| Thu 29 Nov 2001, 0:00 | | Lonmin Plc - Results For The Year Ended 30 Septemb |
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LON
ISIN Code: GB0002568144
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2001
Financial Highlights Year to Year to
30 30 September
September 2000
2001 (i) Restated
PROFITS - continuing operations
(ii) EBITDA - up 31% $541m $412m
Group operating profit - up 29% $490m $380m
Profit before exceptional items - up 33% $523m $392m
Earnings per share pre-exceptionals - up 18% 153.7c 130.1c
(iii) Dividends per share 45.1p/64.0c 35.0p/50.0c
CASH FLOW - continuing operations
Trading cash flow per share - up 21% 242.9c 200.0c
Free cash flow per share - up 23% 129.0c 105.2c
BALANCE SHEET
Equity interests $1,077m $926m
Net cash and deposits $523m $422m
Commenting on the results, Edward Haslam said: "
* By any measure Lonmin has out performed expectations.
* Production of PGM's is at an all time high; costs were contained within
South African inflation, and our expansion programme brought forward by a
full five years.
* $500m is to be returned to Shareholders and committed loan facilities will
ensure that corporate flexibility is maintained."
NOTES ON HIGHLIGHTS
(i) The 2000 figures have been restated to include full provision for
deferred tax on an undiscounted basis in accordance with FRS 19 - Deferred
Tax.
(ii) EBITDA - earnings before interest, tax, depreciation and amortisation.
(iii) The Board recommends a final dividend of 28.2p/40.0c payable per share
on 18 February 2002 to shareholders on the registers on 25 January 2002.
Press enquiries: Anthony Cardew, Cardew & Co - +44 (0)20 7930 0777
This press release is available on http://www.lonmin.com
Chairman's statement
I am pleased to present the Report and Accounts for the year ended 30
September 2001. The results have been by any standard exceptional.
I must, however, sound a note of caution in that the results were flattered
by a sharp and unsustainable increase in the prices of all platinum group
metals in the early part of the financial year. The effects of this on our
results are further exaggerated by the steady fall in the Rand through the
year since most of our costs are denominated in Rand, while we earn our
revenues and report in US dollars. Recently prices have fallen to levels
which we believe to be sustainable and at which we can continue to earn very
satisfactory returns. We thus retain confidence in the medium to longer-term
outlook for the Group and continue to invest in raising output and lowering
costs
Now that we have virtually completed the transformation of the Group from
the sprawling conglomerate of five years ago to a streamlined pure platinum
group metals producer, we are able to produce a much more comprehensive and,
I trust, informative and interesting report on the Group and its activities
and I commend the full report to you. I will thus confine my comments to
matters of broad strategic importance. I would also commend to you the
separate report on Safety, Health and the Environment which we have produced
for the second time and which is available to shareholders on written
request. Lonmin is a significant employer and we take our responsibilities
to our workforce, to the communities in which we operate and to the
environment extremely seriously. In this context you will also be
interested to know that as a matter of policy we confine our social spending
totalling some $4 million almost wholly to organisations or projects in
Africa.
The Group has a very strong balance sheet, and is cash generative. We have
devoted a great deal of attention to ways in which we might enhance the
efficiency of the balance sheet and improve the returns to shareholders,
whilst maintaining the flexibility to finance the major capital
requirements of our South African platinum operations. The facts that we are
almost wholly dependent on a single suite of commodities which exhibit
volatile price characteristics and that we have little geographic
diversification, also demand a conservative approach to the financial
reconstruction of the Company.
The first step in this direction was taken in September and October of this
year when we bought in and cancelled some 11.7 million shares thus
returning some $143 million. This will improve our earnings per share, lower
our cost of capital and hopefully lead to a sustained improvement in the
market rating of our shares. We are formulating plans for a further
reconstruction of the balance sheet, which if approved, will involve the
return of a further $350 million to shareholders. We will also seek to
renew the Board's authority to purchase shares in the market for
cancellation should this be deemed appropriate. This financial
reconstruction will involve our putting in place and maintaining a modest
level of borrowing and one which will not constrain the organic development
of the company or acquisition activity, should suitable opportunities
present themselves. You can be assured that we will keep the financial
structure of the Company under close review as markets, prices and our
business evolve and that we shall not hesitate to take further steps if
considered appropriate.
You will have seen that we have taken some modest steps towards geographic
diversification of the Group with small, but promising, investments in
projects in Australia. As a matter of policy we believe that partnership
with so-called junior exploration companies, rather than the development of
an expensive exploration resource within the Group, is the right model for
us. It is in this context that we welcome to the Board Peter Godsoe who has
extensive knowledge and contacts as a result of the many years he has spent
as Chairman and Chief Executive of one of the Canadian banks with the
closest exposure to, and knowledge of, extractive industries worldwide.
While platinum is our core business we retain some residual gold interests
in the form of our 32% interest in Ashanti Goldfields and 100% of
Independence Gold in Zimbabwe. We have resumed a constructive dialogue with
the Ghanaian Government and are much encouraged by their apparent intention
to adopt a pragmatic and commercial approach to the future of Ashanti. We
will continue our support of the Ashanti management in their encouraging
efforts to improve their financial structure and restore the significant
underlying value of the company for all its shareholders. In Zimbabwe we
have nothing but admiration for the success of our management and staff at
all levels in maintaining the financial viability of our mines in that
troubled country in the face of seemingly overwhelming financial, operating
and, sadly, much publicised, political problems.
To conclude on a positive note, the Board is confident that we have a fine
company operating efficiently and in a financially prudent way, in an
industry with exciting long term prospects and which produces metals which
have a key role to play in the fast evolving new technology driven world of
the future.
I should like to join the Chief Executive Edward Haslam in thanking on
behalf of the Board our management and staff at every level for their
outstanding contribution to an outstanding result.
Sir John Craven
Chairman
Chief Executive's statement
Five years of progressive restructuring culminated in the emergence at the
end of last year of Lonmin as a pure Platinum Group Metal (PGM) mining
company. The year under review is the first full year during which the
Company has operated under its new status.
If ever a justification for the earlier decision to establish PGM mining as
Lonmin's core business, or proof of the Group's subsequent success were
required, then this year's results, both operational and financial are
entirely eloquent.
By any measure, Lonmin's South African operations outperformed budget
expectations and the competition. Total tonnes of ore milled at 10.52m were
an all time record and represented an eight percent increase over the
previous year. Similarly, refined production of PGM's at 1.36m tr.oz was
also an all time record high and was some ten percent greater than the
previous year's production.
Equally satisfactory, was the containment of the Rand costs within the South
African Government's official producer price inflation figure.
The total cash cost per refined ounce of PGM's excluding royalties rose by
eight point four percent year on year in Rand terms and fell by over ten
percent in dollar terms to 192$/tr.oz, probably amongst the very lowest in
the industry.
Any review of the mine's operational successes is, however, incomplete
without the inclusion of an analysis of the safety record. The year under
review saw the real positive impact of our Stop Fatals Totally campaign.
All three mines now operate fully equipped and permanently staffed
underground training schools. These schools provide both induction and
refresher training courses in all aspects of hard rock mining with
exhaustive emphasis on safety.
Against the background of this safety campaign and its objectives, any
death, whatever the cause must be considered as a failure and we deeply
regret the fatalities which occurred during the year. Our condolences and
sympathies have already been expressed fully to the bereaved families and I
take the opportunity to re-express them here.
Although there is a natural reluctance to reduce fatalities to statistics,
our combined efforts in South Africa have resulted in a year on year
reduction of thirty percent in the number of fatal accidents despite a
payroll increase of some 2000 people, which includes a significant number of
contractors engaged on projects with greater potential hazards.
For the first time ever, in one year, all three mines achieved the coveted
one million fatality free shift status and Karee mine achieved the even
rarer two million fatality free shift status.
Generally speaking, it can be said that the safer the mine, the more
efficient it becomes and we shall again be tireless during the coming year
in the pursuit of safety.
This all time record output from the mines was delivered into an extremely
robust market with commensurately high prices. Our average realised
platinum price at 544$/tr.oz was eight percent higher than the previous
year; palladium was twenty-four percent higher at 670$/tr.oz and rhodium one
percent higher at 1,703$/tr.oz.
This propitious combination of price and production resulted in a very sound
financial performance, the highlights of which were a thirty-three percent
increase in profit before tax and exceptional items from continuing
operations and an eighteen percent increase in earnings per share which has
allowed us, for the second year running, to provide shareholders with a
significantly increased dividend.
There was also a fifty-two percent increase in net cash inflow from the
operations which resulted in a year end net cash position of $523m, most of
which is held in London.
Whilst in itself a very positive result, the Board was mindful of the fact
that one of the consequences is a less than efficient balance sheet.
The Chairman has reported on the overall strategy we have adopted to rectify
this and to further improve shareholder returns further. This began with
the announcement of a rolling share buy back programme which we started just
prior to the year end, which will enhance earnings per share and reduce our
weighted average cost of capital.
At the same time and by way of committed loan facilities we intend to
maintain our ability to pursue corporate development opportunities within
our core business competence.
During the year we took our first steps in this direction by a combination
of equity participations and joint ventures with junior mining companies in
Australia. It is our intention to selectively continue and develop further
this strategy throughout the coming year.
In this context the Board is very much aware of the consolidation taking
place within the mining industry. Although such opportunities are more
limited within the PGM's sector we have nevertheless devoted a very
considerable amount of management time and effort in this respect but so far
no transaction has materialised which we have felt able to recommend to
shareholders.
During the year, we have supported the management of our gold mines in
Zimbabwe, who under the most severe combination of the much publicised
political pressures and attendant hyper-inflation, managed to protect our
assets from any permanent damage to their value and at the same time
generate a small operating profit.
Following the September events in the United States, the world's economies
have entered a period of unprecedented uncertainty. As a result we have
devoted considerable resources to an analysis of possible consequences for
our PGM markets. In this context it is perhaps opportune to re-state here
an appreciation of the crucial enabling roles which PGM's play in everyone's
lives and that one in four of all manufactured products in use today either
contains PGM's or involved PGM's at some stage in their production. PGM's
are possessed of remarkable but practical properties, which will continue to
be exploited in the future in ever advancing technologies.
As a result, we retain the confidence to maintain our recently announced
revised capital investment programme, which will see our previous target of
870,000 tr.oz of annual platinum production by the year 2008, brought
forward by five years to 2003.
Whilst this is a very attractive prospect for a Lonmin shareholder, it
remains a modest and very achievable target in the context of the overall
market.
Finally, I would like to end on a personal note and publicly express my most
sincere thanks and appreciation to all employees for their tireless efforts
throughout the year, which resulted in this most satisfactory set of
results.
Edward Haslam
Chief Executive
Lonmin Plc
Consolidated profit and loss account
For the year ended 30 September
2001 2000
Restated
Note $m $m
Turnover 1 866 951
- continuing operations 866 757
- discontinued operations - 194
EBITDA * 2 541 429
- continuing operations
- discontinued operations
Depreciation
541 412
- 17
(51) (44)
Group operating profit 3 490 385
- continuing operations 490 380
- discontinued operations - 5
Share of associate's operating loss - (1)
Total operating profit 490 384
- continuing operations 490 380
- discontinued operations - 4
Profit on sale of fixed assets
- continuing operations - 10
Profit on sale or termination of
operations - 9
- discontinued operations
Profit before net interest receivable and
similar items, taxation and 490 403
minority interests 5 33 11
Net interest receivable and similar items
Profit before taxation and minority 4 523 414
interests
- continuing operations 523 402
- discontinued operations - 12
Taxation 6 (150) (97)
Profit after taxation and before minority 373 317
interests (99) (79)
Minority interests
Profit for the year 274 238
- continuing operations 274 223
- discontinued operations - 15
Dividends 7 (110) (90)
Retained profit for the year 164 148
Earnings per share excluding exceptionals 153.7c 130.1c
- continuing operations 8 153.7c 144.7c
Earnings per share 8 152.4c 136.3c
Diluted earnings per share 8
Dividends per share 7 45.1p/64.0 35.0p/50.0
c c
* EBITDA is earnings before interest, tax, depreciation and amortisation.
The 2000 figures have been restated to include full provision for deferred tax
on an undiscounted basis in accordance with FRS 19 - Deferred Tax.
Lonmin Plc
Consolidated balance sheet
As at 30 September
2001 2000
Restated
$m $m
Fixed assets
Tangible assets 774 710
Investments: 223 206
Associate
Other investments
6 -
217 206
997 916
Current assets
Stocks 30 21
Debtors 99 113
Investments 1 2
Cash and short-term deposits 528 439
658 575
Total assets 1,655 1,491
Creditors: amounts falling due within one (254) (242)
year
Net current assets 404 333
Total assets less current liabilities 1,401 1,249
Creditors: amounts falling due after more (6) (8)
than one year (150) (155)
Provisions for liabilities and charges
1,245 1,086
Capital and reserves
Called up share capital 258 259
Share premium account 417 414
Revaluation reserve 17 18
Other reserves (10) (12)
Profit and loss account 395 247
Equity interests 1,077 926
Minority equity interests 168 160
1,245 1,086
Net cash and deposits 523 422
The 2000 figures have been restated to include full provision for deferred tax
on an undiscounted basis in accordance with FRS 19 - Deferred Tax.
The effect of this restatement on the September 2000 balance sheet has been to
increase provisions by $144 million, reduce equity interests by $105 million
and reduce minority equity interests by $39 million.
Consolidated cash flow statement
For the year ended 30 September
2001 2000
Note $m $m
Net cash inflow/(outflow) from operating 9 525 346
activities
- continuing operations
- discontinued operations
525 354
- (8)
Returns on investment and servicing of (71) (55)
finance
Interest - received 26 10
- paid (9) (25)
Dividends paid to minorities (88) (40)
Taxation (109) (21)
Capital expenditure and financial (126) (117)
investment
(6) 212
Acquisitions and disposals
(110) (71)
Equity dividends paid
Net cash inflow/(outflow) before use of 103 294
liquid resources and financing
- continuing operations
- discontinued operations
Management of liquid resources
Financing
103 338
- (44)
(98) (335)
(17) 41
New long term loans - 102
Repayment of long term loans - (64)
Repayment of short term loans (2) (5)
Issue of ordinary share capital 4 8
Share buyback (19) -
(Decrease)/increase in cash in the year (12) -
- continuing operations
- discontinued operations
(12) 7
- (7)
Lonmin Plc
Statement of total consolidated recognised gains and losses
For the year ended 30 September
2001 2000
Restated
$m $m
- Profit/(loss) for the year - Group 274
- - Associate -
- Total consolidated recognised gains relating 274
to the year (105)
- Adoption of FRS 19 - Deferred Tax
-
Total consolidated recognised gains since last 169
Annual Report
Consolidated historical cost profits
For the year ended 30 September
2001 2000
Restated
$m $m
Reported profit before taxation 523 414
Difference between an historical cost depreciation
charge and the 2 2
actual depreciation charge calculated on the
revalued amount
Historical cost profit before taxation 525 416
Historical cost retained profit for the year 166 150
Reconciliation of movement in equity interests
For the year ended 30 September
2001 2000
$m Restated
$m
Total recognised gains relating to the year 274 238
Dividends (110) (90)
Retained profit for the year 164 148
Share buyback (19) -
Shares issued on conversion of bonds - 163
Shares issued on exercise of share options 4 8
Other items 2 1
Net increase in equity interests in the year 151 320
Equity interests at 1 October - restated for 926 606
deferred tax
Equity interests at 30 September 1,077 926
Lonmin Plc
1 Turnover
Turnover is analysed by activity and geographical origin below:
2001 2000
$m $m
Platinum 815 703
Gold 51 54
Continuing operations 866 757
Discontinued operations - 194
866 951
South Africa 815 703
Zimbabwe 51 54
Continuing operations 866 757
Discontinued operations - 194
866 951
Turnover by destination is analysed by geographical area below:
2001 2000
$m $m
The Americas 279 282
Asia and other 253 222
Europe 158 173
South Africa 120 20
Zimbabwe 56 60
Continuing operations 866 757
Discontinued operations - 194
866 951
2.EBITDA
EBITDA is analysed by activity and geographical origin below:
2001 2000
$m $m
Platinum 553 425
Gold 5 -
Other (6) (2)
Central costs (11) (11)
Continuing operations 541 412
Discontinued operations - 17
541 429
South Africa 539 412
Europe 10 11
Zimbabwe 5 -
Australia (2) -
Central costs (11) (11)
Continuing operations 541 412
Discontinued operations - 17
541 429
Lonmin Plc
3. Group operating profit
Group operating profit is analysed by activity and geographical origin below:
2001 2000
$m $m
Platinum 516 397
Gold (9) (4)
Other (6) (2)
Central costs (11) (11)
Continuing operations 490 380
Discontinued operations - 5
490 385
South Africa 502 384
Europe 10 11
Zimbabwe (9) (4)
Australia (2) -
Central costs (11) (11)
Continuing operations 490 380
Discontinued operations - 5
490 385
4. Profit before taxation
Profit before taxation is analysed by activity and geographical origin below:
2001 2000
$m $m
Platinum 518 394
Gold 1 (5)
Other (6) (2)
Central costs (11) (11)
Central interest and similar items 21 16
Continuing operations 523 392
Discontinued operations - 3
Profit before taxation and exceptional items 523 395
Exceptional items - 19
Profit before taxation 523 414
South Africa 504 381
Europe 10 11
Zimbabwe 1 (5)
Australia (2) -
Central costs (11) (11)
Central interest and similar items 21 16
Continuing operations 523 392
Discontinued operations - 3
Profit before taxation and exceptional items 523 395
Exceptional items - 19
Profit before taxation 523 414
Lonmin Plc
5. Net interest receivable and similar items
2001 2000
$m $m
- Interest payable:
- On bank loans and overdrafts wholly repayable (3)
within five years (1)
- Other loans (1)
- Finance leases -
- Discounting on provisions
(5) (29)
Interest receivable 25 15
Exchange differences on net debt 13 25
Net interest receivable and similar items 33 11
Continuing operations 33 12
Discontinued operations - (1)
6. Tax on profit on ordinary activities
2001 2000
$m $m
United Kingdom:
Corporation tax at 30% (2000 - 30%) 119 41
Double Tax relief (119) (41)
Advance Corporation Tax - (5)
- (5)
Overseas tax charge for the year 175 90
Overseas deferred tax charge - origination and 20 35
reversal of timing differences 1 -
Prior year adjustments (46) (24)
Exchange adjustments
Tax charge on profit on ordinary activities before 150 96
exceptional items - 1
Tax charge on exceptional items
Taxation 150 97
Continuing operations 150 103
Discontinued operations - (6)
A reconciliation of the standard tax rate to the effective tax rate is as
follows:
2001 2000
% %
- Standard tax rate 30
- Prior year losses utilised -
- Overseas taxes on dividends remitted by 7
subsidiary companies (8)
- Effect of exchange adjustments -
- Prior year and other items
Effective tax rate 29 23
The Group's primary operations are based in South Africa. Therefore, the
relevant standard tax rate for the Group is the South African statutory tax
rate of 30% (2000 - 30%).
Lonmin Plc
7. Dividends
2001 2000
$m $m
Interim 16.9p/24.0c (2000 - 9.3p/14.0c) per share 43 25
Final 28.2p/40.0c (2000 - 25.7p/36.0c) per share 67 65
110 90
Until 31 March 1999, advanced corporation tax (ACT) was paid on dividends at th
rate of 25% of the net dividend. Subject to certain restrictions, this was
recoverable by offsetting it against corporation tax liabilities. When this
offset was not available surplus ACT was generated.
At the year end, the Group had surplus ACT of $105 million (2000 - $105 million
carried forward and available, subject to certain restrictions, for set-off
against future United Kingdom corporation tax liabilities. The notional
"Shadow ACT", being the ACT which would have been payable if the system had
not been abolished and which must be set-off prior to utilisation of surplus
ACT, amounts to $70 million (2000 - $41 million).
8. Earnings per share
Earnings per share has been calculated on the profit attributable to
shareholders amounting to $274 million (2000 restated - $238 million) using
a weighted average of 178,264,503 ordinary shares (2000 - 164,527,428
ordinary shares).
For 2000, earnings per share excluding exceptional items from continuing
operations has been calculated on the restated pre-exceptional profit
attributable to shareholders amounting to $214 million using the same
weighted average number of ordinary shares as above. There were no
exceptional items during 2001.
The pre-exceptional attributable profit from continuing operations is calculate
as follows:
2001 2000
$m $m
Profit for the year 274 238
Discontinued operations profit for the year - (15)
Profit for the year - continuing operations 274 223
Profit on sale of fixed assets - continuing - (10)
operations - 1
Tax on profit on sale of fixed assets - continuing
operations
Pre-exceptional profit for the year - continuing 274 214
operations
As the table below illustrates, diluted earnings per share is based on the
weighted average number of ordinary shares in issue adjusted by the dilutive
outstanding share options and, for 2000 only, the convertible bonds for that
part of the year prior to their conversion in July 2000. These adjustments
give rise to an increase in the weighted average number of ordinary shares
in issue of 1,557,158 (2000 - 14,506,651) and no effect on the attributable
profit from continuing operations (2000 - an increase of $6 million arising
from the post tax interest saving which would have arisen had the bonds been
converted at the start of the year).
2001 2000
Profit Per Profit for Per
for Number share the year Number share
the of amount $m of amount
year Shares cents Shares cents
$m
Basic EPS 274 178,264, 153.7 238 164,527, 144.7
Convertible bonds - 503 - 6 428 -
Share option - - - - 12,554,1 -
schemes 1,557,15 78
8 1,952,47
3
Diluted EPS 274 179,821, 152.4 244 179,034, 136.3
661 079
Lonmin Plc
9. Net cash flow from operating activities
2001 2000
$m $m
Group operating profit from continuing operations 490 380
Depreciation charge 51 32
(Increase)/decrease in stock (10) 5
Increase in debtors (19) (59)
(Decrease)/increase in creditors (8) 12
Increase/(decrease) in provisions 1 (7)
Exchange 20 (9)
Net cash inflow from continuing operations 525 354
Net cash outflow in respect of discontinued - (8)
operations
Net cash inflow from operating activities 525 346
10. Exchange Rates
The principal US dollar exchange rates used are as follows:
2001 2000
Average exchange rates:
Sterling 0.69 0.64
SA rand 8.01 6.60
Zimbabwe dollar 117.84 40.44
Closing exchange rates:
Sterling 0.69 0.69
SA rand 8.77 7.23
Zimbabwe dollar 306.68 52.47
11 Statutory Disclosure
The financial information set out above is taken from but does not constitute
the Company's statutory accounts for the years ended 30 September 2001 or
2000. Statutory accounts for 2000 have been delivered, and for 2001 will be
delivered, to the Registrar of Companies. The Auditors have made
unqualified reports on those accounts and such reports did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985.
Copies of the 2001 Lonmin Accounts will be posted to shareholders and will be
available at the Company's registered office in mid December 2001.
12 Annual General Meeting
The 2002 Annual General Meeting will be held at 11.00 am on Friday 25 January
2002 at The Ball Room, Park Lane Hotel, Piccadilly, London W1.
