| Thu 19 Apr 2007, 8:27 | | SAL - Sallies - Reviewed Interim Results: Six Mont |
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SAL
SAL
SAL - Sallies - Reviewed Interim Results: Six Months Ended 31 December 2006
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1903/001879/06)
JSE share code: SAL & ISIN: ZAE000022588
("Sallies" or "the company")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
31 Dec 06 31 Dec 05 % 30 Jun 06
R`000 Reviewed Reviewed Change Audited
Revenue - mining 52 164 57 252 (9) 86 882
Cost of sales (55 728) (58 436) (5) (103 197)
Loss from mining activities (3 564) (1 184) 201 (16 315)
Less: Depreciation (4 950) (112) 4 320 (5 222)
Amortisation of mineral
rights (1 233) (1 200) 3 (2 056)
Operating loss from mining (9 747) (2 496) 291 (23 593)
Profit on disposal of PPE 5 45 (89) 1 817
Administrative expenses (9 555) (5 013) 91 (22 932)
Investment income 58 9 549 85
Finance costs (1 486) (898) 65 (2 735)
Net foreign exchange
gains/(losses) 1 692 1 533 10 (1 435)
Provision for doubtful debt - (585) (100) -
Provision for onerous
contract - (8 689) (100) 9 366
Net loss before taxation (19 033) (16 094) 18 (39 428)
Taxation (deferred) - (620) (100) 1 644
Net loss for period (19 033) (16 714) 14 (37 784)
Issued shares (000) 499 668 257 009 94 450 064
Weighted average shares
issued (000) 459 629 257 009 79 271 263
Weighted average shares
issued for diluted earnings
per share (000) 507 875 266 032 73 271 263
RECONCILIATION OF EARNINGS
Net loss attributable to
ordinary shareholders
for basic earnings
per share (19 033) (16 714) 14 (37 784)
Profit on disposal of
assets (net of tax) (3) (32) (89) (1 290)
Net loss attributable to
ordinary
shareholders for headline
earnings per share (19 036) (16 746) 14 (39 074)
LOSS PER SHARE (cents)
Basic
- undiluted (cents) (4.1) (6.5) (36.3) (13.9)
- diluted (cents) (3.7) (6.3) (40.4) (13.9)
Headline
- undiluted (cents) (4.1) (6.5) (36.4) (14.4)
- diluted (cents) (3.7) (6.3) (40.5) (14.4)
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 Dec 06 31 Dec 05 30 Jun 06
R`000 Reviewed Reviewed Audited
Net cash inflows/(outflows) from
operating activities (40 432) 7 254 2 637
Cash generated/(utilised) by
operations (39 004) 8 143 5 157
Interest paid (1 486) (898) (2 735)
Taxation paid - - 130
Investment income 58 9 85
Net cash inflows/(outflows) from
investing activities (68 325) (4 787) (11 063)
Net additions to mine plant, equipment
and buildings (68 330) (4 832) (12 880)
Proceeds from disposals of plant and
equipment 5 45 1 817
Net cash inflow/(outflows) from
financing activities 35 545 (4 763) 76 489
Long-term loans raised/(repaid) 3 307 1 140 (966)
Short term facility raised/(repaid) (5 903)
Share issues (net of costs) 32 238 - 77 455
Net (decrease)/increase in cash and
cash equivalents (73 212) (2 296) 68 063
Cash and cash equivalents at beginning
of period 60 059 (8 004) (8 004)
Cash and cash equivalents at end of
period (13 152) (10 300) 60 059
CONSOLIDATED BALANCE SHEET
31 Dec 31 Dec 30 Jun
2006 2005 2006
R`000 Reviewed Reviewed Audited
ASSETS
Non-current assets 144 814 98 696 82 668
Property, plant and equipment 134 086 87 974 71 940
Goodwill 10 175 10 175 10 175
Restricted investment 553 547 553
Current assets 25 138 22 217 87 155
Inventories 16 491 9 523 5 187
Accounts receivable 5 768 9 826 4 852
Taxation pre-paid 2 858 2 858 2 858
Cash and cash equivalents 21 10 74 258
Total assets 169 952 120 913 169 823
EQUITY AND LIABILITIES
Capital and reserves 101 061 36 569 87 856
Share capital and premium 207 923 89 167 175 685
Other reserves 724 1975 724
Accumulated loss (107 586) (54 573) (88 553)
Non-current liabilities 17 647 20 811 14 890
Long-term loan 7 945 3525 4 638
Provision for environmental
rehabilitation 4 102 4138 4 652
Deferred taxation 5 600 13 148 5 600
Current liabilities 51 244 63 533 67 077
Accounts payable 26 543 32 097 42 204
Bank overdraft 13 173 10 310 14 198
Provisions 5 380 18 055 4 778
Taxation - - 142
Current portion of long-term liabilities 6 148 3 071 5 755
Total equity and liabilities 169 952 120 913 169 823
Net asset value per share (cents) 20.2 14.2 19.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital Accumulated
R`000 reserves loss Total
Balance at 30 June 2005 91 142 (50 769) 40 373
Movement in capital reserves 85 267 - 85 267
Loss for period - (37 784) (37 784)
Balance at 30 June 2006 176 409 (88 553) 87 856
Movement in capital reserves 32 238 - 32 238
Loss for period - (19 033) (19 033)
Balance at 31 December 2006 208 647 (107 586) 101 061
COMMENTS
Directors, management and auditors
Subsequent to 31 December 2006, the board was reconstituted and now comprises
Tom Dale (Chairman), Izak Marais (CEO), Johann Blersch, Dr Vincent Msibi
(alternate: Jurgen Kugl) and Jeremy Woods.
During December 2006, the management team was further strengthened by the
appointment of a Group Financial Manager.
Shortly after the period under review, the company`s auditors resigned and were
replaced by BDO Spencer Steward (Jhb) Inc.
Marketing
The international market for fluorspar remains buoyant and the company has sold
all of its expected production for calendar 2007 from both Witkop and Buffalo
at higher dollar prices than those achieved during the current review period.
Operations
At the presentation to investors on 20 September 2006, the market was informed
that operating results for July, August and September 2006 had been poor. The
reasons for this were lower than budgeted feed and recovery grades caused by
mining inflexibility with specific reference to the high grade Buffelshoek
area. It was predicted that output from Witkop would achieve budgeted levels of
about 12 000 wet tons of fluorspar per month for October, November and December
2006. These production levels were not achieved due to low availabilities of
mining equipment. After the rights issue of 2006, management had planned to
trade out of a position of inadequate working capital. This proved impossible
and resulted in a further deterioration in the working capital position.
Notwithstanding the operating challenges outlined above, fluorspar output at
Witkop for H1 F2007 was some 60% higher than the preceding six months. In
addition, the final units of a replacement mining fleet were delivered in
February 2007, further bolstering hauling capacity at Witkop.
Finance
Failure to achieve operating budgets resulted in a net loss for the period of
R19.0 million.
The recently announced fully underwritten 1-for-4 rights offer at 60 cents per
share to raise approximately R75 million, should remove working capital
constraints on operating performance. The rights offer is scheduled to be
completed towards the end of June 2007.
Buffalo is beginning to produce fluorspar at budgeted levels.
Given (a) the strength of the fluorspar market, (b) the availability of
adequate working capital derived from the June 2007 rights issue, (c) the
calibre of the ore bodies at Witkop and Buffalo as attested to in the latest
Competent Person`s Reports, and (d) the growing coherence and operating focus
of the new management team, the directors have no doubt that the company is a
going concern.
There has been no change in the contingent liabilities since 30 June 2006.
Human resources
An illegal stayaway on Friday, 6 April 2007 resulted in a lock-out until
Thursday, 12 April 2007. Constructive engagement with the NUM during this
period has highlighted those issues on both sides which are fundamental to
future industrial peace.
Development
Management resources have been committed to researching the economic potential
of rare earths. Shareholders will be kept appraised of progress.
BEE
The agreement in terms of which African Renaissance Investments (Pty) Limited
will acquire a 30% undivided share in the fluorspar business of the Sallies
group, has only one outstanding condition precedent to be fulfilled. The
transaction is expected to be completed before 30 June 2007.
Honeywell
Sallies has been notified that its dispute with Honeywell in which Honeywell is
claiming an amount of almost US$6.7 million from Sallies for damages, will
appear before the International Chamber of Commerce in Zurich during the first
half of May 2007 for arbitration.
Modified review opinion
The interim report for the period 31 December 2006 has been reviewed by the
group`s auditors BDO Spencer Steward (Jhb) Inc. and their modified review
opinion is available for inspection at the registered office of the company.
They have drawn attention to the fact that the group incurred a net loss of R19
million for the six month period ended 31 December 2006, and, as at that date,
the group`s current liabilities exceeded it`s assets by R26, 2 million.
These conditions, along with other matters as set forth above in the
commentary, indicate the existence of a material uncertainty which may cause
doubt on the groups ability to continue as a going concern. The auditors draw
further attention to the fact that reportable irregularities concerning certain
statutory deductions were reported in terms of Section 45 of the Auditing
Professions Act. The audit report for the year ended 30 June 2006 drew
attention to similar matters.
Accounting policies
The interim report has been prepared in accordance with International Financial
Reporting Standards IAS 34: Interim Financial Reporting.
The same accounting policies and methods of measurement and recognition as
those applied in the 30 June 2006 annual financial statements have been applied
in preparing this interim report.
Dividends
No dividend has been declared for the period under review.
By order of the Board
Tom Dale
Chairman
Zeerust
19 April 2007
Directors: Tom Dale (Chairman), Izak Marais* (CEO), Johann Blersch, Dr Vincent
Msibi(alternate: Jurgen Kugl), Jeremy Woods
*Executive
Registered office: Witkop Fluorspar Mine Farm, Wintershoek, Zeerust, 2865.
(Private Bag X1315, Zeerust, 2865)
Transfer Secretaries: Computershare Investor Services 2004 (Proprietary)
Limited (Registration number 2004/003647/07), 70 Marshall Street,
Johannesburg, 2001. (PO Box 61051, Marshalltown, 2107)
Date: 19/04/2007 08:27:53 Produced by the JSE SENS Department.
