Wrap Text
SAL - Sallies Limited - Reviewed consolidated results for the six months ended
31 December 2010
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1903/001879/06)
JSE share code: SAL ISIN: ZAE000022588
("Sallies" or "the company" or "the group")
REVIEWED CONSOLIDATED RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
HIGHLIGHTS
- Although both the Company`s mines remained on care and maintenance during the
period under review, tasks were prioritised and completed to facilitate an
orderly and efficient recommencement of production at Witkop.
- Post 31 December 2010 working capital facility of US$8 million raised.
- Post 31 December 2010 Sallies announced that Witkop would recommence mining
and production.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R`000 Reviewed Not reviewed Audited
Revenue - mining 16 862 44 582 60 815
Net foreign exchange losses (1 456) (1 207) (1 091)
Cost of sales (13 584) (43 548) (59 929)
Profit/(loss) from mining 1 822 (173) (205)
activities
Less: Depreciation (7 157) (8 750) (19 451)
Operating loss from mining (5 335) (8 923) (19 656)
(Loss)/profit on disposal of (25) 130 (611)
plant, property and equipment
Administrative expenses (21 833) (10 984) (17 927)
Investment income 135 84 320
Finance costs on borrowings (652) (445) (6 432)
Interest on convertible (3 657) (3 648) (7 224)
debentures
Loss before Honeywell, share- (31 367) (23 786) (51 530)
based payments and Buffalo
impairment
Honeywell award interest - (235) (464)
provision
Notional interest on convertible (1 836) (1 389) (3 204)
debentures
Share based payments (631) (2 078) (920)
Loss before Buffalo impairment (33 834) (27 488) (56 118)
Buffalo impairment - - (6 464)
Net loss before and after (33 834) (27 488) (62 582)
taxation:
Total comprehensive loss for the
period
Issued shares (000) 724 556 642 220 642 220
Weighted average shares issued 683 388 642 220 642 220
(000)
Weighted average shares issued 683 388 642 220 642 220
for diluted earnings per share
(000)
RECONCILIATION OF EARNINGS
Net loss attributable to (33 834) (27 488) (62 582)
ordinary shareholders for basic
earnings per share
(Profit)/loss on disposal of 25 (130) 611
property, plant and equipment
Buffalo impairment - - 6 464
Net loss attributable to (33 809) (27 618) (55 507)
ordinary shareholders for
headline earnings per share
PER SHARE (cents)
Loss per share (4,7) (4,3) (9,8)
Diluted loss per share (5,0) (4,3) (9,8)
Headline loss per share (4,7) (4,3) (8,7)
Diluted headline loss per share (4,9) (4,3) (8,7)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 31 December 30 June
2010 2009 2010
R`000 Reviewed Not reviewed Audited
ASSETS
Non-current assets 99 001 93 621 102 561
Investment properties 3 143 3 133 3 143
Restricted investment 3 341 2 226 2 779
Property, plant and equipment 82 342 78 087 86 464
Goodwill 10 175 10 175 10 175
Current assets 41 826 82 376 72 609
Inventories 24 275 42 658 31 576
Trade and other receivables 14 745 8 323 13 543
Taxation pre-paid 2 789 2 789 2 789
Cash and cash equivalents 17 28 606 24 701
Total assets 140 827 175 997 175 170
EQUITY AND LIABILITIES
Capital and reserves 13 553 73 879 35 672
Share capital and premium 295 872 284 787 284 787
Portion of convertible 17 102 17 102 17 102
debentures deemed to be equity
Share based payment reserve 19 577 22 060 18 947
Accumulated loss (318 998) (250 070) (285 164)
Non-current liabilities 112 646 81 607 109 053
Long-term loan 1 320 2 576 1 287
Provision for environmental 48 257 19 611 46 532
rehabilitation
Portion of convertible 63 069 59 420 61 234
debentures deemed to be equity
Current liabilities 14 628 20 511 30 445
Trade and other payables 13 304 17 522 27 805
Current portion of long-term 1 324 2 989 2 640
liabilities
Total equity and liabilities 140 827 175 997 175 170
Current asset/current liability 2,9 4,0 2,4
ratio
Net asset value per share 1,9 11,5 5,6
(cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R`000 Reviewed Not reviewed Audited
Net cash (outflows) from (31 178) (1 988) (2 770)
operating activities
Net cash (outflows)/inflows from (3 308) 1 954 470
investing activities
Net cash inflows/(outflows) from 9 802 (2 392) (4 030)
financing activities
Net (decrease) in cash and cash (24 684) (2 425) (6 330)
equivalents
Cash and cash equivalents at 24 701 31 031 31 031
beginning of period
Cash and cash equivalents at end 17 28 606 24 701
of period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Portion of
convertible
debentures
deemed
Share Share to
R`000 capital premium be equity
Balance at 31 December 2009 642 284 145 17 102
Share based payments
Loss for period
Balance at 30 June 2010 642 284 145 17 102
Share based payments
Shares issued 82 11 003
Loss for period
Balance at 31 December 2010 724 295 148 17 102
Share
based
pay- Accumu-
ment lated
R`000 reserve loss Total
Balance at 31 December 2009 22 060 (250 070) 73 879
Share based payments (3 114) (3 114)
Loss for period (35 094) (35 094)
Balance at 30 June 2010 18 946 (285 164) 35 671
Share based payments 631 631
Shares issued 11 085
Loss for period (33 834) (33 834)
Balance at 31 December 2010 19 577 (318 998) 13 553
ABBREVIATED SEGMENTAL ANALYSIS
Witkop Buffalo
R`000 North West Limpopo Other Consolidated
Six months ended 31
December 2009
External revenue 41 432 3 150 - 44 582
Segmental (loss) (15 960) (958) (10 570) (27 488)
Total assets 163 289 4 549 8 159 175 997
Total liabilities (16 046) (11 915) (74 157) (102 118)
Year ended 30 June 2010
External revenue 57 665 3 150 - 60 815
Segmental (loss)/profit (105 419) (10 575) 53 412 (62 582)
Total assets 169 147 3 326 2 697 175 170
Total liabilities (33 668) (20 025) (85 806) (139 499)
Six months ended 31
December 2010
External revenue 16 862 - - 16 862
Segmental (loss) (29 499) (2 613) (1 722) (33 834)
Total assets 135 024 4 567 2 696 140 827
Total liabilities (35 660) (22 207) (69 407) (127 274)
COMMENTARY FOR SIX MONTHS ENDED 31 DECEMBER 2010
ANALYSIS OF RESULTS
Sallies incurred a loss of R5,3 million from mining activities for the six
months to December 2010 compared to a loss of R8,9 million for the same period
last year. Turnover decreased from R44,6 million for the six months to December
2009 to R16,9 million for the six months to December 2010.
OPERATIONS
The international demand for acid grade fluorspar remained flat for the period
and no significant export orders were secured. Consequently, both of the
company`s mines were kept on care and maintenance for the period under review.
The plant at Witkop Fluorspar Mine (Proprietary) Limited ("Witkop") was operated
for two short periods in order to satisfy local orders and a single export
order. The conservation of cash together with the disposal of surplus assets
remained a key strategy. The stock of acid grade fluorspar at the beginning of
the period was disposed of at cost during the period in order to generate cash.
Local sales of metgrade fluorspar were at a similar level to the same period
last year.
In order to have the necessary capacity to recommission the mines key staff were
retained at Witkop and the production facilities were maintained in anticipation
thereof.
The company is pleased to record that no lost time, disabling or fatal accidents
occurred during this review period.
MINERAL RESERVES AND RESOURCES
The mineral reserves and resources as tabled in the 2010 annual financial
statements have not changed materially.
NEGOTIATIONS WITH BEE PARTNER
The Extra Ordinary Shareholders` meeting held in January 2011 approved all the
resolutions needed to finalise the BEE transaction.
OUTLOOK
Hydrofluoric acid (HF) cannot be produced without acid grade fluorspar. This
acid is the feedstock principally used for the production of refrigerant gases
(which drive fridges, freezers and air conditioners) and aluminium tri-fluoride
(without which aluminium cannot be cost effectively produced). HF is also vital
for other small, but rapidly growing niche markets.
Witkop has the rights to a large fluorspar mineral resource of high quality
(albeit low grade) and is now well positioned to regain its reputation as a
preferred reliable supplier of high quality acid grade fluorspar to the
international market.
Sallies announced on 19 January 2011 that it had secured a US$8 million Working
Capital Facility from London listed Maghreb Minerals plc ("Maghreb"), a company
controlled jointly by Firebird Global Master Fund Limited and Firebird Global
Master Fund II Limited (together "Firebird" being Sallies` controlling
shareholder). At the same time, Maghreb announced that Firebird had concluded a
conditional agreement to dispose of its shareholding in Sallies to Maghreb.
Sallies announced, on 14 February 2011, that Witkop would recommence mining and
production to meet export orders for acidgrade Fluorspar. The company is
continuing to work to secure further orders.
It is not expected that sales of sufficient magnitude will be achieved during
the remainder of the current financial year to eliminate the losses made to 31
December 2010.
GOING CONCERN
The ability of Sallies to continue as a going concern is dependent on the
resumption of profitable operations which depends on the achievement of further
export orders.
Given this outlook, the directors are of the opinion that the Sallies group is a
going concern for the foreseeable future as it has adequate cash resources to
meet all its commitments until at least the end of F2011.
HONEYWELL
The dispute with Honeywell was finally resolved during the period by the issue
of 82 million company shares in full and final settlement.
SOUTH AFRICAN REVENUE SERVICES ("SARS")
Sallies and Witkop were involved in disputes with the SARS regarding the 2000 to
2003 years of assessment. SARS had disallowed the deduction of certain inter
company expenditure and rejected the timing of revenue recognised. These issues
were heard in the Tax Court in November 2010 and in a written judgement handed
down in January 2011, the judge ruled in Sallies` and Witkop`s favour in all
material respects. Subsequently, notification has been received from SARS that
they do not intend appealing the judgement.
As a consequence provisional payments amounting to R6,7 million (excluding
interest) will be refunded to the group. Taxation pre-paid of R2,8 million is
currently carried in the consolidated statement of financial position of
Sallies.
The dispute with SARS with regard to Sallies` VAT as previously advised to
shareholders has been successfully resolved in Sallies` favour.
BASIS OF PREPARATION
The reviewed consolidated results contain the information required by IAS 34:
Interim Financial Reporting as well as the AC 500 Standards as issued by the
Accounting Practices Board, the South African Companies Act and the Listing
Requirement of the JSE Limited. They incorporate accounting policies that are in
accordance with International Financial Reporting Standards and are consistent
with those used in preparing the financial results for the year ended 30 June
2010.
MODIFIED REVIEW REPORT
BDO South Africa Inc. has issued a modified review report on the reviewed
consolidated results of the company for the six months ended 31 December 2010.
They have drawn attention to the disclosure made by the directors regarding the
ability of the group to continue as a going concern. Their review was conducted
in accordance with ISRE 2410 "Review of Interim Financial Information performed
by the independent auditor of the company". The modified review report is
available for inspection at the company`s registered office.
BOARD OF DIRECTORS
Patrick Cooke was appointed Acting Chief Executive Officer with effect from 14
February 2011.
DIVIDENDS
No interim dividends have been declared for the period.
By order of the board
Nicholas Davidoff
Non-executive Chairman
Johannesburg
4 March 2011
Directors:
Nicholas Davidoff (Chairman)*
Andrew Kamau*
Jurgen Kogl*
Patrick Cooke (Acting CEO, Financial Director and COO)
Sandile Swana*
Stephen Morris*
* Non-executive
Independent
Registered office:
Block C
Riverwalk Office Park
41 Matroosberg Road, Ashlea Gardens, Pretoria 0081
(Private Bag X1315, Zeerust, 2865)
Auditors:
BDO South Africa Incorporated
Block C
Riverwalk Office Park41 Matroosberg Road, Ashlea Gardens, Pretoria 0081
(PO Box 95436, Waterkloof, 0145)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor:
Bridge Capital Advisors (Proprietary) Limited
2nd Floor, 27 Fricker Road, Illovo Boulevard Illovo, 2196
Date: 04/03/2011 07:05:01 Supplied by www.sharenet.co.za
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