| Thu 25 Sep 2008, 13:00 | | PGL - Pallinghurst Resources (Guernsey) Limited - Interim results for the period |
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PGL
PGL
PGL - Pallinghurst Resources (Guernsey) Limited - Interim results for the period
ended 30 June 2008
Pallinghurst Resources (Guernsey) Limited
Registration Number: 47656
(Incorporated in Guernsey)
ISIN: GG00B27Y8Z93
BSX share code: PALLRES
JSE share code: PGL
("Pallinghurst" or "the Company")
INTERIM RESULTS for the period ended 30 June 2008
* NAV per share up 27% (US$) / up 45% (Rand)
* Successful listing on the JSE
HIGHLIGHTS OF THE PERIOD TO 30 JUNE 2008
* Net asset value per share of $1.30 (R10.15)
* Received exit proceeds of the Consolidated Minerals investment at an
IRR in excess of 150%
* Share placing made in June 2008 to new and existing strategic equity
partners in Faberge Limited, implying a significantly higher rerating in the
Faberge investment valuation
* Successful reverse takeover of Gemfields by Rox Limited (a portfolio
company) and GBP 30 million share placing completed in June 2008
HIGHLIGHTS SINCE 30 JUNE 2008
* Successfully listed on the JSE
* Exercised entitlement to invest in a black empowered manganese
investment in the Kalahari Basin of South Africa
* Exercised entitlement to invest in a black empowered platinum group
metals (PGMs) investment in the Western Limb of the Bushveld Igneous Complex
of South Africa
* Gemfields has released details of a potential offer for TanzaniteOne,
the world`s leading producer of tanzanite. If a bid proceeds and is
successful, a combined Gemfields/ TanzaniteOne entity would create the world`s
leading coloured gemstone producer
Pallinghurst Resources Guernsey CEO Arne H Frandsen commented:
"I am delighted to be able to report an increase in US$NAV of 27% and 45% in
ZAR-NAV for the first six months of the year. We are steadily building our
asset base in our four key focus areas, being Faberge, Coloured Gemstones,
Platinum and Steel Feed Materials.
Our proven ability to identify under performing assets and introducing improved
operational and strategic growth measures, has resulted in us exceeding our
aggressive growth target both in US Dollar and Rand terms.
The momentum is continuing in the second half of the year and we remain
positive as to Pallinghurst`s ability to maintain internal rates of return
above par - despite the extremely challenging market conditions."
Arne H Frandsen, CEO +44 778 7521 871
Martin Tolcher, Legis Fund Services Limited +44 1481 732178
Andrew Willis +44 20 7518 3383
College Hill +27 11 447 3030
Johannes van Niekerk +27 82 921 9110
CONDENSED CONSOLIDATED INCOME STATEMENT
1 Jan 08 to 30 June 08 4 Sept 07 to 31 Dec 07
US$ US$
(reviewed) (restated)(audited)
INCOME
Revenue
Realised profits on
disposal of investments - 4,876,409
Unrealised changes in the
fair value of investments 59,545,397 -
Unrealised foreign
exchange gains in the
portfolio of investments 693,075 -
Portfolio income 60,238,472 4,876,409
Break fee income - 2,025,736
Loan interest income 228,224 10,561
228,224 2,036,297
Revenue and income from
operations 60,466,696 6,912,706
EXPENSES
Investment Manager`s
Benefit (1,269,900) (2,328,095)
Performance Incentive
accrual (12,609,544) -
Administrative expenses (210,095) (330,787)
Other losses (313,189) -
(14,402,728) (2,658,882)
Profit from operations 46,063,968 4,253,824
Net finance income 1,308,723 1,202,830
Profit before share in
loss of associates 47,372,691 5,456,654
Share in loss of
associates (15,235) (7,871)
NET PROFIT FOR THE PERIOD 47,357,456 5,448,783
Earnings, diluted
earnings and headline
earnings per share 0.28 0.03
HEADLINE EARNINGS PER SHARE AND EARNINGS PER SHARE
1 Jan 08 to 30 June 08 4 Sept 07 to 31 Dec 07
US$ US$
EARNINGS PER SHARE (EPS) (reviewed) (restated)(audited)
Headline earnings 47,357,456 5,448,783
Number of shares 169,316,000 169,316,000(1)
EPS after change in
accounting policy and
effect of
1000-for-1 share split 0.28 0.03(2)
(1) A 1000-for-1 share split was approved by Investors on 9 June 2008; for the
purpose of calculating EPS it has been assumed that the share split occurred
before 31 December 2007.
(2) The EPS per the 2007 financial statements was $24.40. The EPS assuming that
the change in accounting policy had occurred before 31 December 2007, but the
share split had not occurred, would have been $32.18.
CONDENSED CONSOLIDATED BALANCE SHEET
2008 2007
US$ US$
(reviewed) (restated) (audited)
ASSETS
Non-current assets
Investments in associates 178,022 193,257
Financial asset investment 1,588,339 -
1,766,361 193,257
Investment portfolio
Quoted investments 67,988,226 -
Unquoted investments 78,715,943 58,401,505
Loan receivable 15,970,758 2,298,490
162,674,927 60,699,995
Total non-current assets 164,441,288 60,893,252
Current assets
Trade and other receivables 26,583,810 25,609,537
Cash and cash equivalents 41,606,595 86,113,647
68,190,405 111,723,184
TOTAL ASSETS 232,631,693 172,616,436
LIABILITIES
Current liabilities
Trade and other payables (267,975) (219,718)
Performance Incentive accrual (12,609,544) -
(12,877,519) (219,718)
TOTAL NET ASSETS 219,754,174 172,396,718
Capital and reserves attributable to
equity holders
Share capital 1,695 1,695
Share premium 166,928,777 166,928,777
Foreign exchange translation reserve 17,463 17,463
Retained earnings 52,806,239 5,448,783
TOTAL EQUITY 219,754,174 172,396,718
NAV and tangible NAV per share 1.30 1.02
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
1 Jan 08 to 30 Jun 08 4 Sept 07 to 31 Dec 07
US$ US$
(reviewed) (restated) (audited)
Net profit for the period 47,357,456 5,448,783
Adjustments for:
Additions to investments (28,064,192) (104,711,568)
Additions to financial
asset investments (1,901,528)
Loan interest reinvested (211,155) -
Fair value changes to
investment portfolio (59,545,397) -
Other losses 313,189 -
Unrealised foreign
exchange gains on
investments portfolio (693,075) -
Loans extended to
investments (23,461,113) (2,287,929)
Loan repayments from
investments 10,000,000 -
Part disposal of
investments - 51,186,594
Gain on return of capital
and sale of investments - (4,876,409)
Net finance income (1,308,723) (1,202,830)
Share in loss of associates 15,235 7,871
Cash flows from operating
activities before
changes in working capital
and provisions (57,499,303) (56,435,488)
Increase in trade and
other receivables (974,273) (25,620,098)
Increase in trade and
other payables 48,257 175,286
Increase in Performance
Incentive accrual 12,609,544 -
11,683,528 (25,444,812)
Cash flows from operating
activities (45,815,775) (81,880,300)
Investing activities
Investments in associates - (156,818)
Net cash used in investing
activities - (156,818)
Financing activities
Issue of ordinary and
management shares - 166,930,472
Net finance income 1,308,723 1,202,830
Net cash generated from
financing activities 1,308,723 168,133,302
NET (DECREASE)/INCREASE IN
CASH AND CASH EQUIVALENTS (44,507,052) 86,096,184
Cash and cash equivalents
at the beginning of the
period 86,113,647 -
Foreign exchange
translation - 17,463
CASH AND CASH EQUIVALENTS
AT THE END OF THE PERIOD 41,606,595 86,113,647
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Retained
Share capital premium earnings
US$ US$ US$
2008 (reviewed)
Balance at 1 Jan 2008 1,695 166,928,777 5,448,783
Net profit for the period - - 47,357,456
Balance at 30 Jun 2008 1,695 166,928,777 52,806,239
2007 (restated) (audited)
Balance at 4 Sept 2007 - - -
Net profit for the period - - 5,448,783
Foreign exchange
translation reserve - - -
Issue of share capital 1,695 166,928,777 -
Balance at 31 Dec 2007 1,695 166,928,777 5,448,783
Foreign
exchange
translation
reserve Total
US$ US$
2008 (reviewed)
Balance at 1 Jan 2008 17,463 172,396,718
Net profit for the period - 47,357,456
Balance at 30 Jun 2008 17,463 219,754,174
2007 (restated) (audited)
Balance at 4 Sept 2007 - -
Net profit for the period - 5,448,783
Foreign exchange
translation reserve 17,463 17,463
Issue of share capital - 166,930,472
Balance at 31 Dec 2007 17,463 172,396,718
Notes
Accounting policies
These results have been compiled in accordance with IAS34 Interim Financial
Reporting, and the Companies (Guernsey) Law, 1994. The presentation of these
results also conforms to the listing requirements of the JSE Limited for
interim reporting.
The accounting policies used are in line with those disclosed in the audited
financial statements for the period ending 31 December 2007, except for a
change in accounting policy relating to the accounting for the portfolio of
investments. IAS 28 Investments in Associates allows investments held by
venture capital organisations to be excluded from its scope where those
investments are designated, upon initial recognition, as at fair value
through profit or loss and accounted for in accordance with IAS 39 Financial
Instruments: Recognition and Measurement, with changes in fair value
recognised in the income statement in the period of the change. This treatment
has been applied to the current period and the comparative period restated
accordingly. Users of the financial statements will now be provided with more
reliable and more relevant information about the Group`s financial position
and financial performance. The change complies with IFRS, specifically
IAS 8 Accounting Policy, Changes in Accounting Estimates and Errors,
paragraph 14.
Also, in line with the requirements of IAS 14 Segment Reporting, the Group`s
segmental reporting has been amended to give user of the financial statements
information that is similar to that used by management and the comparative
figures have been restated accordingly.
For more detail please see the interim financial statements.
www.pallinghurst.com
FAIR VALUATION OF INVESTMENTS
Unrealised Unrealised
fair value FX
Current cost adjustments gains
Investment US$ US$ US$
2008 (reviewed)
Quoted equity investments
Gemfields Resources plc 52,525,840 6,991,781 646,564
Jupiter Mines Ltd 4,707,201 (250,026) 41,296
Mindax Ltd 2,709,807 543,569 5,099
Iron Mountain Mining Ltd 61,468 5,511 116
60,004,316 7,290,835 693,075
Unquoted equity investments
Faberge Ltd 26,461,381 52,254,562 -
Loan investments
Tshipi JV/ Pallinghurst
Kalahari(1) 5,749,042 - -
Faberge Ltd(2) 10,000,000 - -
15,749,042 - -
Total investment portfolio 102,214,739 59,545,397 693,075
Total
Accrued valuation
Investment interest US$
2008 (reviewed)
Quoted equity investments
Gemfields Resources plc - 60,164,185
Jupiter Mines Ltd - 4,498,471
Mindax Ltd - 3,258,475
Iron Mountain Mining Ltd - 67,095
- 67,988,226
Unquoted equity investments
Faberge Ltd - 78,715,943
Loan investments
Tshipi JV/ Pallinghurst Kalahari(1) 97,267 5,846,309
Faberge Ltd(2) 124,449 10,124,449
221,716 15,970,758
Total investment portfolio 221,716 162,674,927
Unrealised Unrealised
fair value FX
Current cost adjustments gains
Investment US$ US$ US$
2007 (restated) (audited)
Unquoted equity investments
Faberge Limited 26,461,381 - -
Rox Limited (relating to
Gemfields
Resources) 31,940,124 - -
58,401,505 - -
Loan investments
Tshipi JV/ Pallinghurst
Kalahari(1) 2,287,929 - -
Total investment portfolio 60,689,434 - -
Total
Accrued valuation
Investment interest US$
2007 (restated) (audited)
Unquoted equity investments
Faberge Limited - 26,461,381
Rox Limited (relating to Gemfields
Resources) - 31,940,124
- 58,401,505
Loan investments
Tshipi JV/ Pallinghurst Kalahari(1) - 2,287,929
Total investment portfolio - 60,699,995
(1) The loan to Pallinghurst Kalahari (Mauritius) Limited ("Pallinghurst
Kalahari") is provided to enable the latter to acquire an initial equity
participation in the joint venture, in terms of the agreement concluded with
Ntsimbintle Limited. The terms of the loan are interest bearing (at a rate of
1 month USD LIBOR +2%), unsecured and repayable within twelve months.
(2) The loan to Faberge Limited was unsecured, bore interest at LIBOR plus 4%
until the repayment date. The loan was repaid on 31 July 2008 including accrued
interest of US$182,243.
SEGMENTAL REPORTING
Primary reporting format - by business segment
Luxury Steel Feed Coloured
brands Corporation Gemstones
US$ US$ US$
2008 (reviewed)
Realised profits on
disposal of investments - - -
Unrealised fair value/ FX gains of
investments 52,254,562 345,565 7,638,345
Portfolio income - 228,224 -
Revenue and income from operations52,254,562 573,789 7,638,345
Other expenses, net finance income
and share of loss in associates - - -
Net profit/(loss) for the period 52,254,562 573,789 7,638,345
Valuation of investment
portfolio(1) 88,840,392 13,670,350 60,164,185
Other net assets - - -
Total net assets 88,840,392 13,670,350 60,164,185
2007 (restated) (audited)
Realised profits on disposal
of investments 473,624 4,402,785 -
Unrealised fair value/ FX gains of
investments - - -
Portfolio income - 2,036,297 -
Revenue and income from operations 473,624 6,439,082 -
Other expenses, net finance income
and share of loss in associates - - -
Net profit/(loss) for the period 473,624 6,439,082 -
Valuation of investment
portfolio(1) 25,986,846 2,298,490 32,414,659
Other net assets - 25,608,459 -
Total net assets 25,986,846 27,906,949 32,414,659
Other Group
US$ US$
2008 (reviewed)
Realised profits on
disposal of investments - -
Unrealised fair value/ FX gains of
investments - 60,238,472
Portfolio income - 228,224
Revenue and income from operations - 60,466,696
Other expenses, net finance income
and share of loss in associates (13,109,240) (13,109,240)
Net profit/(loss) for the period (13,109,240) 47,357,456
Valuation of investment portfolio(1) - 162,674,927
Other net assets 57,079,247 57,079,247
Total net assets 57,079,247 219,754,174
2007 (restated) (audited)
Realised profits on disposal
of investments - 4,876,409
Unrealised fair value/ FX gains of
investments - -
Portfolio income - 2,036,297
Revenue and income from operations - 6,912,706
Other expenses, net finance income
and share of loss in associates (1,463,923) (1,463,923)
Net profit/(loss) for the period (1,463,923) 5,448,783
Valuation of investment portfolio(1) - 60,699,995
Other net assets 86,088,264 111,696,723
Total net assets 86,088,264 172,396,718
(1) The valuations include both equity investments and loans made to the
investments within the investment portfolio.
Investment Manager`s Report
INCORPORATION AND NEW PRIMARY LISTING ON THE JSE
The Company was incorporated on 4 September 2007, and listed on the Bermuda
Stock Exchange (BSX).
The JSE approved the application for a primary listing of all the issued shares
of Pallinghurst in the "Equity Investment Instruments" sector of the JSE main
board with effect from 20 August 2008.
Pallinghurst will continue to be listed on the BSX, as its secondary listing.
INVESTMENTS AND REALISATION
FABERGE LIMITED:
In May 2008, a US$12.1 million share placing was made to new and existing
strategic equity partners, diluting the Company`s see-through interest to
43.2%, but resulting in an implied unrealised value of the Company`s equity
stake of approximately US$79 million.
Faberge enjoys excellent brand recognition globally, and will benefit from the
rapid growth in the premium jewellery market and the strong appetite of high
net worth individuals for superlative luxury items. Faberge will be guided by
the model pioneered by Peter Carl Faberge, pursuing excellence in creativity,
design and craftsmanship. The worldwide debut of its new collection, which will
focus on high jewellery, is planned for the second quarter of 2009.
GEMFIELDS RESOURCES PLC:
During December 2007, the Company announced the proposed reverse takeover of
Gemfields Resources plc by Rox Limited, a Pallinghurst portfolio company. The
reverse takeover was successfully completed on 6 June 2008, together with a
share placing of GBP 30 million (US$ 58.9 million). Together with a further
purchase of shares on the open market during June, the company`s see through
interest in Gemfields is approximately 28%, for a total aggregate cost of
US$52.5 million.
Gemfields intends to become the leading producer and supplier of coloured
gemstones by pursuing consolidation and vertical integration opportunities in
the industry on an international scale. Gemfields` operating scope will include
acquiring and running mines of suitable scale, in-house cutting and polishing
of its high-grade material and pursuing suitable marketing and branding
programmes for coloured gemstones.
Gemfields will seek to further enhance the market appeal of its coloured
gemstones including improving consistency of supply, ensuring ethical sourcing
of gemstones and focusing on natural, untreated stones.
CONSOLIDATED MINERALS LIMITED:
During the period ending 31 December 2007, the Company, along with certain
strategic equity partners, acquired a stake in Consolidated Minerals Limited
shares and convertible bonds. The Company realised this investment during 2007
and proceeds of US$25.6 million were received during the current period. The
overall profit from the investment to the Company was US$6.2 million, or an IRR
in excess of 150%.
EVENTS OCCURRING AFTER THE END OF THE PERIOD
The most significant events occurring after the end of the period are detailed
below. For the details of a number of less significant events occurring after
the end of the period see the interim financial statements.
Inward listing on the JSE on 20 August 2008
On 20 August 2008, the Company obtained an inward listing on the JSE Limited
("JSE").
In addition to complying with its undertaking to do so within a year of listing
on the BSX, the Company sought to implement the JSE listing in order to achieve
a number of strategic and financial benefits including:
* facilitating investments by the Company within the Common Monetary Area;
* enhancing the liquidity and tradability of the Company`s shares;
* facilitating the incremental investment and direct investment in its shares
by South African institutional and retail investors respectively;
* appealing to a broader set of prospective investors, thus providing further
access to capital markets in order to facilitate and accelerate the Company`s
growth and/or acquisition of investments falling within the Company`s
investment scope;
and
* increasing the Company`s public presence and profile.
The Company did not issue new shares as part of the inward listing. However,
the Company may offer further shares for subscription in the future, subject to
the funding requirements of its existing and prospective Investments.
New manganese investment in the Kalahari Basin
The Company has entered into a manganese investment in the Kalahari Basin of
South Africa, in a joint venture with Ntsimbintle Mining (Proprietary) Limited,
called Tshipi e Ntle Manganese Mining (Pty) Ltd ("Tshipi JV"). The purpose of
the joint venture is to create a significant manganese producer within the next
3 year period.
Following the inward listing on 20 August 2008, the Company has invested
approximately US$2.8 million for a see-through equity stake of 9.80% in
Tshipi JV.
New PGM investment in Western Limb of the Bushveld Igneous Complex
The Company has entered into a new platinum investment in the Bushveld Igneous
Complex of South Africa. The Company, along with certain strategic equity
partners, have formed a broad-based and black-owned PGM investment vehicle with
the Bakgatla-Ba-Kgafela tribe ("Bakgatla"), 49.9% by the Pallinghurst
Consortium.
Following the inward listing on 20 August 2008, the Company invested
approximately US$25.2 million for a see-through equity stake of 9.26%.
Gemfields proposed offer to shareholders of TanzaniteOne (T1)
A proposed offer by Gemfields to the shareholders of T1 was made on
12 September 2008, at 45p for each share in T1. T1 is an AIM-listed producer
of a variety of gemstones, including tanzanite, with operations in Tanzania
and Kenya.
The proposed offer described above does not amount to a firm intention to make
an offer. The proposal is at an early stage and there can be no certainty that
any offer will ultimately be made.
As there is no guarantee that an offer will be made, and the Board of T1 are
initially opposed to the proposed offer, there are clearly no guarantees that
the strategy will succeed, but if the bid is successful the Investment Manager
believes that the transaction would unlock significant value for Gemfields
shareholders including the Company.
Further equity investment of US$15 million into Faberge Limited on 11 August
2008
On 11 August 2008, the Company invested a further US$15 million directly
into Faberge Limited in return for an issue of new shares. This represents an
additional stake of 7.61%, which, combined with the existing stake held through
Faberge Conduit (which is diluted by the new purchase), results in a total
see-through interest in Faberge Limited of 47.55%.
The cost of the new investment was in line with the recent cost of investment
paid by other third party investors in April 2008, on which the fair value of
the investment in Faberge Limited at 30 June 2008 has been based. The directors
therefore believe that the new stake has a fair value of US$15 million,
equivalent to cost.
Interim financial statements
Interim financial statements have been released and made available to
shareholders. The independent review conclusion on the interim financial
statements, from Saffery Champness, the auditors, was unqualified. The interim
financial statements are available on the Pallinghurst website,
www.pallinghurst.com
On behalf of the Board
B Gilbertson A Frandsen
Chairman Chief Executive Officer
DIRECTORS Brian Gilbertson, Arne Frandsen, Stuart Platt-Ransom, Clive Harris,
Martin Tolcher* *Appointed permanent alternate to Stuart Platt-Ransom on
3 June 2008 ADMINISTRATOR, SECRETARY AND REGISTERED OFFICE Legis Fund
Services Limited, 1 Le Marchant Street, St Peter Port, Guernsey, GY1 4HP,
Channel Islands
INVESTMENT MANAGER Pallinghurst (Cayman) GP L.P., Walker House, 87 Mary Street,
George Town, Grand Cayman, Cayman Islands INVESTMENT ADVISER Pallinghurst
Resources LLP, 54 Jermyn Street, London, SW1Y 6LX, United Kingdom AUDITOR
Saffery Champness, La Tonnelle House, St Sampson, Guernsey, GY1 3HS, Channel
Islands
Sponsor: Investec Bank Limited
Date: 25/09/2008 13:00:03 Produced by the JSE SENS Department.
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