| Fri 23 Nov 2001, 0:00 | | Trans Hex - Interim Report |
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INTERIM REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2001
ABRIDGED CONSOLIDATED INCOME STATEMENT
Year
Ended Six months ended
31/03/01 % 30/09/01 30/09/00
Audited Change Unaudited Unaudited
R'000 R'000 R'000
506 041 Sales revenue 233 913 262 076
303 233 Cost of sales 164 133 165 375
44 889 Depreciation of mining assets 33 606 25 102
14 300 Royalties: Namaqualand
Diamond Fund Trust 7 109 7 661
244 044 Other costs 123 418 132 612
202 808 Mining income 69 780 96 701
834 Net financial income (Note 1) (3 505) 3 377
(37 944) Exploration costs (27 074) (15 713)
(3 579) Research and development (2 071) -
875 Exceptional items - 1 239
162 994 Net income before taxation 37 130 85 604
39 687 Taxation 1 440 20 061
123 307 Net income after taxation 35 690 65 543
4 458 Outside shareholders' interest 3 090 1 787
6 Equity account adjustment 3 3
127 771 Attributable income (42,4) 38 783 67 333
Earnings per share (cents)
155,5 - Basic (42,8) 46,9 82,0
151,7 - Diluted (44,3) 45,2 81,1
154,1 - Headline (41,6) 46,9 80,3
42,0 Dividend per share (cents) 10,7 15,5 14,0
82 534 Total number of shares in 83 411 82 122
issue ('000)
82 150 Weighted average issued 82 783 82 122
shares ('000)
ABRIDGED CONSOLIDATED BALANCE SHEET
Assets
676 446 Fixed assets 772 630 508 924
36 983 Investments and loans (Note 2) 37 176 36 683
117 938 Current assets 150 390 162 455
- Cash resources - 75 823
72 013 Inventory 107 871 47 354
45 925 Other 42 519 39 278
831 367 960 196 708 062
Equity and Liabilities
581 848 Total shareholders' interest 605 165 516 653
- Outside shareholders' interest - 408
140 361 Deferred liabilities 137 761 117 253
109 158 Current liabilities 217 270 73 748
42 754 Short-term borrowings 178 365 -
66 404 Other 38 905 73 748
831 367 960 196 708 062
705 Net asset value per share (cents) 726 629
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
456 255 Balance at 1 April 581 848 456 255
127 771 Net profit attributable to 38 783 67 333
ordinary shareholders
(11 497) Dividends paid and provided (23 110) (11 497)
6 463 Translation differences on foreign 2 735 4 562
subsidiaries
2 856 Issue of share capital 4 909 -
581 848 Balance at end of period 605 165 516 653
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Year
Ended Six months ended
31/03/01 30/09/01 30/09/00
Audited Unaudited Unaudited
R'000 R'000 R'000
218 089 Cash available from operating 72 778 116 209
activities
(41 985) Movements in working capital (56 102) (12 675)
(3 161) Taxation paid (4 531) (1 844)
(25 017) Dividend paid (23 110) (13 520)
147 926 Cash retained from operating (10 965) 88 170
activities
(293 967) Cash employed (124 646) (113 734)
(6 019) Fixed assets - Replacement (16 064) (3 300)
(290 781) - Additional (113 298) (110 434)
2 833 Investments, loans and issue of capital 4 716 -
1 900 Net cash flow on acquisition - -
of subsidiaries
(144 141) Net cash flow for the period (135 611) (25 564)
NOTES
1. Net financial income
Net financial income consists
mainly of the following
principal categories:
4 548 Interest received 1 085 3 004
(2 977) Interest paid (4 262) (339)
(2 977) Total interest paid (9 491) (339)
- Less capitalised (5 229) -
1 457 Net foreign exchange gain 154 1 259
(2 194) Rehabilitation provision - (482) (547)
unwinding of discount
834 (3 505) 3 377
2. Investments and loans
Listed investments at cost
29 209 Shares 29 234 29 005
15 527 Market value 14 736 20 338
Unlisted investments and loans
at carrying value
168 Associated Company 170 165
6 943 Trans Hex Rehabilitation Trust Fund 7 275 6 176
663 Loan to Trans Hex Group Trust 497 1 337
to finance the share purchase scheme
7 774 7 942 7 678
7 774 Directors' valuation 7 942 7 678
208 830 3. Capital commitments 53 248 77 980
(including amounts authorized,
but not yet contracted)
These commitments will be funded out of
own resources or borrowed funds
4. Segment information
448 250 Revenue - Land 210 598 230 414
57 791 - Marine 23 315 31 662
196 915 Mining income - Land 71 850 91 584
5 893 - Marine (2 070) 5 117
5. Related Party Transaction
Management fee paid to Remgro Finance
and Services Ltd (a fellow subsidiary of
1 335 the Company's major shareholder) 668 668
6. The accounting policies are in accordance with IAS and GAAP.
Income does not accrue evenly throughout the year and the
income for the six months, therefore, does
not necessarily represent half of a full
financial year's income.
FINANCIAL SUMMARY
The first six months of the financial year have been characterised by
delays in the achievement of full capacity at the Baken Central Plant and by
a slowdown in the global demand for rough diamonds.
On average market prices were 15% lower for the period. Diamonds were
therefore retained in the inventory which contributed to a reduction in
carats sold and resulted in a 28% reduction in mining income. Had the
increase in inventory been sold at prevailing prices mining income would
have been maintained.
The retained inventory, coupled with higher exploration costs and higher
financing costs impacted negatively on profits and headline earnings per
share.
Encouraging signs were the 7% drop in production cost per carat and
continued good prices for selected individual stones. The latter confirms
the Company's status as a niche producer of high quality diamonds.
Furthermore, we are pleased to report that the Baken Central Plant is now
operating at design capacity and predicted cost savings in the order of 38%
have been achieved. Production from all projects for the second half is on
target.
The increase in short term borrowing is due to an increase in bank
facilities for capital expenditure in respect of marine and land operations.
OPERATIONS
Technical difficulties at the new Baken Central Plant severely impacted
on availability resulting in lower than budgeted production levels. Only low-
grade material was processed through this plant during the six months to
minimise the losses from poor recoveries whilst the plant problems were
resolved, which impacted on the production mix. These issues have now been
rectified.
Key production features for the period included:
* Production increased by 58% to 94 712 carats
* Unit production costs at the Baken Central Plant reduced by 38% once the
plant achieved full capacity
* Middle-Orange production increased by 34%
Under new management major cost cutting exercises have been implemented
at all projects. Marginal operations have been mothballed and capital
expenditure has been carefully analysed and prioritised.
EXPLORATION
As a result of the external environment, the decision taken last year to
fast track exploration on a wide front has been reviewed. The exploration
programme has been prioritised and Bloeddrif, Reads Drift and
Niewejaarskraal are being fast tracked. Although the substantial earnings
contribution previously achieved from one exceptionally high grade
exploration trench at Bloeddrif was not repeated, the Bloeddrif prospect
remains very positive with an improvement to 1.1 million cubic metres of
proved and probable reserves (at an average grade of 2.5 carats / 100m3) as
well as 3.3 million cubic metres of inferred resources.
MARINE
The acquisition of the mv Ivan Prinsep enabled the joint venture with
Diamond Fields International to commence five months earlier than
anticipated. More than 10 600 carats were recovered with a mixed programme
of trenching and block mining during this start-up phase of the joint
venture. The mining vessel the mv Namakwa was converted on time within
budget. This vessel has been deployed in the joint venture which has
released the mv Ivan Prinsep for work on Trans Hex's own concessions.
DIAMOND MARKET
The economic slowdown particularly in the United States resulted in a
difficult trading period with a general easing in demand for rough
production and a reduction in rough diamond prices. Our regular South
African tender sales have reflected this with price decreases comparable to
those reported elsewhere in the market. However, throughout the current
downturn, we have maintained our status as a producer of high quality rough
diamonds which we believe leaves us well placed when demand revives.
As a measure of the high value niche that Trans Hex continues to occupy
in the rough diamond market, we are pleased to report that, in spite of soft
demand, individual stones have achieved superior prices during the period.
An 11.56 carat vivid yellow stone from our Brakfontein operation and a 2.03
carat pink stone from Bloeddrif achieved per carat prices of US$24 600 and
US$21 565 respectively while a 5.38 carat vivid yellow stone from Baken
achieved a price of US$ 10 734 per carat.
LABOUR RELATIONS
The switch to a three shift eight hour system has been implemented
smoothly at our main production centres. The relationship between management
and organised labour is on a sound footing and several initiatives to
further improve operational efficiencies are under discussion.
MVELAPHANDA GROUP (MVELA)
At a general meeting of shareholders held on 13 November 2001 authority
was granted for the creation and issue of 16 million unsecured 13.5%
participating compulsorily convertible debentures to Mvela. The R152 million
received from Mvela will be used to offset recent land and marine capital
expansions. In an unrelated transaction, Mvela was granted an option by
Remgro to acquire a further 5 million Trans Hex shares. The conversion of
the debentures and the exercise of the Remgro option will result in Mvela
controlling approximately 24,5% of Trans Hex. This meets the empowerment
principles of the Minerals and Petroleum Resources Development Bill and is
already an enabling factor for Trans Hex in securing new prospecting rights
and projects.
TRANS HEX INTERNATIONAL (THI)
In line with the new management's strict cost cutting regime and
following the unfavourable results at THI's Barra Grande project in Brazil
as well as the re-prioritisation of all exploration projects within the
group, Trans Hex notified THI that all future funding for THI and its
exploration properties has been suspended.
PROSPECTS
With the fortunes of our industry closely tied to the strength of the US
economy, we anticipate difficult trading conditions into 2002. Measures to
cut costs have been implemented in all areas. Marginal operations have been
temporarily closed and all procedures are being reviewed to ensure maximum
efficiencies. This process will continue and intensify.
The Minerals and Petroleum Resources Development Bill and the proposed
Precious Minerals Bill are being closely monitored. The indications are that
the ruling marketing arrangement will continue.
It is anticipated that the current lower prices will continue into 2002.
Provided the market can absorb our full production potential, headline
earnings per share for the full year will be lower than the high of the
previous year. The percentage reduction in headline earnings should however
be substantially less than at the interim stage due to a combination of the
cost cutting measures which have been implemented and the fact that the
Baken Central Plant is now fully operational.
The initial production problems experienced at the Baken Central Plant
have now been rectified and production for the full year will be on target.
Our declared total production goal of 211 400 carats remains intact.
DIVIDEND DECLARATION
The directors of Trans Hex have resolved to declare dividend number 42 of
15.5 cents per share for the interim period ended 30 September 2001.
Last date to trade
(cum dividend) Thursday, 27 December 2001
Last date to register transfers
of certificated securities
(cum dividend) Thursday, 27 December 2001
First date of trading
(ex dividend) Friday, 28 December 2001
Record date Friday, 4 January 2002
Payment date Monday, 7 January 2002
On the payment date, where so mandated, dividends due to holders of
certificated securities will either be transferred electronically to such
shareholders' bank accounts or, alternatively, cheques will be posted to
their registered addresses.
Shareholders may not dematerialise or rematerialise their holdings of
Trans Hex shares between Wednesday 19 December 2001 and Friday 4 January
2002, both days inclusive.
By order of the Board
Bernard van Rooyen Calvyn Gardner
Chairman Chief Executive Officer
Parow
23 November 2001
REGISTERED OFFICE TRANSFER SECRETARIES
405 Voortrekker Road Computershare Services Ltd
PAROW 41 Fox Street, Johannesburg 2001
7500 PO Box 61051, Marshalltown 2107
Directors: B.R. van Rooyen (Chairman), T.M.G. Sexwale (Deputy Chairman), C.
Gardner (Chief Executive Officer), A.C. Louw (Executive Director: Marine
Division), W.E. B hmann, E. de la H. Hertzog, D.M. Hoogenhout, A.R. Martin,
Y.P.J. Mercier*, M.J. Willcox *France
G. J. Zacharias (Company Secretary)
WWW.transhex.co.za
