| Mon 29 Mar 2010, 10:02 | | YRK - York Timber Holdings - Unaudited condensed consolidated interim financial |
|
YRK
YRK
YRK - York Timber Holdings - Unaudited condensed consolidated interim financial
statements for the six months ended 31 December 2009
YORK TIMBER HOLDINGS LIMITED
(Registration number 1916/004890/06)
Share code: YRK ISIN: ZAE000133450
("York" or "the Group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED 31 DECEMBER 2009
Salient features
Net asset value per share: 524 cents
Debt and capital restructuring finalised
Tangible net asset value per share: 337 cents
R500 million capital injection by shareholders
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
31 December 30 June 31 December
2009 2009 2008
Restated Restated
Unaudited Audited Unaudited
Note(s) R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant and 428 665 429 456 399 188
equipment
Investment property 5 020 5 020 4 920
Biological assets 1 414 822 1 492 002 1 988 450
Intangible assets 2 609 2 984 -
Goodwill 610 352 610 352 610 352
Other financial assets 816 3 911 2 273
2 462 284 2 543 725 3 005 183
Current assets
Biological assets 243 216 246 369 -
Instalment sale 1 259 1 854 -
receivables
Inventories 165 367 214 629 239 078
Trade and other 124 358 109 012 178 321
receivables
Cash and cash 21 754 124 417 96 610
equivalents
Non-current assets 4 3 174 20 829 83 153
held for sale and
assets of disposal
groups
559 128 717 110 597 162
Total assets 3 021 412 3 260 835 3 602 345
EQUITY AND LIABILITIES
Equity
Share capital 5 16 419 3 919 3 919
Share premium 5 1 477 295 1 026 888 1 002 622
Reserves (35 350) (88 438) 10 227
Retained income 262 563 407 237 558 753
1 720 927 1 349 606 1 575 521
Liabilities
Non-current
liabilities
Cash settled share 6 419 50 -
based payments
Other financial 628 752 1 061 544 1 122 547
liabilities
Finance lease 40 523 23 252 -
obligation
Instalment sale 1 673 2 907 -
liabilities
Retirement benefit 22 916 20 200 18 256
obligation
Provisions 54 643 54 643 54 643
Deferred tax 364 020 414 974 505 448
1 112 946 1 577 570 1 700 894
Current liabilities
Other financial 38 999 97 819 60 174
liabilities
Finance lease 5 031 3 438 -
obligation
Instalment sale 1 523 1 781 -
liabilities
Trade and other 137 030 215 450 256 542
payables
Current tax payable 2 999 5 425 2 622
Liabilities of 4 1 957 9 746 6 592
disposal groups
187 539 333 659 325 930
Total liabilities 1 300 485 1 911 229 2 026 824
Total equity and 3 021 412 3 260 835 3 602 345
liabilities
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
Six months Twelve months Six months
ended ended ended
31 December 30 June 31 December
Restated Restated
2009 2009 2008
Unaudited Audited Unaudited
Note(s) R`000 R`000 R`000
Continuing operations
Revenue 407 333 998 122 601 528
Cost of sales (260 394) (676 836) (330 733)
Gross profit 146 939 321 286 270 795
Other operating income 12 619 9 531 4 850
Selling, general and (147 359) (270 957) (249 250)
administration
expenses
Operating profit 12 199 59 860 26 395
before separately
disclosed items
Separately disclosed
items
Insurance proceeds - 158 731 78 053
Impairment of assets - (43 390) -
Operating profit 12 199 175 201 104 448
Interest income 1 298 13 133 11 835
Restructuring costs - (12 129) -
Fair value adjustments (79 708) (244 598) (5 714)
Loss on non-current 4 - (373) -
assets held for sale
Finance costs (79 313) (182 471) (73 202)
excluding hedge
interest expense
Hedge interest expense (44 678) (15 422) (11 095)
(Loss)/profit before (190 202) (266 659) 26 272
taxation
Taxation 49 668 80 707 (6 970)
(Loss)/profit from (140 534) (185 952) 19 302
continuing operations
Discontinued
operations
(Loss)/profit for the 4 (4 140) (45 968) 2 193
period from
discontinued
operations (net of
taxation)
(Loss)/profit for the (144 674) (231 920) 21 495
period
Other comprehensive
income
Available-for-sale 188 40 (219)
financial assets
adjustments
Effects of cash flow 43 740 (89 545) (101 640)
hedges
Other comprehensive 43 928 (89 505) (101 859)
income/(loss) for the
period (net of
taxation)
Total comprehensive (100 746) (321 425) (80 364)
loss
Net (loss)/profit
attributable to:
Owners of the parent:
(Loss)/profit for the (140 534) (185 952) 19 302
period from continuing
operations
(Loss)/profit for the (4 140) (45 968) 2 193
period from
discontinued
operations
(Loss)/profit for the (144 674) (231 920) 21 495
period attributable to
owners of the parent
Earnings per share
Basic (loss)/earnings 12 (135) (296) 27
per share (cents)
Diluted 12 (129) (296) 26
(loss)/earnings per
share (cents)
Headline 13 (141) (254) 27
(loss)/earnings per
share (cents)
Continuing operations
Basic (loss)/earnings (131) (237) 25
per share (cents)
Diluted (126) (237) 24
(loss)/earnings per
share (cents)
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
Six months Twelve months Six months
ended ended ended
31 December 30 June 31 December
2009 2009 2008
Restated Restated
Unaudited Audited Unaudited
Note(s) R`000 R`000 R`000
Cash flows from
operating activities
Cash (25 306) 232 103 66 301
(utilised)/generated
by operating
activities
Interest income 1 298 13 132 11 835
Finance costs (123 053) (168 549) (88 232)
Tax paid (2 426) (2 998) (2 865)
Cash flows of held for 4 (4 166) (11 195) 3 395
sale/discontinued
operations
Net cash from (153 653) 62 494 (9 566)
operating activities
Cash flows from
investing activities
Purchase of property, (10 938) (130 604) (79 454)
plant and equipment on
expanding of
operations
Sale of property, 94 1 032 589
plant and equipment
Purchase of other - (3 662) -
intangible assets
Decrease in loans and - 98 -
receivables
Contribution to self - (2 108) -
insurance fund
Proceeds from sale of - 650 -
non-current assets
held for sale
Decrease in finance 595 989 -
lease receivables
Net cash from (10 249) (133 605) (78 865)
investing activities
Cash flows from
financing activities
Proceeds on share 5 12 500 - -
issue
Increase in share 450 407 24 266 -
premium
Redemption of - (16 537) -
redeemable preference
shares
Repayment of other (419 409) (30 279) (37 496)
financial liabilities
Movement in instalment (1 492) (1 631) -
sale liabilities
Movement in cash 369 - -
settled share based
payments
Finance lease payments 18 864 (2 829) -
Net cash from 61 239 (27 010) (37 496)
financing activities
Net decrease in cash (102 663) (98 121) (125 927)
and cash equivalents
Cash and cash 124 417 222 538 222 537
equivalents at the
beginning of the
period
Total cash and cash 21 754 124 417 96 610
equivalents at the end
of the period
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
Total
Share Share share
capital premium capital
R`000 R`000 R`000
Balance at 1 July 2008 3 919 1 002 622 1 006 541
Total comprehensive loss for the 12 - - -
months
Transactions with owners recorded
directly in equity
Share premium on rights issue - 24 266 24 266
Reversal of share based payment - - -
reserve
Dividends declared and not claimed - - -
Total changes - 24 266 24 266
Balance at 1 July 2009 3 919 1 026 888 1 030 807
Total comprehensive loss for the six - - -
months
Transactions with owners recorded
directly in equity
Issue of shares through rights issue 12 500 474 673 487 173
Reversal of share premium due to - (24 266) (24 266)
deconsolidation of SPE
Share based payment - - -
Total changes 12 500 450 407 462 907
Balance at 31 December 2009 16 419 1 477 295 1 493 714
Note(s) 5 5 5
Fair value
adjustment
assets Share based
Hedging available payment
for
reserve sale reserve
reserve
R`000 R`000 R`000
Balance at 1 July 2008 - (219) 10 446
Total comprehensive loss for the 12 (89 545) 40 -
months
Transactions with owners recorded
directly in equity
Share premium on rights issue - - -
Reversal of share based payment - - (9 160)
reserve
Dividends declared and not claimed - - -
Total changes (89 545) 40 (9 160)
Balance at 1 July 2009 (89 545) (179) 1 286
Total comprehensive loss for the six 43 740 188 -
months
Transactions with owners recorded
directly in equity
Issue of shares through rights issue - - -
Reversal of share premium due to - - -
deconsolidation of SPE
Share based payment - - 9 160
Total changes 43 740 188 9 160
Balance at 31 December 2009 (45 805) 9 10 446
Note(s)
Total Retained Total
reserves income equity
R`000 R`000 R`000
Balance at 1 July 2008 10 227 638 900 1 655 668
Total comprehensive loss for the 12 (89 505) (231 920) (321 425)
months
Transactions with owners recorded
directly in equity
Share premium on rights issue - - 24 266
Reversal of share based payment (9 160) - (9 160)
reserve
Dividends declared and not claimed - 257 257
Total changes (98 665) (231 663) (306 062)
Balance at 1 July 2009 (88 438) 407 237 1 349 606
Total comprehensive loss for the six 43 928 (144 674) (100 746)
months
Transactions with owners recorded
directly in equity
Issue of shares through rights issue - - 487 173
Reversal of share premium due to - - (24 266)
deconsolidation of SPE
Share based payment 9 160 - 9 160
Total changes 53 088 (144 674) 371 321
Balance at 31 December 2009 (35 350) 262 563 1 720 927
Note(s)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS -
OPERATING SEGMENTS
Processing Forestry
Dec Jun Dec Jun
2009 2009 2009 2009
Business segmental analysis R`000 R`000 R`000 R`000
Revenue
External sales 378 203 933 235 29 130 64 887
Inter-segment sales 38 284 41 938 178 868 445 227
Total revenue 416 487 975 173 207 998 510 114
Result
Fair value adjustment - - (80 334) (244 698)
biological assets
Trading (16 442) 111 011 39 919 77 393
Segment result (16 442) 111 011 (40 415) (167 305)
Unallocated expenses
Profit from operations
Net finance costs
Income tax expense
Profit for the year
Segment assets 508 765 527 864 1 793 982 1 876 764
Unallocated corporate assets - - - -
Consolidated total assets
Segment liabilities 37 351 56 522 20 172 78 487
Unallocated corporate - - -
liabilities
Non-current and current - - -
loans and borrowings
Taxation and deferred - - -
taxation
Consolidated total - - -
liabilities
Additions to biological - - -
assets
Capital expenditure 10 938 125 970 - 4 634
Depreciation and (14 627) (18 814) (2 037) (4 336)
amortisation
Impairment of tangible - (11 065) - -
assets
Discontinued Elimination
operations
Dec Jun Dec Jun
2009 2009 2009 2009
Business segmental analysis R`000 R`000 R`000 R`000
Revenue
External sales 19 712 97 168 - -
Inter-segment sales - - (217 152) (487 165)
Total revenue 19 712 97 168 (217 152) (487 165)
Result
Fair value adjustment - - - -
biological assets
Trading (4 202) (4 632) - -
Segment result (4 202) (4 632) - -
Unallocated expenses 62 (41 335)
Profit from operations
Net finance costs (1)
Income tax expense
Profit for the year
Segment assets 3 174 20 829 - -
Unallocated corporate assets - - - -
Consolidated total assets
Segment liabilities 1 957 9 746 - -
Unallocated corporate - - - -
liabilities
Non-current and current - - - -
loans and borrowings
Taxation and deferred - - - -
taxation
Consolidated total - - - -
liabilities
Additions to biological - - - -
assets
Capital expenditure - - - -
Depreciation and - (2 404) 4 816 6 165
amortisation
Impairment of tangible - (32 325) - -
assets
Consolidated
Dec Jun
2009 2009
Business segmental analysis R`000 R`000
Revenue
External sales 427 045 1 095 290
Inter-segment sales - -
Total revenue 427 045 1 095 290
Result
Fair value adjustment (80 334) (244 698)
biological assets
Trading 19 275 183 772
Segment result (61 059) (60 926)
Unallocated expenses (10 590) (66 940)
Profit from operations (71 649) (127 866)
Net finance costs (122 693) (184 761)
Income tax expense 49 668 80 707
Profit for the year (144 674) (231 920)
Segment assets 2 305 921 2 425 457
Unallocated corporate assets 715 491 835 378
Consolidated total assets 3 021 412 3 260 835
Segment liabilities 59 480 144 755
Unallocated corporate 157 485 155 334
liabilities
Non-current and current 716 501 1 190 741
loans and borrowings
Taxation and deferred 367 019 420 399
taxation
Consolidated total 1 300 485 1 911 229
liabilities
Additions to biological - -
assets
Capital expenditure 10 938 130 604
Depreciation and (11 848) (19 389)
amortisation
Impairment of tangible - (43 390)
assets
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Statement of compliance
The unaudited condensed consolidated interim financial statements for the six
months ended 31 December 2009 have been prepared in accordance with the JSE
Limited Listing Requirements, the Companies Act No. 61 of 1973, as amended, and
the recognition and measurement requirements of International Financial
Reporting Standards ("IFRS") and the presentation and disclosure requirements of
International Accounting Standard ("IAS") 34 Interim Financial Reporting. These
interim results do not include all the information required for full annual
financial statements, and should be read in conjunction with the consolidated
financial statements of the Group as at and for the year ended 30 June 2009.
The unaudited condensed consolidated interim financial statements, which have
been prepared on the going concern basis, were approved by the Board of
Directors on 24 March 2010.
Neither the consolidated financial results for the six months ended 31 December
2009 nor this set of unaudited condensed consolidated interim financial
statements have been audited by the Group`s auditors, and thus no audit report
was issued.
2. Accounting policies
Except as described below, the accounting policies applied by the Group in these
unaudited condensed consolidated interim financial statements are consistent
with those applied by the Group in its consolidated financial statements as at
and for the year ended 30 June 2009.
(i) IAS 23 Borrowing Costs
In respect of borrowing costs relating to qualifying assets for which the
commencement date for capitalisation is on or after 1 January 2009, the Group
capitalises borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset as part of the cost of that
asset. Previously the Group immediately recognised all borrowing costs as an
expense.
This change in accounting policy was due to the prospective adoption of IAS 23
Borrowing Costs (2007) in accordance with the transitional provisions of such
standard, comparative figures have not been restated.
Since the Group did not incur any borrowing costs on qualifying assets during
the interim period ended 31 December 2009, the change in accounting policy had
no impact on assets, profits or earnings per share.
(ii) Determination and presentation of operating segments
As of 1 January 2009 the Group determines and presents operating segments based
on the information that internally is provided to the Chief Executive Officer
("CEO"), who is the Group`s chief operating decision maker. This change in
accounting policy is due to the adoption of IFRS 8 Operating Segments.
Previously operating segments were determined and presented in accordance with
IAS 14 Segment Reporting. The new accounting policy in respect of segment
operating disclosures is presented as follows:
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group`s other
components. An operating segment`s operating results are reviewed regularly by
the CEO to make decisions about resources to be allocated to the segment and
assess its performance and for which salient financial information is available.
Segment results that are reported to the CEO include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly of corporate assets, head office expenses and
income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to
acquire property, plant and equipment and intangible assets other than goodwill.
Comparative segment information needs to be re-presented in conformity with the
transitional requirements of IFRS 8. Since the change in accounting policy only
impacts presentation and disclosure aspects, there is no impact on earnings per
share.
Comparative segment information was not re-presented, due to the fact that the
Group has, in the past, reported segment information based on the information
that management used internally for evaluating segment performance.
(iii) IAS 1 Presentation of Financial Statements (Revised)
The Group applies revised IAS 1 Presentation of Financial Statements (2007),
which became effective as of 1 January 2009. As a result, the Group presents in
the consolidated statement of changes in equity all owner changes in equity,
whereas all non-owner changes in equity are presented in the consolidated
statement of comprehensive income. This presentation has been applied in these
condensed consolidated interim financial statements as at and for the six month
period ended 31 December 2009.
Comparative information has been re-presented so that it also is in conformity
with the revised standard. Since the change in accounting policy only impacts
presentation aspects, there is no impact on earnings per share.
(iv) IAS 27 Consolidated and Separate Financial Statements (Revised)
The Group has applied IAS 27 Consolidated and Separate Financial Statements
(2008) for the acquisition of non- controlling interests that occurred during
the interim period ended 31 December 2009.
Under the new accounting policy, acquisitions of additional non-controlling
equity interests in subsidiaries have to be accounted for as equity
transactions. Disposals of equity interests while retaining control are also
accounted for as equity transactions. No goodwill is recognised as a result of
such transactions. When control of an investee is lost, the resulting gain or
loss relating to the transaction will be recognised in profit or loss.
It has always been the Group`s accounting policy to treat all acquisitions of
additional interests in subsidiaries, as well as disposals of interests in
subsidiaries, as equity transactions. The Group did, however, change its
accounting policy relating to the loss of control when an equity interest is
retained. When control is lost, through sale or otherwise, the resulting gain or
loss recognised in profit or loss includes any re-measurement to fair value of
the retained equity interest. All cash flows relating to these transactions form
part of cash flow from financing activities on the basis that these transactions
are equity transactions.
Losses in a subsidiary are now allocated to the non-controlling interest even if
doing so causes the non-controlling interest to be in a deficit position. In the
past, losses were allocated only until the non-controlling interest had a zero
balance.
During the interim period ended 31 December 2009, the Group did not acquire or
dispose of any non-controlling interests. The change in accounting policy was
applied retrospectively and had no impact on earnings per share.
3. Estimates
The preparation of unaudited condensed consolidated interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies, and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these estimates.
In preparing these unaudited condensed consolidated interim financial
statements, the significant judgements made by management in applying the
Group`s accounting policies and the key sources of estimation uncertainty were
the same as those applied to the consolidated financial statements as at and for
the year ended 30 June 2009.
4. Discontinued operations and non-current assets held for sale
(i) Discontinued operations
In September 2009 the Group decided to discontinue some of its sawmilling
operations as part of a restructuring exercise. The decision was made by the
Board of Directors to discontinue these operations due to the less efficient
sawmilling operations in these plants. A third plant has been mothballed and set
aside for possible future use. The start up cost relating to the third mill
becoming operational again has not been included in the current figures and will
be expensed if and when it occurs.
The sawmill plants that were affected by the restructuring are:
a) Roburnia Sawmill Closed
b) Golden Rhino Lumber Mothballed
c) Madiba Mills Closed
These plants were still operational at 30 June 2009 and closure of these
operations occurred in the 2010 financial year. The assets and liabilities of
the disposal group are set out below and have been restated and reclassified for
the 31 December 2008 comparative figures as the plants were not classified as
held for sale or as discontinued operations as at that date.
31 December 30 June 31 December
2009 2009 2008
R`000 R`000 R`000
Results of discontinued
operations
Revenue 19 712 97 168 58 385
Cost of sales (21 601) (85 387) (39 042)
Gross (loss)/profit (1 889) 11 781 19 343
Other operating income 20 33 -
Selling, general and (2 333) (18 850) (17 146)
administration expenses
Impairment of assets - (32 325) (4)
Operating (loss)/profit (4 202) (39 361) 2 193
Restructuring costs 62 (6 606) -
Finance cost - (1) -
(Loss)/profit before taxation (4 140) (45 968) 2 193
Taxation - - -
(Loss)/profit after taxation (4 140) (45 968) 2 193
Cash flows (used in)/from
discontinued operations
Net cash (used in)/from operating (4 166) (11 195) 3 395
activities
Net cash from investing - - -
activities
Net cash from financing - - -
activities
(4 166) (11 195) 3 395
Assets and liabilities
Assets of disposal groups
Property, plant and equipment - - 33 545
Inventories 207 11 838 16 571
Trade and other receivables 2 967 8 986 32 009
Cash and cash equivalents - 5 5
3 174 20 829 82 130
Liabilities of disposal groups
Trade payables and other 1 957 9 746 6 592
liabilities
Equity of disposal groups
Opening retained loss/(income) 35 582 (10 386) 75 538
Loss/(profit) for the period 4 140 45 968 (2 193)
Closing retained loss 39 722 35 582 73 345
(ii) Non-current assets held for
sale
In the 2008 financial reporting
period the Group was in the
process of disposing certain
investment properties. The last
of these investment properties
was disposed during the 2009
reporting period.
Investment property - - 1 023
The investment property held for
sale consisted of Portion 20 of
Farm Krelingspost. The property
was sold during the 2009
reporting period and a loss of
R0,373 million was recognised in
profit or loss.
31 December 30 June 31 December
2009 2009 2008
R`000 R`000 R`000
5. Share capital
Authorised
600 000 000 (100 000 000) 30 000 5 000 5 000
ordinary shares of R0,05 each
2 870 529 convertible, non- 144 144 144
redeemable cumulative preference
shares of R0,05 each
30 144 5 144 5 144
Reconciliation of number of
shares issued:
Reported as at the beginning of 78 370 78 370 78 370
the period
Issue of shares through rights 250 000 - -
issue offer
328 370 78 370 78 370
Unissued shares cannot be
allocated or issued by directors
without the authorisation of the
shareholders in a general
meeting.
Issued ordinary shares
Ordinary share capital 16 419 3 919 3 919
Share premium 1 477 295 1 026 888 1 002 622
1 493 714 1 030 807 1 006 541
York issued 250 million ordinary shares through a rights offer at an issue price
of R2 per share. The rights offer was announced on 20 November 2009 in the ratio
of 307,72792 rights offer shares for every 100 York shares held at the close of
business on 20 November 2009. The rights offer closed at 12h00 on Friday, 11
December 2009.
The cost of the rights issue was deducted from share premium during the interim
reporting period.
Consolidation of Special Purpose Entities ("SPEs") and subsequent
deconsolidation of the SPEs
On 25 November 2009 the Group disposed of its interest in the SPEs and
transferred it to Blackstar (Cyprus) Investors Limited. The Group did not
consolidate the SPEs into the Group results for the interim period ended 31
December 2009.
6. Share based payments
Cash settled share based payments scheme
The cash settled share option scheme as per the consolidated annual financial
statements as at and for the year ended 30 June 2009 was subsequently cancelled.
The number of options outstanding as at 30 June 2009 were 399 000, with a
weighted average exercise price of R22,70.
During the six month period ended 31 December 2009 the Group issued the
following share based payments:
Share appreciation right scheme Weighted
Number exercise
`000 price
R
Granted on 17 November 2009 8 428 2,49
Outstanding at the end of the period 8 428 2,49
Exercise Exercise Exercise
date date date
within from two to after
one year five years five years
Outstanding appreciation rights - 8 428 265 -
Information on share appreciation rights granted during the year
The Group offers its key employees an incentive plan in the form of an employee
share appreciation right scheme. This incentive is achieved through certain
employees being afforded the right to receive a cash payment over the vesting
period. This cash payment is based on the appreciation in the value of the
shares over the five year period.
These appreciation rights were allocated on 17 November 2009 and notice of
allocation sent to beneficiaries. The transaction constitutes a call option with
a term of six years from the grant date in the hands of the employees.
Employee share options are call options granted by entities to their employees.
During the first portion of its life the option cannot be exercised and is
forfeited should the employee leave the employment of the entity. This period of
the option`s life is referred to as the vesting period. After the vesting date,
a lock in period follows, at which time the option is exercised. The employees
have the option to exercise their rights in tranches of 33,3% at the end of year
3, year 4 and year 5 respectively. The option expires at the end of year 6.
The payoff that a beneficiary of the share appreciation right scheme will
receive, at the end of the lock in period, is the difference between the spot
price on the exercise date and the 30 day volume weighted average price on grant
date. The structure of this scheme is valued using the Black Scholes
methodology.
The scheme is treated as a cash settled scheme. Cash settled schemes are valued
at the reporting date in terms of IFRS 2 Share Based Payment.
Fair value was determined by the Black Scholes model. The following inputs were
used:
- The volume weighted average share price of R2,49 per share while the closing
share price at 31 December 2009 was R2,90 per share.
- Expected volatility was calculated using the equally weighted standard
approach, by making use of the available historical share price data, for a
period equal to the term to maturity of the scheme. Smoothing of the share price
volatility was done at the end of July 2007 and December 2009, in order to
exclude the effects of the rights issues made by the company on the volatility.
- Option life is six years with a maturity/expiry date of 17 November 2015.
Grant date is 17 November 2009. Dates for vesting portions are 17 November 2012
(33,33%), 17 November 2013 (33,33%) and 17 November 2014 (33,33%).
- No dividends will be paid in the foreseeable future. Therefore a dividend
yield of 0% was applied in the calculation.
- The risk free interest rate sourced from the Bond Exchange of South Africa.
The bootstrapped zero coupon perfect fit swap curve as at 31 December 2009 was
used. The risk free interest rates applied range from 7,96% (minimum value) to
8,66% (maximum value).
- It was assumed that no forfeiture of the granted share appreciation rights
will occur.
31 December 30 June 31 December
2009 2009 2008
Liability arising from share R`000 R`000 R`000
based payments
Carrying amount of cash settled 419 50 -
liability
Any changes in the cash settled liability are recognised as part of employee
costs.
7. Operating segments (Refer to table - Operating segments)
The Group is organised into two major operating divisions, as described below,
which are the Group`s strategic business units. For each of the strategic
business units, the CEO reviews internal management reports on at least a
quarterly basis. The following summary describes the operations in each of the
Group`s reportable segments:
- Processing: manufactures and sells a range of structural and industrial sawn
timber products and plywood.
- Forestry: owns plantations on which it grows pine and eucalyptus trees that
are felled on a rotational basis and then sold.
8. Commitments
31 December 30 June 31 December
2009 2009 2008
R`000 R`000 R`000
Capital expenditure authorised
by directors
Contracted for 400 136 -
Not yet contracted for 8 555 3 164 -
9. Contingencies
There are no material contingencies as at 31 December 2009.
10. Comparative figures
The unaudited condensed consolidated interim financial statements reporting
period is for the six months ended 31 December 2009. The comparative 30 June
2009 figures are presented as published in the annual financial statements and
have not been restated. However, the comparative figures for the six months
ended 31 December 2008 have been restated for the disclosure purposes of
discontinued operations as discussed in note 4.
During the 2009 reporting period the policy towards the classification of
accounts as cost of sales was reviewed and certain accounts were reclassified
out of revenue, other operating income, selling general and administration
expenses to cost of sales.
The effect of the reclassification is as follows:
31 December 30 June 31 December
2009 2009 2008
R`000 R`000 R`000
Profit or loss
Cost of sales - - 92 706
Selling, general and - - (92 706)
administration expenses
11. Events after the reporting period
There have been no significant events subsequent to the interim reporting period
ended 31 December 2009 up until the date of this report that requires adjustment
or disclosure.
12. Basic earnings and diluted earnings per share
The calculation of basic earnings per share at 31 December 2009 is based on the
(loss)/profit attributable to ordinary shareholders of R(144 674) million (June
2009: R(231 920); December 2008: R21 495) and a weighted average number of
ordinary shares of 106 903 million (June 2009: 78 370; December 2008: 78 370).
The calculation of diluted earnings per share at 31 December 2009 is based on
the (loss)/profit attributable to ordinary shareholders, after the effect on
basic earnings for the convertible preference shares of R(142 030) million (June
2009: R(231 920); December 2008: R21 495) and a weighted average number of
ordinary shares after the effect of the convertible preference shares of 109 774
million (June 2009: 78 370; December 2008: 81 250). In the year ended 30 June
2009 there were no instruments that had a dilutive effect.
31 December 30 June 31 December
2009 2009 2008
R`000 R`000 R`000
Reconciliation of basic earnings
to diluted earnings
(Loss)/profit for the period (144 674) (231 920) 21 495
(Loss)/profit attributable to (144 674) (231 920) 21 495
ordinary shareholders
Preference dividends 2 644 - -
(Loss)/profit attributable to (142 030) (231 920) 21 495
ordinary shareholders (diluted)
Reconciliation of weighted `000 `000 `000
average number of ordinary shares
Issued ordinary shares 78 370 78 370 78 370
Effect of shares issued in 28 533 - -
December 2009
Weighted average ordinary shares 106 903 78 370 78 370
for the year
Effect of convertible preference 2 871 - 2 880
shares
Weighted average ordinary shares 109 774 78 370 81 250
for the year (diluted)
Basic earnings per share (cents) (135) (296) 27
Diluted earnings per share (129) (296) 26
(cents)
13. Headline earnings
The calculation of headline earnings per share at 31 December 2009 is based on
the (loss)/profit attributable to ordinary shareholders, adjusted by items not
qualified being part of headline earnings of R(150,419) million (June 2009:
R(199,352); December 2008: R21,326) and weighted average number of ordinary
shares of 106,903 million (June 2009: 78,370; December 2008: 78,370).
Reconciliation of basic earnings to headline earnings 31 December 2009
Gross Tax Total
Basic earnings attributable to (194 342) 49 668 (144 674)
ordinary shareholders
Profit on sale of assets and (7 979) 2 234 (5 745)
liabilities
Headline earnings for the six (202 321) 51 902 (150 419)
months
Headline earnings per share (141)
(cents)
COMMENTARY
Company Description
York which is headquartered in Sabie, Mpumalanga, is a vertically integrated
forestry and sawmilling company, growing pine and eucalyptus on 61 000 hectares,
and converting logs to sawn timber through four sawmills and a plywood plant to
serve a range of building, construction, infrastructure, furniture and packaging
markets.
Background
York entered this six month period with significant challenges, mostly as a
consequence of softening demand for its products and lower prices. The key
challenges were:
Recapitalising the balance sheet;
Finalising and signing the revised debt terms;
The closure of three operating units;
Reducing fixed and overhead cost in a comprehensive right-sizing exercise;
Optimising the use of own raw material sources; and
Refocusing the Group on its supply chain management.
The rights issue concluded in December 2009 was over-subscribed by 166%, which
is on endorsement of York`s strategic direction announced during the period as
part of the Group`s restructuring plans.
R450 million of the rights issue was utilised to pay off debt. This provides
York with a much sounder base from which to proactively position the Group to
exploit future growth in the regional timber market.
The goal of reducing fixed and overhead costs of in excess of R72 million on an
annualised basis has been achieved with R37 million being saved in the six
months to December 2009. This was achieved through a comprehensive right-sizing
exercise that involved the complete top down re-employment of all salaried
staff.
Management remains committed to the continued improvement of operating
efficiencies and product mix in order for the Group to remain cost competitive
in tough economic conditions. The Group continues to optimise its raw material
base and its integration with comprehensive supply chain management. This
process is producing good results with improved performance during the latter
portion of the period under review, thereby entrenching the Group`s position as
the largest softwood supplier in Southern Africa.
Market Conditions
York has not escaped the consequences of the severe downturn in the worldwide
economy. In particular, the South African building sector has seen a slow-down
over the past 18 months and a decline in the demand for sawn timber. There has
been a decline in timber utilisation in plated roof trusses, mainly due to the
decrease in domestic housing construction. As the building industry is York`s
primary market, the Group has experienced a decline in demand for its products.
Downward price pressure was also experienced due to excess capacity in the
sawmilling industry, a situation that was exacerbated by the temporary
oversupply of lumber due to the salvage operations subsequent to the fires in
2007 and 2008. This oversupply situation has reduced, but remains a key
consideration within the industry for the next six to twelve months.
The South African sawmilling industry has seen the closure of several sawmills
over the past year and during the latter half of 2009 York embarked on a
restructuring process to align its processing capacity with the current market
demand. The Group closed three of its technologically outdated and less
efficient sawmills. These operations are disclosed separately as discontinued
operations in the financial results for the period under review.
York`s Plantation Asset
Damage from fire during the 2009 fire season was very low when compared to
recent history. This was partly as a result of reasonable weather conditions,
coupled with stringent fire prevention measures implemented by York and the
industry.
Prices for sawlogs remained static for the period under review. The demand and
price paid for pulp reduced, which accounts for a portion of value reduction in
the plantation asset.
Sustainability of the plantation asset is being ensured through continued
accelerated re-planting of the fire damaged areas of the recent past. During the
period under review, in excess of double the number of hectares were re-planted
when compared to those hectares harvested. This situation will continue for a
further 18 months by when all areas affected will be re-planted.
Despite this, as the plantation valuation only records volume from the fourth
year of growth, there is a mathematical reduction in the net standing volume,
even though the re-planting exceeded the harvesting by hectare. All being equal
this will reverse in years to come as the newly planted areas grow and mature.
Company Outlook
The Group remains largely self-sufficient in terms of logs supplied by its own
timber plantations and owns four modern, well-managed sawmills and a plywood
plant. On recovery of the economy, York will gain the benefits from its
restructuring and become even more competitive in the market.
One of management`s key objectives remains to increase the Group`s
profitability. This objective will be fulfilled through optimising its
processing facilities, utilisation of own raw materials, improving operational
productivity and exploitation of its leading position in the softwood market.
The Group also plans to increase its ownership of forestry resources, should
these opportunities present themselves.
The current net asset value per share of 524 cents and tangible net asset value
per share of 337 cents is in excess of the current traded share price.
Financial Review
During the period under review the following material items have affected the
results:
- The key salient feature of operating results is despite a significant drop in
top line revenue, continuing operations results before insurance proceeds are
only marginally down on the six months ended December 2008. This results largely
from the effectiveness of the cost reduction and right sizing exercise.
- The downward adjustment to the fair value of biological assets of R80,3
million. A reduction in volumes contributed R52,7 million, with the balance of
R27,6 million relating to a decrease in log prices in the Mpumalanga region. The
price of pulp logs for both pine and eucalyptus has reduced over the period,
while the price of saw logs remained unchanged. A reduction in volume was
expected as the plantation continues to normalise.
- The rights issue resulted in an increase in share capital and share premium.
The transaction costs directly attributable to the issuing of the new shares to
the amount of R12,8 million were recognised directly in equity (deducted from
share premium).
- The Group raised debt in July 2007 for the acquisition of Global Forest
Products, and concurrently entered into an interest rate swap transaction to
hedge itself against the risk of interest rate increases. During the period
under review, R450 million of the proceeds of the rights issue was utilised to
settle a portion of the debt. The interest rate hedge derivative has been
adjusted to reflect the R450 million debt repayment, and York settled the out of
pocket portion of R16,3 million during December 2009. This was paid out of cash
resources.
- As a consequence of the partial settlement of the debt and interest rate hedge
derivative, a portion of the hedging reserve was released from equity to profit
and loss. Furthermore, the ineffective portion of the movement in the fair value
of the interest rate hedge derivative was recorded in profit and loss. This is
in line with the hedge accounting principles in IFRS, and explains the decrease
in the balance of the hedging reserve. The total amount recognised as an expense
in profit and loss relating to the interest rate hedge derivative amounted to
R44,7 million.
- Other operating income includes a profit on disposal of controlling interest
in SPEs of R7,6 million. On 25 November 2009 the Group disposed of its interest
in the SPEs through Blackstar (Cyprus) Investors Limited acquiring the ordinary
shares in the SPEs. No monies were received from the disposal of the interest.
In effect, the Group disposed of its controlling interest in the SPEs from an
accounting perspective.
- The tax credit consists mainly of deferred tax on the biological asset.
Working Capital
Net working capital decreased year-on-year when compared to 31 December 2008.
Trade and other receivables decreased as a result of the decrease in sales. The
decrease in the inventory balance is in line with the Group`s strategy to
decrease the levels of lumber stock. Furthermore, inventory values decreased as
the log salvage operations necessitated by the 2007 and 2008 forest fires were
completed and inventory levels are back to normal. Trade and other payables
decreased year-on-year. During the previous financial year, York purchased burnt
logs from external parties on extended credit terms, resulting in a higher trade
creditors balance. Working capital management remains one of the Group`s key
focus areas.
Corporate Governance
The Group subscribes to and complied substantially with the recommendations of
the Code of Corporate Governance Practices and Conduct as contained in the
second King Report on Corporate Governance.
Changes to the Board of Directors ("Board")
In line with the Company`s stated intention to restructure and reposition the
Group, the composition of the Board is being assessed ("Board restructure"). The
objective of the Board restructure is to align it more closely with the
restructuring of the Company in the past year, improve overall Board efficiency
and implement a plan to be fully Board compliant with the recommendations of the
King III Code. As part of this restructuring, G Mokoena (Executive director), P
Odendaal (Non-executive director), T Modise (Non-executive director) and D
Claunch (Non-executive director) have resigned with effect from 24 March 2010.
The Company appreciates and values their respective contributions over the past
year in which the Company faced challenging operating conditions and worked
closely with the Board to achieve its financial and operations restructuring.
During the interim period ended 31 December 2009 G Motau accepted a position
with the Group`s auditors, KPMG Incorporated, and, consequently, resigned in
October 2009; S Murray and A Bonamour also resigned in the same month.
The resignations reduced the number of directors from twelve to five. The
remaining Directors will meet in due course to consider further appointments, as
required. This restructuring is to be completed under the guidance of the Board
Chairman, J Myers, as requested by a majority of the shareholders of York.
Transformation
The Group is committed to a process of transformation and the economic
empowerment of its stakeholders. Management has extended its initiatives in
skills development, employment equity and corporate social investment during the
period under review.
Dividends
No ordinary dividend was declared taking into consideration the debt facilities
extended by York`s bankers and other growth plans during the period under
review.
Goodwill
The goodwill, which arose as a result of the acquisition of Global Forest
Products, remains intact. Future economic benefit is expected to flow to the
Group as York`s sustainable forestry management and skilled harvesting and
silviculture plans will see a significant increase in the value of the
plantations. As a result, the value of the asset to which the goodwill relates
still supports the current balance.
On behalf of the Board of Directors
Piet van Zyl Duncan Erskine
Chief Executive Officer Chief Financial Officer
Sabie
24 March 2010
Executive Directors:
Piet van Zyl (CEO), Duncan Erskine (CFO)
Gay Mokoena (Director Corporate Services)
Non-Executive Directors:
Jim Myers (Chairman, USA), Paul BothaDick Claunch
Shakeel MeerTlhopheho Modise, Pieter Odendaal
Company Information:
www.york.co.za
Company Secretary:
Fusion Corporate Secretarial Services (Pty) Limited
Claressica Park Unit B
56 Regency Road, Route 21 Corporate Park, Irene, 0062
PO Box 68528, Highveld, 0169
Sponsor:
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Tel 011 750 0000
24 Fricker Road, Illovo, 2196
Registered Office:
York Corporate Offices, 3 Main Road, Sabie, 1260
Tel 013 764 9200
Fax 013 764 3245
PO Box 1191, Sabie, 1260
Transfer Secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
www.york.co.za
Date: 29/03/2010 10:02:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
