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MML
MML
MML - Metmar Limited - Unaudited interim financial results for the six months
ended 31 August 2007
Metmar Limited
("Metmar" or "the Company")
Incorporated in the Republic of South Africa
Registration Number 1998/007269/06
Share Code: MML
ISIN Code: ZAE000078747
Unaudited Interim Financial Results
for the six months ended 31 August 2007
Revenue up 49,5%
Profit for the period up 45,3%
Headline earnings per share up 41,4%
CONDENSED CONSOLIDATED INCOME STATEMENTS
Unaudited Unaudited Audited
six months to six months to year ended
31 August 31 August 28 February
Figures in R`000 2007 2006 2007
Revenue 1 087 960 727 713 1 634 164
Cost of sales (1 028 003) (664 451) (1 511 579)
Gross profit 59 957 63 262 122 585
Other income 4 401 1 785 11 928
Operating expenses (25 064) (27 049) (56 328)
Operating profit 39 294 37 998 78 185
Investment revenue 2 634 1 071 2 651
Share of associate`s 9 021 - -
profit
Finance costs (8 278) (7 149) (14 670)
Profit before taxation 42 671 31 920 66 166
Taxation (9 775) (9 274) (16 747)
Profit for the period 32 896 22 646 49 419
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
six months at six months at at
31 August 31 August 28 February
Figures in R`000 2007 2006 2007
Assets
Non-current assets
Property, plant and 13 550 15 313 17 678
equipment
Intangible asset 6 192 6 407 7 269
Investment in unlisted 43 743 - -
associate
Financial assets 2 101 1 613 3 536
Deferred taxation 1 032 1 824 1 077
66 618 25 157 29 560
Current assets
Inventories 101 250 86 146 96 406
Financial assets 9 297 - 3 914
Trade and other 255 794 162 327 181 995
receivables
Cash and cash 55 885 39 211 32 880
equivalents
422 226 287 684 315 195
Total assets 488 844 312 841 344 755
EQUITY AND LIABILITIES
Capital and reserves 142 447 74 543 98 647
Non-current liabilities
Interest bearing 847 3 768 1 055
borrowings
847 3 768 1 055
Current liabilities
Trade and other 207 566 92 688 131 653
payables
Financial liabilities 2 748 6 276 2 758
Taxation 11 847 13 060 7 778
Trade finance 123 389 118 990 100 056
facilities
Bank overdrafts - 3 516 2 808
345 550 234 530 245 053
Total liabilities 346 397 238 298 246 108
Total equity and 488 844 312 841 344 755
liabilities
Net asset value per 76,85 42,51 56,25
share (cents)
Net tangible asset value 73,51 38,85 52,11
per share (cents)
Number of shares in 185 362 058 175 362 058 175 362 058
issue
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
Unaudited Unaudited Audited
six months to six months to year ended
31 August 31 August 28 February
Figures in R`000 2007 2006 2007
Cash flows from operating
activities
Cash generated from 59 462 69 731 55 130
operations
Interest received 2 634 1 071 2 651
Finance costs (8 278) (7 149) (14 670)
Dividend received from 1 278 - -
associate
Taxation paid (5 706) (4 538) (16 975)
Net cash from operating 49 390 59 115 26 136
activities
Cash flows from investing
activities
Purchase of property, - - (5 754)
plant and equipment
Proceeds from disposal of 255 - 1 391
property, plant and
equipment
Proceeds on disposal of 5 858 - -
operations
Investment in associate (36 000) - -
Net movement in financial (3 948) 1 237 (5 708)
assets
Net cash used in/generated (33 835) 1 237 (10 071)
by investing activities
Cash flows from financing
activities
Proceeds from share issue 35 500 - -
Share issue expenses - - (5 889)
Repayment of non-current (10) (1 460) (3 557)
liabilities
Net movement in loans to - - 2 317
group companies
Net movement in instalment (208) - (414)
sale agreements
Capital distribution to (25 024) (17 537) (17 535)
shareholders
Net cash raised/(used) in 10 258 (18 997) (25 078)
financing activities
Total cash movement for 25 813 41 355 (9 013)
the period
Cash at the beginning of 30 072 (5 660) 39 085
the period
Cash and cash equivalents 55 885 35 695 30 072
at end of the period
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Foreign
capital currency
and share translation Retained
Figures in R`000 premium reserve income
Group
Balance at 1 March 2006 721 - 71 606
Changes in equity
Goodwill arising on business - - 731
combinations
Revaluation - 44 -
Currency translation - (472) -
differences
Net income (expenses) - (428) 731
recognised directly in equity
Share issue expenses - - (5 889)
Net profit for the period - - 49 062
Distribution to shareholders - - (17 535)
Balance at 28 February 2007 721 (428) 97 975
Changes in equity
Currency translation - 428 -
differences
Net income (expenses) - 428 -
recognized directly in equity
Net profit for the period - - 32 896
New share issue 35 500 - -
Sale of subsidiary - Matrix - - 379
minority
Distribution to shareholders - - (25 024)
Balance at 31 August 2007 36 221 - 106 226
Minority Total
Figures in R`000 interest equity
Group
Balance at 1 March 2006 22 72 349
Changes in equity
Goodwill arising on business - 731
combinations
Revaluation - 44
Currency translation differences - (472)
Net income (expenses) recognised - 303
directly in equity
Share issue expenses - (5 889)
Net profit for the period 357 49 419
Distribution to shareholders - (17 535)
Balance at 28 February 2007 379 98 647
Changes in equity
Currency translation differences - 428
Net income (expenses) recognized - 428
directly in equity
Net profit for the period - 32 896
New share issue - 35 500
Sale of subsidiary - Matrix (379) -
minority
Distribution to shareholders - (25 024)
Balance at 31 August 2007 - 142 447
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited consolidated interim financial results have been prepared
in accordance with International Reporting Standards ("IFRS"), IAS34:
"Interim Financial Reporting", the South African Companies Act, as
amended, and the JSE Listings Requirements. The principal accounting
policies used in the preparation of the financial results for the period
ended 31 August 2007 are consistent with those applied for the year ended
28 February 2007.
2. Other income
Other income includes:
Unaudited Unaudited Audited
six months to six months to year ended
31 August 31 August 28 February
Figures in R`000 (2007 2006 2007
Gain on disposal of 1 518 - -
operations
Profit on exchange 1 600 1 758 5 940
differences
Redeemable preference - - 4 387
shares cancelled
Other 1 283 27 1 601
4 401 1 785 11 928
3. Reconciliation between profit and headline earnings
As at As at As at
31 August 31 August 28 February
2007 2006 2007
Unaudited Unaudited Audited
(R`000) (R`000) (R`000)
Profit for the period/year 32 896 22 646 49 419
Adjustments for:
- (gain)/loss on disposal (48) 1 (8)
of
property, plant and
equipment
- gain on disposal of (930) - -
operations
- fair value adjustments 1 246 - (381)
- redeemable preference - - (4 387)
shares cancelled
Headline earnings 33 164 22 647 44 643
Earnings per share (cents)
- Headline 18,2 12,9 28,0
- Attributable 18,1 12,9 25,3
Weighted average number of 182 028 725 175 362 058 175 362 058
shares in issue*
Weighted average number of
shares in issue
- as at 28 February 2007 175 362 058
- new issue 1 May 2007
(10 000 000)
- weighted 10 000 000* 4/6 6 666 667
Weighted average number of
shares in issue @
31 August 2007 182 028 725
4. Cash and cash equivalents
Cash and cash equivalents comprise cash balances with banks, less bank
overdrafts.
Trade finance facilities are accounted for separately.
5. Related party transactions
During the period, the Company and its subsidiaries in the ordinary
course of business, entered into various transactions with their
associates. These transactions were subject to terms that were no less
favourable than those arranged with third parties.
6. Corporate governance
The Metmar group complies with the code of Corporate Practice and Conduct
published in the King II report on Corporate Governance.
7. Post-balance sheet events
On 1 September 2007 the Company acquired an additional 5,2% interest in
PGR 17 Investments (Pty) Limited ("PGR") for R14,8 million, bringing its
total interest in PGR up to 21%. PGR is an investment holding company
which is the controlling shareholder of Mogale Alloys (Pty) Limited
("Mogale"). This acquisition gives the Company an effective 11,81%
interest in Mogale.
COMMENTARY ON INTERIM RESULTS
PROFILE AND STRUCTURE
Metmar group`s core activities are the physical trading of commodities. Our
business is about managing risk and rendering the highest service levels.
Speculative positions do not form part of Metmar`s operating imperative.
Metmar`s activities are underpinned by strong and long standing partnerships
with financial institutions, producers, industrial consumers and logistical
services. This combination of an extensive commodities network together with
logistical and shipping experience support Metmar`s niche.
FINANCIAL PERFORMANCE
The Metmar group is pleased to report a significant growth in revenue during
the first six months of the current financial year which increased by 49,5%
from R727,7 million to R1,087,9 million.
Gross margin has decreased by 3,2% from 8,7% to 5,5%. Pressure on gross margin
in the first six months of this financial year is attributable to the
establishment of alternative longer-term more sustainable sources of supply
and the spiralling cost of freight and logistics.
Pre-tax profit of R42,7 million exceeded the previous comparative six month
period of R31,9 million by R10,8 million (33,7%).
Headline earnings per ordinary share increased by 41,1% from 12,91 cents to
18,22 cents.
Equity accounted profit of R9,0 million from Associate PGR 17 Investments,
acquired in April 2007 via a new issue of 10 million shares, contributed to
profit after taxation of R32,9 million compared to the previous comparative
six month period of R22,6 million.
Cash and cash equivalents at the end of the period improved by R23,0 million
to R55,8 million from R32,8 million at 28 February 2007. There has been a
steady increase in the usage of trade finance facilities of R23,4 million to
R123,4 million from R100,0 million due to increased trading activity.
OPERATIONAL PERFORMANCE AND PROSPECTS
As predicted, demand for the full spectrum of commodities has remained strong
and no change is anticipated in the second half of the financial year. Prices
have remained relatively robust, and whilst Metmar has experienced some
volatility in both prices and currencies, due to Metmar`s internal policies
there has been little risk or exposure to these fluctuations.
Several developments have progressed in the first period of the current
financial year.
Metmar disposed of the Matrix group (secondary lead smelter and lead
anode producer) and Hornet Properties (property investment company) to
Thuthuka Group Limited on 1 March 2007 for R5,8 million. As the
businesses were non core to the activities and future vision of Metmar,
it was decided to dispose of these assets at the time of near record lead
metal prices.
Kalahari Resources (Pty) Limited ("Kalahari"), in which Metmar holds 10%
equity, completed the drilling programme of 24 holes under the Kalagadi
Manganese (Pty) Limited project. It was decided through Mineral
Corporation to drill a further six confirmation holes, four of these
holes have been completed with the final two due for completion soon. The
results reflecting the size of the deposit are favourable.
Kalahari has received a number of financial proposals from potential
international partners in their manganese project.
Detailed engineering and full bankable feasibility is expected to take a
further three months.
Subsequent to 31 August 2007 Metmar acquired an additional 5,2% interest
in PGR for R14,8 million, settled in cash, bringing the total interest in
PGR up to 21%. PGR is the holding company of Mogale and this investment
provides an effective 11,81% interest in Mogale. The total acquisition
was undertaken in two tranches, totalling R50,8 million.
Demand for Mogale`s production of manganese and chrome alloys has been
exceptionally strong and prices have been at near record levels.
Strong financial results are anticipated for Mogale to March 2008.
Metmar`s marketing agreement with Kivu Resources Limited ("Kivu") is in
motion. South African Reserve Bank approval for Metmar`s 7% equity stake
in Kivu is awaited.
Kivu owns tin, tantalum and tungsten deposits in both Rwanda and eastern
Democratic Republic of Congo. Kivu is currently undertaking an intensive
exploration programme in conjunction with SRK Consultants, Cardiff, UK.
The preliminary exploration results appear to be very encouraging.
Overall Metmar`s core trading operations remain healthy and we expect a
strong second half of our financial year from our trading activities.
BEE
Terms, conditions and pricing have been agreed earlier in the year in respect
of equity participation with a number of Black Economic Empowerment entities.
The transaction will be finalised in the near future.
DISTRIBUTION TO SHAREHOLDERS
A distribution of 13,5 cents per ordinary share was made in July 2007 in
respect of the Metmar Group`s 2007 financial year. In line with the Group`s
dividend policy, a distribution for 2008 will be made after closure of the
current financial year.
L Boyd DJ Ellwood
Non-Executive Chairman Chief Executive Officer
7 November 2007
Directors:
L Boyd* (Chairman), DJ Ellwood (Chief Executive Officer), PP Boshoff, CB
Brayshaw*, GR Forsdyke, GP Lotis, D Mashile-Nkosi*, AP Ruiters*, MF de Wet
(Alt) * Non-executive
Company secretary:
MRD Boyns (British)
Registered office:
24 Sloane Street, Bryanston, 2191 (P O Box 98549, Sloane Park, 2152)
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited (PO Box 61051,
Marshalltown, 2107)
Sponsor:
BDO QuestCo (Pty) Limited
Auditors:
Grant Thornton
These results may be viewed on the internet on http://www.metmar.com
Date: 07/11/2007 15:24:01 Produced by the JSE SENS Department.
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