Wrap Text
Summary audited consolidated statements for the year ended 31 March 2014
TRANS HEX GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number (1963/007579/06)
Share code: TSX
ISIN: ZAE000018552
("Trans Hex" or the "Company" or the "Group")
SUMMARY AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 MARCH 2014
FINANCIAL HEADLINES
- Sales revenue amounted to R695,7 million (2013: R751,3 million).
- Group loss after tax from continuing operations was R5,1 million (2013: profit of R65,0 million).
- Profit after tax from discontinued operations amounted to R27,8 million (2013: R20,4 million).
- Group net profit for the year was R22,7 million (2013: R85,4 million).
- The Group's net cash position at the end of the year was R397,6 million (2013: R383,4 million).
- Earnings per share amounted to 20,7 cents (2013: 79,7 cents) and headline earnings per share amounted
to 9,8 cents (2013: 69,9 cents).
- Net asset value per share was 521,0 cents (2013: 505,0 cents).
- In Angola, Somiluana sales amounted to US$32,4 million (2013: US$14,9 million).
SUMMARY CONSOLIDATED INCOME STATEMENT
2014 2013
Notes R'000 R'000
Continuing operations
Sales revenue 695 730 751 304
Cost of goods sold (653 736) (605 181)
Gross profit 41 994 146 123
Royalties (4 629) (19 832)
Selling and administration costs (71 620) (65 377)
Mining (loss)/profit (34 255) 60 914
Exploration costs (3 762) (5 213)
Other gains – net 1 21 407 22 158
Finance income 15 378 17 566
Finance costs (4 995) (8 403)
(Loss)/profit before income tax (6 227) 87 022
Income tax 1 112 (22 017)
(Loss)/profit for the year from continuing operations (5 115) 65 005
Discontinued operations
Share of income from joint ventures 2 27 854 20 364
Profit for the year 22 739 85 369
Attributable to:
Continuing operations (5 115) 65 005
- Owners of the parent (5 991) 63 847
- Non-controlling interest 876 1 158
Discontinuing operations
- Owners of the parent 27 854 20 364
22 739 85 369
Earnings per share – basic and diluted (cents)
- Continuing operations (5,7) 60,4
- Discontinued operations 26,4 19,3
Total 20,7 79,7
Shares in issue adjusted for treasury shares („000) 105 699 105 699
2014 2013
Notes R'000 R'000
Headline earnings 3
- Continuing operations (17 459) 53 485
- Discontinued operations 27 854 20 364
- Total 10 395 73 849
Headline earnings per share (cents)
- Continuing operations (16,6) 50,6
- Discontinued operations 26,4 19,3
- Total 9,8 69,9
Average US$ exchange rate 10,20 8,62
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2014 2013
R'000 R'000
Profit for the year 22 739 85 369
Other comprehensive income net of tax:
Items will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations 2 061 –
- Before-tax amount 2 863 –
- Tax (expense)/benefit (802) –
Translation differences on foreign subsidiaries before and after tax (8 560) (20 220)
Fair value adjustment on available-for-sale financial assets before and after tax – (116)
Reclassification of fair value adjustment on available-for-sale financial assets
on disposal before and after tax (37) (82)
Total comprehensive income for the year 16 203 64 951
Attributable to:
- Owners of the parent 15 327 63 793
- Non-controlling interest 876 1 158
16 203 64 951
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2014 2013 2012
Notes R'000 R'000 R'000
Assets
Non-current assets 391 393 449 810 483 873
Property, plant and equipment 279 000 338 483 384 858
Investment in associates 59 580 60 964 50 833
Investments held by environmental trust 52 813 50 245 47 835
Available for sale investments – 118 347
Current assets 560 378 540 617 466 547
Inventories 4 137 305 133 569 97 636
Trade and other receivables 21 670 23 672 21 593
Current income tax 3 853 – –
Cash and cash equivalents 397 550 383 376 347 318
Total assets 951 771 990 427 950 420
2014 2013 2012
R'000 R'000 R'000
Equity and liabilities
Capital and reserves 549 231 533 904 470 111
Non-controlling interest 1 000 124 (1 034)
Non-current liabilities 148 488 153 717 191 065
Borrowings – 1 281 24 401
Deferred income tax liabilities 46 138 53 583 70 735
Provisions 102 350 98 853 91 473
Deferred income – – 4 456
Current liabilities 253 052 302 682 290 278
Trade and other payables 126 263 139 361 121 776
Interest in joint ventures 125 188 134 798 131 180
Current income tax liabilities 320 2 584 4 787
Borrowings 1 281 25 939 32 535
Total equity and liabilities 951 771 990 427 950 420
Net asset value per share (cents) 521 505 442
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2014 2013
R'000 R'000
Balance at 1 April 534 028 469 077
Total comprehensive income for the year 16 203 64 951
Balance at end of year 550 231 534 028
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
2014 2013
R'000 R'000
Cash generated from operations 72 302 155 235
Movements in working capital (11 404) (17 521)
Income tax paid (13 252) (41 372)
Net cash generated from operating activities 47 646 96 342
Cash employed (33 472) (60 284)
Property, plant and equipment
- Proceeds from disposal 25 298 13 561
- Replacement (31 638) (26 561)
- Additional (11 634) (17 828)
Investments and loans 10 283 –
Borrowings repaid (25 781) (29 456)
Net increase in cash and cash equivalents 14 174 36 058
Cash and cash equivalents at beginning of year 383 376 347 318
Cash and cash equivalents at end of year 397 550 383 376
NOTES TO THE SUMMARY CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
2014 2013
R'000 R'000
1. Other gains – net
Other gains – net consists of the following categories:
- Net foreign exchange gains 9 846 11 719
- Profit on sale of assets and investments 11 561 10 439
21 407 22 158
2. Discontinued operations
On 5 October 2011, the Angolan Ministry of Geology, Mines and Industry
revoked the mining rights of the Luarica and Fucaúma joint ventures as
no mining activities had been performed at the sites for a period of three
years as a result of the projects being placed under care and
maintenance.
The prescription of unclaimed debts of R27,8 million (2013: R22,2 million)
is included below.
Share of income from joint ventures 27 854 20 364
Profit before income tax 27 854 20 364
Taxation – –
Profit for the year 27 854 20 364
3. Reconciliation of headline earnings
Continuing operations
(Loss)/profit for the year (5 991) 63 847
- Profit on sale of assets (11 561) (10 357)
- Taxation impact 93 77
- Profit on sale of listed investment – (82)
- Taxation impact – –
Headline (loss)/earnings (17 459) 53 485
Discontinued operations
Profit for the year 27 854 20 364
Headline earnings 27 854 20 364
4. Inventories
Diamonds 117 689 113 302
Consumables 19 616 20 267
137 305 133 569
5. Capital commitments
(including amounts authorised, but not yet contracted) 62 655 77 430
These commitments will be financed from the Group's own resources or
with borrowed funds.
6. Change in accounting policy and reclassifications
The following tables summarise the Group's retroactive restatements to its consolidated financial
statements resulting from the adoption of IFRS 11, joint arrangements and the change in method of
presentation of certain financial assets.
The impacts on the consolidated statements of financial position are as follows, as at:
31 March 2013
Consolidated
Joint 2013
As reported arrangements Reclassifications Restated
R'000 R'000 R'000 R'000
ASSETS
Non-current assets 449 810 – – 449 810
Property, plant and equipment 338 483 – – 338 483
Investment in associates – – 60 964 60 964
Investments held by environmental
trust – – 50 245 50 245
Financial assets 111 327 – (111 327) –
Available for sale investments – – 118 118
Current assets 540 637 (20) – 540 617
Inventories 133 569 – – 133 569
Trade and other receivables 23 672 – – 23 672
Cash and cash equivalents 383 396 (20) – 383 376
Total assets 990 447 (20) – 990 427
EQUITY
Capital and reserves 533 904 – – 533 904
Stated capital 206 276 – – 206 276
Other reserves 33 643 – – 33 643
Retained profit 293 985 – – 293 985
Non-controlling interest 124 – – 124
LIABILITIES 456 419 (20) – 456 399
Non-current liabilities 153 717 – – 153 717
Borrowings 1 281 – – 1 281
Deferred income tax liabilities 53 583 – – 53 583
Provisions 98 853 – – 98 853
Deferred income – – – –
Current liabilities 302 702 (20) – 302 683
Trade and other payables 231 144 (91 783) – 139 361
Interest in joint ventures – 134 798 – 134 798
Current income tax liabilities 2 584 – – 2 584
Borrowings 68 974 (43 035) – 25 939
Total equity and liabilities 990 447 (20) – 990 427
31 March 2012
Consolidated
As Joint 2012
reported arrangements Reclassifications Restated
R'000 R'000 R'000 R'000
ASSETS
Non-current assets 483 873 – – 483 873
Property, plant and equipment 384 858 – – 384 858
Investment in associates – – 50 833 50 833
Investment held by environmental
trusts – – 47 835 47 835
Financial assets 99 015 – (99 015) –
Available for sale investments – – 347 347
Current assets 466 720 (173) – 466 547
Inventories 97 776 (140) – 97 636
Trade and other receivables 21 593 – – 21 593
Cash and cash equivalents 347 351 (33) – 347 318
Total assets 950 593 (173) – 950 420
EQUITY
Capital and reserves 470 111 – – 470 111
Stated capital 206 276 – – 206 276
Other reserves 125 266 – – 125 266
Retained profit 138 569 – – 138 569
Non-controlling interest (1 034) – – (1 034)
LIABILITIES 481 516 (173) – 481 343
Non-current liabilities 191 065 – – 191 065
Borrowings 24 401 – – 24 401
Deferred income tax liabilities 70 735 – – 70 735
Provisions 91 473 – – 91 473
Deferred income 4 456 – – 4 456
Current liabilities 290 451 (173) – 290 278
Trade and other payables 216 325 (94 549) – 121 776
Interest in joint ventures – 131 180 – 131 180
Current income tax liabilities 4 787 – – 4 787
Borrowings 69 339 (36 804) – 32 535
Total equity and liabilities 950 593 (173) – 950 420
In the 2014 financial year, the Company decided to reclassify financial assets that were previously reported
as available-for-sale investments, investments in associates and investments in environment rehabilitation
trusts on the face of the statement of financial position.
There was no impact on the income statements and the statements of comprehensive income as a result of
the reclassifications and the change in accounting policy.
7. Segment information
Operating segments
Continuing Discontinued
Twelve months ending 31 March 2014 South Angola Total Angola
Africa
Carats sold 55 083 – 55 083 –
R'000 R'000 R'000 R'000
Revenue 695 730 – 695 730 –
Cost of goods sold (653 736) – (653 736) –
Gross profit 41 994 – 41 994 –
Royalties (4 629) – (4 629) –
Selling and administration costs (63 059) (8 561) (71 620) –
Mining loss (25 694) (8 561) (34 255) –
Exploration costs (3 762) – (3 762) –
Other gains – net 10 176 11 231 21 407 27 854
Finance income 15 378 – 15 378 –
Finance costs (4 995) – (4 995) –
(Loss)/profit before income tax (8 897) 2 670 (6 227) 27 854
Depreciation included in the above (90 379) (335) (90 713) –
Net assets/(liabilities) 588 500 86 919 675 419 (125 188)
Capital expenditure 43 261 11 43 272 –
Net asset value per share (cents) 562 77 639 (118)
Continuing Discontinued
Twelve months ending 31 March 2013 South Angola Total Angola
Africa
Carats sold 65 339 – 65 339 –
R'000 R'000 R'000 R'000
Revenue 751 304 – 751 304 –
Cost of goods sold (605 181) – (605 181) –
Gross profit 146 123 – 146 123 –
Other operating expenses – – – (1 866)
Royalties (19 832) – (19 832) –
Selling and administration costs (58 961) (6 416) (65 377) –
Mining profit/(loss) 67 330 (6 416) 60 914 (1 866)
Exploration costs (5 213) – (5 213) –
Other gains – net 16 937 5 221 22 158 22 230
Finance income 17 566 – 17 566 –
Finance costs (8 403) – (8 403) –
Profit/(loss) before income tax 88 217 (1 195) 87 022 20 364
Depreciation included in the above (89 247) (469) (89 716) –
Net assets/(liabilities) 596 851 71 975 668 826 (134 798)
Capital expenditure 44 386 3 44 389 –
Net asset value per share (cents) 565 68 633 (128)
Revenues from transactions with certain customers can amount to 10% or more of total revenue. During
the periods under review, no individual customer was responsible for aggregate sales in excess of 10%
of revenue.
8. Mineral resources and mineral reserves
There have been no material changes to the mineral resources and mineral reserves previously
reported in the Annual Report for the South African projects. At Somiluana a reclassification of
Indicated Resources to Inferred Resources has resulted in a reduction of 69% in the Probable
Reserves.
9. Contingent liabilities
There have been no material changes to contingent liabilities previously reported in the Annual Report.
10. Accounting policies
The summary consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies
Act applicable to summary financial statements. The Listings Requirements require preliminary reports
to be prepared in accordance with the framework concepts, the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
the Financial Reporting Standard Council, and to also, as a minimum, contain the information required
by IAS 34 Interim Financial Reporting.
The accounting policies are consistent with those of the previous annual financial statements, unless
otherwise stated. The Group has adopted all the new, revised or amended accounting pronouncements
as issued by the IASB which were effective for the Group from 1 April 2013. The adoption of these
standards and amendments to standards and interpretations did not have any material impact on the
Group's results and cash flows for the year ended 31 March 2014 or its financial position as at 31 March
2014, with the exception of IFRS 11 as noted below.
11. Impact of change in accounting policy
IFRS 11 focuses on the rights and obligations of a joint arrangement rather than its legal form as was
the case under IAS 31. IFRS 11 classifies joint arrangements into two types: joint ventures and joint
operations. Joint ventures are arrangements whereby the parties have rights to net assets, while joint
operations are arrangements whereby the parties have rights to the assets and obligations for the
liabilities. The standard eliminates choices in the reporting of joint arrangements by requiring the use of
the equity method to account for interests in joint ventures, and by requiring joint operators to recognise
assets and liabilities in relation to their interests in the arrangements. The change has been accounted
for retroactively in accordance with the transition rules of IFRS 11.
A part of the Group's investments in joint arrangements qualifies as joint ventures and is now accounted
for using the equity method of accounting. These investments were previously accounted for using the
proportionate consolidation method. Under the equity method of accounting, the Group's share of net
assets, net income and other comprehensive income of joint ventures are presented as one-line items
on the consolidated statement of financial position, the consolidated statement of income and the
consolidated statement of comprehensive income respectively. In addition, the consolidated statement
of cash flows under the equity method of accounting includes the cash flows between the Group and its
joint ventures and not the Group's proportionate share of the joint ventures' cash flows. The impact of
the change in accounting policy is contained in note 6.
12. Preparation of financial statements
The preparation of the summary consolidated financial statements was supervised by the Financial
Director, IP Hestermann CA(SA).
13. Report of independent auditor
These summary consolidated financial statements for the year ended 31 March 2014 have been audited
by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The auditor also
expressed an unmodified opinion on the annual financial statements from which these summary
consolidated financial statements were derived.
A copy of the auditor's report on the summary consolidated financial statements and of the auditor's
report on the annual consolidated financial statements are available for inspection at the Company's
registered office, together with the financial statements identified in the respective auditor's reports.
OVERVIEW
In this commentary, results are compared with the 12 months of the 2013 financial year (in brackets).
Sales revenue decreased by 7,4% in Rand terms from R751,3 million in 2013 to R695,7 million as a result of
a 15,7% decrease in carats sold and a 7,2% decrease in average prices. Revenue was however positively
affected by a 14,4% weakening in the Rand. The average price decreased from US$1 334 per carat (2013)
to US$1 238 as a result of fewer special stones being sold during the first six months of the year.
South African production decreased to 52 081 carats (2013: 67 115 carats) due to a 14,9% reduction in
volume treated as a result of the withdrawal of joint-venture contractors and a 21-day strike over pay
increases by members of the National Union of Mineworkers. A 12,4% drop in grade as a result of grade
underperformance during the first six months of the year, also impacted on production. The average grade
realised was 0,92 carats/100 m(3) (2013: 1,05 carats/100 m(3)).
The cost of goods sold increased to R653,7 million (2013: R605,2 million), mainly due to stock movement of
R32,7 million and a 2,5% increase in operating costs. The unit cost of production increased by 20,0% due to
lower volumes treated and increases in the cost of overburden stripping at Baken.
Gross profit for the year amounted to R42,0 million (2013: R146,1 million).
South African operations showed a loss before tax of R8,9 million (2013: profit of R88,2 million).
In Angola, production at Somiluana, in which Trans Hex holds a 33% stake, amounted to 72 041 carats
(2013: 41 313 carats) due to an increase of 20,9% in volumes treated and a 44,2% increase in grade. Total
sales amounted to US$32,4 million at an average price of US$478 per carat (2013: sales of US$14,9 million
at an average price of US$352 per carat). Somiluana's operating margin was 32% (2013: -20%) and the
Mine generated net profit of US$10,5 million (2013: loss of US$3,0 million). Repayments of US$1,0 million
were made to Trans Hex against the outstanding investment amount and the balance of cash generated was
retained to develop the Mine.
The investment in Somiluana is accounted for as an investment in an associate under the equity method. As
the investment's liabilities exceed its assets, no equity accounted profit or loss was accounted for.
Profit from the Angolan head office operations amounted to R2,7 million mainly as a result of an
R11,2 million profit on the sale of assets (2013: loss of R1,2 million).
The Group reports an after-tax loss for the year from continuing operations of R5,1 million
(2013: profit of R65,0 million).
Profit from the discontinued Luarica and Fucaúma operations amounted to R27,8 million
(2013: R20,4 million).
The Group therefore reports a profit for the year of R22,7 million (2013: R85,4 million).
Cash and cash equivalents at the end of the reporting year amounted to R397,6 million
(2013: R383,4 million).
OPERATING PERFORMANCE
Detailed project information
Twelve months ended 31 March 2014 Twelve months ended 31 March 2013
Average Average
price per price per
Detailed project Average Average carat Average Average carat
information grade per Carats carats per achieved grade per Carats carats per achieved
(unaudited) 100 m(3) produced stone (US$) 100 m(3) produced stone US$
South Africa
Baken 0,96 35 637 1,31 1 320 1,03 44 465 1,11 1 313
Richtersveld
Operations 0,79 7 630 1,60 1 541 1,13 13 490 1,97 1 940
Shallow water – 8 813 0,32 487 – 9 159 0,31 515
Total South Africa 0,92 52 081 0,87 1 238 1,05 67 115 0,88 1 334
Angola
Somiluana 23,95 72 041 0,60 478 16,58 41 313 0,42 352
Note: Average grade in South Africa is calculated excluding shallow water production.
South Africa
Increased stripping of overburden in the main channel at Baken during the first six months of the year
opened up new blocks for mining in the second half. Mining in the second six-month period yielded higher
grades at 1,11 carats/100 m(3) compared to the first six-month period of 0,79 carats/100 m(3). A higher
proportion of special stones was also sold in the second six-month period, as is evident from the increase in
the average price of Baken stones from $1 100 per carat at interim stage to $1 320 for the year.
Results from the Richtersveld Operations were affected by the winding down of operations at the Nxodap
mining area that reached the end of its economic life. The Nxodap mining assets are being relocated to the
Jakkalsberg mining area.
Angola
Mining activities during the financial year focused on the east bank of the Luana River where the grades and
diamond values continue to exceed resource estimations. In the previous financial year all activities were
concentrated on the west bank of the river.
OUTLOOK
Trans Hex has reached agreement with De Beers Consolidated Mines Proprietary Limited (DBCM) which
addresses the State's 20% interest in Namaqualand Mines in order to close the transaction originally signed
on 6 May 2011. As a result, the sale agreement between DBCM, Emerald Panther Investments 78 (Pty)
Limited and Trans Hex is being amended to provide for the creation of a Special Purpose Vehicle to hold the
State's 20% share in EPI. The effective date of the acquisition is expected to be 31 October 2014.
Stripping operations in the Baken central channel will continue until the economically viable gravel in the
main channel has been exhausted, which is expected to be towards the end of the 2015 financial year.
Thereafter mining will focus on shallow deposits and lower grade stockpiles.
The Richtersveld Operations are expected to improve on the carat performance of the previous year due to
increased volumes and grade.
South African production for the 2015 financial year is expected to be 55 000 carats.
In Angola, Somiluana is increasing production capacity through internal cash flows and external funding will
not be pursued. Production results and geological work through drilling and bulk sampling indicate that carat
production for the 2015 financial year will surpass the 72 000 carats achieved in 2014.
Trans Hex is continuing to wind up the discontinued Luarica and Fucaúma projects in Angola.
Tight controls over cash and costs will continue to be exercised in all areas of the Group's business.
Rough diamond prices are expected to remain stable in the coming financial year as the US market
continues to show signs of recovery and increased demand from China and India is set to persist.
Based on the market outlook, interest and strong demand for Trans Hex production are expected to continue
for the foreseeable future.
DIVIDEND
The Board has resolved that it would not be prudent to recommence dividend payments until there is a
degree of confidence that the Group has achieved a growing flow of new earnings. Accordingly, no final
dividend is declared.
Shareholders' diary
The Annual Report will be distributed by 30 June 2014 and the Annual General Meeting is scheduled for
7 August 2014.
By order of the Board
BR van Rooyen L Delport
Chairman Chief Executive Officer
Parow
29 May 2014
REGISTERED OFFICE
405 Voortrekker Road, Parow 7500
PO Box 723, Parow 7499
JSE SPONSOR
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TRANSFER SECRETARIES
Computershare Investor Services (Pty) Limited
PO Box 61051, Marshalltown 2107
DIRECTORATE
BR van Rooyen (Chairman), L Delport (Chief Executive Officer), IP Hestermann (Financial Director),
T de Bruyn, AR Martin, GM van Heerden (Company Secretary)
Date: 02/06/2014 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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