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MAS
MAS
Masonite - Audited Results
MASONITE (AFRICA) LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1942/015502/06)
Share code: MAS & ISIN: ZAE000004289
("Masonite" or "the Group")
AUDITED RESULTS
Income statement
12 months to
Group and company December 31 December 31,
2005 2004
Note (R"000) (R"000)
Revenue 402 761 375 791
Cost of sales (313 506) (298 472)
Gross profit 89 255 77 319
Other operating income 3 755 6 690
Distribution costs (43 201) (43 186)
Selling and marketing costs (12 764) (11 875)
Administrative expenses (10 369) (8 479)
Other operating expenses (10 256) (8 770)
Trading income 16 420 11 699
Fair value adjustment of
biological assets 430 (2 523)
Operating profit before
financing costs 16 850 9 176
Finance income 638 361
Finance expenses (558) (784)
Profit before tax 16 930 8 753
Income tax expenses 5 (4 015) (2 939)
Profit for the year 12 915 5 814
HEADLINE EARNINGS
RECONCILIATION
Profit for the year 12 915 5 814
Adjusted for:
Loss/(profit) on sale of assets 62 (102)
Tax effect of adjustments (18) 31
Headline earnings 12 959 5 743
Number of shares in issue 6 900 224 6 854 054
Earnings per share (cents)
Basic 188 85
Headline 188 84
Diluted 183 82
Balance sheet
12 months to
Group and company December 31 December 31,
2005 2004
Note (R"000) (R"000)
ASSETS
Non-current assets
Property, plant and
equipment 101 127 103 193
Intangible assets 1 238 1 767
Biological assets 2 96 336 95 906
Deferred tax assets 8 124 7 632
Investments 1 030 985
Loans receivable 42 78
Total non-current assets 207 897 209 561
Current assets
Inventories 41 780 34 415
Trade receivables and
other receivables 53 603 45 006
Amounts due from fellow
subsidiaries 1 732 4 835
Cash and cash equivalents 14 825 13 295
Total current assets 111 940 97 551
Total assets 319 837 307 112
EQUITY AND LIABILITIES
Capital and reserves
Share capital 3 450 3 427
Share premium 2 357 2 194
Non-distributable reserves 700 700
Retained earnings 213 687 200 772
Total equity 220 194 207 093
Non-current liabilities
Deferred tax liabilities 41 032 41 201
Deferred investment allowances - 9
Retirement benefit obligation 3 17 731 16 691
Straight lining lease accrual 70 153
Total non-current liabilities 58 833 58 054
Current liabilities
Trade and other payables 35 677 31 389
Provisions 4 4 144 3 924
Amounts payable to holding company 435 436
Amounts payable to fellow subsidiaries 329 1 101
Bank overdrafts - 4 140
Tax liabilities 114 975
Straight lining lease accrual 111 -
Total current liabilities 40 810 41 965
Total equity and liabilities 319 837 307 112
Cash flow statement
12 months to
Group and company December 31 December 31,
2005 2004
Note (R"000) (R"000)
Cash flows from operating activities
Profit from operations 16 850 9 176
Interest received 563 325
Interest paid (558) (784)
Adjusted for:
Depreciation and amortisation 11 812 11 219
(Increase)/ decrease in fair value
of biological assets (430) 2 523
Loss/(gain) on disposal of assets 62 (102)
Increase in provisions 220 224
Increase in liability for
retirement benefit obligation 1 040 1 184
Straight lining lease accrual (83) 139
Investment fair value adjustment (45) (37)
Taxation paid (5 546) (2 707)
Working capital changes (9 158) 2 605
Net cash inflow from operating
activities 14 727 23 765
Cash flows from investing activities
Additions to property, plant and
equipment (9 700) (14 151)
Additions to intangible assets - (512)
Proceeds from sale of property,
plant and equipment 421 110
Loan repayment received from
related party 36 36
Net cash outflow from investing
activities (9 243) (14 517)
Cash flows from financing activities
Proceeds from issue of ordinary
shares 186 89
Net cash inflow from financing
activities 186 89
Net increase in cash and cash
equivalents 5 670 9 337
Net cash and cash equivalents at
beginning of year 9 155 (182)
Cash and cash equivalents at end
of year 14 825 9 155
Statement of changes in equity
Group and company Non-
Share Share distributable Retained
Capital premium reserves earnings Total
R000"s R000"s R000"s R000"s R000"s
Balance at 1 January 2004 3416 2 116 700 180 358 186 590
Effect of transition
to IFRS - - - 14 610 14 610
Effect of errors under
prior SA GAAP - - - (10) (10)
Restated balance 3 416 2 116 700 194 958 201 190
Net profit for the period - - - 5 814 5 814
Issue of share capital 11 78 - - 89
Balance at 31
December 2004 3 427 2 194 700 200 772 207 093
Net profit for the period - - - 12 915 12 915
Issue of share capital 23 163 - - 186
Balance at 31
December 2005 3 450 2 357 700 213 687 220 194
Segmental analysis
Primary reporting - business segments
Mill Other
2005 2004 2005 2004
R000"s R000"s R000"s R000"s
Total gross segment
revenue 344 952 323 167 68 519 66 570
Inter-segment revenue - - (10 710) (13 946)
Segment revenue 344 952 323 167 57 809 52 624
Segment trading income 20 036 8 483 6 753 11 695
Fair value adjustment
of biological assets - - 430 (2 523)
Segment results 20 036 8 483 7 183 9 172
Administrative expenses
Finance income
Finance expense
Profit before income tax
Income tax expense
Profit for the year
Total
2005 2004
R000"s R000"s
Total gross segment
revenue 413 471 389 737
Inter- segment revenue (10 710) (13 946)
Segment revenue 402 761 375 791
Segment trading income 26 789 20 178
Fair value adjustment
of biological assets 430 (2 523)
Segment results 27 219 17 655
Administrative expenses (10 369) (8 479)
Finance income 638 361
Finance expense (558) (784)
Profit before income tax 16 930 8 753
Income tax expense (4 015) (2 939)
Profit for the year 12 915 5 814
Secondary reporting - geographical segments
Domestic Exports Total
2005 2004 2005 2004 2005 2004
R000"s R000"s R000"s R000"s R000"s R000"s
Revenue 348 868 308 806 53 893 66 985 402 761 375 791
Explanation of transition to IFRS
These are the Group"s first consolidated financial statements prepared in
accordance with International Financial Reporting Standards (IFRSs).
In preparing its opening IFRS balance sheet, the Group has adjusted amounts
reported previously in financial statements prepared in accordance with South
African Statements of Generally Accepted Accounting Practice (SA GAAP) and the
requirements of the South African Companies Act. An explanation of how the
transition from previous SA GAAP to IFRS has affected the Group"s financial
position and financial performance is set out in the following tables and the
notes that accompany the tables.
Effect of
transition
to IFRSs
Previous 1 January
GAAP 2004 IFRSs
BALANCE SHEET
ASSETS
Non-current assets
Property, plant and
equipment 77 381 22 414 99 795
Intangible assets 1 627 102 1 729
Biological assets 98 429 - 98 429
Investments 948 - 948
Loans receivable 114 - 114
Total non-current
assets 178 499 22 516 201 015
Current assets
Inventories 40 367 (1 644) 38 723
Trade and other
receivables 55 592 - 55 592
Amounts due from
fellow subsidiaries 7 209 - 7 209
Cash and cash
equivalents 2 148 - 2 148
Total current
assets 105 316 (1 644) 103 672
Total assets 283 815 20 872 304 687
Equity
Capital and reserves
Share capital 3 416 - 3 416
Share premium 2 116 - 2 116
Non-distributable
reserves 700 - 700
Retained earnings 180 358 14 600 194 958
Total equity 186 590 14 600 201 190
Effect of
transition
to IFRSs
Previous 31 December
GAAP 2004 IFRSs
BALANCE SHEET
ASSETS
Non-current assets
Property, plant and
equipment 80 195 22 998 103 193
Intangible assets 1 642 125 1 767
Biological assets 95 906 - 95 906
Investments 985 - 985
Loans receivable 78 - 78
Total non-current
assets 178 806 23 123 201 929
Current assets
Inventories 36 650 (2 235) 34 415
Trade and other
receivables 45 006 - 45 006
Amounts due from
fellow subsidiaries 4 835 - 4 835
Cash and cash
equivalents 13 295 - 13 295
Total current
assets 99 786 (2 235) 97 551
Total assets 278 592 20 888 299 480
Equity
Capital and reserves
Share capital 3 427 - 3 427
Share premium 2 194 - 2 194
Non-distributable
reserves 700 - 700
Retained earnings 186 259 14 513 200 772
Total equity 192 580 14 513 207 093
Effect of
transition
to IFRSs
Previous 1 January
GAAP 2004 IFRSs
Liabilities
Non-current
laibilities
Deferred tax
liabilities 27 944 6 258 34 202
Deferred investment
allowances 38 - 38
Retirement benefit
obligation 15 507 - 15 507
Straight lining
lease accrual - 14 14
Total non current
liabilities 43 489 6 272 49 761
Current liabilities
Trade and other
payables 47 113 - 47 113
Provisions 3 700 - 3 700
Amounts payable to
holding company 346 - 346
Amounts payable to
fellow subsidiaries 166 - 166
Bank overdrafts 2 330 - 2 330
Tax liabilities 81 - 81
Total current
liabilities 53 736 - 53 736
Total equity and
liabilities 283 815 20 872 304 687
Effect of
transition
to IFRSs
Previous 31 December
GAAP 2004 IFRSs
Liabilities
Non-current
laibilities
Deferred tax
liabilities 27 347 6 222 33 569
Deferred investment
allowances 9 - 9
Retirement benefit
obligation 16 691 - 16 691
Straight lining
lease accrual - 153 153
Total non current
liabilities 44 047 6 375 50 422
Current liabilities
Trade and other
payables 31 389 - 31 389
Provisions 3 924 - 3 924
Amounts payable to
holding company 436 - 436
Amounts payable to
fellow subsidiaries 1 101 - 1 101
Bank overdrafts 4 140 - 4 140
Tax liabilities 975 - 975
Total current
liabilities 41 965 - 41 965
Total equity and
liabilities 278 592 20 888 299 480
Effect of
Previous transition
GAAP to IFRSs IFRSs
Revenue 346 828 28 963 375 791
Cost of sales (255 229) (43 243) (298 472)
Gross profit 91 599 (14 280) 77 319
Other operating income 7 790 (1 100) 6 690
Distribution costs (75 033) 31 847 (43 186)
Selling and general administrative
expenses (20 295) 20 295 -
Selling and marketing costs - (11 875) (11 875)
Administrative expenses - (8 479) (8 479)
Other operating expenses (1 427) (7 343) (8 770)
Plantation income 9 189 (9 189) -
Trading income 11 823 (124) 11 699
Fair value adjustment of
biological assets (2 523) - (2 523)
Profit from operations 9 300 (124) 9 176
Finance income 361 - 361
Finance expense (784) - (784)
Profit before tax 8 877 (124) 8 753
Income tax expenses (2 976) 37 (2 939)
Profit for the year 5 901 (87) 5 814
Earnings per share
Basic 86 (1) 85
Headline 84 (1) 83
Diluted 84 (2) 82
i) The Group has reviewed the residual values and estimated useful lives of
property, plant, equipment and intangible assets. The effect is to increase
the value of property, plant, equipment and intangible assets by R20 872 000
at 1 January 2004 and by R16 000 at 31 December 2004. The Group has included
plant critical spares in property, plant and equipment; these were
previously included in inventory. The effect of this is to increase
property, plant & equipment by R2 235 000 (1 January 2004: R1 644 000) and
decrease inventories by the same amounts.
The effect of the review of residual values and estimated lives of property,
plant, equipment and intangible assets, on 2004 profit from operations, is
to decrease depreciation and amortisation by R16 000.
ii) A misinterpretation of previous SA GAAP resulted in lease payments being
charged to the income statement as they were incurred. This was incorrect,
as in terms of SA GAAP and IAS 17 lease payments under an operating lease
shall be recognised as an expense on a straight-line basis over the lease
term. The Group leases a number of offices and items of equipment. As at
1 January 2004 the leases were reviewed and the lease payments were adjusted
on a straight-line basis.
The effect of lease payments being expensed on a straight line basis in 2004
is an increase in operating rentals of R140 000. It also required the
raising of a liability of R153 000 at 31 December 2004.
iii) The following income and expense items have been reclassified within
the income statement in order to improve the meaningfulness of the
information presented:
a) Net plantation income has been reallocated to revenue and cost of sales;
b) Volume rebates, previously included in distribution costs, have now been
set off against revenue;
c) Settlement discounts, previously included in distribution costs, now been
included in other operating expenses; and
d) Selling and general administrative expenses were previously combined.
These have now been disclosed separately.
iv) The above changes increased (decreased) the deferred tax liability as
follows:
1 January 31 December
Group and company 2004 2004
R000"s R000"s
Property, plant and equipment 6 231 6 229
Intangible assets 31 38
Operating leases (4) (45)
Increase in deferred tax liability 6 258 6 222
v) The effect of the above adjustments on retained earnings is as follows:
1 January 31 December
2004 2004
R000"s R000"s
Property, plant and equipment 14 539 14 534
Intangible assets 71 87
Operating leases (10) (108)
Increase in retained earnings 14 600 14 513
Notes
1. Basis of preparation
The audited results of the Group for the year ended December 31, 2005 have
been prepared in accordance with the Group"s accounting policies. These comply
with International Financial Reporting Standards (IFRSs) which were adopted
with effect from 1 January 2005. The comparative figures have accordingly
been restated. The disclosures required by IFRS 1 (First-time Adoption of
International Financial Reporting Standards) concerning the transition from
South African Statements of Generally Accepted Practice (SA GAAP) to IFRSs
and the requisite changes in accounting policies are set out in the
explanation of transition to IFRS.
The auditors of the Group are KPMG Inc. Their unqualified audit opinion is
available for inspection at the Company"s registered office.
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 change in value of biological assets
was a profit of R0.3 million (2004: R1.8 million loss). The decrease in fair
value of biological assets in 2004 was the result of the forest fires which
reduced the saleable value of timber.
12 months to
December 31 December 31,
2005 2004
Note (R"000) (R"000)
Timber and sugar cane
plantations - immature 25 959 29 729
Timber and sugar cane
plantations - mature 70 377 66 177
Total 96 336 95 906
3. Retirement benefit obligation
The Group provides post-retirement medical benefits to retired employees who
were employed before January 1997. The liability in respect of post-retirement
medical benefit is actuarially valued at R17.7 million (2004:R16.7 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. Provisions
The Group enjoyed, until June 2003, 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 need to be renegotiated. The
Group"s 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. An amount of R4.1 million including interest (2004:
R3.9 million) has been provided for a surplus redistribution exercise. It is
not known when the FSB will reach a final decision on this matter, and it is
therefore impossible to estimate the expected timing of any resulting outflow of
economic benefits. Interest on the surplus has been provided for at an
effective interest rate of 5.6% (2004: 6.1%) which is typical of the rate that
has been earned in a low risk banker portfolio.
5. Income tax expense
December 31 December 31,
2005 2004
(R"000) (R"000)
Current tax expense 4 685 3 601
Deferred tax expense 458 (633)
Deferred tax - tax rate change (1 119) -
Deferred investment allowances (9) (29)
Total 4 015 2 939
COMMENTARY
HEADLINE EARNINGS INCREASED BY 125.7% TO R13.0 MILLION AFTER ADJUSTMENT FOR
INCREASE IN FAIR VALUE OF BIOLOGICAL ASSETS. REVENUE INCREASED BY 7.2% TO
R402.8 MILLION WHILE TRADING INCOME WAS 40.3% HIGHER THAN THE PREVIOUS YEAR
(R16.4 MILLION vs R11.7 MILLION).
The results were achieved despite the effect of the strong Rand on local and
export margins. Local volumes were up by 5% due to the improvement in the
economy, while local margins were maintained through effective cost reduction
programmes.
The forestry operations were able to minimize the effect of the fires during the
dry conditions in September 2004, and the Estcourt mill exceeded the high
standards established for operational efficiency. Both operations continued to
be leaders in the field of safety and health.
The strong growth forecast for the economy, and the emphasis on spending on
infrastructure and housing, should have a positive effect on the Group"s
earnings for 2006.
DIVIDEND
On 23 March 2006, the board declared a dividend of 63 cents per share for the
year ended 31 December 2005. The dividend is covered three times by basic
earnings per share.
The salient dates for the dividend are as follows:
Last day to trade shares cum dividend Thursday, 20 April 2006
Shares trade ex dividend Friday, 21 April 2006
Record date Friday, 28 April 2006
Payment date Tuesday, 2 May 2006
No share certificates may be dematerialised or rematerialised between Friday
21 April 2006 and Friday 28 April 2006, both dates inclusive. No dividend has
been provided for in these annual financial statements, as the dividend was
declared after the balance sheet date.
For and on behalf of the Board
M J Slater D S Cooper
Managing Director Financial Director
24 March 2006
DIRECTORS
A H Wilson (Chairman), M J Slater **(Managing),
P A Bernards*** (resigned 3 February 2006), W P Coetzee,
D S Cooper, D G Ellis*, J U Morrison*, K M P Spencer,
R V Tubbesing*, A G Venton *USA **British ***Canadian
COMPANY SECRETARY
E R Roberts
SPONSOR
Nedbank Capital
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited
PO Box 61051, Marshalltown, 2107
70 Marshall Street, Johannesburg, 2001, Republic of South Africa
Telephone (011) 370 5000
Date: 24/03/2006 09:20:30 AM Produced by the JSE SENS Department
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