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ZCI
ZAKK
ZCI - Zambia Copper Investments Limited - Reviewed interim report
ZAMBIA COPPER INVESTMENTS LIMITED
(Registered in Bermuda)
("ZCI" or "the Company")
ISIN : BMG 988431240
REVIEWED INTERIM REPORT
ZAMBIA COPPER INVESTMENTS LIMITED
Consolidated Income Statement
for the six months ended 30 September 2008
expressed in thousands of US Dollars
Reviewed Audited Reviewed
Six months Twelve months Six months
ended ended ended
30 September 31 March 2008 30
2008 September
2007
Finance income 2,652 465 221
General and administration (1,028) (5,956) (3,892)
expenses
Impairment loss arising from (887) - -
available
for sale investments
Income from associated - 36,268 36,268
companies
Net cost arising from assets - (2,732) -
classified
as held for sale
Profit before taxation 737 28,045 32,597
Taxation (39) (67) (32)
Profit for the period / year 698 27,978 32,565
Headline earnings per 0.55 25.62 25.80
ordinary share
in US cents
Less exceptional expenses :
Negative fair value of - (3.45) -
derivative
Net profit per ordinary 0.55 22.17 25.80
share
in US Cents
126,197,3 62 126,197,362 126,197,362
Number of ordinary shares in
issue
Consolidated Balance Sheet
as at 30 September 2008
expressed in thousands of US Dollars
Reviewed Audited
30 September 31 March 2008
2008
Current assets
Available for sale 10,733 12,322
investment
Accounts receivable 5,726 5,258
Cash and cash equivalents 219,234 6,584
Assets classified as held - 205,398
for sale
235,693 229,562
Current liabilities
Accounts payable and accrued (1,318) (7,296)
liabilities
Net current assets 234,375 222,266
Total assets less current 234,375 222,266
liabilities
Net assets 234,375 222,266
Capital and reserves
Capit 334,547 334,547
al
Revaluation reserve - 702
Amounts recognized directly
in equity relating
to assets classified as - (12,113)
held for sale
Accumulated loss (100,172) (100,870)
Total Shareholders` Equity 234,375 222,266
Number of ordinary shares in 126,197,362 126,197,362
issue
Net asset value (per 185.72 176.12
ordinary share) in USD cents
Consolidated statement of changes in equity
for the six months ended 30 September 2008
expressed in thousands of US Dollars
Share Contributed Revaluation Hedging
capital surplus reserve reserve
Balance at 31 March 2007 30,299 304,248 573 (12,558)
Revaluation on available
for sale investment - - 525 -
Hedging reserve of
associated company - - - 445
Profit for the period - - - -
----- ----- ------ -----
Balance at 30
September 2007 30,299 304,248 1,098 (12,113)
Revaluation on available
for sale investment - - (396) -
associated company - - - 12,113
Profit for the period - - - -
----- ----- ----- -----
Balance at 31 March 2008 30,299 304,248 702 -
Transfer to income
statement on available
for sale investment - - (702) -
Disposal of assets
held for sale - - - -
Profit for the period - - - -
----- ----- ----- -----
Balance at 30
September 2008 30,299 304,248 - -
---- ----- ----- -----
Consolidated statement of changes in equity (cont)
for the six months ended 30 September 2008
expressed in thousands of US Dollars
Assets
classified
as held Accumulated Total
for sale loss equity
Balance at 31 March 2007 - (128,848) 193,714
Revaluation on available
for sale investment - - 525
Hedging reserve of
associated company - - 445
Profit for the period - 32,565 32,565
----- ------ -----
Balance at 30
September 2007 - (96,283) 227,249
Revaluation on available
for sale investment - - (396)
Hedging reserve of
associated company (12,113) - -
Profit for the period - (4,587) (4,587)
---- ---- -----
Balance at 31 March 2008 (12,113) (100,870) 222,266
Transfer to income
statement on available
for sale investment - (702)
Disposal of assets
held for sale 12,113 - 12,113
Profit for the period 698 698
---- ---- -----
Balance at 30
September 2008 - (100,172) 234,375
----- ----- -----
Consolidated statement of cash flow
for the six months ended 30 September 2008
expressed in thousands of US Dollars
Reviewed Audited Reviewed
Six months Twelve months Six months
ended ended ended
30 September 31 March 2008 30
2008 September
2007
Cash flow from operating
activities
Cash paid to suppliers and (2,686) (3,198) (1,145)
employees
Cash absorbed by operations (2,686) (3,198) (1,145)
Interest received 2,224 135 57
Income tax paid (38) (86) (33)
Net cash absorbed by (500) (3,149) (1,121)
operating activities
Cash flow from investing
activities
Purchase of available for - (1,600) (1,600)
sale investments
Proceeds from partial - 5,220 -
disposal of investment
in subsidiary
Proceeds from disposal of 213,150 - -
assets classified as held
for sale
Dividends received from - 1,629 -
assets classified as held
for sale
Dividends received from - 1,628 1,628
associated company
Cash generated by investing 213,150 6,877 28
activities
Net (decrease) / increase in 212,650 3,728 (1,093)
cash
Net cash at the beginning of 6,584 2,856 2,856
the period / year
Net cash at the end of the 219,234 6,584 1,763
period / year
Notes to the interim financial statements
for the six months ended 30 September 2008
expressed in thousands of US Dollars
1. ACCOUNTING POLICIES
These consolidated interim financial statements have been prepared in
accordance with IAS 34, Interim Financial Reporting. IAS 34 does not
require a full set of disclosures for interim financial statements. These
consolidated interim financial statements are in compliance with IFRSs when
users of such information have access to the most recent IFRS annual financial
statements, which are available on our website.
In its consolidated interim financial statements, Zambia Copper
Investments Limited applied the same accounting policies as described in
the consolidated financial statements for the year ended 31 March 2008.
The consolidated balance sheet of Zambia Copper Investments Limited and
its subsidiaries (the "Group") for the period ended 30 September 2008 and
the related consolidated statements of income, cash flow, and change to
shareholders equity for the period then ended, have been reviewed by KPMG
Audit S.a.r.l. Luxembourg, in accordance with the International Standard on
Review Engagements (ISRE) 2410, applicable to review engagements, and their
review report is available for inspection at the registered office of the
Company. These consolidated interim financial statements are the
responsibility of the Board of Directors.
2. FINANCE INCOME
Six months ended Six months ended
30 September 2008 30 September 2007
Interest income on cash
and cash equivalents 2,537 56
Interest income on accounts
receivable 115 -
Unwinding of discount on
deferred purchase consideration - 165
------ ------
2,652 221
------ ------
3. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the period to 30 September 2008
include costs relating to the Circular to Shareholders of 2 September 2008
in addition to ordinary operating expenses. The period to 30 September 2007
included ordinary operating expenses as well as costs relating to the
arbitration proceedings on the Vedanta call option and sale of Konkola
Copper Mines Plc (KCM).
4. INCOME FROM ASSOCIATED COMPANY
With effect from 30 September 2007, the investment in KCM met the criteria
to be classified as held for sale in accordance with IFRS 5. From that
date, it was no longer considered to be an associated company, and equity
accounting was discontinued.
5. AVAILABLE FOR SALE INVESTMENT
The investment represents investments in an equity mutual fund. The fair
value for available for sale investments is based on dealer price quotations.
Gains and losses arising from changes in the fair value are recognized
directly in equity until the security is disposed of or is determined to be
impaired, at which time the cumulative gain or loss previously recognized in
equity is included in the net profit and loss for the period.
6. ASSETS CLASSIFIED AS HELD FOR SALE
As at 30 September 2007, the investment in KCM met the criteria to be
classified as held for sale. The investment was measured at its carrying
value as of 30 September 2007 and equity accounting was discontinued as from
that date. Vedanta settled its obligations under the terms of the Vedanta
call option deed with an effective date of 9 April 2008. The Group`s
investment in KCM was transferred to Vedanta on that date in exchange for the
cash receipt of the call option`s exercise price, USD 213,150,000.
7. CASH AND CASH EQUIVALENTS
The increase in cash is the result of the receipt of the Vedanta call
option exercise price and interest earned on cash deposits and cash
equivalents, less payment of operating expenses.
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The decrease of USD 5,978,000 from 31 March 2008 is the sum of the net
reduction in creditors and accrued expenses and the settlement of the
derivative financial instrument liability of USD 4,361,000.
9. SUBSEQUENT EVENTS
The Company issued a Circular to Shareholders on 2 September 2008
relating to the offer by the Company to purchase from all shareholders
all or a portion of their ZCI shares at a price of 186.48 US cents per share,
being the net asset value per share as at 31 August 2008. The voluntary tender
offer closed on 10 October 2008. The Company repurchased 70,519,719 ordinary
shares for offer consideration of USD 131,505,172 cash. The repurchased
shares were cancelled. After this transaction, the Company has 55,677,643
ordinary shares in issue.
CHAIRMAN`S STATEMENT
I am pleased to present the Company`s reviewed interim financial statements
for the period ended 30 September 2008. These results are a snapshot of the
Company`s financial situation in the midst of the tender offer (buy-back)
process, being after the buy-back was approved by the shareholders at the
Company`s special general meeting called for this purpose on 24 September
2008, but prior to the closing of the offer on 10 October 2008 and the
subsequent payment of the tender price to shareholders accepting the offer.
The results of the buy-back are dealt with in the "Subsequent Events" note
to these financial statements. The tender offer was, in the Board`s view,
the
most effective way of returning value to shareholders. A significant number
of shareholders tendered shares in terms of the offer and the resulting
shareholder base post the buyback is significantly reduced. The Board
welcomes the confidence shown in it by the remaining shareholders as the
Company enters a new and exciting chapter.
Knowing that any new business plan "post KCM" would require increased depth
of experience and expertise on the Board for both corporate governance as
well as purely business reasons, I am delighted that the shareholders approved
the appointment of three new directors to the ZCI Board on 24 September 2008
and I take this opportunity to formally welcome three new Board members to the
Board, namely Thys du Toit, Prof. Stephen Simukanga and Edgar Hamuwele.
The latter weeks of this reporting period and the month of October 2008 in
particular, marked what was to date the height of extreme and unprecedented
market turmoil and volatility on a worldwide scale. During this period, ZCI
has been invested primarily in cash, meaning that the negative effects of
the financial crisis have largely been avoided, although your Board has
needed to remain extremely vigilant in order to prevent significant negative
exposure
to banking risk. The Company has regrettably not emerged completely unscathed,
with its sole investment in an equity mutual fund tracking the worldwide
downturn in such investments as will be seen from the financial statements.
This position has now been closed out to prevent further loss.
Shareholders are naturally interested to know what ZCI`s next steps will be.
The circular dated 2 September 2008 contained the broad outlines of the new
business strategy that the Company intends to pursue. This remains the case.
Shareholders will be aware that while the Company remains purely a cash shell,
without having made significant investments, its continued listing on the
JSE and by extension on the Euronext in Paris, is dependent on the
JSE Listings Requirements and deadlines imposed therein. In the absence of
appropriate investments being made within the time scales set out by the
JSE or of a shareholders circular being posted setting out new listings
particulars,
ZCI faces the possibility of a suspension of the listing and a subsequent
de-listing after three months, should no appropriate investment be made or
circular be forthcoming. As will have been noted from the announcement
released by ZCI on 10 October 2008, the JSE granted the Company an extension
of any suspension of the listing until 12 January 2009 on condition that by
9 January 2009, the Company post a circular in compliance with the Listings
Requirements to shareholders, relating to the new business plan and which
complies with the basic conditions of listing. While the Board`s present
intention, which I believe is also the shareholders` preference, is to
retain the Company`s listings and to avoid any suspension where possible,
it is of paramount importance that the Company not be rushed into committing
capital to investments purely to meet stock exchange deadlines.
Although the Company`s Board has been significantly strengthened with a
view to the implementation of the new business plan, ZCI`s legacy as a pure
holding company without infrastructure or staff of its own has meant
that an experienced and appropriate Investment Advisor is required to source,
research, evaluate and present possible investment opportunities to the
Board and thereafter to manage any such investments made, on behalf of the
Board.
This appointment has recently been finalised and the process of investment
evaluation and presentation to the Board can only now commence. The current
deal pipeline looks extremely promising.
In all likelihood this will mean that it will not be possible to prepare
and post a further circular to shareholders by 9 January 2009 and that a
suspension of the JSE and Euronext listings will be triggered as a result.
While disappointing, your Board sees this result as unavoidable given the
timing and its obligation to ensure that it is not rushed into committing
the Company to investments that may not be in the best interests of the
Company or its shareholders solely for reasons of timing.
Your Board will be making utmost use of the time available to it to ensure
that appropriate investment opportunities are evaluated and presented
to it without delay and in parallel with this process, a shareholders
circular expanding on the Company`s new business plan of 2 September
is being prepared and will be posted to shareholders as soon as circumstances
permit.
Thomas Kamwendo
Chairman,
Bermuda
08 January 2009
Date: 08/01/2009 10:01:40 Produced by the JSE SENS Department.
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