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MAS
MAS
MAS - Masonite - Unaudited interim results for the six months ended 30 June 2007
MASONITE (AFRICA) LIMITED
(Incorporated in the Republic of South Africa)
Share code: MAS ISIN: ZAE000004289
(Registration number 1942/015502/06)
("Masonite" or "the company")
UNAUDITED INTERIM RESULTS
for the six months ended 30 June 2007
Condensed income statement
Restated Restated
Unaudited unaudited unaudited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2007 2006 2006
Group and company Notes (R000`s) (R000`s) (R000`s)
Revenue 227 948 179 737 431 962
Cost of sales (166 573) (126 501) (316 852)
Gross profit 61 375 53 236 115 110
Other operating income 1 523 1 702 1 231
Distribution expenses (26 247) (22 989) (56 286)
Selling and marketing
expenses (5 985) (5 842) (11 895)
Administrative expenses (5 405) (5 152) (10 868)
Other operating expenses (5 425) (7 949) (12 137)
Trading income 19 836 13 006 25 155
Fair value adjustment of
biological assets 4 689 590 5 359
Operating profit before
financing costs 24 525 13 596 30 514
Finance income 985 262 1 069
Finance expense (799) (763) (1 583)
Profit before tax 24 711 13 095 30 000
Income tax expense 6 (9 444) (4 520) (9 236)
Net profit for the year
attributable
to ordinary shareholders 15 267 8 575 20 764
Earnings per share (cents)
Basic 217 123 298
Diluted 215 121 293
Condensed statement of changes in equity
Non-
Share Share distributable
capital premium reserves
Group and company (R000`s) (R000`s) (R000`s)
Balance at 1 January 2006
as previously stated 3 450 2 357 700
Effects of prior year restatement
Effects of restatement of fair value
of biological assets - - -
Related deferred tax - - -
Restated balance at 1 January 2006 3 450 2 357 700
Issue of share capital 63 446 -
Net profit for the year attributable
to ordinary shareholders - - -
As previously reported - - -
Effects of restatement of fair value
of biological assets - - -
Related deferred tax - - -
Dividends paid - - -
Restated balance at 30 June 2006 3 513 2 803 700
Issue of share capital 5 34 -
Net profit for the year attributable
to ordinary shareholders - - -
Net profit excluding the effects of
restatement of fair value of
biological assets - - -
Effects of restatement of fair value
of biological assets - - -
Related deferred tax - - -
Restated balance at 31 December 2006 3 518 2 837 700
Issue of share capital 22 161 -
Net profit for the year attributable
to ordinary shareholders - - -
Dividends paid - - -
Balance at 30 June 2007 3 540 2 998 700
Retained
earnings Total
Group and company (R000`s) (R000`s)
Balance at 1 January 2006
as previously stated 213 687 220 194
Effects of prior year restatement
Effects of restatement of fair value
of biological assets 9 599 9 599
Related deferred tax (2 784) (2 784)
Restated balance at 1 January 2006 220 502 227 009
Issue of share capital - 509
Net profit for the year attributable
to ordinary shareholders 8 575 8 575
As previously reported 7 173 7 173
Effects of restatement of fair value
of biological assets 1 975 1 975
Related deferred tax (573) (573)
Dividends paid (4 428) (4 428)
Restated balance at 30 June 2006 224 649 231 665
Issue of share capital - 39
Net profit for the year attributable
to ordinary shareholders 12 190 12 190
Net profit excluding the effects of
restatement of fair value of
biological assets 13 332 13 332
Effects of restatement of fair value
of biological assets (1 609) (1 609)
Related deferred tax 467 467
Restated balance at 31 December 2006 236 839 243 894
Issue of share capital - 183
Net profit for the year attributable
to ordinary shareholders 15 267 15 267
Dividends paid (6 939) (6 939)
Balance at 30 June 2007 245 167 252 405
Condensed balance sheet
Restated Restated
Unaudited unaudited unaudited
As at As at As at
30 June 30 June 31 December
2007 2006 2006
Group and company
Notes (R000`s) (R000`s) (R000`s)
ASSETS
Non-current assets
Property, plant and equipment 96 120 97 677 98 130
Intangible assets 678 1 028 728
Biological assets 3 115 984 106 525 111 294
Deferred tax assets 9 102 8 060 8 038
Investments 30 30 30
Total non-current assets 221 914 213 320 218 220
Current assets
Inventories 54 900 56 528 41 429
Trade and other receivables 83 184 63 442 59 594
Amounts due from fellow subsidiaries 608 1 566 1 031
Cash and cash equivalents 25 011 18 305 40 150
Tax receivable 3 017 - 3 017
Total current assets 166 720 139 841 145 221
Total assets 388 634 353 161 363 441
EQUITY
Capital and reserves
Share capital 3 540 3 513 3 518
Share premium 2 998 2 803 2 837
Non-distributable reserves 700 700 700
Retained earnings 245 167 224 649 236 839
Total equity 252 405 231 665 243 894
LIABILITIES
Non-current liabilities
Deferred tax liabilities 51 544 43 655 48 407
Post retirement
benefit obligation 4 18 846 18 193 18 347
Straight lining lease accrual 99 70 55
Total non-current liabilities 70 489 61 918 66 809
Current liabilities
Trade and other payables 53 394 47 086 47 802
Provisions 5 5 170 8 551 4 186
Amounts payable to fellow
subsidiaries 660 1 314 701
Tax liabilities 6 507 2 546 -
Straight lining lease accrual 9 81 49
Total current liabilities 65 740 59 578 52 738
Total equity and liabilities 388 634 353 161 363 441
Condensed cash flow statement
Restated
Unaudited unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2007 2006 2006
Group and company (R000`s) (R000`s) (R000`s)
Operating cash flows before
movement
in working capital 24 131 19 322 32 523
(Increase)/decrease in working
capital (27 725) (7 259) 14 684
Cash (utilised for)/generated
from operating activities (3 594) 12 063 47 207
Finance income received 1 013 325 990
Finance expense (799) (763) (1 583)
Taxation paid (868) (2 186) (7 689)
Net cash (utilised
for)/generated
from operating activities (4 248) 9 439 38 925
Cash flow from investing
activities
Additions to property, plant
and equipment - - (58)
Replacement of property, plant
and equipment (4 453) (2 493) (9 491)
Proceeds from disposal of
property, plant and equipment 17 2 184
Loan repayments received from
related parties - 42 42
Net cash outflow from investing
activities (4 436) (2 449) (9 323)
Cash flow from financing
activities
Issue of share capital 183 509 548
Dividends paid (6 939) (4 428) (4 428)
Net cash outflow from
financing activities (6 756) (3 919) (3 880)
Net (decrease)/increase in
cash and cash equivalents (15 440) 3 071 25 722
Effects of exchange rates on
the balance of cash held
in foreign currencies 301 409 (397)
Net cash and cash equivalents
at the beginning of the period 40 150 14 825 14 825
Cash and cash equivalents at
the end of the period 25 011 18 305 40 150
Condensed segment information
Mill Forestry Other Total
Group and company (R000`s) (R000`s) (R000`s) (R000`s)
Primary reporting -
business segments
For the period ending
30 June 2006 (restated)
Segment revenue 146 665 32 483 589 179 737
Segment results 22 550 1 856 2 291 26 697
For the period ending
31 December 2006
Segment revenue 367 078 63 539 1 345 431 962
Segment results (restated) 43 044 8 406 2 069 53 519
For the period ending
30 June 2007
Segment revenue 188 845 38 321 782 227 948
Segment results 24 733 8 317 2 305 35 355
Domestic Exports Total
Secondary reporting
- geographical segments - Revenue
For the period ending 30 June 2006 153 127 26 610 179 737
For the period ending 31 December 2006 362 118 69 844 431 962
For the period ending 30 June 2007 203 524 24 424 227 948
Segment information for the period ending 30 June 2006 has been restated to
disclose the Forestry results as a separate segment in accordance with IAS 14
paragraph 35: Segment Reporting.
Notes
1. Basis of preparation
The condensed consolidated financial statements have been prepared in
accordance with IAS 34: Interim Financial Reporting.
2. Significant accounting policies
The same methods of computation and accounting policies, except for the
valuation of biological assets (note 8), are followed in these condensed
financial statements as were applied in the preparation of the Group`s
financial statements for the year ended 31 December 2006. Those financial
statements were in accordance with International Financial Reporting Standards,
and in the manner required by the Companies Act of South Africa.
3. 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.
Standing timber
The Group owns timber plantations which it operates in order to supply the Mill
at Estcourt with its primary raw material. The fair value of timber aged seven
years and older (mature), being the age at which it becomes marketable, is
based on the market price of the estimated wood volumes, net of harvesting and
transport costs.
Standing timber aged zero to seven years (immature) is valued at the higher of
establishment costs or fair value. Fair value is based on the market price of
the estimated wood volumes, net of harvesting and transport costs and
discounted at an appropriate factor to account for its unsuitability for board
production.
Sugar cane
Sugar cane has been planted in areas unsuitable for timber, in order to use the
land productively. Such sugar cane is sold on reaching maturity. The fair value
of sugar cane aged 18 months and older (mature), being the age at which it
becomes marketable, is based on the market price of the estimated sugar cane
volumes, net of harvesting and transport costs. The fair value of cane younger
than 18 months (immature) is based on the market price of the estimated sugar
cane volumes, net of harvesting and transport costs and discounted at an
appropriate factor to account for any non-marketable volume. Sugar cane
establishment costs are reduced in value over the period of their productive
lives.
Restated Restated
As at as at as at
30 June 30 June 31 December
2007 2006 2006
(R000`s) (R000`s) (R000`s)
Immature 42 298 36 302 36 633
Mature 73 686 70 223 74 661
Total 115 984 106 525 111 294
4. Retirement benefit obligation
The Group provides post-retirement medical benefits to retired employees who
were employed before January 1997. The liability in respect of this
post-retirement medical benefit was actuarially valued, at 31 December 2006,
using the Projected Unit Credit Method. The liability in respect of
post-retirement medical benefit is R18,8 million (2006: actuarially valued at
R18,3 million). Actuarial gains or losses in respect of post-retirement medical
benefits are recognised as income or expenses if the net cumulative unrecognised
actuarial gains or losses at the end of the previous reporting date exceed 10%
of the present value of the post-retirement obligation at that date. There are
no plan assets held. The amount recognised is the excess determined above,
divided by the expected average remaining working lives of the employees
participating in the plan. Past service costs are recognised as an expense on a
straight-line basis over the average period until the benefits vest. To the
extent that the benefits have already vested, past service costs are recognised
immediately.
5. Provisions
Provisions are comprised as follows:
Restated
Unaudited unaudited Audited
30 June 30 June 31 December
2007 2006 2006
(R000`s) (R000`s) (R000`s)
Provision - Provident fund
contribution holiday - 4 263 -
Provision - Leave pay 5 170 4 288 4 186
Total 5 170 8 551 4 186
The Group had the benefit, until June 2003, of a contribution holiday approved
by the Financial Services Board (FSB) as a result of a 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 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. In 2006 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 in 2006.
6. Income tax expense
Restated Restated
Unaudited unaudited unaudited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2007 2006 2006
(R000`s) (R000`s) (R000`s)
Current tax 6 507 4 617 3 988
Deferred tax 2 070 (97) 4 678
Secondary tax 867 - 553
Capital gains tax - - 17
Total 9 444 4 520 9 236
7. Headline earnings per share
Profit for the year 15 267 8 575 20 764
Adjusted for:
Loss/(profit) on sale of assets 35 5 (64)
Tax effect of adjustments (10) (1) 19
Headline earnings 15 292 8 579 20 719
Headline earnings per share 217 123 297
8. Revised accounting policy for biological assets
Previously, the fair value of biological assets excluded the cost of
establishment of timber and sugar cane plantations. The company has now changed
the valuation to recognise certain biological assets at the higher of
establishment cost or fair value. The effect of this change has been to reflect
immature timber at the higher of establishment cost or fair value and in
respect of cane to recognise establishment costs applicable to the remaining
number of harvests. The effect of this change has been adjusted in prior year
figures as follows:
i)Restatement of previously reported value of biological assets
As at As at As at
30 June 31 December 1 January
2006 2006 2006
(R000`s) (R000`s) (R000`s)
Previously reported value of
biological assets
Immature 24 728 26 668 25 959
Mature 70 223 74 661 70 377
Total 94 951 101 329 96 336
Effects of restatement of fair value
of biological assets
Immature 11 574 9 965 9 599
Mature - - -
Total 11 574 9 965 9 599
Restated value of biological assets
Immature 36 302 36 633 35 558
Mature 70 223 74 661 70 377
Total 106 525 111 294 105 935
ii) Restatement of previously reported results
6 months to 12 months to
30 June 31 December
2006 2006
(R000`s) (R000`s)
Previously reported results 7 173 20 505
Effects of restatement of fair value of
biological assets 1 975 366
Related deferred tax (573) (107)
Restated net profit for the year attributable
to ordinary shareholders 8 575 20 764
iii) Effect on earnings per share
Cents per share Cents per share
Basic earnings
Previously reported earnings per share 103 294
Effects of restatement of fair value of
biological assets 28 6
Related deferred tax (8) (2)
Restated earnings per share 123 298
Diluted earnings
Previously reported earnings per share 101 289
Effects of restatement of fair value of
biological assets 28 5
Related deferred tax (8) (1)
Restated earnings per share 121 293
Headline earnings - basic
Previously reported earnings per share 103 294
Effects of restatement of fair value of
biological assets 28 5
Related deferred tax (8) (1)
Restated earnings per share 123 298
iv) Restatement of retained earnings at the beginning of year
1 January 2006
(R000`s)
Previously reported 213 687
Effects of restatement of fair value of biological assets 9 599
Related deferred tax (2 784)
Restated retaining earnings at the beginning of year 220 502
9. Subsequent events
No material fact or circumstance has occurred between the end of the period and
the date of this report.
COMMENTARY
Trading income, which excludes the effect of IAS 41: Agriculture, interest and
taxation, improved from R13,0 million in 2006 to R19,8 million in 2007. Net
profit for the six months to June improved from R8,6 million in 2006 to R15,3
million in 2007.
This improvement was mainly attributable to higher domestic sales volumes and a
more favourable domestic product mix. In addition, a favourable timber
valuation adjustment (IAS 41: Agriculture) was achieved, due mainly to an
increase in timber prices.
The board has declared an interim dividend of 54 cents per share for the period
ended 30 June 2007. The dividend is covered four times by headline earnings per
share.
The salient dates for the dividends are as follows:
Last day to trade shares cum dividend Friday, 19 October 2007
Shares trade ex dividend Monday, 22 October 2007
Record date Friday, 26 October 2007
Payment date Monday, 29 October 2007
No share certificates may be dematerialised or rematerialised between Monday,
22 October 2007 and Friday, 26 October 2007, both dates inclusive. This
dividend has not been provided for in these interim results, as the dividend
was declared after balance sheet date.
For and behalf of the board
M J Slater E R Roberts
Managing Director Company Secretary
26 September 2007
DIRECTORS
A H Wilson (Chairman), M J Slater** (Managing), W P Coetzee, D G Ellis*,
J U Morrison*, K M P Spencer, A G Venton, H M Coghlan*
*USA **British
COMPANY SECRETARY
E R Roberts
SPONSOR
Nedbank Capital
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001, Republic of South Africa
PO Box 61051, Marshalltown, 2017
Telephone 011 370 5000
Date: 26/09/2007 16:00:01 Produced by the JSE SENS Department.
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