| Thu 4 Mar 2010, 7:05 | | SAL - Sallies Limited - Consolidated Interim Results For The Six Months Ended |
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SAL
SAL
SAL - Sallies Limited - Consolidated Interim Results For The Six Months Ended
31 December 2009
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1903/001879/06)
JSE share code: SAL ISIN: ZAE000022588
("Sallies" or "the company" or "the group")
CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2009
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
31 December 31 December 30 June
% 2009 2008 2009
R`000 Change Not reviewed Reviewed Audited
Revenue - mining (70) 44 582 149 608 251 928
Net foreign exchange 68 (1 207) (3 782) (9 259)
(losses)/gains
Cost of sales 56 (43 548) (99 334) (144 406)
(Loss)/Profit from (100) (174) 46 492 98 263
mining activities
Less: Depreciation (156) (8 750) (3 416) (16 862)
Amortisation of mineral 100 - (1 053) (1 850)
rights
Operating (loss)/profit (121) (8 924) 42 023 79 551
from mining
Profit on disposal of - 130 - 257
plant, property and
equipment
Administrative expenses 33 (10 984) (16 431) (27 650)
Investment income (80) 84 425 1 087
Finance costs on 53 (445) (951) (1 654)
borrowings
Interest on convertible 2 (3 648) (3 709) (7 207)
debentures
(Loss)/Profit before (211) (23 786) 21 357 44 384
Honeywell, share-based
payments and Buffalo
impairment
Honeywell settlement - - - (9 626)
award provision
Honeywell award interest - (235) - (1 658)
provision
Notional interest on 7 (1 389) (1 495) (2 892)
convertible debentures
Share based payments 70 (2 078) (6 853) (8 779)
(Loss)/Profit before (311) (27 488) 13 009 21 429
Buffalo impairment
Buffalo impairment - (74 592) (74 592)
Net loss before and 55 (27 488) (61 583) (53 163)
after taxation
Other comprehensive loss - - - -
items
Total comprehensive loss 55 (27 488) (61 583) (53 163)
for the period
Issued shares (000) 642 220 642 220 642 220
Weighted average shares 642 220 639 255 640 725
issued (000)
Weighted average shares 642 220 639 255 640 725
issued for diluted
earnings per share (000)
RECONCILIATION OF
EARNINGS
Net (loss) attributable 55 (27 488) (61 583) (53 163)
to ordinary shareholders
for basic earnings per
share
Gain on disposal of - (130) - (257)
plant and equipment
Impact of the impairment - 68 072 68 072
of Buffalo fixed assets
Net (loss)/profit (526) (27 618) 6 489 14 652
attributable to ordinary
shareholders for
headline earnings per
share
PER SHARE (cents)
Loss per share (cents) 56 (4,3) (9,6) (8,3)
Diluted loss per share 56 (4,3) (9,6) (8,3)
(cents)
Headline (loss)/profit (524) (4,3) 1,0 2,3
per share (cents)
Diluted headline (524) (4,3) 1,0 2,3
(loss)/profit per share
(cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Portion of
convertible
debentures
Share Share deemed to
R`000 capital premium be equity
Balance at 30 June 2008 635 280 418 17 960
Share based payments
Shares issued 7 2 870
Loss for period
Balance at 31 December 2008 642 283 288 17 960
Debentures converted to 858 (858)
shares
Share based payments
Profit for period
Balance at 30 June 2009 642 284 146 17 102
Options granted
Loss for period
Balance at 30 December 2009 642 284 146 17 102
Share
based
pay- Accumu-
ment lated
R`000 reserve loss Total
Balance at 30 June 2008 11 191 (169 419) 140 785
Share based payments 6 853 6 853
Shares issued 2 877
Loss for period (61 583) (61 583)
Balance at 31 December 2008 18 044 (231 002) 88 932
Debentures converted to -
shares
Share based payments 1 937 1 937
Profit for period 8 420 8 420
Balance at 30 June 2009 19 981 (222 582) 99 289
Options granted 2 078 2 078
Loss for period (27 488) (27 488)
Balance at 30 December 2009 22 059 (250 070) 73 879
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 31 December 30 June
2009 2008 2009
R`000 Not reviewed Reviewed Audited
ASSETS
Non-current assets 93 621 101 445 104 292
Investment properties 3 133 3 167 3 167
Restricted investment 2 226 2 064 1 932
Property, plant and equipment 78 087 86 039 89 018
Goodwill 10 175 10 175 10 175
Current assets 82 376 97 494 114 546
Inventories 42 658 42 678 64 022
Accounts receivable - trade 3 557 30 856 4 684
Accounts receivable - other 4 766 9 146 8 290
Taxation pre-paid 2 789 2 789 2 789
Cash and cash equivalents 28 606 12 025 34 761
Total assets 175 997 198 939 218 838
EQUITY AND LIABILITIES
Capital and reserves 73 879 88 932 99 288
Share capital and premium 284 788 284 788 284 787
Portion of convertible 17 102 17 102 17 102
debentures deemed to be equity
Share based payment reserve 22 059 18 044 19 981
Accumulated loss (250 070) (231 002) (222 582)
Non-current liabilities 81 607 83 553 81 148
Long-term loan 2 576 5 446 3 926
Provision for environmental 19 611 21 474 19 192
rehabilitation
Portion of convertible 59 420 56 633 58 030
debentures deemed to be debt
Current liabilities 20 511 26 454 38 402
Trade and other payables 17 522 21 665 30 642
Bank overdraft - - 3 730
Current portion of long-term 2 989 4 789 4 030
liabilities
Total equity and liabilities 175 997 198 939 218 838
Current asset/current 4,0 3,7 3,0
liability ratio
Net asset value per share 11,5 13,8 15,5
(cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2009 2008 2009
R`000 Not reviewed Reviewed Audited
Net cash (outflows)/inflows (1 988) 6 552 39 802
from operating activities
Net cash inflows/(outflows) 1 954 (17 589) (29 556)
from investing activities
Net cash (outflows) from (2 392) (2 317) (4 595)
financing activities
Net (increase)/decrease in (2 425) (13 354) 5 651
cash and cash equivalents
Cash and cash equivalents at 31 031 25 380 25 380
beginning of period
Cash and cash equivalents at 28 606 12 026 31 031
end of period
ABBREVIATED SEGMENTAL ANALYSIS
R`000 Witkop Buffalo Other Group
Six months ended 31
December 2008
Revenue 136 845 12 763 - 149 608
Profit/(loss) 32 425 (76 421) (17 587) (61 583)
Total assets 152 901 11 448 34 590 198 939
Total liabilities (35 338) (12 606) (62 063) (110 007)
Year ended 30 June 2009
Revenue 235 036 16 892 - 251 928
Profit/(loss) 61 580 (77 688) (37 055) (53 163)
Total assets 204 557 6 345 7 936 218 838
Total liabilities (33 436) (11 563) (74 548) (119 550)
Six months ended 31
December 2009
Revenue 41 432 3 150 - 44 582
(Loss) (15 960) (958) (10 570) (27 488)
Total assets 163 289 4 549 8 159 175 997
Total liabilities (16 046) (11 915) (74 157) (102 118)
IAS 1
Presentation of Financial Statements as amended has been adopted by the company
for the first time. The adoption only resulted in changes in disclosure.
COMMENTARY FOR THE SIX MONTHS ENDED 31 DECEMBER 2009
ANALYSIS OF RESULTS
Sallies incurred a loss of ZAR8,9 million from mining activities for the six
months to December 2009 compared to a profit of ZAR42 million for the same
period last year. Turnover decreased from ZAR149,6 million for the six months to
December 2008 to ZAR44,6 million for the six months to December 2009.
OPERATIONS
Demand for acid grade fluorspar has collapsed and despite concerted efforts by
management and its marketing agent, future orders have not been secured.
Consequently, as announced in June 2009, the company decided to mothball its
Witkop Fluorspar Mine ("Witkop`). Both of the company`s mines are now on care
and maintenance, Buffalo Fluorspar Mine ("Buffalo") having been mothballed in
October 2008. Witkop had produced sufficient fluorspar prior to mothballing to
honour its export sale contracts for the six months ended 31 December 2009 and
the final export sale contract was fulfilled in February 2010.
In order to have the necessary capacity to recommission the mines, key staff
were retained at Witkop and the production facilities are being maintained in
anticipation thereof. Some exploration drilling was completed during the six
months under review and once the sampling and analysis is complete the current
geological model will be updated for Witkop.
The company is delighted to record that no disabling or fatal accidents occurred
during this review period.
MINERAL RESERVES AND RESOURCES
The work to revise the mineral reserves and resources as tabled in the 2009
annual financial statements as a Canadian compliant Resource and Reserve
Statement compliant with NI 43 - 101 is ongoing and shareholders will be
informed as soon as the work has been completed.
The initial work performed on the preparation of the NI 43 - 101 compliant
resource statement has indicated a possible reduction in the mineral resources
disclosed in the 2009 annual financial statements. The downward adjustment is
unlikely to have a material impact on the normal commercial operation of the
company in the medium term.
NEGOTIATIONS WITH BEE PARTNER
In the 2009 Annual Report it was noted that some shortcomings had been
identified in the structure of the transaction between Sallies and African
Renaissance Investments (Pty) Limited ("BEE Partner") and discussions to
restructure the transaction are in progress. These discussions are ongoing.
OUTLOOK
Hydrofluoric acid ("HF") cannot be produced without acid grade fluorspar. This
acid is feedstock principally for the production of refrigerant gases (which
drive fridges, freezers and air conditioners) and aluminium tri-fluoride
(without which aluminium cannot be cost effectively produced). HF is also vital
for other small, but rapidly growing niche markets.
Witkop has a large mineral resource of high quality (albeit low grade) fluorspar
and a strong reputation amongst a broad, international client base, as a
reliable business partner.
The hard rock resources at both Witkop and Buffalo are still uneconomical at
today`s price/cost ratio. However, research into reducing the phosphorus content
in the final product from the Buffalo tailings dams continues.
The future of Sallies is closely aligned to that of the world economy. Acid
grade fluorspar pricing has begun to recover but is still not at a level that
justifies placing the mines back into production. Not only do prices need to
recover further but the continuing strength of the South African Rand against
particularly the United States Dollar is a further reason for not
recommissioning the mines in the foreseeable future.
The company is cost conscious and a cash conservation strategy continues to be
followed. At the current level of care and maintenance expenditure, the company
will require to be recapitalised by August 2010 and will require funds of about
ZAR40 million in order to recommission the Witkop mine.
HONEYWELL
Honeywell International Inc ("Honeywell") claimed an amount of USD6 847 305 from
Sallies and its subsidiary, Witkop, for damages as a result of breach of
contract. Sallies and Witkop counterclaimed an amount of USD1 067 327 from
Honeywell for payment of materials delivered to Honeywell as well as USD2 027
797 for under-payments made by Honeywell for materials delivered to Honeywell.
On 3 April 2009 the International Chamber of Commerce International Court of
Arbitration ("the Arbitral Tribunal") ruled that:
- Sallies and Witkop are to pay to Honeywell an amount totalling USD1 243 824
plus interest at 5 per cent per annum since 19 January 2006 until full payment;
- the counterclaim of USD3 095 119 by Sallies and Witkop be dismissed; and
- each party is to bear its own legal and other costs, ("the Award").
The amount awarded to Honeywell is 18% of the amount originally claimed.
On 19 May 2009, Sallies and Witkop requested the Federal Supreme Court of
Switzerland to:
- set aside the Award which would have the effect that the case would be sent
back to the Arbitral Tribunal for assessment; and
- instruct the Arbitral Tribunal to reject Honeywell`s claim and approve the
counterclaim of Sallies and Witkop.
During December 2009 the Federal Supreme Court of Switzerland rejected the
request by Sallies and Witkop.
Sallies accounted for its own expense in relation to the proceedings as these
were incurred. Full provision has been made for the USD1 243 824 Award and the
interest thereon until 31 December 2009.
South African regulatory and procedural requirements must be met before payment
is made.
SOUTH AFRICAN REVENUE SERVICES
Witkop Fluorspar Mine (Pty) Limited is currently involved in disputes with the
SARS regarding the 2000 to 2003 years of assessment. SARS has disallowed the
deduction of certain intercompany expenditure and rejected the timing of revenue
recognised.
If Witkop is successful in the disputes, provisional payments amounting to R6,7
million (excluding interest) will be refunded to the group. If unsuccessful in
all of the disputes, the total amount payable by Witkop will amount to
approximately R0,7 million (excluding interest). Taxation pre-paid of R2 789 000
is currently carried in the consolidated balance sheet of Sallies.
Discussions to resolve the disputes with SARS are ongoing.
BASIS OF PREPARATION
The interim report is prepared in accordance with International Financial
Reporting Standards (IFRS) and IAS 34 Interim Financial Reporting, the South
African Companies Act and the Listings Requirements of the JSE Limited. The
interim results incorporate accounting policies that are consistent with those
used in preparing the financial results for the year ended 30 June 2009. These
results have been neither reviewed nor audited by the company`s auditors.
BOARD OF DIRECTORS
SP (Stephen) Morris and PR (Patrick) Cooke were appointed non-executive
directors on 18 August 2009. Dr FJP (Fred) Roux and Mr DGJ (Dennis) Kerrison
(non-executive Chairman and non-executive director, respectively) were removed
from the board by shareholders` resolution on 22 October 2009. Messrs
N (Nicholas) Davidoff and A (Andrew) Kamau were appointed non-executive
directors and Messrs TG (Tom) Dale and Mr BE (Barnie) Esterhuizen (Chief
Executive Officer and non-executive director, respectively) resigned as
directors on the same day. Nicholas was subsequently appointed Chairman of the
board. Patrick Cooke was appointed Financial Director on the resignation of J
(Johann) Blersch with effect from 31 January 2010.
DIVIDENDS
No interim dividend has been declared for the period.
By order of the board
Nicholas Davidoff
Non-executive Chairman
Johannesburg
3 March 2010
Directors:
Nicholas Davidoff (Chairman)*
Andrew Kamau*^
Johann Blersch (resigned 31 January 2010)
J?rgen K?gl*
Patrick Cooke (Financial Director and COO)
Sandile Swana*^
Stephen Morris*^
* Non-executive
^ Independent
Registered office:
Block C, Riverwalk Office Park
41 Matroosberg Road, Ashlea Gardens, Pretoria, 0081
(Private Bag X1315, Zeerust, 2865)
Auditors:
BDO South Africa Incorporated
Block C, Riverwalk Office Park
41 Matroosberg Road, Ashlea Gardens, Pretoria, 0081
(PO Box 95436, Waterkloof, 0145)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor:
Bridge Capital Advisors (Proprietary) Limited
2nd Floor, 27 Fricker Road, Illovo Boulevard, Illovo, 2196
Date: 04/03/2010 07:05:05 Produced by the JSE SENS Department.
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