1 002 622 (219)
Write off of share issue costs
Adjust hedge reserve (101 640)
Issue of shares
Net profit for the period
Total recognised income and
expense for the period
Balance at 31 December 2008 3 919 1 002 622 (101 859)
Share
based
payment Retained
reseve earnings Total
In thousands of Rands
Balance at 1 July 2007 - 112 449 114 714
Write off of share issue costs (20 390)
Issue of shares 1 024 783
Net profit for the period 122 812 122 812
Total recognised income
and expense for the period 122 812 122 812
Balance at 31 December 2007 - 235 261 1 241 919
Balance at 1 July 2008 10 446 638 900 1 655 668
Write off of share issue costs -
Adjust hedge reserve (101 640)
Issue of shares (1) (1)
Net profit for the period 21 494 21 494
Total recognised income and
expense for the period 21 494 21 494
Balance at 31 December 2008 10 446 660 393 1 575 521
Unaudited condensed consolidated interim cash flow statement
For the six months ended 31 December 2008
Unaudited Reviewed Pro forma
31 Dec 2008 31 Dec 2007 31 Dec 2007
In thousands of Rands 6 month 12 months 6 months
Cash flows from
operating activities
Cash generated by operating
activities 69 700 60 420 69 024
Finance income 11 835 5 867 5 092
Finance expense (88 232) (85 310) (83 408)
Taxation paid (2 865) (6 742) (87)
Net cash (outflow)/inflow
from operating activities (9 562) (25 765) (9 379)
Cash flows from
investing activities
Proceeds from sale of property
plant and equipment 589 1,078 1 054
Additions to property
plant and equipment (79 454) (29 292) (15 270)
Additions to biological assets - (20 690) (690)
Acqusition of subsidiaries ,
net of cash acquired - (1 698 786) (1 698 786)
Net cash (outflow)/inflow
from investing activities (78 865) (1 747 690) (1 713 692)
Cash flows from financing
activities
(Decrease)/increase in borrowings (37 496) 918 317 900 362
Proceeds from the issue of
share capital - 1 003 045 1 003 045
Net cash inflow from
financing activities (37 496) 1 921 362 1 903 407
Net (decrease)/increase in cash
and cash equivalents (125 923) 147 907 180 336
Cash and cash equivalents at
beginning of period 222 538 41 731 9 302
Cash and cash equivalents at
end of period 96 615 189 638 189 638
Notes to the unaudited condensed consolidated interim financial statements
The condensed consolidated Group
interim financial statements of the Company for the 6 months ended 31 December
2008 comprise the Company and its subsidiaries (together referred to as the
Group).
The unaudited condensed consolidated interim financial statements were
authorised for
issue on 3 March 2009.
(a) Basis of preparation
The unaudited condensed consolidated interim financial statements of The York
Timber Organisation Limited ("the Group") have been prepared in accordance with
International Financial Reporting Standards and presented in accordance with
International Accounting Standard ("IAS") 34: Interim Financial Reporting. The
condensed interim financial results do not include all of the information
required for full annual financial statements, and should be read in conjunction
with the most recent consolidated financial statements of the Group as at and
for the year ended 30 June 2008.
(b) Basic and headline earnings per share
Basic and headline earnings per share are calculated by dividing the earnings
attributable to ordinary shareholders for the period of R21,5 million (December
2007: R122.8 million) by the weighted average of 78 380 000 ordinary shares in
issue.
(December 2007: 70 629 126 shares).
(c) Fully diluted headline earnings per ordinary share
The calculation of fully diluted headline earnings per ordinary share is based
on headline earnings attributable to ordinary shareholders of R21,5 million
(December 2007: R124.6 million) and the weighted average of 81 250 529 fully
diluted ordinary shares (December 2007: 73 499 655).
(e) Review by external auditors
The unaudited condensed consolidated interim financial results have not been
audited or reviewed.
(f) Significant accounting policies
Except for the adoption of IAS 39: Financial Instruments (Hedge Accounting) the
accounting policies applied by the Group in these condensed consolidated
interim financial results are the same as those applied by the Group in the
most recent annual financial statements as at and for the year ended 30 June
2008.
(g) Year-end change
In 2007 the Group`s year-end was changed from December to June. The current
results are based on a 6 month period. The comparable figures previously
reported are for a 12 month period. To compare like with like, pro forma
figures were also prepared for the 6 months ended 31 December 2007.
Commentary
INTRODUCTION
Comparisons in the commentary below are made with the pro forma corresponding
six month period ended 31 December 2007 (derived by subtracting the figures
disclosed for the six months to June 2007 from the 12 months to 31 December
2007) in order to ensure that similar periods are compared.
COMPANY DESCRIPTION
The York Timber Organisation Limited ("York") or ("the Group "), which is head
quartered in Sabie, Mpumalanga, is South Africa`s largest vertically
integrated solid wood products group, growing pine and eucalyptus on 61 000
hectares , and converting logs to sawn timber through seven sawmills and a
plywood plant to serve a range of building , construction, infrastructure,
furniture and packaging markets.
OVERVIEW
Demand for sawn timber decreased during the latter half of 2008.
The Institute of Timber Construction statistics show an 17% decline in timber
utilisation in plated roof trusses in 2008, mainly attributable to the decrease
in domestic housing construction. Production capacity in the industry is
currently declining as less efficient sawmills close and remaining sawmills
decrease production.
The market for Plywood remained strong as a result of the substantial volumes
of timber consumed in large, mainly government-funded, infrastructure projects.
The negative market impacted York`s operations and resulted in a decrease in
turnover, gross profit and cashflow. Log inventories increased as a result of
the salvage operations of fire damaged logs from the 2007 and 2008 fires , the
slowdown in demand and lower production at the Company `s sawmills.
FINANCIAL REVIEW
Revenue for the period under review decreased by 3,3% to R660 million. Gross
profit was down by 16.9% as a result of margin pressure caused by rising input
and raw material costs that could not be passed on to York`s customers as a
result of current market conditions.
Operating profit increased by 9,5% from R97,4 million to R106,6 million.
Included in operating profit for the current period is the outcome of the
insurance settlement pertaining to the 2007 fires. Of this amount R27,8 million
is in respect of business interruption profits recouped from insurers and R50,2
million is in respect of once-off insurance amounts received for capital
expenditure for the Driekop sawmill rebuild.
Headline earnings per share ("HEPS") was 27,4 cents , down by 84,2% on
the comparable period. After taking into account the fully convertible
preference shares issued in terms of the BEE transaction concluded in February
2007, fully diluted HEPS decreased by 84,4% to 26,5 cents. The major reason for
the decline in HEPS was a materially reduced fair value adjustment of R5,4
million (2007: R239,9 million) to the biological assets when compared to the
previous period, because no log price increases were effected during the period
under review.
Inventory values increased by 54.5%, mainly due to log salvage operations
necessitated by the 2007 and 2008 forest fires.
Receivables and other debtors decreased by 15,8%, mainly due to the reduced
turnover, whilst debtors` days showed a marginal weakening.
INSURANCE CLAIM SETTLED
The insurance claim arising from the 2007 fire at the Group`s Driekop
sawmill was settled and the underwriters have undertaken to pay the final
outstanding amount of R64 million in March 2009. The proceeds from the R190
million claim were utilised to rebuild the Driekop sawmill and compensate for
business interruption over a period of 19 months.
OPERATIONAL REVIEW
Early in the period several projects aimed at enhancing York`s long-term
sustainability were executed. Capex of R12 million was incurred to improve
operational efficiencies and strengthen fire fighting capabilities.
An amount of R9 million was invested replanting 3 080 hectares of timber
damaged in plantation fires in order to facilitate commercial rehabilitation
over the shortest space of time and restore normality to York`s plantations and
ensure its sustainability.
Towards the end of 2008, trading conditions deteriorated resulting in most
capex projects being put on hold, whilst replanting of the remainder of the
burnt areas was slowed. Management has implemented a stringent cost control
programme, improving internal efficiencies , increasing sales volumes and
carefully monitoring debtors.
Management continues to focus on unlocking synergy benefits and improving
efficiencies throughout the Group. Rationalisation of marginal sawmills is
under consideration in order to reduce sawn timber output to 80% of capacity as
a result of reduced market demand for timber products. The decrease in
sawmilling volumes will result in an improved ratio of own timber processed to
bought out timber and is positive for margins and cash flows.
A R9 million upgrade of the Sabie sawmill was carried out between September and
December 2008. The upgrade has resulted in labour savings, an improved product
mix and higher recovery rates. Production at the sawmill, which was disrupted
throughout the period of the upgrade, was restored to normal levels in January
2009. The lower production volumes during the upgrade helped to avoid a
build-up of finished goods stocks as a result of the weak market.
The Driekop sawmill isbeing rebuilt at an estimated cost of R120 million and
will commence production in April 2009, when the Driekop auxiliary and
temporary sawmills will be closed to avoid placing additional production on the
market. The new Driekop sawmill is being rebuilt to emulate the models of
York`s successful Nicholson & Mullen and Jessievale sawmills and an improvement
in margins is expected as the sawmill increases production output.
PLANTATION FIRES
For a second successive year, widespread fires damaged major areas of
plantations throughout South Africa. Damage to York`s plantations (2 000
hectares) was considerably lower than the damage suffered in 2007, and the 2008
losses were covered by insurance.
The total industry volume damaged in the 2008 plantation fires in South Africa
exceeded 40 000 hectares compared to 84 000 hectares in 2007, making 2008 the
second-worst fire year in the history of South African forestry. Once the
surplus of logs arising from the accelerated harvesting and salvage operations
has been depleted, it is forecasted that industry log availability will
deconstrain for at least the next 25 years.
PROSPECTS
Whilst adverse trading conditions are expected to continue throughout 2009,
York`s cash flow is expected to improve as the excessive fire salvage log
inventories are reduced. The positive impact of the rebuilt Driekop sawmill
will contribute to improved margins later in 2009, supported by efficiency
gains at York`s ongoing sawmilling operations , the possible cost savings at
marginal sawmills and an improved ratio of own timber processed. In addition,
cost control measures implemented in 2008 have begun delivering savings in the
current period.
For and on behalf of the board
Lance Cooper John Lehman
Chief Executive Officer Chief Financial Officer
4 March 2009
Executive Directors : Lance Cooper (CEO) & Gay Mokoena
Non-Executive Directors : Jim Myers (Chairman, USA), Andrew Bonamour,
Paul Botha, Dick Claunch, Shakeel Meer, Tlhopheho Modise, Simon Murray,
Pieter Odendaal, Grathel Motau.
Company Secretary : Francois Dekker
Registered Office: York Corporate Offices , 3 Main Road, Sabie, 1260.
Tel 013 764 9200 Fax 013 764 3245. PO Box 1191, Sabie, 1260
Transfer Secretaries : Computershare Investor Services (Proprietary)
Limited, 70 Marshall Street, Johannesburg 2000. PO Box 61051, Marshalltown 2107
www.york.co.za
Date: 04/03/2009 12:00:02 Supplied by www.sharenet.co.za
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