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Audited Summarised Consolidated Financial Results For The Year Ended 30 June 2013
York Timber Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1916/004890/06
JSE share code: YRK ISIN: ZAE000133450
York, the Company or the Group
www.york.co.za
Audited summarised consolidated financial results
for the year ended 30 June 2013
Highlights
- Cash generated from operations of R106 million
(2012: R197 million) impacted by external log purchases
- Investment of R45 million in processing technology to improve
efficiencies (2012: R22 million)
- Revenue up 2%, driven by higher selling prices for lumber and
plywood
- Processing plant revenue up R47 million achieving targeted results
with a R30 million increase in operating segment profit
- Cost of debt down R25 million
- Debt to equity ratio low at 16%
- Biological asset value increased by R31 million
- Underlying TNAV up 5% to 692 cents per share
Summarised consolidated statement of financial position
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Assets
Non-current assets
Biological asset (note 5) 1 827 525 1 782 061
Investment property 22 966 26 088
Property, plant and equipment 429 994 404 609
Goodwill 565 442 565 442
Intangible assets 2 257 3 205
Other financial assets 29 969 1 311
Total non-current assets 2 878 153 2 782 716
Current assets
Biological asset (note 5) 273 345 288 161
Inventories 190 960 151 322
Trade and other receivables 157 306 137 080
Cash and cash equivalents 158 694 144 570
Total current assets 780 305 721 133
Total assets 3 658 458 3 503 849
Equity and liabilities
Equity
Share capital 16 562 16 562
Share premium 1 505 352 1 505 352
Reserves 569 408
Retained income 754 862 647 998
Total equity 2 277 345 2 170 320
Liabilities
Non-current liabilities
Cash settled share based payments 18 874 16 054
Deferred tax 550 507 519 183
Loans and borrowings 559 398 529 550
Provisions 18 927 46 575
Retirement benefit obligations 23 073 22 179
Total non-current liabilities 1 170 779 1 133 541
Current liabilities
Current tax payable 2 7
Loans and borrowings 37 775 28 850
Operating lease liability 164 -
Cash settled share-based payments 4 573 2 100
Trade and other payables 167 820 169 031
Total current liabilities 210 334 199 988
Total liabilities 1 381 113 1 333 529
Total equity and liabilities 3 658 458 3 503 849
Summarised consolidated statement of comprehensive income
Year ended Year ended
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Revenue 1 131 994 1 112 843
Cost of sales (721 696) (691 324)
Gross profit 410 298 421 519
Other operating income 38 787 28 412
Selling, general and
administration expenses (287 720) (283 863)
Operating profit 161 365 166 068
Fair value adjustments 25 230 130 843
Profit before finance costs 186 595 296 911
Investment income 6 239 6 484
Finance costs excluding hedge
interest expense (54 672) (79 356)
Hedge interest expense (paid) (1 997)
Hedge interest expense
(ineffective portion) (5 955)
Profit before taxation 138 162 216 087
Taxation (31 298) (78 269)
Profit for the period 106 864 137 818
Other comprehensive income/(loss):
Available-for-sale financial
assets adjustments 205 308
Effects of cash flow hedges 8 290
Taxation related to components of
other comprehensive income (44) (2 364)
Other comprehensive income for the
period net of taxation 161 6 234
Total comprehensive income 107 025 144 052
Earnings per share (cents)
(note 7) 32 42
Headline earnings per share (cents)
(note 8) 33 42
Summarised consolidated statement of cash flows
Year ended Year ended
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Cash generated from operations 106 486 197 088
Investment income 6 239 6 484
Finance costs (54 672) (66 783)
Taxation paid (5) 9 260
Net cash from operating
activities 58 048 146 049
Cash flows from investing
activities
Purchase of property, plant
and equipment (51 958) (36 340)
Proceeds from disposal of
property, plant and equipment 83 376
Purchase of intangible assets (67) (937)
Purchase of financial assets (28 453) -
Purchase of biological assets (2 264) -
Purchase of investment property (38) -
Net cash from investing
activities (82 697) (36 901)
Cash flows from financing
activities
Net movement in loans and
borrowings 38 773 (68 062)
Net cash from financing
activities 38 773 (68 062)
Total cash movement for the
period 14 124 41 086
Cash at beginning of period 144 570 103 484
Cash at end of period 158 694 144 570
Summarised consolidated statement of changes in equity
Share Share Hedging
capital premium reserve
R000 R000 R000
Balance at 1 July 2011
(audited) 16 562 1 505 352 (5 969)
Profit for the year
Other comprehensive
income
Change in fair value of
cash flow hedge,
net of tax 5 969
Change in fair value of
available-for-sale
financial assets, net of
tax -
Total other comprehensive
income - 5 969
Total comprehensive income
for the year and total
transactions with owners 5 969
Balance at 30 June 2012
(audited) 16 562 1 505 352
Profit for the period
Other comprehensive income
Change in fair value of
available-for-sale
financial assets, net of
tax -
Total other comprehensive
income
Total comprehensive income
for the period and total
transactions with
owners -
Balance at 30 June 2013
(audited) 16 562 1 505 352
Available-
for-sale Retained Total
reserve income equity
R000 R000 R000
Balance at 1 July 2011
(audited) 143 510 180 2 026 268
Profit for the year 137 818 137 818
Other comprehensive
income
Change in fair value of
cash flow hedge,
net of tax 5 969
Change in fair value of
available-for-sale
financial assets, net of
tax 265 265
Total other comprehensive
income 265 137 818 144 052
Total comprehensive income
for the year and total
transactions with owners 265 137 818 144 052
Balance at 30 June 2012
(audited) 408 647 998 2 170 320
Profit for the period 106 864 106 864
Other comprehensive income
Change in fair value of
available-for-sale financial
assets, net of tax 161 161
Total other comprehensive
income 161 - 161
Total comprehensive income
for the period and total
transactions with owners 161 106 864 107 025
Balance at 30 June 2013
(audited) 569 754 862 2 277 345
Notes to the summarised consolidated financial statements
1. Basis of preparation
These summarised consolidated financial statements have been prepared
in accordance with the JSE Listings Requirements, the Companies Act,
2008 and the Companies Regulations, 2012. The Group has applied the
recognition and measurement requirements of International Financial
Reporting Standards (IFRS) and the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and the Financial
Reporting Pronouncements as issued by Financial Reporting Standards
Council as well as the presentation and disclosure requirements of
International Accounting Standard (IAS) 34 Interim Financial
Reporting. The financial results have been compiled under the
supervision of S Pretorius CA (SA), the Acting Chief Financial
Officer. The directors take responsibility for the preparation of
the summarised consolidated financial statements and that the
financial information is correctly extracted from the underlying
financial statements.
These summarised 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 2013 which are available on the
Companys website, www.york.co.za or at the companys registered
office.
The auditors, KPMG Inc., have issued their opinion on the Group's
financial statements for the year ended 30 June 2013. The audit was
conducted in accordance with International Standards on Auditing.
They have issued an unmodified audit opinion. The auditors report
does not necessarily report on all of the information contained in
this announcement / financial results. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of
the auditors engagement they should obtain a copy of the auditors
report together with the accompanying financial information from the
issuers registered office. These summarised consolidated financial
statements have been extracted from audited information but are not
audited. These summarised consolidated financial results have been
prepared on the going concern basis and were approved by the Board of
Directors on 19 September 2013.
There has been no material changes in judgements or estimates
relating to amounts reported in prior reporting periods.
The Group financial results are presented in Rand, which is the
Companys 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 2012.
2. Additional disclosure items
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Authorised capital commitments:
Contracted, but not provided 11 852 4 117
Not contracted 25 098 5 798
Capital expenditure 51 958 36 340
Depreciation of property,
plant and equipment 26 972 35 387
Amortisation of intangible assets 1 015 1 007
Impairment of trade receivables 1 189 132
- The Group did not have any litigation settlements during the
reporting period.
- The Group participates in a pooled banking facility of
R85 million granted by First Rand Bank Limited. Group companies
have provided cross suretyships limited to
R5 million 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 to or disclosure
in these results.
- No movement occurred in the number of shares issued during the
period under review.
3. Comparative figures
The annual financial statements for the year ended 30 June 2012, are
presented as published and have not been restated.
4. Operating segments
The Group has two reportable segments which are the Groups strategic
divisions. The Group operates in one geographic segment, countries
within the Southern Africa Development Community (SADC). The segment
analysis is as follows:
Timber products
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Revenue: external sales 1 090 205 1 042 790
Revenue: inter-segment sales
Total revenue 1 090 205 1 042 790
Depreciation and amortisation (22 286) (27 271)
Reportable segment profit* 87 990 57 961
Capital expenditure 44 601 21 959
Forestry
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Revenue: external sales 41 405 69 436
Revenue: inter-segment sales 522 944 491 494
Total revenue 564 349 560 930
Depreciation and amortisation (3 502) (4 835)
Reportable segment profit* 97 129 136 402
Capital expenditure 3 889 1 015
Total
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Revenue: external sales 1 131 610 1 112 226
Revenue: inter-segment sales 522 944 491 494
Total revenue 1 654 554 1 603 720
Depreciation and amortisation (25 788) (32 106)
Reportable segment profit* 185 119 194 363
Capital expenditure 48 490 22 974
*Being the earnings before interest, taxation, depreciation &
amortisation (EBITDA)
4. Operating segments (continued)
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Reconciliation of reportable
segment profit or loss
Total EBITDA for reportable
segments 185 119 194 363
Depreciation, amortisation and
impairment (25 788) (28 658)
Unallocated amounts 2 034 363
Operating profit 161 365 166 068
5. Biological assets
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Reconciliation of biological
assets
Opening balance 2 070 222 1 936 398
Fair value adjustment:
Increase due to growth and
enumerations 384 403 453 552
Decrease due to harvesting (311 580) (322 318)
Adjustment to standing timber
values to reflect fair value at
period end (44 439) 2 590
Purchased plantations 2 264 -
Closing balance 2 100 870 2 070 222
Classified as non-current assets 1 827 525 1 782 061
Classified as current assets * 273 345 288 161
30 Jun 2013 30 Jun 2012
Audited Audited
Key assumptions used in the
discounted cash flow valuation
Risk free rate
(Jun 2013: R186 bond,
Jun 2012: R186 bond) 7,89% 7,95%
Beta factor 1.04 0,99
Cost of equity 14,61% 14,4%
Pre-tax cost of debt 9,5% 9,5%
Debt: equity ratio 35:65 35:65
After-tax weighted average
cost of capital 11,89% 11,75%
The additional key assumptions underlying the discounted cash flow
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. It was assumed that
log prices will increase by 8% per year over the next two years
and at 6%* (2012: 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. A contributory
asset charge was introduced in the current period; this takes into
account the cost of property, plant and equipment utilised to generate
cash flows from the biological asset over the valuation period. The
operating costs exclude the transport costs necessary to get the
asset to market. These operating costs have been reviewed and updated
to current actual costs. A long term inflation rate of 5,5%*
(2012: 5,5%) 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.)
6. Related parties
The Groups related parties are its subsidiaries and key management,
including directors. No change in control occurred in the Companys
subsidiaries during the period. No businesses were acquired or
disposed of during the period.
7. Earnings per share
The calculation of basic earnings per share is based on:
30 Jun 2013 30 Jun 2012
Audited Audited
Earnings attributable to
ordinary shareholders (R000) 106 864 137 818
Weighted average number of
ordinary shares in issue (R000) 331 241 331 241
Earnings per share (cents) 32 42
No change occurred in the number of shares in issue and no
instruments had a dilutive effect.
8. Headline earnings per share
The calculation of headline earnings per share is based on:
30 Jun 2013 30 Jun 2012
Audited Audited
R000 R000
Reconciliation of earnings to
headline earnings
Earnings attributable to
ordinary shareholders 106 864 137 818
Loss on sale of assets and
liabilities (net of tax) 157 366
Fair value adjustment on
investment property (net of tax) 2 565 2 424
Reversal of impairment of plant,
equipment and vehicles (net of tax) (498) (2 876)
Headline earnings for the period 109 088 137 732
Weighted average number of
ordinary shares in issue (000) 331 241 331 241
Headline earnings per share (cents) 33 42
9. Directorship and company secretary
Ms Han-hsiu Hsieh replaced Fusion Corporate Secretarial Services
(Proprietary) Limited as the company secretary with effect from
15 November 2012.
Mr Duncan Erskine resigned as Chief Financial Officer (CFO), with
effect from 30 January 2013. Mr Sean Pretorius assumed the role of
acting Chief Financial Officer and a suitable successor has been
recruited. Mr Pieter van Buuren has been appointed as Executive
Director and Chief Financial Officer with effect from 1 October 2013.
With effect from 6 March 2013, Messrs Dinga Mncube and Thabo
Mokgatlha were appointed as independent non-executive directors of
the Company.
COMMENTARY
Group performance and financial review
The directors are pleased to present a solid set of results in tough
market conditions. Despite disproportionate escalations in labour
and electricity costs, York achieved a lower than inflation increase
in its cost of production through efficiency improvements. The
EBITDA margin remained intact at 17%. Our performance this year
reflects strategic capital investments that form the foundation of
the unfolding growth strategy of the Group.
Overall market confidence was volatile with some erratic trends in
purchasing patterns. York's strategy was to maintain prices and to
hold higher levels of stock where appropriate. An average price
increase of 5% for lumber was achieved. Strong growth in volume and
prices of plywood was experienced. The Processing division's profit
increased by 52% on the prior year.
Processing plants
The York philosophy of cost optimisation resulted in processing plant
efficiencies improving during the year. The unit cost of production
increased by 5% year-on-year, despite above inflation increases in
labour, electricity and insurance costs. Cost structures at the
processing plants have been well managed and costs were contained
during the year. Combined lumber and plywood volumes produced
increased by 3% against an increase in log intake of only 1%, compared
to the prior year. Our continued investment in technology should
further improve processing margins and the Groups cash generating
ability. York has received Development Facilitation Act (DFA) approval
from the Mpumalanga DFA Tribunal for the intended developments at its
Sabie site and is well on track to obtaining all other necessary
approvals. York will continue to progress its strategy of complete
fibre utilisation.
Forestry division
York continues to procure third party raw material so as to conserve
our own plantations over the medium term to achieve sustainable
maturity. In line with this strategy, the Forestry division produced
16% lower volumes than the prior year with external purchases being
25% higher. This decision significantly impacts the nature of the
Groups earnings and resulted in a ca R24 million increase in costs
compared to the prior year. The forecast volume of trees used in the
discounted cash flow valuation has increased by 12%, reflecting an
increase in the long term value of the biological asset. Had York
supplied all of its own raw material needs, the resultant EBITDA
would have been in the order of R114 million, an increase of 60,7%.
Biological asset
The biological asset is valued on a discounted cash flow (DCF) basis
using the key assumptions described in note 5 to the audited
summarised consolidated financial statements. 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 Groups plantations should increase.
During the reporting period York suffered fire damage to a limited
area of its plantations and as a result the temporary unplanted (TUP)
area increased by 291 hectares, partially reducing the impact of the
growth that resulted from lower harvesting during the period, a net
increase of R73 million. As the TUP areas are replanted to normalised
levels the value of the plantation asset will increase.
York continues to invest in research on genetic improvements, site
species matching and silviculture practices to improve the future
yields from its plantations. Initial trials indicate that the future
yield improvements will be significant.
Cost of debt
The refinancing of the Group's primary debt resulted in a decrease in
finance costs for the year. The loans and borrowings balance
increased during the year as a result of the utilisation of the Land
Bank facility for the purchase of the businesses of Thorpe Timber
Company and Timber Preservation Services from Iliad Africa Holdings
Limited. The money was deposited into an attorney trust account
pending approval by the Commissioner of the Competition Commission.
The unconditional approval was granted on 23 July 2013 and York took
effective control on 1 August 2013.
Adjusted tangible net asset value
Adjusted tangible net asset value (TNAV) improved by 5% to 692 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 biological asset cash generating unit.
In considering the Groups net asset value cognisance should be taken
of the fact that while the components of the deferred tax related to
the plantations originate and reverse through the Groups operations,
the aggregate balance will only reverse: should the plantation value
decrease, should harvested areas not be re-established or should the
plantations be disposed of.
Cash flow
Cash generated from operations was impacted by the Group's continued
strategy to procure third party saw logs while preserving its own
plantations and increased stock at year-end in preparation for higher
seasonal sales during the first two quarters. The net cash flow from
operations was R106 million.
Outlook
York remains well positioned to advance its strong market position.
The acquisition subsequent to year end of the businesses of Thorpe
Timber Company in Roodekop and Timber Preservation Services in Epping
will improve our access to the market through the wholesale channels.
This will improve York's market footprint nationally and lead to
growth and diversification of revenue; the wholesale division has
expanded the Group's value adding capacity thereby diversifying our
product offering to the market.
The efficiency and processing improvements resulting from the Group's
investment in technology will improve operating margins at York's
processing plants and further increase York's cost competitive
advantage.
The lead indicators of the primary drivers of York's market suggest
growth going forward. The South African market is underpinned by a
need for residential building and infrastructure development which
will drive a continued demand for timber related products.
The Group is actively pursuing both internal and external growth
possibilities with a strong focus on fibre utilisation and processing
efficiencies, this strategy is aimed at unlocking York's full
potential and significantly improving both earnings and cash
generating ability.
Executive director: Pieter van Zyl (CEO)
Non-executive directors: Dr Jim Myers* (Non-executive Chairman, USA),
Paul Botha, Dr Azar Jammine*, Shakeel Meer, Dinga Mncube*,
Thabo Mokgatlha*, Gavin Tipper* (*independent)
Registered office: York Corporate Office: 3 Main Road, Sabie,
Mpumalanga. Postal address: PO Box 1191, Sabie 1260
Auditors: KPMG Inc.
Company secretary: Han-hsiu Hsieh
Acting Chief Financial Officer: Sean Pretorius
Sponsor: One Capital
Transfer secretaries: Computershare Investor Services (Pty) Ltd
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