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Summarised consolidated financial results for the period ended 30 June 2018
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)
Summarised consolidated financial results for the period ended 30 June 2018
www.york.co.za
Highlights
- Revenue down by 1%.
- EBITDA (Earnings before interest, tax, depreciation and amortisation) up by
12%.
- Debt reduced by R108 million.
- Core earnings per share up by 59%.
- Net asset value per share up 5% from 943c to 989c.
- Cash generated from operations increased by 69% to R286 million.
- Biological asset value up 3%, after regime change adjustment in 2017.
- Earnings per share down by 62%.
Commentary
Operational results
York managed to grow EBITDA by 12% and Core Earnings by 59% despite challenging
market conditions. Weak industry demand and declining lumber prices saw revenue
decline by 1%.
Investment in processing and forestry operations in the last few years together
with continued efficiency gains created the platform for York to produce its
best EBITDA result to date in this period. The expanded plywood plant enabled a
32% increase in plywood sales over the prior year. The new plywood plant has
not yet produced a full 12 months of earnings but is now fully operational.
The 48 daylight press installation was completed on time and within budget.
Plywood now contributes 30% of the Group's turnover and represents an important
source of diversification of earnings for the Company, particularly as regards
export markets. Plywood exports, in a year with a predominantly strong rand,
represented 8% of total revenue.
Forestry mechanisation initiatives, together with cost savings through the
integration of the supply chain in the Highveld, are bearing fruit and this
division increased its profitability to R163 million for the year. External
forestry sales improved marginally from the prior year.
York's lumber sales were impacted by a reduced intake due to high log prices in
the Mpumalanga region. Inefficient processing operations have been scaled down
with other operations functioning at capacity. Operating margins were
maintained by purchasing less logs externally and focusing on customer service.
Certain processing facilities experienced by labour unrest and unprotected
strikes, negatively impacting sales volumes.
Fair value adjustments in the year reflect a 3% increase in the biological
asset value mostly due to volume growth. The prior year included a large
once-off fair value adjustment arising from an alignment of the asset valuation
model to forestry management practices that are resulting in improved yields
per annum, and the application of a 20 year rotation rather than the historic
25 year rotation cycle. This skewed relative earnings in the prior year
resulted in earnings per share being 62% lower in the current year.
Balance sheet and cash flows
Capital expenditure is starting to normalise post the investment in the plywood
plant resulting in improved cash generation with loans and borrowings reduced
by R108 million in the year. Reduced inventory levels and increased creditor
payment terms contributed to a decrease in net working capital, while
R8 million was invested into the Company's self-insurance fund.
Net asset value per share increased by 5% to R9.89 per share.
Outlook
Faced with low economic growth in South Africa, York will focus on cash
generation through cost-efficiencies and optimisation of its supply chain.
The plywood plant is now fully operational and is expected to make a strong
contribution going forward.
The Company is a significant contributor to employment in the regions in
which it operates, with its extensive external log procurement, forestry
activities, processing plant and distribution network. As a responsible
corporate citizen York will continue to work with labour to minimise
industrial relations issues and to contribute to an environment that benefits
all stakeholders.
In the medium to long term, York remains well positioned to benefit from
consolidation in the industry.
In the absence of a significant improvement in economic growth and prospects,
the next year is likely to be difficult for the South African economy. The
Company has adjusted its strategy accordingly, and will implement further
changes to its supply chain and operations where necessary. While there may be
some short term cost to the necessary changes, the outlook for the Company is
positive, despite the difficult market conditions.
Consolidated statement of financial position
As at 30 June 2018 As at 30 June 2017
Audited Audited
R'000 R'000
Assets
Non-current assets
Biological asset (refer note 3) 2 498 082 2 392 979
Investment property 26 731 26 731
Property, plant and equipment 901 202 911 532
Goodwill 565 442 565 442
Intangible assets 463 908
Other financial assets 39 707 31 965
Deferred tax 4 687 3 084
Total non-current assets 4 036 314 3 932 641
Current assets
Biological asset (refer note 5) 420 468 435 539
Inventories 296 619 339 693
Trade and other receivables 258 619 206 982
Current tax receivable 3 363 7 749
Cash and cash equivalents 152 039 159 347
Total current assets 1 131 108 1 149 310
Total assets 5 167 422 5 081 951
Equity and liabilities
Equity
Share capital 1 480 232 1 480 232
Reserves (353) (489)
Retained income 1 652 556 1 512 822
Total equity 3 132 435 2 992 565
Liabilities
Non-current liabilities
Loans from related parties - 1 527
Cash-settled share-based payments - 3 710
Deferred tax 863 901 825 867
Loans and borrowings 636 836 731 498
Provisions 14 623 13 900
Retirement benefit obligations 26 430 25 334
Total non-current liabilities 1 541 790 1 601 836
Current liabilities
Current tax payable 15 277
Loans and borrowings 167 759 180 804
Cash-settled share-based payments - 4 370
Operating lease liability 1 741 1 415
Trade and other payables 323 673 300 684
Bank overdraft 9 -
Total current liabilities 493 197 487 550
Total liabilities 2 034 987 2 089 386
Total equity and liabilities 5 167 422 5 081 951
Consolidated statement of profit or loss and other comprehensive income
Year ended Year ended
30 June 2018 30 June 2017
Audited Audited
R'000 R'000
Revenue 1 817 609 1 832 805
Cost of sales (1 263 458) (1 335 303)
Gross profit 554 151 497 502
Other operating income 23 097 11 626
Other operating (losses)/gains 5 009 (3 024)
Administration expenses (386 691) (354 735)
Operating profit 195 566 151 369
Fair value adjustments 71 327 436 494
Profit before finance costs 266 893 587 863
Investment income 4 899 11 175
Finance costs (81 800) (88 595)
Profit before taxation 189 992 510 443
Taxation (50 258) (143 157)
Profit for the period 139 734 367 286
Other comprehensive loss
Remeasurement of defined benefit liability (663) (806)
Taxation related to components of
other comprehensive income 185 226
Other comprehensive loss for the
period net of taxation (478) (580)
Total comprehensive income 139 256 366 706
Basic earnings per share (cents) (note 7) 44 116
Headline earnings per share (cents) (note 8) 46 116
Consolidated statement of cash flows
Year ended Year ended
30 June 2018 30 June 2017
Audited Audited
R'000 R'000
Cash generated from operations 286 420 169 979
Investment income 4 899 11 175
Finance costs (80 707) (88 595)
Taxation paid (11 950) (3 732)
Net cash from operating activities 198 662 88 827
Cash flows applied to investing activities
Additions to property, plant and equipment (64 680) (154 258)
Additions to intangible assets (24) (168)
Additions to financial assets (14 563) (32 200)
Proceeds from financial assets 6 821 19 622
Additions to biological assets (71 811) (59 082)
Proceeds from biological assets 59 081 1 384
Proceeds from disposal of property,
plant and equipment 103 307
Acquisition of subsidiaries,
net of cash acquired (6 087) -
Repayment of loans from related parties (4 580) -
Proceeds from loans to related parties - 177
Net cash applied to investing activities (95 740) (224 218)
Cash flows from financing activities
Reduction of share capital or buyback
of shares - (6 714)
Net movement in loans and borrowings (107 707) 18 157
Movement in cash-settled share-based payment (6 971)
Net cash (invested in)/from financing
activities (114 678) 11 443
Total cash movement for the year (11 756) (123 948)
Cash at the beginning of the year 159 347 286 144
Effect of exchange rate movement
on cash balances 4 439 (2 849)
Cash at the end of the year 152 030 159 347
Consolidated statement of changes in equity
Defined Share
benefit based
Share Share plan payment Retained 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 2016 15 908 1 471 038 91 - 1 145 536 2 632 573
Profit for the
year - - - - 367 286 367 286
Other comprehensive
loss - - (580) - - (580)
Total comprehensive
income/(loss)
for the year - - (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
Profit for the
period - - - - 139 734 139 734
Other comprehensive
loss - - (478) - - (478)
Total comprehensive
income/(loss)
for the year and
total transactions
with owners - - (478) - 139 734 139 256
Employee share
option scheme - - - 614 - 614
Balance as at 30
June 2018 15 802 1 464 430 (967) 614 1 652 556 3 132 435
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 (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 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 GCD Stoltz
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 consolidated annual financial statements do not include all
the information required for full consolidated annual financial statements, and
should be read in conjunction with the audited consolidated annual financial
statements for the year ended 30 June 2018, which are available on the
Company's website,
http://www.york.co.za/downloads/ConsolidatedFinancialStatements-30June2018.pdf
or from the Company's registered office.
The Company's external auditor, KPMG Inc., has issued an opinion on the Group's
audited consolidated annual financial statements for the year ended 30 June
2018. 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 21 September 2018.
There have been no material changes to judgments 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 2017, except for new standards that became effective during
this financial year.
2. Additional disclosure items
30 June 2018 30 June 2017
Audited Audited
R'000 R'000
Authorised capital commitments
- Contracted, but not provided 11 139 20 267
- Not contracted 10 149 13 022
Capital expenditure 64 680 154 258
Depreciation of property,
plant and equipment 80 937 92 174
Amortisation of intangible assets 469 892
Impairment/(reversal) of trade receivables 1 196 (1 766)
- 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, Credit Guarantee Insurance Corporation of Africa Ltd (CGIC)
insurance and cross-suretyships of R154 million with Absa Bank and R5 million
with FirstRand Bank Limited. The general banking facility is available to all
companies in 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 or disclosure in these results.
- No movement occurred in the number of shares issued during the period under
review.
3. Comparative figures
The summarised consolidated annual financial statements for the year ended 30
June 2017 are presented as published.
4. Operating segments
The Group has three reportable segments, which are the Group's strategic
divisions. The Group operates in three geographic segments, namely South
Africa, Southern Africa Development Community (SADC) and non-SADC regions. The
non-SADC sales refer to plywood sales to the United Kingdom, Belgium, Italy and
the United States of America.
The segmental analysis is as follows:
Processing Forestry and
plants Wholesale Fleet Total
R'000 R'000 R'000 R'000
For the year ending
30 June 2018
Revenue: external
sales 1 165 551 594 667 54 809 1 815 027
Revenue: inter-segment
sales 344 862 - 739 547 1 084 409
Total revenue 1 510 413 594 667 794 356 2 899 436
Depreciation and
amortisation (55 490) (1 737) (20 593) (77 820)
Reportable segment
profit* 81 522 7 537 162 892 251 951
As at 30 June 2018
Capital expenditure 38 294 6 469 17 621 62 384
Fair value adjustment
to biological assets - - 77 303 77 303
For the year ending
30 June 2017
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
As at 30 June 2017
Capital expenditure 110 923 3 426 27 468 141 817
Fair value adjustment
to biological assets - - 436 494 436 494
*Being the earnings before interest, taxation, depreciation and amortisation
(EBITDA)
30 June 2018 30 June 2017
Audited Audited
R'000 R'000
Revenue per geographical area
South Africa 1 499 236 1 592 917
Southern Africa Development Community
(SADC) 179 166 215 602
International (Non-SADC) 139 207 24 286
Total 1 817 609 1 832 805
Reconciliation of reportable segment
profit or loss
Total EBITDA for reportable segments 251 951 255 397
Depreciation, amortisation and
impairment (81 406) (94 732)
Unallocated amounts 25 021 (9 296)
Operating profit 195 566 151 369
5. Biological asset
30 June 2018 30 June 2017
Audited Audited
R'000 R'000
Reconciliation of biological asset
Opening balance 2 828 518 2 334 327
Fair value adjustment
- Increase due to growth and enumerations 304 220 349 005
- Adjustment to standing timber values to
reflect fair value at year-end 101 170 366 875
Decrease due to harvesting (328 088) (279 387)
Purchased plantations 71 811 59 082
Standing timber harvested (59 081) (1 384)
Closing balance 2 918 550 2 828 518
Classified as non-current assets 2 498 082 2 392 979
Classified as current assets 420 468 435 539
30 June 2018 30 June 2017
Audited Audited
Key assumptions used in the discounted
cash flow valuation
Risk-free rate (R186 bond) 8.84% 8.78%
Beta factor 1.25 1.21
Cost of equity 16.97% 16.44%
Pre-tax cost of debt 10.00% 10.50%
Debt:equity ratio 35:65 35:65
After-tax weighted average cost of
capital 13.55% 13.33%
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 a 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 based mainly on factors such as
animal damage and damage due to natural elements such as wind, rain, hail,
droughts and fires. An adjustment factor of 10% (2017:10%) was used.
- Log prices: The price per cubic metre per log class is based on current and
future expected market prices per log class. It was assumed that prices will
increase at 5.15% over the next year, 5.33% over the following year, and at
5.50% per year over the long term (2017: 6.5% over the next year, 6% over the
following year, and at 6% per year over the long term). Log prices are computed
at a weighted average of external market prices and internal prices that were
charged to the company's processing operations. Internal prices are generally
lower than external prices and are limited to levels that result in the
profitability of the processing operations.
- Operating costs: The costs are based on the unit cost of the forest
management activities required for the trees to reach the age of felling. The
costs include the current and expected future costs of harvesting, maintenance
and risk management, as well as an appropriate amount of fixed overhead costs.
The costs exclude the costs necessary to get the asset to market. An inflation
rate of 5.15% over the next year, 5.33% over the following year, and at 5.50%
per year over the long term (2017: 5.8% over the next year, 6% over the
following year and 6% per year over the long term) was used.
- Costs to sell: Costs to sell are the 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'
Beta to calculate the after-tax weighted average cost of capital (WACC), which
was applied to the after taxation net cash flows.
6. Related parties
The Group's related parties are its subsidiaries and key management, including
directors. On 31 January 2018, York Timbers Proprietary Limited acquired the
remaining 50% equity interest in Mbulwa Estates Proprietary Limited from Mondi
Timber (Wood Products) Proprietary Limited. The acquisition resulted in a
change from an investment in joint venture to a wholly owned subsidiary.
A bargain purchase of R0.7 million, included under other operating gains in
the current financial year, was the result of assets at fair value exceeding
the consideration paid.
7. Basic earnings per share
The calculation of basic earnings per share is based on:
30 June 2018 30 June 2017
Audited Audited
Basic earnings attributable to ordinary
shareholders (R'000) 139 734 367 286
Reconciliation of weighted average
number of ordinary shares
Issued number of shares ('000) 316 048 316 048
Bonus element of share-based payment
('000) 826 -
Shares repurchased ('000) - 1 161
Weighted average number of ordinary
shares in issue ('000) 316 874 317 209
Earnings per share (cents) 44 116
Diluted earnings per share (cents) 44 116
8. Headline earnings per share
The calculation of headline earnings per share is based on:
30 June 2018 30 June 2017
Audited Audited
Reconciliation of basic earnings
to headline earnings
Basic earnings attributable to ordinary
shareholders (R'000) 139 734 367 286
Loss on sale of assets and liabilities
(net of tax) (R'000) 128 126
Impairment of plant, equipment and
vehicles (net of tax) (R'000) - 1 200
Bargain purchase on acquisition (R'000) (747) -
Fair value adjustment on deemed disposal
of joint arrangement (R'000) 5 976 -
Headline earnings for the year (R'000) 145 091 368 612
Weighted average number of ordinary
shares in issue ('000) 316 874 317 209
Headline earnings per share (cents) 46 116
Diluted headline earnings per share
(cents) 46 116
9. Core earnings per share
The calculation of core earnings per share is based on:
30 June 2018 30 June 2017
Audited Audited
Basic earnings attributable to ordinary
shareholders (R'000) 139 734 367 286
Fair value adjustment on biological
assets (net of tax) (R'000) (55 658) (314 276)
Core earnings for the year (R'000) 84 076 53 010
Weighted average number of ordinary
shares in issue ('000) 316 874 317 209
Core earnings per share (cents) 27 17
Diluted core earnings per share (cents) 27 17
10. Board of directors
Mr JPF van Buuren resigned as Chief Financial Officer on 30 November 2017 and
Mr GCD Stoltz was appointed as acting Chief Financial Officer from 1 December
2017 and permanently on 26 June 2018.
Company information
Executive directors
Pieter van Zyl (CEO), Gerald Stoltz (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
Gerald Stoltz
Sponsor
One Capital
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Date: 25/09/2018 01:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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