To view the PDF file, sign up for a MySharenet subscription.

YORK TIMBER HOLDINGS LIMITED - Audited Summarised Consolidated Financial Results For The Year Ended 30 June 2013

Release Date: 30/09/2013 07:05
Code(s): YRK     PDF:  
Wrap Text
Audited Summarised Consolidated Financial Results For The Year Ended 30 June 2013

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

Audited summarised consolidated financial results
for the year ended 30 June 2013
 

Highlights
- Cash generated from operations of R106 million 
  (2012: R197 million) impacted by external log purchases
- Investment of R45 million in processing technology to improve 
  efficiencies (2012: R22 million)
- Revenue up 2%, driven by higher selling prices for lumber and 
  plywood
- Processing plant revenue up R47 million achieving targeted results 
  with a R30 million increase in operating segment profit
- Cost of debt down R25 million
- Debt to equity ratio low at 16%
- Biological asset value increased by R31 million
- Underlying TNAV up 5% to 692 cents per share

Summarised consolidated statement of financial position
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Assets
Non-current assets
Biological asset (note 5)          1 827 525         1 782 061
Investment property                   22 966            26 088
Property, plant and equipment        429 994           404 609
Goodwill                             565 442           565 442
Intangible assets                      2 257             3 205
Other financial assets                29 969             1 311
Total non-current assets           2 878 153         2 782 716
Current assets
Biological asset (note 5)            273 345           288 161
Inventories                          190 960           151 322
Trade and other receivables          157 306           137 080
Cash and cash equivalents            158 694           144 570
Total current assets                 780 305           721 133
Total assets                       3 658 458         3 503 849
Equity and liabilities
Equity
Share capital                         16 562            16 562
Share premium                      1 505 352         1 505 352
Reserves                                 569               408
Retained income                      754 862           647 998
Total equity                       2 277 345         2 170 320
Liabilities
Non-current liabilities
Cash settled share based payments     18 874            16 054
Deferred tax                         550 507           519 183
Loans and borrowings                 559 398           529 550
Provisions                            18 927            46 575
Retirement benefit obligations        23 073            22 179
Total non-current liabilities      1 170 779         1 133 541
Current liabilities
Current tax payable                        2                 7
Loans and borrowings                  37 775            28 850
Operating lease liability                164                 -
Cash settled share-based payments      4 573             2 100
Trade and other payables             167 820           169 031
Total current liabilities            210 334           199 988
Total liabilities                  1 381 113         1 333 529
Total equity and liabilities       3 658 458         3 503 849

Summarised consolidated statement of comprehensive income
                                  Year ended        Year ended
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Revenue                            1 131 994         1 112 843
Cost of sales                       (721 696)         (691 324)
Gross profit                         410 298           421 519
Other operating income                38 787            28 412
Selling, general and 
administration expenses             (287 720)         (283 863)
Operating profit                     161 365           166 068
Fair value adjustments                25 230           130 843
Profit before finance costs          186 595           296 911
Investment income                      6 239             6 484
Finance costs excluding hedge
interest expense                     (54 672)          (79 356)
Hedge interest expense (paid)                          (1 997)
Hedge interest expense 
(ineffective portion)                                  (5 955)
Profit before taxation               138 162           216 087
Taxation                             (31 298)          (78 269)
Profit for the period                106 864           137 818
Other comprehensive income/(loss):
Available-for-sale financial 
assets adjustments                       205               308
Effects of cash flow hedges                             8 290
Taxation related to components of
other comprehensive income               (44)           (2 364)
Other comprehensive income for the
period net of taxation                   161             6 234
Total comprehensive income           107 025           144 052
Earnings per share (cents) 
(note 7)                                  32                42
Headline earnings per share (cents) 
(note 8)                                  33                42

Summarised consolidated statement of cash flows
                                  Year ended        Year ended
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Cash generated from operations       106 486           197 088
Investment income                      6 239             6 484
Finance costs                        (54 672)          (66 783)
Taxation paid                             (5)            9 260
Net cash from operating 
activities                            58 048           146 049
Cash flows from investing 
activities 
Purchase of property, plant 
and equipment                        (51 958)          (36 340)
Proceeds from disposal of 
property, plant and equipment             83               376
Purchase of intangible assets            (67)             (937)
Purchase of financial assets         (28 453)                -
Purchase of biological assets         (2 264)                -
Purchase of investment property          (38)                -
Net cash from investing 
activities                           (82 697)          (36 901)
Cash flows from financing 
activities
Net movement in loans and 
borrowings                            38 773           (68 062)
Net cash from financing 
activities                            38 773           (68 062)
Total cash movement for the 
period                                14 124            41 086
Cash at beginning of period          144 570           103 484
Cash at end of period                158 694           144 570



 
Summarised 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 30 June 2013
(audited)                  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                  106 864        106 864
Other comprehensive income
Change in fair value of 
available-for-sale financial
assets, net of tax           161                          161
Total other comprehensive 
income                       161              -            161
Total comprehensive income
for the period and total 
transactions with owners     161        106 864        107 025
Balance at 30 June 2013 
(audited)                    569        754 862      2 277 345

Notes to the summarised consolidated financial statements
1.    Basis of preparation
These summarised consolidated financial statements have been prepared 
in accordance with the JSE Listings Requirements, the Companies Act, 
2008 and the Companies Regulations, 2012. The Group has applied the 
recognition and measurement requirements of International Financial 
Reporting Standards (IFRS) and the SAICA Financial Reporting Guides 
as issued by the Accounting Practices Committee and the Financial 
Reporting Pronouncements as issued by Financial Reporting Standards 
Council 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 S Pretorius CA (SA), the Acting Chief Financial 
Officer.  The directors take responsibility for the preparation of 
the summarised consolidated financial statements and that the 
financial information is correctly extracted from the underlying 
financial statements.
These summarised 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 2013 which are available on the 
Companys website, www.york.co.za or at the companys registered 
office.
The auditors, KPMG Inc., have issued their opinion on the Group's 
financial statements for the year ended 30 June 2013.  The audit was 
conducted in accordance with International Standards on Auditing.  
They have issued an unmodified audit opinion.  The auditors report 
does not necessarily report on all of the information contained in 
this announcement / financial results. Shareholders are therefore 
advised that in order to obtain a full understanding of the nature of 
the auditors engagement they should obtain a copy of the auditors 
report together with the accompanying financial information from the 
issuers registered office.  These summarised consolidated financial 
statements have been extracted from audited information but are not 
audited.  These summarised consolidated financial results have been 
prepared on the going concern basis and were approved by the Board of 
Directors on 19 September 2013.
There has 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
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Authorised capital commitments:
Contracted, but not provided          11 852             4 117
Not contracted                        25 098             5 798
Capital expenditure                   51 958            36 340
Depreciation of property, 
plant and equipment                   26 972            35 387
Amortisation of intangible assets      1 015             1 007
Impairment of trade receivables        1 189               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 First Rand Bank Limited. Group companies
   have provided cross suretyships limited to
   R5 million in favour of First Rand 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 to or disclosure 
   in these results.
-  No movement occurred in the number of shares issued during the 
   period under review.

3.  Comparative figures
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         
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Revenue: external sales            1 090 205         1 042 790
Revenue: inter-segment sales                                
Total revenue                      1 090 205         1 042 790
Depreciation and amortisation        (22 286)          (27 271)
Reportable segment profit*            87 990            57 961
Capital expenditure                   44 601            21 959 

                                             Forestry         
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Revenue: external sales               41 405            69 436
Revenue: inter-segment sales         522 944           491 494
Total revenue                        564 349           560 930
Depreciation and amortisation         (3 502)           (4 835)
Reportable segment profit*            97 129           136 402
Capital expenditure                    3 889             1 015

                                             Total         
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Revenue: external sales            1 131 610         1 112 226
Revenue: inter-segment sales         522 944           491 494
Total revenue                      1 654 554         1 603 720
Depreciation and amortisation        (25 788)          (32 106)
Reportable segment profit*           185 119           194 363
Capital expenditure                   48 490            22 974

*Being the earnings before interest, taxation, depreciation & 
amortisation (EBITDA)

4.  Operating segments (continued)
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Reconciliation of reportable 
segment profit or loss
Total EBITDA for reportable 
segments                             185 119           194 363
Depreciation, amortisation and 
impairment                           (25 788)          (28 658)
Unallocated amounts                    2 034               363
Operating profit                     161 365           166 068

5.  Biological assets                                                 
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000               
Reconciliation of biological 
assets
Opening balance                    2 070 222         1 936 398
Fair value adjustment:
Increase due to growth and 
enumerations                         384 403           453 552
Decrease due to harvesting          (311 580)         (322 318)
Adjustment to standing timber 
values to reflect fair value at 
period end                           (44 439)            2 590
Purchased plantations                  2 264                 -
Closing balance                    2 100 870         2 070 222
Classified as non-current assets   1 827 525         1 782 061
Classified as current assets *       273 345           288 161

                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
Key assumptions used in the 
discounted cash flow valuation
Risk free rate 
(Jun 2013: R186 bond, 
Jun 2012: R186 bond)                   7,89%              7,95%
Beta factor                            1.04               0,99
Cost of equity                        14,61%              14,4%
Pre-tax cost of debt                    9,5%               9,5%
Debt: equity ratio                     35:65              35:65
After-tax weighted average 
cost of capital                        11,89%             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 by 8% per year over the next two years 
   and at 6%* (2012: 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%* 
   (2012: 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:
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
Earnings attributable to 
ordinary shareholders (R000)        106 864           137 818
Weighted average number of 
ordinary shares in issue (R000)     331 241           331 241
Earnings per share (cents)                32                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:
                                 30 Jun 2013       30 Jun 2012     
                                     Audited           Audited
                                       R000             R000
Reconciliation of earnings to 
headline earnings
Earnings attributable to 
ordinary shareholders                106 864           137 818
Loss on sale of assets and 
liabilities (net of tax)                 157               366
Fair value adjustment on 
investment property (net of tax)       2 565             2 424
Reversal of impairment of plant, 
equipment and vehicles (net of tax)     (498)           (2 876)
Headline earnings for the period     109 088           137 732
Weighted average number of 
ordinary shares in issue (000)      331 241           331 241
Headline earnings per share (cents)       33                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 30 January 2013. Mr Sean Pretorius assumed the role of 
acting Chief Financial Officer and a suitable successor has been 
recruited. Mr Pieter van Buuren has been appointed as Executive 
Director and Chief Financial Officer with effect from 1 October 2013.
With effect from 6 March 2013, Messrs Dinga Mncube and Thabo 
Mokgatlha were appointed as independent non-executive directors of 
the Company.

COMMENTARY
Group performance and financial review
The directors are pleased to present a solid set of results in tough 
market conditions. Despite disproportionate escalations in labour 
and electricity costs, York achieved a lower than inflation increase 
in its cost of production through efficiency improvements. The 
EBITDA margin remained intact at 17%. Our performance this year 
reflects strategic capital investments that form the foundation of 
the unfolding growth strategy of the Group.

Overall market confidence was volatile with some erratic trends in 
purchasing patterns. York's strategy was to maintain prices and to 
hold higher levels of stock where appropriate.  An average price 
increase of 5% for lumber was achieved.  Strong growth in volume and 
prices of plywood was experienced. The Processing division's profit 
increased by 52% on the prior year.

Processing plants
The York philosophy of cost optimisation resulted in processing plant 
efficiencies improving during the year. The unit cost of production 
increased by 5% year-on-year, despite above inflation increases in
labour, electricity and insurance costs. Cost structures at the 
processing plants have been well managed and costs were contained 
during the year.  Combined lumber and plywood volumes produced 
increased by 3% against an increase in log intake of only 1%, compared
to the prior year. Our continued investment in technology 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 and is well on track to obtaining all other necessary 
approvals. York will continue to progress its strategy of complete 
fibre utilisation.

Forestry division
York continues to procure third party raw material so as to conserve 
our own plantations over the medium term to achieve sustainable 
maturity. In line with this strategy, the Forestry division produced 
16% lower volumes than the prior year with external purchases being
25% higher. This decision significantly impacts the nature of the 
Groups earnings and resulted in a ca R24 million increase in costs 
compared to the prior year. The forecast volume of trees used in the 
discounted cash flow valuation has increased by 12%, reflecting an 
increase in the long term value of the biological asset. Had York 
supplied all of its own raw material needs, the resultant EBITDA 
would have been in the order of R114 million, an increase of 60,7%.

Biological asset
The biological asset is valued on a discounted cash flow (DCF) basis 
using the key assumptions described in note 5 to the audited 
summarised consolidated financial statements. 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 by 291 hectares, partially reducing the impact of the 
growth that resulted from lower harvesting during the period, a net 
increase of R73 million. As the TUP areas are replanted to normalised 
levels the value of the plantation asset will increase.

York continues to invest in research on genetic improvements, site 
species matching and silviculture practices to improve the future 
yields from its plantations. Initial trials indicate that the future 
yield improvements will be significant.

Cost of debt
The refinancing of the Group's primary debt resulted in a decrease in 
finance costs for the year.   The loans and borrowings balance 
increased during the year as a result of the utilisation of the Land 
Bank facility for the purchase of the businesses of Thorpe Timber 
Company and Timber Preservation Services from Iliad Africa Holdings 
Limited. The money was deposited into an attorney trust account 
pending approval by the Commissioner of the Competition Commission.  
The unconditional approval was granted on 23 July 2013 and York took 
effective control on 1 August 2013.

Adjusted tangible net asset value
Adjusted tangible net asset value (TNAV) improved by 5% to 692 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
Cash generated from operations was impacted by the Group's continued 
strategy to procure third party saw logs while preserving its own 
plantations and increased stock at year-end in preparation for higher 
seasonal sales during the first two quarters. The net cash flow from 
operations was R106 million.

Outlook
York remains well positioned to advance its strong market position.  
The acquisition subsequent to year end of the businesses of Thorpe 
Timber Company in Roodekop and Timber Preservation Services in Epping 
will improve our access to the market through the wholesale channels. 
This will improve York's market footprint nationally and lead to 
growth and diversification of revenue; the wholesale division has 
expanded the Group's value adding capacity thereby diversifying our 
product offering to the market.

The efficiency and processing improvements resulting from the Group's 
investment in technology will improve operating margins at York's 
processing plants and further increase York's cost competitive 
advantage.

The lead indicators of the primary drivers of York's market suggest 
growth going forward. The South African market is underpinned by a 
need for residential building and infrastructure development which 
will drive a continued demand for timber related products.

The Group is actively pursuing both internal and external growth 
possibilities with a strong focus on fibre utilisation and processing 
efficiencies, this strategy is aimed at unlocking York's full 
potential and significantly improving both earnings and cash 
generating ability.


Executive director: Pieter van Zyl (CEO)
Non-executive directors: 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

Acting Chief Financial Officer: Sean Pretorius

Sponsor: One Capital

Transfer secretaries: Computershare Investor Services (Pty) Ltd
Date: 30/09/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story