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The York Timber Organisation Limited - Interim Report For The Six Months
To 30 June 2005
The York Timber Organisation Limited
Reg. No. 1916/004890/06
Share code: YRK
ISIN: ZAE000008108
Interim report for the six months
to 30 June 2005
Group income statements
For the six months ended 30 June 2005
30 Jun 30 Jun 31 Dec
2005 2004 2004
IFRS IFRS IFRS
In thousands of Rands restated restated
Revenue 125 893 76 018 179 658
Cost of sales (61 491) (37 033) (85 088)
Gross profit 64 402 38 985 94 570
Employment expenses (23 816) (18 979) (39 884)
Depreciation (1 961) (1 920) (3 744)
Other operating expenses (24 027) (16 328) (37 400)
Operating profit before
financing costs 14 598 1 758 13 542
Financial income 846 52 6 412
Financial expenses (586) (759) (1 361)
Net financing costs 260 (707) 5 051
Profit before tax 14 858 1 051 18 593
Income tax expense (6 332) (533) (7 373)
Profit for the period 8 526 518 11 220
Attributable to:
Equity holders of the parent 8 063 1 011 11 074
Minority interest 463 (493) 146
Profit for the period 8 526 518 11 220
Basic and diluted earnings
per share (cents) 73,03 9,16 100,30
Basic and diluted headline
earnings per share (cents) 72,71 8,87 82,90
Determination of headline earnings
Profit attributable to
ordinary shareholders
2005 2004
Basic and diluted
earnings per share (cents) 73,03 9,16
Profit on sale of assets (cents) 0,32 0,29
Basic and diluted headline earnings
per share (cents) 72,71 8,87
Shares in issue (`000) 11 040 11 040
Group balance sheets
As at 30 June 2005
30 Jun 30 Jun 31 Dec
2005 2004 2004
IFRS IFRS IFRS
In thousands of Rands restated restated
Assets
Property, plant and equipment 58 001 51 498 57 796
Investment property 6 364 11 769 6 364
Other investments 10 196 391 7 188
Long-term receivable 3 316 3 316 3 316
Total non-current assets 77 877 66 974 74 664
Inventories 17 764 11 475 12 777
Trade and other receivables 38 899 32 540 27 724
Cash and cash equivalents 24 635 43 758 48 732
Total current assets 81 298 87 773 89 233
Total assets 159 175 154 747 163 897
Equity
Issued capital 552 552 552
Share premium 3 060 3 060 3 060
Reserves 21 191 20 976 21 611
Retained earnings 61 015 60 026 69 093
Total equity attributable
to equity holders
of the parent 85 818 84 614 94 316
Minority interest 3 252 2 150 2 789
Total equity 89 070 86 764 97 105
Liabilities
Interest-bearing loans
and borrowings 6 422 9 295 7 895
Provisions 9 053 9 053 9 053
Deferred tax liabilities 11 955 10 839 11 928
Total non-current liabilities 27 430 29 187 28 876
Income tax payable 3 593 881 5 108
Interest-bearing loans
and borrowings 2 644 3 640 2 515
Trade and other payables 36 438 34 275 30 293
Total current liabilities 42 675 38 796 37 916
Total liabilities 70 105 67 983 66 792
Total equity and liabilities 159 075 154 747 163 897
Group cash flow statements
For the six months ended
30 June 2005
30 Jun 30 Jun 31 Dec
2005 2004 2004
IFRS IFRS IFRS
In thousands of Rands restated restated
Cash flows from operating activities
Cash generated from operations 6 265 41 295 52 699
Interest paid 260 (707) (312)
Income taxes paid (7 820) (1 638) (3 523)
Income from investments - - 5 118
Net cash from operating activities (1 295) 38 950 53 982
Cash flows from investing activities
Proceeds from sale of
property, plant and equipment 35 33 130
Proceeds from sale of investments
Acquisition of
property, plant and equipment (1 924) (1 226) (2 172)
Acquisition of other investments (3 008) - (6 552)
Net cash from investing activities (4 897) (1 193) (8 594)
Cash flows from
financing activities
Repayment of borrowings (1 344) 462 (2 195)
Dividends paid (16 561)
Net cash from
financing activities (17 905) 462 (2 195)
Net increase in cash
and cash equivalents (24 097) 38 219 43 193
Cash and cash equivalents
at beginning of period 48 732 5 539 5 539
Cash and cash equivalents
at end of period 24 635 43 758 48 732
Statements of changes in equity
For the six months ended 30 June 2005
Non-
Share Share Distributable Retained
In thousands of Rands capital premium reserves earnings Total
1 January 2004
- unaudited IFRS restated 552 3 060 21 396 58 595 83 603
Net profit for the period 1 011 1 011
Depreciation on asset
revaluations reversed (420) 420 -
Balance at 30 June 2004
- IFRS restated 552 3 060 20 976 60 026 84 614
1 January 2005
- unaudited IFRS restated 552 3 060 21 611 69 093 94 316
Net profit for the period 8 063 8 063
Depreciation on asset
revaluations reversed (420) 420 -
Dividend paid (16 561) (16 561)
Balance at 30
June 2005 - IFRS 552 3 060 21 191 61 015 85 818
Chairman"s letter
Succeeding
"Nothing succeeds like success" - whoever was the first to say that, had it
right. In my letter to shareholders in last year"s annual report I spoke of
the "flavour of success". In the six months to 30 June 2005 we have begun to
savour its quintessence.
Results for first half year 2005
Basic and diluted headline earnings per share rose by 720 percent from 8,87
cents per share to 72,71 cents per share
Revenue rose by two-thirds - from R76 million to R126 million;
Gross profit rose two-thirds - from R39 million to R64 million;
Pretax profit rose 15 times - from R1 million to R15 million;
Profit after tax rose 17 times - from R0,5 million to R8,5 million;
Net asset value rose - from 786 cents to 807 per share, (after special
dividends totaling 125 cents per share and ordinary dividends of 25 cents per
share in May 2005 - Nil in 2004).
Black Empowerment Enterprise
The company is still in talks relating to significant Timber Resource and
Black Economic Empowerment initiatives.
Shareholders are advised to continue to exercise caution when dealing in
their shares until a further announcement is made.
Markets
Lumber prices appear to continue their firm thrust upwards, as evidenced,
inter alia, by the diminishing difference prevailing between the highest and
lowest prices (about 20 percent in July 2005)
The average market price for sawlogs at the roadside has increased by about
10 percent.
Yorkcor out performs its rivals in almost all key result factors, save,
however, the delivered cost of its log intake.
Competition Jurisdiction - proposed Bonheur/Komatiland merger
Almost a year ago to the day, on 22 September 2004, the Competition
Commission decided to prohibit a proposed merger between Bonheur 50 General
Trading (Pty) Ltd (Bonheur) and Komatiland Forests (Pty) Ltd (Komatiland).
Few participants in the South African forest products industry seriously
believe that the proposed merger could ultimately muster the endorsement of
the competition authorities.
Exit of small independent saw millers and job losses
The Commission found that this merger is likely to result in the exit of
small independent saw millers, which would result in approximately 2 000 job
losses.
No remedies adequately addressed the concerns raised
"After considering all possible remedies, we found that no remedies
adequately addressed the concerns raised." concluded the Competition
Commissioner.
The unbending Bonheur/Komatiland combination, have taken the prohibition on
appeal to the Competition Tribunal. The Tribunal will hear the appeal during
November 2005.
Exclusionary conduct
Whilst Yorkcor"s performance, by and large, outperforms industry average by
wide margins, your directors have been driven to take steps in the Competition
jurisdiction to neutralise the prejudicial anticompetitive conduct of Safcol
and Global. We are cautiously optimistic that these steps will be effective.
Triumphs at law
Much headway has been made with legal actions in which the group is
involved.
Peace with DWAF
During September 2005, the government and Yorkcor mutually agreed to call a
halt to pending legal hostilities.
Arbitration
The outcome, on balance, is an important triumph for Yorkcor. The key result
of the award was an order declaring that an agreement entered into between the
parties had not been not validly cancelled.
The award determined that Yorkcor was indeed entitled to its counterclaim
for damages in consequence of Safcol"s repudiation, plus costs. Yorkcor"s
counterclaim for damages amounts to R21 816 800.00, or alternatively, R16 262
217,90.
The arbitrator awarded Safcol an amount of R3 665 616,64, plus some interest
and costs.
It must be noted that the arbitration agreement between the parties provides
for appeals which must be launched within six weeks.
Trading operations
The trading division"s operating profit before interest and tax rose about
6,5 times, from R432 000 in the six months to 30 June 2004 to R2 799 000 for
the corresponding period for the year under review.
The objective is, in the main, to render the group immune, if need be,
against the vagaries of sawlog supplies.
Capex
Improved production facilities played a significant part in the improved
profitability of the sawmills.
Two further major projects are planned which will boost efficiencies and
reduce our dependency on scarce raw materials.
Marketability of Yorkcor shares
Yorkcor was listed in 1948.
But the main purpose of a listing is to raise capital economically and
efficiently. The liquidity of Yorkcor stock is low.
Yorkcor"s JSE listing would boost our access to additional capital and
facilitates our plans to set up a strong BEE enterprise especially in our
programme for accumulating access to forestry resources.
Income Distribution
In the light of the group"s substantial current cash and near cash resources
and its continuing strong cash flow in operations, your directors, on 15
September 2005, resolved to declare an ordinary cash dividend of 30 cents per
share ("the ordinary dividend") plus a special cash dividend of 70 cents per
share ("the special dividend").
Basis of Accounting
The condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) for interim
financial statements. These are the Group"s first IFRS condensed consolidated
interim financial statements for part of the period covered by the first IFRS
annual financial statements and IFRS 1 First-time adoption of International
Financial Reporting Standards has been applied. The condensed consolidated
interim financial statements do not include all of the information required
for full annual financial statements.
Significant changes to the Group"s accounting policies as a result of the
adoption of IFRS
The principal accounting policies of the Group are consistent with those
applied in the previous year, except for the following:
Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated depreciation and impairment losses. Previously, certain items of
property, plant and equipment had been revalued to fair value. These items of
property, plant and equipment that had been revalued on or prior to 1 January
2004, the date of transition to IFRS, are measured on the basis of deemed
cost, being the revalued amount at the date of that revaluation.
When parts of an item of property, plant and equipment have different useful
lives, those components are accounted for as separate items of property, plant
and equipment.
Impact of the transition to IFRS
In preparing its comparative information for the six months ended 30 June 2004
and for the year ended 31 December 2004, the Group has adjusted the amounts
previously reported in financial statements prepared in accordance with
previous GAAP.
The net effect of the transition to IFRS are not material - the restatement of
comparative information resulted in an increase in retained earnings
(attributable to equity holders of the parent) of approximately R33 000 for
the six months ended 30 June 2004 and R 71 000 for the year ending 31 December
2004.
A detailed explanation of how the transition from previous GAAP to IFRS has
affected the Group"s financial position, financial performance and cash flows
is set out in the booklet to be distributed to shareholders, which will be
available from the Registered Office of the Group.
Acknowledgements
I could not conclude this interim report without a special salute to our
management and my colleagues on the Board whose diverse specialties and
experience have made for unbeatable strategic leadership where we encounter
risks and opportunities.
Solly Tucker 23 September 2005
Chairman Pretoria
Directors: S Tucker*, I S D Tucker*, A C de Villiers*, Dr M J C van Vuuren,
L S Cooper*,Dr J Kopp, S Motlana, N Motlana
* Executive directors
Company Secretary: J F Dekker
Registered Office: 5th Floor, Yorkcor Park, 86 Watermeyer Street, Val de
Grace,
Pretoria 0184, PO Box 380, Pretoria 0001.
Transfer Secretaries: Computershare Investor Services 2004 (Proprietary)
Limited,
70 Marshall Street, Johannesburg 2001.
PO Box 61051, Marshalltown 2107.
Date: 23/09/2005 08:53:54 AM Supplied by www.sharenet.co.za
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