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TSX - Trans Hex Group Limited - Audited annual results for the year ended 31

Release Date: 02/06/2011 07:05
Code(s): TSX
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TSX - Trans Hex Group Limited - Audited annual results for the year ended 31 March 2011 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") AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 31 MARCH 2011 Abridged consolidated income statement 2011 2010 Notes R`000 R`000
Continuing operations Sales revenue 657 998 715 667 Cost of goods sold (578 003) (527 611) Gross profit 79 995 188 056 Other operating expenses 1 (25 284) (31 568) Royalties (6 061) (29 837) Selling and administration costs (68 822) (74 671) Mining (loss)/profit (20 172) 51 980 Exploration costs (5 699) (4 046) Other (losses)/gains - net 2 (847) 958 Finance income 11 023 17 649 Finance costs (20 828) (29 636) Share of results of associated companies (10) (9) (Loss)/profit before income tax (36 533) 36 896 Income tax (7 559) (11 747) (Loss)/profit for the period from continuing operations (44 092) 25 149 Discontinued operations Loss for the period from discontinued operations 3 (1 007) (3 543) (Loss)/profit for the period (45 099) 21 606 Attributable to: Continuing operations (44 092) 25 149 - Owners of the parent (41 876) 25 149 - Non-controlling interest (2 216) - Discontinuing operations - Owners of the parent (1 007) (3 543) (45 099) 21 606 (Loss)/earnings per share from continuing operations (cents) - Basic (41,7) 23,8 - Diluted (41,7) 23,8 Loss per share from discontinued operations (cents) - Basic (1,0) (3,4) - Diluted (1,0) (3,4) Total number of shares in issue (`000) 106 051 106 051 Shares in issue adjusted for treasury shares (`000) 105 699 105 699 Average US$ exchange rate 7,26 7,85 Headline (loss)/earnings 4 - Continuing operations (47 638) 23 313 - Discontinued operations (550) (2 775) Headline (loss)/earnings per share (cents) - Continuing operations (cents) (45,1) 22,1 - Discontinued operations (cents) (0,5) (2,6) Abridged consolidated statement of other comprehensive income 2011 2010
R`000 R`000 (Loss)/profit for the period (45 099) 21 606 Other comprehensive income net of tax: Translation differences on foreign subsidiaries 29 452 118 863 - Before-tax amount 9 434 38 508 - Tax benefit 20 018 80 355 Fair value adjustment on available-for- sale financial assets 1 408 240 - Before-tax amount 1 408 240 - Tax benefit/(expense) - -
Reclassification of foreign currency differences on repayment of long-term (3 375) - receivable from foreign operations Total comprehensive (loss)/income for the period (17 614) 140 709 Attributable to: - Owners of the parent (15 398) 140 709 - Non-controlling interest (2 216) - (17 614) 140 709 Abridged consolidated statement of financial position Notes 2011 2010 R`000 R`000 Assets Property, plant and equipment 408 678 498 252 Investment in associates 108 120 Financial assets 5 93 591 43 342 Current assets 420 184 464 605 Inventories 6 114 528 162 792 Trade and other receivables 14 599 32 921 Cash and cash equivalents 291 057 268 892 Non-current assets classified as held for sale - 2 044 922 561 1 008 363 Equity and liabilities Total shareholders` interest 311 609 327 007 Non-controlling interest (2 216) - Borrowings 56 937 95 772 Deferred income tax liabilities 65 629 90 165 Provisions 82 990 75 886 Deferred income 11 140 17 824 Current liabilities 396 472 401 709 Trade and other payables 262 176 264 776 Current income tax liabilities 16 138 20 619 Borrowings 94 571 92 987 Bank overdraft 23 587 23 327 922 561 1 008 363
Net asset value per share (cents) 292 308 Abridged consolidated statement of changes in equity 2011 2010 R`000 R`000
Balance at 1 April 327 007 186 298 Total comprehensive (loss)/income for the period (17 614) 140 709 Balance at end of period 309 393 327 007 Abridged consolidated statement of cash flows 2011 2010 R`000 R`000 Cash available from operating 38 889 122 714 activities Movements in working capital 54 211 20 924 Income tax paid (16 558) (2 324) Cash generated from operations 76 542 141 314 Cash employed (54 637) (101 087) Property, plant and equipment - Proceeds from disposal 2 093 5 696 - Replacement (34 276) (30 396) - Additional (15 962) (43 011) Borrowings (33 276) (33 376) Investment and loans 26 784 -
Net increase in cash and cash 21 905 40 227 equivalents Cash and cash equivalents at beginning of year 245 565 205 338 Cash and cash equivalents at end of 267 470 245 565 year Notes 2011 2010
R`000 R`000 1. Other operating expenses Other operating expenses consist of Luarica and Fucauma care and maintenance costs. 25 284 31 568 2. Other (losses)/gains - net Other (losses)/gains - net consists mainly of the following principal categories: - Net foreign exchange (losses)/gains (4 222) 958 - Foreign exchange gains on repayment of long- term receivable from foreign operation 3 375 - (847) 958 3. Discontinued operations The marine mining vessels were included in the group`s discontinued Namibian segment. The remaining vessel, the MV Namakwa was sold on 26 May 2010.
Revenue - 111 Expenses (550) (2 886) (550) (2 775) Impairment of assets - (1 067) Loss on sale of assets (457) - Loss before income tax (1 007) (3 842) Taxation - 299 Loss for the year (1 007) (3 543) 4. Reconciliation of headline earnings Continuing operations
(Loss)/profit for the period (44 092) 25 149 - Profit on sale of assets (237) (2 550) - Taxation impact 66 714 - Foreign exchange gains on repayment of long-term receivable from foreign (3 375) - operation - Taxation impact - - Headline (loss)/earnings (47 638) 23 313 Discontinued operations Loss for the period (1 007) (3 543) - Loss on sale of assets 457 - - Taxation impact - - - Impairment of assets - 1 067 - Taxation impact - (299) Headline loss (550) (2 775) 2011 2010 R`000 R`000 5. Financial assets On 12 May 2010, the group signed the Somiluana 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 loan of R46,3 million to the associate is based on the net asset value of Somiluana on the date of the signature of the mining contract, less repayments received. The balance of the financial assets represents the available- for-sale investments. 6. Inventories Diamonds 91 833 133 889 Consumables 22 695 28 903 114 528 162 792 The carrying value of diamond inventories carried at net realisable value amounted to R40 million (2010: R22 million). 7. Capital commitments (including amounts authorised, but not yet contracted) 54 841 61 539 These commitments will be financed from the group`s own resources or with borrowed funds. 8. Segment information Operating segments Continuing Discon- tinued
Year ending South 31 March 2011 Africa Angola Liberia Total Namibia Carats sold 77 957 - - 77 957 -
R`000 R`000 R`000 R`000 R`000 Revenue 657 998 - - 657 998 - Cost of goods sold (574 625) (3 378) - (578 003) - Gross profit 83 373 (3 378) - 79 995 - Other operating expenses - (25 284) - (25 284) (1 007) Royalties (6 061) - - (6 061) - Selling and administration (59 982) (8 840) - (68 822) - costs Mining loss 17 330 (37 502) - (20 172) (1 007) Exploration costs (5 699) - - (5 699) - Other (losses)/gains - net 5 421 (6 268) - (847) - Finance income 11 023 - - 11 023 - Finance costs (13 439) (7 389) - (20 828) - Share of results of associated (10) - - (10) - companies Loss before income taxation 14 626 (51 159) - (36 533) (1 007) Depreciation included in the above (82 734) (1 788) - (84 522) - Assets 859 310 63 231 20 922 561 - Liabilities 383 100 230 068 - 613 168 - Capital expenditure 51 573 298 - 51 871 - Net asset value per share (cents) 449 (157) - 292 - Continuing Discon-
tinued Year ending South 31 March 2010 Africa Angola Liberi Total Namibia a
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 193 717 (5 661) - 188 056 (2 775) Other operating expenses - (31 568) - (31 568) - Royalties (29 837) - - (29 837) - Selling and administration (63 643) (12 189) 1 161 (74 671) - costs Mining profit 100 237 (49 418) 1 161 51 980 (2 775) Exploration costs (4 046) - - (4 046) - Other (losses)/gains - net 958 - - 958 - Finance income 17 649 - - 17 649 - Finance costs (18 683) (10 953) - (29 636) - Impairment of - - - - (1 067) assets Share of results of associated (9) - - (9) - companies Profit before income taxation 96 106 (60 371) 1 161 36 896 (3 842) Depreciation included in the above (95 490) (5 107) - (100 597) - Assets 906 989 98 680 650 1 006 319 - Non-current assets classified as held for sale - - - - 2 044 Liabilities 456 835 224 521 - 681 356 - Capital expenditure 31 955 2 097 - 34 052 - Net asset value per share (cents) 424 (119) 1 306 2 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 R74,6 million (2010: R0,0 million). 9. Mineral resources and mineral reserves The Baken mine has seen a reduction of 30% (74,830cts) year on year in terms of total carats in reserve as a result of a 16% reduction in volume due to mining activities and a reduction of 17% in grade due to lower than estimated grades realizing for a portion of the orebody. The Bloeddrif reserve increased by 83% mainly on the back of higher diamond pricing and at the Richtersveld operations reserves increased slightly. The resources at Somiluana have been updated using production information resulting in probable reserves of 1,422,000 carats and a total resource of 10,015,000 carats. 10. Contingent liabilities There have been no material changes to contingent liabilities previously reported in the annual report. 11. Accounting policies The abridged group financial statements for the year ended 31 March 2011 were prepared in accordance with IAS 34. The accounting policies used to prepare financial statements are consistent with those applied in the previous period, except for the adoption of IAS 27 Consolidated and Separate Financial Statements (Revised). The adoption of this revised standard has resulted in a debit balance being recognised for non-controlling interest which has not been accounted for previously. 12. Report of independent auditor The external auditors, PricewaterhouseCoopers Inc. have audited the group`s annual financial statements and the abridged financial statements contained herein for the year ended 31 March 2011. Copies of their unqualified audit reports are available on request at the company`s registered office. Overview In this commentary, results are compared with the twelve months of the 2009/2010 financial year (in brackets). A significant turnaround from the South African operations was achieved during the second six months of the reporting year. Profit before tax of R116,0 million was generated compared to a loss before tax of R101,4 million in the first six months. Strong diamond prices during the second six months of the year offset grade under-performance at the South African operations. The continued strength of the Rand against the US dollar however continued to have a negative effect. Good progress has been made in Angola, where production capacity at Somiluana is being steadily increased and six successful sales have been held during the year. South African production during the reporting period amounted to 69,508 carats (2010: 92,904 carats). Whilst total gravels treated increased by 17% over the corresponding reporting period in 2010 and the unit cost of production was reduced by 8%, the average grade achieved decreased from 2,07 carats/100m3 to 1,27 carats/100m3. The year on year reduction in grade was also due to the decision to temporarily suspend stripping at the Baken operations given current exchange rates. Total sales attributable to the South African operations marginally decreased to US$90,6 million (2010: US$91,2 million), at an average price of US$1,162 per carat (2010: US$957). The average price per carat increased despite fewer carats sold originating from the Richtersveld Operations which achieved a significantly higher price per carat than those from other operating areas. The average price per carat achieved during the second six months of the reporting year was US$1,394 per carat. In Rand terms, revenue was down by 7,9% to R658,0 million (2010: R714,3 million). The loss from Angolan operations, mainly attributable to the Luarica and Fucauma projects that are under care and maintenance, amounted to R51,2 million. As a result, the Group reports an after-tax loss for the period of R45,1 million (2010: profit of R21,6 million). Cash and cash equivalents at the end of the reporting period increased to R267,5 million (2010: R245,6 million). Prospects in Angola have improved significantly. Somiluana (in which Trans Hex has a 33% stake) had sales amounting to US$19,3 million (2010: US$0,0 million), of which US$3,5 million was repaid to Trans Hex against the outstanding investment loan amount. Financial headlines - Sales revenue down to R658,0 million (2010: R715,7 million) primarily as a result of grade under-performance and the decision to temporarily suspend stripping at the Baken operations, but also affected by stronger diamond prices in the second half and a strong Rand. - South African operations generated a profit before tax of R116,0 million during the second six months compared to a loss before tax of R101,4 million in the first six months resulting in profit before tax for the year of R14,6 million. - Group loss after tax of R45,1 million, against a profit of R21,6 million in 2010 financial year. - Net cash generated during the reporting period was R21,9 million (2010: R40,2 million generated) resulting in the Group`s net cash position being R267,5 million (2010: R245,6 million). - Headline loss per share amounted to 45,6 cents compared to earnings per share of 19,5 cents in 2010. - Somiluana sales of US$19,3 million (2010: US$0,0 million), of which US$3,5 million repaid to Trans Hex. Operating performance Detailed project information (Unaudited) 2011 Average Carats Average Average
grade per produced carats per price per 100 m3 stone carat achieved (US$)
South Africa Baken - own operations 1,23 44 095 1,02 1 106 Baken - contractor 0,97 2 255 1,09 1 579 Baken - total 1,21 46 350 1,02 1 121 Richtersveld operations 1,41 15 503 1,89 1 714
Shallow water - 7 655 0,27 366 Angola Fucauma - - - - Luarica - - - - Somiluana 18,36 27 662 0,46 351 Detailed project information (Unaudited) (continued) 2010 Average Carats Average Average grade per produced carats per price per 100 m3 stone carat
achieved (US$) South Africa Baken - own operations 1,90 58 760 1,10 921 Baken - contractor - - - - Baken - total 1,90 58 760 1,10 921 Richtersveld operations 2,67 24 436 1,64 1 228 Shallow water - 9 708 0,29 306
Angola Fucauma - - - - Luarica - - - - Somiluana 33,91 20 510 0,41 - Note: Fucauma and Luarica were under care and maintenance during the period South Africa South African production decreased from 92 904 carats in the 2010 financial year to 69 508 carats as a result of lower grades. A 17% increase in total gravels treated was achieved, together with an 8% reduction in the unit cost of production. Total sales attributable to the South African operations amounted to US$90,6 million at an average price of US$1,162 per carat (2010: US$957). The average price per carat increased despite fewer carats sold originating from the Richtersveld Operations, which fetch a significantly higher price per carat than those from other operating areas. The average price per carat achieved during the second six months of the reporting year was US$1,394 per carat. Angola Somiluana commenced production build-up in June 2010, directly after the signing of the mining contract. By the end of March, a total of 27 662 carats at an average stone size of 0,46 carats per stone had been produced. Total sales attributable to the project during the period amounted to US$19,3 million at an average price of US$351 per carat. US$3,5 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 As reported at the interim results, it was decided to suspend stripping operations at Baken given current exchange rates. 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 2012 financial year is now expected to be 86,000 carats. In Angola, the forecast for Somiluana for the coming year is to produce 42 000 carats. As of 1 October 2010 the operations are running on a continuous shift basis. 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. Demand for rough diamonds remained strong throughout the financial period which saw a continued strengthening of prices. Prices for Trans Hex production currently stand at all time highs, buoyed by restocking of the diamond pipeline and good demand for polished diamonds, most notably from China and India. The strength in the market seems likely to continue given demand levels, but pricing levels are anticipated to show greater stability in the longer-term after a sustained period of increases. In respect of new business opportunities, an agreement with De Beers Consolidated Mines Limited ("DBCM") was signed on 6 May 2011 in terms of which, and subject to certain conditions precedent, Trans Hex`s 50% held associate, Emerald Panther Investments 78 (Pty) Limited will acquire assets and liabilities relating to Namaqualand Mines, a division of DBCM. Exploration activities are continuing in Southern Africa and potential new ventures are being evaluated on an ongoing basis. 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. Mr Ian Hestermann was appointed Financial Director with effect from 27 May 2010 after serving as acting director from 1 February 2010. Mr Greg van Heerden was appointed as company secretary with effect from 27 May 2010. Dr E de la H Hertzog, Adv Theo van Wyk and Mr Jan Dreyer resigned as directors of the company effective 26 October 2010 pursuant to Remgro Limited unbundling its shareholding in Trans Hex. Mr Mervyn Carstens resigned as executive director for SA land operations effective 5 April 2011 pursuant to his secondment on a full-time basis as managing director of Trans Hex`s new joint venture agricultural company. Dividend In order to maintain cash resources, the directors deem it prudent not to declare a final dividend. Shareholders` diary The annual report will be mailed before 30 June 2011 and the annual general meeting is scheduled for 4 August 2011. By order of the board BR van Rooyen L Delport Chairman Chief Executive Officer Parow 31 May 2011 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 Directorate BR van Rooyen (Chairman), L Delport (Chief Executive Officer), IP Hestermann (Financial Director), T de Bruyn, AR Martin, GM van Heerden (Company Secretary) Sponsor RAND MERCHANT BANK (a division of FirstRand Limited) Date: 02/06/2011 07:05:01 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. 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