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MAS
MAS
Masonite - Unaudited Interim Results For the six months ended 30 June 2006
MASONITE (AFRICA) LIMITED
(Incorporated in the
Republic of South Africa)
(Registration number 1942/015502/06)
Share code: MAS & ISIN: ZAE000004289
("Masonite" or "the company")
UNAUDITED INTERIM RESULTS
For the six months ended 30 June 2006
Condensed income statement
6 months to 6 months to 12 months to
30 June 30 June 31 December
2006 2005 2005
Group and company Note (R000"s) (R000"s) (R000"s)
Revenue 181 224 186 143 402 761
Cost of sales (133 542) (145 975) (313 506)
Gross profit 47 682 40 168 89 255
Other operating
income 2 431 3 450 3 755
Distribution expenses (19 797) (21 517) (43 201)
Selling and
marketing expenses (5 842) (6 069) (12 764)
Administrative
expenses (5 637) (5 733) (10 369)
Other operating
expenses (6 420) (5 990) (10 256)
Trading income 12 417 4 309 16 420
Fair value adjustment
of biological assets (1 385) (1 877) 430
Operating profit
before financing costs 11 032 2 432 16 850
Finance income 262 173 638
Finance expense (174) (384) (558)
Profit before tax 11 120 2 221 16 930
Income tax expenses 6 (3 947) 459 (4 015)
Profit for the year 7 173 2 680 12 915
Earnings per share
Basic 103 39 188
Diluted 101 38 183
Condensed balance sheet
As at As at As at
30 June 30 June 31 December
2006 2005 2005
Group and company Notes (R000"s) (R000"s) (R000"s)
ASSETS
Non-current assets
Property, plant and
equipment 97 677 101 299 101 127
Intangible assets 1 028 1 535 1 238
Biological assets 3 94 951 94 029 96 336
Deferred tax assets 8 060 8 062 8 124
Investments 912 985 1 030
Loans receivable - 60 42
Total non-current
assets 202 628 205 970 207 897
Current assets
Inventories 56 528 44 919 41 780
Trade and other
receivables 62 560 48 790 53 603
Amounts due from
fellow subsidiaries 1 566 10 181 1 732
Cash and cash
equivalents 18 305 15 053 14 825
Total current assets 138 959 118 943 111 940
Total assets 341 587 324 913 319 837
EQUITY
Capital and reserves
Share capital 3 513 3 440 3 450
Share premium 2 803 2 290 2 357
Non-distributable
reserves 700 700 700
Retained earnings 216 433 203 452 213 687
Total shareholders"
interest 223 449 209 882 220 194
LIABILITIES
Non-current
liabilities
Deferred tax
liabilities 40 298 40 309 41 032
Retirement benefit
obligation 4 18 193 17 363 17 731
Straight lining lease
accrual 70 153 70
Total non-current
liabilities 58 561 57 825 58 833
Current liabilities
Trade and other
payables 51 373 44 752 35 677
Provisions 5 4 263 4 342 4 144
Bank overdraft - 7 023 -
Amounts payable
to holding company - 369 435
Amounts payable
to fellow subsidiaries 1 314 919 329
Tax liabilities 2 546 (199) 114
Straight lining lease
accrual 81 - 111
Total current
liabilities 59 577 57 206 40 810
Total equity
and liabilities 341 587 324 913 319 837
Condensed statement of changes in equity
Non-
Share Share distributable Retained
capital premium reserves earnings Total
Group and company (R000"s) (R000"s) (R000"s) (R000"s) (R000"s)
Balance at
1 January 2005 3 427 2 194 700 200 772 207 093
Net profit
for the period - - - 2 680 2 680
Issue of
share capital 13 96 - - 109
Balance at
30 June 2005 3 440 2 290 700 203 452 209 882
Net profit
for the period - - - 10 235 10 235
Issue of share capital 10 67 - - 77
Balance at
31 December 2005 3 450 2 357 700 213 687 220 194
Dividends paid - - - (4 427) (4 427)
Net profit
for the period - - - 7 173 7 173
Issue of
share capital 63 446 - - 509
Balance at
30 June 2006 3 513 2 803 700 216 433 223 449
Condensed cash flow statement
6 months to 6 months to 12 months to
30 June 30 June 31 December
2006 2005 2005
Group and company (R000"s) (R000"s) (R000"s)
Cash flow from operating
activities
Profit for the year after
taxation 7 173 2 680 12 915
Adjusted for:
Depreciation and
amortisation 6 147 5 801 11 812
Income tax expense 3 947 (459) 4 015
Decrease/(increase) in
value of biological assets 1 385 1 877 (430)
Loss on disposal of assets 5 35 62
Increase in provisions 119 418 220
Increase/(decrease) in
accrual for finance costs 63 36 (75)
Increase in liability for
retirement benefit
obligation 462 672 1 040
Straight lining lease
accrual (30) - (83)
Investment fair value
adjustment 118 - (45)
Operating cash flows before
movement in working capital 19 389 11 060 29 431
Increase in working capital (7 356) (6 557) (9 158)
Cash generated from
operations 12 033 4 503 20 273
Taxation paid (2 186) (2 045) (5 546)
Net cash generated
from operating activities 9 847 2 458 14 727
Cash flow from investing
activities
Additions to property,
plant and equipment (2 493) (3 894) (9 700)
Proceeds from sale of
property, plant and
equipment 2 184 421
Loan repayments received
from related parties 42 18 36
Net cash (inflow)/outflow
from investing activities (2 449) (3 692) (9 243)
Cash flow from financing
activities
Proceeds on issue of
ordinary shares 509 109 186
Dividends paid (4 427) - -
Net cash (outflow)/inflow
from financing activities (3 918) 109 186
Net increase/(decrease)
in cash and cash equivalents 3 480 (1 125) 5 670
Cash and cash equivalents
at the beginning of the
period 14 825 9 155 9 155
Cash and cash equivalents
at the end of the period 18 305 8 030 14 825
Condensed segment information
6 months to 6 months to 12 months to
30 June 30 June 31 December
2006 2005 2005
Group and company (R000"s) (R000"s) (R000"s)
Primary reporting
business segments
Segment revenue
Mill 159 269 161 383 344 952
Other 21 955 24 760 57 809
Total 181 224 186 143 402 761
Segment result
Mill 9 703 14 084 20 036
Other 6 966 (5 919) 7 183
Total 16 669 8 165 27 219
Segment assets
Mill 212 729 194 244 184 440
Other 119 886 121 562 126 201
Total 332 615 315 806 310 641
Segment liabilities
Mill 35 273 37 288 33 707
Other 21 758 20 117 6 989
Total 57 031 57 405 40 696
Secondary reporting
geographical segments
Segment revenue
Domestic 154 041 153 111 348 868
Exports 27 183 33 032 53 893
Total 181 224 186 143 402 761
Notes
1. Statement of compliance
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs).
2. Basis of preparation
The interim financial statements are presented in SA 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: bank
balances denominated in foreign currencies, derivative financial instruments
and biological assets.
The preparation of interim financial statements in conformity with IFRSs
requires management to make judgments, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities,
income and expenses.
The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgments
about carrying values of assets and liabilities that are not readily apparent
from other sources.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and
future periods. Actual results may differ from these estimates.
The accounting policies have been applied consistently to all periods presented
in these consolidated financial statements. Details of the accounting policies
and related parties can be found in the most recently published annual
financial statements.
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 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. The fair value of standing timber younger than seven years (immature) 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 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 sugar 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 marketable volume.
6 months to 6 months to 12 months to
30 June 30 June 31 December
2006 2005 2005
(R000"s) (R000"s) (R000"s)
Timber and sugar cane
plantations - immature 24 728 69 265 25 959
Timber and sugar cane
plantations - mature 70 223 24 764 70 377
Total 94 951 94 029 96 336
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 2005,
using the Projected Unit Credit Method. The liability in respect of
post-retirement medical benefit is R18,2 million (2005: actuarially valued at
R17,7 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
period 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. Retirement benefits provision
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 R4,3 million including interest
(2005: R4,3 million) has been provided for a surplus redistribution exercise.
The FSB has now approved the provident fund surplus apportionment scheme which
allows for the surplus to be apportioned on a 52% member and 48% company basis,
after provision has been made for former member top up payments.
6. Income tax expense
6 months to 6 months to 12 months to
30 June 30 June 31 December
2006 2005 2005
(R000"s) (R000"s) (R000"s)
Current tax expense 4 617 871 4 685
Deferred tax expense (670) (202) 458
Deferred investment allowances - (9) (9)
Reduction in tax rate - (1 119) (1 119)
Total 3 947 (459) 4 015
7. Headline earnings per share
Profit for the year 7 173 2 680 12 915
Adjusted for:
Loss on sale of assets 5 35 62
Tax effect of adjustments (1) (10) (18)
Headline earnings 7 177 2 705 12 959
Headline earnings per share 103 39 188
Commentary
Net profit for the six months to June improved from R2,7 million in 2005 to
R7,2 million in 2006. However trading income, which excludes the application of
AC 137 - Agriculture, improved from R4,3 million to R12,4 million.
This improvement was mainly attributable to stronger local demand for all
products, and higher timber income.
A dividend of 63 cents per share was paid to shareholders on 2 May 2006.
For and on behalf of the board
M J Slater E R Roberts
Managing Director Company Secretary
26 September 2006
DIRECTORS
A H Wilson (Chairman), M J Slater** (Managing), W P Coetzee, D G Ellis*,
J U Morrison*, K M P Spencer, R V Tubbesing*, A G Venton
*USA **British
COMPANY SECRETARY SPONSOR
E R Roberts Nedbank Capital
TRANSFER SECRETARIES
Computershare Investor
Services 2004 (Pty) Limited PO Box 61051, Marshalltown, 2017
70 Marshall Street,
Johannesburg, 2001,
Republic of South Africa Telephone 011 370 5000
Date: 26/09/2006 05:30:11 PM Produced by the JSE SENS Department
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