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Unaudited condensed consolidated interim financial results for the six months ended 31 December 2012
York Timber Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1916/004890/06
JSE share code:YRK
ISIN:ZAE000133450
York,the Company or the Group
www.york.co.za
Executive directors: Pieter van Zyl (CEO)
Non-executive director: Dr Jim Myers* (Non-executive Chairman, USA),
Paul Botha, Dr Azar Jammine*, Shakeel Meer, Dinga Mncube*,
Thabo Mokgatlha*, Gavin Tipper* (*independent)
Registered office: York Corporate Office: 3 Main Road, Sabie,
Mpumalanga. Postal address: PO Box 1191, Sabie 1260
Auditors: KPMG Inc.
Company secretary: Han-hsiu Hsieh
Sponsor: One Capital
Transfer secretaries: Computershare Investor Services Proprietary
Limited
12 March 2013
Unaudited condensed consolidated interim financial results
for the six months ended 31 December 2012
Highlights
Cash generated up R8,4 million to R10,1 million
Revenue up 5%, driven by higher selling prices for lumber and
plywood
Debt to equity ratio improved to 25% from 28%
Cost of debt down 27%
Efficiency and cost optimisation in the processing plants achieving
targeted results with a R31,6 million increase in operating segment
profit
Biological asset value increased by R18,9 million
Underlying TNAV up 8% to 671 cents per share
Commentary
Group performance and financial review
The reporting period contained numerous external challenges,
including a softening market, industrial action impacting both log
supply and product distribution and various natural disasters.
Despite this earnings for the year remained consistent with the
comparable prior period. Improved selling prices resulted in a 5%
increase in revenue and a 4% increase in gross profit. Payroll and
utility costs increased at above inflationary rates as was expected.
Processing plants
Processing plant efficiencies improved during the period and the
combined lumber and plywood volumes produced increased by 6% against
an increase in log intake of only 3% compared to the prior period.
Planned capital investment should further improve
processing margins and the Groups cash generating ability. York has
received Development Facilitation Act (DFA) approval from the
Mpumalanga DFA Tribunal for the intended developments at its Sabie
site which are aimed at improved fibre utilisation, increased
efficiencies and product diversification.
The capital investment at Yorks plywood plant has improved
efficiencies making the plant more cost competitive and improving its
profitability.
Purchase of saw logs
York remains of the opinion that future log demand will exceed
supply in the Southern African market with consequential upward
pressure on saw log prices over the medium to long term. Given the
above, York strategically manages its own plantation growth and
harvesting versus the purchase of third party logs to ensure the
optimal return for the group. For the comparable period York
purchased 45% more logs from external sources. Yorks current
strategy is to acquire ca. 30% of its total log requirements
externally.
Purchasing saw logs externally has the following impact on Yorks
results:
Cash generated from operations is reduced compared to only
processing logs from own plantations.
The operating margin from the forestry division is higher than that
of processing. External log purchases impact the forestry
margin negatively and need to be offset by improved efficiencies in
the processing division or lumber selling prices.
The potential incremental operating profit for the period under
review, should York have been able to source its full log
requirement from own plantations, would have been ca. R22 million
higher.
The Groups earnings are positively impacted by an R18,9 million
increase in biological asset fair value adjustment; this is a
direct consequence of the reduced harvesting of Yorks own
plantations. This increase offset the lost operating profit as
mentioned above.
As the York plantations mature a reduced reliance on third party logs
can be expected.
Biological asset
The biological asset is valued on a discounted cash flow (DCF) basis
using the key assumptions described in note 5 to the interim
financial results. Any changes to the assumptions are carefully
validated with reference to external data.
As a consequence of the decision to purchase third party logs, the
net volume of timber in the Groups plantations should increase.
During the reporting period York suffered fire damage to a limited
area of its plantations and as a result the temporary unplanted (TUP)
area increased, offsetting the growth that resulted from lower
harvesting during the period. As the TUP areas are replanted to
normalised levels the future plantation asset growth, as taken into
account in the DCF model, will increase the value of the asset.
Cost of debt
Interest bearing debt decreased by R34,4 million to R545 million
at December 2012. The refinancing of the Groups debt in the
previous period resulted in a R10,1 million (excluding hedge interest
expense) decrease in comparable financing costs.
The average maturity period of the Groups committed debt
facilities after the Land Bank refinance is nine years with
unutilised committed borrowing facilities in excess of R210 million.
Tangible net asset value
Adjusted tangible net asset value (TNAV) improved by 8% to 671 cents
per share over the period. TNAV represents the net asset value of
York after the removal of the goodwill and deferred
taxation associated with the biological asset cash generating unit.
In considering the Groups net asset value cognisance should be taken
of the fact that while the components of the deferred tax
related to the plantations originate and reverse through the Groups
operations, the aggregate balance will only reverse: should the
plantation value decrease, should harvested areas not be
re-established or should the plantations be disposed of.
Cash flow
Net cash generated from operations amounted to R44,1 million.
Despite significant expenditure on the purchase of logs from third
parties during this period, cash generated for the period of R10,1
million was up R8,4 million on the comparable prior year period.
Outlook
Despite significant cost pressures from escalations in labour, fuel
and electricity costs, York remains poised to advance its strong
market position. Alternative marketing channels are being
explored and our Southern African growth strategy is well underway.
York has been investing in appropriate technology to further
strengthen its cost competitive advantage. The Sabie integrated
site development will reinforce Yorks position as the cost leader
in the Southern African market.
The fundamental market drivers supporting demand for Yorks
product offering remain positive. Market confidence in the
residential building and construction sectors is at a low level
and once this improves, strong growth is anticipated. York is well
placed to take advantage of this growth.
Consolidated statement of financial position
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
ASSETS
Non-current assets
Biological asset
(note 5) 1 795 463 1 650 241 1 782 061
Investment property 26 150 24 940 26 088
Property, plant and
equipment 410 282 417 681 404 609
Goodwill 565 442 565 442 565 442
Intangible assets 1 714 2 847 3 205
Other financial assets 1 421 1 057 1 311
Total non-current
assets 2 800 472 2 662 208 2 782 716
Current assets
Biological asset
(note 5) 293 612 312 931 288 161
Inventories 162 652 121 664 151 322
Trade and other
receivables 154 171 151 227 137 080
Cash and cash
equivalents 154 670 105 211 144 570
Current tax receivable 11 833
Total current assets 765 105 702 866 721 133
Total assets 3 565 577 3 365 074 3 503 849
Equity and liabilities
Equity
Share capital 16 562 16 562 16 562
Share premium 1 505 352 1 505 352 1 505 352
Reserves 496 189 408
Retained income 691 535 553 855 647 998
Total equity 2 213 945 2 075 958 2 170 320
Liabilities
Non-current liabilities
Cash settled share-based
payments 14 399 10 411 16 054
Deferred tax 536 778 450 583 519 183
Loans and borrowings 507 870 515 791 529 550
Provisions 46 575 54 643 46 575
Retirement benefit
obligations 22 943 23 478 22 179
Total non-current
liabilities 1 128 565 1 054 906 1 133 541
Current liabilities
Current tax payable 2 7
Loans and borrowings 37 088 63 589 28 850
Cash settled share-based
payments 4 328 2 100
Trade and other payables 181 649 170 621 169 031
Total current liabilities 223 067 234 210 199 988
Total liabilities 1 351 632 1 289 116 1 333 529
Total equity and
liabilities 3 565 577 3 365 074 3 503 849
Consolidated statement of comprehensive income
Six months Six months Year ended
ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
Revenue 590 703 564 799 1 112 843
Cost of sales (379 629) (361 786) (691 324)
Gross profit 211 074 203 013 421 519
Other operating income 5 641 2 524 28 412
Selling, general and
administration expenses (150 014) (138 198) (283 863)
Operating profit 66 701 67 339 166 068
Fair value adjustments 18 879 26 774 130 843
Profit before finance
costs 85 536 94 113 296 911
Investment income 2 428 4 211 6 484
Finance costs excluding
hedge interest expense (26 878) (37 023) (79 356)
Hedge interest expense
(paid) (1 997) (1 997)
Hedge interest expense
(ineffective portion) (5 955) (5 955)
Profit before taxation 61 130 53 349 216 087
Taxation (17 593) (9 674) (78 269)
Profit for the period 43 537 43 675 137 818
Other comprehensive
income/(loss):
Available-for-sale
financial assets
adjustments 110 53 308
Effects of cash flow
hedges 8 290 8 290
Taxation related to
components of other
comprehensive income (22) (2 328) (2 364)
Other comprehensive
income for the period
net of taxation 88 6 015 6 234
Total comprehensive income 43 625 49 690 144 052
Basic earnings per share
(cents) (note 7) 13 13 42
Headline earnings per share
(cents) (note 8) 13 13 42
Consolidated statement of cash flows
Six months Six months Year ended
ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
Cash flows from
operating activities
Cash receipts from
customers 573 612 691 030 1 311 067
Cash paid to suppliers
and employees (505 073) (591 431) (1 113 979)
Cash generated from
operations 68 539 99 599 197 088
Investment income 2 428 1 641 6 484
Finance costs (26 878) (36 856) (66 783)
Taxation paid (5) 9 260
Net cash from operating
activities 44 084 64 384 146 049
Cash flows from
investing activities
Purchases of property,
plant and equipment (20 579) (25 755) (36 340)
Purchases of intangible
assets (937)
Purchases of investment
property (36)
Proceeds from disposal
of property, plant and
equipment 73 107 376
Net cash from investing
activities (20 542) (25 648) (36 901)
Cash flows from
financing activities
Net movement in loans and
borrowings (13 442) (37 009) (68 062)
Net cash from financing
activities (13 442) (37 009) (68 062)
Total cash movement for
the period 10 100 1 727 41 086
Cash at beginning of
period 144 570 103 484 103 484
Cash at end of period 154 670 105 211 144 570
Consolidated statement of changes in equity
Share Share Hedging
capital premium reserve
R000 R000 R000
Balance at 1 July 2011
(audited) 16 562 1 505 352 (5 969)
Profit for the year
Other comprehensive income
Change in fair value of
cash flow hedge, net of tax 5 969
Change in fair value of
available-for-sale financial
assets, net of tax
Total other comprehensive
income 5 969
Total comprehensive income
for the year and total
transactions with owners 5 969
Balance at 30 June 2012
(audited) 16 562 1 505 352
Profit for the period
Other comprehensive income
Change in fair value of
available-for-sale financial
assets, net of tax
Total other comprehensive
income
Total comprehensive income
for the period and total
transactions with owners
Balance at 31 December 2012
(unaudited) 16 562 1 505 352
Available-
for-sale Retained Total
reserve income equity
R000 R000 R000
Balance at 1 July 2011
(audited) 143 510 180 2 026 268
Profit for the year 137 818 137 818
Other comprehensive income
Change in fair value of cash
flow hedge, net of tax 5 969
Change in fair value of
available-for-sale financial
assets, net of tax 265 265
Total other comprehensive
income 265 137 818 144 052
Total comprehensive income
for the year and total
transactions with owners 265 137 818 144 052
Balance at 30 June 2012
(audited) 408 647 998 2 170 320
Profit for the period 43 537 43 537
Other comprehensive income
Change in fair value of
available-for-sale financial
assets, net of tax 88 88
Total other comprehensive
income 88 88
Total comprehensive income
for the period and total
transactions with owners 88 43 537 43 625
Balance at 31 December 2012
(unaudited) 496 691 535 2 213 945
NOTES
1. Basis of preparation
These unaudited condensed consolidated financial statements have
been prepared in accordance with the JSE Listings Requirements, the
Companies Act of South Africa, 2008 (as amended) and the Companies
Regulations, 2011. The Group has applied the recognition and
measurement requirements of International Financial Reporting
Standards (IFRS) and the AC 500 standards as issued by the Accounting
Practices Board (APB) as well as the presentation and disclosure
requirements of International Accounting Standard (IAS)
34 Interim Financial Reporting. The financial results have been
compiled under the supervision of Sean Pretorius CA (SA), the Acting
Chief Financial Officer.
These condensed results do not include all the information
required for full annual financial statements, and should be read in
conjunction with the audited consolidated financial statements as at
and for the year ended 30 June 2012 which are available on the
Companys website, www.york.co.za or at the Companys registered
office.
The financial results have not been reviewed or audited. The
financial results, which have been prepared on the going concern
basis, were approved by the Board of Directors on 6 March 2013. There
have been no material changes in judgements or estimates relating to
amounts reported in prior reporting periods.
The Group financial results are presented in Rand, which is the
Companys functional currency. All financial information presented
has been rounded to the nearest thousand.
The significant accounting policies and methods of computation are
consistent in all material respects with those applied in the year
ended 30 June 2012.
2. Additional disclosure items
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
Authorised capital
commitments:
- Contracted, but not
provided 18 363 3 663 4 117
- Not contracted 5 082 7 094 5 798
Capital expenditure 20 615 25 755 37 277
Depreciation of property,
plant and equipment 15 726 12 418 35 387
Amortisation of intangible
assets 507 428 1 007
Impairment of trade
receivables 132
The Group did not have any litigation settlements during the
reporting period.
The Group participates in a pooled banking facility of R85 million
granted by FirstRand Bank Limited. Group companies have provided
cross suretyship in favour of FirstRand Bank Limited in respect of
their obligations to the bank. The Group did not have any other
contingent liabilities at the reporting date.
The Group did not have any covenant defaults or breaches of its
loan agreements during the period under review or at the reporting
date.
No events have occurred between the reporting date and the date of
release of these results which require adjustment of or disclosure in
these results.
No movement occurred in the number of shares issued during the
period under review.
3. Comparative figures
The unaudited condensed consolidated interim financial statements are
for the six months ended 31 December 2012. The comparative unaudited
condensed consolidated interim financial statements for the six
months ended 31 December 2011, and the annual financial statements
for the year ended 30 June 2012, are presented as published and have
not been restated.
4. Operating segments
The Group has two reportable segments which are the Groups strategic
divisions. The Group operates in one geographic segment, countries
within the Southern Africa Development Community (SADC).
The segment analysis is as follows:
Timber products
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
Revenue: external sales 568 006 523 970 1 042 790
Revenue: inter-segment
sales
Total revenue 568 006 523 970 1 142 790
Depreciation and
amortisation (13 372) (8 811) (27 271)
Reportable segment profit* 41 018 9 420 57 961
Capital expenditure 18 919 23 036 21 959
Forestry
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
Revenue: external sales 22 372 40 829 69 436
Revenue: inter-segment
sales 265 505 243 308 491 494
Total revenue 287 877 284 137 560 930
Depreciation and
amortisation (1 673) (2 358) (4 835)
Reportable segment profit* 45 730 72 872 136 402
Capital expenditure 77 795 1 015
Total
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
Revenue: external sales 590 378 564 799 1 112 226
Revenue: inter-segment
sales 265 505 243 308 491 494
Total revenue 855 883 808 107 1 603 720
Depreciation and
amortisation (15 054) (12 890) (32 106)
Reportable segment profit* 86 748 82 292 194 363
Capital expenditure 18 996 23 831 22 974
* Being the earnings before interest, taxation, depreciation and
amortisation (EBITDA)
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
Reconciliation of
reportable segment
profit or loss
Total EBITDA for
reportable
segments 86 748 82 292 194 363
Depreciation, amortisation
and impairment (16 233) (12 846) (28 658)
Unallocated amounts (3 814) (2 107) 363
Operating profit 66 701 67 339 166 068
5. Biological assets
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R000 R000 R000
Reconciliation of
biological assets
Opening balance 2 070 222 1 936 398 1 936 398
Fair value adjustment:
Increase due to growth
and enumerations 157 628 115 360 453 552
Decrease due to
harvesting (155 738) (159 328) (322 318)
Adjustment to standing
timber values to reflect
fair value at period end 16 963 70 742 2 590
Closing balance 2 089 075 1 963 172 2 070 222
Classified as non-current
assets 1 795 463 1 650 241 1 782 061
Classified as current
assets* 293 612 312 931 288 161
* Being the biological assets to be harvested and sold in the
12 months after the reporting date.
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
Key assumptions used in
the discounted cash
flow valuation
Risk free rate
(Jun/Dec 2012: R186 bond, 7,29% 7,89% 7,95%
Dec 2011: R207 bond)
Beta factor 1,02 0,94 0,99
Cost of equity 13,9% 14,1% 14,4%
Pre-tax cost of debt 9,5% 10,0% 9,5%
Debt: equity ratio 35:65 30:70 35:65
After-tax weighted average
cost of capital 11,43% 12,0% 11,75%
The additional key assumptions underlying the discounted cash flow
valuation have been updated as follows:
Volumes: Forecast volumes were updated at the reporting date
using a merchandising model.
Log prices: The price per cubic metre is based on current and
future expected market prices per log class. It was assumed that log
prices will increase at 6%* (2011: 6%) over the long term.
Operating costs: The costs are based on the unit costs of the
forest management activities required to enable the trees to reach
the age of felling. The costs include the current and future expected
costs of harvesting, maintenance and risk management, as well as an
appropriate amount of fixed overhead costs. A contributory asset
charge was introduced in the current period; this takes into account
the cost of property, plant and equipment utilised to generate cash
flows from the biological asset over the valuation period. The
operating costs exclude the transport costs necessary to get the
asset to market. These operating costs have been reviewed and updated
to current actual costs. A long-term inflation rate of 5,5%*
(2011: 5,5%) was used.
* Management believes that as a result of the anticipated shortage in
local log supply and forecast long-term demand, long-term revenue
inflation will be greater than cost inflation.
6. Related parties
The Groups related parties are its subsidiaries and key
management, including directors. No change in control occurred in the
Companys subsidiaries during the period. No businesses were acquired
or disposed of during the period.
7. Earnings per share
The calculation of basic earnings per share is based on:
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
Basic earnings
attributable to ordinary
shareholders (R000) 43 537 43 675 137 818
Weighted average number
of ordinary shares in
issue (R000) 331 241 331 241 331 241
Earnings per share
(cents) 13 13 42
No change occurred in the number of shares in issue and no
instruments had a dilutive effect.
8. Headline earnings per share
The calculation of headline earnings per share is based on:
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
R'000 R'000 R'000
Reconciliation of basic
earnings to headline
earnings
Basic earnings
attributable to
ordinary shareholders 43 537 43 675 137 818
Profit)/loss on sale
of assets and
liabilities (net of tax) (45) (153) 366
Loss on non-current assets
held for sale
Fair value adjustment on
investment property
(net of tax) 2 424
Reversal of impairment
of plant, equipment and
vehicles (net of tax) (2 876)
Headline earnings for the
period 43 492 43 522 137 732
Weighted average number
of ordinary shares in
issue (000) 331 241 331 241 331 241
Headline earnings per
share (cents) 13 13 42
9. Directorship and company secretary
Ms Han-hsiu Hsieh replaced Fusion Corporate Secretarial Services
Proprietary Limited as the company secretary with effect from
15 November 2012.
Mr Duncan Erskine resigned as Chief Financial Officer (CFO), with
effect from 31 January 2013. Mr Sean Pretorius is fulfilling the role
of CFO while the recruitment process for a permanent CFO is underway.
With effect from 6 March 2013, Messrs Dinga Mncube and
Thabo Mokgatlha were appointed as non-executive directors of the Company.
Date: 12/03/2013 08:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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