Wrap Text
Unaudited condensed consolidated interim financial results for the six months ended 31 December 2017
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 2017
Salient features
- Revenue down 3%
- EBITDA up 16%
- Core earnings per share up 57% from 7 cents to 11 cents
- Increased harvesting of own plantation
- Net asset value per share up 16% from 837 cents to 975 cents
- Installation of 48 Daylight press
Commentary
Group performance and financial review
Revenue for the six months ended 31 December 2017 of R922 million is similar
to the comparative period.
Earnings before interest, tax, depreciation and amortisation (EBITDA) of
R127 million was up 16% from the comparative period, mostly as a result of
increased harvesting from own plantations.
Both earnings per share (EPS) and headline earnings per share (HEPS)
increased from 10 cents to 28 cents per share.
Core earnings per share (being basic earnings per share excluding the fair
value adjustment on biological assets, net of tax) increased from 7 cents
to 11 cents per share.
Cash generated from operations of R72 million was up 55% and the cash
balance at the reporting date was R104 million.
The value of external logs purchased was 48% lower than the comparative
period. South African Forestry Company (SOC) Limited (SAFCOL) introduced
excessive price increases in April 2017. This resulted in York purchasing
less volume from SAFCOL, utilising more of its own plantations on a
sustainable basis, together with purchases from other third parties to
ensure market demand is met.
Market conditions
There was a weakening in industry lumber sales over the period, consistent
with the slow local economic growth rate. The reduced demand impacted
production of lumber which decreased by 8% for the reporting period.
Plywood production increased by 7% and sales volumes by 14% over the
comparative period. Internationally the Group has seen an increase in
the demand for plywood and products with a high standard of specifications
resulting in export volumes steadily increasing. Although recent Rand
strengthening impacted the average selling prices, the international
US Dollar price for plywood for the reporting period had increased, thereby
further improving export opportunities.
Operational review
Processing
The upgraded Plywood plant is operating at the required production
levels with the full commissioning of the 48 Daylight press to be
completed by the end of March 2018.
Processing plants are confronted with high log costs, a weak demand
and price pressure on lumber products. Plants are required to run at high
levels of efficiency and costs are optimised to ensure sustainable
operation.
Forestry
Forestry delivered excellent results for the reporting period. New
planting regimes are now fully implemented at all forestry operations with
a resultant improvement in forecast yields. These regimes are achieving
better yields through site-specie matching and growth site
optimisation.
Wholesale
New warehouses were introduced to increase the Group's market
distribution network. A wider product range has been introduced,
improving the Group's product offering to customers.
Balance sheet movements
York invested R43 million in additions to property, plant and
equipment. The bulk of this related to the installation of a new
48 Daylight press. The net increase in the biological asset value
of R30 million as at the 2017 financial year-end was due to an increase
in the fair value of R74 million and a decrease in standing timber
harvested of R44 million.
Interest bearing borrowings decreased by R78 million during the
reporting period.
Working capital investment increased by R67 million during the period,
mainly as a result of a decrease in trade and other payables. The
decrease is a result of the purchased plantations at year-end being
paid during the reporting period. Accounts receivable were managed
well. Inventory remained at similar levels over the reporting period.
Cash flow
Cash flows from operating activities of R73 million was used to
pay net interest of R40 million and provisional tax of R9 million.
Purchases of property, plant and equipment of R43 million and a
repayment of loans and borrowings of R78 million resulted in a net
cash decrease of R54 million for the reporting period. Cash at
reporting period-end was R104 million.
Changes to directorate
Mr Pieter van Buuren resigned as Chief Financial Officer (CFO) of the
Company, with effect from 30 November 2017; and Mr Gerald Stoltz was
appointed as acting CFO, with effect from 1 December 2017.
Outlook
The forecasted economic growth rate is promising for the construction
sector from which York will benefit. York will continue to expand its
distribution network, enhancing the Group's service offering to
customers. International demand for plywood is strong and continues
to grow in a wider application range of the housing and infrastructure
sectors.
SAFCOL has engaged the Mpumalanga processing industry and it is foreseen
that an amicable solution to long-term supply agreements and
transparent pricing mechanism can be achieved. York will continue to
engage with SAFCOL to resolve these issues, failing which York will
resort to seek legal recourse.
York's vision is to be the leading integrated timber processor in
Southern Africa, proficiently delivering products and services of
the highest quality. In line with this, York is pursuing other
investment opportunities.
Consolidated statement of financial position
as at 31 December 2017
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Assets
Non-current assets
Biological assets (note 4) 2 618 711 2 014 987 2 392 979
Investment property 26 731 7 753 26 731
Property, plant and
equipment 915 919 916 090 911 532
Goodwill 565 442 565 442 565 442
Intangible assets 673 1 357 908
Deferred tax 1 604 871 3 084
Other financial assets 32 020 24 031 31 965
Total non-current assets 4 161 100 3 530 531 3 932 641
Current assets
Biological assets (note 4) 239 587 332 449 435 539
Inventories 328 181 272 948 339 693
Current tax receivable 12 885 9 667 7 749
Trade and other
receivables 212 363 219 472 206 982
Cash and cash equivalents 104 005 235 336 159 347
Total current assets 897 021 1 069 872 1 149 310
Total assets 5 058 121 4 600 403 5 081 951
Equity and liabilities
Equity
Share capital 15 802 15 833 15 802
Share premium 1 464 430 1 465 999 1 464 430
Reserves (489) 91 (489)
Retained income 1 600 223 1 177 783 1 512 822
Total equity 3 079 966 2 659 706 2 992 565
Liabilities
Non-current liabilities
Cash-settled share-based
payments - 9 435 3 710
Deferred tax 854 847 695 750 825 867
Loans from related parties 1 527 1 527 1 527
Loans and borrowings 650 105 791 906 731 498
Provisions 13 900 13 114 13 900
Retirement benefit
obligations 25 755 24 450 25 334
Total non-current
liabilities 1 546 134 1 536 182 1 601 836
Current liabilities
Current tax payable 920 - 277
Loans and borrowings 184 660 143 847 180 804
Cash-settled share-based
payments 17 073 1 413 4 370
Operating lease liability 1 647 80 1 415
Trade and other payables 227 721 259 175 300 684
Total current liabilities 432 021 404 515 487 550
Total liabilities 1 978 155 1 940 697 2 089 386
Total equity and liabilities 5 058 121 4 600 403 5 081 951
Consolidated statement of profit or loss and other comprehensive income
for the six months ended 31 December 2017
Six months Six months Year
ended ended ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 921 785 952 519 1 832 805
Cost of sales (615 446) (703 405) (1 335 303)
Gross profit 306 339 249 114 497 502
Other operating income 5 718 5 560 8 602
Administration expenses (223 499) (188 534) (354 735)
Operating profit 88 558 66 140 151 369
Fair value adjustment 74 046 14 493 436 494
Profit before finance
costs 162 604 80 633 587 863
Investment income 2 230 6 346 11 175
Finance costs (42 201) (42 689) (88 595)
Profit before taxation 122 633 44 290 510 443
Taxation (35 232) (12 043) (143 157)
Profit for the period 87 401 32 247 367 286
Other comprehensive
income/(loss):
Remeasurement of defined
benefit liability - - (806)
Taxation related to
remeasurement of defined
benefit liability - - 226
Other comprehensive
income for the period net
of taxation - - (580)
Total comprehensive
income 87 401 32 247 366 706
Earnings per share
(cents) (note 7) 28 10 116
Headline earnings per
share (cents) (note 8) 28 10 116
Consolidated statement of changes in equity
for the six months ended 31 December 2017
Defined
benefit
Share Share plan
capital premium reserve
R'000 R'000 R'000
Balance as at 1 July 2016
(Audited) 15 908 1 471 038 91
Profit for the year - - -
Other comprehensive income
Change in defined benefit
plan, net of tax - - (580)
Total other comprehensive
income - - (580)
Total comprehensive income
for the year and total
transactions with owners - - (580)
Purchase of own shares (106) (6 608) -
Balance as at 30 June 2017
(Audited) 15 802 1 464 430 (489)
Profit for the period - - -
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 - - -
Purchase of own shares - - -
Balance as at
31 December 2017 (Unaudited) 15 802 1 464 430 (489)
Retained Total
income equity
R'000 R'000
Balance as at 1 July 2016 (Audited) 1 145 536 2 632 573
Profit for the year 367 286 367 286
Other comprehensive income
Change in defined benefit plan,
net of tax - (580)
Total other comprehensive income - (580)
Total comprehensive income for the
year and total transactions with
owners 367 286 366 706
Purchase of own shares - (6 714)
Balance as at 30 June 2017 (Audited) 1 512 822 2 992 565
Profit for the period 87 401 87 401
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 87 401 87 401
Purchase of own shares - -
Balance as at 31 December 2017
(Unaudited) 1 600 223 3 079 966
Consolidated statement of cash flows
for the six months ended 31 December 2017
Six months Six months Year
ended ended ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash flows from operating
activities
Cash generated from
operations (note 5) 71 546 46 094 169 979
Investment income 2 230 6 346 11 175
Finance costs (42 201) (42 689) (88 595)
Taxation paid (9 265) (2 944) (3 732)
Net cash from operating
activities 22 310 6 807 88 827
Cash flows applied to
investing activities
Purchase of property,
plant and equipment (43 117) (88 534) (154 258)
Purchase of intangible
assets - (167) (168)
Proceeds from disposal of
property, plant and
equipment 101 87 307
Proceeds from loans to
Group companies - 177 177
Purchase of financial
assets (55) (4 644) (32 200)
Proceeds on sale of
financial assets - - 19 622
Purchase of biological
assets - - (59 082)
Harvesting of purchased
biological assets 44 266 1 384 1 384
Net cash applied to
investing activities 1 195 (91 697) (224 218)
Cash flows from financing
activities
Buyback of shares - (5 114) (6 714)
Net (repayment)/proceeds
of loans and borrowings (77 537) 41 608 18 157
Net cash from financing
activities (77 537) 36 494 11 443
Total cash movement for
the period (54 032) (48 396) (123 948)
Cash at beginning of the
period 159 347 286 144 286 144
Effect of exchange rate
movement on cash balances (1 310) (2 412) (2 849)
Cash at end of the period 104 005 235 336 159 347
Notes to the consolidated interim financial statements
for the six months ended 31 December 2017
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 Pronouncements as
issued by Financial Reporting Standards Council. The financial results
have been compiled under the supervision of Gerald Stoltz CA (SA), the
Acting 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 2017 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 by the Company's external auditors. The interim financial
statements, which have been prepared on the going concern basis, were
approved by the Board of Directors on 5 March 2018.
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 and methods of computation are in
terms of International Financial Reporting Standards and are consistent
in all material respects with those applied in the year ended
30 June 2017.
2. Additional disclosure items
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Authorised capital commitments:
- Contracted, but not
provided 9 498 56 829 20 267
- Not contracted 13 298 22 474 13 022
Capital expenditure 43 117 88 701 154 258
Depreciation of property,
plant and equipment 38 593 42 911 92 174
Amortisation of intangible
assets 235 442 892
- The Group did not have any litigation settlements during the
reporting period.
- The banking facility granted by Absa Bank 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. The general banking facility of R37,5 million
with Absa Bank and R100 000 with FirstRand Bank Limited and asset and
vehicle finance facility of R92,5 million with Absa Bank and R20 million
with Wesbank are 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 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 three geographical segments, namely
South Africa, countries within the Southern Africa Development Community
(SADC) and non-SADC regions.
The segment analysis is as follows:
Processing plants
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue: external sales 596 809 633 421 1 245 719
Revenue: inter-segment sales 184 009 142 340 252 837
Total revenue 780 818 775 761 1 498 556
Depreciation and amortisation (26 658) (32 269) (69 269)
Reportable segment profit* 44 572 66 529 137 738
Fair value adjustment - - -
Capital expenditure 31 537 65 094 110 923
Wholesale
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue: external sales 298 105 281 149 523 233
Revenue: inter-segment sales - - -
Total revenue 298 105 281 149 523 233
Depreciation and amortisation (777) (794) (1 782)
Reportable segment profit* 9 423 14 030 21 759
Fair value adjustment - - -
Capital expenditure 3 994 2 037 3 426
Forestry
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue: external sales 24 518 36 808 60 699
Revenue: inter-segment sales 371 271 358 724 708 406
Total revenue 395 789 395 532 769 105
Depreciation and amortisation (9 317) (7 967) (18 726)
Reportable segment profit* 97 156 25 389 95 900
Fair value adjustment 74 046 14 493 436 494
Capital expenditure 6 130 20 711 27 468
Total
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue: external sales 919 432 951 378 1 829 651
Revenue: inter-segment sales 555 280 501 064 961 243
Total revenue 1 474 712 1 452 442 2 790 894
Depreciation and amortisation (36 753) (41 030) (89 777)
Reportable segment profit* 151 151 105 948 255 397
Fair value adjustment 74 046 14 493 436 494
Capital expenditure 41 661 87 842 141 817
* Being earnings before interest, taxation, depreciation, amortisation,
impairment and fair value adjustments (EBITDA).
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Reconciliation of reportable
segment profit or loss
Total EBITDA for reportable
segments 151 151 105 948 255 397
Depreciation, amortisation
and impairment (38 824) (43 295) (94 732)
Unallocated amounts (23 769) 3 487 (9 296)
Operating profit 88 558 66 140 151 369
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue per geographical area
South Africa 767 561 838 670 1 592 917
Southern Africa Development
Community (SADC) 99 883 110 799 215 602
International (Non-SADC) 54 341 3 050 24 286
Total 921 785 952 519 1 832 805
4. Biological assets
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Change in discounted cash
flows (DCF) value
attributable to:
Opening balance 2 828 518 2 334 327 2 334 327
Growth (44 045) 120 739 134 272
Revenue and price 128 572 (4 004) 270 281
Operating cost (21 927) 27 336 (74 727)
Discount rate 11 445 (129 578) (73 151)
Sale of plantation - - -
Purchased plantations - - 59 082
Standing timber harvested (44 265) (1 384) (1 384)
Younger clearfelling age*** – – 179 818
Closing balance 2 858 298 2 347 436 2 828 518
Classified as non-current
assets 2 618 711 2 014 987 2 392 979
Classified as current
assets** 239 587 332 449 435 539
** Being the biological assets to be harvested and sold in the
12 months after the reporting date.
*** The clearfell age has reduced from 25 years to 20 years in line
with the growth forecasts from the new regime, and the clearfell
practice and plans used by the Group. The effect of a younger
clearfelling age is a loss of volume which could have been generated
in the additional period offset by earlier access to the cash flows
from the harvested timber.
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
Cubic metres Cubic metres Cubic metres
Reconciliation of standing
volume
Opening balance 6 001 889 5 840 732 5 840 732
Increase due to growth and
enumeration 390 220 339 273 807 904
Decrease due to harvesting (417 817) (327 135) (646 747)
Closing balance 5 974 292 5 852 870 6 001 889
The additional key assumptions underlying the discounted cash flow
valuation have been updated as follows:
- Volumes: The expected yields per log class are calculated with
reference to growth models relevant to the planted area. The growth
models are derived from actual trial data that has been measured
annually since 1976. A merchandising model, using the modelled tree
shapes at various ages, is used to divide the trees into predefined
products as basis for calculating log yields.
- Volume adjustment factor: Due to the susceptibility of the plantations
to the environment, an adjustment factor is used to reduce the volumes
obtained from the merchandising model. This percentage is mainly based
on factors such as animal damage and damage due to the natural elements
such as wind, rain, hail, droughts and fires. An adjustment factor
of 10% (2016: 10%) has been used.
- 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% for the next year and 6% over the long term
(2016: 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% for the next year and 6% over the long term (2016:
6,15% for the next year and 6% over the long term) were used.
- Costs to sell: Costs to sell are incremental costs directly
attributable to the disposal of an asset, excluding finance costs and
income taxes. The only costs to sell applied are harvesting costs, which
are included under operating costs. No other selling costs are included.
- Discount rate: The directors used a comparable forestry group of
companies after-tax weighted average cost of capital which was applied
to the after taxation net cash flows.
5. Cash generated from operations
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Profit before taxation 122 633 44 290 510 443
Adjustments for: Depreciation,
amortisation and
impairments 38 828 43 295 93 066
Loss on sale of assets 37 78 175
Loss on foreign exchange 1 310 2 412 2 849
Investment income (2 230) (6 346) (11 175)
Finance costs 42 201 42 689 88 595
Fair value adjustments (74 046) (14 493) (436 494)
Impairments of property,
plant and equipment - - 1 666
Movement in operating
lease 232 - 1 335
Movement in retirement
benefit liabilities 421 - 518
Movement in provisions - 440 786
Movement in share-based
payment liability 8 993 4 289 1 520
Changes in working capital
Inventories 11 512 (33 489) (100 234)
Trade and other
receivables (5 381) 6 044 18 534
Trade and other payables (72 964) (43 115) (1 605)
Cash generated from
operations 71 546 46 094 169 979
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 reporting period.
7. Earnings per share
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
Basic earnings 87 401 32 247 367 286
attributable to ordinary
shareholders (R'000)
Weighted average number
of ordinary shares
(thousands) 316 048 317 754 317 209
Earnings per share
(cents) 28 10 116
No shares have been repurchased during the reporting period.
8. Headline earnings per share
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Reconciliation of headline
earnings
Basic earnings
attributable to ordinary
shareholders 87 401 32 247 367 286
Loss on sale of assets
(net of tax) 27 57 126
(Reversal of impairment)/
impairment of plant, equipment
and vehicles - (42) 1 200
Headline earnings for
the period 87 428 32 262 368 612
Weighted average number
of ordinary shares
(thousands) 316 048 317 754 317 209
Headline earnings per
share (cents) 28 10 116
9. Core earnings per share
31 Dec 2017 31 Dec 2016 30 Jun 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Reconciliation of core earnings
Basic earnings attributable
to ordinary shareholders 87 401 32 247 367 286
Fair value adjustment on
biological assets
(net of tax) (53 313) (10 435) (314 276)
Core earnings for the
period 34 088 21 812 53 010
Weighted average number 316 048 317 754 317 209
of ordinary shares
(thousands)
Core earnings per share
(cents) 11 7 17
10. Subsequent events
Subsequent to 31 December 2017, the Company acquired the remaining 50%
shareholding in Mbulwa Estate Proprietary Limited from Mondi Timber
(Wood Products) Proprietary Limited.
Company information
Executive directors: Pieter van Zyl (CEO), Gerald Stoltz (Acting CFO)
Non-executive directors: Dr Jim Myers* (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
Sponsor: One Capital
Transfer secretaries: Computershare Investor Services
Proprietary Limited
Date: 09/03/2018 04:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.