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Summarised consolidated financial results for the year ended 30 June 2017
York Timber Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1916/004890/06
JSE share code: YRK ISIN: ZAE000133450
(York or the Company or the Group)
Summarised consolidated financial results
for the year ended 30 June 2017
www.york.co.za
Highlights
- Revenue up 3%
- Return on equity improved from 9% to 12%
- EBITDA (earnings before interest, tax, depreciation, amortisation
and net of fair value adjustments) up 3%
- Earnings per share up 59% as a result of a 21% increase in the
value of biological assets
- Net asset value per share up 17% from 809 cents to 943 cents
- Core earnings per share down 46% due to increases in depreciation
and interest paid
- Cash generated from operations remains positive at R170 million for the year
Commentary
Group performance and financial review
Revenue achieved for the year was R1,8 billion, a 3% improvement from the
prior year. EBITDA increased by 3% from the prior year and ended on
R246 million. Profit after tax amounted to R367 million, a 54% increase,
driven by a 21% growth in the value of the biological asset's. The increase
in the biological asset’s value includes a once-off adjustment due to an
improvement achieved in the rotation age cycle of the plantation, the
application of precision forestry and improvement in genetic planting
material. The biological asset's value is a fair reflection of its
current market value.
Earnings per share increased to 116 cents from 73 cents per share in the
prior year, a 59% improvement.
Headline earnings per share reflected the same improvement of 59%, at
116 cents per share.
Core earnings per share (being headline earnings per share excluding the fair
value adjustment on biological assets net of tax) decreased by 46%, ending
at 17 cents per share compared to 31 cents per share in the prior year. Core
earnings were negatively impacted due to an increase in depreciation due to
the Plywood Expansion Project and higher interest paid on loan financing
for the Plywood Expansion Project. The full benefit of the Plywood Expansion
Project is not yet reflected in this financial period.
Market conditions
The absence of economic growth and lack of confidence in the construction
sector resulted in lower sales volumes in most product categories.
International demand for plywood is strong, with a wide range of applications.
York is well-positioned to fully participate in this market. York's market
share increased in the subdued local lumber market and showed positive growth
in the East and West Africa regions.
Operational review
The York lumber mills performed exceptionally well during the year under review
at high efficiency levels and managed to extract maximum value from its raw
materials. The Plywood Expansion Project was commissioned as planned but was
scaled down to address one press with critical failure and another with metal
fatigue. This resulted in York making the two presses redundant and replacing
them with a new higher capacity press that will be commissioned in February
2018. This press upgrade was not part of the initial Plywood Expansion Project.
Raw material supply was repeatedly interrupted due to excessive price increases
announced by the South African Forestry Company (SOC) Limited (SAFCOL). York
is endeavoring to resolve this marketing policy dispute with SAFCOL, as we
consider a 17% annual price increase on logs as unreasonable.
Forestry results were negatively impacted by this impasse, with higher than
anticipated logistics costs, as logs were transported over longer than expected
distances to keep plants fully supplied and operational. Alternative raw
material supplies are available to York and are being secured.
The Wholesale strategy is delivering exceptional results as distribution costs
are reduced and York has the ability to respond quickly to customer buying
patterns.
Balance sheet movements
York continued to invest in its processing capabilities, totaling R154 million
for the 2017 financial year. In addition, the Company secured standing trees
to the value of R59 million. Investment activities were partly financed by
increasing long-term debt by R98 million. Existing commitments of R80 million
were repaid during the 2017 financial year.
Working capital increased as a result of additional warehouses being opened
and accumulation of export orders. Export orders were deferred due to excessive
distribution costs being charged. This issue has been resolved post year-end.
York ended the 2017 financial year with R159 million cash and has sufficient
cash reserves to fund the increase in working capital.
Share repurchase programme
In compliance with the JSE Limited Listings Requirements (Listings
Requirements), the Companies Act of South Africa, 71 of 2008 (Companies Act)
and in accordance with the resolution approved by shareholders at the 2016
annual general meeting, York continued to repurchase shares through its
subsidiary, Agentimber Proprietary Limited. The repurchased shares total 4,6%
of the issued shares. York's Board of Directors ("Board") has complete
confidence in the value of the business and will request shareholders to
continue supporting the share repurchase programme at the upcoming 2017 annual
general meeting.
Outlook
The insourcing of mechanical harvesting and transport has proven to be very
successful and York will continue introducing further appropriate technologies
and equipment upgrades. Traditional costs associated with outdated forestry
practices are being replaced with better utilisation of capital equipment,
fuel load reduction, improvement in tree breeding and enhancing genetic
material that responds more effectively to growth sites.
Sustainable raw material supply is key to the success of York's growth
strategy. South Africa has limited permissible area available to expand its
forestry footprint. The Company is therefore engaged in expanding its forestry
operations outside of South Africa.
The plywood operation is set to deliver the expected results and is currently
achieving the defined and required operational specifications. The
commissioning of the higher capacity press will allow York to further increase
volume output aimed at the export market.
It is unfortunate that there has been no announcement for the preferred bidder
of the Renewable Energy Independent Power Producer Procurement Programme
submitted under the expedited 4b window. York is exploring alternative options
to participate in the energy market as this remains a very viable revenue
stream.
York is expanding its warehouses, with the aim of making its customers
successful in challenging market conditions.
Consolidated statement of financial position
As at As at
30 June 2017 30 June 2016
Audited Audited
R'000 R'000
Assets
Non-current assets
Biological asset (note 5) 2 392 979 1 993 501
Investment property 26 731 26 231
Property, plant and equipment 911 532 852 096
Goodwill 565 442 565 442
Intangible assets 908 1 632
Other financial assets 31 965 19 387
Deferred tax 3 084 3 039
Total non-current assets 3 932 641 3 461 328
Current assets
Biological asset (note 5) 435 539 340 826
Inventories 339 693 239 459
Trade and other receivables 206 982 225 516
Current tax receivable 7 749 8 183
Cash and cash equivalents 159 347 286 144
Total current assets 1 149 310 1 100 128
Total assets 5 081 951 4 561 456
Equity and liabilities
Equity
Share capital 1 480 232 1 486 946
Reserves (489) 91
Retained income 1 512 822 1 145 536
Total equity 2 992 565 2 632 573
Liabilities
Non-current liabilities
Loans from related parties 1 527 1 350
Cash-settled share-based payments 3 710 3 191
Deferred tax 825 867 687 332
Loans and borrowings 731 498 802 196
Provisions 13 900 13 114
Retirement benefit obligations 25 334 24 010
Total non-current liabilities 1 601 836 1 531 193
Current liabilities
Current tax payable 277 2
Loans and borrowings 180 804 91 949
Cash-settled share-based payments 4 370 3 369
Operating lease liability 1 415 80
Trade and other payables 300 684 302 290
Total current liabilities 487 550 397 690
Total liabilities 2 089 386 1 928 883
Total equity and liabilities 5 081 951 4 561 456
Consolidated statement of comprehensive income
Year ended Year ended
30 June 2017 30 June 2016
Audited Audited
R'000 R'000
Revenue 1 832 805 1 771 049
Cost of sales (1 335 303) (1 270 483)
Gross profit 497 502 500 566
Other operating income 11 626 10 837
Other operating (losses)/gains (3 024) 6 758
Administration expenses (354 735) (335 228)
Operating profit 151 369 182 933
Fair value adjustments 436 494 195 337
Profit before finance costs 587 863 378 270
Investment income 11 175 11 762
Finance costs (88 595) (56 632)
Profit before taxation 510 443 333 400
Taxation (143 157) (95 188)
Profit for the year 367 286 238 212
Other comprehensive income:
Remeasurement of defined benefit
liability (806) (890)
Taxation related to components of
other comprehensive income 226 249
Other comprehensive income for the
year net of taxation (580) (641)
Total comprehensive income 366 706 237 571
Basic earnings per share (cents)
(note 7) 116 73
Headline earnings per share (cents)
(note 8) 116 73
Consolidated statement of cash flows
Year ended Year ended
30 June 2017 30 June 2016
Audited Audited
R'000 R'000
Cash generated from operations 169 979 284 963
Investment income 11 175 11 762
Finance costs (88 595) (56 632)
Taxation paid (3 732) (14 987)
Net cash from operating activities 88 827 225 106
Cash flows applied to investing activities
Purchase of property, plant and
equipment (154 258) (283 241)
Proceeds from disposal of property,
plant and equipment 307 288
Purchase of investment property - (1 874)
Purchase of intangible assets (168) -
Proceeds/(repayment) of loans from/to
Group companies 177 (155)
Purchase of financial assets (32 200) (7 550)
Proceeds from sale of financial
assets 19 622 30 063
Purchase of biological assets (59 082) (1 384)
Proceeds from sale of biological
assets 1 384 -
Net cash applied to investing
activities (224 218) (263 853)
Cash flows from financing activities
Reduction of share capital or buyback
of shares (6 714) (24 992)
Net movement in loans and borrowings 18 157 150 785
Net cash from financing activities 11 443 125 793
Total cash movement for the year (123 948) 87 046
Cash at beginning of year 286 144 192 068
Effect of exchange rate movement on
cash balances (2 849) 7 030
Cash at end of year 159 347 286 144
Consolidated statement of changes in equity
Defined
Share Share benefit plan Retained Total
capital premium reserve income equity
Audited R'000 R'000 R'000 R'000 R'000
Balance as at
1 July 2015 16 377 1 495 561 732 907 324 2 419 994
Profit for the
year - - - 238 212 238 212
Other
comprehensive
income - - (641) - (641)
Total
comprehensive
income for the
year - - (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
Profit for the
year - – – 367 286 367 286
Other
comprehensive
income - - (580) - (580)
Total
comprehensive
income for the
year and total
transactions
with owners - - (580) 367 286 366 706
Purchase of own
shares (106) (6 608) - - (6 714)
Balance as at
30 June 2017 15 802 1 464 430 (489) 1 512 822 2 992 565
Notes to the consolidated annual financial statements
1. Basis of preparation
These summarised consolidated annual financial statements have been prepared
in accordance with the Listings Requirements, the Companies Act and the
Companies Regulations, 2011. The Group has applied the framework concepts and
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.
These summarised consolidated annual financial statements have been extracted
from and 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 for the year ended 30 June 2017, which are
available on the Company's website, www.york.co.za, or from the Company's
registered office. The directors take full responsibility for the preparation
of the summarised consolidated annual financial statements and for the correct
extraction of the financial information.
These summarised consolidated annual financial statements have been extracted
from audited information, but are not audited. The auditor, KPMG Inc., has
issued an opinion on the Group's consolidated annual financial statements for
the year ended 30 June 2017. 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 Company's registered office.
These summarised consolidated annual financial results have been prepared on
the going concern basis and were approved by the Board on 13 September 2017.
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 in terms of
IFRS and are consistent in all material respects with those applied during the
year ended 30 June 2016, except for the new standards that became effective
during this financial year.
2. Additional disclosure items
30 Jun 2017 30 Jun 2016
Audited Audited
R'000 R'000
Authorised capital commitments
- Contracted, but not provided 20 267 59 229
- Not contracted 13 022 32 112
Capital expenditure 154 258 283 241
Depreciation of property, plant and
equipment 92 174 56 344
Amortisation of intangible assets 892 1 079
Impairment of trade receivables (1 766) (335)
- The Group did not have any litigation settlements during the reporting period.
- The banking facility granted by Absa Bank (2016: FirstRand Bank Limited)
was secured by a cession of trade receivables and Credit Insurance Solutions
(CIS) insurance and cross-suretyships of R154 million with Absa Bank, and
R5 million with FirstRand Bank Limited, within the Group. The general banking
facility is available to all companies across the Group.
- 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.
- The Company repurchased 2,1 million shares through a subsidiary company
within the Group.
3. Comparative figures
The summarised consolidated annual financial statements for the year ended
30 June 2016 are presented as previously published.
4. Operating segments
The Group has three reportable segments, which are the Group's strategic
divisions. The Group operates in three geographical areas, namely South
Africa, Southern Africa Development Community (SADC) and non-SADC
regions.
The segmental analysis is as follows:
Prosessing
plants Wholesale Forestry Total
2017 R'000 R'000 R'000 R'000
Revenue: external
sales 1 245 719 523 233 60 699 1 829 651
Revenue: inter-segment
sales 252 837 - 708 406 961 243
Total revenue 1 498 556 523 233 769 105 2 790 894
Depreciation and
amortisation (69 269) (1 782) (18 726) (89 777)
Reportable segment
profit* 137 738 21 759 95 900 255 397
Capital expenditure 110 923 3 426 27 468 141 817
2016
Revenue: external
sales 1 227 743 464 958 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
*Being the earnings before interest, taxation, fair value adjustments,
depreciation and amortisation (EBITDA)
30 Jun 2017 30 Jun 2016
Audited Audited
R'000 R'000
Revenue per geographical area
South Africa 1 592 917 1 552 248
Southern Africa Development
Community (SADC) 215 602 218 801
International (Non-SADC) 24 286 -
Total 1 832 805 1 771 049
Reconciliation of reportable
segment profit or loss
Total EBITDA for reportable
segments 255 397 242 202
Depreciation, amortisation and
impairment (94 732) (57 115)
Unallocated amounts (9 296) (2 154)
Operating profit 151 369 182 933
5. Biological asset
30 Jun 2017 30 Jun 2016
Audited Audited
R'000 R'000
Reconciliation of biological asset
Opening balance 2 334 327 2 140 067
Fair value adjustment
- Increase due to growth and
enumerations 349 005 329 011
- Adjustment to standing timber values
to reflect fair value at year-end 366 875 189 821
Decrease due to harvesting (279 387) (325 956)
Purchased plantations 59 082 1 384
Standing timber harvested (1 384) -
Closing balance 2 828 518 2 334 327
Classified as non-current assets 2 392 979 1 993 501
Classified as current assets 435 539 340 826
30 Jun 2017 30 Jun 2016
Audited Audited
Key assumptions used in the
discounted cash flow valuation
Risk-free rate (R186 bond) 8,78% 8,80%
Beta factor 1,21 1,12
Cost of equity 16,44% 15,96%
Pre-tax cost of debt 10,50% 10,50%
Debt:equity ratio 35:65 35:65
After-tax weighted average cost of
capital 13,33% 13,02%
The additional key assumptions underlying the discounted cash flow (DCF)
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 by less than in the prior year due
to changes in temporary unplanted areas and trees per hectare.
- 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
6% over the long term (2016: 6,5% per year over the next year, 6% over the
following year 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 5,8% in year one and 6% over the long term was used (2016: 6,15% in
year one and 6% over the long term).
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. Basic earnings per share
The calculation of basic earnings per
share is based on:
30 Jun 2017 30 Jun 2016
Audited Audited
Basic earnings attributable to
ordinary shareholders (R'000) 367 286 238 212
Weighted average number of
ordinary shares in issue ('000) 317 209 325 286
Earnings per share (cents) 116 73
No change occurred in the number of shares in issue and no instruments had a
dilutive effect. A total of 15,2 million shares (2016: 13,1 million shares)
have been repurchased by the Group and are held as treasury shares.
8. Headline earnings per share
The calculation of headline earnings per share is based on:
30 Jun 2017 30 Jun 2016
Audited Audited
R'000 R'000
Reconciliation of basic earnings
to headline earnings
Basic earnings attributable to
ordinary shareholders 367 286 238 212
Loss on sale of assets and liabilities
(net of tax) 126 161
Fair value adjustment on investment
property (net of tax) - (1 910)
Impairment of plant, equipment and
vehicles (net of tax) 1 200 1 729
Headline earnings for the year 368 612 238 192
Weighted average number of ordinary
shares in issue ('000) 317 209 325 286
Headline earnings per share (cents) 116 73
9. Core earnings per share
The calculation of core earnings per share is based on:
30 Jun 2017 30 Jun 2016
Audited Audited
R'000 R'000
Basic earnings attributable to
ordinary shareholders 367 286 238 212
Fair value adjustment on biological
assets (net of tax) (314 276) (138 870)
Core earnings for the year 53 010 99 342
Weighted average number of ordinary
shares in issue ('000) 317 209 325 286
Core earnings per share (cents) 17 31
10. Board of Directors
Mr Dinga Mncube was appointed as acting Chairman of the Board from 16
January 2017 to 6 April 2017 during Dr Myers' recovery from an operation.
Dr Myers resumed his role as Chairman of the Board with effect from
6 April 2017.
Company information
Executive directors: Pieter van Zyl (Chief Executive Officer), Pieter van Buuren
(Chief Financial Officer) 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
Sponsor: One Capital
Transfer secretaries: Computershare Investor Services Proprietary
Limited
Date: 26/09/2017 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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