Wrap Text
Unaudited condensed consolidated interim financial results
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
Unaudited condensed consolidated interim financial results
For the six months ended 31 December 2013
Highlights
- Revenue up 14%, through the acquisition of the Roodekop and Epping
businesses that added remanufacturing and distribution capabilities
- EBITDA down by 33% due to reduced average selling prices
- Cash from operating activities up R7,1 million to R51,2 million
- Biological asset value increased by R9,7 million
- Underlying TNAV up 4% to 696 cents per share
- Debt to equity percentage remains at 25%
Consolidated statement of financial position
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Assets
Non-current assets
Biological asset (note 5) 1 816 337 1 795 463 1 827 525
Investment property 22 842 26 150 22 966
Property, plant and
equipment 449 261 410 282 429 994
Goodwill 565 442 565 442 565 442
Intangible assets 2 077 1 714 2 257
Deferred tax 9 126 5 143 7 127
Other financial assets 23 074 1 421 29 969
Total non-current assets 2 888 159 2 805 615 2 885 280
Current assets
Biological asset (note 5) 294 246 293 612 273 345
Inventories 188 058 162 652 190 960
Trade and other
receivables 153 657 154 171 157 306
Cash and cash equivalents 152 425 154 670 158 694
Total current assets 788 386 765 105 780 305
Total assets 3 676 545 3 570 720 3 665 585
Equity and liabilities
Equity
Share capital 16 562 16 562 16 562
Share premium 1 505 352 1 505 352 1 505 352
Reserves – 496 569
Retained income 768 519 691 535 754 862
Total equity 2 290 433 2 213 945 2 277 345
Liabilities
Non-current liabilities
Cash settled share-based
payments 12 472 14 399 18 874
Deferred tax 563 653 541 921 557 634
Loans and borrowings 542 615 507 870 559 398
Provisions 18 927 46 575 18 927
Retirement benefit
obligations 22 583 22 943 23 073
Total non-current
liabilities 1 160 250 1 133 708 1 177 906
Current liabilities
Current tax payable 2 2 2
Loans and borrowings 31 547 37 088 37 775
Cash settled share-based
payments 13 399 4 328 4 573
Operating lease liability 138 – 164
Trade and other payables 180 776 181 649 167 820
Total current liabilities 225 862 223 067 210 334
Total liabilities 1 386 112 1 356 775 1 388 238
Total equity and
liabilities 3 676 545 3 570 720 3 665 585
Consolidated statement of comprehensive income
Six months Six months Year ended
ended ended
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Revenue 671 934 590 703 1 131 994
Cost of sales (468 453) (379 629) (721 696)
Gross profit 203 481 211 074 410 298
Other operating income 8 306 5 641 38 787
Selling, general and
administration expenses (173 823) (150 014) (287 720)
Operating profit 37 964 66 701 161 365
Fair value adjustments 5 241 18 879 25 230
Profit before finance
costs 43 205 85 536 186 595
Investment income 2 646 2 428 6 239
Finance costs (28 212) (26 878) (54 672)
Profit before taxation 17 639 61 130 138 162
Taxation (3 982) (17 593) (31 298)
Profit for the period 13 657 43 537 106 864
Other comprehensive
income/(loss):
Available-for-sale financial
assets adjustments (569) 110 205
Taxation related to components
of other comprehensive income – (22) (44)
Other comprehensive
income for the period net
of taxation (569) 88 161
Total comprehensive
income 13 088 43 625 107 025
Basic earnings per share
(cents) (note 7) 4 13 32
Headline earnings per
share (cents) (note 8) 4 13 33
Consolidated statement of cash flows
Six months Six months Year ended
ended ended
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Cash flows from operating
activities
Cash receipts from
customers 675 583 573 612 1 152 220
Cash paid to suppliers (598 791) (505 073) (1 045 734)
and employees
Cash generated from
operations 76 792 68 539 106 486
Investment income 2 646 2 428 6 186
Finance costs (28 212) (26 878) (54 672)
Taxation paid – (5) (5)
Net cash from operating
activities 51 226 44 084 58 048
Cash flows from investing
activities
Purchases of property,
plant and equipment (36 419) (20 579) (51 958)
Proceeds from disposal of
property, plant and
equipment 1 73 83
Purchases of intangible
assets (43) – (67)
Purchase of biological
assets (4 349) – (2 264)
Purchases of investment
property – (36) (38)
Proceeds from disposal/
(purchase) of financial assets 6 326 – (28 453)
Net cash from investing
activities (34 484) (20 542) (82 697)
Cash flows from financing
activities
Net movement in loans and
borrowings (23 011) (13 442) 38 773
Net cash from financing
activities (23 011) (13 442) 38 773
Total cash movement for
the period (6 269) 10 100 14 124
Cash at the beginning of
the period 158 694 144 570 144 570
Cash at end of the period 152 425 154 670 158 694
Consolidated statement of changes in equity
Avail
able-
for
Share Share sale Retained Total
capital premium reserve income equity
R’000 R’000 R’000 R’000 R’000
Balance at
1 July 2012
(audited) 16 562 1 505 352 408 647 998 2 170 320
Profit for the
year – – – 106 864 106 864
Other compre-
hensive income
Change in fair
value of available
-for- sale
financial assets,
net of tax – – 161 – 161
Total other
comprehensive
income – – 161 106 864 107 025
Total
comprehensive – – 161 106 864 107 025
income for the
year and total
transactions with
owners
Balance at
30 June 2013
(audited) 16 562 1 505 352 569 754 862 2 277 345
Profit for the
period – – – 13 657 13 657
Other comprehensive
income
Change in fair
value of available
-for- sale financial
assets, net of tax – – (569) – (569)
Total other
comprehensive
income – – (569) – (569)
Total comprehensive
income for the period
and total transactions
with owners – – (569) 13 657 13 088
Balance at
31 December 2013
(unaudited) 16 562 1 505 352 – 768 519 2 290 433
Notes to the consolidated financial statements
1. Basis of preparation
These unaudited condensed consolidated interim 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 Pieter van Buuren CA
(SA), the 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 2013 which are available on the
Company’s website, www.york.co.za, or at the Company’s 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 10 March 2014.
There have been no material changes to judgements or estimates of
amounts reported in prior reporting periods.
The Group financial results are presented in Rand, which is the
Company’s 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 2013.
2. Additional disclosure items
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Authorised capital
commitments:
- Contracted, but not
provided 16 457 18 363 11 852
- Not contracted 3 611 5 082 25 098
Capital expenditure 28 317 20 615 36 445
Depreciation of property,
plant and equipment 17 054 15 726 26 977
Amortisation of
intangible assets 223 507 1 015
Impairment of trade
receivables 12 – 1 189
- 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 suretyships of R5 million 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 results are
for the six months ended 31 December 2013. The comparative unaudited
condensed consolidated interim financial results for the six months
ended 31 December 2012, and the annual financial statements for the
year ended 30 June 2013, are presented as published and have not been
restated.
4. Operating segments
The Group has two reportable segments which are the Group’s strategic
divisions. The Group operates in one geographic segment, namely
countries within the Southern Africa Development Community (SADC).
The segment analysis is as follows:
Timber products
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Revenue: external sales 651 055 568 006 1 090 205
Revenue: inter-segment
sales – – –
Total revenue 651 055 568 006 1 090 205
Depreciation and
amortisation (15 210) (13 372) (22 286)
Reportable segment
profit* 4 442 41 018 87 990
Fair value adjustment – – –
Capital expenditure 25 516 18 919 44 601
Forestry
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Revenue: external sales 20 527 22 372 41 405
Revenue: inter-segment
sales 285 193 265 505 522 944
Total revenue 305 720 287 877 564 349
Depreciation and
amortisation (1 711) (1 673) (3 502)
Reportable segment
profit* 49 171 45 730 97 129
Fair value adjustment 5 365 18 853 28 384
Capital expenditure 534 77 3 889
Total
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Revenue: external sales 671 582 590 378 1 131 610
Revenue: inter-segment
sales 285 193 265 505 522 944
Total revenue 956 775 855 883 1 654 554
Depreciation and
amortisation (16 921) (15 054) (25 788)
Reportable segment
profit* 53 613 86 748 185 119
Fair value adjustment 5 365 18 853 28 384
Capital expenditure 26 050 18 996 48 490
* Being the earnings before interest, taxation, depreciation,
amortisation, impairment and fair value adjustments (EBITDA)
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Reconciliation of reportable
segment profit or loss
Total EBITDA for reportable
segments 53 613 86 748 185 119
Depreciation, amortisation
and impairment (17 296) (16 233) (25 788)
Unallocated amounts 1 647 (3 814) 2 034
Operating profit 37 964 66 701 161 365
5. Biological assets
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Reconciliation of biological
assets
Opening balance 2 100 870 2 070 222 2 070 222
Fair value adjustment:
– Increase due to growth
and enumerations 154 896 157 628 384 403
– Decrease due to
harvesting (162 788) (155 738) (311 580)
– Adjustment to standing
timber values to reflect
fair value at period end 13 257 16 963 (44 439)
Purchased plantation 4 348 – 2 264
Closing balance 2 110 583 2 089 075 2 100 870
Classified as non-
current assets 1 816 337 1 795 463 1 827 525
Classified as current
assets* 294 246 293 612 273 345
* Being the biological assets to be harvested and sold in the
12 months after the reporting date.
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
Key assumptions used in
the discounted cash
flow valuation
Risk free rate (R186 bond) 8,23% 7,29% 7,89%
Beta factor 1,09 1,02 1,04
Cost of equity 15,23% 13,9% 14,61%
Pre-tax cost of debt 9,5% 9,5% 9,5%
Debt: equity ratio 35:65 35:65 35:65
After-tax weighted
average cost of capital 12,29% 11,43% 11,89%
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 7% and 7% over the next two years
respectively and at 6% over the long term* (2012: 6,5% in the
first year and 6% over the long term); (2013: 8% over the next two
years and 6% over the long term).
- Operating costs: The costs comprise of the forestry 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 takes into account the cost of fixed assets 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 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 Group’s related parties are its subsidiaries and key management,
including directors. No change in control occurred in the Company’s
subsidiaries from the prior period. No businesses were disposed of
during the period. During the period warehousing businesses based in
Roodekop and Epping were acquired from Illiad Africa Limited. This
integration was effective on 1 August 2013.
7. Earnings per share
The calculation of basic earnings per share is based on:
31 Dec 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
Basic earnings
attributable to ordinary
shareholders (R’000) 13 657 43 537 106 864
Weighted average number
of ordinary shares in
issue (R’000) 331 241 331 241 331 241
Earnings per share
(cents) 4 13 32
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 2013 31 Dec 2012 30 Jun 2013
Unaudited Unaudited Audited
R’000 R’000 R’000
Reconciliation of basic
earnings to headline earnings
Basic earnings attributable
to ordinary shareholders 13 657 43 537 106 864
Loss/(profit) on sale of
assets and liabilities
(net of tax) 57 (45) 157
Fair value adjustment on
investment property (net
of tax) 101 – 2 565
(Reversal)/impairment of
plant, equipment and
vehicles (net of tax) 13 – (498)
Headline earnings for the
period 13 828 43 492 109 088
Weighted average number
of ordinary shares in
issue (‘000) 331 241 331 241 331 241
Headline earnings per
share (cents) 4 13 33
9. Directorship and company secretary
Mr Pieter van Buuren was appointed as the CFO with effect from
1 October 2013.
Commentary
Group performance and financial review
The reporting period was characterised by strong price competition
that required York to react in order to protect its market share.
Sales volumes increased but average selling prices were below
prior year levels resulting in a decrease in margins but an increased
cash flow generation.
The acquisition of the Roodekop and Epping businesses became
effective on 1 August 2013. A restructuring of these businesses was
carried out and will be completed by the financial year end. These
businesses provided the Group with a new revenue stream, an improved
market penetration and the ability to improve customer service
levels.
Timber products
Production volumes increased over the comparable period with the cost
of production maintained at below inflationary levels. Average
selling prices for lumber were 1.8% lower than the comparative
period. The lower selling prices contributed to the processing
division not achieving the anticipated results. Restructuring costs
of the Roodekop and Epping businesses also impacted the six month’s
EBITDA. The restructuring process has been completed and these
businesses should contribute positively to the timber products’
segment EBITDA in the last six months of the financial year.
Forestry
Forestry benefited from higher log intake at the processing plants.
The increase in the minimum wage rate resulted in increased
contractor costs and contributed to a 14% increase in forestry
operating costs over the comparable period. Fixed costs were well
managed and remains within the lower quartile of benchmarked costs.
Harvesting of own plantations decreased and external purchases
increased substantially over the comparative period. Despite the
higher external purchases and an extraordinary mandatory minimum
wage rate increase, the forestry division delivered solid results.
Biological asset
The biological asset is valued on a discounted cash flow 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.
Despite York experiencing fire damage to a limited area of its
plantations, the temporary unplanted area decreased in line with
expectations and will continue to be managed according to sustainable
forestry practices. The increase in the valuation due to growth
(R21,9 million) and forecasted log price increases (R125,4 million)
was offset by an increase in the discount rate (R110,9 million) and
costs (R26,7 million). York purchased standing timber from
independent growers and the unharvested portion of such purchases
forms part of the biological asset valuation at period end.
Underlying tangible net asset value
Underlying tangible net asset value (TNAV) increased by 4% to 696
cents per share over the period. Underlying TNAV represents the net
asset value of York after the removal of the goodwill and the
deferred taxation associated with the biological asset.
In considering the Group’s 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 Group’s operations,
the aggregate balance will only reverse should the plantation value
decrease or York not re-establish harvested areas and/ or the
plantations be disposed of.
Cash flow
Net cash generated from operating activities amounted to R51,2
million (2012: R44,1 million). Available cash resources were used to
purchase additional external timber as well as new equipment that
contributed to increased throughput and efficiencies in the
processing plants. After repayment of loans and borrowings there was
a net cash outflow for the period of R6,3 million.
Outlook
Lumber demand has increased on a rolling twelve month basis by 2% and
is expected to increase in line with the GDP growth rate. The higher
repo rate negatively impacted the building and construction
sector. York’s pricing strategy is to at least obtain inflationary
rate increases for lumber. In order to increase York’s global
competitiveness and mitigate rising cost pressures, York will
continue with its stated strategic intent to develop the Sabie
integrated site.
Panel board prices are impacted by imports due to the shortage of
supply. York is in the process of increasing its panel board
production capacity which is expected to be completed by 2015.
York will re-commission its Golden Rhino Lumber sawmill during the
second half of the financial year to achieve greater penetration
in wholesale and remanufacturing sectors. The turnaround strategy,
following the acquisition of the Roodekop and Epping businesses,
is expected to deliver positive results in the next six months. The
granting of the Environmental Impact Assessment approval for the
Sabie integrated site is expected during the next six months and will
allow development of the site to commence. The envisaged Sabie
integrated site will enable York to be cost competitive with other
emerging countries, to optimise its fibre utilisation and to
diversify its product lines as well as access new markets.
24 March 2014
Executive directors: Pieter van Zyl (CEO), Pieter van Buuren (CFO)
Non-executive director: Dr Jim Myers* (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
Date: 24/03/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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