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The York Timber Organisation Limited - Interim report for the six months to 30
June 2002
The York Timber Organisation Limited
Reg. No. 1916/004890/06
JSE Share code: YRK
ISIN: ZAE000008108
Interim report for the six months to 30 June 2002
Group income statements
Unaudited Audited
30 June 31 December
2002 2001 2001
R000 R000 R000
Revenue 41 745 33 607 72 003
Cost of sales (17 950) (14 145) (33 200)
Gross profit 23 795 19 462 38 803
Staff costs (11 370) (9 978) (21 747)
Depreciation (920) (1 009) (2 181)
Other operating expenses (8 193) (6 888) (11 193)
Profit from operations 3 312 1 587 3 682
Legal costs (1 217) (237) (580)
Increase in net policy value
of sinking fund - - 476
Profit before finance costs 2 095 1 350 3 578
Finance costs (585) (810) (1 410)
Profit before taxation 1 510 540 2 168
Taxation (22) (24) (224)
Profit after taxation 1 488 516 1 944
Minority shareholders` interest (177) (191) (387)
Net profit for period 1 311 325 1 557
Notes to the financial statements
Unaudited Audited
30 June 31 December
2002 2001 2001
1. Earnings per share (cents) 11,9 2,9 14,1
2. Headline earnings per share (cents) 11,9 2,9 13,7
3. Dividends per share (cents) - - -
4. Capital expenditure for the period (R000) 242 226 249
5. Capital expenditure committed (R000) - - -
6. Capital expenditure authorised (R000) - - -
7. Shares in issue (000) 11 040 11 040 11 040
8. Net asset value per share (cents) 358 335 346
9. Gearing (%) 9 29 31
10. Current ratio (Ratio) 1,12 1,57 1,56
Group balance sheets
Unaudited Audited
30 June 31 December
2002 2001 2001
R000 R000 R000
ASSETS
Non-current assets
Property, plant, equipment and vehicles 28 181 30 009 28 857
Investments 1 908 25 1 908
Long-term receivables 5 631 5 631 5 631
Sinking fund 3 238 2 761 3 238
38 958 38 426 39 634
Current assets 24 480 30 928 26 407
Inventories 6 646 9 388 7 908
Accounts receivable 17 569 21 257 14 820
Bank balances and cash 265 283 3 679
Total assets 63 438 69 354 66 041
EQUITY AND LIABILITIES
Capital and reserves
Share capital 3 612 3 612 3 612
Non-distributable reserves 14 660 15 515 15 079
Accumulated profits 17 216 13 818 15 486
Ordinary shareholders` funds 35 488 32 945 34 177
Minority shareholders`
interest in subsidiary 4 000 4 000 4 000
Total shareholders` funds 39 488 36 945 38 177
Non-current liabilities
Interest bearing borrowings 1 998 12 749 10 918
Current liabilities 21 952 19 660 16 946
Accounts payable 19 683 17 018 14 481
Taxation 81 2 156
Short-term borrowings 2 188 2 640 2 309
Total equity and liabilities 63 438 69 354 66 041
Abridged group cash flow statements
Unaudited Audited
30 June 31 December
2002 2001 2001
R000 R000 R000
Cash generated by operating
Activities 6 728 (243) 6 133
Finance costs (762) (1 001) (1 797)
Dividends and tax paid (97) (261) (307)
Net cash inflow/(outflow) from
operating activities 5 869 (1 505) 4 029
Net cash (outflow)/inflow from
investing activities (242) (114) 136
Net cash (outflow)/inflow from
financing activities (9 041) 1 091 (1 297)
Net (decrease)/increase in
bank balances and cash (3 414) (528) 2 868
Bank balances and cash at
beginning of year 3 679 811 811
Bank balances and cash at
end of period 265 283 3 679
Statements of changes in equity
Unaudited - at 30 June
Non-distri- Accu-
Share Share butable mulated
Capital premium reserve profit Total
R000 R000 R000 R000 R000
Balance at 31 December 2000 552 3 060 15 935 13 073 32 620
Depreciation on asset
revaluations reversed (417) 417
Expenses of non-revenue
producing subsidiaries (3) 3
Net profit for period 325 325
Balance at 30 June 2001 552 3 060 15 515 13 818 32 945
Balance at 31 December 2001 552 3 060 15 079 15 486 34 177
Depreciation on asset
revaluations reversed (416) 416
Expenses of non-revenue
producing subsidiaries (3) 3
Net profit for period 1 311 1 311
Balance at 30 June 2002 552 3 060 14 660 17 216 35 488
Chairman`s review
Four-fold improvement
Yorkcor has begun to harvest the fruits of its improved strategic position and
operational capability. The group has posted a four-fold improvement in earnings
from R325 000 to R1,3 million, with a matching improvement in headline earnings
per share, from 2,9 cents in the first half of last year to 11,9 cents in the
half-year to 30 June 2002. Revenue rose by R8,1 million, or 24%, mainly as a
result of a continuing boost in the value of group products and the positive
turn in market demand. Group margin on sales improved by 22,2%. We expect
Yorkcor`s second half performance to be even better.
Cash flow
In the half-year under review cash generated by operating activities exceeded
R6,7 million (2001: outflow of R243 000). By mid-2002, group bank balances had
turned 180 degrees from overdrafts of about R3,6 million to cash surpluses
totaling almost that figure. The movement in the group`s current ratio from 1,57
to 1,12 masks gains accomplished by tighter working capital management. Interest
bearing borrowings, in particular, were retired. All in all, this culminated in
a reduction of group gearing from 29% to 9%. Accordingly, the interest burden
was halved and it continues to decline as I write. Unutilised banking facilities
at the end of the half-year stood at about R13 million.
Business is brisk
We were braced for better market conditions this year, as forecast. Business,
at last, is brisk. A key factor has been the surge in exports of sawn timber,
especially "show wood" for the furniture industry. The advent of hospitable
niche timber markets was good for the small and, like Yorkcor, the medium-sized
operator.
Empowerment prospects in the forest products industry
Whilst the emergence of bushmills and other informal timber enterprises has
been a noteworthy and wholesome trend, there have been almost no entrants from
the previously disadvantaged into the formal sector of the lumber milling
industry. One exception has stood out - Madiba Mills, which was launched by
Yorkcor in 1996. It was the first empowerment sawmiller in South Africa and
today competes successfully in a fiercely contested market, led by almost 100%
black management and staff.
The successful replication of Madiba, as part of the plan to nurture
downstream empowerment enterprises benefiting from Komatiland forests, will
unlock widespread opportunity amongst communities in hard pressed rural areas in
Mpumalanga and Limpopo.
Paharpur and privatisation
In July 2002, we announced that Yorkcor would be backing Paharpur Cooling
Towers of India in its bid for the strategically important Komatiland forestry
package, 75% of which is up for privatisation. Paharpur currently enjoys reserve
bidder status. The Government has interrupted the privatisation process to
determine the import of the recent media allegations of corruption. No outcome
has as yet been announced.
For more than seven years the sawmilling industry has been hamstrung by costly
delays and uncertainties in restructuring the national timber resources. We have
an interest in facilitating an early end to these uncertainties, which sap the
industry`s strength. We have not been idle.
Litigation
In June of this year, the Competition Tribunal dismissed an application to
adopt a proposed consent order, developed by SAFCOL and the Competition
Commission. The intention underlying these proceedings was to strike down
Yorkcor`s evergreen contracts. The attempt did not succeed.
Another attempt by SAFCOL to terminate Yorkcor`s evergreen contract was heard
in the High Court in April 2002. Judgment is expected shortly.
Negotiations and further cautionary announcement
A further cautionary announcement was released on 15 July 2002 to advise
shareholders that negotiations were continuing to reach agreement for the amount
of compensation payable for the termination of one of Yorkcor`s evergreen
contracts in 2006. The Government had agreed that compensation is due: only the
quantum is to be determined, if not by agreement then by arbitration. Although
negotiations have narrowed the gap in a number of respects, the quantification
is being referred to arbitration, which stipulates finality by 31 December 2002.
Accordingly, shareholders are advised to continue exercising caution in dealing
in the company`s shares until a further announcement is made.
Outlook
Apart from the enduring strategic gains outlined in this review, your
directors expect the group to acquit itself as well in the second half of 2002
as it did in the first half.
The sawn timber industry has never looked better.
Basis of accounting
These consolidated, abridged annual financial statements were drawn up in
compliance with South African Statements of Generally Accepted Accounting
Practice and the company has complied with the requirements of the Companies
Act, 1973.
Yorkor`s accounting policies have been consistently applied in producing these
results.
By order of the board
Solly Tucker (Chairman)
Pretoria
10 September 2002
Registered office: Transfer Secretaries:
5th Floor, Yorkcor Park Computershare Investor Services Ltd
86 Watermeyer Street 41 Fox Street
Val de Grace, Pretoria 0184 Johannesburg 2001
PO Box 380 PO Box 61051
Pretoria 0001 Marshaltown 2107
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