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PET
PET
PET - Petmin - Condensed Consolidated Interim Financial Statements for the six
months ended 31 December 2006
Petmin Limited
(Formerly Petra Mining Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1972/001062/06)
Share code: PET & ISIN: ZAE000076014
("Petmin" or "the Company" or "the Group")
Highlights
Headline EPS increases by 27%
Somkhele development nearing completion and first sales expected
2nd quarter 2007 as planned
Agreement concluded to dispose of Baobab investment for GBP 2.5 million
(+/- R35 million)
Successful secondary listing on AIM raises R49 million
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31
DECEMBER 2006
Condensed Consolidated Interim
Income Statements
for the six months ended 31 December 2006
GROUP Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Note R`000 R`000 R`000
Revenue 159 500 57 661 176 676
Cost of sales (135 737) (46 430) (145 663)
Gross profit 23 763 11 231 31 013
Other income
- Profit on acquisition
of
- subsidiary 26 052 33 822 33 822
Other expenses -
including
administration
expenses (6 020) (4 195) (7 859)
Operating profit before
financing costs 43 795 40 858 56 976
Net finance
(expense)/income (488) 57 (800)
- Financial income 874 387 1 923
- Financial expenses (1 362) (330) (2 723)
Profit before tax 43 307 40 915 56 176
Income tax expense (4 809) (1 916) (7 576)
Profit for the period 38 498 38 999 48 600
Basic earnings per
ordinary
share (cents) 4 8.73 17.64 16.38
Diluted earnings per
ordinary
share (cents) 4 8.34 16.60 14.85
Condensed Consolidated Interim
Cash Flow Statements
for the six months ended 31 December 2006
GROUP Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Net cash flow from operating
activities (20 459) 14 014 58 218
Cash flows from investing
activities
Acquisition of subsidiary net of
cash acquired - (4 850) (4 850)
Increase in investment in
rehabilitation
funds (351) - (1 430)
Acquisition of property, plant and
equipment (67 881) (8 318) (70 308)
Proceeds from sale of property,
plant and equipment 273 - 240
Net cash flow from investing
activities (67 959) (13 168) (76 348)
Cash flows from financing
activities
Proceeds from specific and general
share
issues for cash during period 34 091 - 95 842
Investment in preference shares in
subsidiary - - (13 000)
Repayment of borrowings (4 771) (1 355) (5 414)
Increase in borrowings 36 529 41 333 1 753
Net cash flows from financing
activities 65 849 39 978 79 181
Net (decrease)/increase in cash and
Cash equivalents (22 569) 40 824 61 051
Cash and cash equivalents
at beginning of period 70 134 9 083 9 083
Cash and cash equivalents
at end of period 47 565 49 907 70 134
Condensed Consolidated Interim
Balance Sheets
at 31 December 2006
GROUP Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Notes R`000 R`000 R`000
ASSETS
Non-current assets 423 018 310 072 365 772
Property, plant and
equipment 406 718 295 065 349 775
Intangible asset 6 556 6 913 6 735
Investments 2 2 2
Financial assets 9 742 8 092 9 260
Current assets 167 418 115 270 155 929
Assets classified as held
for sale 3 1 485 - -
Inventories 49 482 28 760 41 228
Trade and other
receivables 68 886 36 603 44 181
Taxation pre-paid - - 386
Cash and cash equivalents 47 565 49 907 70 134
Total assets 590 436 425 342 521 701
EQUITY AND LIABILITIES
Ordinary share capital
and reserves 408 985 265 073 360 466
Share capital 119 972 87 139 109 972
Share premium 158 912 74 812 134 821
Share option reserve 7 123 2 191 5 141
Contingent consideration 3 1 500 27 552 27 552
Retained earnings 121 478 73 379 82 980
Non-current liabilities 111 966 112 332 82 780
Shareholder`s loan - 40 000 -
Interest bearing loans and
borrowings 41 272 17 740 14 052
Deferred taxation 56 321 41 293 54 495
Environmental rehabilitation
provision 14 373 13 299 14 233
Current liabilities 69 485 47 937 78 455
Trade and other payables 52 513 31 900 67 522
Interest bearing loans and
borrowings 15 387 10 800 10 849
Taxation payable 1 585 5 237 84
Total equity and liabilities 590 436 425 342 521 701
Net asset value ("NAV") per
share (cents) 5 85.22 76.05 81.94
Fully diluted NAV per share
(cents) 5 79.94 64.58 70.16
Condensed Consolidated Interim Statements of Changes in Equity
for the six months ended 31 December 2006
GROUP
Share Share
capital premium
R`000 R`000
Balance at 1 July 2005 48 750 19 767
Shares issued during period
- To acquire Springlake 32472 45 462
- To acquire Samquarz preference shares 4 875 8 125
- Specific issue for cash - Springlake acquisition
costs 1 042 1 458
- Specific issue for cash - Somkhele project 20 833 54 186
- General issue for cash 2 000 7 600
- Contingent consideration to acquire Springlake - -
- Fair value of options vested - -
Costs capitalised to share premium - (1 777)
Profit for period - -
Balance at 30 June 2006 109 972 134 821
Shares issued during period
- General issue for cash 10 000 39 097
- Fair value of options vested - -
Contingent consideration to acquire Springlake
- change in estimate - -
Costs incurred on AIM listing capitalised to share
premium - (15 006)
Profit for period - -
Balance at 31 December 2006 119 972 158 912
Share option Contingent
reserve consideration
R`000 R`000
Balance at 1 July 2005 1 476 -
Shares issued during period
- To acquire Springlake - -
- To acquire Samquarz preference shares - -
- Specific issue for cash - Springlake
acquisition costs - -
- Specific issue for cash - Somkhele project - -
- General issue for cash - -
- Contingent consideration to acquire
Springlake - 27 552
- Fair value of options vested 3 665 -
Costs capitalised to share premium - -
Profit for period - -
Balance at 30 June 2006 5 141 27 552
Shares issued during period
- General issue for cash - -
- Fair value of options vested 1 982 -
Contingent consideration to acquire
Springlake
- change in estimate - (26 052)
Costs incurred on AIM listing capitalised to
share premium - -
Profit for period - -
Balance at 31 December 2006 7 123 1 500
Retained
earnings Total
R`000 R`000
Balance at 1 July 2005 34 380 104 373
Shares issued during period
- To acquire Springlake - 77 934
- To acquire Samquarz preference shares - 13 000
- Specific issue for cash - Springlake acquisition
costs - 2 500
- Specific issue for cash - Somkhele project - 75 019
- General issue for cash - 9 600
- Contingent consideration to acquire Springlake - 27 552
- Fair value of options vested - 3 665
Costs capitalised to share premium - (1 777)
Profit for period 48 600 48 600
Balance at 30 June 2006 82 980 360 466
Shares issued during period
- General issue for cash - 49 097
- Fair value of options vested - 1 982
Contingent consideration to acquire Springlake
- change in estimate - (26 052)
Costs incurred on AIM listing capitalised to share
premium - (15 006)
Profit for period 38 498 38 498
Balance at 31 December 2006 121 478 408 985
Segment Reporting
Segment information is presented in the condensed consolidated interim financial
statements in respect of the Group`s business segments, which are the primary
basis of segment reporting. The business reporting format reflects the Group`s
management and internal reporting structure. Inter-segment pricing is determined
on an arm`s length basis. Segment results include items directly attributable to
a segment as well as those that can be allocated on a reasonable basis.
Business Segments
The Group comprises the following main business segments:
- Silica mining and marketing.
- Anthracite mining and marketing.
Segments
Silica
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Segment revenue 61 291 41 711 90 603
Segment profit/(loss)
- Segment result 14 879 4 877 19 233
- Amortisation of fair values
on acquisition (347) (286) (694)
- Assets held for sale
- Baobab project - - -
- Profit on acquisition
of subsidiary - - -
Segment profit/(loss) 14 532 4 591 18 539
Segment assets 157 977 134 640 153 102
Segment liabilities 115 315 117 074 121 589
Anthracite
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Segment revenue 98 209 15 950 86 073
Segment profit/(loss)
- Segment result 2 226 1 644 1 780
- Amortisation of fair values
on acquisition (1 730) (289) (2 018)
- Assets held for sale
- Baobab project - - -
- Profit on acquisition
of subsidiary - - -
Segment profit/(loss) 496 1 355 (238)
Segment assets 429 062 249 870 328 232
Segment liabilities 296 811 145 957 225 911
Other (Corporate office)
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Segment revenue - - -
Segment profit/(loss)
- Segment result (2 582) (769) (3 523)
- Amortisation of fair values
on acquisition - - -
- Assets held for sale
- Baobab project - - -
- Profit on acquisition
of subsidiary 26 052 33 822 33 822
Segment profit/(loss) 23 470 33 053 30 299
Segment assets 311 855 255 418 303 714
Segment liabilities 9 174 43 089 8 345
Eliminations
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Segment revenue - - -
Segment profit/(loss)
- Segment result - - -
- Amortisation of fair values on
acquisition - - -
- Assets held for sale - Baobab
project - - -
- Profit on acquisition of
subsidiary - - -
Segment profit - - -
Segment assets (308 458) (214 589) (263 347)
Segment liabilities (239 849) (145 853) (194 610)
Consolidated entity
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Segment revenue 159 500 57 661 176 676
Segment profit/(loss)
- Segment result 14 523 5 752 17 490
- Amortisation of fair values on
acquisition (2 077) (575) (2 712)
- Assets held for sale - Baobab
project - - -
- Profit on acquisition of
subsidiary 26 052 33 822 33 822
Segment profit 38 498 38 999 48 600
Segment assets 590 436 425 339 521 701
Segment liabilities 181 451 160 267 161 235
SIGNIFICANT ACCOUNTING POLICIES
for the six months ended 31 December 2006
Petmin is domiciled in South Africa. The condensed consolidated interim
financial statements of the Company for the six months ended 31 December 2006
comprise the Company and its subsidiaries (together referred to as the "Group").
The condensed consolidated financial statements were authorised for issue by the
directors on 1 March 2007.
1. Statement of compliance
The condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") for interim
financial statements and the South African Companies Act. The condensed
consolidated interim financial statements do not include all of the information
required for full annual financial statements and should be read in conjunction
with the consolidated annual financial statements for the year ended 30 June
2006.
1.1 Basis of preparation
The financial statements are prepared on the historical cost basis, except for
financial instruments which are stated at fair value, where applicable, in terms
of IAS 32 - Financial Instruments: Disclosure and Presentation and IAS 39 -
Financial Instruments: Recognition and Measurement.
The preparation of interim financial statements in conformity with IAS 34 -
Interim Financial Reporting, requires management to make judgements, estimates
of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
The accounting policies have been applied consistently by Group entities and
have been applied consistently to all periods presented in these condensed
consolidated interim financial statements.
2. Review of results
The interim results of the Group as set out above have been reviewed by the
Group`s auditors, KPMG Inc., as required by the JSE Limited ("JSE"). The review
report is available for inspection at the Group`s registered office.
3. MANAGEMENT COMMENTARY
Operations
Revenue for the six months ended 31 December 2006 increased by R102 million
compared to the same period in 2005 as the revenues reflect a full six months of
Springlake`s operations whereas the comparatives only included one month after
its acquisition on 30 November 2005.
Gross profit increased by R12.5 million or 112% from the same period in 2005.
The improved performance was largely due to an exceptional profit reported by
SamQuarz (Pty) Limited ("SamQuarz") as production and sales volumes improved and
certain chert stocks, which were previously ascribed a zero value, were sold.
Cash of R30 million was generated by operations before outflows from changes in
working capital of R48 million. Investment in trade receivables increased by R25
million largely due to export shipments made by Springlake Colliery in the
latter part of the reporting period. Trade payables reduced by R15 million as
the trade payables balance at 30 June 2006 included R17 million capital work in
progress related to the Somkhele project which was paid in the period under
review. Capital expenditure of R68 million was incurred in the period under
review, R53 million of which related to the development of the Somkhele project.
SamQuarz silica mine
Production at SamQuarz has increased approximately 46% in the six months ended
31 December 2006 when compared to 31 December 2005. The increased production is
in line with improved demand from customers for SamQuarz product. Profitability
was further enhanced by disciplined cost control by mine management. The results
for the six months to 31 December 2006 include the recognition of additional
profits after tax on the sale of certain chert stocks that were previously
ascribed a zero value, to an amount of R2.9 million.
Springlake Colliery
Springlake`s performance was disappointing in the six months to 31 December
2006. Although the monthly average run-of-mine ("ROM") production has increased
by 40% when compared to the average monthly production for the seven months to
30 June 2006, this has come mainly from an improved performance from the
opencast sections. Management`s focus for the next six months will be on
reducing the unit cost of production by increasing production volumes and
improving efficiencies in the underground sections.
Somkhele anthracite project
The Somkhele anthracite project is nearing completion with first sales predicted
in the second quarter of calendar 2007 as budgeted. The Group has drawn down R36
million on the R40 million banking facilities negotiated with The Standard Bank
of South Africa Limited ("Standard Bank").
Mining rights
In October 2006, Springlake Colliery was granted a new order mining right on
portions of the farm Besterdale. The granting of this mining right paves the way
for Springlake to increase the capacity of its opencast operations from
approximately 40 000 run-of-mine tonnes ("ROM(t)") per month to approximately 70
000 ROM(t) per month.
Increase in authorised share capital In the period under review, the Company
increased its authorised share capital from 500 000 000 ordinary shares of 25
cents each to 1 000 000 000 ordinary shares of 25 cents each.
General issue of shares for cash - Listing on AIM
Petmin concluded its successful secondary listing on the London Stock Exchange`s
Alternative Investment Market ("AIM") on 20 December, 2006. Petmin issued 40
million new shares at 9 British pence per share in a general issue of shares for
cash on the listing, raising approximately R49 million gross proceeds. Capital
raising expenses of R15 million were posted to share premium. The listing
presents Petmin with a platform for future growth by:
-improving the acceptability of the Company`s shares as a global currency for
the purpose of acquiring or developing new assets;
-gaining access to the international pool of capital in the London market with a
view to widening the Company`s institutional and retail investors
shareholder base;
-increasing the Company`s international profile and research coverage;
-improving share liquidity in the longer term.
Disposal of investment in Baobab Mining and Exploration (Pty) Limited
("Baobab")
The Company has reached an agreement with GVM Metals Limited to dispose of its
investment in Baobab for an amount of GBP 2.5 million (+/- R35 million). The
sale is subject to ministerial approval, by no later than 30 April 2007, in
terms of the Mineral and Petroleum Resource Development Act, 2002. In accordance
with IFRS, assets of R1.5 million have been disclosed as assets held for sale
and are carried at cost which is lower than their net realisable value. Revenue
on the sale will be recorded when the last remaining suspensive condition is
satisfied.
An amount of R1.5 million will only become payable to a third-party mineral
consultant should the remaining suspensive clause be satisfied and the sale of
Baobab be concluded.
Contingent consideration reserve - Springlake profit warranty
As noted in the 30 June 2006 Annual Report, the Directors have given further
consideration to the financial performance of the Springlake Colliery. It is the
opinion of the Directors that the warranted profit will not be met. Petmin has
reached agreement that the profit warranty will not be met with Springlake
Vendors representing 91% of the shares to be issued under the profit warranty.
The contingent consideration has been re-estimated to R1.5 million, resulting in
an amount of R26.052 million being recognised as "profit on acquisition of
subsidiary" in the income statement during the period under review.
4. EARNINGS PER ORDINARY SHARE
Earnings per share ("EPS") is based on the Group`s profit for the period,
divided by the weighted average number of shares in issue during the period.
Six months ended
31 December
2006
Net Number Per
income of shares share
(R`000) (`000) (cents)
Basic EPS 38 498 441 205 8.73
Share options
and contingent
consideration - 20 275 (0.39)
Diluted EPS 38 498 461 480 8.34
Headline earnings
per share
Headline EPS is based
on the Group`s headline
earnings divided by the
weighted average
number of shares in
issue during the period.
Reconciliation
between earnings
and headline
earnings:
Basic EPS 38 498 441 205 8.73
Adjustments:
- AIM listing expenses 663 - 0.15
- Profit on acquisition
of subsidiary (26 052) - (5.90)
Headline EPS 13 109 441 205 2.97
Share options
and contingent
consideration - 20 275 (0.13)
Diluted headline EPS 13 109 461 480 2.84
Six months ended
31 December
2005
Net Number Per
income of shares share
(R`000) (`000) (cents)
Basic EPS 38 999 221 084 17.64
Share options
and contingent
consideration - 13 915 (1.04)
Diluted EPS 38 999 234 999 16.60
Headline earnings
per share
Headline EPS is based
on the Group`s headline
earnings divided by the
weighted average
number of shares in
issue during the period.
Reconciliation
between earnings
and headline
earnings:
Basic EPS 38 999 221 084 17.64
Adjustments:
- AIM listing expenses - - -
- Profit on acquisition
of subsidiary (33 822) - (15.30)
Headline EPS 5 177 221 084 2.34
Share options
and contingent
consideration - 13 915 (0.14)
Diluted headline EPS 5 177 234 999 2.20
Headline EPS increased by 0.63 cent or 27% compared to 2005.
Diluted headline EPS increased by 0.64 cent or 29% compared to 2005.
5.NET ASSET VALUE ("NAV") PER SHARE
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Ordinary share capital and reserves
(R`000) 408 985 265 073 360 466
Total number of shares in issue
(`000) 479 889 348 557 439 889
NAV per share (cents) 85.22 76.05 81.94
Reconciliation between
NAV and fully diluted NAV:
Ordinary share capital
and reserves (R`000) 408 985 265 073 360 466
Total number of shares in issue
(`000) 479 890 348 557 439 889
Share options and contingent
consideration (`000) 31 706 61 920 73 920
Fully diluted number of shares
(`000) 511 596 410 477 513 809
Fully diluted NAV per share (cents) 79.94 64.58 70.16
NAV per share increased 3.28 cents per share or 4% when compared to 30 June
2006.
Fully diluted NAV per share increased 9.78 cents per share or 14% when compared
to 30 June 2006.
6. Related Parties
NAMF Nominees (Proprietary) Limited, Dark Capital (Pty) Limited and PSG Limited
are material shareholders in Petmin and are therefore related parties as defined
by Section 10 of the JSE Listings Requirements. Dark Capital (Pty) Limited is
the anchor entity of the broad-based Black Economic Empowerment consortium.
River Corporate Finance (Proprietary) Limited, is a related party by virtue of
its advisory role to Petmin.
6.1 Profit on acquisition of subsidiary - Springlake
The re-estimation of the contingent consideration related to the Springlake
acquisition constitutes a related party transaction, as NAMF Nominees is a
material shareholder in Petmin. Refer to amounts disclosed in note 3.
6.2 Petmin Executive Committee remuneration scheme and share option trust
As disclosed in the annual financial statements for the year ended 30 June 2006,
the Petmin Executive Committee remuneration scheme and share option trust
affects the executive directors of the Company and constitutes a related party
transaction. Amounts due to the executive directors are included in the table of
compensation to directors and key management below.
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
R`000 R`000 R`000
Key management emoluments
- Short-term emoluments * 9 855 ** 3 305 *** 10 448
- Retirement fund contributions 79 69 139
- Share-based payments 1 302 492 2 321
11 236 3 866 12 908
Amounts payable to directors
and key management included
in trade and other payables 6 817 1 554 5 698
*Includes Springlake key management for six months.
**Includes Springlake key management for one month.
***Includes Springlake key management for seven months.
7. increase in borrowings
During the period under review a loan of R36 million was advanced to fund
capital expenditure at the Somkhele anthracite project by Standard Bank. In
terms of the asset based finance facility, interest is payable at the prime
lending rate less 1% and the loan is repayable over 72 months.
8. Subsequent events
There have been no events that have occurred subsequent to the balance sheet
date which require adjustment of, or disclosure in the financial statements or
notes thereto in accordance with IAS 10 - Events After the Balance Sheet Date.
9. Dividends
Due to the development of the Somkhele anthracite project and the associated
cash requirements and Petmin`s focus on acquisitive growth, the Board has
resolved that no interim dividend will be declared.
10. Prospects
SamQuarz
The production from the newly developed areas of the SamQuarz open pit, whilst
generating the same overall product yield, has resulted in a different sizing
distribution of products. This may necessitate additional capital expenditure at
SamQuarz in order to meet the increased demand from key customers. Management
does not foresee any material effect on the profitability of SamQuarz.
Springlake Colliery
With increased opencast production planned in the second quarter of 2007 and
with the measures introduced to the underground operations, management expects a
significantly improved performance in the six months to 30 June 2007. The coal
market remains buoyant and Springlake is expected to enjoy these prices for the
remainder of the calendar year.
Somkhele anthracite project
With first sales from this project expected in the second quarter of 2007,
management expects a positive, although small, contribution from Somkhele in the
six months to 30 June 2007.
New business
Acquisitive growth remains a focus of Petmin and management is continuously
reviewing potential new business opportunities.
By order of the Board
P J Nel J C du Preez
Chairman Chief Executive Officer
Pretoria
1 March 2007
Directors
P J Nel* (Chairman), L Mogotsi (Deputy Chairperson), J C du Preez (Chief
Executive Officer),
B B Doig (Chief Operating Officer), E de V Greyling*, J P Mabena*, A Martin*, J
A Strijdom*, D H Warmenhoven, J Taylor* *Non-executive
Registered Office
Parc Nouveaux, First Floor, Block C, 225 Veale Street, Brooklyn, Pretoria, 0002
(PO Box 899, Groenkloof, 0027)
Tel: (011) 706 1644 Fax: (011) 706 1594
Secretary and Sponsor
River Sponsors (Pty) Limited
Nominated Adviser and Broker
Numis Securities Limited
Transfer Secretaries
Computershare Investor Services 2004 (Proprietary) Limited
Auditors
KPMG Inc.
www.petmin.co.za
Date: 05/03/2007 11:59:55 Produced by the JSE SENS Department.
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