The macroeconomic environment continued to be characterised by liquidity constraints. As a result, very few local financial institutions were in a position to offer
long term funding required by a forestry operation. Wage costs have continued to grow ahead of revenue growth and have reached levels that are causing a
strain on viability. Going forward, it is important that wage negotiations be bench marked against inflation. Although having gone on a dedicated power supply
arrangement with the power authority, this has come at a premium and the availability is not guaranteed due to the national shortage. Recapitalisation is continuing
in line with plans and will ultimately improve the unit cost of production. The financial results for the year continue to be reflective of a business in rebuilding with
the focus being on developing and maintaining the forests. Settler activity is still a cause of concern although we continue to engage relevant authorities.
Forestry & Sawmilling
The rebuilding of the forestry resource is continuing on an ongoing basis. A total of 1,891 ha were planted during the year, up 48% from last year. The significant
plantings over the past three years and the catch up on backlog silviculture activities have resulted in a corresponding increase in the level of care and maintenance.
This is in line with good practice and should taper off as the plantings develop. Going forward, the level of plantings will be brought down and equated to clear
felling area as most of the backlog has been addressed. Total spend on silviculture activities for the year was US$ 4,099,352, against prior year at US$1,968,596.
This year’s fire season was one of the worst in recent times with a total of 1,452 ha being destroyed by fire. Salvage operations were undertaken and ended in April
2012. Management has continued to engage the relevant authorities with a view of addressing the root cause of the fires. The board and management appreciates
the cooperation from authorities and chiefs in combarting fires.
The equipment recapitalisation program in extraction has resulted in the total round wood production being 216,560 m3, up 14% from prior year. The next step
will be an investment in terms of haulage within the estates. Contractors will continue to form a key part of the haulage of round wood between production points.
Total sawmilling output was at 76,307 m3, up 24% from prior year. This was as a result of the increased round wood production. Recoveries were below budget
mainly due to the effect of salvage timber after the fire damage. This also had an impact on the grade yields and the final average selling price per cube. This is
expected in a salvage operation. In addition, a significant portion of the timber came from thinning material which invariably affected the recovery at the mill due
to the age profile of the plantation.
Total volume output for Paulington factory which specialises in veneer products and boards was at 9,627 m3, up 9% from prior year. Although the equipment
is aged, a conscious decision was made to rather focus on annual and routine repairs and maintenance during the course of year. The factory also went on a
dedicated power line arrangement with ZESA which has seen a stabilisation in terms of power availability although with the odd outage due to national grid issues.
The dedicated line has however come at a premium hence increasing the product unit cost. The demand for the products remains firm both locally and outside the
country. Total sales volume for the year increased by 15% to 9,347 m3.
Border Timbers International (BTI)
Total volume output for BTI which specialises in solid doors, shelving, and mouldings was down 7% to prior year at 7,233 m3. The high electricity consumption at
BTI led to a delay in putting the factory on a dedicated line. This severely affected the production during the cause of the year. Efforts are being made to modify
certain equipment with a view of improving consumption. The demand for the products also remains firm both locally and outside the country. Total sales volume
decreased by 11% to 6,869m3.
Although total volume output for the poles business at 17,327 m3 was up 40% on prior year, production could have been better had it not been for the fire
that destroyed the pole facility at the end of the last financial year. The subsequent repairs of the autoclaves took longer than expected and when they were
commissioned further problems emerged which took time to resolve. The availability of the major raw material creosote still remains a constraint both locally and
regionally. Plans are in place to have imports in order to compliment the erratic supply. The market is also gradually accepting the alternative CCA treated pole.
Demand for housing locally remains firm with a number of housing projects being undertaken. This has resulted in a firm demand for your Group’s products. The
demand for transmission poles also continues to be strong due to the electrification projects being undertaken by most power utilities within the region. Your
business is geared to take advantage of this opportunity.
Prices on the local market remained firm. Better marketing on the local market is needed to educate customers on the long term benefit of using better quality kiln
dried products in building. The major export destinations are still South Africa and Botswana on the value added products side and sawn timber, whilst the other
Southern region countries lead on poles.
Mr Simbarashe Dube was appointed to the board on the 1st of March 2012 following the resignation of Mr Prince Nyemba. On the 18th of April 2012, the Group
lost its Managing Director Mr Douglas Dell who passed away suddenly. His experience and management contribution to the Group will be greatly missed. Efforts
are being made to identify a suitable replacement and have reached an advanced stage.
The Group recorded revenue of $28 million during the year under review. This represented a 28% increase from the $22 million against the same period prior year.
Revenue growth was driven by increased sales volume mainly in rough sawn timber, poles and boards.
Continued cost pressure from unrealistic labour demands, high repair and maintenance costs mainly at the sawmills and value adding factories, high power costs
emanating from ring fenced power arrangements with the power utility company coupled with generator usage in cases of power outages have erroded operating
Finance costs at $1.9 million are a reflection of the borrowing levels of your Group. These borrowings have been brought about by the vigorous replanting regime,
care and maintenance of the biological assets and also recapitalisation in key items of plant and equipment. These borrowings increased by $5.3 million during
Operating profit before interest and tax achieved was $4.6 million, a decrease of 41% on prior year profit of $7.8 million. This decrease was attributable to high
operating costs and fire losses of 1,452 ha across all estates, with the major loss being at Sheba Estate. The cost of the fire losses was $2.7 million.
Capital expenditure during the year amounted to $7.4 million of which $4.0 million was expenditure on plantation development.
Capital expenditure related debt continues to be disclosed under current liabilities thereby affecting the current assets to current liabilities ratios. Although efforts
continue to be exerted to source long term finance and restructure the debt, the market is still limited in its ability to avail such funds.
There is still a great degree of uncertainty in the economy. For your Group, the refinancing of the short term debt to long term debt remains critical. Recapitalisation
of the business has had a positive effect on production volumes and has resulted in the growth of the biological asset over the past three years. Future capital
expenditure will be scaled down as the recapitalisation programe progresses, only key capital expenditure related to productivity and efficiency improvement will
be undertaken. Going foward, the bussiness will look at utilising more contractors across the value chain as they become better equipped to handle the contracts.
This will lessen the burden on the business and improve return. It is a model which has already proved successful in other forestry operations.
The overall focus will be to grow the biological asset through best operating practice, and also to reduce the overall cost of production of all timber and timber
related products given the plethora of problems.
As highlited above, management has issues to deal with on the ground but the board is pleased with the progress the Group has made in the last three years.
The Group greatly appreciates the support it has received from management and all staff.
By order of the Board
Radar Investments (Private) Limited
24 September 2012
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2012
Directors: K R R Schofield (Chairman); R E Breschini; E Hwenga; S Dube; R von Pezold; H B A J von Pezold; I Kanyemba; P Nyemba*(*Resigned 31 December 2011)
GROUP STATEMENT OF COMPREHENSIVE INCOME Year ended Year ended
Revenue 27 963 462 21 930 331
Operating profit before the following: 3 418 944 4 114 332
Depreciation (2 042 228 ) (1 763 862 )
Plantation fire damage (2 738 014 ) (601 677 )
Plantation redemption (4 069 383 ) (4 736 014 )
Impairment loss on property plant and equipment (8 844 ) (193 322 )
Fair value gains 10 070 422 10 973 007
Profit before interest and tax 4 630 897 7 792 464
Finance costs (1 900 167 ) (1 133 038)
Finance income 2 633 3 405
Profit before taxation 2 733 363 6 662 831
Taxation (906 386 ) (1 631 862 )
Profit for the year 1 826 977 5 030 969
Other comprehensive income:
Deferred tax on transfer to retained earnings 24 128 -
Total comprehensive income for the year 1 851 105 5 030 969
Shares in issue 42 942 947 42 942 947
Earnings per share - Basic (cents) 4 12
Interest cover (times) 2.43 6.88
GROUP STATEMENT OF FINANCIAL POSITION As at As at
Property plant and equipment 47 858 555 46 867 238
Biological assets 97 794 631 90 432 254
Total non-current assets 145 653 186 137 299 492
Inventories 4 487 015 4 580 560
Trade and other receivables 4 891 046 3 841 047
Cash and cash equivalents 193 593 127 360
Total current assets 9 571 654 8 548 967
TOTAL ASSETS 155 224 840 145 848 459
EQUITY AND LIABILITIES
Share capital 429 425 429 425
Non distributable reserve 90 455 727 90 455 727
Revaluation reserve 2 295 909 2 365 481
Retained earnings 13 584 439 11 663 762
Total equity 106 765 500 104 914 395
Deferred tax liability 31 623 725 30 717 337
Medium term loans 422 054 1 100 979
Total non-current liabilities 32 045 779 31 818 316
Trade and other payables 4 636 319 2 701 801
Provisions 275 206 301 581
Short term loans 9 825 797 3 872 071
Bank overdraft 1 676 239 2 240 295
Total current liabilities 16 413 561 9 115 748
TOTAL EQUITY AND LIABILITIES 155 224 840 145 848 459
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
1. Accounting policies
The accounting policies adopted in the preparation of the year-end financial statements have been followed consistently in all material respects. The
financial statements are prepared under the historical cost convention, except for certain property, plant and equipment, and biological assets which are
included at valuation. No other procedures have been adopted to reflect the impact of specific price changes or changes in the general level of prices.
International Accounting Standard 16 “Property, Plant and Equipment” requires that revaluations of property plant and equipment be undertaken on
a regular basis. Professional valuers are engaged every three years to value property, plant and equipment. The last revaluation was as at June 2010
and the next valuation will be at 30 June 2013.
International Accounting Standard 41 “Agriculture” requires that the Group value its “Biological Assets” at fair value. As plantation trees younger than
six years have no biological mass, these are valued at cost. The rest of the plantation is valued at fair value based on the anticipated recovery of timber
at market values. In compliance with IAS 41, the fair value gain on biological assets has been credited to the statement of comprehensive income.
2. Audit report
The Auditors, Messrs PricewaterhouseCoopers, have indicated that the audit report on the financial statements for the Group for the year ended 30
June 2012, will be unqualified.
GROUP STATEMENT OF CHANGES
IN EQUITY Non
Share distributable Revaluation Retained
capital reserves reserve earnings Total
US$ US$ US$ US$ US$
Year ended 30 June 2011
At 1 July 2010 - 90 885 152 2 365 481 6 632 793 99 883 426
Profit for the year - - - 5 030 969 5 030 969
Transactions with owners:
Redenomination of share capital 429 425 (429 425) - - -
At 30 June 2011 429 425 90 455 727 2 365 481 11 663 762 104 914 395
Year ended 30 June 2012
At 1 July 2011 429 425 90 455 727 2 365 481 11 663 762 104 914 395
Profit for the year - - - 1 826 977 1 826 977
Other comprehensive income:
Transfer to retained earnings - - ( 93 700) 93 700 -
Deferred tax on transfer to retained earnings - - 24 128 - 24 128
At 30 June 2012 429 425 90 455 727 2 295 909 13 584 439 106 765 500
GROUP STATEMENT OF CASH FLOWS Year ended Year ended
Profit before interest 4 613 873 7 792 464
Non-cash items (949 813 ) (3 673 109)
Operating cash flows before working capital changes 3 664 060 4 119 355
Movement in working capital 951 690 (1 554 063 )
CASH FLOW FROM OPERTING ACTIVITIES 4 615 750 2 565 292
Net cash outflow from investing activities (7 362 726 ) (4 074 545 )
Acquisition of property plant and equipment (3 263 374 ) (2 105 949 )
Plantation development costs (4 099 352 ) (1 968 596 )
Net cash inflow from financing activities 3 377 300 2 286 400
Net proceeds from borrowings 5 274 834 3 416 032
Net interest paid (1 897 534 ) (1 129 632 )
NET CASH INFLOW 630 324 777 147
Cash and cash equivalent at start of year (2 112 970) (2 890 117)
Cash and cash equivalent at end of year (1 482 646) (2 112 970)
Net increase in cash resources 630 324 777 147