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SALLIES LIMITED - REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2004
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1903/001879/06
JSE Share Code: SAL
ISIN: ZAE000022588
REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2004
PERFORMANCE IMPROVEMENTS COUNTERED BY STRONG RAND
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
30 June 30 June
2004 2003
R000 Reviewed Audited
Revenue - mining 84 406 83 288
Cost of sales 95 345 92 773
Loss from mining
operations (10 939) (9 485)
Administrative expenses (9 473) (9 102)
Amortisation of goodwill (674) (1 220)
Amortisation of mineral
rights (2 110) (2 166)
Finance cost (1 762) (2 006)
Investment income 157 372
Profit on disposal of
property, plant and
equipment 282 46
Net foreign exchange gain 5 316 5 204
Write-off - (2 463)
Net loss before taxation (19 203) (20 820)
Taxation 3 643 6 271
Net loss for the year (15 560) (14 549)
Issued shares (000) 257 009 92 294
Weighted average shares
issued (000) 151 174 92 294
Weighted average shares
issued for diluted
earnings per share (000) 155 118 92 294
Reconciliation of earnings:
Net loss attributable to
ordinary shareholders for
basic earnings per share (15 560) (14 549)
Amortisation of goodwill 674 1 220
Deferred tax on business
Combination (674) (690)
Profit on disposal of
assets (net of tax) (197) (32)
Property, plant and
equipment write-off
(net of tax) - 1 724
Net loss attributable to
ordinary shareholders for
headline earnings per share (15 757) (12 327)
Depreciation (net of tax) 2 125 1 556
Amortisation of mineral
Rights 2 110 2 166
Adjusted cash loss
attributable to
ordinary shareholders
for cash earnings
per share (11 522) (8 605)
Loss per share (cents)
Basic
Undiluted (10.3) (15.8)
Diluted (10.0) (15.8)
Headline
Undiluted (10.4) (13.4)
Diluted (10.2) (13.4)
Cash earnings
Undiluted (7.6) (9.3)
Diluted (7.4) (9.3)
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
30 June 30 June
2004 2003
R000 Reviewed Audited
Net cash (outflow)/
inflow from operating
activities (14 922) 1 969
Cash receipts from
Customers 79 045 102 283
Cash paid to suppliers
and employees (92 300) (95 902)
Cash (utilised)/generated
by operations (13 255) 6 381
Finance cost (1 762) (2 006)
Investment income 157 372
Normal taxation paid (62) (2 778)
Net cash outflow from
investing activities (5 466) (6 510)
Additions to property,
plant and equipment (5 825) (6 645)
Proceeds from disposal of
property, plant
and equipment 359 135
Net cash inflow from
financing activities 24 444 2 807
Issue of shares 35 122 -
Long term loan raised - 4 600
Long term loan repaid (10 678) (1 793)
Net increase/(decrease)
in cash and cash
equivalents 4 056 (1 734)
Cash and cash equivalents
at beginning of year (8 882) (7 148)
Cash and cash equivalents
at end of year (4 826) (8 882)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Accum-
ulated
Share Share profit/
R000 capital premium (loss) Total
Balance at
30 June 2002
(Audited) 92 53 953 8 197 62 242
Net loss
for the
year - - (14 549) (14 549)
Balance at
30 June 2003
(Audited) 92 53 953 (6 352) 47 693
Shares issued
during the year 165 34 957 - 35 122
Net loss for
the year - - (15 560) (15 560)
Balance at
30 June 2004
(Reviewed) 257 88 910 (21 912) 67 255
CONSOLIDATED BALANCE SHEET
30 June 30 June
2004 2003
R000 Reviewed Audited
ASSETS
Non-current assets 69 791 66 520
Goodwill 10 175 10 849
Property, plant and equipment 58 912 55 014
Accounts receivable 704 657
Current assets 38 036 36 232
Inventories 8 054 14 922
Accounts receivable 23 688 18 326
Taxation prepaid 2 858 2 796
Cash and cash equivalents 3 436 188
Total assets 107 827 102 752
EQUITY AND LIABILITIES
Capital and reserves 67 255 47 693
Share capital and premium 89 167 54 045
Accumulated loss (21 912) (6 352)
Non-current liabilities 9 701 12 817
Interest bearing debt 2 489 2 492
Provision for environmental
Rehabilitation 1 612 1 082
Deferred taxation 5 600 9 243
Current liabilities 30 871 42 242
Bank overdraft 8 262 9 070
Accounts payable 20 111 23 302
Current portion of
interest bearing debt 2 498 9 870
Total equity and
Liabilities 107 827 102 752
COMMENTS
The results for the year reflect both the positive effects of the turnaround
programme and the negative impact of the strong rand. While production, export
sales and prices in US dollar terms all increased substantially over the
comparable figures for 2003, the unfavourable exchange rate forced rand revenue
down. Had it not been for the rand`s continuing rise against the dollar, the
company would at least have broken even for the year. However, while Sallies is
not back in the black yet, it has continued to make tangible progress on the
road to recovery. The results of the six months ended 30 June 2004 compared to
the six months ended 31 December 2003 are as follows:
Six months Six months
ended ended
R000 31 Dec 2003 30 June 2004
Revenue - mining 44 599 39 807
Cost of sales (53 518) (41 827)
Loss from mining
Operations (8 919) (2 020)
Expenses (6 374) (7 206)
Net foreign exchange gain 3 400 1 916
Net loss before taxation (11 893) (7 310)
Taxation 3 257 386
Net loss for the period (8 636) (6 924)
The continuing performance improvement evident in the second half of the year
resulted from a sustained emphasis on production efficiency and cost control, as
well as the significant savings achieved by insourcing the mining operations as
of November 2003. It should be noted that the capital expansion project on the
Witkop plant was only completed after the year-end and the substantial benefits
expected from the 50% increase in production levels it will deliver will
therefore only be felt in the new year.
While the main focus has been on completing the expansion project, management
has also been investigating the feasibility of extracting product from the
fluorspar tailings dams at the mine. A pilot plant built from surplus equipment
has already proven the process. The board will make a decision on whether or
not to proceed to commercial production later this month and if the project goes
ahead it is expected to be in production by the end of the current financial
year.
At the beginning of the review period the company undertook a fundraising
exercise which realised R36 million through a rights offer and private placement
of shares. Of this, R11 million was used for the capital expansion project
while the balance has been used to ease the company`s heavy debt burden. The
company`s major creditor, RMB Resources Australia, has been repaid and gearing
has been reduced from 45% at the end of the 2003 financial year to 20% at
present. As a result of the fundraising exercise, the number of shares in issue
has increased from 92.3 million to 257 million. The relatively high level of
receivables on the balance sheet is attributable to the structure of the
Honeywell contract. A trade finance agreement with the company`s bankers will
reduce this and improve cash flow.
Prospects
The global market for fluorspar remains buoyant and the company will enjoy an
average price of at least US$120/ton (2004 - US$109/ton), including long-term
contracts, for the year to June 2005. Production for this period is forecast at
180 000 tons of finished product. At this price and at planned production
levels, the company should be modestly profitable at a projected R6.50 to the US
dollar. Given its gearing to the exchange rate, any material strengthening or
weakening of the rand will have a significant impact on Sallies` 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 comparatives
Comparative amounts have been restated where appropriate to facilitate improved
disclosure.
Review opinion
The financial information set out in the reviewed results has been reviewed by
the Group`s auditors Ernst & Young who issued a modified review opinion on the
fact that the going concern of Sallies Limited is dependent on the successful
outcome of the turnaround strategy as disclosed in the directors comments. The
modified review report is available for inspection at the registered office of
the company.
Diluted loss per share
Diluted losses per share have been calculated assuming that at the beginning of
the year 18 873 000 (2003 - 6 415 000) share options, allocated to directors,
employees, lenders and consultants, were exercised.
On behalf of the Board
PH Flack 14 September 2004
Chairman Johannesburg
Directors:
PH Flack (Chairman), LB Robertson*, AD Moffat, JJ Geldenhuys, IJ Marais*
(*Executive)
Registered office:
Farm Wintershoek, Zeerust, 2865 (Private Bag X1315, Zeerust, 2865)
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street,
Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Investor and media relations:
For further information contact Kathy du Plessis on Telephone +27 (11) 728 4701,
Telefax +27 (11) 728 2547, e-mail: sallies@dpapr.com
Date: 14/09/2004 12:15:53 PM Produced by the JSE SENS Department
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