Wrap Text
Unaudited condensed consolidated interim financial results for the six months ended 31 December 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”)
Unaudited condensed consolidated interim financial results
For the six months ended 31 December 2016
Highlights
– Revenue up 9% on the back of increased average sales prices
– Operating profit down 4% due to an increase in plywood plant depreciation
after commissioning
– EBITDA (earnings before interest, tax, depreciation and amortisation) up 14%
– Core earnings per share down 28% due to an increase in depreciation and
interest paid
– Tangible net asset value per share up 12% from 750 cents to 837 cents in line
with ongoing capital investment
– Cash at the end of the period up R30 million
– Biological assets up 9%
Commentary
Group performance and financial review
York achieved revenue growth of 9% year-on-year in an economic environment where
the lumber industry has declined by 4,5% in the same period. This was attained
through a dedicated focus on improving customer support and service. York
increased its geographical footprint by opening new warehouse distribution
facilities in provinces previously not covered directly. Growth of 14% over
the comparative period in EBITDA was achieved by growth in improved average
selling prices year-on-year. An increase of 9% in the value of the biological
asset was recorded despite an increase in the R186 bond rate during the period.
Consistent attention to forestry best practices resulted in improvements
in growth and forecast yields over the life of the biological assets.
Driven by a focus on increasing inventory levels to better service customers,
cash generated from operations decreased by R75 million as a result of the
increase in working capital. Stock volume at the warehouses increased by
R28 million (47%) to enable active participation in available sales
opportunities through smaller loads and shorter lead times to satisfy clients
from the various warehouses.
Cash on hand at the reporting date amounted to R235,3 million, an improvement
of 15% on the comparable period.
Processing division
Sawmills delivered an outstanding performance, with the completion of on-time
and below budget capital expansion projects at Sabie and Driekop sawmills, the
benefits of which have already started to contribute to improved results in
the business. Capital investment projects at Nicholson & Mullin sawmill were
completed in February 2017. Process and productivity improvements embedded by
Project Evolve continue to support processing efficiency.
The plywood plant has increased production volumes by 35% year-on-year
subsequent to the commissioning of the plant upgrade. The expected revenue
increase is, however, lagging the depreciation and interest charges incurred
during the period due to optimisation and fine-tuning now being finalised.
Forestry division
External log volumes acquired were 19% higher than the comparative period,
driven by increased intake at processing plants, but R43 million (37%) higher
in value as price increases from South African Forestry Company Limited have
far outstripped inflation. This is currently being addressed with the
supplier.
Improved fire prevention measures and response times resulted in no significant
growth stock losses to York during the reporting period. The planting season
started off later than normal due to delayed rains especially in the Escarpment
area. With high rainfall expected during the remainder of the planting season,
planting targets should, however, still be achieved. The Escarpment and Highveld
regions, where York’s plantations are based, received high rainfall from October
2016 to March 2017, encouraging tree growth and volume yields.
Increased lead distances as well as harvesting from own plantations being behind
target resulted in the Forestry division’s EBITDA being 40% lower than the prior
period. Savings achieved through the mechanised harvesting insourcing project
have contributed to overall profitability, and going forward insourced
opportunities relating to inbound logistics will further enhance long-term value.
Wholesale division
This division grew market share, assisted by the opening of new lumber and
plywood distribution warehouses that allow for quick delivery and improved
customer support. During March, the first supply loads from the newly opened
warehouse in Limpopo, based on a similar low cost model, will ensure further
volume growth is achieved going forward. Gross profit margin, supported by an
improved product mix which includes more structural dimensions, has also
increased from the prior period, resulting in an increase in EBITDA of 5%.
Balance sheet movements
York invested R88,5 million in property, plant and equipment during the current
period. The additions focus on capacity and efficiency increases in order to
offset the escalating raw material costs that demand continued process
improvements. Drawings of R40,6 million against the Land Bank facility were made
during the period. York also obtained a mortgage bond of R10 million for the
acquisition of Ligna Lodge (previously Lone Creek River Lodge), which will cater
for increased accommodation needs during construction projects.
Working capital investment increased during the period, mainly as a result
of an increase in inventory. Accounts receivable are managed well. Trade
payables increased as a result of increased external log purchases.
Underlying tangible net asset value (UTNAV)
UTNAV represents the physical net asset value including property, plant and
equipment, biological assets, all other assets excluding intangible items
such as goodwill and deferred tax, less liabilities. This measurement
demonstrates the underlying value inherent in the Company on a per-share basis.
UTNAV improved by 14% from 759 cents to 864 cents per share. York repurchased
a further 1,5 million shares during the period. As of 31 December 2016, total
shares repurchased comprise 14,6 million shares, representing 4,4% of issued
share capital.
Core earnings per share
In terms of IAS 41, the biological assets are revalued at each reporting date
and any changes in the valuation are reflected in the income statement. The
biological assets are long-term in nature and the valuation assumes their
realisation over a 25-year period from the date of the valuation. While the
manner in which the assets are managed in the short term will impact on their
long-term value, in order to provide financial statement users with an
additional measure of the current period’s results, core earnings per share
have been presented. Core earnings comprise basic earnings adjusted for the
after-tax change in the value of the biological assets as reflected in the
income statement. See note 9. Core earnings per share decreased by 28% due
to an increase in depreciation and interest paid.
Cash flow
Net cash from operating activities was R6,8 million, resulting from a decrease
in cash from operating activities and an increase in finance costs and tax paid.
Purchases of property, plant and equipment totalled R88,5 million, of which
R41,6 million was funded through a net increase in borrowings.
Outlook
York submitted a bid for a biomass power plant as part of the Renewable Energy
Independent Power Producer Procurement Programme (REIPPPP). The announcement
of preferred bidders has been delayed and bidders were required to extend
guarantees to the end of September 2017. After a thorough review of the project
viability studies, York decided to extend the guarantees required and awaits
the announcement of preferred bidders, remaining confident in the ability of
this programme to deliver value to all stakeholders.
York received environmental approval for the development of the next phases
of the Sabie site future developments.
The additional regional warehouses that are being added will enable York to
better serve its customers through immediate product availability and shorter
delivery times. The model will also be used as a catalyst for expansion into
the rest of Africa.
Securing alternative raw material supply, in the light of excessive price
increases, is a continued strategic focus. With plantation areas in South
Africa being finite, investments further afield into sub-Saharan Africa’s
forestry territories are also currently being explored.
York is concerned about the current slow economic growth in infrastructure and
housing investment in South Africa and notes the impact this might have on the
results for the second half of the current financial year.
Consolidated statement of financial position
as at 31 December 2016
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
ASSETS
Non-current assets
Biological assets (note 4) 2 014 987 1 910 004 1 993 501
Investment property 7 753 23 473 26 231
Property, plant and equipment 916 090 751 964 852 096
Goodwill 565 442 565 442 565 442
Intangible assets 1 357 2 172 1 632
Deferred tax 871 5 910 3 039
Other financial assets 24 031 41 941 19 387
Total non-current assets 3 530 531 3 300 906 3 461 328
Current assets
Biological assets (note 4) 332 449 239 319 340 826
Inventories 272 948 206 435 239 459
Current tax receivable 9 667 206 8 183
Trade and other receivables 219 472 200 772 225 516
Cash and cash equivalents 235 336 205 174 286 144
Total current assets 1 069 872 851 906 1 100 128
Total assets 4 600 403 4 152 812 4 561 456
EQUITY AND LIABILITIES
Equity
Share capital 15 833 16 279 15 908
Share premium 1 465 999 1 490 658 1 471 038
Reserves 91 732 91
Retained income 1 177 783 942 762 1 145 536
Total equity 2 659 706 2 450 431 2 632 573
Liabilites
Non-current liabilities
Cash-settled share-based payments 9 435 3 680 3 191
Deferred tax 695 750 613 883 687 332
Loans from related parties 1 527 1 505 1 350
Loans and borrowings 791 906 776 033 802 196
Provisions 13 114 12 371 13 114
Retirement benefit obligations 24 450 23 210 24 010
Total non-current liabilities 1 536 182 1 430 682 1 531 193
Current liabilities
Current tax payable - 2 757 2
Loans and borrowings 143 847 44 274 91 949
Cash-settled share-based payments 1 413 1 616 3 369
Operating lease liability 80 540 80
Trade and other payables 259 175 222 512 302 290
Total current liabilities 404 515 271 699 397 690
Total liabilities 1 940 697 1 702 381 1 928 883
Total equity and liabilities 4 600 403 4 152 812 4 561 456
Consolidated statement of comprehensive income
for the six months ended 31 December 2016
Six months Six months
ended ended Year ended
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Revenue 952 519 873 734 1 771 049
Cost of sales (703 405) (644 458) (1 270 483)
Gross profit 249 114 229 276 500 566
Other operating income 5 560 16 320 17 970
Administration expenses (188 534) (176 813) (335 603)
Operating profit 66 140 68 783 182 933
Fair value adjustment 14 493 5 726 195 337
Profit before finance costs 80 633 74 509 378 270
Investment income 6 346 4 836 11 762
Finance costs (42 689) (29 186) (56 632)
Profit before taxation 44 290 50 159 333 400
Taxation (12 043) (14 721) (95 188)
Profit for the period 32 247 35 438 238 212
Other comprehensive income/(loss):
Remeasurement of defined benefit
liability - - (890)
Taxation related to remeasurement
of defined benefit liability - - 249
Other comprehensive income for the
period net of taxation - - (641)
Total comprehensive income 32 247 35 438 237 571
Earnings per share (cents) (note 7) 10 11 73
Headline earnings per share
(cents) (note 8) 10 11 73
Consolidated statement of changes in equity
for the six months ended 31 December 2016
Defined
benefit
Share Share plan Retained Total
capital premium reserve income equity
R’000 R’000 R’000 R’000 R’000
Balance as at 1 July
2015 (Audited) 16 377 1 495 561 732 907 324 2 419 994
Profit for the year - - - 238 212 238 212
Other comprehensive income
Change in defined benefit
plan, net of tax - - (641) - (641)
Total other
comprehensive income - - (641) - (641)
Total comprehensive income
for the year 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 (Audited) 15 908 1 471 038 91 1 145 536 2 632 573
Profit for the period - - - 32 247 32 247
Other comprehensive income
Change in defined benefit
plan, net of tax - - - - -
Total other
comprehensive income - - - - -
Total comprehensive income
for the period and total
transactions with owners - - - 32 247 32 247
Purchase of own shares (75) (5 039) - - (5 114)
Balance as at 31
December 2016
(Unaudited) 15 833 1 465 999 91 1 177 783 2 659 706
Consolidated statement of cash flows
for the six months ended 31 December 2016
Six months Six months
ended ended Year ended
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Cash flows from operating activities
Cash generated from operations (note 5) 46 094 121 152 284 963
Investment income 6 346 4 836 11 762
Finance costs (42 689) (29 186) (56 632)
Taxation paid (2 944) (364) (14 987)
Net cash from operating activities 6 807 96 438 225 106
Cash flows applied to investing activities
Purchase of property, plant and equipment (88 534) (150 211) (283 241)
Purchase of intangible assets (167) - -
Proceeds from disposal of
property, plant and equipment 87 82 288
Purchase of investment property - (1 578) (1 874)
Proceeds/(repayment) of loans from
Group companies 177 - (155)
Purchase of financial assets (4 644) (4 887) (7 550)
Sale of financial assets - 4 846 30 063
Purchase of biological assets - (3 530) (1 384)
Harvesting of purchased plantations 1 384 - -
Net cash applied to investing activities (91 697) (155 278) (263 853)
Cash flows from financing activities
Buyback of shares (5 114) (5 001) (24 992)
Net proceeds from loans and borrowings 41 608 76 947 150 785
Net cash from financing activities 36 494 71 946 125 793
Total cash movement for the period (48 396) 13 106 87 046
Cash at the beginning of the period 286 144 192 068 192 068
Effect of exchange rate movement
on cash balances (2 412) - 7 030
Cash at the end of the period 235 336 205 174 286 144
Notes to the consolidated interim 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, 71 of 2008 (as amended) and the Companies Regulations, 2011.
These unaudited condensed consolidated interim financial statements have been
prepared in accordance with and containing the information required by IAS 34:
Interim Financial Reporting, as well as the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncemements
as issued by Financial Reporting Standards Council. The financial results
have been compiled under the supervision of Pieter van Buuren CA (SA), the
Chief Financial Officer.
These unaudited condensed consolidated interim 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 2016 which are available on the Company’s website,
www.york.co.za or at the Company’s registered office.
These condensed consolidated interim 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 8 March 2017.
There have been no material changes to judgements or estimates of amounts
reported in prior reporting periods.
The Group financial results are presented in South African Rand, which is
the Company’s functional currency. All financial information presented has
been rounded to the nearest R’000.
The significant accounting policies are in terms of International Financial
Reporting Standrds and methods of computation are consistent in all material
respects with those applied in the year ended 30 June 2016.
2. Additional disclosure items
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Authorised capital commitments
- Contracted, but not provided 56 829 56 916 59 229
- Not contracted 22 474 23 730 32 112
Capital expenditure 88 701 151 789 285 115
Depreciation of property, plant
and equipment 42 911 26 355 56 344
Amortisation of intangible assets 442 539 1 079
– The Group did not have any litigation settlements during the reporting period.
– The Group participates in a pooled banking facility of R120 million granted
by Absa Bank Limited. 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. 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
Dec 2016 Dec 2015 Jun 2016
R’000 R’000 R’000
Revenue: external sales 633 421 597 700 1 227 743
Revenue: inter-segment sales 142 340 110 139 204 926
Total revenue 775 761 707 839 1 432 669
Depreciation and amortisation (32 269) (20 529) (47 964)
Reportable segment profit* 66 529 41 878 124 152
Fair value adjustment - - -
Capital expenditure 65 094 141 691 286 306
Wholesale
Dec 2016 Dec 2015 Jun 2016
R’000 R’000 R’000
Revenue: external sales 281 149 237 972 464 958
Revenue: inter-segment sales - - -
Total revenue 281 149 237 972 464 958
Depreciation and amortisation (794) (699) (1 419)
Reportable segment profit* 14 030 6 833 17 171
Fair value adjustment - - -
Capital expenditure 2 037 231 1 088
Forestry
Dec 2016 Dec 2015 Jun 2016
R’000 R’000 R’000
Revenue: external sales 36 808 39 806 77 519
Revenue: inter-segment sales 358 724 316 784 646 253
Total revenue 395 532 356 590 723 772
Depreciation and amortisation (7 967) (3 257) (7 732)
Reportable segment profit* 25 389 43 200 100 879
Fair value adjustment 14 493 5 726 192 875
Capital expenditure 20 711 5 389 62 371
Total
Dec 2016 Dec 2015 Jun 2016
R’000 R’000 R’000
Revenue: external sales 951 378 875 478 1 770 220
Revenue: inter-segment sales 501 064 426 923 851 179
Total revenue 1 452 442 1 302 401 2 621 399
Depreciation and amortisation (41 030) 24 485 (57 115)
Reportable segment profit* 105 948 91 911 242 202
Fair value adjustment 14 493 5 726 192 875
Capital expenditure 87 842 147 311 349 765
* Being EBITDA
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Reconciliation of reportable segment
profit or loss
Total EBITDA for reportable
segments 105 948 91 911 242 202
Depreciation, amortisation and
impairment (43 295) (26 896) (57 115)
Unallocated amounts 3 487 3 768 (2 154)
Operating profit 66 140 68 783 182 933
4. Biological assets
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Reconciliation of biological assets
Opening balance 2 334 327 2 140 067 2 140 067
Fair value adjustment:
- Increase due to growth and enumeration 146 562 163 517 329 011
- Decrease due to harvesting (141 318) (156 691) (325 956)
- Adjustment to standing timber values
to reflect fair value at period end 9 249 (1 100) 189 821
Standing timber harvested (1 384) - -
Purchased plantations - 3 530 1 384
Closing balance 2 347 436 2 149 323 2 334 327
Classified as non-current assets 2 014 987 1 910 004 1 993 501
Classified as current assets** 332 449 239 319 340 826
** Being the biological assets to be harvested and sold in the 12 months after
the reporting date
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Change in discounted cash flows
(DCF) value attributable to:
Opening balance 2 334 327 2 140 067 2 140 067
Growth 120 739 65 444 154 330
Revenue and price (4 004) 134 313 355 632
Operating cost 27 336 (2 155) (162 509)
Discount rate (129 578) (191 876) (154 577)
Sale of plantation (1 384) - -
Purchased plantations - 3 530 1 384
Closing balance 2 347 436 2 149 323 2 334 327
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
Cubic metres Cubic metres Cubic metres
Reconciliation of standing volume
Opening balance 5 840 732 5 833 661 5 833 661
Increase due to growth and enumeration 339 273 378 522 761 621
Decrease due to harvesting (327 135) (362 720) (754 550)
Closing balance 5 852 870 5 849 463 5 840 732
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 expected future
market prices per log class. It was assumed that log prices will increase at
6,5% over the next year and at 6% over the long term (2015:6,5% over the next
year and at 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
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 assets to market. These costs have been reviewed and updated to
current actual costs. Inflation rates of 6,15% for the next year and 6% over
the long term (2015: 6,15% for the next year and 6% over the long term) were used.
5. Cash generated from operations
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
Profit before taxation 44 290 50 159 333 400
Adjustments for:
Depreciation, amortisation and
impairments 43 295 26 896 59 825
Loss/(profit) on sale of assets 78 (80) 223
Loss/(profit) on foreign exchange 2 412 - (7 030)
Investment income (6 346) (4 836) (11 762)
Finance costs 42 689 29 186 56 632
Fair value adjustments (14 493) (5 726) (195 337)
Movement in provisions 440 381 573
Movement in share-based payment
liability 4 289 (9 628) (8 363)
Changes in working capital
Inventories (33 489) 51 897 18 873
Trade and other receivables 6 044 10 156 (14 251)
Trade and other payables (43 115) (27 253) 52 180
Cash generated from operations 46 094 121 152 284 963
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 acquired or disposed of during the period.
7. Earnings per share
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
Basic earnings attributable to
ordinary shareholders (R‘000) 32 247 35 438 238 212
Weighted average number of
ordinary shares (thousands) 317 754 326 707 325 286
Earnings per share (cents) 10 11 73
No change other than in respect of the buyback of shares occurred in the
number of shares in issue and no instruments had a dilutive effect.
8. Headline earnings per share
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Reconciliation of basic earnings
to headline earnings
Basic earnings attributable to
ordinary shareholders 32 247 35 438 238 212
Loss/(profit) on sale of assets
and liabilities (net of tax) 57 (56) 161
Fair value adjustment on
investment property (net of tax) - - (1 910)
(Reversal of impairment)/impairment
of plant, equipment and vehicles (42) - 1 729
Headline earnings for the period 32 262 35 382 238 192
Weighted average number of
ordinary shares (thousands) 317 754 326 707 325 286
Headline earnings per share (cents) 10 11 73
9. Core earnings per share
31 Dec 2016 31 Dec 2015 30 Jun 2016
Unaudited Unaudited Audited
R’000 R’000 R’000
Reconciliation of core earnings to
headline earnings
Basic earnings attributable to
ordinary shareholders 32 247 35 438 238 212
Fair value adjustment on
biological assets (net of tax)* (10 435) (4 123) (138 870)
Core earnings for the period 21 812 31 315 99 342
Weighted average number of
ordinary shares (thousands) 317 754 326 707 325 286
Core earnings per share (cents) 7 10 31
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*, Maserame Mouyeme*,
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 Proprietary Limited
www.york.co.za
Date: 15/03/2017 03:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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