| Fri 26 Nov 2010, 7:05 | | SNU - Sentula Mining - Reviewed Condensed Consolidated Results for the six |
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SNU
SNU
SNU - Sentula Mining - Reviewed Condensed Consolidated Results for the six
months ended 30 September 2010
Sentula Mining
Incorporated in the Republic of South Africa
(Registration number 1992/001973/06)
Share code: SNU ISIN: ZAE000107223
("Sentula" or "the Company" or "the Group")
REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER
2010
Revenue increased by 3% to R1 219 million (2009 : R1 188 million)
Profit attributable to owners increased by 54% to R57,5 million (2009 : R37,3
million)
HEPS increased by 10% to 10,6 cents (2009 : 9,6 cents)
Statement of financial position
Reviewed Reviewed Audited
six months six months year
ended ended ended
30 September 30 September 31 March
R`000 2010 2009 2010
ASSETS
Property, plant and 2 666 051 2 718 517 2 641 957
equipment
Mineral rights 411 642 418 410 412 183
Intangible assets 21 146 15 153 17 621
Investment in equity- - 334 046 -
accounted associate
Goodwill 409 014 423 275 411 148
Restricted investment 4 322 - 4 322
Deferred tax assets 18 442 12 375 21 625
Total non-current assets 3 530 617 3 921 776 3 508 856
Inventories 377 007 335 839 328 267
Trade and other 508 555 451 971 1 118 174
receivables
Assets classified as held- 15 559 - 15 559
for-sale
Cash and cash equivalents 95 673 131 040 80 435
Total current assets 996 794 918 850 1 542 435
TOTAL ASSETS 4 527 411 4 840 626 5 051 291
EQUITY AND LIABILITIES
Equity
Share capital and premium 1 994 823 1 534 370 1 994 823
Reserves 886 336 641 810 840 435
Total equity attributable 2 881 159 2 176 180 2 835 258
to equity holders of the
Company
Non-controlling interest 75 799 75 228 79 356
Total equity 2 956 958 2 251 408 2 914 614
Liabilities
Loans and borrowings 373 935 1 308 073 544 860
Rehabilitation provision 67 325 72 491 56 292
Deferred tax liabilities 231 128 243 579 226 672
Total non-current 672 388 1 624 143 827 824
liabilities
Trade and other payables 458 227 417 134 410 569
Loans and borrowings 318 338 373 034 623 324
Bank overdraft 84 151 115 540 184 008
Taxation 37 349 59 367 90 952
Total current liabilities 898 065 965 075 1 308 853
TOTAL LIABILITIES 1 570 453 2 589 218 2 136 677
TOTAL EQUITY AND 4 527 411 4 840 626 5 051 291
LIABILITIES
Net asset value per share 509 979 502
- excluding treasury
shares (cents)
Tangible net asset value 435 788 428
per share (excluding
goodwill) - excluding
treasury shares (cents)
Income statement
Reviewed Reviewed Audited
six months six months year
ended ended ended
30 September 30 September 31 March
R`000 2010 2009 2010
Revenue 1 218 949 1 188 416 2 178 601
Results from operating 123 613 125 607 128 986
activities
Net finance charges (46 814) (109 804) (221 330)
Fair value adjustment - - 6 920
Profit on disposal of - - 329 300
equity-accounted
associate
Income from investment in - 23 944 31 331
associate (net of tax)
Profit before income tax 76 799 39 747 275 207
Income tax expense (22 868) (14 704) (44 164)
Profit for the period 53 931 25 043 231 043
Attributable to:
- Owners of the Company 57 488 37 266 239 138
- Non-controlling (3 557) (12 223) (8 095)
interest
Profit for the period 53 931 25 043 231 043
Basic and diluted
earnings per share (2009
restated for the
rights issue) (cents) 9,9 10,2 55,8
Headline earnings per 10,6 9,6 0,6
share (2009 restated for
the rights issue) (cents)
Shares in issue at the
end of the period
excluding treasury
shares (`000) 581 005 230 012 581 005
Weighted average number
of shares excluding
treasury shares
at the end of the period 581 005 364 806 428 185
(`000)
Statement of comprehensive income
Reviewed Reviewed Audited
six months six months year
ended ended ended
30 September 30 September 31 March
R`000 2010 2009 2010
Profit for the period 53 931 25 043 231 043
Other comprehensive loss
Foreign currency (14 345) (42 489) (56 598)
translation differences
for foreign operations
Other comprehensive loss (14 345) (42 489) (56 598)
for the period, net of tax
Total comprehensive 39 586 (17 446) 174 445
income/(loss) for the
period
Attributable to:
- Owners of the Company 43 143 (5 223) 182 540
- Non-controlling interest (3 557) (12 223) (8 095)
Total comprehensive income 39 586 (17 446) 174 445
/(loss) for the period
Statement of cash flows
Reviewed Reviewed Audited
six months six months year
ended ended ended
30 September 30 September 31 March
R`000 2010 2009 2010
Cash flows from operating 749 976 98 053 109 065
activities
Cash generated by 868 926 237 559 380 086
operations
Interest paid (48 295) (111 417) (218 900)
Income taxes paid (70 655) (28 089) (52 121)
Cash flows from investing (175 041) (57 889) (139 523)
activities
Purchase of property, (202 316) (171 156) (261 064)
plant and equipment
Proceeds from disposal of 29 993 93 182 102 822
property, plant and
equipment
Capitalised exploration (4 199) (4 651) (8 959)
expenditure
Cash received from - 23 123 23 856
investment in equity-
accounted associate
Interest received 1 481 1 613 3 822
Cash flows from financing (459 840) (62 112) (110 563)
activities
Proceeds from rights - - 501 920
issue
Proceeds from sale of - - 6 734
rights in treasury shares
Payment of transaction - - (39 769)
costs related to rights
issue
Changes in borrowings (459 840) (62 112) (579 448)
Net increase/(decrease) 115 095 (21 948) (141 021)
in cash and cash
equivalents
Cash and cash equivalents (103 573) 37 448 37 448
at beginning of the
period
Cash and cash equivalents 11 522 15 500 (103 573)
at end of the period
Reconciliation of headline earnings
Reviewed Reviewed Audited
six months six months year
ended ended ended
30 September 30 September 31 March
R`000 2010 2009 2010
Net profit for the year 57 488 37 266 239 138
attributable to owners of
the Company
Adjust for:
Loss/(profit) on sale of 5 589 (3 336) 11 658
plant and equipment
Impairment of plant and - - 7 315
equipment
Scrapping of assets - 170 2 257
Profit on disposal of - - (329 300)
equity-accounted
associate
Tax effect of above (1 565) 984 71 676
adjustments
Headline earnings 61 512 35 084 2 744
attributable to ordinary
shareholders
Operational segment reporting
The Group is organised into four major operating segments, namely opencast
mining services, exploration drilling, crane hire, and coal mining. JEF Drill &
Blast is included in "Opencast mining services" as management views them as part
of this segment and the majority of this company`s services are rendered inter-
segment. Previously it was recorded as a separate segment "Drilling and
Blasting". Equipment trading, spares and engineering is included in "Other".
Segment performance is measured based on the segment profit before interest and
income tax. Inter-segment revenue is priced on an arms length basis.
Opencast
mining Exploration Crane
R`000 services drilling hire
Reviewed six months ended
30 September 2010
Total segment revenue 855 260 367 570 28 448
Inter-segment revenue (81 430) (885) (187)
External revenues 773 830 366 685 28 261
Segment result 91 662 54 415 16 523
Reviewed six months ended
30 September 2009
Total segment revenue 917 261 302 697 27 411
Inter-segment revenue (79 159) (1 244) -
External revenues 838 102 301 453 27 411
Segment result 99 483 51 390 17 524
Operational segment reporting (continued)
Coal
R`000 mining Other Consolidated
Reviewed six months ended
30 September 2010
Total segment revenue 44 996 37 844 1 334 118
Inter-segment revenue (949) (31 718) (115 169)
External revenues 44 047 6 126 1 218 949
Segment result 24 673 (63 660) 123 613
Reviewed six months ended
30 September 2009
Total segment revenue 17 205 31 549 1 296 123
Inter-segment revenue (657) (26 647) (107 707)
External revenues 16 548 4 902 1 188 416
Segment result (20 203) (22 587) 125 607
Statement of changes in equity
Employee
share
Share Share incentive Treasury
R`000 capital premium reserve shares
Balance at 31 March 2009 2 356 1 557 680 33 878 (25 666)
Profit for the period - - - -
Other comprehensive income
Foreign currency - - - -
translation differences
for foreign operations
Income tax effect on other - - - -
comprehensive income
Total other comprehensive - - - -
income
Total comprehensive income - - - -
for the period
Transactions with owners,
recorded directly in
equity
Share-based payments - - 4 833 -
Balance at 30 September 2 356 1 557 680 38 711 (25 666)
2009
Profit for the period - - - -
Other comprehensive income
Foreign currency - - - -
translation differences
for foreign operations
Income tax effect on other - - - -
comprehensive income
Total other comprehensive - - - -
income
Total comprehensive income - - - -
for the period
Transactions with owners,
recorded directly in
equity
Shares issued for cash 3 510 498 410 - -
Sale of treasury share - - - -
rights
Rights issue transaction - (39 769) - -
costs
Share-based payments - - 4 385 -
Share options exercised - (1 883) - 185
Share options forfeited - - (5 394) -
Total contributions by and 3 510 456 758 (1 009) 185
distributions to owners
Balance as at 31 March 5 866 2 014 37 702 (25 481)
2010 438
Profit for the period - - - -
Other comprehensive income
Foreign currency - - - -
translation differences
for foreign operations
Income tax effect on other - - - -
comprehensive income
Total other comprehensive - - - -
income
Total comprehensive income - - - -
for the period
Transactions with owners,
recorded directly in
equity
Share-based payments - - 2 758 -
Total contributions by and - - 2 758 -
distributions to owners
Balance as at 30 September 5 866 2 014 438 40 460 (25 481)
2010
Statement of changes in equity (continued)
Foreign
exchange
trans- Non-con-
lation Retained trolling
R`000 reserve earnings interest Total
Balance at 31 March 2009 22 545 585 777 87 451 2 264 021
Profit for the period - 37 266 (12 223) 25 043
Other comprehensive income
Foreign currency (42 489) - - (42 489)
translation differences
for foreign operations
Income tax effect on other - - - -
comprehensive income
Total other comprehensive (42 489) - - (42 489)
income
Total comprehensive income (42 489) 37 266 (12 223) (17 446)
for the period
Transactions with owners, -
recorded directly in
equity
Share-based payments - - - 4 833
Balance at 30 September (19 944) 623 043 75 228 2 251 408
2009
Profit for the period - 201 872 4 128 206 000
Other comprehensive income
Foreign currency (14 109) - - (14 109)
translation differences
for foreign operations
Income tax effect on other - - - -
comprehensive income
Total other comprehensive (14 109) - - (14 109)
income
Total comprehensive income (14 109) 201 872 4 128 191 891
for the period
Transactions with owners,
recorded directly in
equity
Shares issued for cash - - - 501 920
Sale of treasury share - 6 734 - 6 734
rights
Rights issue transaction - - - (39 769)
costs
Share-based payments - - - 4 385
Share options exercised - 1 628 - (70)
Share options forfeited - 3 509 - (1 885)
Total contributions by and - 11 871 - 471 315
distributions to owners
Balance as at 31 March (34 053) 836 786 79 356 2 914 614
2010
Profit for the period - 57 488 (3 557) 53 931
Other comprehensive income
Foreign currency (14 345) - - (14 345)
translation differences
for foreign operations
Income tax effect on other - - - -
comprehensive income
Total other comprehensive (14 345) - - (14 345)
income
Total comprehensive income (14 345) 57 488 (3 557) 39 586
for the period
Transactions with owners,
recorded directly in
equity
Share-based payments - - - 2 758
Total contributions by and - - - 2 758
distributions to owners
Balance as at 30 September (48 398) 894 274 75 799 2 956958
2010
"While the global economic outlook has continued to show signs of a recovery,
trading conditions in South Africa remain under pressure. Despite this, the
turnaround of Megacube has gained traction and remains a key objective. I am
satisfied by its return to profitability in the second quarter of the 2011
financial year and that this business is now showing a positive profit trend.
The diverse nature of the Group`s businesses has ensured that the underlying
fundamentals of the Group remain intact, notwithstanding the ongoing volatility
in global resource markets. Furthermore, by leveraging from our mining services
businesses, we will continue to realise our overall strategy of unlocking value
in our coal investments."
Robin Berry, CEO - Sentula Mining Limited
FINANCIAL REVIEW
- Revenue increased by 3% to R1 219 million (2009: R1 188 million)
- Results from operating activities remained constant at R123,6 million (2009:
R125,6 million)
- Net profit after tax increased by 115% to R53,9 million (2009: R25,0 million)
- Headline EPS increased by 10% to 10,6 cents (2009: 9,6 cents)
- Net asset value per share: 509 cents (2009: 979 cents)
- Tangible net asset value per share: 435 cents (2009: 788 cents)
- Debt to equity gearing ratio improved from 43% to 23% since March 2010
(September 2009: 74%).
Notwithstanding the substantially improved results for the first half of the
2011 financial year the following issues adversely impacted the Group`s
earnings:
- Legal and forensic fees of R4,2 million associated with the recovery of funds
misappropriated in the 2008 financial year;
- Retrenchment and restructuring costs, primarily, associated with the
turnaround of the Megacube business, and the impact of completing the previously
terminated loss making contracts during the first quarter, resulting in losses
for this quarter of R14,8 million; and
- Currency losses of R11 million relating to the translation of the Group`s
foreign operations as a consequence of the strong Rand/Dollar exchange rate
relative to March 2010 exchange rates.
Group cash flows for the period under review improved dramatically following
receipt of the Koornfontein sale proceeds of R670 million in April, which was
included in trade and other receivables at 31 March 2010. This has contributed
to the Group reducing its senior debt levels by a further R300 million to R692
million, resulting in a net debt to equity ratio of 23% at 30 September 2010.
The Group is in advanced negotiations with its bankers to provide Sentula with a
revolving capital financing facility. This proposed facility will enable
refurbishment and replacement of the Group`s existing fleet.
This new facility will provide the Group with the capital funding to grow the
businesses generically in a sustainable manner for the foreseeable future.
The Group has continued to pursue civil and criminal actions against the
individuals and entities implicated in the fraud perpetrated during the 2008
financial year. The first civil action involving a claim of R133 million
commenced hearing on 25 November 2010 and a number of other civil actions will
follow during the course of the 2012 financial year. The criminal actions are
being pursued by the prosecuting authorities, including the National Prosecuting
Authority.
OPERATIONAL REVIEW
Safety track record
The Group`s Classified Injury Frequency Rate of 0,79 per million man hours
worked is a 58,2% improvement on the comparative period in the prior year, with
no serious injuries to employees being reported for the period under review.
Three of the Group`s managed subsidiaries, CCT, JEF Drill and Blast and Ritchie
Crane Hire, remained injury free during the six-month period, with Megacube
continuing to record an improvement on the prior period. Sentula remains
proactive in establishing systems and structures to identify hazards and reduce
risks on its operations and to align its efforts in this area with those of its
clients. Sentula has identified the health and safety of its employees as one of
its core values.
Mining services
The provision of mining services remains the core of Sentula`s business, with
the four operating areas, and the six underlying subsidiaries, continuing to
trade satisfactorily, despite improving but volatile market conditions.
Opencast mining services
Megacube`s contribution to the Group`s turnover was above expectation, due to
the award of new contracted work, which exceeded the previously terminated
contracts. Improved operational efficiencies and asset utilisation have
contributed to the further freeing up of capacity and reductions in head count.
In conjunction with improved contract pricing and cost controls, these actions
have lead to improved margins and a profitable second quarter. Once-off
expenses, associated with the right sizing of the Company`s cost structure,
legal and forensic expenses and a loss on the sale of non-core equipment of R5,3
million, impacted adversely on this subsidiary`s results. Megacube remains on
track to be marginally profitable for the full year, despite the loss in the
first quarter.
Benicon has continued to grow turnover from its medium-term steady state sites
and additional work from its key client. With all sites operating at capacity,
the prospects for the subsidiary look solid for the remainder of the financial
year. Some margin pressure has however been experienced in this business, as a
result of sub inflationary rate escalations in the current financial year.
With the ongoing recovery in ferrochrome related operations, CCT opencast mining
has delivered a solid contribution. CCT is expected to operate at capacity,
through to the financial year end.
JEF Drill and Blast delivered a solid set of earnings on the back of increased
demand from Megacube and Benicon. Operating margins have continued to improve,
as the turn-around in this company continues to deliver into expectations.
Exploration drilling
The diversified earnings that Geosearch brings to the Group have increased
during the period under review notwithstanding the strong Rand/US Dollar
exchange rates experienced during this period. While market volatility
continues, in certain mineral sectors, earnings are vulnerable to the
appreciating Rand/US Dollar exchange rate. However, the relatively low level of
gearing and fixed cost component of the business, coupled with specific areas of
drilling expertise, continues to position the business as a substantial
contributor to the Group`s bottom line earnings for the 2011 financial year.
Crane hire
Ritchie Crane Hire has enjoyed robust demand from the coal mining,
infrastructure and construction sectors which has resulted in the company
remaining a solid earnings contributor to the Group. The fleet of medium to
large capacity mobile cranes have enjoyed a high level of utilisation during the
first half of the year and this segment is expected to maintain its level of
contribution to the Group, through to the end of the 2011 financial year,
despite indications of slowdowns in certain segments of the sectors in which it
operates.
Coal mining investments
In line with the strategy to develop a diversified portfolio of coal assets, the
Group has continued to operate, develop and undertake exploration activities
across its various coal projects in Southern Africa. Sentula is currently
invested in six projects (three in South Africa, and one in each of Botswana,
Zambia and Mozambique). The projects can be broadly described as mining assets,
comprising of an operating mine, near development properties (those projects
which can be operational within 18 months) and further exploration areas.
Mining operation
The Nkomati Anthracite Mine, in which Sentula holds a 60% equity interest,
experienced challenging geological conditions in its underground operation.
Together with delayed access to the new Madadeni open pit area this had an
adverse impact on production during the period under review. With the
development of the opencast operation now completed and a strong demand for
ferrochrome, the mine has increased production to capacity which should result
in this business being profitable for the remainder of the financial year.
Near development properties
Sentula, through its joint venture investments has been granted new order
prospecting rights over portions of the farms Bankfontein and Schoongezicht in
Mpumalanga. Exploration has been completed and mining right applications have
been submitted for both properties.
Exploration drilling has been completed at the Mulungwa project in Southern
Zambia. The third and final phase of the feasibility programme, which included
resource estimation, completion of the environmental impact assessment,
technical/mining investigations and financial modelling, has been completed. A
total of 45 boreholes have been drilled to date, delineating a target
opencastable indicated/measured resource of some 6,5 million tonnes. A small
scale mining license has been awarded and production is planned to commence in
2011.
Exploration properties
The Asenjo joint venture with Jonah Capital and Aquilla Resources, situated in
Botswana, has continued exploration on its tenements. The value of the large
resource base is expected to be unlocked through the construction of rail
infrastructure to port facilities in Namibia or Mozambique, the provision of
which is enjoying renewed interest in the region. Exploration on the Mabapa
coking coal project will recommence in 2011, following the acquisition of an
option on a neighbouring property. This will enhance the critical mass of the
overall project. Ongoing recovery in steel markets, improving coke prices and
the potential extension to the project area, may result in an economically
viable project in the near future.
Sentula has recently also acquired an option to earn an interest, through
exploration, in the Carborifera de Changara coal project, situated south of Tete
in Northern Mozambique. The initial phase of the exploration will be completed
during the second half of the financial year.
Sustainability
During the period under review, Sentula has been independently verified as a
"level 5" contributor, in terms of the DTI codes, measuring Broad Based Black
Economic Empowerment. The Group has plans in place to elevate its status to that
of a "level 4" contributor during the 2012 financial year.
Strategic review
The Group`s strategic vision remains one of medium to longer term sustainable
growth by being the mining services provider of choice across the African
continent. Our strategy will be pursued through the exploitation of
opportunities identified in both mining services and proprietary mining
investments in Southern Africa. The insights and experience, gleaned from
Geosearch`s broad geographic footprint, across Southern, Central Africa and more
recently West Africa, positions the Group to capitalise on the early
introduction of its mining services offerings stemming from the development of
new mineral resources.
In addition, through its access to the resources, expertise and experience base
of the collective Group, Sentula is well positioned to nurture the development
of a growing portfolio of coal investments. Initiatives to unlock the intrinsic
value in these investments will continue to be evaluated.
Sentula`s foothold in the coal and energy sector, as a service provider and
proprietary investor, coupled with its diversified service offering, client
base, mineral exposure and geographical spread, have combined to create a solid
platform for sustainably developing the business into the future.
Basis of preparation
The condensed consolidated financial results for the six months ended 30
September 2010 has been prepared in accordance with the South African Companies
Act, 1973 (Act 61 of 1973), as amended, the Listings Requirements of the JSE
Limited and International Accounting Standard 34, Interim Financial Reporting.
The interim results have been prepared using accounting policies that comply
with International Financial Reporting Standards. The accounting policies are
consistent with those applied in the financial statements for the year ended 31
March 2010.
The directors are of the opinion that the Group has adequate resources to
continue in operation for the foreseeable future and accordingly the condensed
consolidated financial statements have been prepared on a going concern basis.
Independent review opinion
The condensed consolidated statement of financial position at 30 September 2010
and related condensed consolidated income statement, condensed consolidated
statement of comprehensive income, condensed consolidated statement of changes
in equity and condensed consolidated statement of cash flows for the six months
ended 30 September 2010 have been reviewed by KPMG Inc. Their unmodified review
report is available for inspection at the Company`s registered office.
DIRECTORATE
The following changes took place to the board of directors during the period
under review:
Appointments
Cor van Zyl, Rain Zihlangu and Kholeka Mzondeki were appointed to the board on 1
July 2010.
Resignations
There were no resignations during the period under review.
On behalf of the board
Jonathan Best
Non-executive Chairman
Robin Berry
Chief Executive Officer
Woodmead
26 November 2010
Directors: JG Best*(Chairman), RC Berry (Chief Executive Officer), GP Louw
(Financial Director), PP Modisane, A Kawa*, EHJ Stoyell*, CJPG van Zyl*, D
Zihlangu*, KW Mzondeki*
*Independent non-executive
Company Secretary: GM Chemaly
Transfer Secretaries: Computershare (Proprietary) Limited, Ground floor, 70
Marshall Street, Johannesburg, 2001. PO Box 61051 Marshalltown, 2001. Tel (011)
370-5000
Investor Relations Advisers: College Hill
Sponsor: Merchantec Capital
Auditor: KPMG Inc.
Registered address: Block 14 - Ground floor, Woodlands Office Park, Woodmead,
2080. PO Box 76, Woodmead, 2080. Telephone (011) 656-1303.
www.sentula.co.za
Date: 26/11/2010 07:05:07 Produced by the JSE SENS Department.
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