| Mon 3 Jul 2006, 16:40 | | Matodzi - Reviewed provisional results for the yea |
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MTZ
MTZ
Matodzi - Reviewed provisional results for the year ended 31 March 2005
MATODZI RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
Registration Number: 1933/004523/06
Share Code: MTZ & ISIN: ZAE000042412
("Matodzi" or "the Company" or "the Group")
REVIEWED PROVISIONAL RESULTS FOR THE YEAR ENDED 31 MARCH 2005
ABRIDGED CONSOLIDATED INCOME STATEMENTS
Restated
Reviewed Reviewed Audited
Year ended Year ended Year ended
31 March 2006 31 March 2005 31 March 2005
Notes R"000 R"000 R"000
Revenue 401 523 280 085 280 121
Total production costs (218 953) (162 099) (142 454)
Production costs (184 098) (136 341) (116 696)
Depreciation (28 185) (23 621) (23 621)
Other non cash operating expenses (6 670) (2 137) (2 137)
Operating profit 182 570 117 986 137 667
Net finance costs 2 (58 715) (59 560) (59 560)
Impairment of listed investments 3 (16 820) (81 945) (81 945)
Fair value adjustment
of investment property 1 001 - -
Profit on restructuring of debt 4 181 143 27 772 40 732
General and administrative expenses (62 705) (85 595) (101 144)
Net profit/(loss) before taxation 5 226 474 (81 342) (64 250)
Income tax expense 6 (47 182) (32 647) (35 748)
Net profit/(loss) for the period 179 292 (113 989) (99 998)
Profit/(Loss) attributable to :
Minority interest 48 614 14 842 12 870
Equity holders of the parent 130 678 (128 831) (112 868)
Earnings/(Loss) per share - (cents) 7
Basic earnings/(loss) - (cents) 86.6 (86.3) (75.6)
Diluted earnings/(loss) per share - (cents) 35.3 (35.6) (31.2)
Number of ordinary shares in issue 370 547 286 149 262 157 149 262 157
Weighted average number of
shares in issue 150 887 597 149 262 157 149 262 157
CONSOLIDATED BALANCE SHEETS (ABRIDGED)
Restated
Reviewed Reviewed Audited
Year ended Year ended Year ended
31 March 2006 31 March 2005 31 March 2005
Notes R"000 R"000 R"000
ASSETS
Non-current assets
Property, plant and equipment 96 282 392 201 370
Goodwill - - 81 618
Investment properties 1 310 309 -
Investments and loans receivable8 151 821 56 261 56 261
Total non-current assets 153 227 338 962 339 249
Current assets
Inventory - 21 082 21 082
Trade and other receivables 6 735 14 614 20 850
Cash and cash equivalents 20 355 58 566 58 566
Total current assets 27 090 94 262 100 498
Disposal group held for sale 12 348 100 - -
Total assets 528 417 433 224 439 747
EQUITY AND LIABILITIES
EQUITY
Equity attributable
to equity holders 9 62 763 (282 779) (262 259)
Equity component of preference shares - 12 960 -
Minority interest 66 036 17 422 22 359
Total equity 128 799 (252 397) (239 900)
LIABILITIES
Non-current liabilities
Interest bearing borrowings 11 46 773 569 975 569 975
Provisions - 14 637 -
Deferred tax - 26 464 35 641
Total non-current liabilities 46 773 611 076 605 616
Current liabilities
Interest bearing borrowings 11 227 701 33 991 33 991
Trade and other payables 3 865 40 554 40 040
Total current liabilities 231 566 74 545 74 031
Disposal group held for sale 12 121 279 - -
Total equity and liabilities 528 417 433 224 439 747
ABRIDGED CONSOLIDATED CASH FLOW STATEMENTS
Restated
Reviewed Reviewed Audited
Year ended Year ended Year ended
31 March 2006 31 March 2005 31 March 2005
Notes R"000 R"000 R"000
Cash flow from operating activities 105 386 66 897 66 897
Cash flow utilised in
investing activities (113 393) (21 388) (21 388)
Cash flow (utilised)/
generated financing activities (7 410) 3 110 3 110
Net movement in cash and cash equivalents (15 417) 48 619 48 619
Cash and cash equivalents at
beginning of the year 58 566 97 97
Reclassification to disposal group
held for sale 12 (22 794) - -
Cash and cash equivalents on
acquisition of subsidiary - 9 850 9 850
Cash and cash equivalents at
the end of the year 20 355 58 566 58 566
STATEMENT OF CHANGES IN EQUITY
Accumu- Equity
Share Share lated component Minority
capital premium loss of pref interest Total
R"000 R"000 R"000 R"000 R"000 R"000
Balance 31 March 2004
(restated) 37 315 42 010 (218 349) 12 960 2 580 (123 484)
IFRS adjustment -
Property, plant and
equipment - - (5 544) - - (5 544)
Adjustment for understatement
of rehabilitation costs - - (1 682) - - (1 682)
Adjustment for incorrect
capitalisation of
preproduction
expenditure - - (3 617) - - (3 617)
Adjustment for
depreciation on
right to mine - - (4 081) - - (4 081)
Net loss for the period - - (128 831) - 14 842 (113 989)
Balance 31 March 2005
(restated) 37 315 42 010 (362 104) 12 960 17 422 (252 397)
Shares issued 55 322 159 542 - (12 960) - 201 904
Net profit for
the period - - 130 678 - 48 614 179 292
Balance 31 March 2006 92 637 201 552 (231 426) - 66 036 128 799
NOTES TO THE PRELIMINARY RESULTS
1. Basis of preparation
The consolidated results are prepared in accordance with International
Financial Reporting Standards ("IFRS") and schedule 4 of the Companies Act, No
61 of 1973, as amended in South Africa. These are the Group"s results for the
first year prepared in compliance with IFRS and therefore, IFRS 1 - First time
adoption of IFRS has been applied in preparing these financial statements.
The preparation of these financial statements in accordance with IAS 34
Interim Financial Reporting resulted in changes to the accounting policies as
compared with the most recent consolidated annual financial statements prepared
provisionally under South African Statements of Generally Accepted Accounting
Practice ("GAAP"). These accounting policies have been applied consistently to
all periods presented in these abridged consolidated financial results.
1.1 First-time adoption of IFRS
IFRS adjustments
Property, plant and equipment
Matodzi has applied the provision of IAS 16 - Property, plant and equipment,
which requires that the Group perform an annual review and assessment of the
useful life of its assets, depreciation method and residual values at the end of
each financial year. Where items of property, plant and equipment comprise
individual components for which different depreciation methods are used, each
component is accounted for separately. The adoption of IAS 16 has resulted in an
increase in the depreciation charge of R5.5 million for the year-ended 31 March
2005 as a result of the plant being componentised into significant components.
Other adjustments
Preproduction expenditure
In prior periods expenditure relating to donations, and head office
administration costs, were capitalised as property, plant and equipment. This
expenditure does not qualify for capitalisation and has thus been expensed.
Rehabilitation costs
The full environmental liability for the Letseng Diamond mine had not been
recognised in the prior year.
Goodwill
The amount previously disclosed as goodwill in Letseng is considered to be a
right to mine and therefore has been reclassified and disclosed as part of the
disposal group held for sale.
Depreciation
Depreciation has been adjusted for on the right to mine. The cost of the right
to mine is to be depreciated over 10 years.
R"000
Accumulated Loss - 1 April 2004 - SA GAAP (218 349)
IFRS Adjustment - Property, plant and equipment -
Accumulated Loss - 1 April 2004 - IFRS (218 349)
Net loss for the period - 31 March 2005 - SA GAAP (128 831)
IFRS Adjustment - Property, plant and equipment (5 544)
Adjustment for understatement of rehabilitation costs (1 682)
Adjustment for incorrect capitalisation of
preproduction expenditure (3 617)
Adjustment for depreciation on right to mine (4 081)
Accumulated Loss - 31 March 2005 - IFRS (362 104)
Net profit for the period - 31 March 2006 130 678
Accumulated Loss - 31 March 2006 - IFRS (231 426)
Reclassification of net loss
for the period - 31 March 2005 R"000
Net loss - SA GAAP (113 907)
Adjustment for incorrect capitalisation
of preproduction expenditure (3 617)
Adjustment for understatement of rehabilitation
costs (1 682)
Adjustment for depreciation on right to mine (4 081)
IFRS Adjustment - Property, plant and equipment (5 544)
Net loss for the period - IFRS (128 831)
Reconciliation of Property, plant and equipment - 31 March 2005
Property plant and equipment - SA GAAP 205 210
IFRS Adjustment - Property, plant and equipment (5 544)
Reclassification of investment property (309)
Adjustment for incorrect classification
of preproduction expenditure (3 617)
Adjustment for understatement of
rehabilitation costs (1 682)
Adjustment for a decommissioning asset 14 637
Adjustment for incorrect classification
of right to mine 77 778
Adjust for depreciation for right to mine (4 081)
Property plant and equipment - IFRS 282 392
Restated
Reviewed Reviewed Audited
Year ended Year ended Year ended
31 March 2006 31 March 2005 31 March 2005
Notes R"000 R"000 R"000
2 Net finance costs
Interest received 11 703 2 439 2 439
Preference shares - "B" Prefs (23 417) (20 472) (20 472)
Preference shares - Witnigel Prefs (19 339) (18 452) (18 452)
Interest on loans (27 662) (23 075) (23 075)
(58 715) (59 560) (59 560)
3 Impairment of listed investments
Investments
210 255 713 JCI ordinary
shares at R0.16 (2005:
210 255 713 ordinary
shares @ R0.24) (16 820) (81 945) (81 945)
4 Profit on restructuring of debt
Profit on restructuring
of debt - "B" Pref shares - 27 772 40 732
Profit on restructuring
of debt - Witnigel Pref shares 181 143 - -
181 143 27 772 40 732
The effect of the restructuring
of the Witnigel Pref shares is
the elimination of R194 million
of external debt for the Group
resulting in a gain for the Group on
consolidation of R181million.
Refer note 11.
5 Profit/(loss) for the year is stated
after taking into account
the following:
Depreciation (36 437) (27 785) (23 704)
Staff costs (14 794) (13 536) (13 536)
Impairment of property, plant
and equipment - (23 436) (24 207)
Loss on disposal of investments - (13 439) (13 439)
6 Income tax expense
Current tax (11 579) (202) (127)
Current year (52 037) (202) (127)
Utilisation of prior year losses 40 458 - -
Deferred tax
Current year (35 603) (32 647) (35 621)
(47 182) (32 647) (35 748)
7 Earnings/(Loss) per share
Attributable profit/(loss)
for the year 130 678 (128 831) (112 868)
Reconciliation between
attributable profit/(loss)
and headline loss:
Attributable profit/(loss) 130 678 (128 831) (112 868)
Impairment of property,
plant and equipment - 23 436 24 207
Profit on restructuring of
debt of pref shares (181 143) (27 772) (40 732)
Headline loss (50 465) (133 167) (129 393)
Headline loss per share - (cents) (33.4) (89.2) (86.7)
Weighted average number of
ordinary shares in issue 150 887 597 149 262 157 149 262 157
Diluted number of ordinary
shares in issue 370 547 286 362 262 157 362 262 157
8 Investments and loans receivable
Listed investments 33 641 50 461 50 461
Unlisted investments - 1 000 1 000
Loans receivable 118 180 4 800 4 800
151 821 56 261 56 261
Directors" valuation of unlisted
investments - 1 000 1 000
The directors are satisfied the
loans are recoverable.
Listed investments consist of
210 255 713 JCI ordinary shares
of R0.16, which is the price at
which they were delisted on JSE
(2005: 210 55 713 at R0.25).
9 Equity attributable to equity holders
Ordinary Share Capital
Authorised:
750 000 000 (2005: 250 000 000)
ordinary shares of 25 cents each 187 500 62 500 62 500
Issued:
364 487 286 (2005: 149 262 157)
ordinary shares of 25 cents each 92 637 37 315 37 315
Movements in issued share capital
Total number of shares in issue at
beginning of the year 149 262 157 149 262 157 149 262 157
Shares issued to public
shareholders 7 460 000 -
Shares issued to JCI in respect
of the pref share redemption 213 825 129 - -
Total number of shares in
issue at end of the year 370 547 286 149 262 157 149 262 157
Share Premium
At beginning of the year 42 010 42 010 42 010
Arising on shares issued
during the year 159 542 - -
201 552 42 010 42 010
The unsecured redeemable convertible participating
"B" preference shares ("B" Pref") and redeemable cumulative
preference shares ("Witnigel Pref") were redeemed and
purchased during the year under review by the issue
of 200 000 000 and 13 825129 ordinary shares, respectively.
10 Equity component of preference shares
"B" PREFERENCE SHARES
At beginning of the year 12 960 - -
Equity component raised - 12 960 -
Equity component transferred to share premium
on redemption (12 960) - -
- 12 960 -
The Matodzi "B" Prefs are considered a compound financial instrument in
terms of IAS 32 Financial Instruments: Presentation, and in accordance with
this statement the equity component was raised and the prior years
profit on restructuring of debt was adjusted.
11 Interest bearing borrowings
Loan payable 274 474 266 750 266 750
Preference shares - 337 216 337 216
274 474 603 966 603 966
Current portion of interest bearing borrowings
and loans (227 701) (33 991) (33 991)
46 773 569 975 569 975
Matodzi redeemed the 200 million "B" Pref shares by the allotment and issue of
200 million new Matodzi ordinary shares to JCI Investment Finance (Proprietary)
Limited (a wholly-owned subsidiary of JCI) at an issue price of 104 cents per
new Matodzi share.
The Company acquired the 200 million Witnigel Pref shares from JCI by the
allotment and issue of 13.8 million new Matodzi ordinary shares at an issue
price of 96.4427 cents per Matodzi share The effect of this transaction is the
elimination of R194 million of external debt for the Group. Resulting in a gain
for the Group on consolidation of R181 million.
Letseng Investment Holdings (South Africa) (Pty) Limited ("Letseng Holdings")
repaid its loan to the Industrial Development Corporation of South Africa
Limited ("IDC") from the proceeds of a new facility granted by Investec Bank
Limited ("Investec"). The current balance of this loan is R227 619 626 and
becomes repayable in full in the event of a sale of the investment in Letseng
Diamonds (Proprietary) Limited. ("Letseng Diamonds").
12 Disposal group held for sale
The Group has entered into a binding legal agreement with Gem Diamond Mining
Company of Africa Limited for the proposed disposal of Letseng Investment
Holdings (South Africa) (Proprietary) Limited ("Letseng Holdings") entire 76%
equity interest in Letseng Diamonds (incorporated in Lesotho and a subsidiary of
the Group) ("Letseng Diamonds"), and as set out in the further cautionary
announcement which was published on 27 June 2006. Letseng Diamonds results are
consolidated in the financial statements of Letseng Holdings.
The proposed disposal is subject to the fulfilment of certain conditions
precedent, including shareholders" and regulatory approvals in South Africa and
Lesotho. The effective date of the proposed disposal is 1 July 2006.
Based on the requirements of IFRS 5 - Non-current Assets Held for Sale and
Discontinued Operations, the assets and liabilities attributable to Letseng
Diamonds have been disclosed as a disposal group, and separately disclosed on
the balance sheet. Assets and liabilities comprising the disposal group
classified as held for sale are as follows:
Reviewed
Year-ended
31 March 2006
R"000
Non-current assets 266 652
Property, plant and equipment 201 116
Mining rights 65 536
Current assets 81 448
Inventory 43 959
Trade and other receivables 14 290
Cash and cash equivalents 22 794
Current tax 405
Total assets classified as held for sale 348 100
Non-current liabilities (78 714)
Provision - environmental provision (16 647)
Deferred tax liabilities (62 067)
Current liabilities (42 565)
Trade and other payables (26 356)
Taxation (11 535)
Provision - leave and severance pay (4 674)
Total liabilities classified as held for sale (121 279)
Net assets of disposal group 226 821
In accordance with the requirements of IFRS 5, no comparative information has
been disclosed. The potential disposal is not a discontinued operation as
defined and therefore, the income statement has not been restated to separately
disclose the results of the disposal group. The proceeds of the proposed
disposal exceed the net assets of the entity, and therefore no impairment is
considered necessary. Letseng Holdings" entire 76% equity interest in Letseng
Diamonds, is payable in cash for a purchase consideration of R879.5 million.
13 Related Parties
Identification of related parties
The ultimate holding company of Matodzi is JCI. JCI effectively acquired 58% of
the issued share capital of Matodzi during the year, through the transactions
described in Note 11.
Material related party transactions
Transactions with directors
Remuneration is paid to directors in the form of fees to non-executive directors
and remuneration to executive directors. The directors did not have a material
interest in any contract of significance with the Company or any of its
subsidiaries, which may have given rise to a conflict of interest during the
year.
Transactions with entities in the Group
During the year under review, the Company and its subsidiaries entered into
various loan transactions with one another in the ordinary course of business.
These transactions occurred at arm"s length and have been eliminated on
consolidation.
Transactions with other related stakeholders Consolidated Mining Management
Services Limited, a subsidiary of JCI, advanced an amount of R11 282 682 to the
Group, including interest capitalised at prime overdraft rate during the 2006
year to fund operating activities. Refer note 14.
Loan receivable from JCI amounts to R113 380 336.
14 Going Concern
Restructuring of the preference shares has restored the solvency position of the
Group, and therefore the Group will be in a position to meet its obligations as
they fall due. Accordingly the directors continue to adopt the going concern
basis in the preparation of the financial statements.
15 Subsequent events
There have been no material events subsequent to the reporting period, other
than referred to in note 12 regarding the disposal of Letseng Diamonds, and
before the date of this report that requires disclosure.
16 Directorate changes
In compliance with paragraph 3.59 of the Listings Requirements of JSE Limited,
the following information is disclosed:
Adv. L Makatini resigned as an independent non-executive director on 17 March
2006, and Mr JC Lamprecht resigned as a non-executive director on 16 May 2006.
Directors currently in office are as follows:
Andrew Mlangeni - (Independent Non-Executive Chairman)
Sello Mashao Rasethaba - (Chief Executive Officer)
Peter Henry Gray - (Non-Executive)
Mafika Edmund Mkwanazi - (Non-Executive)
Thabo Mosololi - (Non-Executive)
17 Review report of the independent auditors of Matodzi
The Company"s auditors KPMG Inc. have reviewed the preliminary results for the
year ended 31 March 2006. A copy of their review report is available for
inspection at the Company"s registered address.
COMMENTARY TO THE PRELIMINARY RESULTS
In accordance with JSE Limited"s Listings Requirements the preliminary results
for the year ended 31 March 2006 have been reviewed by KPMG Inc. following their
appointment as auditors for the Company in November 2005. The significant items
that require restatement of previous financial statements following the review
were:
Periods prior to - 31 March 2005
Preproduction expenditure of R3.6 million previously capitalised in the 2005
financial year was expensed to the income statement as a prior year adjustment;
The independent review commissioned for the Leteng Diamond life of mine plan to
facilitate the mineral reserve and resource declaration also reviewed the
estimate of the rehabilitation provision and decommissioning asset, resulting in
the necessity to raise a provision of R14.6 million and decommissioning asset of
R13 million;
Profit on reclassification of debt of R13 million previously recognised in the
income statement has been reclassified as an equity component of preference
shares in the statement of changes in equity in accordance with IAS 32 Financial
Instruments: Presentation.
Following the implementation of componentisation as required by IFRS the
Property, plant and equipment - IAS 39, the amortisation charges for the prior
periods have been restated to the extent of R5.5 million;
Goodwill stemming from the at acquisition premium paid for Leteng Diamonds has
been reclassified as mining rights, requiring depreciation thereof, has been
done over the useful life of the diamond recovery plant (10 years), resulting in
an additional R4 million depreciation charge;
The consequences of the restatements for the prior reporting periods are as
follows:
Loss attributable to equity holders (R"000) Audited year ended 31 March 2005
Results previously reported (112 868)
Reviewed results (122 830)
Difference (9 962)
The decline in the share price of JCI Limited to R0.16/share from R0.24/share in
March 2005 financial statements accounts for R17 million of the fair value
adjustment. At the forthcoming Annual General Meeting, the strategy for Matodzi
going forward will be presented to shareholders.
The Group achieved an attributable profit to ordinary shareholders of R130.7
million from a loss of R122.8 million, in the prior year and headline loss per
share of 33.4 cents per share from a loss of 84.7 cents relative to the 2005
financial year.
LETSENG
Letseng Holdings, in which Matodzi has a 50% equity interest of its 76%
shareholding in Letseng Diamonds has entered into a binding legal agreement with
Gem Diamond Mining Company of Africa Limited, for the disposal of Letseng
Holdings" entire 76% equity interest in Letseng Diamonds, for a purchase
consideration of R879.5 million, payable in cash ("the proposed transaction").
The proposed transaction is subject to the fulfilment of certain conditions
precedent, including, inter alia, the necessary shareholder and regulatory
consents being obtained, and the approval of the Government of Lesotho, which
owns the other 24% equity interest in Letseng Diamonds. The Matodzi board of
directors have approved the proposed transaction.
A detailed announcement pertaining to the proposed disposal, as outlined above,
will include the salient features, and will be announced shortly. The financial
effects of the proposed transaction will be included in the circular to
shareholders, subject to JSE approval.
MATODZI BALANCE SHEET RESTRUCTURING
As originally set out in the 2005 Matodzi Annual Report, the 200 million
preference shares owned by JCI Limited ("JCI") in Witnigel Investments
(Proprietary) Limited ("Witnigel") ("the Witnigel prefs"), a wholly-owned
subsidiary of Matodzi, and the 200 million "B" preference shares owned by JCI in
Matodzi were restated as a combined instrument in the financial statements of
Matodzi for the year-ended 31 March 2005 in terms of IAS 32: Financial
Instruments - Presentation and IAS 39: Financial instruments: Recognition and
Measurement ("the restatement").
In order to resolve the technical insolvency of Matodzi created due to the
restatement, the following transactions have been implemented:
Matodzi acquired the Witnigel Prefs from JCI for a purchase consideration of
R13.3 million, which was to be settled by Matodzi through the issue of
13 825 129 Matodzi ordinary shares calculated on the basis of a 30-day weighted
average share price of 96.4427 cents per Matodzi share; and
The "B" Prefs were converted into ordinary shares in Matodzi on a one for one
basis ("the conversion").
(collectively, "the restructuring")
The effect of the restructuring on the financial position is as follows:
Matodzi owns 100% of the Witnigel ordinary shares and the Witnigel Prefs.
Witnigel will have a pref share obligation to Matodzi of R194.4 million and will
own shares in JCI. On a consolidated basis therefore, the net effect of the
Witnigel acquisition is to reflect the market value of the shares held in JCI of
R13.3 million as the Witnigel"s pref share obligation is set-off against
Matodzi"s investment in Witnigel; and
In terms of the conversion, the debt obligation of R181.8 million relating to
the "B" Prefs has been eliminated on conversion of the "B" prefs into ordinary
shares in Matodzi.
The net effect of the restructuring is the elimination of R377.5 million from
Matodzi"s balance sheet, and Matodzi therefore, has returned to a technically
solvent financial position. Post restructuring of the preference shares,
approximately R42.8 million of non-cash finance charges for the year would be
eliminated from the results of Matodzi.
The restructuring became effective on the 30 March 2006.
GOING CONCERN
The Group reversed the loss position and reflected a profit during the year
ended 31 March 2006. As a result of the restructuring the Group"s total
liabilities no longer exceed its total assets. The Group"s solvency has been
restored.
As a result of the restructuring, JCI has become the majority shareholder in
Matodzi with an interest of 58%.
The cash flows of Leteng are anticipated to be sufficient to meet all
expenditure and debt service obligations for the next twelve months.
In light of the above the directors are of the opinion that Matodzi will meet
its obligations in the normal course of business. Accordingly the directors
continue to adopt the going concern basis in the preparation of the financial
statements.
For and on behalf of the board
Andrew Mlangeni Sello Mashao Rasethaba
Chairman Chief Executive Officer
3 July 2006
Johannesburg
Sponsor
Sasfin Capital
(A division of Sasfin Bank Limited)
Registered office:
28 Harrison Street Johannesburg 2001(PO Box 11165 Johannesburg 2000)
www.matodzi.co.za
Date: 03/07/2006 04:40:25 PM Produced by the JSE SENS Department
