| Thu 31 Aug 2006, 12:10 | | Yorkcor - Unaudited Interim Report 2006 for the si |
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YRK
YRK
Yorkcor - Unaudited Interim Report 2006 for the six months to 30 June 2006
The York Timber Organisation Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1916/004890/06)
Share code: YRK & ISIN code: ZAE000008108
("Yorkcor" or "the company")
Unaudited Interim Report 2006 for the six months to 30 June 2006
Commentary
A NEW BEGINNING
HIGHLIGHTS COMPARED TO LAST YEAR
- Revenue up 29% to R162,1 million compared to same period last year
- Headline earnings per share up 13% to 87,1 cents (2005: 76,9 cents)
- Operating profit up 9% to R15,9 million (2005: R14,6 million)
- Settlement of all outstanding litigation with Safcol
The six month period under review marks a new beginning for Yorkcor in
several respects:
- the outstanding litigation with state forestry group Safcol has been
settled;
- a recent upward adjustment in log prices by Komatiland Forest (KLF),
the forestry arm of Safcol, to its long-term contractors; this price
increase will take effect from 1 August 2006 and will narrow the gap
between the long-term contractors and open market buyers of saw logs.
This means that Safcol customers with long-term contracts are now
paying prices closer to that charged to Yorkcor and other open market
customers, which was not the case in the past;
- some of the uncertainty in respect of KLF has been removed with the
recent Cabinet decision that the State retain, for the foreseeable
future, the KLF forests under public ownership after the proposed
merger with Bonheur was terminated. However, new uncertainties have
been introduced regarding the future role of Safcol;
- the Competition Commission is investigating complaints of price
discrimination and excessive pricing by Komatiland Forests as well as
the alleged prior implementation of a merger between Komatiland and
the Bonheur consortium;
- market conditions show signs of levelling off;
- the proposed introduction of a BEE Charter for the timber industry.
On balance, however, we enter the second half of the current financial year
even more confident.
FINANCIAL RESULTS
Revenue for the six months to 30 June 2006 increased by 29 per cent to
R162,1 million, while headline earnings per share improved by 13% to 87,1
cents, versus 76,9 cents for the comparable period in 2005.
Yorkcor"s balance sheet remains solid. Stock levels increased by 91% from
the corresponding previous period and 41% since year end due to higher
revenue volumes, organic growth and the expansion of our merchandising
activities. The group"s gearing increased from 9% in June 2005 to 49% in
June 2006. This increase is attributable to certain Safcol provisions being
converted to long-term debt and the acquisition of a timber plantation
being purchased with debt funding.
Cash and cash equivalents improved by R16,7 million to R25,4 million as at
the end of June 2006. Yorkcor is in a strong position for making
acquisitions and funding further organic growth.
These results are particularly satisfying given the softer market
conditions prevailing in the residential housing sector.
MARKET CONDITIONS
After several years of saw logs and consequently lumber prices increasing
at levels well above the Consumer Price Index, there has been a noticeable
levelling off in demand for lumber over the period under review. Despite
the rand"s volatility Yorkcor continues to grow its foreign trade.
POST BALANCE SHEET EVENT - SAFCOL SETTLEMENT
Yorkcor and Safcol have settled the last outstanding item in a long-
standing arbitration between the companies. Adequate provision was made in
our 2005 year-end balance sheet for the amounts settled. Safcol has
expressed its satisfaction that the arbitration proceedings have been
settled and looks forward to building a successful relationship with
Yorkcor in the future.
PRIVATISATION
The government has back-pedalled on its earlier decision to privatise KLF,
having spent the last 10 years and three attempts at great expense to
achieve this end. This has kept the industry, not to mention KLF staff, in
a state of suspense throughout this period. Yorkcor"s view is that the
South African government, in keeping with trends elsewhere in the world,
should not be in the commercial forestry business and should pursue the
privatisation of KLF.
STRATEGY
Yorkcor continues to make progress in pursuit of its four-pronged growth
strategy:
- Our requirement for a black economic empowerment partner is one that
would add real value to our business and shareholders. We are inter
alia exploring broad-based black economic empowerment in the
geographical environment in which we operate. A further cautionary has
been issued in this regard, which we expect to be finalised in the
coming weeks, allowing for the withdrawal of the cautionary.
- The pursuit of selective acquisitions, various forestry opportunities
have been identified and are under consideration.
- In the development of new merchandising opportunities we have forged
alliances with saw millers offering the benefit of our marketing
supremacy.
- We are securing new log supplies from KLF and independent growers on
competitive terms.
LIQUIDITY OF SHARES
Yorkcor is committed to remaining listed on the JSE Limited. A listing is
the ideal vehicle for growth. To improve liquidity a number of options are
being contemplated.
PROSPECTS
We are actively seeking acquisitions and alliances with other industry
players, and we expect to make an announcement on introducing BEE partners
at the shareholder level in the near future. The prospects for the second
half of the year are positive, and we expect to maintain our current growth
path.
Ivor Tucker
Chief executive officer
John Lehman
Financial director
Condensed consolidated interim income statement
For the six months ended 30 June 2006
30 Jun 30 Jun 31 Dec
2006 2005 % 2005
In thousands of Rands IFRS IFRS change IFRS
Revenue 162 058 125 893 29 284 012
Cost of sales (97 552) (68 979) 41 (154 530)
Gross profit 64 506 56 914 13 129 482
Other operating income 4 141 3 366 23 4 157
Distribution expenses (2 935) (2 514) 17 (5 827)
Administration expenses (18 754) (14 222) 32 (31 595)
Other operating expenses (31 016) (28 946) 7 (67 962)
Profit from operations 15 942 14 598 9 28 255
Arbitration awards - - (22 956)
provision
Profit before finance 15 942 14 598 9 5 299
costs
Finance income 77 2 619 (97) 8 812
Finance expenses (2 473) (2 359) 5 (1 449)
Profit before tax 13 546 14 858 (9) 12 662
Income tax expense (3 928) (6 332) (38) (6 404)
Profit for the period 9 618 8 526 13 6 258
Attributable to:
Equity holders of the 9 618 8 526 6 258
parent
Basic and diluted 87,1 77,2 56,7
earnings per share -
cents
Dividends paid - cents - 150,0 250,0
2006 2005 2005
IFRS IFRS IFRS
Determination of
headline earnings
Basic and diluted 87,1 77,2 56,7
earnings per share -
cents
Profit on sale of shares - (0,32) -
Surplus on disposal of - - (0,10)
fixed assets
Increase in fair value - - (4,50)
of investment properties
Increase in fair value (3,50)
of listed investment
Impairment of plant (3,60)
Basic and diluted 87,1 76,9 13 45,0
headline earnings per
share
Condensed consolidated interim balance sheet
As at 30 June 2006
30 Jun 30 Jun 31 Dec
2006 2005 % 2005
In thousands of Rands IFRS IFRS change IFRS
ASSETS
Total non-current assets 85 819 74 561 95 256
Property, plant and 63 712 58 001 10 63 894
equipment
Biological assets 14 278 - 14 278
Investment property 7 070 6 364 11 7 070
Other investments 759 10 196 (93) 10 014
Total current assets 110 015 81 298 68 019
Inventories 33 911 17 764 91 24 066
Trade and other 50 679 38 899 30 35 246
receivables
Cash and cash 25 425 24 635 3 8 707
equivalents
Total assets 195 834 155 859 163 275
EQUITY AND LIABILITIES
Issued capital 552 552 552
Share premium 3 060 3 060 3 060
Retained earnings 78 452 85 458 68 834
Total equity
attributable to equity
holders of
the parent 82 064 89 070 (8) 72 446
Total non-current 53 922 27 430 32 070
liabilities
Interest bearing loans 37 747 6 422 488 14 735
and borrowings
Provisions 9 053 9 053 12 728
Deferred tax liabilities 7 122 11 955 (40) 4 607
Total current 59 848 39 359 58 759
liabilities
Interest bearing loans 6 050 2 644 129 5 416
and borrowings
Provisions - - 22 956
Trade and other payables 52 518 33 122 59 29 645
Income tax payable 1 280 3 593 (64) 742
Total equity and 195 834 155 859 163 275
liabilities
Condensed consolidated interim cash flow
For the six months ended 30 June 2006
28 Jun 30 Jun 31 Dec
2006 2005 2005
In thousands of Rands IFRS IFRS IFRS
Cash flows from
operating activities
Cash generated by 15 405 6 265 15 633
operating activities
Provisions transferred (26 631) - -
to interest-bearing
liabilities
Net finance income (2 396) 260 1 302
Taxation paid (875) (7 820) (18 091)
Income from investments - - 6 060
Dividends paid - (16 561) (27 601)
Net cash (14 497) (17 856) (22 697)
inflow/(outflow) from
operating activities
Cash flows from
investing activities
Proceeds from sale of - 35 80
property, plant and
equipment
Additions to property, (1 686) (1 924) (3 230)
plant and equipment
Additions to biological - - (8 920)
assets
Additions to other 9 255 (3 008) (2 826)
investments
Net cash 7 569 (4 897) (14 896)
inflow/(outflow) from
investing activities
Cash flows from
financing activities
Increase/(decrease) in 23 646 (1 344) (2 432)
borrowings
Net cash 23 646 (1 344) (2 432)
(outflow)/inflow from
financing activities
Net increase/(decrease) 16 718 (24 097) (40 025)
in cash and cash
equivalents
Cash and cash 8 707 48 732 48 732
equivalents at the
beginning of the period
Cash and cash 25 425 24 635 8 707
equivalents at the end
of the period
Condensed consolidated interim statement of changes in equity
For the six months ended 30 June 2006
Share Share Retained
In thousands of Rands capital premium earnings Total
1 January 2005 - IFRS 552 3 060 93 493 97 105
Net profit for the 8 526 8 526
period
Dividend paid (16 561) (16 561)
Balance at 30 June 2005 552 3 060 85 458 89 070
- IFRS
1 January 2006 - IFRS 552 3 060 68 834 72 446
Net profit for the 9 618 9 618
period
Balance at 30 June 2006 552 3 060 78 452 82 064
- IFRS
Notes to the condensed consolidated interim financial statements
The York Timber Organisation Limited (the Company) is a company domiciled
in South Africa. The condensed consolidated interim financial statements of
the Company for the six months ended 30 June 2006 comprise the Company and
its subsidiaries (together referred to as the Group).
The condensed consolidated interim financial statements were authorised for
issuance on 31 August 2006.
(a) Statement of compliance
The condensed consolidated interim financial statements have been prepared
in accordance with International Financial Reporting Standards (IFRS) for
interim financial statements. The condensed consolidated interim financial
statements do not include all of the information required for full annual
financial statements.
(b) Basis of preparation
The financial statements are presented in Rands, rounded to the nearest
thousand. They are prepared on the historical cost basis except that the
following assets and liabilities are stated at their fair value: financial
instruments held for trading, financial instruments and investment
property.
Non-current assets and disposal groups held for sale are stated at the
lower of carrying amount and fair value less costs to sell.
The preparation of interim financial statements are in conformity with IAS
34 Interim Financial Reporting which requires management to make
judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates.
(c) Minority interest
In the corresponding previous period the company reported a minority
interest charge of R463 000. The associate company is now a 100% subsidiary
and therefore a minority interest is no longer required. The effect of the
change resulted in the earnings per share for the six months to June 2005
increasing from 73,1 cents to 77,2 cents per share.
Executive directors:
I S D Tucker, A C de Villiers, L S Cooper, J K H Lehman
Non-executive directors:
Dr M J C van Vuuren (Chairman), Dr J Kopp, S Motlana, T G Mokoena
Company Secretary:
J F Dekker
Registered Office:
5th Floor, Yorkcor Park,
86 Watermeyer Street, Val de Grace,
Pretoria 0184,
PO Box 380, Pretoria 0001
Reg. No. 1916/004890/06
Share code: YRK
ISIN: ZAE000008108
Transfer Secretaries:
Computershare Investor Services 2004 (Proprietary) Limited,
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
www.yorkcor.co.za
Date: 31/08/2006 12:10:24 PM Produced by the JSE SENS Department
