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YRK-The York Timber Organisation Limited- Results:six months ended 30 June 2007
The York Timber Organisation Limited
Reg. No. 1916/004890/06
Share code: YRK
ISIN: ZAE000008108
("York" or "the Company")
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
HIGHLIGHTS
- Revenue up 52% to R247 million
- Fully diluted headline earnings per share up 36% to 118.8c (2006: 87.1c)
- Operating profit up 24% to R19.7 million (2006: R15.9 million)
- Goedgeloof Plantation acquisition finalised in March 2007
- Acquisition of Global Forest Products completed in July 2007 - making York
the largest integrated forestry and sawmilling company in South Africa
York produced robust results for the six month period, notwithstanding rapidly
escalating raw material (saw log) prices and a modest slowdown in the demand
for timber finished products (lumber).
Sawlog prices accounted for approximately 55% of total production costs and
continued to rise during the period mainly due to Komatiland Forests (Pty) Ltd
("KLF") closing the gap between long term contract saw log prices and spot
market prices by raising long term prices. Despite this, York was able to
substantially maintain its margins through increases in lumber prices,
efficiencies at its mills and steady volumes. It is pleasing to report that
York`s ongoing exposure to these price increases has to an extent been
mitigated by the acquisition of plantations and the consequent substantial
increase in the proportion of raw material requirements it produces itself.
Although the demand for lumber for the 12 months ended June 2007 was 4.5% lower
than that for the previous year, York`s sales volumes did not decline.
Lumber prices increased by 21.7% year on year to 30 June 2007.
The post balance sheet acquisition of Global Forest Products (Pty) Ltd
increases York`s self reliance as it now owns sufficient forestry resources
to satisfy at least 70% of its own timber requirements.
FINANCIAL RESULTS
Revenue for the six months to 30 June 2006 increased by 53% to R247 million.
Sales volumes were up 6% over the corresponding period.
The net operating margin was 8% (2006: 9.8%). The reduction in margin was due
to a 91% increase in lower margin timber warehousing revenue, whilst higher
margin sawmilling revenue only increased by 29%. The contribution per cubic
metre of sawmilling lumber sold increased marginally over the corresponding
period, indicating that the company had maintained production efficiency in
its processing plants.
Headline earnings per share was 148.8c, up 71% on the previous period. After
taking into account the fully convertible preference shares issued in terms of
the BEE transaction concluded in February 2007, fully diluted headline earnings
per shareimproved by 36% from 87.1c to 118.8c. York`s balance sheet remains
solid. Stock levels increased by 34% over the corresponding period due to higher
raw material prices and organic growth. Receivables and other debtors increased
by 62% mainly due to the growth in sales prices over the corresponding period
and a marginal weakening in debtors days. Working capital management will be a
focus going forward.
The Company`s gearing increased from 49% in June 2006 to 51% in June 2007 due
to R20 million debt used for the acquisition of the Goedgeloof plantation and
the warehousing division using trade finance to improve its cashflows.
Cash and cash equivalents were lower at the end of the period as a result of
the use of a portion of the surplus cash to fund the Goedgeloof acquisition in
March 2007. York traditionally generates the larger portion of its profits
during the busier period from July to December each year, due to the cyclical
nature of the timber industry. When viewed in this context, the performance for
the first half of the year is satisfactory.
MARKET CONDITIONS
After several years of saw log and consequently lumber prices increasing at
levels well above the Consumer Price Index, there has been a noticeable
levelling off in the demand for lumber.
Industry analysts Crickmay and Associates have however forecast annual lumber
shortages of between 32% and 55% until 2036.
KLF continued to narrow the gap between long term and spot log prices. On the
1st April 2007 KLF raised the long term saw log prices by 20% and on 1
September 2007 by a further 14%. Crickmay estimates a current gap of R300/m3
between import parity and the current prices. Future increases will thus level
off as import parity is approached.
STRATEGY
During the period under review, York made substantial progress in pursuit of
its strategy of developing efficient sawmills underpinned by sustainable
resource supplies. The acquisition of Goedgeloof Plantation and the post
balance sheet acquisition of Global Forest Products constitute a major step
forward for the Company.
The enlarged York will be approximately 70% self-sufficient with regard to
grown raw material. However, the ongoing scarcity of timber, coupled with the
effects of the recent fires, mean that York may consider further plantation
acquisitions in order to reduce its reliance on external saw log supplies.
In the current period, York`s sawmilling operations will continue to focus on
improving efficiency.
LIQUIDITY OF SHARES
The Company has recently completed a R350 million rights offer to fund the
acquisition of Global Forest Products and a R203 million issue of shares for
cash to finance working capital within the enlarged Company.
As a consequence of this, the number of ordinary shares in issue increased from
8 170 068 to 78 370 068 shares and liquidity has improved dramatically.
BEE EQUITY HOLDING BOLSTERED
Together with two of its major shareholders, the Industrial Development
Corporation ("IDC") and Blackstar Plc, York completed two black economic
empowerment transactions. Excluding the IDC stake, approximately 28% of its
equity is now owned by previously disadvantaged individuals.
POST BALANCE SHEET EVENTS
Acquisition of Global Forest Products (Pty) Ltd ("GFP") and South African
Plywood (Pty) Ltd ("SAP)
On 12 July 2007, York completed the acquisition of 100% of GFP and SAP for a
consideration of R1.695 billion. GFP owns 56 805 hectares of certified
plantation forests and 29 101 hectares of unafforested land. The acquisition
makes York the largest integrated forestry and sawmilling company in South
Africa. The merged Companies own and operate eight sawmills and a plywood plant
supplied by 60 000 hectares of plantations located around these plants.
The acquisition was financed with an appropriate level of gearing. The debt
package is long term in nature and is backed by a high quality forestry asset
base. Integration of Global Forest Products is well underway and management
expects to provide details on the progress at the year end results.
Forest Fires
Between 27 July 2007 and 11 August 2007, approximately 84 000 hectares of South
Africa`s timber plantations suffered the most devastating wild fires in the
country`s history. Several sawmills were crippled by the fires which will
further compound South Africa`s sawlog shortage. Approximately 16% of York`s
plantations were affected, and the Company sustained partial damage to its
Driekop Sawmill. The mill is insured against asset losses and loss of profits.
However, only minimal self insurance is held on the plantations due to the
difficulty and cost of acquiring cover. A preliminary estimate of the cost of
the damages to the plantations is R103 million, comprising a R25 million cash
flow cost and a R78 million reduction in asset value (non-cash flow).
PROSPECTS
The prospects for the second half of the year are positive, and we expect to
maintain our current growth rate.
On behalf of the board:
Lance Cooper
Chief Executive Officer
Unaudited condensed Group income statement
For the six months ended 30 June 2007
6 months 6 months Year
ended ended Ended
30 Jun 30 Jun Change 31 Dec
2007 2006 2006
IFRS IFRS IFRS
(R`000s)
Revenue 246,960 162,058 52% 393,975
Cost of sales (164,500) (97,552) (242,481)
Gross profit 82,460 64,506 28% 151,494
Other operating income 2,891 4,141 6,649
Distribution expenses (3,421) (2,935) (6,883)
Administration expenses (13,019) (18,754) (29,511)
Operating expenses (49,146) (31,016) (79,476)
Profit from operations 19,765 15,942 24% 42,273
Arbitration awards provision - - 3,273
Profit before finance costs 19,765 15,942 24% 45,546
Finance income 775 77 2,066
Finance expenses (1,902) (2,473) (5,282)
Profit before tax 18,638 13,546 38% 42,330
Income tax expense (5,526) (3,928) (11,014)
Profit for the period 13,112 9,618 36% 31,316
Attributable to:
Equity holders of the parent 12,155 9,618 31,316
Convertible preference
equity holders 957 - -
Basic earnings per
share - cents 148.8 87.1 71% 283.6
Headline earnings per share
- cents 148.8 87.1 71% 263.2
Fully diluted headline
earnings per share - cents 118.8 87.1 36% 263.2
Preference dividends
paid - cents 33.3 - -
Unaudited condensed Group statement of changes in equity
For the six months ended 30 June 2007
Share Share Retained
(R`000s) capital premium earnings Total
1 January 2006 - IFRS 552 3,060 68,834 72,446
Net profit for the period 9,618 9,618
Balance at 30 June
2006 - IFRS 552 3,060 78,452 82,064
1 January 2007 - IFRS 552 3,061 100,294 103,907
Issue of 2,870,529
preference shares 144 28,074 - 28,218
Repurchase of 2,870,529
ordinary shares (144) (28,074) - (28,218)
Write off of issuing expenses - (1,348) - (1,348)
Preference dividend - - (957) (957)
Net profit for the period - - 13,112 13,112
Balance at 30 June 2007 -
IFRS 552 1,713 112,449 114,714
Unaudited condensed Group balance sheet
As at 30 June 2007
ASSETS 30 Jun 30 Jun 31 Dec
2007 2006 2006
IFRS IFRS IFRS
(R`000s)
ASSETS
Total non-current assets 125,831 85,819 90,603
Property, plant and equipment 77,029 63,712 65,801
Biological assets 42,000 14,278 18,000
Investment property 5,900 7,070 5,900
Other investments 902 759 902
Total current assets 139,083 110,015 138,564
Inventories 45,546 33,911 34,724
Trade and other receivables 82,035 50,679 59,909
Cash and cash equivalents 9,302 25,425 41,731
Non-current assets held for sale 2,200 - 2,200
Total assets 264,914 195,834 229,167
EQUITY AND LIABILITIES
Issued capital 552 552 552
Share premium 1,713 3,060 3,061
Retained earnings 112,449 78,452 100,294
Total equity attributable to
equity holders of the parent 114,714 82,064 103,907
Total non-current liabilities 60,913 53,922 50,060
Interest bearing loans and borrowings 43,610 37,747 32,757
Provisions 7,889 9,053 7,889
Deferred tax liabilities 9,414 7,122 9,414
Total current liabilities 89,287 59,848 75,200
Interest bearing loans and borrowings 19,152 6,050 12,050
Provisions 0 0 0
Trade and other payables 65,790 52,518 57,676
Income tax payable 4,345 1,280 5,474
Total equity and liabilities 264,914 195,834 229,167
Unaudited condensed Group cash flow statement
For the six months ended 30 June 2007
6 months 6 months Year
ended ended Ended
30 Jun 30 Jun 31 Dec
2007 2006 2006
IFRS IFRS IFRS
(R`000s)
Cash flows from operating activities
Cash (generated by)/applied to operating
activities (8,604) 15,405 8,015
Provisions transferred to interest
bearing liabilities - (26,631) -
Net finance income 775 77 891
Net finance expense (1,902) (2,473) (5,282)
Taxation paid (6,655) (875) (1,475)
Income from investments - - 362
Net cash (outflow)/inflow from
operating activities (16,386) (14,497) 2,511
Cash flows from investing activities
Proceeds from sale of property
plant and equipment 24 - 783
Additions to property plant and equipment (14,022) (1,686) (2,787)
Additions to biological assets (20,000) - -
Proceeds on sale of other investments - 9,255 10,069
Reduction in purchase consideration - - 2,000
Net cash (outflow)/inflow
from investing activities (33,998) 7,569 10,065
Cash flows from financing activities
Increase in borrowings 17,955 23,646 20,447
Issue of share capital - - 1
Net cash inflow from financing activities 17,955 23,646 20,448
Net (decrease)/increase in cash
and cash equivalents (32,429) 16,718 33,024
Cash and cash equivalents at the
beginning of the period 41,731 8,707 8,707
Cash and cash equivalents at the end of
the period 9,302 25,425 41,731
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
The York Timber Organisation Limited (the "Company") is a company domiciled in
South Africa. The condensed consolidated Group interim financial statements of
the Company for the six months ended 30 June 2007 comprise the Company and its
subsidiaries (together referred to as the Group).
The condensed consolidated interim financial statements were authorised for
issue on 26 September 2006.
(a) Statement of compliance
The condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) for interim
financial statements. The condensed consolidated interim financial statements
do not include all of the information required for full annual financial
statements.
(b) Basis of preparation
The financial statements are presented in Rands, rounded to the nearest
thousand. They are prepared on the historical cost basis except for financial
instruments held for trading, financial instruments and investment property
which are reflected at fair value, and non-current assets and disposal groups
held for sale which are stated at the lower of carrying amount and fair value
less costs to sell.
The interim financial statements are prepared in conformity with IAS 34 Interim
Financial Reporting, which requires management to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. Actual results may differ from
these estimates.
(c) Basic and headline earnings per share.
Basic and headline earnings per share are calculated by dividing the earnings
attributable to ordinary shareholders for the period of R12.155 million (June
2006: R9.168 million) by 8,170,068 ordinary shares in issue. (June 2006:
11,040,597 shares).
(d) Fully diluted headline earnings per ordinary share.
The calculation of fully diluted headline earnings per ordinary share is based
on headline earnings attributable to ordinary shareholders of R13.112 million
(June 2006: R9.618 million) and fully diluted ordinary shares of 11,040,597
(June 2005: 11,040,597).
Reconciliation between net profit attributable to the equity holders of the
company and headline earnings:
Determination of Headline earnings
6 months 6 months Year ended
2007 2006 2006
IFRS IFRS IFRS
Basic and diluted earnings per share - cents 118.8 87.1 283.6
Surplus on disposal of fixed assets - - (0.72)
Increase in fair value of investment properties - - (12.51)
Fair Value Adjustments and Impairments - - (7.17)
Basic and diluted headline earnings per share 118.8 87.1 263.2
Executive Directors: Lance Cooper (CEO) & John Lehman (CFO)
Non-Executive Directors: Jim Myers (Chairman, USA), Andrew Bonamour,
Paul Botha, Dick Claunch, Shakeel Meer, Gay Mokoena, , Tlhopheho Modise,
Simon Murray, Gavin Tipper, Company Secretary: Francois Dekker
Registered Office:
York Corporate Offices, 3 Main Road, Sabie, 1260
Tel 013 764 9200 Fax 013 764 3245 PO Box 1191, Sabie, 1260
Transfer Secretaries:
Computershare Investor Services 2004 (Proprietary) Limited,
70 Marshall Street, Johannesburg 200
PO Box 61051, Marshalltown 2107
www.yorkcor.co.za
26 September 2007
Sponsor
Metier
Date: 26/09/2007 13:21:01 Supplied by www.sharenet.co.za
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