Wrap Text
Audited summarised consolidated financial results
for the year ended June 2015
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
Audited summarised consolidated financial results
for the year ended June 2015
www.york.co.za
Highlights
• Cash generated from operations of R183 million increased by
R31 million from the prior year
• R203 million invested in improvements and capacity
• Revenue up 17% and 99% improvement in profit for the year
• Operating profit increased by 23% due to improved sales, better
average selling prices and operational efficiencies
• Commencement of R300 million plywood expansion project
• Net biological asset value increased by R37 million
• Underlying tangible net asset value up 4% to 739 cents per share
• Earnings per share increased by 107%
Commentary
Group performance and financial review
Combined sales volumes of both lumber and plywood increased by 12,
4% year-on-year. Production at processing plants increased by 3%
from the previous year in spite of the August 2014 industrial action
by wage earners and load shedding interruptions. The total production
lost during 2015 amounted to 4% and 6% of planned production time
respectively. The investments made in the current and previous years
to increase efficiencies and production flow contributed to this
year’s results.
During 2015 York commenced with a R300 million upgrade of the
existing plywood facility that will increase production capacity
by 69%. This upgrade will be completed during the last quarter of
the 2016 financial year. This investment is the first in a number of
step changes planned for York's EBITDA generating ability.
The volume of lumber sold by York increased by 14% year-on-year
relevant to the lumber market that grew by only 3%. The average
selling prices for lumber increased by 5% in the period. Plywood
volume sold by York increased by 7% year-on-year while the average
selling price increased by 14%.
The previously loss-making Wholesale division that was purchased
from Iliad Africa, became profitable during the year with
an increase of R9 million in EBITDA relative to the prior year.
Further investment in remanufacturing capabilities is planned for
the next year. This division contributed R392.5 million
in turnover and has the ability to meet short delivery lead times and
immediate stock availability required by customers across a range of
products.
The Forestry division EBITDA decreased year-on-year by 29%, in line
with York's sustainable forestry management practises and outside
procurement strategy. Industry log prices for solid wood processing
continues to increase for larger diameter logs, at the same time the
number of hectares managed for pine long saw log rotation continues
to reduce. The York biological asset increased year-on-year with a
fair value adjustment of R37 million. The net movement of additional
volume due to growth, price increases and costs added R59 million but
was negatively impacted by the change in the applied discount rate by
R22 million.
The Forestry division delivered 1 134 358m3 of own and purchased
volumes, 7,2% more than the previous year. York suffered a fire at
its Taurus plantation that resulted in a higher temporary unplanted
area of 3,428 hectares. The targeted temporary unplanted area for
the 2016 financial year is 2 238 hectares. York will continue to
procure external raw material so as to conserve its own
plantations over the medium term to achieve sustainable maturity.
In line with this strategy, the Forestry division purchased 8%
more external logs than the previous year. External purchases
represented 35% (previous year also 35%) of total available processed
volumes, whilst own plantations accounted for the remaining
balance of required processed volumes. These external
purchases had a negative impact of R28.8 million on the Forestry
division's EBITDA. The standing volume of trees increased by 4%,
enhancing the long-term value of the biological asset.
Balance sheet movements
York has invested R203 million in acquiring property, plant and
equipment, the bulk of which relates to the plywood expansion
project. This expenditure is funded with a term loan from the Land
Bank of R280 million. The total long-term debt is R678 million, with
a debt: equity ratio at a conservative 19%.
The working capital investment increased by 3% during the year,
mainly as a result of higher plywood resin consumption and the
revenue growth experienced by the Wholesale division. Accounts
receivable days outstanding improved by 24% from the prior year.
Trade payables have increased as a result of inventory purchases at
our Wholesale division, higher external log purchases and the capital
projects in progress.
During the year, York elected to utilise R14,3 million of its
self-insurance fund to recoup firefighting costs. York also
continued with the investment and contributed another
R18,45 million towards this self-insurance fund. The total value
of the self-insurance fund at year-end was R41,9 million.
Adjusted tangible net asset value
Adjusted tangible net asset value (TNAV) represents the physical net
asset value, including property plant and equipment, biological
assets, plus all other assets and less all liabilities,
but specifically excludes intangible items such as goodwill and
deferred tax. With this measurement management aims to
demonstrate the actual value inherent in the company on a per
share basis. It is a useful measurement as it aims to be a
comparable data point to reference against the current traded share
performance.
As at 30 June 2015, York traded at a 63% discount to the TNAV as
at year-end. The annual growth in TNAV is 4,5% from 707c to 739c
per share. York has re-purchased 3,7 million of its issued
shares at year-end. Given this large discount, York will continue
its repurchase programme.
Cash flow
Cash generated from operations improved to R182,5 million, up
from R151,5 million. York invested R203,2 million (previous year
R66,1 million) in property, plant and equipment.
York received Land Bank funding for the plywood expansion project
of R183,9 million, and repaid existing loans to the value of
R44 million during the year.
Cash at year-end ended on R192 million, which is R81 million (74%)
better than the prior year.
Outlook
York embarked on Project Evolve to improve planning and scheduling,
contractor engagement, management and supervisory effectiveness,
problem solving as well as improve reaction times to variations in
performance achieved by the implementation of management operating
systems. Benefits of this project create a dynamic platform to
build York's growth strategy.
Extracting value from our plantation growth stock remains a key focus
area. It is with this objective in mind that York continues to
invest in the appropriate processing technology. York will continue
to focus on efficiencies in its processing plants and improving
process flow, where appropriate.
Insourcing of various forestry activities has and will continue to
deliver benefits to York, and will remain a key priority. The
continued improvements in our plantation growth stock through
enhanced silviculture practices, site specie matching and
effective external log procurement will ensure adequate raw material
is available to deliver on the growth strategy.
York is committed to develop a more diversified earnings base. As a
result, York will participate in the Department of Energy's Renewable
Energy Independent Power Producer Procurement Programme (REIPPPP)
in the expedited bid window that closes on 11 November 2015. A bid
for a 25 megawatt electrical biomass power plant will be submitted.
This project will strengthen York's EBITDA generating capability,
diversify earnings and extract increased value from available biomass
in the Group.
Consolidated statement of financial position
30 Jun 39 Jun
2015 2014
Audited Audited
R’000 R'000
Assets
Non-current assets
Biological assets (see note 5) 1 821 029 1 834 963
Investment property 21 895 21 866
Property, plant and equipment 628 112 463 645
Goodwill 565 442 565 442
Intangible assets 2 711 2 439
Other financial assets 41 900 38 464
Deferred tax 7 050 8 495
Total non-current assets 3 088 139 2 935 314
Current assets
Biological asset (see note 5) 319 038 268 129
Inventories 258 332 234 032
Trade and other receivables 210 928 171 893
Cash and cash equivalents 192 068 110 464
Current tax receivable 2 477 -
Total current assets 982 842 784 518
Total assets 4 070 982 3 719 832
Equity and liabilities
Equity
Share capital 16 377 16 562
Share premium 1 495 561 1 505 352
Reserves 732 (668)
Retained income 907 324 805 856
Total equity 2 419 994 2 327 102
Liabilities
Non-current liabilities
Loans from related parties 1 505 -
Cash-settled share-based payments 12 538 12 363
Deferred tax 605 605 574 879
Loans and borrowings 678 150 528 459
Provisions 12 371 11 671
Retirement benefit obligations 22 829 24 313
Total non-current liabilities 1 332 998 1 151 685
Current liabilities
Current tax payable 79 2
Loans and borrowings 65 210 34 157
Cash-settled share-based payments 2 386 13 785
Operating lease liability 540 358
Trade and other payables 249 775 192 743
Total current liabilities 317 990 241 046
Total liabilities 1 650 988 1 392 730
Total equity and liabilities 4 070 982 3 719 832
Consolidated statement of comprehensive income
30 Jun 39 Jun
2015 2014
Audited Audited
R’000 R'000
Revenue 1 543 149 1 323 976
Cost of sales (1 138 734) (946 031)
Gross profit 404 415 377 945
Other operating income 29 618 17 215
Selling, general and administration
expenses (290 012) (278 349)
Operating profit 144 021 116 811
Fair value adjustments 42 422 (2 084)
Bargain purchase on acquisition 6 244 2 984
Profit before finance costs 192 687 117 711
Investment income 3 585 5 820
Finance costs (58 385) (56 440)
Profit before taxation 137 887 67 071
Taxation (36 419) (16 097)
Profit for the period 101 468 50 994
Other comprehensive income/(loss):
Available-for-sale financial assets
adjustments - (680)
Remeasurement on defined benefit
liability 1 944 (928)
Taxation related to components of
other comprehensive income (544) 371
Other comprehensive income for the
period net of taxation 1 400 (1 237)
Total comprehensive income 102 868 49 757
Basic earnings per share (cents)
(see note 7) 31 15
Consolidated statement of cash flows
30 Jun 39 Jun
2015 2014
Audited Audited
R’000 R'000
Cash generated from operations 182 574 151 461
Investment income 3 585 5 820
Finance costs (58 385) (56 440)
Taxation paid (7 193) -
Net cash from operating activities 120 581 100 841
Cash flows from investing activities
Purchase of property, plant and
equipment (203 288) (66 169)
Purchase of intangible assets (1 417) (2 127)
Acquisition of subsidiaries net
cash acquired (2 769) (34 228)
Purchase of financial assets (17 750) (14 000)
Sale of financial assets 14 314 5 717
Purchase of biological assets - (4 206)
Sale of biological assets 5 477 -
Proceeds from disposal of property,
plant and equipment 1 374 463
Proceeds from disposal of
intangible assets 41 37
Net cash from investing activities (204 018) (114 513)
Cash flows from financing activities
Reduction of share capital or buy-
back of shares (9 976) -
Net movement in loans and
borrowings 175 017 (34 558)
Net cash from financing activities 165 041 (34 558)
Total cash movement for the period 81 604 (48 230)
Cash at beginning of period 110 464 158 694
Cash at end of period 192 068 110 464
Consolidated statement of changes in equity
Defined
benefit
Share Share plan
capital premium reserve
’000 R’000 R'000
Balance at 1 July 2013
(audited) 16 562 1 505 352 -
Profit for the year – – –
Other comprehensive income – – (668)
Total comprehensive income for
the year and total
transactions with owners – – (668)
Balance at 30 June 2014
(audited) 16 562 1 505 352 (668)
Profit for the period – – –
Other comprehensive income - - 1 400
Total comprehensive income for
the period and total
transactions with owners – – 1 400
Purchase of own shares (185) (9 791) -
Balance at 30 June 2015
(audited) 16 377 1 495 561 732
Available-
for-sale Retained Total
reserves income equity
’000 R’000 R'000
Balance at 1 July 2013
(audited) 569 754 862 2 277 345
Profit for the year – 50 994 50 994
Other comprehensive income (596) – (1 237)
Total comprehensive income
for the year and total
transactions with owners (569) 50 994 49 757
Balance at 30 June 2014
(audited) - 805 856 2 327 102
Profit for the period – 101 468 101 468
Other comprehensive income - - 1 400
Total comprehensive income
for the period and total
transactions with owners - 101 468 102 868
Purchase of own shares - - (9 976)
Balance at 30 June 2015
(audited) - 907 324 2 419 994
Notes to the consolidated financial statements
1. Basis of preparation
These summarised consolidated annual financial statements have been
prepared in accordance with the JSE Listings Requirements, the
Companies Act of South Africa, 2008 and the Companies Regulations,
2011. 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 Financial Reporting Pronouncements as issued
by Financial Reporting Standards Council as well as the presentation
and disclosurerequirements of International Accounting Standard
(IAS) 34 Interim Financial Reporting. The financial results have
been compiled under the supervision of JPF van Buuren CA (SA),
the Chief Financial Officer. The directors take responsibility for
the preparation of the summarised consolidated annual 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 annual financial statements
as at and for the year ended 30 June 2015, which are available on the
Company’s website, www.york.co.za or at the company’s registered
office.
The auditor, KPMG Inc., has issued their opinion on the Group's
financial statements for the year ended 30 June 2015. The audit was
conducted in accordance with International Standards on Auditing.
They have issued an unmodified audit opinion. The auditor’s 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 auditor’s engagement, they should
obtain a copy of the auditor’s report together with the accompanying
financial information from the issuer’s registered office. These
summarised consolidated annual financial statements have been
extracted from audited information, but are not itself audited.
These summarised consolidated annual financial results have been
prepared on the going concern basis and were approved by the Board of
Directors on 28 September 2015.
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 South African 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 2014, except for the new standards that became
effective during the year.
2. Additional disclosure items
30 Jun 39 Jun
2015 2014
Audited Audited
R’000 R'000
Authorised capital commitments:
- Contracted, but not provided 124 034 5 068
- Not contracted 8 097 290 160
Capital expenditure 203 288 66 169
Depreciation of property, plant
and equipment 54 264 38 206
Amortisation of intangible assets 1 104 924
Reversal of impairment of trade
receivables - (6 866)
• The Group did not have any litigation settlements during the
reporting period.
• The Group participates in a pooled banking facility of
R105 million granted by FirstRand Bank Limited. Group companies have
provided cross suretyship, limited to R5 million, in favour of
FirstRand 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, although the Company has re-purchased some of
its shares through a subsidiary company within the Group.
3. Comparative figures
The annual financial statements for the year ended 30 June 2014, had
reclassifications as follows:
During the year it was established that depreciation and utility
expenses previously classified as part of Selling, general and
administration expenses should be reclassified to Cost of sales as
these expenses are directly linked to the manufacturing of timber
related products. The consolidated amount of the adjustment amounted
to R66 865 000 (2014: R54 013 000). The directors have not
presented a third column in the statement of financial
position as this reclassification is limited to the Statement of
Profit or Loss and other Comprehensive Income.
Statement of profit or loss and other comprehensive Income
30 Jun 39 Jun
2015 2014
Audited Audited
R’000 R'000
Cost of sales - 54 013
Selling, general and administration
expense - (54 013)
Impact on operating profit - -
Impact on profit after tax - -
4. Operating segments
The Group has three reportable segments, which are the Group’s
strategic divisions. The Group operates in one geographic segment,
being countries within the Southern Africa Development Community
(SADC).
The segment analysis is as follows:
2015 Sawmills Wholesale Forestry Total
Revenue: external
sales 1 079 157 400 399 62 833 1 542 389
Revenue: inter-
segment sales 206 763 - 603 115 809 878
Total revenue 1 285 920 400 399 665 948 2 352 267
Depreciation and
amortisation (44 402) (1 424) (6 005) (51 831)
Reportable segment
profit* 97 026 4 065 93 131 194 222
Fair value
adjustment - - 42 452 42 452
Capital expenditure 182 542 407 10 850 193 799
2014
Revenue: external
sales 996 886 278 568 47 822 1 323 276
Revenue: inter-
segment sales 177 133 - 572 946 750 079
Total revenue 1 174 019 278 568 620 768 2 073 355
Depreciation and
amortisation (31 761) (1 154) (3 693) (36 608)
Reportable segment
profit* 54 331 (5 289) 118 478 167 520
Fair value adjustment - - (1 984) (1 984)
Capital expenditure 52 872 3 482 7 993 64 347
*Being the earnings before interest, taxation, depreciation &
amortisation (EBITDA)
Reconciliation of reportable segment profit or loss
30 Jun 39 Jun
2015 2014
Audited Audited
R’000 R'000
Total EBITDA for reportable segments 194 222 167 520
Depreciation, amortisation and impairment (51 831) (36 608)
Unallocated amounts 1 630 (14 101)
Operating profit 144 021 116 811
5. Biological assets
Reconciliation of biological assets
30 Jun 39 Jun
2015 2014
Audited Audited
R’000 R'000
Opening balance 2 103 092 2 100 870
Fair value adjustment:
– Increase due to growth and
enumerations 435 042 447 357
– Adjustment to standing timber
values to reflect fair value at
period end (68 958) (123 284)
Decrease due to harvesting (323 632) (326 057)
Purchased plantations - 4 206
Sale of plantations (5 477) -
Closing balance 2 140 067 2 103 092
Classified as non-current assets 1 821 029 1 834 963
Classified as current assets* 319 038 268 129
30 Jun 39 Jun
2015 2014
Audited Audited
Key assumptions used in the discounted
cash flow valuation
Risk free rate (R186 bond) 8, 28% 8,31%
Beta factor 1, 09 1,08
Cost of equity 15, 28% 15,25%
Pre-tax cost of debt 10, 25% 10,00%
Debt: equity ratio 35:65 35:65
After-tax weighted average cost
of capital 12.51% 12.43%
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 with 6,5% per year over the next two years and
at 6%* (2014: 6,5% over the first two years and 6% over the long
term) 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 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 5,7% in year one and 6% over the long term* (2014: 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 Group’s related parties are its subsidiaries and key management,
including directors. No change in control occurred in the Company’s
subsidiaries during the period. The Group acquired a joint operation
during the year.
7. Earnings per share
The calculation of basic earnings per share is based on:
30 Jun 39 Jun
2015 2014
Audited Audited
Basic earnings attributable to
ordinary shareholders (R’000) 101 468 50 994
Weighted average number of ordinary
shares in issue (R’000) 327 544 331 241
Earnings per share (cents) 31 15
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 39 Jun
2015 2014
Audited Audited
R’000 R'000
Reconciliation of basic earnings
to headline earnings
Basic earnings attributable to
ordinary shareholders 101 468 50 994
Profit on sale of assets and
liabilities (net of tax) (304) (402)
Fair value adjustment on investment
property (net of tax) 24 81
Impairment of plant, equipment and
vehicles (net of tax) - 229
Bargain purchase on acquisition (6 244) (2 984)
Headline earnings for the period 94 944 47 918
Weighted average number of ordinary
shares in issue (‘000) 331 032 331 241
Headline earnings per share (cents) 29 14
9. Directorship changes
Ms Maserame Mouyeme was appointed on 22 May 2015 as a non-executive
independent director.
Company information
Executive directors: Pieter van Zyl (CEO), Pieter van Buuren (CFO)
Non-executive directors: Dr Jim Myers* (Non-executive Chairman, USA),
Paul Botha, Dr Azar Jammine*, Shakeel Meer, Dinga Mncube*, Maserame
Mouyeme*, Thabo Mokgatlha*, Gavin Tipper* (*independent) Registered
office: York Corporate Office: 3 Main Road, Sabie, Mpumalanga.
Postal address: PO Box 1191, Sabie 1260
Auditor: KPMG Inc.
Company secretary: Han-hsiu Hsieh
Chief Financial Officer: Pieter van Buuren
Sponsor: One Capital
Transfer secretaries: Computershare Investor Services (Pty) Ltd
29 September 2015
Date: 29/09/2015 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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