Wrap Text
Audited summarised consolidated financial results for the year ended 30 June 2014
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 2014
Salient features
- Revenue up 17% driven largely by the acquisition of two wholesale
businesses
- Cash generated from operations improved by R45 million to
R151 million
- Earnings per share down by 53.1% due to reduced sawmill segment
profitability and lower margins from wholesale division
- Biological assets' value increased by R2,2 million
- R182 million spent on external log purchases which enhances the
value and long term sustainability of the biological assets
- 5% volume growth in biological assets
- Underlying tangible net asset value up 2% to 707 cents per share
Commentary
Group performance and financial review
Revenue for the year increased by 17%, whilst cash from operations
increased by 42%. The increased revenue was driven mainly by the
acquisition of two wholesale businesses. The trading nature of this
acquisition, with consequent lower margins, reduced the gross margin
by 3%. The additional volume sold contributed to increased turnover
and cash generation. Operating profit reduced by 27.6%, largely as a
result of the processing plants not being able to recover their cost
increases from the market. We increased investment in our processing
plants to further enhance efficiencies and expect consequent benefits
in the next financial year.
Operations
Forestry division performed well during the year, driven by high
price increases on eucalyptus and above inflation increases from pine
plantations. The processing plants experienced substantial cost
increases on utilities and wages, in an environment where lumber
prices moved sideways. Plywood prices increased in line with cost
escalations and contributed substantially to Processing division's
profitability. The Wholesale division was restructured with
associated once-off costs. This new channel will further advance
York's marketing strategy going forward.
Biological assets
The quality of York's biological assets (plantations) has improved
substantially over the last few years, with a positive incremental
volume growth of 270 672 m3 during the year. An increase in the
discount rate negatively impacted the overall valuation, with a net
increase of R2.2 million reported for the year. All plantations
remained FSC certified and continue to be managed on a sustainable
basis. During the year York purchased logs with a cost of
R182 million from third parties, negatively impacting EBITDA by an
estimated R28.6 million relative to use of own plantations.
Adjusted tangible net asset value
TNAV improved by 2.2% from 688c to 703c, driven by continued
investment in property, plant and equipment, as well as growth in the
biological asset. Goodwill was tested for any impairment and remains
unchanged.
Cash flow
Cash generated from operations improved to R151.5 million (2013:
R106.5 million). Net cash of R114.5 million (prior year
R82.7 million) was invested in the business. This included
R61.1 million invested in capital projects and R34.2 million on the
acquisition of wholesale businesses. The cash balance at the end of
the period was R110.5 million.
Outlook
York's Board of Directors approved the R280 million expansion to the
plywood plant, with funding being finalised. The upgraded plant is
expected to be operational within the next 18 months, without
impacting existing operations.
Lumber outlook remains stable, with volumes sold increasing and
prices slowly moving upwards. Plywood demand remains strong, with
prices at profitable levels. In line with our growth strategy, York
will invest in plant efficiencies and value adding opportunities in
order to improve operating margins.
Colidated statement of financial position
30 Jun 2014 30 Jun 2013
Audited Audited
R’000 R’000
Assets
Non-current assets
Biological asset (note 5) 1 834 963 1 827 525
Investment property 21 866 22 966
Property, plant and equipment 463 645 429 994
Goodwill 565 442 565 442
Intangible assets 2 439 2 257
Other financial assets 38 464 29 969
Deferred tax 8 495 -
Total non-current assets 2 935 314 2 878 153
Current assets
Biological asset (note 5) 268 129 273 345
Inventories 234 032 190 960
Trade and other receivables 171 893 157 306
Cash and cash equivalents 110 464 158 694
Total current assets 784 518 780 305
Total assets 3 719 832 3 658 458
Equity and liabilities
Equity
Share capital 16 562 16 562
Share premium 1 505 352 1 505 352
Reserves (668) 569
Retained income 805 856 754 862
Total equity 2 327 102 2 277 345
Liabilities
Non-current liabilities
Cash settled share based
payments 12 363 18 874
Deferred tax 574 879 550 507
Loans and borrowings 528 459 559 398
Provisions 11 671 18 927
Retirement benefit obligations 24 313 23 073
Total non-current liabilities 1 151 685 1 170 779
Current liabilities
Current tax payable 2 2
Loans and borrowings 34 157 37 775
Cash settled share-based
payments 13 785 4 573
Operating lease liability 358 -
Trade and other payables 192 743 167 820
Total current liabilities 241 045 210 334
Total liabilities 1 392 730 1 381 113
Total equity and liabilities 3 719 832 3 658 458
Consolidated statement of comprehensive income
Year ended Year ended
30 Jun 2014 30 Jun 2013
Audited Audited
R’000 R’000
Revenue 1 323 976 1 131 994
Cost of sales (892 018) (721 696)
Gross profit 431 958 410 298
Other operating income 17 215 38 787
Selling, general and
administration expenses (332 362) (287 720)
Operating profit 116 811 161 365
Fair value adjustments (2 084) 25 230
Bargain purchase on acquisition 2 984 -
Profit before finance costs 117 711 186 595
Investment income 5 820 6 239
Finance costs (56 440) (54 672)
Profit before taxation 67 091 138 162
Taxation (16 097) (31 298)
Profit for the period 50 994 106 864
Other comprehensive income/(loss):
Available-for-sale financial
asset adjustments (680) 205
Remeasurement of defined benefit
liability (928) -
Taxation related to components
of other comprehensive income 371 (44)
Other comprehensive (loss)/
income for the period net of
taxation (1 237) 161
Total comprehensive income 49 757 107 025
Basic earnings per
share (cents) (note 7) 15 32
Consolidated statement of cash flows
Year ended Year ended
30 Jun 2014 30 Jun 2013
Audited Audited
R’000 R’000
Cash generated from operations 151 461 106 486
Investment income 5 820 6 239
Finance costs (56 440) (54 672)
Taxation paid - (5)
Net cash from operating
activities 100 841 58 048
Cash flows from investing
activities
Purchase of property, plant
and equipment (66 169) (51 958)
Purchase of intangible assets (2 127) (67)
Acquisition of subsidiaries
net cash acquired (34 228) -
Purchase of financial assets (14 000) (28 453)
Sale of financial assets 5 717 -
Purchase of biological assets (4 206) (2 264)
Purchase of investment property - (38)
Proceeds from disposal of
property, plant and equipment 463 83
Proceeds from disposal of
intangible assets 37 -
Net cash from investing
activities (114 513) (82 697)
Cash flows from financing
activities
Net movement in loans and
borrowings (34 558) 38 773
Net cash from financing
activities (34 558) 38 773
Total cash movement for the
period (48 230) 14 124
Cash at beginning of period 158 694 144 570
Cash at end of period 110 464 158 694
Consolidted statement of changes in equity
Defined
benefit
Share Share plan
capital premium reserve
R’000 R’000 R’000
Balance at
1 July 2012 (audited) 16 562 1 505 352 -
Profit for the year – – –
Other comprehensive
income – – -
Total comprehensive
income for the year
and total transactions
with owners – – -
Balance at
30 June 2013 (audited) 16 562 1 505 352 –
Profit for the period – – –
Other comprehensive
income – – (668)
Total comprehensive
income for the period
and total transactions
with owners – – (668)
Balance at
30 June 2014 (audited) 16 562 1 505 352 (668)
Available-
for-sale Retained Total
reserve income equity
R’000 R’000 R’000
Balance at
1 July 2012 (audited) 408 647 998 2 170 320
Profit for the year – 106 864 106 864
Other comprehensive
income 161 – 161
Total comprehensive
income for the year
and total transactions
with owners 161 106 864 107 025
Balance at
30 June 2013 (audited) 569 754 862 2 277 345
Profit for the period – 50 994 50 994
Other comprehensive
income (569) - (1 237)
Total comprehensive
income for the period
and total transactions
with owners (569) 50 994 49 757
Balance at
30 June 2014 (audited) - 805 856 2 327 102
Notes to the 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 of South Africa, 2008 and the Companies Regulations,
2011. 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 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 JPF van Buuren CA (SA), the 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 2014 which are available on the
Company’s website, www.york.co.za or at the company’s registered
office.
The auditors, KPMG Inc., have issued their opinion on the Group's
financial statements for the year ended 30 June 2014. The audit was
conducted in accordance with International Standards on Auditing.
They have issued an unmodified audit opinion. The auditor’s 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 auditor’s engagement they should obtain a copy of the auditor’s
report together with the accompanying financial information from the
issuer’s 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 17 September 2014. These summarised consolidated
financial results are the responsibility of the directors.
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, except for the new standards that became
effective during the year.
2. Additional disclosure items
30 Jun 2014 30 Jun 2013
Audited Audited
R’000 R’000
Authorised capital commitments:
- Contracted, but not provided 5 068 11 852
- Not contracted 290 160 25 098
Capital expenditure 66 169 51 958
Depreciation of property,
plant and equipment 38 206 26 972
Amortisation of intangible assets 924 1 015
Impairment of trade receivables (6 866) 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 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 of 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 2013,
are presented as published and have not been restated.
4. Operating segments
The Group has three reportable segments which are the Group’s
strategic divisions. The Group operates in one geographic segment,
countries within the Southern Africa Development Community (SADC).
The segment analysis is as follows:
2014 Processing Wholesale Forestry Total
Revenue:
external sales 996 886 278 568 47 822 1 323 276
Revenue: inter-
segment sales 177 133 - 572 946 750 079
Total revenue 1 174 019 278 568 620 768 2 073 355
Depreciation and
amortisation (31 761) (1 154) (3 693) (36 608)
Reportable seg-
ment profit* 54 331 (5 289) 118 478 167 520
Capital expen-
diture 52 872 3 482 7 993 64 347
2013
Timber products Forestry Total
Revenue:
external sales 1 090 205 41 405 1 131 610
Revenue: inter-
segment sales - 522 944 522 944
Total revenue 1 090 205 564 349 1 654 554
Depreciation and
amortisation (22 286) (3 502) (25 788)
Reportable seg-
ment profit* 87 990 97 129 185 119
Capital expenditure 44 601 3 889 48 490
*Being the earnings before interest, taxation, depreciation &
amortisation (“EBITDA”)
30 Jun 2014 30 Jun 2013
Audited Audited
R’000 R’000
Reconciliation of reportable
segment profit or loss
Total EBITDA for reportable
segments 167 520 185 119
Depreciation, amortisation
and impairment (36 608) (25 788)
Unallocated amounts (14 101) 2 034
Operating profit 116 811 161 365
5. Biological assets
30 Jun 2014 30 Jun 2013
Audited Audited
R’000 R’000
Reconciliation of biological
assets
Opening balance 2 100 870 2 070 222
Fair value adjustment:
– Increase due to growth
and enumerations 447 357 384 403
– Adjustment to standing
timber values to reflect fair
value at period end (123 284) (44 439)
Decrease due to harvesting (326 057) (311 580)
Purchased plantations 4 206 2 264
Closing balance 2 103 092 2 100 870
Classified as non-
current assets 1 834 963 1 827 525
Classified as current assets* 268 129 273 345
30 Jun 2014 30 Jun 2013
Audited Audited
Key assumptions used in the
discounted cash flow valuation
Risk free rate ( R186 bond) 8.31% 7,89%
Beta factor 1.08 1.04
Cost of equity 15.25% 14,61%
Pre-tax cost of debt 10.00% 9,5%
Debt: equity ratio 35:65 35:65
After-tax weighted average
cost of capital 12.43% 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 with 6.5% per year over the next two years
and at 6% over the long term * (2013: 8% over the first two years
and 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 contri-
butory 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%* (2013: 5,5%) was used.
(*Management believe that as a result of the higher demand for
timber products and limited supply of logs for solid wood processing,
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 during the period. On 1 August 2013 York acquired
wholesales businesses based at Roodekop and Epping from the Illiad
Africa group for a cash consideration of R34.2 million.
7. Earnings per share
The calculation of basic earnings per share is based on:
30 Jun 2014 30 Jun 2013
Audited Audited
Basic earnings attributable
to ordinary shareholders (R’000) 50 994 106 864
Weighted average number of
ordinary shares in issue (R’000) 331 241 331 241
Earnings per share (cents) 15 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:
30 Jun 2014 30 Jun 2013
Audited Audited
R’000 R’000
Reconciliation of basic
earnings to headline earnings
Basic earnings attributable
to ordinary shareholders 50 994 106 864
(Profit)/loss on sale of assets
and liabilities (net of tax) (402) 157
Fair value adjustment on invest-
ment property (net of tax) 81 2 565
Impairment/(reversal) of impair-
ment of plant, equipment and
vehicles (net of tax) 229 (498)
Bargain purchase on acquisition (2 984) -
Headline earnings for the period 47 918 109 088
Weighted average number of ordi-
nary shares in issue (‘000) 331 241 331 241
Headline earnings per share (cents) 14 33
9. Directorship
On 1 October 2013 Johannes Petrus Fourie van Buuren was appointed as
the Chief Financial Officer.
30 September 2014
Sabie
Executive directors: Pieter van Zyl (CEO), Pieter van Buuren (CFO)
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
Chief Financial Officer: Pieter van Buuren
Sponsor: One Capital
Transfer secretaries: Computershare Investor Services (Pty) Ltd
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