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SALLIES LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1903/001879/06
JSE Share Code: SAL
ISIN: ZAE000022588
Reviewed results for the six months ended 31 December 2002
PERFORMANCE TURNAROUND STRATEGY INITIATED
CONSOLIDATED INCOME STATEMENT
Restated
Six months Six months 12 months
ended ended ended
31 Dec 31 Dec Per- 30 June
2002 2001 centage 2002
R000 Reviewed Unaudited change Audited
Revenue - mining 44 144 56 818 (22) 114 115
Cost of sales (44 133) (42 147) 5 (86 513)
Profit from mining
activities 11 14 671 (100) 27 602
Less:
Depreciation (1 075) (1 019) 5 (2 639)
Amortisation of
mineral rights (1 111) (1 016) 9 (1 966)
Operating (loss)/
profit from
mining (2 175) 12 636 (117) 22 997
Profit/(loss) on
disposal of
assets - 16 (100) (322)
Administrative
expenses (5 396) (4 775) 13 (11 516)
Impairment of assets - (5 101) (100) (5 101)
Amortisation of
goodwill (355) (415) (14) (628)
Net finance costs (256) (1 188) (78) (1 060)
Net foreign exchange
gains 524 2 281 (77) 2 287
Net (loss)/profit
before taxation (7 658) 3 454 (322) 6 657
Taxation 1 107 (1 036) (207) (2 062)
Net (loss)/profit
for period (6 551) 2 418 (371) 4 595
Issued shares (000) 92 294 92 294 - 92 294
Weighted average
shares issued
(000) 92 294 92 294 - 92 294
Weighted average
shares issued
for diluted
earnings per share
(000) 99 133 98 204 1 99 133
Reconciliation of
earnings:
Net (loss)/profit
attributable to
ordinary
shareholders for
basic earnings
per share (6 551) 2 418 (371) 4 595
Amortisation of
goodwill 355 415 (14) 628
Impairment of assets
(net of tax) - 3 571 (100) 3 571
Deferred tax on
amortised goodwill (355) (415) (14) (628)
Loss on disposal of
assets (net of tax) - (11) (100) 225
Loss on discontinued
operations
(net of tax) - - 1 112
Non recurring
expenditure
(net of tax) - - 260
Net (loss)/profit
attributable to
ordinary
shareholders
for headline
earnings per
share (6 551) 5 978 (210) 9 763
Depreciation
(net of tax) 753 713 5 1 841
Amortisation of
mineral rights 1 111 1 016 9 1 966
Adjusted cash(loss)/
earnings
attributable to
ordinary
shareholders
for cash earnings
per share (4 688) 7 707 (161) 13 570
(Loss)/earnings
per share:
Basic
- undiluted (cents) (7.1) 2.6 (373) 5.0
- diluted (cents) (6.6) 2.6 (354) 5.0
Headline
- undiluted (cents) (7.1) 6.5 (209) 10.6
- diluted (cents) (6.6) 6.6 (200) 10.2
Cash (loss)/earnings
- undiluted (cents) (5.1) 8.4 (161) 14.7
- diluted (cents) (4.7) 7.8 (160) 14.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Accu-
Share Share mulated
R000 capital premium income Total
Balance at 30 June 2001 92 53 953 3 602 57 647
Net income for period - - 2 418 2 418
Balance at 31 December
2001 92 53 953 6 020 60 065
Net income for period - - 2 177 2 177
Balance at 30 June 2002 92 53 953 8 197 62 242
Net loss for period - - (6 551) (6 551)
Balance at 31 December
2002 92 53 953 1 646 55 691
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months 12 months
ended ended ended
31 Dec 31 Dec 30 June
2002 2001 2002
R000 Reviewed Unaudited Audited
Net cash inflow/
(outflow) from
operating
activities 5 641 (11 191) (823)
Cash surplus/(deficit)
generated by
operations 9 566 (9 880) 2 895
Net interest paid (256) (1 188) (1 060)
Normal taxation
(paid)/received (3 669) (123) (2 658)
Net cash outflow from
investment
activities (6 008) (1 222) (3 494)
Net additions to mine
plant, equipment
and buildings (6 008) (2 742) (5 991)
Additions to office
furniture and
equipment - - (104)
Proceeds from
disposal of
assets - 1 520 2 601
Net cash inflow/
(outflow) from
funding activities 4 622 1 036 (11 467)
Long-term loan
- raised 4 740 1 157 1 014
- repaid (118) (121) (12 481)
Net increase/(decrease)
in cash and cash
equivalents 4 255 (11 377) (15 784)
Cash and cash
equivalents at
beginning of
period (6 574) 9 210 9 210
Cash and cash
equivalents/
(overdraft) at end
of period (2 319) (2 167) (6 574)
CONSOLIDATED BALANCE SHEET
Restated
31 Dec 31 Dec 30 June
2002 2001 2002
R000 Reviewed Unaudited Audited
EQUITY AND LIABILITIES
Capital and reserves 55 691 60 065 62 242
Share capital and
premium 54 045 54 045 54 045
Accumulated income 1 646 6 020 8 197
Non-current liabilities 17 614 21 717 16 776
Long-term loan 3 266 5 279 269
Provision for
environmental
rehabilitation 957 1 096 993
Deferred taxation 13 391 15 342 15 514
Current liabilities 27 715 43 175 37 282
Accounts payable and
provisions 14 112 14 823 18 252
Taxation payable - 1 664 -
Bank overdraft 2 319 2 167 6 574
Current portion of
long-term
liabilities 11 284 24 521 12 456
Total equity and
liabilities 101 020 124 957 116 300
ASSETS
Non-current assets 70 860 68 209 67 390
Property, plant and
equipment 59 143 55 927 55 321
Goodwill 11 717 12 282 12 069
Current assets 30 160 56 748 48 910
Inventories 12 743 12 663 13 524
Accounts receivable 15 000 36 816 35 368
Forward exchange
contract asset 643 7 269 -
Taxation pre-paid 1 774 - 18
Total assets 101 020 124 957 116 300
Net asset value per
share (cents) 60.3 65.1 67.4
COMMENTS
Shareholders have been advised that the board has retained FRM Strategies to
implement a performance improvement plan for the group. This follows a major
deterioration in its operational and financial results for the six months to
December 2002, due mainly to lower production levels and consequent increases in
costs. FRM has undertaken a comprehensive review of the group"s business and
has initiated a turnaround strategy based on * an extensive exploration
programme designed to improve the reliability of the current geological model
and to delineate other impurities such as silicates and iron;
* the optimisation of the recently completed upgrade of the flotation plant to
enable it to accommodate a higher feed, increase recoveries and improve quality;
and
* the improvement of mine planning, operational efficiencies and overall
controls at the group"s Witkop operation.
Production
The production of acid-grade fluorspar concentrate decreased as a result of
lower head grades and recoveries. With the geological model for the higher-
grade Buffelshoek deposit proving to be unreliable, mining activities were moved
to the lower-grade Wintershoek deposit. Resumption of mining at Buffelshoek
will be considered once the geological model has been re-evaluated.
The upgrade of the flotation plant was completed and commissioned in December
2002. Early indications are that this is decreasing the production cost of acid
grade fluorspar by some 15%, and is having a beneficial effect on product
quality as well. The upgrade has also enabled the plant to produce
metallurgical grade fluorspar, previously bought from another producer and
briquetted for sale to the local market.
Sales
Acid-grade fluorspar sales decreased in line with the reduction in production
volumes. The US$ price per tonne decreased by 8.4% to US$101.28/DMT but this
reduction was largely offset by an improved exchange rate. The price to current
customers has dropped by a further US$5/DMT since the beginning of 2003.
Metallurgical grade fluorspar sales, which account for a small part of overall
sales, decreased by 33%. It should be noted that the plant"s full production
for the 2003 calendar year has already been sold.
Mineral resources
Re-evaluation of the Buffelshoek deposit reduced the reserve to 9.6 million
tonnes of ore at an average calcium fluoride grade of 18.6%. This will be
corroborated by a further drilling programme. The drilling programme on the
Wintershoek deposit has been completed and final results are excepted by April
2003. Large unexplored inferred reserves exist in close proximity to the plant.
Capital expenditure
Capital expenditure during the review period amounted to R6 million and is
related mainly to the plant upgrade.
Prospects
The recovery process that has been initiated should arrest the rate of decline
of the past six months in the latter half of the year. However, it may take
several years for its full effects to flow through to the bottom line.
Accounting policies
The group"s accounting policies conform to South African Statements of Generally
Accepted Accounting Practice. These policies are consistent with those applied
in the previous year.
Restatement of comparative results
The consolidated income statement, consolidated balance sheet, earnings per
share and net asset value per share have been restated. The restatement is
related to an impairment of mining assets that were disposed of during the
second half of the previous year.
Review opinion
The interim report for the period ended 31 December 2002 has been reviewed by
Ernst & Young, who issued a modified review opinion on the fact that the going
concern of Sallies Limited is dependent on the continued financial support from
RMB Resources Limited, Australia (a loan creditor and a major shareholder) and
the successful implementation of a turnaround strategy. Their modified review
report is available for inspection at the registered office of the company.
Diluted earnings per share
Diluted earnings per share have been calculated assuming that at the beginning
of the year 6 415 000 (2001 - 5 910 000) share options, allocated to directors,
employees and consultants, were exercised. The net profit is adjusted by the
after-tax effect of interest earned on the additional capital from the exercise
of the share options.
Change of directors and management
Subsequent to the period under review, Messrs Peter Flack, Lindsay Robertson and
Alastair Moffat, all of FRM Strategies, have been appointed to the board. Mr
Jurie Geldenhuys has also joined the board as an independent director. Messrs
Mike Tuite, Les Woolcock, James Slade and Pierre de Villiers have resigned from
the board, but Mr de Villiers will continue as a consultant to the group.
On behalf of the Board
PH Flack 26 March 2003
Chairman Johannesburg
Registered office: KPMG Forum, 1226 Schoeman Street, Pretoria, 0002 * (PO Box
11265, Hatfield, 0028)
Transfer secretaries: Computershare Services Limited, 70 Marshall Street,
Johannesburg, 2001 * (PO Box 61051, Marshalltown, 2107)
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