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SAL
SAL
Sallies Limited - Reviewed results for the six months ended 31 December
2005
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 2005
PROSPECTS BRIGHTEN AFTER DIFFICULT PERIOD
CONSOLIDATED INCOME STATEMENT
Year Year
to to Year
date date ended
31 Dec 31 Dec 30 Jun
05 04 % 05
R000 Reviewed Reviewed Change Audited
Revenue - mining 57 252 49 955 15 101 157
Cost of sales (58 436) (49 865) 17 (98 853)
(Loss)/profit
from mining
activities (1 184) 90 (1 422) 2 304
Less:
Depreciation (112) (100) 12 (384)
Amortisation of
mineral rights (1 200) (1 401) (14) (2 310)
Operating loss
from mining (2 496) (1 411) 77 (390)
Profit on disposal
of assets 45 441 (90) 469
Administrative
expenses (5 013) (5 088) (1) (11 372)
Investment income 9 67 (87) 90
Finance costs (898) (850) 6 (2 912)
Net foreign
exchange gains 1 533 468 227 (1 853)
Provision for
dead freight - - - (2 380)
Provision for
doubtful debt (585) - - -
Provision for
onerous contract (8 689) (22 717) 100 (9 366)
Net loss before
taxation (16 094) (29 090) (45) (27 714)
Taxation
(Deferred) (620) 6 956 (109) (865)
Net loss
for period (16 714) (22 134) (24) (28 579)
Issued shares
(000) 257 009 257 009 - 257 009
Weighted average
shares issued
(000) 257 009 257 009 - 257 009
Weighted average
shares issued for
diluted earnings
per share
(000) 266 032 264 034 1 263 848
Reconciliation
of earnings:
Net loss
attributable to
ordinary share-
holders for basic
earnings per
share (16 714) (22 134) (24) (28 579)
Profit on disposal
of assets (net
of tax) (32) (309) 100 (333)
Net loss attribut-
able to ordinary
shareholders for
headline earnings
per share (16 746) (22 443) (25) (28 912)
Add Provision
for onerous
contract
(net of tax) 6 169 15 902 100 6 650
Amortisation of
mineral rights 1 200 1 401 (14) 2 310
Depreciation
(net of tax) 80 70 14 273
Adjusted cash
loss attributable
to ordinary
shareholders for
cash earnings
per share (9 297) (5 070) 83 (19 679)
Loss per share
(cents)
Basic
undiluted (cents) (6.5) (8.6) (4.3) (11.1)
diluted (cents) (6.3) (8.4) (6.4) (10.8)
Headline
undiluted (cents) (6.5) (8.7) (2.1) (11.2)
diluted (cents) (6.3) (8.5) (5.3) (11.0)
Cash (loss)/earnings
undiluted (cents) (3.6) (2.0) 83.4 (7.7)
diluted (cents) (3.5) (1.9) (73.9) (7.5)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share
R000 capital premium Other
Balance at 30 June 2004 as
previously reported 257 88 910 -
Opening IFRS adjustments
IFRS 2 1 512
IAS 16
Net loss for the period
Net loss for period as
previously reported
IAS 16 current period
Restated balance at
31 Dec 2004 257 88 910 1 512
Net loss for the period 463
Net loss for period as
previously reported
IAS 16 current period
IFRS 2 current period 463
Restated balance at
30 June 2005 257 88 910 1 975
Net loss for the period
Balance as at 31 Dec 2005 257 88 910 1 975
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (contd)
Accum-
ulated
R000 (loss) Total
Balance at 30 June 2004 as
previously reported (21 912) 67 255
Opening IFRS adjustments
IFRS 2 (1 512) -
IAS 16 14 143 14 143
Net loss for the period (22 134) (22 134)
Net loss for period as
previously reported (23 226) (23 226)
IAS 16 current period 1 092 1 092
Restated balance at 31 Dec 2004 (31 415) 59 264
Net loss for the period (6 444) (5 981)
Net loss for period as
previously reported (7 709) (7 709)
IAS 16 current period 1 728 1 728
IFRS 2 current period (463) -
Restated balance at 30 June 2005 (37 859) 53 283
Net loss for the period (16 714) (16 714)
Balance as at 31 Dec 2005 (54 573) 36 569
CONSOLIDATED CASH FLOW STATEMENT
Year Year Year
to date to date ended
31 Dec 31 Dec 30 Jun
05 04 05
R000 Reviewed Reviewed Audited
Net cash inflows/
(outflows) from
operating activities 7 254 1 898 (1 902)
Cash surplus generated
by operations 8 143 2 681 920
Interest paid (898) (850) (2 912)
Taxation paid - - -
Investment income 9 67 90
Net cash outflows
from investing activities (4 787) (6 538) (7 648)
Net additions to
mine plant, equipment
and buildings (4 832) (7 226) (8 492)
Proceeds from disposals
of plant and equipment 45 688 844
Net cash (inflows)/outflows
from financing activities (4 763) 1 608 6 372
Long term loans
repaid 1 140 3 200 (172)
Short term facility
raised (5 903) (1 592) 6 544
Net decrease in cash
and cash equivalents (2 296) (3 032) (3 178)
Cash and cash equivalents
at beginning of period (8 004) (4 826) (4 826)
Cash and cash equivalents
at end of period (10 300) (7 858) (8 004)
CONSOLIDATED BALANCE SHEET
31 Dec 31 Dec 30 Jun
2005 2004 2005
R000 Reviewed Reviewed Audited
ASSETS
Non-current assets 98 696 97 322 95 249
Property, plant and
equipment 87 974 84 597 84 542
Goodwill 10 175 10 175 10 175
Accounts receivable 547 729 532
Deferred taxation - 1 821 -
Current assets 22 217 29 823 27 149
Inventories 9 523 11 992 15 838
Accounts receivable 9 826 13 591 8 204
Taxation pre-paid 2 858 2 858 2 858
Cash and cash equivalents 10 1 382 249
Total assets 120 913 127 145 122 398
Net asset value per
share (cents) 14.2 23.1 20.7
EQUITY AND LIABILITIES
Capital and reserves 36 569 59 264 53 283
Share capital and premium 89 167 89 167 89 167
Other reserves 1 975 1 512 1 975
Accumulated (loss)/
profit (54 573) (31 415) (37 859)
Non-current liabilities 20 811 11 994 18 751
Long-term loan 3 525 3 611 2 385
Provision for environmental
rehabilitation 4 138 1 854 3 838
Deferred taxation 13 148 6 529 12 528
Current liabilities 63 533 55 887 50 364
Accounts payable 32 097 20 946 23 771
Bank overdraft 10 310 9 240 8 253
Provision for onerous
contract 18 055 22 717 9 366
Current portion of
long-term liabilities 3 071 2 984 8 974
Total equity and
liabilities 120 913 127 145 122 398
COMMENTS
The six months to December was another very difficult time for the
company. A delay in the approval of its application for the mining
rights to the Buffelshoek deposit significantly reduced feed grades and
consequently recoveries. With the first rains of the season only
falling at the end of November, the mine was largely dependant on
recycled tailings dam water which aggravated the reduction in recovery.
In addition, the already strained relations with its major customer
Honeywell reached breaking point through that company"s non-payment for
deliveries.
Since the review period, however, Sallies" situation has improved
greatly. The mining licence for Buffelshoek was awarded in March 2006
following the BEE transaction in terms of which African Renaissance
Investments will acquire a 30% interest in Sallies. A fully
underwritten rights offer to raise R65 million has been launched. Its
proceeds will ease the extreme financial pressure under which the
company has operated in recent years and will enable it to expand
through the proposed acquisition of Buffalo Fluorspar. In addition,
Sallies has terminated its onerous supply agreement with Honeywell on
the grounds of overdue payment which has freed more than half of the
company"s production for sale at more favourable rates to other
customers. Honeywell has referred the matter to arbitration before the
International Chamber of Commerce ("ICC") in Zurich, and the company
will contest this. The provision at 31 December 2005 is still reflected
on the balance sheet as the cancellation is a non adjusting subsequent
event.
Operational and market overview
Because of the grade problem referred to above, and the negative impact
of the company"s cash shortage on operational efficiency, production was
significantly below the annualised target level of 170 000 WMT. The
recycling project remained on hold in the continued absence of a
response from the Department of Water Affairs and Forestry to the
company"s application for an Integrated Water Use Licence which has been
outstanding for 12 months. The rand/dollar exchange rate was reasonably
steady and the international market for fluorspar was buoyant with price
levels improving further. The company has strengthened its position in
the European market.
Board and management
Izak Marais was appointed chief executive on 1 November 2005. He was
previously managing director of the Witkop mine, a position he retains.
He succeeded Lindsay Robertson who remains on the board as a non-
executive director. The management team at the mine was strengthened
through a number of senior appointments.
BEE transaction and Rights Offer
The salient features of these transactions have already been announced
in the media and circulars detailing them will shortly be sent to
shareholders. A due diligence on Buffalo Fluorspar is currently under
way and a further announcement in this regard will be made in due
course.
Prospects
The company"s prospects have brightened considerably over the past three
months and the major transactions currently being completed will not
only stabilise its position but will provide it with a sound platform
for future growth. While results for the March quarter will still be
poor, the June quarter should see an improvement on the back of higher
feed grades from the Buffelshoek material, and the company is set up for
a good start to the new financial year which starts in July.
Modified audit opinion
The interim report for the period 31 December 2005 has been reviewed by
the company"s auditors Ernst & Young and their modified review report is
available for inspection at the registered office of the company. They
draw attention to the fact that the group incurred a net loss of R16.7
million for the six month period ended 31 December 2005 and, as of that
date, the group"s current liabilities exceeded its current assets by
R41.3 million. These conditions, along with other matters as set forth
in the above commentary, indicate the existence of a material
uncertainty which may cast significant doubt on the group"s ability to
continue as a going concern. The audit report for the year ended 30
June 2005 drew attention to similar matters.
Accounting policies
The reviewed results for the half year have been prepared in accordance
with International Financial Reporting Standards ("IFRS").
The financial information for the half year ended 31 December 2005 has
been prepared adopting the same accounting policies used in the most
recent annual financial statements, except for the adoption of the new
statement IFRS 2: Share Based Payments and IAS 16: Property, plant and
equipment.
As a result the previously reported results for the half year ended 31
December 2004 and year ended 30 June 2005 have been restated to
incorporate the adoption of IFRS.
These consolidated financial statements are prepared in accordance with
IAS 34: Interim Financial Reporting.
On behalf of the board
PH Flack 28 March 2006
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) Ltd,
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Investor and media relations: For further information contact Helen
McKane on Telephone +27 (11) 728 4701, Telefax +27 (11) 728 2547, e-
mail: sallies@dpapr.com
Date: 28/03/2006 12:15:15 PM Produced by the JSE SENS Department
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