Wrap Text
Audited summarised consolidated financial results for the year ended 30 June 2016
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
Audited summarised consolidated financial results
for the year ended 30 June 2016
www.york.co.za
Highlights
– Revenue up 15%
– EBITDA increased to R243 million as a result of improved product
mix, plant efficiencies and with an increase in lumber market share
of 4%
– Cash generated from operations of R285 million up R102 million from
prior year
– R283 million invested in the Plywood Expansion Project and
mechanised harvesting equipment
– Net biological asset value increased by 9% to R2.334 billion
– Underlying TNAV up 13% to 834 cents per share
– Earnings per share increased by 135%
– Core earnings per share increased by 63%
– York returned value to shareholders through a share repurchase
programme
Commentary
Group performance and financial review
York is celebrating its 100-year anniversary of incorporation, with
the additional milestone of being listed on the Johannesburg Stock
Exchange for 70 years.
York's revenue grew by 15% and operating profit by 27%, while cash
flow from operations improved by R102 million compared to the
previous year. Growth in lumber and plywood sales were achieved
despite a weak market. The continued focus on improving value
creation from raw material has enabled the processing plants to
absorb log price increases of up to 17% for certain log classes.
The Processing division has improved its profitability by 28%
year-on-year supported by a recovery of the lumber price index.
The Forestry division benefitted from the higher log prices with
profitability increasing by 8% over the previous year. The Wholesale
division has grown its revenue by 16% and profitability by 322%
compared to the prior year.
York has further invested in EBITDA-generating capabilities during
the year and concluded the Plywood Expansion Project and the
mechanised harvesting in the Highveld forestry region. The benefit
of these investments will start to materialise in the next financial
year.
York’s business is based on six strategic pillars namely: lumber,
plywood, forestry, wholesale, remanufacturing and energy. York will
continue to invest in these value adding opportunities.
An EBITDA result of R243 million was achieved compared to
R199 million in the prior year.
Processing division
Total sawmilling intake was consistent year-on-year, with the plywood
plant intake lower by ca. 5% as a direct consequence of construction
interruptions. Overall, sawmill recovery increased by 0.5% and costs
were optimised with increases of less than inflation. York's
annualised lumber market share increased by 4% year-on-year, in line
with its focused marketing strategy. The Plywood Expansion Project
is in the commissioning phase and will be in full production by
December 2017.
Forestry division
York applies an internationally recognised log paying capability
model to determine log prices for internal use. These prices are
weighted with externally procured logs to determine the prices
charged to processing plants and to value the biological asset. Log
prices increased on a weighted average basis by 10% during the year.
Site-genotype forestry regimes, site specie-matching and the progress
to precision forestry practises resulted in an increase in projected
yields. The forecast volume at maturity, as used in the discounted
cash flow model, increased by 11.3% or an incremental 2.6 million m3
year-on-year.
The value of the biological asset increased by R194 million to
R2,334 billion (based on a post-tax discounted cash flow model).
Investment in fire-preventative measures has continued and minimal
losses were experienced during the reporting period. Pest and disease
control measures improved and are mitigated across property
boundaries.
Wholesale division
York expanded its distribution network throughout Southern Africa.
The remanufacturing plant is expanding its product range and market
share. By adding value to timber products, it gives York access to a
broader customer base.
Balance sheet movements
York invested R283 million in property, plant and equipment, the bulk
related to the Plywood Expansion Project and the mechanised
harvesting project in the Highveld district. This was funded by a
term loan provided from the Land Bank and asset backed facility from
Absa Bank Limited ("Absa"). Long-term debt increased by R151 million,
with financial gearing remaining at 19%.
Working capital reduced by R57.1 million as finished goods inventory
was reduced over the period. The Company contributed R7.5 million
towards the self- insurance fund for plantation fire risk. The value
of the fund was R19.3 million at year-end. York is insured against
plantation fire risk for up to R100 million for a single event. York
claimed R30 million for the Taurus plantation fire that occurred in
the previous financial year.
Underlying tangible net asset value (UTNAV)
UTNAV represents the net asset value, including property plant and
equipment, biological assets and all other assets less all
liabilities, but excluding goodwill and the deferred tax on the
biological asset. This measurement aims to demonstrate the actual
value inherent in the Company on a per share basis. The UTNAV
increased by 13% from 739 cents per share to 834 cents per share.
As at 30 June 2016, York shares traded at a 70% discount to the
UTNAV. York repurchased 13.1 million shares to date under the share
repurchase programme.
Earnings per share and core earnings per share
In terms of IAS 41, a biological asset must be valued at each
reporting date and any changes in the valuation are reflected in the
income statement. York’s biological asset is valued over a 25-year
lifecycle, considering all the investment costs to maturity. Core
earnings represent headline earnings adjusted for the change in the
value of the biological asset, net of tax, as reflected in the income
statement.
For the period under review, core earnings per share increased from
19 cents per share to 31 cents per share, an increase of 63%.
Earnings per share (including the biological asset fair value
movement) increased from 31 cents per share to 73 cents per share,
an increase of 135%.
Cash flow
Cash generated from operations improved to R285 million compared to
R183 million in the previous year. York invested R283 million
(2015: R203 million) in property, plant and equipment. Hedging
foreign exchange liabilities resulted in a R7 million cash inflow to
the Company. Net cash flow from financing activities resulted in a
net cash inflow of R126 million (previous year R165 million). The
year-end cash position was R286 million, an increase of
R94 million year-on-year. Interest on cash invested of R11.8 million
was received during the year (2015: R3.6 million).
Outlook
York's strategy is based on value creation through optimisation to
unlock appeal to shareholders. This is supported by a strong balance
sheet and good cash generation. The Plywood Expansion Project was the
first major investment in executing the growth strategy. The value of
this investment is still to be realised. York submitted a binding bid
under the expedited window 4b as part of the Renewable Energy
Independent Power Producer Procurement Programme and is awaiting
preferred bidder announcement by Government. This investment will
allow York to extract more value from its raw material. If this bid
is unsuccessful, York will pursue the upgrade of its sawmills and
further invest in remanufacturing capabilities.
In addition, York is well positioned to explore cross-border
opportunities and potential international investments.
Consolidated statement of financial position
Audited Audited
As at As at
30 June 30 June
2016 2015
R'000 R'000
Assets
Non-current assets
Biological asset (note 5) 1 993 501 1 821 029
Investment property 26 231 21 895
Property, plant and equipment 852 096 628 112
Goodwill 565 442 565 442
Intangible assets 1 632 2 711
Other financial assets 19 387 41 900
Deferred tax 3 039 7 050
Total non-current assets 3 461 328 3 088 139
Current assets
Biological asset (note 5) 340 826 319 038
Inventories 239 459 258 332
Trade and other receivables 233 699 213 742
Cash and cash equivalents 286 144 192 068
Total current assets 1 100 128 983 180
Total assets 4 561 456 4 071 319
Equity and liabilities
Equity
Share capital 15 908 16 377
Share premium 1 471 038 1 495 561
Reserves 91 732
Retained income 1 145 536 907 324
Total equity 2 632 573 2 419 994
Liabilities
Non-current liabilities
Cash-settled share-based payments 3 191 12 538
Deferred tax 687 332 605 605
Loans and borrowings 803 546 679 655
Provisions 13 114 12 371
Retirement benefit obligations 24 010 22 829
Total non-current liabilities 1 531 193 1 332 998
Current liabilities
Current tax payable 2 79
Loans and borrowings 91 949 65 210
Cash-settled share-based payments 3 369 2 386
Operating lease liability 80 540
Trade and other payables 302 290 250 112
Total current liabilities 397 690 318 327
Total liabilities 1 928 883 1 651 325
Total equity and liabilities 4 561 456 4 071 319
Consolidated statement of comprehensive income
Audited Audited
Year ended Year ended
30 June 30 June
2016 2015
R'000 R'000
Revenue 1 771 049 1 543 149
Cost of sales (1 270 483) (1 138 734)
Gross profit 500 566 404 415
Other operating income 17 970 29 618
Selling, general and administration
expenses (335 603) (290 012)
Operating profit 182 933 144 021
Fair value adjustments 195 337 42 422
Bargain purchase on acquisition - 6 244
Profit before finance costs 378 270 192 687
Investment income 11 762 3 585
Finance costs (56 632) (58 385)
Profit before taxation 333 400 137 887
Taxation (95 188) (36 419)
Profit for the period 238 212 101 468
Other comprehensive (loss)/income:
Remeasurement of defined benefit
liability (890) 1 944
Taxation related to components of
other comprehensive income 249 (544)
Other comprehensive (loss)/income for the
period net of taxation (641) 1 400
Total comprehensive income 237 571 102 868
Basic earnings per share (cents)
(note 7) 73 31
Consolidated statement of cash flows
Audited Audited
Year ended Year ended
30 June 30 June
2016 2015
R'000 R'000
Cash generated from operations 284 963 182 574
Investment income 11 762 3 585
Finance costs (56 632) (58 385)
Taxation paid (14 987) (7 193)
Net cash from operating activities 225 106 120 581
Cash flows applied to investing
activities
Purchase of property, plant and
equipment (283 241) (203 288)
Purchase of intangible assets (1 874) (1 417)
Acquisition of subsidiaries net
of cash acquired - (2 769)
Repayment of loans from Group companies (155) -
Purchase of financial assets (7 550) (17 750)
Sale of financial assets 30 063 14 314
Purchase of biological assets (1 384) -
Sale of biological assets - 5 477
Proceeds from disposal of property,
plant and equipment 288 1 374
Proceeds from disposal of
intangible assets - 41
Net cash applied to investing
activities (263 853) (204 018)
Cash flows from financing activities
Reduction of share capital or buyback
of shares (24 992) (9 976)
Net movement in loans and borrowings 150 785 175 017
Net cash from financing activities 125 793 165 041
Total cash movement for the period 87 046 81 604
Cash at the beginning of the period 192 068 110 464
Effect of exchange rate movement
on cash balances 7 030 -
Cash at the end of the period 286 144 192 068
Consolidated statement of changes in equity
Defined Avail-
benefit able Re-
Share Share plan for-sale tained Total
capital premium reserve reserve income equity
Audited R’000 R’000 R’000 R’000 R’000 R’000
Balance as at
1 July 2014 16 562 1 505 352 (668) - 805 856 2 327 102
Profit for
the year – – – – 101 468 101 468
Other comprehen-
sive income - - 1 400 - - 1 400
Total comprehen-
sive income
for the year – – 1 400 - 101 468 102 868
Purchase of
own shares (185) (9 791) - - - (9 976)
Balance as
at 30 June
2015 16 377 1 495 561 732 - 907 324 2 419 994
Profit for
the period – – – – 238 212 238 212
Other
comprehen-
sive income - - (641) - - (641)
Total comprehen-
sive income for
the period and
total transactions
with owners – – (641) - 238 212 237 571
Purchase of
own shares (469) (24 523) - - - (24 992)
Balance as
at 30 June
2016 15 908 1 471 038 91 - 1 145 536 2 632 573
Notes to the consolidated annual financial statements
1. Basis of preparation
These summarised consolidated annual financial statements have been
prepared in accordance with the JSE Limited Listings Requirements,
the Companies Act of South Africa, 71 of 2008, and the Companies
Regulations, 2011. The Group has applied the recognition and
measurement requirements of International Financial Reporting
Standards (IFRS), the SAICA Financial Reporting Guides, as issued by
the Accounting Practices Committee, and Financial Reporting
Pronouncements, as issued by the 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 annual financial statements and
for the correct extraction of the financial information.
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 annual financial statements
as at and for the year ended 30 June 2016, which are available on the
Company’s website, www.york.co.za or from the Company’s registered office.
The auditor, KPMG Inc., has issued an opinion on the Group's consolidated
annual financial statements for the year ended 30 June 2016. The audit was
conducted in accordance with International Standards on Auditing. The
auditor issued an unmodified audit opinion. The auditor’s report does not
necessarily report on all of the information contained in this announcement.
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 annual financial statements have been extracted from audited
information, but are not audited. These summarised consolidated annual
financial results have been prepared on the going concern basis and were
approved by the board of directors ("Board") on 23 September 2016.
There have been no material changes to judgements or estimates
relating to 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 during
the year ended 30 June 2015, except for the new standards that
became effective during this year.
2. Additional disclosure items
Audited Audited
Year ended Year ended
30 June 30 June
2016 2015
R'000 R'000
Authorised capital commitments
- Contracted, but not provided 59 229 124 034
- Not contracted 32 112 8 097
Capital expenditure 283 241 203 288
Depreciation of property, plant
and equipment 56 344 54 264
Amortisation of intangible assets 1 079 1 104
Impairment of trade receivables (335) (2 233)
– The Group did not have any litigation settlements during the
reporting period.
– The Group participated in a pooled banking facility of R105 million,
granted by FirstRand Bank Limited. Group companies provided
cross-suretyship limited to 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
security was returned on 11 July 2016 and Absa became the new
transactional banking partner.
– 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, although the Company repurchased 9.4 million
shares through a subsidiary company within the Group.
3. Comparative figures
The summarised consolidated annual financial statements for the year
ended 30 June 2015 are presented as published.
4. Operating segments
The Group has three 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 segmental analysis is as follows:
Processing
plants Wholesale Forestry Total
2016
Revenue: external sales 1 226 743 464 958 77 519 1 770 220
Revenue: inter-segment
sales 204 926 - 646 253 851 179
Total revenue 1 432 669 464 958 723 772 2 621 399
Depreciation and
amortisation (47 964) (1 419) (7 732) (57 115)
Reportable segment profit* 124 152 17 171 100 879 242 202
Capital expenditure 286 306 1 088 62 371 349 765
2015
Revenue: external sales 1 079 157 400 399 62 833 1 542 389
Revenue: inter-segment
sales 206 763 - 603 115 809 878
Total revenue 1 285 920 400 399 665 948 2 352 267
Depreciation and
amortisation (44 402) (1 424) (6 005) (51 831)
Reportable segment profit* 97 026 4 065 93 131 194 222
Capital expenditure 182 542 407 10 850 193 799
*Being the earnings before interest, taxation, depreciation and
amortisation (EBITDA)
Reconciliation of reportable segment profit or loss
Audited Audited
30 June 30 June
2016 2015
R'000 R'000
Total EBITDA for reportable segments 242 202 194 222
Depreciation, amortisation and impairment (57 115) (51 831)
Unallocated amounts (2 154) 1 630
Operating profit 182 933 144 021
5. Biological asset
Audited Audited
30 June 30 June
2016 2015
R'000 R'000
Reconciliation of biological asset
Opening balance 2 140 067 2 103 092
Fair value adjustment
– Increase due to growth
and enumerations 329 011 435 042
– Adjustment to standing timber
values to reflect fair value
at year-end 189 821 (68 958)
Decrease due to harvesting (325 956) (323 632)
Purchased plantations 1 384 -
Sale of plantations - (5 477)
Closing balance 2 334 327 2 140 067
Classified as non-current assets 1 993 501 1 821 029
Classified as current assets 340 826 319 038
Audited Audited
30 June 30 June
2016 2015
Risk-free rate (R186 bond) 8.80% 8.28%
Beta factor 1.12 1.09
Cost of equity 15.96% 15.28%
Pre-tax cost of debt 10.50% 10.25%
Debt: equity ratio 35:65 35:65
After-tax weighted average cost of capital 13.02% 12.51%
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. Growth in the DCF model refers to the forecast
yield of planted trees at maturity and has increased from the prior
year due to the temporary unplanted areas decreasing slightly during
the year, the expected yield per hectare increasing with improvements
/amendments to the forestry regime.
– 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 6.5% per year over the next year, 6% over the
following year and at 6% over the long term* (2015: 6.5% 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 contributory asset
charge 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 6.15% in year one, 6% in year two and 6% over the
long term* (2015: 5.7% in year one, 6% in year two and 6% over the
long term) 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 during the period.
7. Earnings per share
The calculation of basic earnings per share is based on:
Audited Audited
30 June 30 June
2016 2015
Basic earnings attributable to ordinary
shareholders (R’000) 238 212 101 468
Weighted average number of ordinary
shares in issue (’000) 325 286 327 544
Earnings per share (cents) 73 31
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:
Audited Audited
30 June 30 June
2016 2015
R'000 R'000
Reconciliation of basic earnings to
headline earnings
Basic earnings attributable to ordinary
shareholders 238 212 101 468
(Profit)/loss on sale of assets and
liabilities (net of tax) 161 (304)
Fair value adjustment on investment
property (net of tax) (1 910) 24
Impairment of plant, equipment and
vehicles (net of tax) 1 729 -
Bargain purchase on acquisition - (6 244)
Headline earnings for the year 238 192 94 944
Weighted average number of ordinary
shares in issue (’000) 325 286 331 032
Headline earnings per share (cents) 73 29
9. Core earnings per share
The calculation of core earnings per share is based on:
Audited Audited
30 June 30 June
2016 2015
R'000 R'000
Headline earnings attributable to
ordinary shareholders 238 192 94 944
Fair value adjustment on biological
assets (net of tax) (138 870) (30 566)
Core earnings for the year 99 322 64 378
Weighted average number of ordinary
shares in issue (’000) 325 286 331 032
Core earnings per share (cents) 31 19
10. Board of directors
There were no changes to the Board during the year.
Company information
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*, Maserame Mouyeme*, 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
27 September 2016
Date: 27/09/2016 04:27:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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