| Thu 23 May 2002, 0:00 | | Lonmin Plc - Interim Statement - 31 March 2002 |
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Lonmin Plc
ISIN code: GB0031192486
NEWS RELEASE
ISSUED BY LONMIN PLC
4 GROSVENOR PLACE, LONDON SW1X 7YL
TEL 020 7201 6000 FAX 020 7201 6100
INTERIM STATEMENT - 31 MARCH 2002
Financial Highlights - Continuing Operations 6 months to 6 months to
31 March 31 March
2002 2001
Profits
(i) EBITDA $155m $259m
Operating profit $136m $240m
Profit before tax $138m $252m
Earnings per share 63.1c 72.6c
(ii) Interim dividend per share 30.0c 24.0c
Cash flow
Trading cash flow per share 16.5c 92.6c
Free cash flow per share (20.8)c 49.4c
Balance sheet
Equity interests $657m $1,017m
Net (borrowings)/cash and deposits $(57)m $447m
(iii) Gearing 9% nil
Commenting on the figures, the Chief Executive, Edward Haslam said:
"These results once again confirm our commitment to, and our ability to
deliver against, our stated strategies and create shareholder value."
NOTES ON HIGHLIGHTS
(i) EBITDA is operating profit before interest, tax, depreciation and
amortisation.
(ii) The interim dividend will be paid on 16 August 2002 to shareholders on
the registers on 19 July 2002.
(iii) Gearing is calculated on the equity interests of the Group.
Press enquiries: Anthony Cardew/Jackie Range, Cardew & Co - +44 (0)20 7930
0777
This press release is available on http://www.lonmin.com
CHIEF EXECUTIVE`S STATEMENT
Introduction
Lonmin`s first half performance has been particularly encouraging as a
result of our increased Platinum Group Metals (PGM`s) production. These
results once again confirm our commitment to, and our ability to deliver
against, our stated strategies.
The overall production from our South African assets of 643,896 troy ounces
was a 13% increase over the previous period and the comparative South
African rand unit cost increase over the same period was contained to 8%.
Unit costs expressed in US dollar terms decreased by 24% to $171 per PGM
troy ounce as a result of a weakening of the South African rand.
While lower metal prices throughout the period reduced both turnover and
profits, Lonmin still achieved a very satisfactory 2002 interim profit
before tax of $138 million and an attributable profit of $103 million,
equivalent to 63.1 cents per share. The reduction in the earnings per share
of 13% was lower than the reduction of 21% in the attributable profit
demonstrating the beneficial effects of the share buybacks and capital
return.
Platinum
Operations
Our South African operations continue to perform well. The achievement of
our production target of 870,000 troy ounces of platinum in 2003 remains on
track in terms of production and capital cost.
After some initial difficulties, the new smelter project successfully
completed commissioning at the end of the half year and is now fully
operational. This essential component of the expansion programme removes a
former production bottleneck and will make a significant additional
contribution to production in the second half.
The major projects currently in hand are making good progress and we remain
confident that we will deliver against our published production targets.
The first half of this year saw Lonmin`s inclusion for the first time in the
FTSE4Good index for socially responsible investment and we remain committed
to further improvements. It is therefore very disappointing to report that
we had four fatalities during the period, all of which we deeply regret, and
we shall continue our strenuous efforts to eliminate fatal accidents.
Markets
Purchases of platinum by the automobile industry have risen sharply over the
last few months. Contributing factors are the increasing stringency of
emission control legislation, the move from palladium to platinum and the
increasing popularity of diesel engines in passenger cars.
Average platinum prices realised during the first half periods fell from
$586 per troy ounce to $460 per troy ounce. However, a recent consolidation
in the $460 per troy ounce to $520 per troy ounce range supports continuing
sustainable demand for platinum from all the major market sectors.
Exploration
Work continues on both Platinum Australia`s Panton Sill project and Helix
Resources` Munni-Munni project, both located in Western Australia.
At Panton Sill the drilling programme has been completed and bulk samples
have been excavated and are currently undergoing extensive metallurgical
testwork.
Exploration at Munni-Munni is focused on previously untested areas. Multi-
layered PGM`s mineralisation has been discovered on the western margin and
exploration for extensions to the Ferguson Reef and other PGM`s
mineralisation continues.
We entered into an agreement with Wallbridge Mining Company Limited, a
company listed on the Toronto Stock Exchange, in January this year. The
agreement comprises the exploration of nineteen mostly early stage
exploration properties around the Sudbury Basin in Canada, all with
promising PGM`s potential. We are committed to spending a minimum of $4.5
million on exploring these properties over a two year period and can earn a
65% interest in a property by funding and delivering a full feasibility
study.
Gold
Ashanti
We continue to support the board and management in their efforts to
restructure the company`s finances. It is therefore pleasing to note the
considerable progress made by Ashanti during the period under review.
Zimbabwe
The management is again to be complimented on its success in operating these
assets under the very difficult conditions which prevailed both before and
after the recent elections.
Particularly pleasing to note is an attributable profit of $2 million for
the six months to 31 March 2002 and the elimination of borrowings by the
period end.
Outlook and dividend
The outlook in the second half for PGM`s in general and for platinum in
particular remains positive. Demand for platinum is expected to continue to
increase and overall we remain persuaded that the markets into which we
shall deliver our metals have the capacity to absorb our increased
production.
During the course of the first half, we bought back 10 million shares and
effected a capital reduction resulting in a total return to shareholders of
some $500 million. We also confirmed committed borrowing facilities
amounting to $355 million and we continue to look carefully at growth
opportunities in the PGM`s sector.
We have restructured the balance sheet with a view to improving its
efficiency and enhancing returns to shareholders. In this context, we are
declaring an interim dividend of 30.0 cents per share which is covered 2.1
times by earnings.
In conclusion, I would like to take the opportunity of thanking all
employees at every level for their efforts and support throughout the first
half of the year and for their individual contributions to a Company of
which we can all be proud.
FINANCIAL REVIEW
Basis of preparation
The interim financial information presented has been prepared on the same
basis and using the same accounting policies which were used to prepare the
financial statements of the Lonmin Group for the year ended 30 September
2001.
Profits
Turnover decreased by 26% to $306 million due to lower commodity prices
realised during the six months to March 2002 despite an increase in sales
volumes. Production costs were lower than the corresponding period due
principally to the South African rand devaluing by 31% in the six months to
31 March 2002 even though PGM ounces produced increased by 13% to 643,896
troy ounces from 568,289 troy ounces. As a consequence, EBITDA was $155
million for the 2002 interim period compared with $259 million for the six
months to March 2001. Depreciation remained in line with the corresponding
period with a slight decrease arising from the reduced scale of the gold
operations in Zimbabwe offset by an increase in the platinum operations as a
result of ongoing capital expenditure. Net interest receivable of $2
million was down on the March 2001 period due to lower interest rates and
lower levels of deposits during most of the 2002 period and a net borrowings
position of $57 million arising at 31 March 2002.
Tax for the six months to 31 March 2002 was a credit to the profit and loss
account of $6 million compared with a charge of $75 million in the six
months to 31 March 2001. The credit arose from the weakening of the South
African rand by 31% during the 2002 six month period which resulted in a US
dollar exchange gain of $65 million offsetting a tax charge of $59 million.
The weakening of the rand also gave rise to taxable realised exchange
profits in the local South African rand books of account. These exchange
profits arose primarily on sales debtors where rand receipts were higher
than those originally booked at the point of sale. Excluding the effects of
the US dollar exchange gain and the locally taxable exchange gains, the
effective tax rate was 38% compared with 37% in the corresponding period.
It should be noted however, that the recent strengthening of the South
African rand will, if sustained, result in a reduction in the exchange
profits in the full financial year.
The minority interest for the six months to 31 March 2002 was $41 million
compared with $47 million in the corresponding period, a reduction simply
due to lower profits, and the profit attributable to shareholders fell by
21% to $103 million from $130 million for the corresponding period. There
were no exceptional items to report in either period.
Earnings per share were 63.1 cents based on a weighted average number of
shares outstanding of 163 million compared with 72.6 cents for the
corresponding period based on a weighted average number of shares
outstanding of 178 million.
Balance Sheet
Equity interests reduced from $1,077 million at 30 September 2001 to $657
million at 31 March 2002 reflecting the retained profit for the period of
$61 million offset by the capital return to shareholders of $360 million
approved by the Court in February 2002 and the buyback by the Company of 10
million shares at a cost of $123 million during October 2001. The ordinary
share capital of the Company was redenominated from Sterling into US dollars
in February 2002 and there were 141 million US$1 ordinary shares in issue at
31 March 2002. A $355 million loan facility was entered into during the
period and net borrowings at 31 March 2002 amounted to $57 million. This
resulted in a gearing level of 9% at the period end and we continue to
review the capital structure of the balance sheet with a view to optimising
its efficiency.
Cash flow
The following table summarises the main components of the cash flow during
the period:
March March
2002 2001
$m $m
Net cash inflow from 140 233
operating activities
Interest 6 13
Tax (119) (81)
Trading cash flow 27 165
Capital expenditure (52) (47)
Minority dividends (9) (30)
Free cash flow (34) 88
Shares issued 2 2
Shares bought back (123) -
Capital return (357) -
Equity dividends paid (67) (66)
Cash (outflow)/inflow (579) 24
Trading cash flow per 16.5c 92.6c
share
Free cash flow per share (20.8)c 49.4c
Note: the difference between the opening net cash and deposits of $523
million and the closing net borrowings of $57 million was made up of a cash
outflow of $579 million as shown above and an exchange loss of $1 million.
The trading cash flow of $27 million in the six month period to 31 March
2002 was down on the $165 million achieved in the corresponding period
primarily arising from the 40% decrease in net cash inflow from operating
activities to $140 million as a consequence of lower commodity prices
reducing profitability. Corporation tax payments made by the platinum
companies were 47% higher at $119 million compared with $81 million in the
six months to 31 March 2001 and the resulting trading cash flow per share
was 16.5 cents compared with 92.6 cents for the corresponding period.
Capital expenditure of $52 million showed an increase of 11% on the
corresponding period. This increase was offset somewhat by the marked
depreciation in the South African rand during the period; actual rand
expenditure increased by 48%. Minority dividends during 2002 reflected the
payment of the September 2001 dividend accrual of $9 million to arrive at a
negative free cash flow of $34 million and a negative free cash flow per
share of 20.8 cents. In addition, the Group spent $123 million on share
buybacks during October 2001 and $357 million of the $360 million capital
return to shareholders had been settled by 31 March 2002.
Dividend
In line with the policy outlined in the circular to shareholders dated 20
December 2001 on the return of capital, dividend declarations are now based
on the reported earnings for the year, but taking into account the projected
cash requirements of the business. The traditional one-third/two-thirds
split of the total dividend between the interim and final declarations will
no longer be followed.
The Board has declared a 2002 interim dividend of 30.0 cents per share, a
cover of 2.1 times on earnings. This compares to a 2001 interim dividend of
24.0 cents per share.
STATISTICS
March March
2002 2001
Platinum operations:
Tonnes milled (excluding (000) 5,481 5,006
slag) (000) 5,610 4,814
Tonnes mined (kg) 20,981 19,337
Noble metals in matte (oz) 336,57 302,90
Refined production of - (oz) 9 1
platinum (oz) 153,16 135,71
- palladium (oz) 2 4
- rhodium (oz) 46,661 39,836
- ruthenium (oz) 86,002 71,935
- iridium (oz) 13,562 10,774
- gold (R millions) 7,930 7,129
- Total PGM`s + gold ($ millions) 643,89 568,28
Capital expenditure (R) 6 9
($) 534 362
Average price received per (R) 52 45
ounce - platinum ($) 5,112 4,627
(R) 460 586
- palladium ($) 4,116 6,659
(R) 372 845
- rhodium ($) 10,260 15,413
(R) 925 1,954
Cash cost per refined ($) 3,687 3,330
ounce of platinum (R) 337 428
($) 1,927 1,775
Cash cost per refined (R) 176 228
ounce of PGM (including ($) 1,876 1,739
royalties) 171 224
( /$) (330) (2,326
Cash cost per refined (R/$) (27) )
ounce of PGM (excluding (Z$/$) (290)
royalties) ( /$) 0.70
(R/$) 10.92 0.69
Cash cost per refined (Z$/$) 285.05 7.78
ounce of platinum net of other 0.70 55.09
metal revenue 11.48 0.70
308.17 7.94
General: 55.15
Average exchange rates -
Sterling
- SA rand
- Zimbabwe dollar
Closing exchange rates -
Sterling
- SA rand
- Zimbabwe dollar
Independent review report by KPMG Audit Plc to Lonmin Plc
Introduction
We have been instructed by the Company to review the financial information
set out on pages 8 to 13 and we have read the other information contained in
the Interim Report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors` responsibilities
The Interim Report, including the financial information contained therein,
is the responsibility of, and has been approved by, the Directors. The
Directors are responsible for preparing the Interim Report in accordance
with the Listing Rules of the Financial Services Authority which require
that the accounting policies and presentation applied to the interim figures
should be consistent with those applied in preparing the preceding annual
accounts except where they are to be changed in the next annual accounts in
which case any changes, and the reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: "Review of interim financial information", issued by the Auditing
Practices Board for use in the United Kingdom. A review consists
principally of making enquiries of group management and applying analytical
procedures to the financial information and underlying financial data and,
based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review is
substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended 31 March 2002.
KPMG Audit Plc
Chartered Accountants
London 22 May 2002
Lonmin Plc
Consolidated profit and loss account
6 months 6 months
to to
31 March 31 March
2002 2001
$m $m
Turnover 306 415
EBITDA (2) 155 259
Depreciation (19) (19)
Operating profit 136 240
Net interest and similar items 2 12
Profit on ordinary activities 138 252
before taxation 6 (75)
Taxation
Profit after taxation 144 177
Minority interest (41) (47)
Profit for the period 103 130
Interim dividend (42) (43)
Retained profit for the period 61 87
63.1c 72.6c
Earnings per share
Diluted earnings per share 62.8c 71.9c
Interim dividend per share 30.0c 24.0c
Financial ratios
Tax rate (3) 38% 37%
Net debt to EBITDA (4) 0.1 times (0.9)
times
Notes:
(1) The results for both periods relate to continuing operations.
EBITDA is operating profit before interest, tax, depreciation and
amortisation.
The tax rate has been calculated excluding exchange items as disclosed in
note 3 on page 13.
EBITDAs used in this calculation are for the 12 month periods to March 2002
and 2001.
Lonmin Plc
Consolidated balance sheet
As at As at As at
31 March 30 Sept 31 March
2002 2001 2001
$m $m $m
Fixed assets
Tangible assets 808 774 739
Investments:
Associate
Other investments
5 6 -
216 217 205
221 223 205
1,029 997 944
Current assets
Stocks 31 30 28
Debtors 86 99 100
Investments 1 1 2
Cash and short-term deposits 17 528 467
135 658 597
Creditors: amounts falling due (110) (254) (195)
within one year
Net current assets 25 404 402
Total assets less current liabilities 1,054 1,401 1,346
Creditors: amounts falling due (75) (6) (7)
after more than one year (124) (150) (146)
Provisions for liabilities and charges
855 1,245 1,193
Capital and reserves
Called up share capital 141 258 255
Reserves 516 819 762
Equity interests 657 1,077 1,017
Minority equity interest 198 168 176
855 1,245 1,193
Net (borrowings)/cash and deposits (57) 523 447
Lonmin Plc
Consolidated cash flow statement
6 months 6 months
to to
31 March 31 March
2002 2001
$m $m
Net cash inflow from operating 140 233
activities
(3) (17)
Returns on investment and
servicing of finance
Net interest received 6 13
Dividends paid to minority (9) (30)
Taxation (119) (81)
Capital expenditure and financial (52) (47)
investment
(67) (66)
Equity dividends paid
Net cash (outflow)/inflow before use (101) 22
of liquid resources and financing
429 (22)
Management of liquid resources
(409) 1
Financing
Short-term loans (1) (1)
Long-term loans 70 -
Issue of share capital 2 2
Share buyback (123) -
Capital return (357) -
(Decrease)/increase in cash in (81) 1
the period
Reconciliation of operating profit to
net cash inflow from operating activities:
Operating profit 136 240
Depreciation charge 19 19
Increase in working capital (8) (27)
Other items (7) 1
Net cash inflow from operating 140 233
activities
Note:
The cash flows for both periods relate to continuing operations.
Lonmin Plc
Statement of total consolidated recognised gains and losses
There are no total consolidated recognised gains and losses to report other
than the profit for the period of $103 million (six months to 31 March 2001
- $130 million).
Reconciliation of movement in equity interests
6 months to 6 months to
31 March 31 March
2002 2001
$m $m
Total consolidated recognised gains 103 130
relating to the period (42) (43)
Dividend
Retained profit for the period 61 87
Return of capital to shareholders (360) -
Share buyback (123) -
Shares issued on exercise of options 2 2
Other items - 2
Net (decrease)/increase in equity (420) 91
interests in the period
Equity interests at 1 October 1,077 926
Equity interests at 31 March 657 1,017
Lonmin Plc
Segmental analysis
By business
origin:
6 months to 31 March 2002
Operating Operating
Turnover EBITDA profit PBT assets
$m $m $m $m $m
Platinum 278 164 145 143 737
Gold 28 2 2 2 215
Other - (5) (5) (5) -
Corporate - (6) (6) (2) 2
306 155 136 138 954
South Africa 278 161 142 140 725
Zimbabwe 28 2 2 2 15
Ghana - - - - 200
Other - (2) (2) (2) 12
Corporate - (6) (6) (2) 2
306 155 136 138 954
6 months to 31 March 2001
Operating Operating
Turnover EBITDA profit PBT assets
$m $m $m $m $m
Platinum 393 268 250 251 570
Gold 22 - (1) (2) 225
Other - (3) (3) (3) -
Corporate - (6) (6) 6 (6)
415 259 240 252 789
South Africa 393 261 243 244 571
Zimbabwe 22 - (1) (2) 25
Ghana - - - - 200
Other - 4 4 4 (1)
Corporate - (6) (6) 6 (6)
415 259 240 252 789
Net interest and similar items
6 months to 6 months
31 March to
2002 31 March
$m 2001
$m
Net interest receivable 3 11
Exchange differences on net borrowings (1) 1
2 12
Lonmin Plc
Taxation
6 months 6 months
to to
31 March 31 March
2002 2001
$m $m
Overseas:
Current taxation - excluding tax on local 34 68
currency exchange 6 3
- tax on local currency exchange 11 6
Deferred taxation 8 19
Overseas tax on dividends remitted by (32) (7)
subsidiary companies (33) (14)
Exchange - on current taxation
- on deferred taxation
(6) 75
Dividend
An interim dividend of 30.0 cents (24.0 cents for the six months to 31 March
2001) will be paid on 16 August 2002 to shareholders on the registers on 19
July 2002.
Earnings per share
The calculation of earnings per share is based on a weighted average of
163,343,509 ordinary shares in issue for the six months to 31 March 2002
(178,218,176 ordinary shares in issue for the six months to 31 March 2001).
Diluted earnings per share is based on the weighted average number of
ordinary shares in issue adjusted by dilutive outstanding share options
during the period as follows:
6 months to 31 March 2002 6 months to 31 March 2001
Profit Number of Per Profit Number of Per
for shares share for shares share
the amount the amount
period cents period cents
$m $m
Basic EPS 103 163,343,509 63.1 130 178,218,176 72.6
Share - 795,591 (0.3) - 1,718,541 (0.7)
option
schemes
Diluted EPS 103 164,139,100 62.8 130 179,936,717 71.9
Purchase of own shares
During October 2001 the Company purchased an aggregate of 10 million of its
own ordinary shares of 1 each through the market for an aggregate
consideration of $123 million.
Capital return and redenomination
On 20 February 2002 the Court approved both a return of capital by the
Company and the redenomination of the Company`s share capital from Sterling
into US dollars.
The capital return and redenomination were effected by way of a capital
reduction whereby shareholders received 150 pence in cash for each existing
ordinary share and 21 new ordinary shares of US$1 each in exchange for every
25 existing ordinary shares of 1 each.
The return of capital amounted to $360 million including expenses of $1
million of which $357 million was paid during the six months to 31 March
2002.
Statutory Disclosure
The balance sheet at 30 September 2001 is taken from, but does not
constitute, the Company`s statutory accounts for the year ended 30 September
2001. Accounts for that year have been delivered to the Registrar of
Companies. The Auditors made an unqualified report thereon and such report
did not contain a statement under section 237(2) or (3) of the Companies Act
1985.
