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YRK - York Timber Holdings - Unaudited condensed consolidated interim financial

Release Date: 29/03/2010 10:02
Code(s): YRK
Wrap Text

YRK - York Timber Holdings - Unaudited condensed consolidated interim financial statements for the six months ended 31 December 2009 YORK TIMBER HOLDINGS LIMITED (Registration number 1916/004890/06) Share code: YRK ISIN: ZAE000133450 ("York" or "the Group") UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2009 Salient features Net asset value per share: 524 cents Debt and capital restructuring finalised Tangible net asset value per share: 337 cents R500 million capital injection by shareholders UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION 31 December 30 June 31 December 2009 2009 2008
Restated Restated Unaudited Audited Unaudited Note(s) R`000 R`000 R`000 ASSETS Non-current assets Property, plant and 428 665 429 456 399 188 equipment Investment property 5 020 5 020 4 920 Biological assets 1 414 822 1 492 002 1 988 450 Intangible assets 2 609 2 984 - Goodwill 610 352 610 352 610 352 Other financial assets 816 3 911 2 273 2 462 284 2 543 725 3 005 183 Current assets Biological assets 243 216 246 369 - Instalment sale 1 259 1 854 - receivables Inventories 165 367 214 629 239 078 Trade and other 124 358 109 012 178 321 receivables Cash and cash 21 754 124 417 96 610 equivalents Non-current assets 4 3 174 20 829 83 153 held for sale and assets of disposal groups 559 128 717 110 597 162 Total assets 3 021 412 3 260 835 3 602 345 EQUITY AND LIABILITIES Equity Share capital 5 16 419 3 919 3 919 Share premium 5 1 477 295 1 026 888 1 002 622 Reserves (35 350) (88 438) 10 227 Retained income 262 563 407 237 558 753 1 720 927 1 349 606 1 575 521 Liabilities Non-current liabilities Cash settled share 6 419 50 - based payments Other financial 628 752 1 061 544 1 122 547 liabilities Finance lease 40 523 23 252 - obligation Instalment sale 1 673 2 907 - liabilities Retirement benefit 22 916 20 200 18 256 obligation Provisions 54 643 54 643 54 643 Deferred tax 364 020 414 974 505 448 1 112 946 1 577 570 1 700 894 Current liabilities Other financial 38 999 97 819 60 174 liabilities Finance lease 5 031 3 438 - obligation Instalment sale 1 523 1 781 - liabilities Trade and other 137 030 215 450 256 542 payables Current tax payable 2 999 5 425 2 622 Liabilities of 4 1 957 9 746 6 592 disposal groups 187 539 333 659 325 930
Total liabilities 1 300 485 1 911 229 2 026 824 Total equity and 3 021 412 3 260 835 3 602 345 liabilities UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME Six months Twelve months Six months ended ended ended 31 December 30 June 31 December Restated Restated
2009 2009 2008 Unaudited Audited Unaudited Note(s) R`000 R`000 R`000 Continuing operations Revenue 407 333 998 122 601 528 Cost of sales (260 394) (676 836) (330 733) Gross profit 146 939 321 286 270 795 Other operating income 12 619 9 531 4 850 Selling, general and (147 359) (270 957) (249 250) administration expenses Operating profit 12 199 59 860 26 395 before separately disclosed items Separately disclosed items Insurance proceeds - 158 731 78 053 Impairment of assets - (43 390) - Operating profit 12 199 175 201 104 448 Interest income 1 298 13 133 11 835 Restructuring costs - (12 129) - Fair value adjustments (79 708) (244 598) (5 714) Loss on non-current 4 - (373) - assets held for sale Finance costs (79 313) (182 471) (73 202) excluding hedge interest expense Hedge interest expense (44 678) (15 422) (11 095) (Loss)/profit before (190 202) (266 659) 26 272 taxation Taxation 49 668 80 707 (6 970) (Loss)/profit from (140 534) (185 952) 19 302 continuing operations Discontinued operations (Loss)/profit for the 4 (4 140) (45 968) 2 193 period from discontinued operations (net of taxation) (Loss)/profit for the (144 674) (231 920) 21 495 period Other comprehensive income Available-for-sale 188 40 (219) financial assets adjustments Effects of cash flow 43 740 (89 545) (101 640) hedges Other comprehensive 43 928 (89 505) (101 859) income/(loss) for the period (net of taxation) Total comprehensive (100 746) (321 425) (80 364) loss Net (loss)/profit attributable to: Owners of the parent: (Loss)/profit for the (140 534) (185 952) 19 302 period from continuing operations (Loss)/profit for the (4 140) (45 968) 2 193 period from discontinued operations (Loss)/profit for the (144 674) (231 920) 21 495 period attributable to owners of the parent Earnings per share Basic (loss)/earnings 12 (135) (296) 27 per share (cents) Diluted 12 (129) (296) 26 (loss)/earnings per share (cents) Headline 13 (141) (254) 27 (loss)/earnings per share (cents) Continuing operations Basic (loss)/earnings (131) (237) 25 per share (cents) Diluted (126) (237) 24 (loss)/earnings per share (cents) UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS Six months Twelve months Six months ended ended ended 31 December 30 June 31 December 2009 2009 2008
Restated Restated Unaudited Audited Unaudited Note(s) R`000 R`000 R`000 Cash flows from operating activities Cash (25 306) 232 103 66 301 (utilised)/generated by operating activities Interest income 1 298 13 132 11 835 Finance costs (123 053) (168 549) (88 232) Tax paid (2 426) (2 998) (2 865) Cash flows of held for 4 (4 166) (11 195) 3 395 sale/discontinued operations Net cash from (153 653) 62 494 (9 566) operating activities Cash flows from investing activities Purchase of property, (10 938) (130 604) (79 454) plant and equipment on expanding of operations Sale of property, 94 1 032 589 plant and equipment Purchase of other - (3 662) - intangible assets Decrease in loans and - 98 - receivables Contribution to self - (2 108) - insurance fund Proceeds from sale of - 650 - non-current assets held for sale Decrease in finance 595 989 - lease receivables Net cash from (10 249) (133 605) (78 865) investing activities Cash flows from financing activities Proceeds on share 5 12 500 - - issue Increase in share 450 407 24 266 - premium Redemption of - (16 537) - redeemable preference shares Repayment of other (419 409) (30 279) (37 496) financial liabilities Movement in instalment (1 492) (1 631) - sale liabilities Movement in cash 369 - - settled share based payments Finance lease payments 18 864 (2 829) - Net cash from 61 239 (27 010) (37 496) financing activities Net decrease in cash (102 663) (98 121) (125 927) and cash equivalents Cash and cash 124 417 222 538 222 537 equivalents at the beginning of the period Total cash and cash 21 754 124 417 96 610 equivalents at the end of the period UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
Total Share Share share capital premium capital
R`000 R`000 R`000 Balance at 1 July 2008 3 919 1 002 622 1 006 541 Total comprehensive loss for the 12 - - - months Transactions with owners recorded directly in equity Share premium on rights issue - 24 266 24 266 Reversal of share based payment - - - reserve Dividends declared and not claimed - - - Total changes - 24 266 24 266 Balance at 1 July 2009 3 919 1 026 888 1 030 807 Total comprehensive loss for the six - - - months Transactions with owners recorded directly in equity Issue of shares through rights issue 12 500 474 673 487 173 Reversal of share premium due to - (24 266) (24 266) deconsolidation of SPE Share based payment - - - Total changes 12 500 450 407 462 907 Balance at 31 December 2009 16 419 1 477 295 1 493 714 Note(s) 5 5 5 Fair value
adjustment assets Share based Hedging available payment for
reserve sale reserve reserve R`000 R`000 R`000 Balance at 1 July 2008 - (219) 10 446 Total comprehensive loss for the 12 (89 545) 40 - months Transactions with owners recorded directly in equity Share premium on rights issue - - - Reversal of share based payment - - (9 160) reserve Dividends declared and not claimed - - - Total changes (89 545) 40 (9 160) Balance at 1 July 2009 (89 545) (179) 1 286 Total comprehensive loss for the six 43 740 188 - months Transactions with owners recorded directly in equity Issue of shares through rights issue - - - Reversal of share premium due to - - - deconsolidation of SPE Share based payment - - 9 160 Total changes 43 740 188 9 160 Balance at 31 December 2009 (45 805) 9 10 446 Note(s)
Total Retained Total reserves income equity R`000 R`000 R`000 Balance at 1 July 2008 10 227 638 900 1 655 668 Total comprehensive loss for the 12 (89 505) (231 920) (321 425) months Transactions with owners recorded directly in equity Share premium on rights issue - - 24 266 Reversal of share based payment (9 160) - (9 160) reserve Dividends declared and not claimed - 257 257 Total changes (98 665) (231 663) (306 062) Balance at 1 July 2009 (88 438) 407 237 1 349 606 Total comprehensive loss for the six 43 928 (144 674) (100 746) months Transactions with owners recorded directly in equity Issue of shares through rights issue - - 487 173 Reversal of share premium due to - - (24 266) deconsolidation of SPE Share based payment 9 160 - 9 160 Total changes 53 088 (144 674) 371 321 Balance at 31 December 2009 (35 350) 262 563 1 720 927 Note(s) NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - OPERATING SEGMENTS Processing Forestry
Dec Jun Dec Jun 2009 2009 2009 2009 Business segmental analysis R`000 R`000 R`000 R`000 Revenue External sales 378 203 933 235 29 130 64 887 Inter-segment sales 38 284 41 938 178 868 445 227 Total revenue 416 487 975 173 207 998 510 114 Result Fair value adjustment - - (80 334) (244 698) biological assets Trading (16 442) 111 011 39 919 77 393 Segment result (16 442) 111 011 (40 415) (167 305) Unallocated expenses Profit from operations Net finance costs Income tax expense Profit for the year Segment assets 508 765 527 864 1 793 982 1 876 764 Unallocated corporate assets - - - - Consolidated total assets Segment liabilities 37 351 56 522 20 172 78 487 Unallocated corporate - - - liabilities Non-current and current - - - loans and borrowings Taxation and deferred - - - taxation Consolidated total - - - liabilities Additions to biological - - - assets Capital expenditure 10 938 125 970 - 4 634 Depreciation and (14 627) (18 814) (2 037) (4 336) amortisation Impairment of tangible - (11 065) - - assets Discontinued Elimination operations Dec Jun Dec Jun 2009 2009 2009 2009
Business segmental analysis R`000 R`000 R`000 R`000 Revenue External sales 19 712 97 168 - - Inter-segment sales - - (217 152) (487 165) Total revenue 19 712 97 168 (217 152) (487 165) Result Fair value adjustment - - - - biological assets Trading (4 202) (4 632) - - Segment result (4 202) (4 632) - - Unallocated expenses 62 (41 335) Profit from operations Net finance costs (1) Income tax expense Profit for the year Segment assets 3 174 20 829 - - Unallocated corporate assets - - - - Consolidated total assets Segment liabilities 1 957 9 746 - - Unallocated corporate - - - - liabilities Non-current and current - - - - loans and borrowings Taxation and deferred - - - - taxation Consolidated total - - - - liabilities Additions to biological - - - - assets Capital expenditure - - - - Depreciation and - (2 404) 4 816 6 165 amortisation Impairment of tangible - (32 325) - - assets Consolidated Dec Jun
2009 2009 Business segmental analysis R`000 R`000 Revenue External sales 427 045 1 095 290 Inter-segment sales - - Total revenue 427 045 1 095 290 Result Fair value adjustment (80 334) (244 698) biological assets Trading 19 275 183 772 Segment result (61 059) (60 926) Unallocated expenses (10 590) (66 940) Profit from operations (71 649) (127 866) Net finance costs (122 693) (184 761) Income tax expense 49 668 80 707 Profit for the year (144 674) (231 920) Segment assets 2 305 921 2 425 457 Unallocated corporate assets 715 491 835 378 Consolidated total assets 3 021 412 3 260 835 Segment liabilities 59 480 144 755 Unallocated corporate 157 485 155 334 liabilities Non-current and current 716 501 1 190 741 loans and borrowings Taxation and deferred 367 019 420 399 taxation Consolidated total 1 300 485 1 911 229 liabilities Additions to biological - - assets Capital expenditure 10 938 130 604 Depreciation and (11 848) (19 389) amortisation Impairment of tangible - (43 390) assets NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. Statement of compliance The unaudited condensed consolidated interim financial statements for the six months ended 31 December 2009 have been prepared in accordance with the JSE Limited Listing Requirements, the Companies Act No. 61 of 1973, as amended, and the recognition and measurement requirements of International Financial Reporting Standards ("IFRS") and the presentation and disclosure requirements of International Accounting Standard ("IAS") 34 Interim Financial Reporting. These interim results do not include all the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 June 2009. The unaudited condensed consolidated interim financial statements, which have been prepared on the going concern basis, were approved by the Board of Directors on 24 March 2010. Neither the consolidated financial results for the six months ended 31 December 2009 nor this set of unaudited condensed consolidated interim financial statements have been audited by the Group`s auditors, and thus no audit report was issued. 2. Accounting policies Except as described below, the accounting policies applied by the Group in these unaudited condensed consolidated interim financial statements are consistent with those applied by the Group in its consolidated financial statements as at and for the year ended 30 June 2009. (i) IAS 23 Borrowing Costs In respect of borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009, the Group capitalises borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Previously the Group immediately recognised all borrowing costs as an expense. This change in accounting policy was due to the prospective adoption of IAS 23 Borrowing Costs (2007) in accordance with the transitional provisions of such standard, comparative figures have not been restated. Since the Group did not incur any borrowing costs on qualifying assets during the interim period ended 31 December 2009, the change in accounting policy had no impact on assets, profits or earnings per share. (ii) Determination and presentation of operating segments As of 1 January 2009 the Group determines and presents operating segments based on the information that internally is provided to the Chief Executive Officer ("CEO"), who is the Group`s chief operating decision maker. This change in accounting policy is due to the adoption of IFRS 8 Operating Segments. Previously operating segments were determined and presented in accordance with IAS 14 Segment Reporting. The new accounting policy in respect of segment operating disclosures is presented as follows: An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group`s other components. An operating segment`s operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and assess its performance and for which salient financial information is available. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets, head office expenses and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible assets other than goodwill. Comparative segment information needs to be re-presented in conformity with the transitional requirements of IFRS 8. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share. Comparative segment information was not re-presented, due to the fact that the Group has, in the past, reported segment information based on the information that management used internally for evaluating segment performance. (iii) IAS 1 Presentation of Financial Statements (Revised) The Group applies revised IAS 1 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. This presentation has been applied in these condensed consolidated interim financial statements as at and for the six month period ended 31 December 2009. Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share. (iv) IAS 27 Consolidated and Separate Financial Statements (Revised) The Group has applied IAS 27 Consolidated and Separate Financial Statements (2008) for the acquisition of non- controlling interests that occurred during the interim period ended 31 December 2009. Under the new accounting policy, acquisitions of additional non-controlling equity interests in subsidiaries have to be accounted for as equity transactions. Disposals of equity interests while retaining control are also accounted for as equity transactions. No goodwill is recognised as a result of such transactions. When control of an investee is lost, the resulting gain or loss relating to the transaction will be recognised in profit or loss. It has always been the Group`s accounting policy to treat all acquisitions of additional interests in subsidiaries, as well as disposals of interests in subsidiaries, as equity transactions. The Group did, however, change its accounting policy relating to the loss of control when an equity interest is retained. When control is lost, through sale or otherwise, the resulting gain or loss recognised in profit or loss includes any re-measurement to fair value of the retained equity interest. All cash flows relating to these transactions form part of cash flow from financing activities on the basis that these transactions are equity transactions. Losses in a subsidiary are now allocated to the non-controlling interest even if doing so causes the non-controlling interest to be in a deficit position. In the past, losses were allocated only until the non-controlling interest had a zero balance. During the interim period ended 31 December 2009, the Group did not acquire or dispose of any non-controlling interests. The change in accounting policy was applied retrospectively and had no impact on earnings per share. 3. Estimates The preparation of unaudited condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies, and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these unaudited condensed consolidated interim financial statements, the significant judgements made by management in applying the Group`s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 30 June 2009. 4. Discontinued operations and non-current assets held for sale (i) Discontinued operations In September 2009 the Group decided to discontinue some of its sawmilling operations as part of a restructuring exercise. The decision was made by the Board of Directors to discontinue these operations due to the less efficient sawmilling operations in these plants. A third plant has been mothballed and set aside for possible future use. The start up cost relating to the third mill becoming operational again has not been included in the current figures and will be expensed if and when it occurs. The sawmill plants that were affected by the restructuring are: a) Roburnia Sawmill Closed b) Golden Rhino Lumber Mothballed c) Madiba Mills Closed These plants were still operational at 30 June 2009 and closure of these operations occurred in the 2010 financial year. The assets and liabilities of the disposal group are set out below and have been restated and reclassified for the 31 December 2008 comparative figures as the plants were not classified as held for sale or as discontinued operations as at that date. 31 December 30 June 31 December
2009 2009 2008 R`000 R`000 R`000 Results of discontinued operations Revenue 19 712 97 168 58 385 Cost of sales (21 601) (85 387) (39 042) Gross (loss)/profit (1 889) 11 781 19 343 Other operating income 20 33 - Selling, general and (2 333) (18 850) (17 146) administration expenses Impairment of assets - (32 325) (4) Operating (loss)/profit (4 202) (39 361) 2 193 Restructuring costs 62 (6 606) - Finance cost - (1) - (Loss)/profit before taxation (4 140) (45 968) 2 193 Taxation - - - (Loss)/profit after taxation (4 140) (45 968) 2 193 Cash flows (used in)/from discontinued operations Net cash (used in)/from operating (4 166) (11 195) 3 395 activities Net cash from investing - - - activities Net cash from financing - - - activities (4 166) (11 195) 3 395 Assets and liabilities Assets of disposal groups Property, plant and equipment - - 33 545 Inventories 207 11 838 16 571 Trade and other receivables 2 967 8 986 32 009 Cash and cash equivalents - 5 5 3 174 20 829 82 130 Liabilities of disposal groups Trade payables and other 1 957 9 746 6 592 liabilities Equity of disposal groups Opening retained loss/(income) 35 582 (10 386) 75 538 Loss/(profit) for the period 4 140 45 968 (2 193) Closing retained loss 39 722 35 582 73 345 (ii) Non-current assets held for sale In the 2008 financial reporting period the Group was in the process of disposing certain investment properties. The last of these investment properties was disposed during the 2009 reporting period. Investment property - - 1 023 The investment property held for sale consisted of Portion 20 of Farm Krelingspost. The property was sold during the 2009 reporting period and a loss of R0,373 million was recognised in profit or loss. 31 December 30 June 31 December 2009 2009 2008 R`000 R`000 R`000
5. Share capital Authorised 600 000 000 (100 000 000) 30 000 5 000 5 000 ordinary shares of R0,05 each 2 870 529 convertible, non- 144 144 144 redeemable cumulative preference shares of R0,05 each 30 144 5 144 5 144
Reconciliation of number of shares issued: Reported as at the beginning of 78 370 78 370 78 370 the period Issue of shares through rights 250 000 - - issue offer 328 370 78 370 78 370 Unissued shares cannot be allocated or issued by directors without the authorisation of the shareholders in a general meeting. Issued ordinary shares Ordinary share capital 16 419 3 919 3 919 Share premium 1 477 295 1 026 888 1 002 622 1 493 714 1 030 807 1 006 541
York issued 250 million ordinary shares through a rights offer at an issue price of R2 per share. The rights offer was announced on 20 November 2009 in the ratio of 307,72792 rights offer shares for every 100 York shares held at the close of business on 20 November 2009. The rights offer closed at 12h00 on Friday, 11 December 2009. The cost of the rights issue was deducted from share premium during the interim reporting period. Consolidation of Special Purpose Entities ("SPEs") and subsequent deconsolidation of the SPEs On 25 November 2009 the Group disposed of its interest in the SPEs and transferred it to Blackstar (Cyprus) Investors Limited. The Group did not consolidate the SPEs into the Group results for the interim period ended 31 December 2009. 6. Share based payments Cash settled share based payments scheme The cash settled share option scheme as per the consolidated annual financial statements as at and for the year ended 30 June 2009 was subsequently cancelled. The number of options outstanding as at 30 June 2009 were 399 000, with a weighted average exercise price of R22,70. During the six month period ended 31 December 2009 the Group issued the following share based payments: Share appreciation right scheme Weighted Number exercise `000 price
R Granted on 17 November 2009 8 428 2,49 Outstanding at the end of the period 8 428 2,49 Exercise Exercise Exercise
date date date within from two to after one year five years five years Outstanding appreciation rights - 8 428 265 - Information on share appreciation rights granted during the year The Group offers its key employees an incentive plan in the form of an employee share appreciation right scheme. This incentive is achieved through certain employees being afforded the right to receive a cash payment over the vesting period. This cash payment is based on the appreciation in the value of the shares over the five year period. These appreciation rights were allocated on 17 November 2009 and notice of allocation sent to beneficiaries. The transaction constitutes a call option with a term of six years from the grant date in the hands of the employees. Employee share options are call options granted by entities to their employees. During the first portion of its life the option cannot be exercised and is forfeited should the employee leave the employment of the entity. This period of the option`s life is referred to as the vesting period. After the vesting date, a lock in period follows, at which time the option is exercised. The employees have the option to exercise their rights in tranches of 33,3% at the end of year 3, year 4 and year 5 respectively. The option expires at the end of year 6. The payoff that a beneficiary of the share appreciation right scheme will receive, at the end of the lock in period, is the difference between the spot price on the exercise date and the 30 day volume weighted average price on grant date. The structure of this scheme is valued using the Black Scholes methodology. The scheme is treated as a cash settled scheme. Cash settled schemes are valued at the reporting date in terms of IFRS 2 Share Based Payment. Fair value was determined by the Black Scholes model. The following inputs were used: - The volume weighted average share price of R2,49 per share while the closing share price at 31 December 2009 was R2,90 per share. - Expected volatility was calculated using the equally weighted standard approach, by making use of the available historical share price data, for a period equal to the term to maturity of the scheme. Smoothing of the share price volatility was done at the end of July 2007 and December 2009, in order to exclude the effects of the rights issues made by the company on the volatility. - Option life is six years with a maturity/expiry date of 17 November 2015. Grant date is 17 November 2009. Dates for vesting portions are 17 November 2012 (33,33%), 17 November 2013 (33,33%) and 17 November 2014 (33,33%). - No dividends will be paid in the foreseeable future. Therefore a dividend yield of 0% was applied in the calculation. - The risk free interest rate sourced from the Bond Exchange of South Africa. The bootstrapped zero coupon perfect fit swap curve as at 31 December 2009 was used. The risk free interest rates applied range from 7,96% (minimum value) to 8,66% (maximum value). - It was assumed that no forfeiture of the granted share appreciation rights will occur. 31 December 30 June 31 December
2009 2009 2008 Liability arising from share R`000 R`000 R`000 based payments Carrying amount of cash settled 419 50 - liability Any changes in the cash settled liability are recognised as part of employee costs. 7. Operating segments (Refer to table - Operating segments) The Group is organised into two major operating divisions, as described below, which are the Group`s strategic business units. For each of the strategic business units, the CEO reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group`s reportable segments: - Processing: manufactures and sells a range of structural and industrial sawn timber products and plywood. - Forestry: owns plantations on which it grows pine and eucalyptus trees that are felled on a rotational basis and then sold. 8. Commitments 31 December 30 June 31 December 2009 2009 2008
R`000 R`000 R`000 Capital expenditure authorised by directors Contracted for 400 136 - Not yet contracted for 8 555 3 164 - 9. Contingencies There are no material contingencies as at 31 December 2009. 10. Comparative figures The unaudited condensed consolidated interim financial statements reporting period is for the six months ended 31 December 2009. The comparative 30 June 2009 figures are presented as published in the annual financial statements and have not been restated. However, the comparative figures for the six months ended 31 December 2008 have been restated for the disclosure purposes of discontinued operations as discussed in note 4. During the 2009 reporting period the policy towards the classification of accounts as cost of sales was reviewed and certain accounts were reclassified out of revenue, other operating income, selling general and administration expenses to cost of sales. The effect of the reclassification is as follows: 31 December 30 June 31 December
2009 2009 2008 R`000 R`000 R`000 Profit or loss Cost of sales - - 92 706 Selling, general and - - (92 706) administration expenses 11. Events after the reporting period There have been no significant events subsequent to the interim reporting period ended 31 December 2009 up until the date of this report that requires adjustment or disclosure. 12. Basic earnings and diluted earnings per share The calculation of basic earnings per share at 31 December 2009 is based on the (loss)/profit attributable to ordinary shareholders of R(144 674) million (June 2009: R(231 920); December 2008: R21 495) and a weighted average number of ordinary shares of 106 903 million (June 2009: 78 370; December 2008: 78 370). The calculation of diluted earnings per share at 31 December 2009 is based on the (loss)/profit attributable to ordinary shareholders, after the effect on basic earnings for the convertible preference shares of R(142 030) million (June 2009: R(231 920); December 2008: R21 495) and a weighted average number of ordinary shares after the effect of the convertible preference shares of 109 774 million (June 2009: 78 370; December 2008: 81 250). In the year ended 30 June 2009 there were no instruments that had a dilutive effect. 31 December 30 June 31 December 2009 2009 2008
R`000 R`000 R`000 Reconciliation of basic earnings to diluted earnings (Loss)/profit for the period (144 674) (231 920) 21 495 (Loss)/profit attributable to (144 674) (231 920) 21 495 ordinary shareholders Preference dividends 2 644 - - (Loss)/profit attributable to (142 030) (231 920) 21 495 ordinary shareholders (diluted) Reconciliation of weighted `000 `000 `000 average number of ordinary shares Issued ordinary shares 78 370 78 370 78 370 Effect of shares issued in 28 533 - - December 2009 Weighted average ordinary shares 106 903 78 370 78 370 for the year Effect of convertible preference 2 871 - 2 880 shares Weighted average ordinary shares 109 774 78 370 81 250 for the year (diluted) Basic earnings per share (cents) (135) (296) 27 Diluted earnings per share (129) (296) 26 (cents) 13. Headline earnings The calculation of headline earnings per share at 31 December 2009 is based on the (loss)/profit attributable to ordinary shareholders, adjusted by items not qualified being part of headline earnings of R(150,419) million (June 2009: R(199,352); December 2008: R21,326) and weighted average number of ordinary shares of 106,903 million (June 2009: 78,370; December 2008: 78,370). Reconciliation of basic earnings to headline earnings 31 December 2009 Gross Tax Total Basic earnings attributable to (194 342) 49 668 (144 674) ordinary shareholders Profit on sale of assets and (7 979) 2 234 (5 745) liabilities Headline earnings for the six (202 321) 51 902 (150 419) months Headline earnings per share (141) (cents) COMMENTARY Company Description York which is headquartered in Sabie, Mpumalanga, is a vertically integrated forestry and sawmilling company, growing pine and eucalyptus on 61 000 hectares, and converting logs to sawn timber through four sawmills and a plywood plant to serve a range of building, construction, infrastructure, furniture and packaging markets. Background York entered this six month period with significant challenges, mostly as a consequence of softening demand for its products and lower prices. The key challenges were: Recapitalising the balance sheet; Finalising and signing the revised debt terms; The closure of three operating units; Reducing fixed and overhead cost in a comprehensive right-sizing exercise; Optimising the use of own raw material sources; and Refocusing the Group on its supply chain management. The rights issue concluded in December 2009 was over-subscribed by 166%, which is on endorsement of York`s strategic direction announced during the period as part of the Group`s restructuring plans. R450 million of the rights issue was utilised to pay off debt. This provides York with a much sounder base from which to proactively position the Group to exploit future growth in the regional timber market. The goal of reducing fixed and overhead costs of in excess of R72 million on an annualised basis has been achieved with R37 million being saved in the six months to December 2009. This was achieved through a comprehensive right-sizing exercise that involved the complete top down re-employment of all salaried staff. Management remains committed to the continued improvement of operating efficiencies and product mix in order for the Group to remain cost competitive in tough economic conditions. The Group continues to optimise its raw material base and its integration with comprehensive supply chain management. This process is producing good results with improved performance during the latter portion of the period under review, thereby entrenching the Group`s position as the largest softwood supplier in Southern Africa. Market Conditions York has not escaped the consequences of the severe downturn in the worldwide economy. In particular, the South African building sector has seen a slow-down over the past 18 months and a decline in the demand for sawn timber. There has been a decline in timber utilisation in plated roof trusses, mainly due to the decrease in domestic housing construction. As the building industry is York`s primary market, the Group has experienced a decline in demand for its products. Downward price pressure was also experienced due to excess capacity in the sawmilling industry, a situation that was exacerbated by the temporary oversupply of lumber due to the salvage operations subsequent to the fires in 2007 and 2008. This oversupply situation has reduced, but remains a key consideration within the industry for the next six to twelve months. The South African sawmilling industry has seen the closure of several sawmills over the past year and during the latter half of 2009 York embarked on a restructuring process to align its processing capacity with the current market demand. The Group closed three of its technologically outdated and less efficient sawmills. These operations are disclosed separately as discontinued operations in the financial results for the period under review. York`s Plantation Asset Damage from fire during the 2009 fire season was very low when compared to recent history. This was partly as a result of reasonable weather conditions, coupled with stringent fire prevention measures implemented by York and the industry. Prices for sawlogs remained static for the period under review. The demand and price paid for pulp reduced, which accounts for a portion of value reduction in the plantation asset. Sustainability of the plantation asset is being ensured through continued accelerated re-planting of the fire damaged areas of the recent past. During the period under review, in excess of double the number of hectares were re-planted when compared to those hectares harvested. This situation will continue for a further 18 months by when all areas affected will be re-planted. Despite this, as the plantation valuation only records volume from the fourth year of growth, there is a mathematical reduction in the net standing volume, even though the re-planting exceeded the harvesting by hectare. All being equal this will reverse in years to come as the newly planted areas grow and mature. Company Outlook The Group remains largely self-sufficient in terms of logs supplied by its own timber plantations and owns four modern, well-managed sawmills and a plywood plant. On recovery of the economy, York will gain the benefits from its restructuring and become even more competitive in the market. One of management`s key objectives remains to increase the Group`s profitability. This objective will be fulfilled through optimising its processing facilities, utilisation of own raw materials, improving operational productivity and exploitation of its leading position in the softwood market. The Group also plans to increase its ownership of forestry resources, should these opportunities present themselves. The current net asset value per share of 524 cents and tangible net asset value per share of 337 cents is in excess of the current traded share price. Financial Review During the period under review the following material items have affected the results: - The key salient feature of operating results is despite a significant drop in top line revenue, continuing operations results before insurance proceeds are only marginally down on the six months ended December 2008. This results largely from the effectiveness of the cost reduction and right sizing exercise. - The downward adjustment to the fair value of biological assets of R80,3 million. A reduction in volumes contributed R52,7 million, with the balance of R27,6 million relating to a decrease in log prices in the Mpumalanga region. The price of pulp logs for both pine and eucalyptus has reduced over the period, while the price of saw logs remained unchanged. A reduction in volume was expected as the plantation continues to normalise. - The rights issue resulted in an increase in share capital and share premium. The transaction costs directly attributable to the issuing of the new shares to the amount of R12,8 million were recognised directly in equity (deducted from share premium). - The Group raised debt in July 2007 for the acquisition of Global Forest Products, and concurrently entered into an interest rate swap transaction to hedge itself against the risk of interest rate increases. During the period under review, R450 million of the proceeds of the rights issue was utilised to settle a portion of the debt. The interest rate hedge derivative has been adjusted to reflect the R450 million debt repayment, and York settled the out of pocket portion of R16,3 million during December 2009. This was paid out of cash resources. - As a consequence of the partial settlement of the debt and interest rate hedge derivative, a portion of the hedging reserve was released from equity to profit and loss. Furthermore, the ineffective portion of the movement in the fair value of the interest rate hedge derivative was recorded in profit and loss. This is in line with the hedge accounting principles in IFRS, and explains the decrease in the balance of the hedging reserve. The total amount recognised as an expense in profit and loss relating to the interest rate hedge derivative amounted to R44,7 million. - Other operating income includes a profit on disposal of controlling interest in SPEs of R7,6 million. On 25 November 2009 the Group disposed of its interest in the SPEs through Blackstar (Cyprus) Investors Limited acquiring the ordinary shares in the SPEs. No monies were received from the disposal of the interest. In effect, the Group disposed of its controlling interest in the SPEs from an accounting perspective. - The tax credit consists mainly of deferred tax on the biological asset. Working Capital Net working capital decreased year-on-year when compared to 31 December 2008. Trade and other receivables decreased as a result of the decrease in sales. The decrease in the inventory balance is in line with the Group`s strategy to decrease the levels of lumber stock. Furthermore, inventory values decreased as the log salvage operations necessitated by the 2007 and 2008 forest fires were completed and inventory levels are back to normal. Trade and other payables decreased year-on-year. During the previous financial year, York purchased burnt logs from external parties on extended credit terms, resulting in a higher trade creditors balance. Working capital management remains one of the Group`s key focus areas. Corporate Governance The Group subscribes to and complied substantially with the recommendations of the Code of Corporate Governance Practices and Conduct as contained in the second King Report on Corporate Governance. Changes to the Board of Directors ("Board") In line with the Company`s stated intention to restructure and reposition the Group, the composition of the Board is being assessed ("Board restructure"). The objective of the Board restructure is to align it more closely with the restructuring of the Company in the past year, improve overall Board efficiency and implement a plan to be fully Board compliant with the recommendations of the King III Code. As part of this restructuring, G Mokoena (Executive director), P Odendaal (Non-executive director), T Modise (Non-executive director) and D Claunch (Non-executive director) have resigned with effect from 24 March 2010. The Company appreciates and values their respective contributions over the past year in which the Company faced challenging operating conditions and worked closely with the Board to achieve its financial and operations restructuring. During the interim period ended 31 December 2009 G Motau accepted a position with the Group`s auditors, KPMG Incorporated, and, consequently, resigned in October 2009; S Murray and A Bonamour also resigned in the same month. The resignations reduced the number of directors from twelve to five. The remaining Directors will meet in due course to consider further appointments, as required. This restructuring is to be completed under the guidance of the Board Chairman, J Myers, as requested by a majority of the shareholders of York. Transformation The Group is committed to a process of transformation and the economic empowerment of its stakeholders. Management has extended its initiatives in skills development, employment equity and corporate social investment during the period under review. Dividends No ordinary dividend was declared taking into consideration the debt facilities extended by York`s bankers and other growth plans during the period under review. Goodwill The goodwill, which arose as a result of the acquisition of Global Forest Products, remains intact. Future economic benefit is expected to flow to the Group as York`s sustainable forestry management and skilled harvesting and silviculture plans will see a significant increase in the value of the plantations. As a result, the value of the asset to which the goodwill relates still supports the current balance. On behalf of the Board of Directors Piet van Zyl Duncan Erskine Chief Executive Officer Chief Financial Officer Sabie 24 March 2010 Executive Directors: Piet van Zyl (CEO), Duncan Erskine (CFO) Gay Mokoena (Director Corporate Services) Non-Executive Directors: Jim Myers (Chairman, USA), Paul BothaDick Claunch Shakeel MeerTlhopheho Modise, Pieter Odendaal Company Information: www.york.co.za Company Secretary: Fusion Corporate Secretarial Services (Pty) Limited Claressica Park Unit B 56 Regency Road, Route 21 Corporate Park, Irene, 0062 PO Box 68528, Highveld, 0169 Sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Limited Tel 011 750 0000 24 Fricker Road, Illovo, 2196 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 (Pty) Limited 70 Marshall Street, Johannesburg, 2001 PO Box 61051, Marshalltown, 2107 www.york.co.za Date: 29/03/2010 10:02:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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