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TSX - Trans Hex Group - Unaudited interim results for the six months ended 30

Release Date: 28/10/2010 07:05
Code(s): TSX
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TSX - Trans Hex Group - Unaudited interim results for the six months ended 30 September 2010 Trans Hex Group Limited (Incorporated in the Republic of South Africa) Registration number: 1963/007579/06 ISIN: ZAE000018552 JSE share code: TSX NSX share code: THX ("Trans Hex" or "the group") UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010 Abridged consolidated income statement Notes Six months ended Year ended
30/09/10 30/09/09 31/03/10 Unaudited Unaudited Audited R`000 R`000 R`000 Continuing operations Sales revenue 242 647 370 839 715 667 Cost of goods sold (291 438) (273 025) (527 611) Gross (loss)/profit (48 791) 97 814 188 056 Other operating expenses 1 (10 236) (12 545) (31 568) Royalties (13 088) (15 452) (29 837) Selling and administration costs (40 581) (38 232) (74 671) Mining (expenses)/income (112 696) 31 585 51 980 Exploration costs (1 845) (2 056) (4 046) Other (losses)/gains - net 2 (4 936) 516 958 Finance income 6 229 8 171 17 649 Finance costs (13 943) (15 813) (29 636) Share of results of associated (7) (7) (9) companies (Loss)/profit before income tax (127 198) 22 396 36 896 Income tax 25 039 (12 151) (11 747) (Loss)/profit for the period from (102 159) 10 245 25 149 continuing operations Discontinued operations Loss for the period from 3 (828) (1 520) (3 543) discontinued operations (Loss)/profit for the period (102 987) 8 725 21 606 (Loss)/earnings per share from continuing operations (cents) - Basic (96,7) 9,7 23,8 - Diluted (96,7) 9,7 23,8 Loss per share from discontinued operations (cents) - Basic (0,8) (1,4) (3,4) - Diluted (0,8) (1,4) (3,4) Dividends per share (cents) - - - Total number of shares in issue 106 051 106 051 106 051 (`000) Shares in issue adjusted for 105 699 105 699 105 699 treasury shares (`000) Average US$ exchange rate 7,46 8,17 7,85 Headline (loss)/earnings - Continuing operations (102 081) 9 624 23 313 - Discontinued operations (641) (1 520) (2 775)
Headline (loss)/earnings per share (cents) - Continuing operations (cents) (96,6) 9,1 22,1 - Discontinued operations (cents) (0,6) (1,4) (2,6) Abridged consolidated statement of comprehensive income Six months ended Year ended 30/09/10 30/09/09 31/03/10 Unaudited Unaudited Audited
R`000 R`000 R`000 (Loss)/profit for the period (102 987) 8 725 21 606 Other comprehensive income net of tax: Translation differences on foreign 23 965 38 201 118 863 subsidiaries - Before-tax amount 8 532 37 401 38 508 - Tax benefit 15 433 800 80 355 Fair value adjustment on available- 444 - 240 for-sale financial assets - Before-tax amount 444 - 240 - Tax benefit/(expense) - - - Total comprehensive (loss)/income (78 578) 46 926 140 709 for the period Abridged consolidated statement of financial position Note Six months ended Year ended
30/09/10 30/09/09 31/03/10 Unaudited Unaudited Audited R`000 R`000 R`000 Assets Property, plant and equipment 429 803 479 262 498 252 Investment in associates 5 56 006 123 120 Financial assets 45 146 44 412 43 342 Current assets 336 082 458 814 464 605 Inventories 120 175 168 142 162 792 Trade and other receivables 16 532 23 056 32 921 Cash and cash equivalents 199 375 267 616 268 892 Non-current assets classified as - 3 111 2 044 held for sale 867 037 985 722 1 008 363 Equity and liabilities Total shareholders` interest 248 429 233 224 327 007 Borrowings 78 814 118 435 95 772 Deferred income tax liabilities 49 207 167 447 90 165 Provisions 79 588 69 641 75 886 Deferred income 14 482 21 166 17 824 Current liabilities 396 517 375 809 401 709 Trade and other payables 280 224 246 448 264 776 Current income tax liabilities 4 687 23 284 20 619 Borrowings 89 574 85 746 92 987 Bank overdraft 22 032 20 331 23 327 867 037 985 722 1 008 363 Net asset value per share (cents) 234 220 308 Abridged consolidated statement of changes in equity Six months ended Year ended 30/09/10 30/09/09 31/03/10 Unaudited Unaudited Audited
R`000 R`000 R`000 Balance at 1 April 327 007 186 298 186 298 Total comprehensive (loss)/income (78 578) 46 926 140 709 for the period Balance at end of period 248 429 233 224 327 007 Abridged consolidated statement of cash flows Six months ended Year ended 30/09/10 30/09/09 31/03/10
Unaudited Unaudited Audited R`000 R`000 R`000 Cash available from operating (96 674) 63 981 122 714 activities Movements in working capital 74 674 2 394 20 924 Income tax paid (16 417) (2 632) (2 324) Cash (utilised in)/generated from (38 417) 63 743 141 314 operations Cash employed (29 805) (21 796) (101 087) Property, plant and equipment - Proceeds from disposal 1 914 3 878 5 696 - Replacement (22 406) (4 018) (30 396) - Additional (10 560) (2 331) (43 011) Borrowings (16 663) (16 397) (33 376) Investment and loans 17 910 (2 928) -
Net (decrease)/increase in cash (68 222) 41 947 40 227 and cash equivalents Cash and cash equivalents at 245 565 205 338 205 338 beginning of period Cash and cash equivalents at end 177 343 247 285 245 565 of period Notes Six months ended Year
ended 30/09/10 30/09/09 31/03/10 Unaudited Unaudited Audited R`000 R`000 R`000
1. Other operating expenses 10 236 12 545 31 568
Other operating expenses consist of Luarica and Fucauma care and maintenance costs.
2. Other (losses)/gains - net Other (losses)/gains - net consists mainly of the following principal categories: - Net foreign exchange (4 936) 516 958 (losses)/gains
3. Discontinued operations During the 2008 financial year it was decided to discontinue with the group`s marine vessel operations in Namibia. The results of the operations were as follows:
Revenue - - 111 Expenses (641) (1 520) (2 886) (641) (1 520) (2 775) Impairment of assets - - (1 067) Loss on sale of assets (187) - - Loss before income tax (828) (1 520) (3 842) Taxation - - 299 Loss for the period (828) (1 520) (3 543) 4. Reconciliation of headline earnings
Continuing operations (Loss)/profit for the period (102 159) 10 245 25 149 Loss/(profit) on sale of assets 108 (863) (2 550) - Taxation impact (30) 242 714 Headline (loss)/earnings (102 081) 9 624 23 313 Discontinued operations Loss for the period (828) (1 520) (3 543) Loss on sale of assets 187 - - - Taxation impact - - - Impairment of assets - - 1 067 - Taxation impact - - (299) Headline loss (641) (1 520) (2 775) 5. Investment in associates
On 12 May 2010, the group signed the Luana mining contract and thereby acquired a 33% equity interest in the project and the right to reimbursement of the expenditure incurred during the exploration phase. The investment has been equity accounted and the carrying value of the investment in associate is based on the net asset value of Luana on the date of the signature of the mining contract, less repayments received. 6. Capital commitments 17 031 33 567 61 539 (including amounts authorised, but not yet contracted)
7. Segment information Operating segments Six months ended 30 September 2010 Continuing Discon- tinued South Angola Liberia Total Namibia
Africa Carats sold 36 641 - - 36 641 - R`000 R`000 R`000 R`000 R`000 Revenue 242 647 - - 242 647 - Cost of goods sold (288 658) (2 780) - (291 438) - Gross loss (46 011) (2 780) - (48 791) - Other operating - (10 236) - (10 236) (828) expenses Royalties (13 088) - - (13 088) - Selling and (33 217) (7 364) - (40 581) - administration costs Mining expenses (92 316) (20 380) - (112 696) (828) Exploration costs (1 845) - - (1 845) - Other (losses)/gains (4 936) - - (4 936) - - net Finance income 6 229 - - 6 229 - Finance costs (8 519) (5 424) - (13 943) - Share of results of (7) - - (7) - associated companies Loss before income (101 394) (25 804) - (127 198) (828) taxation Depreciation (45 384) (1 137) - (46 521) - included in the above Assets 783 007 84 009 21 867 037 - Non-current assets - - - - - classified as held for sale Liabilities 398 704 219 904 - 618 608 - Capital expenditure 32 966 - - 32 966 - Net asset value per 362 (128) - 234 - share (cents) Six months ended 30 September 2009 Continuing Discon-
tinued South Angola Liberia Total Namibia Africa Carats sold 49 458 1 220 - 50 678 - R`000 R`000 R`000 R`000 R`000 Revenue 369 395 1 444 - 370 839 - Cost of goods sold (273 673) 648 - (273 025) (1 520) Gross profit/(loss) 95 722 2 092 - 97 814 (1 520) Other operating - (12 545) - (12 545) - expenses Royalties (15 452) - - (15 452) - Selling and (31 252) (6 980) - (38 232) - administration costs Mining 49 018 (17 433) - 31 585 (1 520) income/(expenses) Exploration costs (1 804) - (252) (2 056) - Other (losses)/gains 463 53 - 516 - - net Finance income 8 171 - - 8 171 - Finance costs (10 704) (5 109) - (15 813) - Share of results of (7) - - (7) - associated companies Profit/(loss) before 45 137 (22 489) (252) 22 396 (1 520) income taxation Depreciation (46 337) (3 237) - (49 574) - included in the above Assets 895 726 86 885 - 982 611 - Non-current assets - - - - 3 111 classified as held for sale Liabilities 543 983 208 515 - 752 498 - Capital expenditure 4 933 1 416 - 6 349 - Net asset value per 332 (115) - 217 3 share (cents) Twelve months ended 31 March 2010 Continuing Discon- tinued
South Angola Liberia Total Namibia Africa Carats sold 95 251 1 220 - 96 471 - R`000 R`000 R`000 R`000 R`000
Revenue 714 279 1 388 - 715 667 111 Cost of goods sold (520 562) (7 049) - (527 611) (2 886) Gross profit/(loss) 193 717 (5 661) - 188 056 (2 775) Other operating - (31 568) - (31 568) - expenses Royalties (29 837) - - (29 837) - Selling and (63 643) (12 189) 1 161 (74 671) - administration costs Mining income/ 100 237 (49 418) 1 161 51 980 (2 775) (expenses) Exploration costs (4 046) - - (4 046) - Other (losses)/gains 958 - - 958 - - net Finance income 17 649 - - 17 649 - Finance costs (18 683) (10 953) - (29 636) - Impairment of assets - - - - (1 067) Share of results of (9) - - (9) - associated companies Profit/(loss) before 96 106 (60 371) 1 161 36 896 (3 842) income taxation Depreciation (95 490) (5 108) - (100 598) - included in the above Assets 906 989 98 680 650 1 006 319 - Non-current assets - - - - 2 044 classified as held for sale Liabilities 456 835 224 521 - 681 356 - Capital expenditure 31 955 2 097 - 34 052 - Net asset value per 424 (119) 1 306 2 share (cents) Revenues from transactions with certain customers amount to ten percent or more of total revenue. During the period under review total revenue from these customers amounted to R41 million (31/03/2010: R0,0 million; 30/09/2009: R38 million). 8. Mineral resources and mineral reserves No adjustments have been made to the statement of mineral resources and mineral reserves as contained in the 2010 annual report. Annual reconciliation of production data will take place in March 2011 and an updated resource and reserve statement will be published in the 2011 annual report. 9. Contingent liabilities There have been no material changes to contingent liabilities previously reported in the annual report. 10. Restatement of comparative figures Unwinding of discount was previously included under "Other (losses)/gains - net" in the income statement. In terms of IAS 37 "Provisions, contingent liabilities and contingent assets" unwinding of discount should be presented as borrowing cost. The effect of this reclassification on the prior year figures is that "Finance costs" in the income statement increased by R3,2 million (31/03/2010) and R2,3 million (30/09/2009) and "Other (losses)/gains - net" decreased by the same amount. The Luarica and Fucauma care and maintenance costs were reclassified as "Other operating expenses" (note 1). "Cost of goods sold" decreased with the same amount. 11. Accounting policies The accounting policies are consistent with the annual report and the corresponding prior year period in accordance with International Financial Reporting Standards. These abridged financial statements comply with IAS 34. Income does not accrue evenly throughout the year and the income for the six months, therefore, does not necessarily represent half of a full financial year`s income. Overview In this commentary, results are compared with the first six months of the 2009/2010 financial year (in brackets). Results for the reporting period have been significantly affected by grade underperformance at the South African operations. The continued strengthening of the rand against the US dollar also had a negative effect. Good progress has, however, been made in Angola, where production capacity at Project Luana is being steadily increased and two successful sales have been held. South African production during the reporting period amounted to 32 288 carats (Sep 2009: 45 502 carats). Whilst total gravels treated increased by 24% over the corresponding reporting period in 2009 and the unit cost of production was reduced by 9%, the average grade achieved decreased from 2,38 carats/100 m3 to 1,24 carats/100 m3. Total sales attributable to the South African operations decreased by 27,3% to US$33,0 million (Sep 2009: US$45,4 million), at an average price of US$901 per carat (Sep 2009: US$913). The average price per carat reduced, despite general market price increases, due to fewer carats sold originating from the Richtersveld Operations which fetch a significantly higher price per carat than those from other operating areas. In Rand terms, revenue was down by 34,5% to R242,7 million (Sep 2009: R370,8 million). As a result, the group reports an after-tax loss for the period of R103,0 million (Sep 2009: profit of R8,7 million). Cash and cash equivalents at the end of the reporting period amounted to R177,3 million (Sep 2009: R247,3 million). Prospects in Angola have improved significantly. Project Luana (in which Trans Hex has a 33% stake) had sales amounting to US$11,3 million (Sep 2009: US$0,0 million), of which US$2,3 million was repaid to Trans Hex against the outstanding investment amount. Financial headlines - Sales revenue down to R243 million (Sep 2009: R371 million) primarily as a result of grade underperformance, but also affected by the stronger rand. - Loss after tax of R103 million, against a profit of R9 million in September 2009. - Net cash utilised during the reporting period was R68 million (Sep 2009: R42 million generated) resulting in the group`s net cash position being R177 million (Sep 2009: R247 million). - Headline loss per share amounted to 97,2 cents compared to earnings per share of 7,7 cents in September 2009. - Luana sales of US$11,3 million (Sep 2009: US$0,0 million), of which US$2,3 million repaid to Trans Hex. Operating Performance Detailed Project Information Six months ended 30 September 2010 Average grade Carats Average Average price
per 100 m3 produced carats per per carat stone achieved (US dollar) South Africa Baken 1,23 21 104 1,01 935 Richtersveld 1,26 6 766 1,62 1 259 Operations Shallow water - 4 207 0,24 257 Angola Fucauma - - - - Laurica - - - - Luana 15,46 6 164 0,43 315 Six months ended 30 September 2009 Average grade Carats Average Average price per 100 m3 produced carats per per carat stone achieved
(US dollar) South Africa Baken 1,93 27 123 1,07 683 Richtersveld 3,89 16 255 1,89 1 264 Operations Shallow water - 1 992 0,31 431 Angola Fucauma - - - - Laurica - - - 145 Luana 36,34 16 803 0,41 - Note: Fucauma and Luarica were under care and maintenance during the period South Africa South African production decreased from 45 502 carats in September 2009 to 32 288 carats as a result of lower grades. A 24% increase in total gravels treated was achieved, together with a 9% reduction in the unit cost of production. Total sales attributable to the South African operations amounted to US$33,0 million at an average price of US$901 per carat (Sep 2009: US$913). The average price per carat reduced, despite general market price increases, due to fewer carats sold originating from the Richtersveld Operations which fetch a significantly higher price per carat than those from other operating areas. Angola The Luana Project commenced production build-up in June 2010, directly after the signing of the mining contract. By the end of September, a total of 6 164 carats at an average stone size of 0,43cts/st had been produced. Total sales attributable to the project during the period amounted to US$11,3 million at an average price of over US$300 per carat. A total of US$2,3 million was repaid to Trans Hex against the outstanding investment amount. Expansion of production capacity is being funded through cash generated from operations and the earthmoving fleet in particular has seen the addition of a number of key production units. Projects Luarica and Fucauma remain under care and maintenance. Namibia The last remaining vessel was sold during the reporting period and all operations in Namibia have terminated. Outlook Towards the end of the reporting period, the grade at SA Land Operations started to recover. However, at the same time the rand strengthened significantly and it was decided to suspend stripping operations at Baken until the rand weakens. The mine is now concentrating on lowering total costs and generating an acceptable margin by processing existing low grade stockpiles at increased throughput levels. South African production for the 2011 financial year is now expected to be 74 000 carats. In Angola, the forecast for Luana for the coming six months is to produce 31 000 carats. As of 1 October the operations are running on a continuous operations shift system and a step change is already evident in the month to date figures for October. Trans Hex is continuing discussions with its Angolan partners over the future of the Luarica and Fucauma projects. Tight controls over cash and costs will continue to be exercised in all areas. As far as new business opportunities are concerned, exploration activities are continuing in South and southern Africa and potential new ventures are being evaluated, as a priority, on an ongoing basis. With regard to sales, it is anticipated that demand for rough will remain strong given the future supply scenarios for high quality gem producers like Trans Hex. Changes in Directorship At the board meeting held on 27 May 2010, Mr Bernard van Rooyen was confirmed as chairman of the board for a further period of one year. Further to Remgro`s unbundling of its shareholding in Trans Hex, Dr E de la H Hertzog, Advocate T van Wyk and Mr J Dreyer resigned as directors of Trans Hex on 26 October 2010. Dividend In order to maintain cash resources, the directors deem it prudent not to declare an interim dividend. By order of the board BR van Rooyen L Delport Chairman Chief Executive Officer Parow 28 October 2010 Registered office 405 Voortrekker Road, Parow 7500 PO Box 723, Parow 7499 Transfer secretaries South Africa Computershare Investor Services (Pty) Limited PO Box 61051, Marshalltown 2107 Namibia Transfer Secretaries (Pty) Ltd PO Box 2401, Windhoek Sponsor RAND MERCHANT BANK (A division of FirstRand Bank Limited) Directorate BR van Rooyen (Chairman), L Delport (Chief Executive Officer), MJ Carstens (SA Land Operations), IP Hestermann (Financial Director), T de Bruyn, AR Martin, GM van Heerden (Company Secretary) Date: 28/10/2010 07:05:23 Supplied by www.sharenet.co.za 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.

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