Wrap Text
Reviewed Condensed Consolidated Interim Results For The Six Months Ended 30 September 2012
Sentula Mining
Incorporated in the Republic of South Africa (Registration number 1992/001973/06)
Share code: SNU ISIN: ZAE000107223 (Sentula or the Company or the Group)
REVIEWED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
Revenue decreased by 13% to R1 175 million
(2011: R1 345 million)
Adjusted HEPS* increased by 7% to 11,3 cents
(2011: 10,6 cents)
* Adjusted for BBBEE share-based payment and transaction expenses of R16,4 million
COMMENTARY
Despite the considerable challenges being experienced in the South African mining sector, Sentula has continued to work at stabilising earnings
from its local earthmoving entities in the face of considerable volatility. Sector specific economic and industrial action, in the local platinum
industry, have led to a reduction in exploration expenditure, which in turn has resulted in an inevitable restructure and downscaling of the Groups South
African exploration drilling business. The diversity of Sentulas earnings should nonetheless continue to support the resilience of the Groups
underlying revenue base. The recently announced partnership with Thebe Mining Resources Proprietary Limited, as the Groups strategic broad-based black
economic empowerment ("BBBEE") partner, in conjunction with the Anglo American Khula Mining Fund and Sentulas employee and community trusts, will enhance the
preservation of current contracts and the award potential of new tender opportunities for the Group.
Robin Berry, CEO Sentula Mining Limited
FINANCIAL REVIEW
Revenue decreased by 13% to R1 175 million (2011: R1 345 million)
Results from operating activities increased to R94 million (2011: (R420) million)
Adjusted headline EPS* increased by 7% to 11,3 cents (2011: 10,6 cents)
Headline EPS decreased by 20% to 8,5 cents (2011: 10,6 cents)
Net asset value per share: 431 cents (March 2012: 418 cents)
Tangible net asset value per share: 354 cents (March 2012: 343 cents)
Debt to equity gearing ratio remained constant at 22% at September 2012, relative to the corresponding period
*Adjusted for the BBBEE share-based payment and direct transactional expenses of R16,4 million
The results for the six months to 30 September 2012 were impacted by the following post tax expenses:
The depreciating Rand/Dollar exchange rate impacted positively on revenue from Geosearchs foreign operations and currency gains of R6,3 million
were recognised;
Expenses of R16,4 million associated with the first phase of the Groups BBBEE transaction;
Legal and forensic costs of R4,4 million incurred in support of civil actions associated with the funds misappropriated in 2008 financial year;
Losses of R24 million resulting from the early termination of the Vanggatfontein contract and the closure of Megacubes operations;
Restructuring cost of R3,6 million associated with the downsizing of Geosearchs South African exploration drilling business;
A provision of R9,5 million for possible inventory obsolescence in Geosearch; and
A loss of R7,4 million realised on the sale of certain of Megacubes idle assets.
OPERATIONAL REVIEW
Sustainability
Safety track record
The Groups Classified Injury Frequency Rate of 0,18 per million man hours worked is an 83% improvement on the comparative prior period (1,09).
Through the regular monitoring of leading performance indicators, Sentula, with its clients, continues to strive towards the goal of zero harm and the
nurturing of a culture where a robust safety performance is regarded as a prerequisite and a competitive advantage.
Transformation
The recently concluded BBBEE transaction has resulted in the status of the companys underlying mining services businesses increasing to that of
level 4 contributor, with an effective 25,1% empowered ownership. The BBBEE transaction has also resulted in the 26% empowerment of Bankfonteins new
order prospecting license.
The successful conclusion of these BBBEE transactions has already enhanced the Groups competitiveness, with respect to the tendering and retention
of contracts in the South African mining sector.
Environment
During the period under review, the Group has embedded the monitoring of its carbon emissions against a baseline carbon footprint, for several of
its core activities. Targets and initiatives to reduce the quantum and impact of emissions have been introduced across the Group.
Sentula Group companies have during this period met their objectives with respect to the International Standards Organisation accreditation of their
safety, environmental and training systems.
Mining services
The provision of mining services remains the core of Sentulas business, with the four operating divisions and the five underlying businesses
trading satisfactorily during the period under review. In spite of the volatility and challenges which are being experienced in the sector, the visibility
of work remains reasonable for these businesses.
Continuing business units
Opencast mining operations
The period under review has been characterised by growing demand, but exacting trading conditions, as margins remained under pressure across the
open cast contracting sector.
Benicon was awarded a contract at Anglo Platinums Mologkwena mine in June 2012, which substitutes the terminated Vanggatfontein contract.
CCT was adversely impacted during the period under review by the regulatory delay in the commencement of the Spitzkop contract for Samancor. With
final regulatory approvals for this mining operation in process, the company should thereafter be well positioned to deliver into future expectations.
JEF Drill and Blast has sustained its revenue and profit base during the period under review and remains positioned to deliver sustainable earnings,
as it continues to diversify its commodity and counterparty exposure.
Exploration drilling
With the deteriorating economic fundamentals of the South African PGM industry, resulting in an abrupt reduction of exploration expenditure during
the first half of the period under review, management has now completed a downsizing and restructuring of this part of the business. The depreciating
Rand/ Dollar exchange rate during the six months did however, impact positively on Geosearchs revenue and margins. The scaling down of its South
African operations has resulted in a shift in Geosearchs revenue split for the 2013 financial year of 15% and 85% for the domestic and foreign operations,
respectively.
The significant geographical diversification of the Companys foreign businesses and the consolidation of its logistical hubs, has established a
platform for future growth and operational efficiencies.
Crane hire
Ritchie sustained its performance during the period under review and maintained its level of profitability on a comparative basis. The results from
this entity continue to be supported by its mix of cranes, strong competitive position in the eMalahleni/Middelburg geographical area and diversity of
clientele in the coal mining, steel and power generation industries.
Discontinuing opencast mining services
Megacube
As a business, Megacube ceased operations during the period under review and through outright disposals, trade-ins and redeployment within the
Group, will monetise the remaining plant and equipment amounting to R285 million.
The Keaton Energy Vanggatfontein contract was terminated in early July 2012, following the non-payment of the Companys May 2012 certificated
invoice. The non-payment of the two subsequent remaining certificated invoices, has
now resulted in the formulation of a contractual claim of R42 million against Keaton Energy. This claim is the subject of a legal process.
The retrenchment of all remaining Megacube employees was completed during the six-month period ended
30 September 2012.
Coal mining investments
Aligned with the strategy of unlocking the value inherent in the Groups portfolio of coal assets, Sentula has continued to assess opportunities to
achieve this in the medium term while only incurring expenditure that maintains and enhances their value. Sentula is currently invested in five
projects (three in South Africa, and one in each of Botswana and Zambia). The projects can be broadly described as mining operations, comprising of an
operating mine, near development properties (those projects which could be operational within 18 to 24 months) and exploration areas.
Mining operations
Nkomati Anthracites integrated water use license has now been issued. This was achieved after close co-operation between the mines management and
the Department of Water Affairs, in dealing with the outstanding issues for the award of the license. This will allow the mine to commence with the
construction of water management infrastructure and the implementation of the water management plan. Current indications are that this process could be
completed during the first quarter of the 2013 calendar year and for mining operations to commence shortly thereafter.
Near development properties
Sentula, through its joint venture investments, has been granted new order prospecting rights over portions of the farms Bankfontein and
Schoongezicht, located in Mpumalanga. Exploration has been completed and mining right applications have been submitted for both of these properties.
Exploration drilling has been completed at the Mulungwa project in Southern Zambia. The third and final phase of the feasibility programme, which
included resource estimation, completion of the environmental impact assessment, technical/mining investigations and financial modeling, has also been
completed. A small scale mining license has been awarded and planning indicates that, subject to a viable feasibility study, development could commence
in the short term.
Exploration areas
The Asenjo joint venture with Jonah Capital and Aquilla Resources, situated in Botswana, has continued exploration on its tenements. The value of
the large resource base is expected to be unlocked through the construction of rail infrastructure to port facilities in either Namibia or Mozambique,
the provision of which is enjoying renewed interest in the region. The timing of the requisite infrastructure investment remains a key risk, given the
current remaining tenure to the tenements and the on-going exploration expenditure associated therewith.
PROGRESS ON LEGAL MATTERS
Following the announcement on 26 November 2010 of the civil judgment of R88 million against Casper Scharrighuisen by the South Gauteng High Court, a
second judgment for R171 million and interest thereon of R124 million was obtained against Scharrighuisen on 5 April 2011, bringing the total civil
judgments against him to R383 million. An order for the final sequestration of Scharrighuisens insolvent estate was granted during July 2011 by the
Western Cape High Court. Megacube lodged a claim of R393 million against Scharrighuisens insolvent estate in September 2011. In terms of the Insolvency
Act, the property of Scharrighuisens spouse, Clasina Scharrighuisen, vests in the trustees of his insolvent estate. During November 2011, Clasina
Scharrighuisen instituted an action against the trustees for an order releasing such property to her, which action is defended. During October 2011, the
trustees of Scharrighuisens insolvent estate launched an urgent application in the Western Cape High Court for an order preserving property/assets
of Clasina Scharrighuisen and certain related entities, pending conclusion of the release action instituted by her. The application was successful and
the order was granted on 24 August 2012. During September 2011, Megacube instituted an action in the Western Cape High Court against the trustees of
the Marinvia Trust for payment of R34 million and interest, which action is defended. The extradition of Jason Holland and Casper Scharrighuisen and
the pursuit of criminal proceedings against them for the misappropriation of funds from Megacube Mining in the 2008 financial year are in the hands of
the National Prosecuting Authority. The Company will assist the prosecuting authorities to the extent required by them.
With the conclusion of the High Court actions against Scharrighuisen, the final sequestration of his insolvent estate and the conclusion of related
proceedings, the Companys legal and forensic costs have materially reduced.
STRATEGIC REVIEW
The Groups strategic vision remains one of sustainable growth by being the preferred mining services provider across the African continent. Our
strategy seeks to maximise the exploitation of opportunities identified in the provision of mining services in Southern Africa, and is further enhanced
through the recently finalised broad-based black economic empowerment transactions. While exacting conditions are set to prevail in the South African
mining sector, productivity and capital efficiency will remain an imperative.
Sentula remains well positioned to unlock the value inherent in its portfolio of coal investments and the Groups exposure to the coal and energy
sector, as a service provider and proprietary investor, coupled with its diversified service offering, client base, mineral exposure and geographical
spread will continue to provide a solid platform for developing the business into the future.
In the short term and despite the challenging economic environment, the Group will continue to drive the monetisation of its idle assets and its
coal investments.
SUBSEQUENT EVENTS
Subsequent to the interim reporting date, Sentula released an announcement on 1 November 2012, in which Sentulas shareholders (Shareholders) are
referred to the announcement released on the Securities Exchange News Service of the JSE Limited on Monday, 17 September 2012 and published in the
press on Tuesday, 18 September 2012, which sets out the terms of the proposed empowerment of Sentulas Bankfontein coal project (the Bankfontein
Project), held by Sentulas wholly-owned subsidiary Benicon Mining Proprietary Limited (Benicon Mining) by introducing its existing empowerment
consortium, Shanike Investments No 171 Proprietary Limited (RF) (BEE Co) as a 26% shareholder in Benicon Mining (the Transaction). Shareholders are advised
that the conditions precedent to the Transaction have now been fulfilled and accordingly the Transaction has been implemented in accordance with its
terms.
BASIS OF PREPARATION
The condensed consolidated interim financial information for the six months ended 30 September 2012 have been prepared in accordance with IAS 34,
Interim Financial Reporting, the South African Companies Act, 2008 (Act 71 of 2008), as amended and the Listings Requirements of JSE Limited.
The accounting policies adopted are consistent with those applied in the annual financial statements for the year ended
31 March 2012, except for those standards that become effective during the reporting period. The adoption of these standards had no effect on the
results. This report was compiled under the supervision of the financial director, GP Louw
CA(SA). The condensed consolidated interim financial information does not include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the Groups annual financial statements as at 31 March 2012, which have been prepared in
accordance with International Financial Reporting Standards.
The directors are of the opinion that the Group has adequate resources to continue in operation for the foreseeable future and accordingly the
condensed consolidated interim financial results have been prepared on a going concern basis.
INDEPENDENT REVIEW CONCLUSION
The condensed consolidated statement of financial position at 30 September 2012 and related condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows
for the period have been reviewed by PricewaterhouseCoopers Inc. Their unmodified review report is available for inspection at the Companys registered
office.
DIVIDENDS
The Board has decided not to declare an interim dividend for the period under review.
DIRECTORATE
Mr EHJ Stoyell resigned from the Board, with effect from 17 September 2012.
On behalf of the Board
Jonathan Best Robin Berry Woodmead
Independent Non-executive Chairman Chief Executive Officer 14 November 2012
Statement of financial position
Reviewed Reviewed Audited
as at as at as at
30 September 30 September 31 March
R000 2012 2011 2012
ASSETS
Property, plant and equipment 1 608 534 2 289 047 1 545 934
Mineral rights 410 761 410 761 410 761
Intangible assets 28 859 27 590 27 220
Goodwill 415 935 413 906 412 709
Restricted investment 8 693 8 693 8 693
Deferred tax assets 42 740 19 576 34 869
Total non-current assets 2 515 522 3 169 573 2 440 186
Inventories 335 350 389 396 364 521
Trade and other receivables 498 730 519 018 468 870
Current tax receivable 6 534 6 052 12 507
Cash and cash equivalents 126 247 138 580 180 236
Total current assets 966 861 1 053 046 1 026 134
Assets classified as held-for-sale 329 858 41 477 389 315
TOTAL ASSETS 3 812 241 4 264 096 3 855 635
EQUITY AND LIABILITIES
Equity
Share capital and premium 1 994 406 1 994 406 1 994 406
Reserves 461 466 678 948 376 554
Total equity attributable to equity holders of the Company 2 455 872 2 673 354 2 370 960
Non-controlling interest 46 819 69 987 59 815
Total equity 2 502 691 2 743 341 2 430 775
Liabilities
Loans and borrowings 429 405 491 685 488 695
Rehabilitation provision 66 899 66 900 66 899
Deferred tax liabilities 308 059 261 900 297 852
Total non-current liabilities 804 363 820 485 853 446
Trade and other payables 264 037 485 303 344 138
Loans and borrowings 235 643 180 901 220 316
Current tax payable 5 507 34 066 6 960
Total current liabilities 505 187 700 270 571 414
TOTAL LIABILITIES 1 309 550 1 520 755 1 424 860
TOTAL EQUITY AND LIABILITIES 3 812 241 4 264 096 3 855 635
Net asset value per share excluding treasury shares (cents) 431 472 418
Tangible net asset value per share excluding treasury shares (cents) 354 396 343
Income statement
Reviewed Reviewed Audited
six months ended six months ended year ended
30 September 30 September 31 March
R000 2012 2011 2012
Revenue 1 175 252 1 345 048 2 512 415
Results from operating activities pre-impairment and inventory write-off 94 026 149 844 201 578
Inventory write-off - (14 205) (30 478)
Impairment of plant and equipment - (282 337) (591 171)
Results from operating activities 94 026 (146 698) (420 071)
Net finance charges (31 444) (33 959) (63 821)
Fair value adjustment on interest rate hedge (2 011) (5 007) (6 677)
Profit/(loss) before income tax 60 571 (185 664) (490 569)
Income tax expense (31 256) (44 593) (41 625)
Profit/(loss) for the period 29 315 (230 257) (532 194)
Attributable to:
Owners of the Company 42 306 (224 943) (516 703)
Non-controlling interest (12 991) (5 314) (15 491)
Basic and diluted earnings/(loss) per share (cents) 7,3 (38,7) (88,9)
Shares in issue at the end of the period excluding treasury shares ('000) 581 005 581 005 581 005
Statement of comprehensive income/(loss)
Reviewed Reviewed Audited
six months ended six months ended year ended
30 September 30 September 31 March
R000 2012 2011 2012
Profit/(Loss) for the period 29 315 (230 257) (532 194)
Other comprehensive income
Foreign currency translation differences for foreign operations 25 075 39 660 28 000
Other comprehensive income for the period, net of tax 25 075 39 660 28 000
Total comprehensive income/(loss) for the period 54 390 (190 597) (504 194)
Attributable to:
Owners of the Company 67 381 (185 283) (488 703)
Non-controlling interest (12 991) (5 314) (15 491)
Operational segment reporting
The Group is organised into four major operating segments, namely opencast mining services, exploration drilling, crane hire, and coal mining. Megacube is disclosed under
the Opencast mining services as a discontinuing business operation as it is in the process of being wound down. Benicon Opencast, CCT and JEF are included in the continuing
operations. Equipment trading, spares and engineering is included in Other. Segment performance is measured based on the segment profit before interest and income tax.
Inter-segment revenue is priced on an arms length basis.
Continuing Discontinuing
opencast mining opencast mining Total opencast Exploration
R000 services services mining services drilling Crane hire Coal mining Other Consolidated
Reviewed six months ended 30 September 2012
Total segment revenue 711 996 67 388 779 384 442 835 33 785 449 25 721 1 282 174
Inter-segment revenue 90 165 1 578 91 743 - 267 - 14 912 106 922
External revenues 621 831 65 810 687 641 442 835 33 518 449 10 809 1 175 252
Segment result 49 825 37 168 86 993 48 761 17 681 (5 299) (54 110) 94 026
Reviewed six months ended 30 September 2011
Total segment revenue 599 020 334 818 933 838 468 898 25 914 12 982 33 663 1 475 295
Inter-segment revenue 99 319 3 014 102 333 - 132 458 27 324 130 247
External revenues 499 701 331 804 831 505 468 898 25 782 12 524 6 339 1 345 048
Total segment results pre-impairment 23 088 64 436 87 524 98 763 12 631 (6 833) (56 446) 135 639
Impairment (3 095) (279 242) (282 337) - - - (282 337)
Segment result 19 993 (214 806) (194 813) 98 763 12 631 (6 833) (56 446) (146 698)
Statement of changes in equity Employee share Foreign exchange Non-
Share Share incentive Treasury translation Retained controlling
R000 capital premium reserve shares reserve earnings Total interest Total equity
Balance at 31 March 2011 5 866 2 014 438 42 426 (25 898) (53 403) 874 105 2 857 534 75 301 2 932 835
Loss for the period - - - - - (224 943) (224 943) (5 314) (230 257)
Other comprehensive income for the period - - - - 39 660 - 39 660 - 39 660
Transactions with owners, recorded directly in equity
Share-based payments - - 1 103 - - - 1 103 - 1 103
Share options forfeited - - (6 284) - - 6 284 - -
Balance at 30 September 2011 5 866 2 014 438 37 245 (25 898) (13 743) 655 446 2 673 354 69 987 2 743 341
Loss for the period - - - - - (291 760) (291 760) (10 177) (301 937)
Other comprehensive loss for the period - - - - (11 665) - (11 665) 5 (11 660)
Transactions with owners, recorded directly in equity
Share-based payments - - 1 031 - - - 1 031 - 1 031
Share options forfeited - - (1 702) - - 1 702 - -
Balance as at 31 March 2012 5 866 2 014 438 36 574 (25 898) (25 408) 365 388 2 370 960 59 815 2 430 775
Profit for the period - - - - - 42 306 42 306 (12 991) 29 315
Other comprehensive income for the period - - - - 25 075 - 25 075 (5) 25 070
Transactions with owners, recorded directly in equity
Share-based payment empowerment transaction - - 12 531 - - - 12 531 - 12 531
Option premium on empowerment transaction - - 5 000 - - - 5 000 - 5 000
Balance as at 30 September 2012 5 866 2 014 438 54 105 (25 898) (333) 407 694 2 455 872 46 819 2 502 691
Statement of cash flows
Reviewed Reviewed Audited
six months ended six months ended year ended
30 September 30 September 31 March
R000 2012 2011 2012
Cash flows from operating activities 65 846 150 648 229 485
Cash generated by operations 122 533 201 056 319 156
Interest paid (31 347) (33 048) (62 377)
Income taxes paid (25 340) (17 360) (27 294)
Cash flows from investing activities (82 237) (91 135) (140 905)
Purchase of property, plant and equipment (127 483) (98 847) (291 600)
Proceeds from disposal of property, plant and equipment 39 107 12 197 156 708
Capitalised exploration expenditure (55) (1 772) (2 212)
Additions to assets held-for-sale - (3 698) (6 833)
Proceeds from empowerment subscription 5 000 - -
Interest received 1 194 985 3 032
Cash flows from financing activities (43 964) (31 829) 4 596
Loans raised 67 974 - 147 335
Loans repaid (111 938) (31 829) (142 739)
Net (decrease)/increase in cash and cash equivalents (60 355) 27 684 93 176
Effects of changes in foreign exchange rates 6 366 22 664 (1 172)
Cash and cash equivalents at beginning of the period 180 236 88 232 88 232
Cash and cash equivalents at end of the period 126 247 138 580 180 236
Reconciliation of headline earnings
Reviewed Reviewed Audited
six months ended six months ended year ended
30 September 30 September 31 March
R000 2012 2011 2012
Net profit/(loss) for the year attributable to owners of the Company 42 306 (224 943) (516 703)
Adjust for:
Profit on disposal of plant and equipment (403) - (2 464)
Loss on disposal of plant and equipment 7 380 2 303 54 621
Impairment of plant and equipment - 282 337 591 171
Scrapping of assets - 4 625 -
Tax effect of above adjustments 59 (2 806) (508)
Headline earnings attributable to ordinary shareholders 49 342 61 516 126 117
Headline earnings per share (cents) 8,5 10,6 21,7
Directors: JG Best*(Chairman), RC Berry (Chief Executive Officer), GP Louw (Financial Director),
PP Modisane, CJPG van Zyl*, DR Zihlangu*, KW Mzondeki*, RB Patmore* *Independent Non-executive
Company Secretary: GM Chemaly
Transfer Secretaries: Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051 Marshalltown. 2107. Tel (011) 370-5000
Investor Relations Advisers: College Hill
Sponsor: Merchantec Capital
Auditor: PricewaterhouseCoopers Inc.
Registered address: Block 14 Ground Floor, Woodlands Office Park, Woodmead, 2080. PO Box 76, Woodmead, 2080. Tel (011) 656-1303
www.sentula.co.za
Date: 15/11/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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