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YRK - York - Unaudited Condensed Consolidated Interim Financial Results for the
six months ended 31 December 2011
York Timber Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1916/004890/06)
JSE Share code: YRK
ISIN: ZAE000133450
("York" or "the Company" or "the Group")
.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 31 December 2011
HIGHLIGHTS
------------------------------------
* Underlying earnings from operations up 47%
* Revenue up 15%, driven by increased demand for lumber and plywood
* Restructuring & cost optimisation strategies producing planned results
* Focus on sustainability of plantations and purchase of third party logs
* Refinancing of Group long term debt completed
* Underlying TNAV up 5% to 620 cents per share
.
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GROUP PERFORMANCE AND FINANCIAL REVIEW
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Profit before finance costs of R94.1 million was up 47% on the comparable prior
year period. Sales volumes continued to improve and average selling prices for
the period were higher when compared to the comparable prior year period.
.
The substantial restructuring of the Group embarked on 3 years ago has been
completed and the results for the reporting period reflect the success thereof.
.
* Processing plants *
Processing plant efficiency has improved and the historically poor performing
sawmills are now profitable. The largest of the Group`s sawmills, the Sabie
mill, is one of the most cost effective sawmills in Southern Africa. Value
Margins, a function of processing and product mix efficiencies, have increased
across all processing plants and planned capital investment should further
improve processing margins and the Group`s cash generating ability.
.
* Purchase of saw logs*
In line with the Group`s view on future log prices, approximately 20% of York`s
log requirement for the financial period was purchased in the open market;
insignificant third party purchases were made during the comparable prior year
period. This had the effect of preserving the Group`s plantation asset in an
environment where log supply is under increasing pressure.
.
This decision has a particular impact on the nature of the earnings recorded for
this period. Purchasing saw logs on the open market reduces gross profit margin
but as a direct consequence fewer trees are harvested from York`s plantations,
the value of which is enhanced. This value enhancement is reflected in the fair
value adjustment line in profit and loss and represents future cash generating
ability.
.
* Interest bearing debt refinanced *
Interest bearing debt decreased by R74.8 million to R579.4 million from December
2010. The majority of this debt was refinanced through the Land and Agricultural
Development Bank of South Africa (Land Bank) during the period under review.
R538.7 million was successfully drawn down on 20 February 2012 and was utilised
to settle the existing Senior term and Mezzanine facilities. The new Land Bank
facility provides flexibility in implementing the strategy of purchasing saw
logs from third parties. The average maturity of the Group`s committed debt
facilities after the Land Bank refinance is 10 years.
The Group has unutilised committed borrowing facilities in excess of R200
million.
During the period under review the interest rate swap (hedging derivative)
matured and the current charges through profit and loss are the final charges
required. Finance costs reduced in line with the reduced debt balance and
further savings are expected as the improved cost of finance negotiated with the
Land Bank takes effect.
* Plantation asset *
The plantation asset is valued on a discounted cash flow basis using the key
assumptions described in note 5 of the financial results. Any changes to the
assumptions are carefully validated with reference to external data.
As a consequence of the decision to purchase third party logs, the net volume of
timber in the Group`s plantations should increase over the period.
.
* Tangible net asset value *
Tangible net asset value (TNAV) improved by 5% to 620 cents per share over the
period. TNAV represents the net asset value of York after the removal of the
goodwill and deferred taxation associated with the plantation asset.
.
In considering the Group`s net asset value, cognisance should be taken of the
fact that while the components of the deferred tax related to the plantations
originates and reverses through the Group`s operations; the aggregate balance
will only reverse should York not re-establish harvested areas.
* Cash flow *
Net cash generated from operations amounted to R64.4 million, an increase of 78%
on the comparable prior year period. Despite significant cash spend on the
purchase of logs from third parties in this period, when compared to the
comparable period, cash generated from operating activities grew significantly
over the comparable prior year period.
OUTLOOK
The ownership of plantations managed for solid wood processing is advantageous
as the demand for lumber products is expected to outstrip the available long
term supply. York recognises the importance of the future availability of
suitable timber and is managing its plantations accordingly.
.
York anticipates continued value margin improvements across all processing
plants and with a new debt structure, plantations are managed for optimal
returns in prevailing market conditions. York`s carbon footprint and its
positive contribution to the environment, society and economy are strengthened
by an innovative management team.
.
On behalf of the Board of Directors
PIETER VAN ZYL (Chief Executive Officer)
DUNCAN ERSKINE (Chief Financial Officer)
.
Sabie, Mpumalanga
12 March 2012
.
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UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the six months ended 31 December 2011
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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31 Dec 31 Dec 30 Jun
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
NON-CURRENT ASSETS
Biological assets (note 5) 1 650 241 1 610 614 1 616 363
Investment property 24 940 24 740 24 940
Property, plant and equipment 417 681 418 023 404 665
Goodwill 565 442 565 442 565 442
Intangible assets 2 847 2 374 3 275
Other financial assets 1 057 881 1 004
TOTAL NON-CURRENT ASSETS 2 662 208 2 622 074 2 615 689
.
CURRENT ASSETS
Biological assets (note 5) 312 931 320 611 320 035
Inventories 121 664 119 441 148 807
Trade and other receivables 151 227 119 980 124 595
Cash and cash equivalents 105 211 84 856 103 484
Current tax receivable 11 833 3 503 3 524
TOTAL CURRENT ASSETS 702 866 648 391 700 445
TOTAL ASSETS 3 365 074 3 270 465 3 316 134
.
EQUITY AND LIABILITIES
EQUITY
Share capital 16 562 16 562 16 562
Share premium 1 505 352 1 505 352 1 505 352
Reserves 189 (16 802) (5 826)
Retained income 553 855 479 053 510 180
TOTAL EQUITY 2 075 958 1 984 165 2 026 268
.
LIABILITIES
NON-CURRENT LIABILITIES
Cash settled share based payments 10 411 5 569 6 497
Deferred tax 450 583 411 317 432 451
Loans and borrowings 515 791 575 868 539 657
Provisions 54 643 55 265 54 643
Retirement benefit obligations 23 478 23 222 21 454
TOTAL NON-CURRENT LIABILITIES 1 054 906 1 071 241 1 054 702
.
CURRENT LIABILITIES
Current tax payable - 369 369
Loans and borrowings 63 589 78 273 74 568
Provisions - 375 285
Trade and other payables 170 621 136 042 159 942
TOTAL CURRENT LIABILITIES 234 210 215 059 235 164
TOTAL LIABILITIES 1 289 116 1 286 300 1 289 866
TOTAL EQUITY AND LIABILITIES 3 365 074 3 270 465 3 316 134
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
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Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
Revenue 564 799 491 096 959 143
Cost of sales (note 3) (361 786) (289 578) (538 231)
Gross profit 203 013 201 518 420 912
Other operating income 2 524 2 390 5 802
Selling, general and
administration expenses (note 3) (138 198) (136 335) (264 817)
Operating profit 67 339 67 573 161 897
Loss on non-current assets held for sale - (13 126) (13 362)
Fair value adjustments 26 774 9 551 14 924
Profit before finance costs 94 113 63 998 163 459
Investment income 4 211 1 136 2 217
Finance costs excl. hedge
interest expense (37 023) (41 723) (78 866)
Hedge interest expense
- paid (1 997) (9 855) (21 504)
- ineffective portion (5 955) (8 238) (11 992)
Profit before taxation 53 349 5 318 53 314
Taxation (9 674) 1 872 (14 997)
Profit for the period 43 675 7 190 38 317
Other comprehensive income/ (loss):
Available-for-sale
financial assets adjustments 53 (464) (341)
Effects of cash flow hedges 8 290 13 657 28 756
Taxation related to components of
other comprehensive income (2 328) (3 759) (8 005)
Other comprehensive income for the
period net of taxation (subtotal) 6 015 9 434 20 410
TOTAL COMPREHENSIVE INCOME 49 690 16 624 58 727
.
Basic earnings per share
(cents) (note 7) 13 2 12
Headline earnings per share
(cents) (note 8) 13 6 16
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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No movements occurred in
- Share capital (Balance in R`000: R16 562)
- Share premium (Balance in R`000: R1 505 352)
.
Available
Hedging -for-sale Retained TOTAL
Reserve reserve income EQUITY
R`000 R`000 R`000 R`000
BALANCE AT 1 JULY 2010
(Audited) (26 673) 437 471 863 1 967 541
Profit for the year - - 38 317 38 317
Other comprehensive income
Change in fair value of
cash flow hedge,
net of tax 20 704 - - 20 704
Change in fair value
of available-for-sale
financial assets,
net of tax - (294) - (294)
Total other comprehensive
income 20 704 (294) - 20 410
Total comprehensive income
for the year and total
transactions with owners 20 704 (294) 38 317 58 727
BALANCE AT 30 JUNE 2011
(Audited) (5 969) 143 510 180 2 026 268
Profit for the period - - 43 675 43 675
Other comprehensive income
Change in fair value of
cash flow hedge,
net of tax 5 969 - - 5 969
Change in fair value
of available-for-sale
financial assets,
net of tax - 46 - 46
Total other comprehensive
income 5 969 46 - 6 015
Total comprehensive income
for the year and total
transactions with owners 5 969 46 43 675 49 690
BALANCE AT 31 DECEMBER 2011
(Unaudited) - 189 553 855 2 075 958
.
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CONSOLIDATED STATEMENT OF CASH FLOWS
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Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 691 030 470 472 1 166 643
Cash paid to suppliers & employees (591 431) (386 674) (979 404)
Cash generated from operations 99 599 83 798 187 239
Investment income 1 641 1 136 2 217
Finance costs (36 856) (48 601) (91 750)
Taxation paid - (81) (82)
NET CASH FROM OPERATING ACTIVITIES 64 384 36 252 97 624
.
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of
property, plant and equipment (25 755) (11 248) (18 887)
Purchase of other intangible assets - (65) (1 352)
Proceeds of
property, plant and equipment 107 194 601
NET CASH FROM INVESTING ACTIVITIES (25 648) (11 119) (19 638)
.
CASH FLOWS FROM FINANCING ACTIVITIES
Net movement in loans and borrowings (37 009) (25 376) (59 601)
Movement in instalment sale receivables - 606 606
NET CASH FROM FINANCING ACTIVITIES (37 009) (24 770) (58 995)
.
TOTAL CASH MOVEMENT FOR THE PERIOD 1 727 363 18 991
Cash at the beginning of the period 103 484 84 493 84 493
CASH AT THE END OF THE PERIOD 105 211 84 856 103 484
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NOTES
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1. BASIS OF PREPARATION
------------------------------------
These unaudited condensed consolidated financial statements have been prepared
in accordance with the JSE Listings Requirements, the Companies Act of South
Africa, No. 71 of 2008 (as amended) and the Companies Regulations, 2011. The
Group has applied the recognition and measurement requirements of International
Financial Reporting Standards (IFRS) and the AC 500 standards as issued by the
Accounting Practices Board (APB) as well as the presentation and disclosure
requirements of International Accounting Standard (IAS) 34 Interim Financial
Reporting. The financial results has been compiled under supervision of DJ
Erskine CA(SA), the Chief Financial Officer.
.
These condensed results do not include all the information required for full
annual financial statements, and should be read in conjunction with the audited
consolidated financial statements as at and for the year ended 30 June 2011
which are available on the Company`s website, www.york.co.za or at the Company`s
registered office.
.
The financial results have not been reviewed or audited. The financial results,
which have been prepared on the going concern basis, were approved by the Board
of Directors on 8 March 2012.
.
There have been no material changes in judgements or estimates of 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 consistent in
all material respects with those applied in the year ended 30 June 2011.
.
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2. ADDITIONAL DISCLOSURE ITEMS
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31 Dec 31 Dec 30 Jun
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
Authorised capital commitments:
- Contracted, but not provided 3 663 4 261 2 651
- Not contracted 7 094 3 938 5 459
Capital expenditure 25 755 11 313 20 239
Depreciation of
property, plant & equipment 12 418 13 318 31 305
Amortisation of intangible assets 428 382 768
Impairment of trade receivables - 161 99
.
- The Group did not have any litigation settlements during the reporting period.
- The Group participates in a pooled banking facility granted by First Rand Bank
Limited. As such, the Group companies have provided an unlimited cross
suretyship in favour of First Rand Bank Limited in respect of their obligations
to the bank. The Group did not have any other contingent liabilities at the
reporting date.
- 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 of or disclosure in these results.
- No movement occurred in the number of shares issued during the period under
review.
.
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3. COMPARATIVE FIGURES
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In the six months ended 31 December 2010 certain costs were classified as
selling, general and administration expenses, which should have been classified
as cost of sales. The reclassification has resulted in cost of sales increasing
by R27.512 million for that period and selling, general and administration
expenses decreasing by the same amount. This had no effect on the reported
profit for the year ended 30 June 2011.
.
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4. OPERATING SEGMENTS
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The Group has two reportable segments which are the Group`s strategic
divisions. The Group operates in one geographic segment, namely
countries within the Southern Africa Development Community (SADC).
.
The segment analysis is as follows:
31 Dec 31 Dec 30 Jun
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
* Timber products *
Revenue: external sales 523 970 459 721 897 556
Revenue: inter-segment sales - - -
Total revenue 523 970 459 721 897 556
Depreciation and amortisation (8 811) (9 653) (27 818)
Reportable segment profit # 9 420 4 697 30 086
Capital expenditure 23 036 4 511 10 236
.
* Forestry *
Revenue: external sales 40 829 30 451 60 897
Revenue: inter-segment sales 243 308 214 118 429 894
Total revenue 284 137 244 569 490 791
Depreciation and amortisation (2 358) (2 943) (5 255)
Reportable segment profit # 72 872 78 637 165 103
Capital expenditure 795 5 383 7 440
.
* Total for reportable segments *
Revenue: external sales 564 799 490 172 958 453
Revenue: inter-segment sales 243 308 214 118 429 894
Total revenue 808 107 704 290 1 388 347
Depreciation and amortisation (11 169) (12 596) (33 073)
Reportable segment profit # 82 292 83 334 195 189
Capital expenditure 23 831 9 894 17 676
.
# being the earnings before
interest, taxation, depreciation
& amortisation ("EBITDA")
.
* Reconciliation of reportable segment profit *
Total EBITDA for reportable segments 82 292 83 334 195 189
Depreciation, amortisation
and impairment (12 846) (13 700) (33 163)
Unallocated amounts (2 107) (2 061) (129)
Operating profit 67 339 67 573 161 897
.
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5. BIOLOGICAL ASSETS
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31 Dec 31 Dec 30 Jun
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
* Reconciliation of biological assets *
Opening balance 1 936 398 1 921 674 1 921 674
Fair value adjustment:
- Increase due to growth &
enumerations 115 360 181 308 312 530
- Decrease due to harvesting (159 328) (227 289) (358 167)
- Adjustment to standing timber
values to reflect fair value at
period end 70 742 55 532 60 361
Closing balance 1 963 172 1 931 225 1 936 398
Classified as non-current assets 1 650 241 1 610 614 1 616 363
Classified as current assets # 312 931 320 611 320 035
# Being the biological assets to
be harvested and sold in the
12 months after the reporting date.
.
* Key assumptions used in the
discounted cashflow valuation *
Risk free rate (bond used) R207 R157 R157
Risk free rate (%) 7.9% 7.3% 7.5%
Beta factor 0.94 0.73 0.82
Cost of equity 14.1% 12.3% 13.0%
Pre-tax cost of debt 10.0% 9.0% 10.0%
Debt: equity ratio 30:70 30:70 30:70
After-tax weighted average
cost of capital 12.0% 10.6% 11.3%
.
The other key assumptions underlying the discounted cashflow valuation have been
updated as follows:
- Volumes: Forecast volumes were updated at the reporting date using a
merchandising model.
- Log prices: The price per cubic metre is based on current and future expected
market prices per log class. The base market selling prices have been updated to
the latest price increases in the Mpumalanga region. It was assumed that prices
will increase at 6% # (2010: 6%) over the long term.
- Operating costs: The costs are based on the unit costs of the forest
management activities required to enable the trees to reach the age of felling.
The costs include the current and future expected 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 the
market. These costs have been reviewed and updated to the latest applicable
amounts. A long term inflation rate of 5.5% # (2010: 6%) was used.
.
(# Management believes that as a result of the anticipated shortage
in local log supply and forecast long term demand, long term
revenue inflation will be greater than cost inflation.)
.
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6. RELATED PARTIES
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The Group`s related parties are its subsidiaries and key management,
including directors. No change in control occurred in the Company`s
subsidiaries from the prior period. No businesses were acquired or
disposed during the year.
.
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7. EARNINGS PER SHARE
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The calculation of basic earnings per share
is based on:
31 Dec 31 Dec 30 Jun
2011 2010 2011
Unaudited Unaudited Audited
Basic earnings attributable to
ordinary shareholders (`000) R43 675 R7 190 R38 317
Weighted average number
of ordinary shares (`000) 331 241 331 241 331 241
Earnings per share (cents) 13 2 12
.
No change occurred in the number of shares in issued and
no instruments had a dilutive effect.
.
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8. HEADLINE EARNINGS PER SHARE
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The calculation of headline earnings per share
is based on:
31 Dec 31 Dec 30 Jun
2011 2010 2011
Unaudited Unaudited Audited
* Reconciliation of basic earnings
to headline earnings * R`000 R`000 R`000
Basic earnings attributable
to ordinary shareholders 43 675 7 190 38 317
Profit on sale of assets and
liabilities (net of tax) (153) (72) (217)
Loss on non-current assets held for sale - 13 126 13 362
Fair value adjustment on
investment property (net of tax) - - (172)
Impairment of plant, equipment and
vehicles (net of tax) - - 65
Headline earnings for the period 43 522 20 244 51 355
.
Weighted average number
of ordinary shares (`000) 331 241 331 241 331 241
.
Headline earnings per share (cents) 13 6 16
.
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COMPANY INFORMATION:
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Executive directors: Pieter van Zyl (CEO) and Duncan Erskine (CFO)
Non-executive directors: Jim Myers* (Chairman, USA), Paul Botha,
Dr Azar Jammine*, Shakeel Meer,
Gavin Tipper* (* independent)
Registered office: York Corporate Office,
3 Main Street, Sabie, Mpumalanga
Postal address: PO Box 1191, Sabie, 1260
Auditors: KPMG Incorporated
Company secretary: Fusion Corporate
Secretarial Services (Pty) Ltd
Sponsor: One Capital
Transfer secretaries: Computershare Investor Services (Pty) Ltd
info@york.co.za
www.york.co.za
Date: 12/03/2012 17:00:01 Supplied by www.sharenet.co.za
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