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ZCI
ZAKK
ZCI - Reviewed Interim Report
Zambia Copper Investments Limited
(Registered in Bermuda)
(Registration number 1970/000023/01)
("ZCI" or "the Company")
ISIN: BMG988431240
JSE code: ZCI
REVIEWED INTERIM REPORT
Consolidated statement of earnings
for the twelve months ended December 31, 2005
expressed in thousands of US Dollars
Reviewed Unaudited Audited
Twelve months ended Six months ended Year ended
December 31, 2005 June 30, 2005 December 31, 2004
Turnover - - 440,649
Cost of sales - - (300,638)
Gross Profit - - 140,011
Other
operating
expenses - - (62,020)
Depreciation - - (12,412)
Profit from
operations - - 65,579
Other income
/(loss) - - 2,485
Interest
income 78 33 30
Interest
expense (2) (2) (1,331)
General and
administration
expenses (978) (401) (1,090)
(Loss) on
sale of
investment
in
subsidiary - - (19)
Income from
associated
companies 14,545 13,138 25,093
Exceptional
item - - (9,763)
Profit
before
taxation 13,643 12,768 80,984
Taxation (60) (32) (85)
Profit after
taxation 13,583 12,736 80,899
(Profit)
attributable
to minority
interest - - (23,510)
Net Profit 13,583 12,736 57,389
per ordinary share in US cents
Headline
earnings
before
exceptional
item
and
amortisation
of goodwill 10.76 10.09 53.21
Exceptional
expenses - - (7.73)
Earnings per
share (EPS) 10.76 10.09 45.48
Number of
ordinary
shares in
issue 126,197,362 126,197,362 126,197,362
Consolidated statement of financial position
as at December 31, 2005
expressed in thousands of US Dollars
Reviewed Unaudited Audited
Twelve months ended Six months ended Year ended
December 31, 2005 June 30, 2005 December 31, 2004
Fixed assets
Tangible
fixed assets - - -
Long term
accounts
receivable 10,440 15,660 15,660
Investment
in
associated
companies 75,828 74,421 61,282
Current
assets
Stocks - - -
Accounts
receivable 5,237 5,226 5,220
Cash and
short-term
investments 7,344 2,570 3,120
12,581 7,796 8,340
Current
liabilities
Short term
loans and
bank
overdrafts - - -
Accounts
payable and
accrued
liabilities (340) (215) (356)
(340) (215) (356)
Net current
assets 12,241 7,581 7,984
Total assets
less current
liabilities 98,509 97,662 84,926
Long term
liabilities
Long term
loans - - -
Provisions - - -
Minority
interest - - -
98,509 97,662 84,926
Net assets
Capital and
reserves
Capital 334,547 334,547 334,547
Accumulated
deficit (236,038) (236,885) (249,621)
98,509 97,662 84,926
Number of
ordinary
shares in
issue 126,197,362 126,197,362 126,197,362
Net asset
value (per
ordinary
share) in
USD cents 78.06 77.39 67.30
Consolidated statement of changes to equity
for the twelve months ended December 31, 2005
expressed in thousands of US Dollars
Share Contributed Accumulated
capital surplus deficit
Balance at December 31, 2003 (As
restated) 30,299 478,508 (481,270)
Released on maturity of Cashflow
hedges - - -
Released Minority Interest on
maturity of Cashflow Hedges - - -
Released on disposal of Equity Fund
Investment - - -
Change in scope of consolidation - (174,260) 174,260
Profit for the year - - 57,389
Balance at December 31, 2004 30,299 304,248 (249,621)
Profit for the period - - 13,583
Balance at December 31, 2005 30,299 304,248 (236,038)
Revaluation Hedging
reserve reserves Total
Balance at December 31, 2003 (As
restated) 1,220 (1,734) 27,023
Released on maturity of Cashflow hedges - 2,989 2,989
Released Minority Interest on maturity
of Cashflow Hedges - (1,255) (1,255)
Released on disposal of Equity Fund
Investment (1,220) - (1,220)
Change in scope of consolidation - - -
Profit for the year - - 57,389
Balance at December 31, 2004 - - 84,926
Profit for the period - - 13,583
Balance at December 31, 2005 - - 98,509
Consolidated statement of cash flow
for the twelve months ended December 31, 2005
expressed in thousands of US Dollars
Reviewed Unaudited Audited
Twelve months Six months Year
ended ended ended
December 31, June 30, December 31,
2005 2005 2004
Cash flow from operating
activities
Cash received from customers - - 425,201
Cash paid to suppliers and
employees (995) (543) (325,967)
Cash generated/(utilized)
by operations (995) (543) 99,234
Interest received 61 27 30
Interest paid (2) (2) (1,020)
Income tax paid (60) (32) (121)
Net cash generated/(utilized)
by operating
activities (996) (550) 98,123
Cash flow from investing
activities
Proceeds from sale
of short term investment - - 981
Proceeds from partial
disposal of investment in
subsidiary 5,220 - 2,320
Purchase of tangible fixed
assets - - (46,060)
Cash absorbed by investing
activities 5,220 - (42,759)
Cash flow from financing
activities
Lease financing received - - -
Lease financing paid - - (3,526)
Cash absorbed by financing
activities - - (3,526)
Change in scope of
consolidation - - (26,326)
Net (decrease)/increase in
cash 4,224 (550) 25,512
Net cash/(debt) at the
beginning of the year 3,120 3,120 (22,392)
Net cash at the end of the
year 7,344 2,570 3,120
Cash deposits and cash at bank 7,344 2,570 3,120
Short term loans and
bank overdraft - unsecured - - -
Net cash at the end of the
year 7,344 2,570 3,120
ACCOUNTING POLICIES
The financial statements were prepared in accordance with International
Financial Reporting Standards and in terms of the same accounting policies
applied during the previous financial period except that during the year ended
31 December 2004, the Company changed its accounting policy in respect of
secondary development expenditure (details of which can be found in the annual
report for the year ended 31 December 2004 as posted to shareholders on 26
August 2005). Previously, the cost of developing access to mine ore bodies
during the commercial production stage that were deemed significant and
identified as benefiting future years were deferred and expensed in the year
when the related production was achieved. Subsequently, these costs were
expensed as incurred. Also, the consolidated financial statements incorporated
the financial results of the majority owned subsidiary KCM up to 31 October
2004. Following the change in majority ownership of KCM with effect from 31
October 2004, the results of KCM are included according to the equity
accounting method for associated companies.
The consolidated balance sheet of Zambia Copper Investments Limited and its
subsidiaries (the "Group") for the period ended 31 December 2005 and the
related consolidated statements of income, cash flow and changes in
shareholders" equity for the period then ended, have been reviewed by KPMG
Audit Sarl, Luxembourg, in accordance with the International Standard on Review
Engagements (ISRE) 2400, applicable to review engagements. These consolidated
interim financial statements are the responsibility of the Board of Directors.
The Group reduced its shareholding in Konkola Copper Mines Plc. from 58% to
28.4% in 2004. The financial information on this associated company has not
been subject to a review by an external auditor as at 31 December 2005. As the
investment in this associated company represents the main asset of the Group,
KPMG are not in a position to complete their review. Due to the significance of
the matters described above, KPMG Audit Sarl, Luxembourg, do not express any
opinion on the accompanying consolidated interim financial statements. The
review report is available for inspection at the registered office of the
Company.
CHAIRMAN"S STATEMENT
As shareholders will be aware, the Company at it"s last Annual General Meeting
in September 2005, resolved to change the Company"s financial year end from 31
December to 31 March in order to bring the Company in line with the financial
reporting period of Konkola Copper Mines plc ("KCM") and primarily with the
object of avoiding previous delays associated with the timeous production of
financial results. Accordingly, in terms of the relevant stock exchange
regulations, the Company is required to produce reviewed interim results for
the period ending 31 December 2005, which accompany this report.
The six months since the end of June 2005 have been a busy period, with the
notable development having been the exercise by Vedanta Resources plc
("Vedanta") of its call option in terms of the Vedanta Call Option Deed ("the
Deed") over the remaining 28.4% of Konkola Copper Mines plc ("KCM") shares held
by ZCI through its wholly owned subsidiary, ZCI Holdings S.A. The key terms of
the call option were fully described in the circular posted to shareholders on
11 October 2004, regarding the recommended introduction of Vedanta as a
strategic equity partner in KCM, and were repeated on page 6 of the 2004 ZCI
annual report. In short, should the parties not be able to agree the price of
the call option, an Independent Bank ("the Bank") would be appointed to perform
a valuation. In the event that Vedanta is unwilling to pay the option exercise
price as determined by the Bank, it shall not be required to proceed with the
associated purchase of ZCI"s KCM shares. In terms of the provisions of the
Deed, ZCI shall be bound to accept the valuation made by the Bank.
I wish to inform shareholders that the advisers of both the Company and Vedanta
are still in the process of agreeing the terms of reference to be submitted to
the Independent Bank for the purposes of settling the letter of engagement and
enabling the Independent Bank to progress with the valuation. The parties are
of the view that the appointment of the bank is likely to be finalised shortly,
after which further announcements will be made. ZCI shareholders are advised to
exercise caution when dealing in ZCI"s securities until detailed announcements
are made.
The period was also marked by the sad passing of the previous Chairman,
Jean-Pierre Rozan. This unfortunate event necessitated certain changes to the
Company"s board and in January 2006, Michel Clerc, Chairman of AMZCI, the
association of minority shareholders in France, was elected to the Board. In
February 2006, I was elected to assume the position of Chairman of the Company.
Turning to the results themselves, shareholders will note that the Company"s
investment in KCM remains profitable, returning a net profit of USD 13,6
million for the 12 months ending 31 December 2005. Although copper prices
remain high, the board of ZCI maintain their concern that production levels at
KCM still appear to be disappointingly low and that accordingly, KCM has not
been able to maximise its profitability by taking advantage of the currently
favourable copper market. In addition, mention should be made of the fact that
substantial hedging reserves reflected at the KCM level in the six months to 31
December 2005, have impacted on the bottom line profit figure of ZCI.
Shareholders will note that KPMG Audit Sarl, Luxembourg, were engaged to review
the accompanying consolidated balance sheet and the related consolidated
statements of income, cash flow and changes in shareholders" equity of ZCI and
its subsidiaries ("the Group") as at 31 December 2005. The Group reduced its
shareholding in KCM from 58% to 28.4% in 2004. The investment in this
associated company represents the main asset of the Group. The financial
information from KCM has not been subject to a review by an external auditor in
Zambia as at 31 December 2005. As a result of the lack of an audit review of
the financial information received from KCM, ZCI"s auditors have been unable to
complete their review and have not expressed any opinion on the consolidated
interim financial statements.
It is clear that the Company is working through a watershed period that has the
potential to define and revise its future operations and business model. The
Board of ZCI recognises the significance of the process that the Company is
currently faced with and the gravity of the potential outcomes. I wish to
assure shareholders that appropriate resources have been and will continue to
be deployed to ensure that shareholders" interests remain paramount and are
protected when determining the future course for the Company.
Thomas Kamwendo
Chairman
Bermuda
31 March 2006
Date: 03/04/2006 08:08:10 AM Produced by the JSE SENS Department
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