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MAS - Masonite - Audited results for the 12 months ended 31 December 2006 and
dividend declaration
MASONITE (AFRICA) LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1942/015502/06)
Share code: MAS & ISIN: ZAE000004289
("Masonite" or "the company")
AUDITED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2006 AND DIVIDEND
DECLARATION
Income statement
12 months to
Group and company December 31 December 31,
2006 2005
Note (R`000) (R`000)
Revenue 431 962 395 391
Cost of sales (316 852) (295 944)
Gross profit 115 110 99 447
Other operating income 1 231 2 338
Distribution costs (56 286) (48 919)
Selling and marketing costs (11 895) (12 764)
Administrative expenses (10 868) (9 391)
Other operating expenses (12 137) (12 806)
Trading income 25 155 17 905
Fair value adjustment of
biological assets 4 993 430
Operating profit before
financing costs 30 148 18 335
Finance income 1 069 638
Finance expenses (1 583) (2 043)
Profit before tax 29 634 16 930
Income tax expenses 5 (9 129) (4 015)
Profit for the year 20 505 12 915
Number of shares in issue 7 035 558 6 900 224
Earnings per share (cents)
Basic 294 188
Diluted 289 183
HEADLINE EARNINGS
RECONCILIATION
Profit for the year 20 505 12 915
Adjusted for:
(Profit)/loss on sale of assets (64) 62
Tax effect of adjustments 19 (18)
Headline earnings 20 460 12 959
Headline earnings per share (cents)
Basic 294 188
Diluted 288 183
Balance sheet
Group and company at December 31 at December 31,
2006 2005
Note (R`000) (R`000)
ASSETS
Non-current assets
Property, plant and
equipment 98 130 101 127
Intangible assets 728 1 238
Biological assets 2 101 329 96 336
Deferred tax assets 8 038 8 124
Investments 30 30
Loans receivable - 42
Total non-current assets 208 255 206 897
Current assets
Inventories 41 429 41 780
Trade receivables and
other receivables 59 594 54 604
Amounts due from fellow
subsidiaries 1 031 1 732
Cash and cash equivalents 40 150 14 825
Tax asset 3 017 -
Total current assets 145 221 112 941
Total assets 353 476 319 838
EQUITY AND LIABILITIES
Capital and reserves
Share capital 3 518 3 450
Share premium 2 837 2 357
Non-distributable reserves 700 700
Retained earnings 229 764 213 687
Total equity 236 819 220 194
Non-current liabilities
Deferred tax liabilities 45 517 41 032
Post retirement benefit obligation 3 18 347 17 731
Straight lining lease accrual 55 70
Total non-current liabilities 63 919 58 833
Current liabilities
Trade and other payables 47 802 31 952
Provisions 4 186 7 870
Amounts payable to holding company - 435
Amounts payable to fellow subsidiaries 701 329
Tax liabilities - 114
Straight lining lease accrual 49 111
Total current liabilities 52 738 40 811
Total equity and liabilities 353 476 319 838
Condensed cash flow statement
12 months to
Group and company December 31 December 31,
2006 2005
(R`000) (R`000)
Cash flows from operating activities
Profit from operations 30 148 18 335
Interest received 990 563
Interest paid (1 583) (2 043)
Adjusted for:
Depreciation and amortisation 12 936 11 812
(Increase)/ decrease in fair value
of biological assets (4 993) (430)
(Gain)/loss on disposal of assets (64) 62
Provisions utilised (6 799) (3 957)
Increase in liability for
Retirement benefit obligation 616 1 040
Foreign exchange losses (unrealised) 757 1 355
Straight lining lease accrual (78) (83)
Taxation paid (7 689) (5 546)
Working capital changes 14 684 (5 632)
Net cash inflow from operating
activities 38 925 15 476
Cash flows from investing activities
Additions to property, plant and
equipment (9 549) (9 700)
Proceeds from sale of property,
Plant and equipment 184 421
Loan repayment received from
related party 42 36
Net cash outflow from investing
activities (9 323) (9 243)
Cash flows from financing activities
Proceeds from issue of ordinary
shares 548 186
Dividends paid (4 428) -
Net cash (outflow)/inflow from financing
activities (3 880) 186
Net increase in cash and cash
equivalents 25 722 6 419
Effects of exchange rates on the
Balance of cash held in foreign
currencies (397) (749)
Net cash and cash equivalents at
beginning of year 14 825 (9 155)
Cash and cash equivalents at end
of year 40 150 14 825
Statement of changes in equity
Group and company Total
Non-distri attributable
Share Share butable Retained to ordinary
Capital premium reserves earnings shareholders
R000`s R000`s R000`s R000`s R000`s
Balance at 1 January 2005 3427 2 194 700 200 772 207 093
Issue of share capital 23 163 - - 186
Net profit for the period - - - 12 915 12 915
Balance at 31
December 2005 3 450 2 357 700 213 687 220 194
Issue of share capital 68 480 - - 548
Net profit for the period - - - 20 505 20 505
Dividends paid (4 428) (4 428)
Balance at 31
December 2006 3 518 2 837 700 229 764 236 819
Segmental analysis
Primary reporting - business segments
Group and company - 2006 Mill Forestry Other Total
R000`s R000`s R000`s R000`s
Segment income statement
Total gross segment
revenue 367 078 75 689 1 345 444 112
Inter-segmant revenue - (12 150) - (12 150)
Revenue 367 078 63 539 1 345 431 962
Segment trading income 42 537 3 047 1 345 46 929
Other operating income 507 - 724 1 231
Fair value adjustment of
biological assets - 4 993 - 4 993
Segment results 43 044 8 040 2 069 53 153
Administrative expenses (10 868)
Other operating expenses (12 137)
Operating profit
before financing income 30 148
Finance income 1 069
Finance expense (1 583)
Profit before income tax 29 634
Income tax expense (9 129)
Profit for the year 20 505
Group and company - 2005 Mill Forestry Other Total
R000`s R000`s R000`s R000`s
Segment income statement
Total gross segment
revenue 325 989 78 960 1 152 406 101
Inter-segment revenue - (10 710) - (10 710)
Revenue 325 989 68 250 1 152 395 391
Segment trading income 32 891 3 721 1 152 37 764
Other operating income - - 2 338 2 338
Fair value adjustment of
biological assets - 430 - 430
Segment results 32 891 4 151 3 490 40 532
Administrative expenses (9 391)
Other operating expenses (12 806)
Operating profit before
financing income 18 335
Finance income 638
Finance expense (2 043)
Profit before income tax 16 930
Income tax expense (4 015)
Profit for the year 12 915
Secondary reporting - geographical segments
Domestic Exports Total
2006 2005 2006 2005 2006 2005
R000`s R000`s R000`s R000`s R000`s R000`s
Revenue 362 118 341 728 69 844 53 663 431 962 395 391
Restatement of 2005 Balance sheet
Previously Effect of 2005
reported reclassification Restated
(R`000) (R`000) (R`000)
ASSETS
Non-current assets
Property, plant and
equipment 101 127 - 101 127
Intangible assets 1 238 - 1 238
Biological assets 96 336 - 96 336
Deferred tax assets 8 124 - 8 124
Investments 1 030 (1 000) 30
Loans receivable 42 - 42
Total non-current assets 207 897 (1 000) 206 897
Current assets
Inventories 41 780 - 41 780
Trade receivables and
other receivables 53 603 1 001 54 604
Amounts due from fellow
subsidiaries 1 732 - 1 732
Cash and cash equivalents 14 825 - 14 825
Total current assets 111 940 1 001 112 941
Total assets 319 837 1 319 838
EQUITY AND LIABILITIES
Capital and reserves
Share capital 3 450 - 3 450
Share premium 2 357 - 2 357
Non-distributable reserves 700 - 700
Retained earnings 213 687 - 213 687
Total equity 220 194 - 220 194
Non-current liabilities
Deferred tax liabilities 41 032 - 41 032
Retirement benefit obligation 17 731 - 17 731
Straight lining lease accrual 70 - 70
Total non-current liabilities 58 833 - 58 833
Current liabilities
Trade and other payables 35 677 (3 725) 31 952
Provisions 4 144 3 726 7 870
Amounts payable to holding
company 435 - 435
Amounts payable to fellow
Subsidiaries 329 - 329
Tax liabilities 114 - 114
Straight lining lease accrual 111 - 111
Total current liabilities 40 810 - 40 811
Total equity and liabilities 319 837 1 319 838
Explanation of the effect of reclassification within the balance sheet
1) The insurance policy, underwritten by Guardrisk Insurance Company Limited,
previously disclosed in investments, has now been included in other receivables
in accordance with the requirements of IAS 39: Financial Instruments.
2) Provision for employee leave pay, previously included in other payables, now
included in provisions.
Restatement of 2005 Income statement
Previously Effect of 2005
reported reclassification Restated
R000`s R000`s R000`s
Revenue 402 761 (7 370) 395 391
Cost of sales (313 506) 17 562 (295 944)
Gross profit 89 255 10 192 99 447
Other operating income 3 755 (1 417) 2 338
Distribution costs (43 201) (5 718) (48 919)
Selling and marketing costs (12 764) - (12 764)
Administrative expenses (10 369) 978 (9 391)
Other operating expenses (10 256) (2 550) (12 806)
Trading income 16 420 1 485 17 905
Fair value adjustment of
biological assets 430 - 430
Operating profit before
financing costs 16 850 1 485 18 335
Finance income 638 - 638
Finance expenses (558) (1 485) (2 043)
Profit before tax 16 930 - 16 930
Income tax expenses (4 015) - (4 015)
Profit for the year 12 915 - 12 915
Explanation of the effect of reclassification within the income statement
The following income and expense items have been reclassified within the income
statement:
1) Settlement discounts allowed and skills levy refund, previously included
in other operating expenses and administrative expenses respectively, now
included in revenue. In addition settlement discounts received,
previously included in other operating income, now offset against cost of
sales. This is in compliance with the requirements of SAICA Circular
9/2006.
2) Non-production overheads and warehousing costs previously included in
cost of sales, now included in other operating expenses and distribution
costs respectively. This is incompliance with IAS 2: Inventories.
3) Interest on the post-retirement medical benefit obligation, previously
included in administrative expenses, now included in finance expenses.
Notes
1. Basis of preparation
The audited annual financial statements of the Group for the year ended
December 31, 2006 have been prepared in accordance with the Group`s accounting
policies, which are consistent with those of the prior year. Those financial
statements comply with International Financial Reporting Standards (IFRS). The
condensed financial statements are in accordance with IAS 34: Interim Financial
Reporting.
2. Biological assets
Biological assets are stated at fair value less estimated point of sale costs
with any resultant gain or loss recognised in the income statement. The after
tax effect on profits resulting from the increase in value of biological assets
was a profit of R3.5 million (2005: R0.3 million). The increase in fair value
of biological assets in 2006 was mainly due to an increase in mature timber
volumes.
12 months to December 31 December 31,
2006 2005
(R`000) (R`000)
Timber and sugar cane
plantations - immature 26 668 25 959
Timber and sugar cane
plantations - mature 74 661 70 377
Total 101 329 96 336
3. Retirement benefit obligation
The Group provides post-retirement medical benefits to retired employees. The
liability in respect of post-retirement medical benefit is actuarially valued
at R18.3 million (2005:actuarially valued at R17.7 million). Actuarial gains or
losses in respect of post-retirement medical benefits are recognised as income
or expense if the net cumulative unrecognised actuarial gains or losses at the
end of the previous reporting period exceed 10% of the present value of the
post-retirement medical benefit at that date.
4. Retirement benefits
The Group had the benefit, until June 2003, of a contribution holiday approved
by the Financial Services Board ("FSB") as a result of the surplus residing in
Provident Fund No. 2. However, in terms of the Pension Fund Second Amendment
Act, 2001, any surplus residing in this fund may have needed to be
renegotiated. The Group`s initial application to the FSB for the continued use
of its portion of the contribution holiday was rejected, mainly on the grounds
that the members of the Fund did not vote on the distribution of the surplus,
despite the fact that the surplus distribution was approved by the trustees
comprising 50% member trustees and 50% company trustees. During the year the
FSB approved the provident fund surplus apportionment scheme which allowed for
the surplus to be distributed on a 52% member and 48% company basis, after
provision had been made for former member top up payments. The surplus was
distributed accordingly.
5. Income tax expense
December 31 December 31,
2006 2005
(R`000) (R`000)
Current tax expense 3 988 4 685
Deferred tax expense 4 571 458
Deferred tax - tax rate change - (1 119)
Secondary tax expense 553 -
Capital gains tax 17 -
Deferred investment allowances - (9)
Total 9 129 4 015
6. Capital commitments at December 31 at December 31
2006 2005
R000`s R000`s
Commitments in respect of capital
expenditure:
Contracted for 190 414
Authorised but not contracted for 4 205 2 697
4 395 3 111
7. Capital and reserves
Number Ordinary Share
of shares shares premium Total
R000`s R000`s R000`s
Issued:
At 1 January 2005 6 854 054 3 427 2 194 5 621
Employee share option scheme:
Proceeds from shares issued 46 170 23 163 186
At December 2005 6 900 224 3 450 2 357 5 807
Employee share option scheme:
Proceeds from shares issued 135 334 68 480 548
At December 2006 7 035 558 3 518 2 837 6 355
8. Audited annual financial statements
The auditors, Deloitte & Touche, have issued their opinion on the Group`s
financial statements for the year ended December 31, 2006. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. A copy of their audit report is available
for inspection at the company`s registered office.
These summarised financial statements have been derived from the Group financial
statements and are consistent in all material respects, with the Group financial
statements
Commentary
Headline earnings increased by 57.9% to R20.5 million after adjustment for the
increase in fair value of biological assets. Revenue increased by 9.3% to
R431.9 million (2005: R395.4 million), while trading income was 40.5% higher at
R25.2 million (2005: R17.9 million).
Local margins were maintained by effective cost containment programmes and
despite a strong Rand in the first half of the year.
The Estcourt mill turned in an excellent operational performance, and both the
mill and forestry operations continued to excel in the areas of safety, health
and environmental practices.
Sound working capital management throughout the year resulted in the Group
ending the year R40.2 million cash positive (2005: R14.8 million).
The continuing strong growth in all served markets, particularly housing and
construction, should have a positive effect on earnings in 2007.
Dividend
The board has declared a dividend for the year of 98 cents (2005: 63 cents) per
share for the year ended 31 December 2006. The dividend is covered three times
by headline earnings per share.
The salient dates for the dividend are as follows:
Last day to trade shares cum dividend Wednesday, 25 April 2007
Shares trade ex dividend Thursday, 26 April 2007
Record date Friday, 4 May 2007
Payment date Monday, 7 May 2007
No share certificates may be dematerialised or rematerialised between Thursday
26 April 2007 and Friday 4 May 2007, both dates inclusive. This dividend has
not been provided for in these annual financial statements, as the dividend was
declared after the balance sheet date.
Annual General Meeting
Notice is hereby given that the sixty-fourth Annual General Meeting of
shareholders of the company will be held at Masonite`s offices at 13th Floor,
Nedbank Centre, Durban Club Place, Durban on 8 June 2007, at 12H00.
For and on behalf of the Board
A H Wilson M J Slater
Chairman Managing Director
28 March 2007
DIRECTORS
A H Wilson (Chairman), M J Slater** (Managing), W P Coetzee, H M Coghlan*,
D G Ellis*, J U Morrison*, K M P Spencer, A G Venton
*USA **British
COMPANY SECRETARY
E R Roberts
SPONSOR
Nedbank Capital
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Proprietary) Limited
PO Box 61051, Marshalltown, 2107
70 Marshall Street, Johannesburg, 2001, Republic of South Africa
Telephone (011) 370 5000
Date: 29/03/2007 10:00:01 Produced by the JSE SENS Department.
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