15th Nov 2006 07:02
Lonmin PLC15 November 2006 Final Results 2006 Delivering Growth and Raising Targets • In a sustained strong market for Platinum Group Metals Lonmin has achieved: • Record EBIT up 141% to US$842 million • Underlying earnings per share up 163% to 312.1 cents per share • Strong improvement in cash generation with free cash flow of US$290 million (203.4 cents per share)• Record mine production of 1,017,137 ounces of Platinum in concentrate and sales of 952,682 ounces of Platinum and 1,817,624 ounces of total PGMs• First Platinum major to convert old order mining rights to new order mining rights• Growth target raised to around 1.4 million ounces of Platinum in 2012• Effective conversion of US$215.8 million Convertible Bond• Total dividend declarations of US$1.00 per share, an increase of 39% (final dividend 55 cents per share) +--------------------------------+-------+--------------+-----------+----------+|Financial highlights - | | | | ||Continuing Operations | | | | || | | | | ||Year to 30 September | | 2006 | 2005 | Variance |+--------------------------------+-------+--------------+-----------+----------+|Turnover | US$m | 1,855 | 1,128 | 64% |+--------------------------------+-------+--------------+-----------+----------+|EBITDA (i) | US$m | 923 | 417 | 121% |+--------------------------------+-------+--------------+-----------+----------+|EBIT (ii) | US$m | 842 | 350 | 141% |+--------------------------------+-------+--------------+-----------+----------+|Underlying profit before | | | | ||taxation (iii) | US$m | 827 | 339 | 144% |+--------------------------------+-------+--------------+-----------+----------+|Profit before taxation | US$m | 633 | 319 | 98% |+--------------------------------+-------+--------------+-----------+----------+|Earnings per share | cents | 219.5 | 111.5c | 97% |+--------------------------------+-------+--------------+-----------+----------+|Underlying earnings per share | | | | ||(iii) | cents | 312.1 | 118.5c | 163% |+--------------------------------+-------+--------------+-----------+----------+|Trading cash flow per share | cents | 354.9 | 191.2c | 86% |+--------------------------------+-------+--------------+-----------+----------+|Free cash flow per share | cents | 203.4 | 39.5c | 415% |+--------------------------------+-------+--------------+-----------+----------+|Equity shareholders' funds | US$m | 1,089 | 838 | 30% |+--------------------------------+-------+--------------+-----------+----------+|Net debt | US$m | 458 | 585 | (22)% |+--------------------------------+-------+--------------+-----------+----------+|Interest cover (iv) | x | 23.1 | 15.1 | 53% |+--------------------------------+-------+--------------+-----------+----------+|Gearing (v) | % | 27 | 41 | (34)% |+--------------------------------+-------+--------------+-----------+----------+ NOTES ON HIGHLIGHTS (i) EBITDA is EBIT before depreciation and amortisation.(ii) EBIT is defined as revenue and other operating expenses before net finance costs and before share of profit of associates and joint ventures.(iii) Underlying measures for the year are calculated excluding movements in the fair value of the embedded derivative associated with the convertible bond, exchange on tax balances, profits on the sale of Marikana houses, an adjustment to the interest capitalised in prior years and, for 2005, the effects of a change in the South African tax rate on the opening deferred tax balance and re-organisation costs as disclosed in note 3 to the accounts.(iv) Interest cover is calculated as EBIT excluding special items divided by net interest excluding exchange.(v) Gearing is calculated on the net debt attributable to the group divided by the net debt attributable to the Group plus equity shareholders' funds. Commenting on the results, Brad Mills, Lonmin's Chief Executive said: "These are an excellent set of results, with record levels of production, salesand earnings. Lonmin has a clear strategy and we are targeting production growthto around 1.4 million ounces of Platinum in 2012. Lonmin today has a marketleading safety performance, a robust growth profile and a culture of innovationand operational excellence. We are the first Platinum major to be awarded neworder mining rights by the South African Government and we are developing a newgeneration of mechanised and automated Platinum mines." Enquiries: Alex Shorland-Ball, Lonmin Plc +44 (0) 20 7201 6060 This press release is available on www.lonmin.com. A live webcast of the finalresults' presentation starting at 09.30hrs (London) on 15 November 2005 can beaccessed through the Lonmin website. There will also be a web question facilityavailable during the presentation. An archived version of the presentation,together with the presentation slides, will be available on the Lonmin website. Chief Executive's Comments Introduction Our mining operations performed strongly during the year producing 1,017,137ounces of Platinum in concentrate. The Marikana mines had a record yearproducing 966,733 Platinum ounces and 1,861,179 total Platinum Group Metal (PGM)ounces in concentrate from 11.9 million tonnes of underground ore and 2.0million tonnes of opencast ore. At Limpopo we are continuing to re-engineer themine and ramp up mechanised production. Our current target is to achieve amonthly throughput rate of 120,000 tonnes of ore. We expect to be at this levelin the second half of the 2007 fiscal year, some 6 months behind our originalschedule. We achieved a new record for total sales of 952,682 ounces of Platinum. However,our refined metal sales were impacted by our Smelter rebuild programme and anunscheduled Smelter outage in April. We achieved stable Smelter operations inthe fourth quarter of the year. Based on our growth targets and the desire toensure more stable processing operations we have decided to re-commission ourMerensky furnace which is currently expected to be operational in the secondquarter of the 2007 fiscal year. The combination of our Number 1 Furnace and theMerensky Furnace with back-up from our Pyromet furnaces should give ussufficient operational flexibility to overcome outages of any single smeltingunit and ensure our ability to smelt all of our own concentrate. We continue to build growth into our business to supply robust market demand. Weare now forecasting a growth profile which, including contributions from LimpopoPhase 2 and Pandora, will allow us to reach around 1.4 million ounces ofPlatinum in 2012. Balance Sheet Management and Dividends We will give notice later today to the holders of our outstanding ConvertibleBonds due 2008 that these will be redeemed on 18 December 2006 at a conversionprice of approximately 1233p per share. Bondholders have the right to converttheir Bonds into new Lonmin shares until the close of business in London on 12December 2006. During this period we expect to receive notices of conversion ofthe balance of the Bonds, which currently amount to US$ 199.45 million. Assumingfull conversion of all outstanding Bonds, Lonmin will have approximately 154million shares in issue. The conversion of these securities will leave the groupwith net debt of some US$250 million. At 30 September due to higher prices and increased concentrate sales in thesecond half of the year we had an increase of US$249 million in receivables onour balance sheet. The majority of this will reverse in the first half of 2007as these accounts are settled in line with their normal contractual terms. The Board has recommended a final dividend of US 55.0 cents per share which,subject to approval at the Company's AGM on 25 January 2007, will be paid on 9February 2007 to shareholders on the registers at the close of business on 12January 2007. Together with the interim dividend paid during the year thisrepresents a full year dividend of US$1.00 per share an increase of 39%. Safety The momentum to achieve injury free running of our operations has grownsubstantially during the year across all areas of the business. We achieved a31% reduction in our lost time injury frequency rate which dropped to 12.45 permillion man hours worked from 18.10 for the 2005 fiscal year. We have alsosignificantly reduced the severity of accidents in our operations with ourseverity ratio now standing at an average of 13.81 days, an improvement of some14% on last year. We regrettably suffered four industrial fatalities at the Marikana operationsduring the year and two at our Limpopo mine. We have completed DuPont Visible Felt Leadership Training for all managementemployees and have successfully used industrial theatre and other methods toimprove safety awareness. During 2007 we will continue to focus on embeddingsafe production both within our systems and behaviours with key projectsincluding the continued roll out of our Fatal Risk Protocols, continued use ofindustrial theatre and the re-design of our underground materials handlingsystem. Marikana Mining Our Marikana Mining Division achieved record underground production of 11.9million tonnes mined, an increase of 8% on the previous fiscal year. Our largestshafts K3 and Rowland both set new monthly hoisting records during the secondhalf of the year. We continued to cut back our opencast production (2.0 milliontonnes mined) and replace these tonnes with higher quality underground ore. Atthe current reduced production rate we now expect the opencast operations atMarikana to continue until 2009. Previously each concentrator at Marikana was controlled by the nearest shaft andpredominantly milled the production of that shaft. We made a decision in thefirst half of the year to group all the concentrators together in one unit andmanage the feed across the operations. This has allowed us to optimisethroughput with tonnes milled up 5% year on year. During the year we developed a comprehensive new life of mine plan for theMarikana operations incorporating all elements of our mechanisation, automationand safety technology. As a result of this work we will develop our new Hossy,Saffy and K4 shafts as fully mechanised operations from day one using our ultralow profile (ULP) equipment. We will also incorporate a variety of additionalsafety, efficiency and employee friendly measures in these shafts to improve theworking environment for our employees. We are currently carrying out developmentat Hossy and Saffy with stoping scheduled to start early in 2007. K4 will comeinto production in 2008. Wherever possible we are looking at ways to modernise the remainder of ourshafts based on the production life remaining and the cost of re-engineering theoperation. Solutions could include using the full fleet of ultra low profileequipment, parts of the fleet in partnership with conventional mining andinnovations such as the DDT jigs. We remain on track to meet our 50%mechanisation target by 2010. Limpopo Mining In our first full year of ownership of Limpopo we have continued to ramp upproduction from the mine and re-engineer the operations to a predominantlymechanised mining basis. The Limpopo operations contributed 50,404 ounces ofPlatinum and 113,364 ounces of total PGMs in concentrate during the year. Our plan for Limpopo phase 1 is to achieve steady state production of 120,000tonnes hoisted per month. In the fourth quarter of 2006 we encountered adverseground conditions at Limpopo and have accelerated development to maintain ourgrowth plan. We are currently forecasting that we will be able to achieve asteady rate of 120,000 tonnes per month in the second half of 2007 some sixmonths behind schedule. Largely as a result of price improvements, Limpopocontributed US$33 million to our EBIT during the year, well ahead of ouroriginal acquisition plan assumptions for the mine. Pandora Joint Venture During the year we have mined ore from our Pandora joint venture property bothunderground as an extension of our E3 shaft and in an open pit operation. Goingforward we will split out the Pandora Joint Venture as a separate EBIT centre. New Order Mining Licences We are delighted that on 9 October 2006 we were granted the conversion of ourold order mining rights into new order mining rights for our Marikanaoperations. This is a highly significant moment for us as it ensures the futureof the Marikana operation giving us the right to mine for PGMs and associatedmetals at Marikana for the next 30 years with a right to apply for renewal for afurther 30 years thereafter. We will apply for our new order mining rights in respect of our Limpopooperations in the early part of calendar 2007. The application for our Pandoraproject has been submitted and we will continue to discuss this with the DMEduring the coming months. Process Division The Process Division experienced a difficult year. After a very successfulplanned Number 1 Furnace rebuild campaign of some 27 days in February, theDivision struggled to achieve stable operations. Unplanned outages occurred atboth the Smelter and Precious Metal Refinery with the Smelter only achievingstable design throughput in the fourth quarter of the financial year. As aconsequence of these issues, refined metal sales were behind prior year results.We were able to offset this shortfall in refined metal in part by sellingconcentrate and other partially refined materials (around 166,000 ounces ofPlatinum and just under 360,000 ounces of total PGMs). Final metal sales for theyear were 952,682 ounces of Platinum and 1,817,624 ounces of total PGMs. Our Base Metal Refinery has become the bottleneck in our refining process. Weinstigated a comprehensive evaluation of this facility during the year and havedeveloped a project to improve throughput at this facility. We have seen someinitial success from this project with new monthly records being set in thetonnes of matte milled and tonnes of nickel sulphate crystals produced. During2007 we will continue to upgrade and expand this plant to support our productiongrowth profile. We experienced a fire at the Precious Metal Refinery in September. Necessaryrepairs were carried out within 54 hours to allow the Refinery to return tonormal production. We are converting the Precious Metal Refinery from a manualprocessing operation to a new automated standard to improve both reliability andrecoveries. This programme will be completed by the end of 2007. Six Sigma and Shared Business Services Our Six Sigma continuous improvement programme performed well during the yeardelivering R330 million of net EBIT benefit. The programme is nowself-sustaining in Lonmin and we continue to progress with the training of BlackBelts and Green Belts across the business. We are targeting an additional R400million of Six Sigma EBIT benefits for the 2007 fiscal year. We have completed the preliminary integration of our Shared Business Servicesdivision and expect to see significant benefits from this initiative in 2007. Wealso implemented the first phase of our SAP Enterprise Resource Planning systemin March. The implementation of this system has been a positive step forward forus in terms of creating one source for business information. Our intent is tocontinue modernising our information system environment over the next two yearswith full conversion of all our core systems to SAP or related systems by theend of 2008. Costs and Capital Expenditure In common with the majority of the mining sector we saw increasing costpressures in the second half of the year for a number of consumables and scarceskill sets such as mining engineers. We also made a number of investments toimprove safety, the health of our employees and our environmental impact. Our unit costs were impacted by the Smelter outages, which added around 80 Randper PGM ounce sold to the Process Division costs. C1 costs of own metalproduction at Marikana net of by product credits were R2,441 up 8.8% on lastyear. At Limpopo costs have continued to decline on last year's figure of R4,102 as wehave ramped up production from the mine. However, costs for the full year areabove our target range as a result of the lower than expected productionthroughput. C1 costs of metal in concentrate at Limpopo were R3,891 per PGMounce, a decrease of 5.1% year on year. We are committed to maintaining our advantage as the lowest cost producer andare targeting C1 costs for fiscal 2007 for Marikana of around R2,450 to R2,500per PGM ounce sold net of by product credits and for Limpopo R3,000 to R3,250per PGM ounce in concentrate. Our gross capital expenditure for the year was US$182 million. We areforecasting gross capex for fiscal 2007 of US$370 million which includesinvestment in the modernisation of our mines and the programme to de-bottleneckthe Process Division. Markets During fiscal 2006 the prices for all our metals continued to be strong with ouraverage realised Platinum price increasing by 27% to US$1,084 per ounce. We areconfident of continued growth in demand for Platinum over the medium term withregulatory driven demand for autocatalysts continuing to be the prime driver.Supply will continue to lag demand due to the economics of the new South Africanprojects and the longer lead times for bringing mines into production. Rhodium demand has been driven by the autocatalyst sector where the metal isimportant for the reduction of Nitrous Oxide from the exhaust gases of motorvehicles. Rhodium is entirely a by-product of Platinum production so supplyresponse to demand is inelastic. As a result of these factors, our averagerealised Rhodium price has increased by some 135% over the financial year toUS$3,897 per ounce. The metal now represents some 28% of our revenue. We arecautious about predicting the future supply/demand balance for this thinlytraded metal as price volatility may contribute to thrifting and substitution inthe medium term. The Palladium market has seen a pick up in demand both in the autocatalystsector and the early reports of a potentially promising Chinese jewellerymarket. Our average realised price for Palladium rose by 58% in the year toUS$299 per ounce. On the supply side, we see continuing oversupply and inventoryoverhang. Growth Profile We are committed to growing our business to supply what we believe will becontinuing strong demand growth for Platinum. Our original growth profile forMarikana targeted around 1 million Platinum ounces per annum from the operationin 2008. We have this year developed a comprehensive new life of mine plan forour Marikana operations and are now targeting an additional 175,000 ounces ofproduction from the mines to reach around 1.175 million ounces of Platinumproduction in 2012. At Limpopo our base case for growth was to reach a steady state of 75,000Platinum ounces per annum. We have now revised this profile upwards andare targeting around 87,000 Platinum ounces per annum from 2009. Work has continued on the pre-feasibility studies for both our Limpopo phase 2and Pandora projects. Both these studies will be completed during the first halfof our 2007 financial year. At Limpopo phase 2 we are targeting around 93,000Platinum ounces per annum at full production for Lonmin's account from 2012. Atfull production the Pandora project has the potential, to add an additional55,000 Platinum ounces per annum attributable to Lonmin from 2012. Incorporating all these elements we have been able to revise our growth targetupwards to 1.4 million ounces of Platinum in 2012. Based on an assessment of our overall smelting needs going forwards and ourdesire to establish more stable smelting operations matching our mining profile,we have taken the decision to re-commission our Merensky furnace. This furnace,in combination with our Number 1 furnace and with modifications to our gashandling system will allow us to achieve capacity up to 1.4 million Platinumounces of smelting capacity per annum by 2010. Beyond this production level weare undertaking pre-feasibility study work to increase our metallurgicalcapacity to 2 million ounces of Platinum per annum. Looking beyond 2012 we have set ourselves the goal of building optionality intothe business to reach production of 2 million ounces of Platinum. We havecommenced a scoping study on our Loskop project which we estimate has thepotential to generate around 80,000 Platinum ounces in concentrate per annum(50% Lonmin share). We continue to develop our high quality portfolio ofexploration projects and to assess possible acquisitions in the PGM sector. Inaddition during the year we acquired a stake in emerging junior PlatminResources and now hold 22% of that company. Outlook In 2007 we are targeting around 1.02 to 1.04 million saleable ounces of Platinumproduction and 1.93 to 1.97 million saleable ounces of total PGMs. We arecommitted to maintaining our advantage as the lowest cost producer and we aretargeting C1 costs of own metal production at Marikana of around R2,450 toR2,500 per PGM ounce sold and for Limpopo, C1 costs of metal produced inconcentrate of around R3,000 to R3,250 per PGM ounce. We are targeting aroundR400 million of additional EBIT benefits from our Six Sigma continuousimprovement programme in the 2007 fiscal year. Lonmin today has a market leading safety performance, a clear strategy, a robustgrowth profile and a culture of innovation and operational excellence. We are acompany which is capitalising on the diversity and quality of our South Africanworkforce and we are the only South African Platinum major to have achievedconversion of old order mining rights into new order mining rights. Thecontribution of Lonmin employees, contractors and community members is highlyvalued and their hard work and dedication is greatly appreciated. Bradford A MillsChief Executive Financial Review Introduction The financial information presented for 2006 has been prepared on an IFRS basisfor the first time. The comparative information for 2005 has been restated basedon the accounting policies and adjustments as set out in detail in note 35 tothe accounts. Analysis of results Income Statement A comparison of the 2006 total operating profit with the prior year is set outbelow: $m Total operating profit - 2005 350 Reorganisation cost - 2005 12 _________ Underlying operating profit - 2005 362 Smelter insurance recovery - 2005 (22) Price 579 Volume 37 Cost changes (126) _________ Underlying operating profit - 2006 830 Sale of houses - 2006 12 _________ Total operating profit - 2006 842 ========= The 2005 total operating profit of $350 million was adversely impacted byreorganisation costs of $12 million however this was offset by a non-recurringinsurance recovery relating to the 2004 smelter incident. The key featureimpacting profit in 2006 has been a very strong market with the average pricerealised for the basket of metals sold at $30,916/kg up 55% on the prior year.Sales volumes of PGMs increased from 1,692,517 ounces to 1,817,624 ounces andrevenue amounted to $1,855 million. After other cost changes of $126 million,which are explained in more detail below, the resulting underlying operatingprofit was $830 million up 129% on the prior year. This, when combined with a$12 million gain resulting from the sales of company owned housing, has resultedin a total operating profit for 2006 of $842 million. Other cost changes (increase) / decrease: $m Safety, health, environment and community ('SHEC') (26) Exploration and technical development (14) Inflation / other (59) Remuneration restructuring and skills retention (18) Plant running (15) Change of costing basis (8) Royalties (6) Depreciation and amortisation (17) Foreign exchange impact 37 _________ (126) ========= Given the strong market conditions, and to meet our obligations under our neworder mining licence, the Group has chosen to invest $40 million by developingthe business in a number of areas. We have invested some $26 million in SHECprojects to improve the safety, health and environment in which our employeeswork and to enhance the communities in which they live. We are pleased to havemade significant reductions in our injury rate. We have also made substantialinvestments in mechanisation to develop our new generation platinum mines whichwill become operational in 2007 and furthermore we have increased ourexploration funding. During 2006 inflationary pressures have typically added some 7% to our costbase. This together with abnormal increases in raw materials and other costs hasadversely impacted operating profit by $59 million. Furthermore, the boomingmining sector has created strong competition for skilled resources. We have madesignificant changes in our remuneration policy during 2006. This has involvedimplementing skills retention programmes via share schemes and adjusting thelevel of bonuses. This approach has also seen the closure of the UK definedbenefit pension scheme to new members which therefore limits the Group's futureexposure. Plant running costs increased in the year. This was partly caused by running thesmaller capacity (and higher cost) Pyromet furnaces during the period of thesmelter repair, but also reflected the introduction of new plant to reduce ourenvironmental impact. As part of our implementation of SAP we have moved from aweekly to monthly costing basis. This resulted in a one-off catch-up of $8million in 2006. Royalty payments have increased by $6 million reflecting theprofit growth in the year. Depreciation and amortisation costs were up $17million which effectively reflected the full year effect of the Limpopo minefollowing our acquisition of Southern Platinum Corporation on 15 June 2005. The C1 cost per PGM ounce sold net of by-product credits on own production fromthe Marikana operations amounted to R2,441 for 2006 compared with R2,243 for2005, an increase of 8.8%. However, as the South African Rand depreciatedagainst the US Dollar during the year by some 7% this resulted in an increase inUS$ unit costs of 2%. Further details of unit costs analysis can be found in theoperating statistics table within the Annual Review. Net finance costs in 2006 were $228 million compared with $34 million in 2005.In 2006 this includes a $227 million charge for the fair value movement of theembedded derivative in the convertible bond. Borrowing levels reduced towardsthe end of the year although interest rates on average were higher than in theprevious year. Interest cover remained strong at 23.1 times (2005 - 15.1 times). Profit before tax amounted to $633 million in 2006 compared with $319 million in2005. Included in 2006 was the $227 million fair value adjustment on theconvertible bond noted above. The 2006 tax charge was $202 million compared with $118 million in 2005. Thecorporate tax rate in South Africa has remained at 29% during the year. Theeffective tax rate, excluding the effects of exchange, and special items was 34%compared with 38% last year mainly due to the utilisation of brought forwardlosses in Limpopo. The overall tax charge includes a credit of $67 million onthe translation adjustment of the deferred tax balance resulting from the 22%depreciation of the closing Rand/$ exchange rates at the respective year ends. Profit for the year attributable to equity shareholders amounted to $313 million(2005 - $158 million) and earnings per share were 219.5 cents compared with111.5 cents in 2005. Underlying earnings per share, being earnings excludingspecial items, amounted to 312.1 cents (2005 - 118.5 cents). Balance sheet Equity interests were $1,089 million at 30 September 2006 compared with $838million at 30 September 2005 principally reflecting the profit attributable toequity shareholders of Lonmin Plc of $313 million offset by dividends declaredof $124 million and a fair value uplift in our investment in Platmin of $36million. Dividends are now recorded on a cash basis under IFRS and thus the $124 millionincludes $60 million for the 2005 final and $64 million for the 2006 interims. Southern Platinum Corporation was acquired on 15 June 2005, with a compulsoryacquisition of the remaining shares on 28 July 2005. During the currentfinancial year the 8.5% minority interest in Limpopo was acquired for $13million. The fair value assessment on the acquisition of Southern PlatinumCorporation was finalised during the year. This resulted in an allocation of $60million to goodwill and a restatement of the relevant opening balances inaccordance with IFRS. Net debt amounted to $458 million at 30 September 2006 with the main componentsbeing the convertible bond of $216 million and bank loans of $288 million.Gearing was 27% compared with 41% at 30 September 2005, calculated on netborrowings attributable to the Group divided by those attributable netborrowings and the equity interests outstanding at the balance sheet date. As at 15 November 2006 Lonmin Plc has given notice to force redemption of alloutstanding convertible bonds at their principal amount. Given the expecteddifferential between prevailing share prices and the conversion price of £12.33it is expected that this will lead to the issue of 10,576,944 shares subsequentto the balance sheet date and a reduction in non-current financial liabilitiesof $211 million. This will further strengthen the Group balance sheet. Cash flow The following table summarises the main components of the cash flow during theyear: 2006 2005 Total Total______________________________________________________________________ $m $m______________________________________________________________________Cash flow from operations 722 377Interest and finance costs (31) (27)Tax (185) (79)______________________________________________________________________Trading cash flow 506 271Capital expenditure (182) (190)Proceeds from disposal of assets held for sale 28 -Dividends received from associate - 2Dividends paid to minority (62) (27)______________________________________________________________________Free cash flow 290 56Acquisitions* (14) (212)Financial investments (36) 1Shares issued 15 6Equity dividends paid (124) (102)______________________________________________________________________Cash inflow / (outflow) 131 (251)Opening net debt (585) (272)Exchange (4) (2)Net debt in subsidiaries acquired - (60)______________________________________________________________________Closing net debt (458) (585)______________________________________________________________________Trading cash flow (cents per share) 354.9c 191.2c______________________________________________________________________Free cash flow (cents per share) 203.4c 39.5c______________________________________________________________________ * 2005 comparative includes $15 million on intangible non-current assetsacquired in 2005. Cash flow from operations was $722 million during 2006, a 92% increase on lastyear's figure of $377 million. Included was an outflow on working capital of$202 million compared with an outflow of $44 million last year. This was due toa build up in debtors resulting from price increases and the high volume ofconcentrate sales in the last quarter of the year which have significantlylonger credit terms than spot metal sales. This will be reversed in the firsthalf of the new financial year. After interest and finance costs of $31 millionand tax payments of $185 million, trading cash flow amounted to $506 million in2006 against $271 million in 2005, with trading cash flow per share of 354.9cents in 2006 against 191.2 cents in 2005. Capital expenditure of $182 million was incurred during the year, broadly inline with the prior year. Associate and minority dividends received and paidrepresented dividends from and to Incwala. Free cash flow amounted to $290million with free cash flow per share at 203.4 cents (2005 - 39.5 cents).Acquisitions of $14 million in 2006 principally represented the buyout cost ofthe minority interest in Limpopo at $13 million. Financial investments primarilyrepresented the purchase of a 22% stake in Platmin. After accounting for sharesissued on the exercise of share options of $15 million and equity dividends paidof $124 million, the cash inflow was $131 million during 2006 and net debtamounted to $458 million at 30 September 2006. Dividends As dividends are now accounted for on a cash basis under IFRS the dividend shownin the accounts represents the 2005 final of 42 cents and the 2006 interim of 45cents making a total of 87 cents for the year. In addition the Board recommendsa final dividend of 55.0 cents (2005 - 42.0 cents). Financial risk management The Group's functional currency remains the US Dollar and the share capital ofthe Company is based in US Dollars. The Group's business is mining and it does not undertake trading activity infinancial instruments. Interest rate risk Monetary assets and liabilities are subject to the risk of movements in interestrates. The borrowings at 30 September 2006 represented $211 million of long-termborrowings in the form of US Dollar 3.75% convertible bonds due 2008 in the UK.In South Africa a long-term bank loan of $288 million was drawn together with anoverdraft of $18 million. Cash deposits represented balances of $47 million inthe UK and $14 million in South Africa. Liquidity risk Liquidity risk measures the risk that the Group may not be able to meet itsliabilities as they fall due and, therefore, its ability to continue trading.The Group's policy on overall liquidity is to ensure that there are sufficientcommitted facilities in place which, when combined with available cashresources, are sufficient to meet the funding requirements in the foreseeablefuture. At the 2006 year end, the Group had $1,411 million of committedfacilities in place, of which $499 million were drawn down. Foreign currency risk Foreign currency risk arises when movements in exchange rates, particularly theUS Dollar against the South African Rand, affect the transactions the Groupenters into, reported profits and net assets. Most of the Group's operations arebased in South Africa and the majority of the revenue stream is in US Dollars.However the bulk of the Group's costs and taxes are Rand driven. Most of thecash held in South Africa is in US Dollars and is normally remitted to the UK ona regular basis. Short-term working capital facilities required in South Africaare drawn primarily in US Dollars. Fluctuations in the Rand to US Dollar exchange rate can have a significantimpact on the Group's results. A strengthening of the Rand against the US Dollarhas an adverse effect on profits due to the majority of costs being denominatedin Rand. The approximate effect on the Group's results of a 10% movement in theRand to US Dollar 2006 year average exchange rate would be as follows: +------------------+----+---------+|EBIT |+/- |$87m |+------------------+----+---------+|Profit for the |+/- |$51m ||year | | |+------------------+----+---------+|EPS (cents) |+/- |35.8c |+------------------+----+---------+ These sensitivities are based on 2006 prices, costs and volumes and assume allother variables remain constant. They are estimated calculations only. Commodity price risk Commodities trade on worldwide commodities markets and are subject to pricefluctuations. Therefore, the prices obtained are dependent upon the prevailingmarket prices. Any change in prices will have a direct effect on the Group'strading results. Forward sales are undertaken where the Board determines that itis in the Group's interest to secure a proportion of future cash flows. TheGroup has undertaken a limited number of forwards on Nickel and Copperby-product sales as disclosed in note 21 to the accounts. The approximate effects on the Group's results of a 10% movement in the 2006year average market prices for platinum (Pt), palladium (Pd) and rhodium (Rh)would be as follows: +-----------------+----------------+---------------+----------------+| | Pt | Pd | Rh || | | | || | | | |+-----------------+-----+----------+------+--------+------+---------+|EBIT | +/-|$103m | +/-|$13m | +/-|$53m |+-----------------+-----+----------+------+--------+------+---------+|Profit for the | +/-|$60m | +/-|$8m | +/-|$31m ||year | | | | | | |+-----------------+-----+----------+------+--------+------+---------+|EPS (cents) | +/-|42.1c | +/-|5.4c | +/-|21.5c |+-----------------+-----+----------+------+--------+------+---------+ The above sensitivities are based on 2006 volumes and assume all other variablesremain constant. They are estimated calculations only. John RobinsonChief Financial Officer14 November 2006 Operating Statistics - 5 year review Sept Sept Sept Sept Sept Units 2006 2005 2004 2003 2002______________________________________________________________________________________________Mining Tonnes Milled(i)Marikana Underground 000 11,959 11,102 11,121 11,418 11,260 Opencast 000 2,308 2,444 3,283 2,790 - Limpopo Underground 000 887 214 N/A N/A N/A Opencast 000 14 - N/A N/A N/A Lonmin Platinum Total 000 15,168 13,760 14,404 14,208 11,260Tonnes Mined Marikana Underground 000 11,942 11,047 11,070 11,450 12,346 Opencast 000 2,032 2,653 2,730 2,880 - Limpopo Underground 000 858 212 N/A N/A N/A Opencast 000 14 - N/A N/A N/A Lonmin Platinum Total 000 14,846 13,912 13,800 14,330 12,346______________________________________________________________________________________________UG2 to Merensky Ratio % 72.9 74.3 82.4 81.6 78.3Noble metalsin matte Marikana kg 56,098 53,290 55,031 54,295 46,557Noble metalsin concentrate Limpopo kg 3,526 801 N/A N/A N/AYield into matte g/t 3.84 3.81 3.82 3.83 4.13______________________________________________________________________________________________Metals in Marikana Platinum oz 966,733 930,373 N/C N/C N/Cconcentrate Palladium oz 433,699 402,748 N/C N/C N/C Rhodium oz 137,220 129,872 N/C N/C N/C Total PGMs oz 1,861,179 1,766,908 N/C N/C N/C Limpopo Platinum oz 50,404 11,567 N/A N/A N/A Palladium oz 38,170 9,217 N/A N/A N/A Rhodium oz 7,845 1,305 N/A N/A N/A Total PGMs oz 113,364 25,672 N/A N/A N/A Lonmin Platinum Platinum oz 1,017,137 941,940 N/C N/C N/C Palladium oz 471,869 411,965 N/C N/C N/C Rhodium oz 145,065 131,177 N/C N/C N/C Total PGMs oz 1,974,543 1,792,580 N/C N/C N/C______________________________________________________________________________________________Metallurgical production Marikana refined Platinum oz 739,277 830,911 833,822 932,867 757,451 Palladium oz 323,275 360,753 358,705 417,418 350,792 Rhodium oz 87,674 93,445 90,012 140,514 113,549 Total PGMs oz 1,352,037 1,510,553 1,491,760 1,757,757 1,467,525 Marikana concentrate Platinum oz 158,114 73,985 82,935 - - Palladium oz 77,630 38,345 38,341 - - Rhodium oz 37,855 24,491 23,082 - - Total PGMs oz 341,643 167,955 184,808 - - Limpopo concentrate Platinum oz 50,404 11,524 N/A N/A N/A Palladium oz 38,170 9,043 N/A N/A N/A Rhodium oz 7,845 1,320 N/A N/A N/A Total PGMs oz 113,364 25,741 N/A N/A N/A Lonmin Platinum Platinum oz 947,795 916,420 916,757 932,867 757,451 Palladium oz 439,075 408,141 397,046 417,418 350,792 Rhodium oz 133,374 119,256 113,094 140,514 113,549 Total PGMs oz 1,807,044 1,704,249 1,676,568 1,757,757 1,467,525______________________________________________________________________________________________Capital expenditure Rm 1,207 1,180 1,230 1,294 1,558 $m 182 190 187 162 150______________________________________________________________________________________________Sales Lonmin Platinum Platinum oz 952,682 912,844 941,146 903,077 757,958 Palladium oz 442,630 402,425 405,329 405,073 349,243 Rhodium oz 135,449 117,944 126,723 131,752 109,194 Total PGMs oz 1,817,624 1,692,517 1,761,171 1,728,387 1,415,112______________________________________________________________________________________________PricesAverage price received per oz Platinum R 7,283 5,366 5,356 5,053 5,357 $ 1,084 856 816 645 501 Palladium R 1,999 1,184 1,485 1,698 3,759 $ 299 189 227 212 351 Rhodium R 26,106 10,494 4,876 4,201 9,123 $ 3,897 1,661 745 529 850Basket price of PGMs and base metals $/kg 30,916 19,979 17,072 14,618 13,662______________________________________________________________________________________________Marikana cash costs own productionCash costs Mining R 2,030 1,889 1,696 N/C N/C Smelting & refining R 384 261 242 N/C N/C Shared business services R 460 347 316 N/C N/C Movement in physical stock R (33) (11) 165 N/C N/C ______________________________________________Cost per PGM ounce sold before by-product credits R 2,841 2,486 2,419 N/C N/C Base metal credits R (400) (243) (233) N/C N/C ______________________________________________C1 cost per PGM ounce sold net of by-product credits R 2,441 2,243 2,186 N/C N/C Improved recoveries R - (118) (29) N/C N/C Smelter repair R - 47 - N/C N/C Stock accounting change R - 91 - N/C N/COther EBIT Depreciation and items amortisation R 227 253 232 N/C N/C Insurance proceeds R - (83) - N/C N/C Restructuring R - 23 - N/C N/COther R - 12 26 N/C N/C ______________________________________________C2 Costs per PGM ounce sold own production R 2,668 2,468 2,415 N/C N/CCash cost per refined ounce of PGM sold (inc. royalties) R N/C N/C N/C 1,974 1,863 $ N/C N/C N/C 251 176Cash cost per refined ounce of PGM sold (exc. royalties) R N/C N/C N/C 1,969 1,847 $ N/C N/C N/C 250 174Cash cost per refined ounce of PGMproduced(exc royalties): Underground R N/C N/C N/C 2,022 1,776 $ N/C N/C N/C 257 168 Opencast R N/C N/C N/C 1,801 2,726 $ N/C N/C N/C 229 257 Total R N/C N/C N/C 1,996 1,780 $ N/C N/C N/C 254 168______________________________________________________________________________________________Limpopo - cash costs own productionC1 cash cost per PGM ounce in concentrate R 3,891 4,102 N/A N/A N/A______________________________________________________________________________________________Exchange RatesAverage exchange rates £/$ 0.55 0.54 0.56 0.62 0.68 R/$ 6.63 6.28 6.60 7.90 10.70Closing exchange rate £/$ 0.53 0.57 0.55 0.60 0.64 R/$ 7.77 6.36 6.48 6.97 10.54______________________________________________________________________________________________ Footnotes: i. Excluding slag.N/C Not calculatedN/A Not applicable Consolidated income statementFor the year ended 30 September Special Special 2006 items 2006 2005 items 2005 Underlying (note 3) Total Underlying (note 3) Total (i) (i) Continuing operations Note $m $m $m $m $m $m______________________________________________________________________________________________________Revenue 2 1,855 - 1,855 1,128 - 1,128======================================================================================================EBITDA (ii) 911 12 923 429 (12) 417Depreciation and amortisation (81) - (81) (67) - (67)______________________________________________________________________________________________________Operating profit / (loss) (iii) 2 830 12 842 362 (12) 350Finance income 4 12 - 12 11 - 11Finance expenses 4 (34) (206) (240) (37) (8) (45)Share of profit ofassociate and joint venture 19 - 19 3 - 3______________________________________________________________________________________________________ Profit / (loss) before taxation 827 (194) 633 339 (20) 319Income tax expense (iv) 5 (280) 78 (202) (129) 11 (118)______________________________________________________________________________________________________Profit / (loss) for the year 547 (116) 431 210 (9) 201======================================================================================================Attributable to:- Equity shareholders of Lonmin Plc 445 (132) 313 168 (10) 158- Minority interest 102 16 118 42 1 43______________________________________________________________________________________________________Earnings per share 6 312.1c 219.5c 118.5c 111.5c______________________________________________________________________________________________________Diluted earnings per share (v) 6 307.7c 216.4c 118.3c 111.3c______________________________________________________________________________________________________Dividends paid per share 7 87.0c 72.0c______________________________________________________________________________________________________ Statement of recognised income and expenseFor the year ended 30 September 2006 2005 Total Total Note $m $m____________________________________________________________________________________________Profit for the year 431 201Change in fair value of available for sale financial assets 46 -Amounts charged to hedging reserve (4) -Actuarial (losses)/gains on post retirement benefit plan (6) 7____________________________________________________________________________________________Total recognised income for the year 467 208============================================================================================ Attributable to:- Equity shareholders of Lonmin Plc 10 350 165- Minority interest 10 117 43____________________________________________________________________________________________ 10 467 208============================================================================================ Footnotes: (i) Underlying earnings are calculated on profit for the year excluding movements in the fair value of the embedded derivative associated with the convertible bond, exchange on tax balances, profit on the sale of Marikana houses, an adjustment to the interest capitalised in prior years and, for 2005, the effect of a change in the South African tax rate on the opening deferred tax balance and reorganisation costs as disclosed in note 3.(ii) EBITDA is operating profit before depreciation and amortisation.(iii) Operating profit is defined as revenue and other operating expenses before net finance costs and before share of profit of associate and joint venture.(iv) The income tax expense relates to overseas and includes exchange gains of $82 million (2005 - losses of $2 million) as disclosed in note 5.(v) The calculation of diluted EPS includes adjustments for the movements in fair value on the embedded derivative within the convertible bond subject to the limitation under IAS 33 - Earnings Per Share that this cannot thereby create a figure exceeding basic EPS. Consolidated balance sheetAs at 30 September 2005 2006 Restated (i) Note $m $m________________________________________________________________________________________Non-current assetsGoodwill 113 100Intangible assets 328 319Property, plant and equipment 1,463 1,339Investment in associate and joint venture 113 91Financial assets:- Available for sale financial assets 98 15- Other receivables 19 22Employee benefits 6 12________________________________________________________________________________________ 2,140 1,898________________________________________________________________________________________Current assetsInventories 135 110Trade and other receivables 396 147Assets held for sale 6 16Tax recoverable 3 4Cash and cash equivalents 8 61 11________________________________________________________________________________________ 601 288________________________________________________________________________________________Current liabilitiesBank overdraft repayable on demand 8 (18) (1)Trade and other payables (209) (133)Financial liabilities:- Interest bearing loans and borrowings - (86)- Derivative financial instruments (4) -Tax payable (91) (28)________________________________________________________________________________________ (322) (248)________________________________________________________________________________________Net current assets 279 40________________________________________________________________________________________Non-current liabilitiesEmployee benefits (7) (1)Financial liabilities:- Interest bearing loans and borrowings (499) (506)- Derivative financial instruments (268) (41)Deferred tax liabilities (294) (344)Provisions (39) (42)________________________________________________________________________________________ (1,107) (934)________________________________________________________________________________________Net assets 1,312 1,004________________________________________________________________________________________ Capital and reservesCalled up share capital 10 143 142Share premium account 10 26 12Other reserves 10 84 88Retained earnings 10 836 596________________________________________________________________________________________Attributable to equity shareholders of Lonmin Plc 10 1,089 838Attributable to minority interest 10 223 166________________________________________________________________________________________Total equity 10 1,312 1,004======================================================================================== Footnote: (i) 2005 has been restated under IFRS 3 - Business combinations, following the finalisation of the fair values arising upon the acquisition of Southern Platinum Corporation (note 11). Consolidated cash flow statementFor the year ended 30 September 2006 2005 Note $m $m________________________________________________________________________________________Profit for the year 431 201Taxation 5 202 118Finance income 4 (12) (11)Finance expenses 4 240 45Share of profit after tax of associate and joint venture (19) (3)Depreciation and amortisation 81 67Change in inventories (25) (30)Change in trade and other receivables (249) (22)Change in trade and other payables 74 5Change in provisions (2) 3Profit on sale of assets held for sale 3 (12) -Other non cash charges 13 4________________________________________________________________________________________Cash flow from consolidated operations 722 377Dividend from associate - 2________________________________________________________________________________________Cash flow from operations 722 379Interest received 1 2Interest paid (32) (23)Tax paid (185) (79)________________________________________________________________________________________Cash flow from operating activities 506 279________________________________________________________________________________________Cash flow from investing activitiesAcquisition of subsidiaries (net of cash acquired) (14) (197)Purchase of intangible asset (21) (27)Purchase of property, plant and equipment (161) (178)Proceeds from available for sale financial assets - 3Purchase of available for sale financial assets (36) (2)Proceeds from disposal of assets held for sale 28 -________________________________________________________________________________________Cash used in investing activities (204) (401)________________________________________________________________________________________ Cash flow from financing activitiesEquity dividends paid to Lonmin shareholders (124) (102)Dividends paid to minority (62) (27)Proceeds from current borrowings - 85Repayment of current borrowings (86) -Proceeds from non-current borrowings 288 204Repayment of non-current borrowings (296) (26)Finance costs - (6)Issue of ordinary share capital 15 6________________________________________________________________________________________Cash used in financing activities (265) 134________________________________________________________________________________________Increase in cash and cash equivalents 37 12Opening cash and cash equivalents 8 10 (2)Effect of exchange rate changes (4) -________________________________________________________________________________________Closing cash and cash equivalents 8 43 10======================================================================================== 1. Basis of preparation The financial information presented has been prepared on the basis ofInternational Financial Reporting Standards (IFRSs) as disclosed in note 1 tothe financial statements. 2. Segmental analysis 2006________________________________________________________________________________________ Platinum Corporate Exploration TotalAnalysis by business group $m $m $m $m________________________________________________________________________________________Revenue - external sales 1,855 - - 1,855Operating profit 877 (19) (16) 842Segment total assets 2,596 145 - 2,741Segment total liabilities (926) (503) - (1,429)Capital expenditure (i) 232 1 - 233Depreciation and amortisation 81 - - 81________________________________________________________________________________________ 2005________________________________________________________________________________________ Platinum Corporate Exploration TotalAnalysis by business group $m $m $m $m________________________________________________________________________________________Revenue - external sales 1,128 - - 1,128Operating profit 385 (24) (11) 350Segment total assets 2,051 135 - 2,186Segment total liabilities (672) (510) - (1,182)Capital expenditure (i) 210 - - 210Depreciation and amortisation 67 - - 67________________________________________________________________________________________ 2006________________________________________________________________________________________ South Africa UK Other TotalAnalysis by geographical location $m $m $m $m________________________________________________________________________________________Revenue - external sales 1,855 - - 1,855Segment total assets 2,594 145 2 2,741Capital expenditure (i) 232 1 - 233________________________________________________________________________________________ 2005________________________________________________________________________________________ South Africa UK Other TotalAnalysis by geographical location $m $m $m $m________________________________________________________________________________________Revenue - external sales 1,128 - - 1,128Segment total assets 2,048 135 3 2,186Capital expenditure (i) 210 - - 210________________________________________________________________________________________ Revenue by destination is analysed by geographical area below: 2006 2005 $m $m________________________________________________________________________________The Americas 435 368Asia 518 351Europe 291 210South Africa 602 191Zimbabwe 9 8________________________________________________________________________________ 1,855 1,128________________________________________________________________________________ Footnote: (i) Capital expenditure includes additions to plant, property and equipment, intangible assets and goodwilI in accordance with IAS 14 - Segment reporting 3. Special items 'Special items' are those items of financial performance that the Group believesshould be separately disclosed on the face of the income statement to assist inthe understanding of the financial performance achieved by the Group. Suchitems, detailed below, are material by nature or amount to the results for theperiod and require separate disclosure in accordance with IAS 1 - Presentationof financial statements. 2006 2005 $m $m________________________________________________________________________________EBITDA- Sale of houses 12 -- Reorganisation - (12)Finance costs- Calculation of capitalised interest 21 -- Movement in fair value of embedded derivative (227) (8)________________________________________________________________________________ Special loss before taxation (194) (20)Taxation on above items (note 5) (4) 2Tax rate change - effect on opening deferred tax balance - 11Exchange on tax balances (note 5) 82 (2)________________________________________________________________________________Special loss before minority interest (116) (9)Minority interest (16) (1)________________________________________________________________________________Special loss for the year attributable to equity shareholders of Lonmin plc (132) (10)================================================================================ • Sale of houses: We currently accommodate a substantial number of our employees in hostels and married quarters with the remainder living in their homes. We are selling houses to employees to encourage home-ownership. Any profits or losses from such sales at fair value are not deemed to represent underlying earnings. • Capitalised interest includes an adjustment to the interest capitalised in prior years of $21 million. • The convertible bond contains an embedded derivative which is held at fair value. Due to the cash settlement option the bond is classified within non-current liabilities and movements in fair value are taken to the income statement. Fluctuations in fair value are mainly due to changes in share price. • The Group holds both current and deferred tax balances in Rand which is not the functional currency of the Group. Given the volatility of the Rand to US$ exchange rate the revaluation of such tax balances can cause significant variations in the tax charge and therefore profitability. Consequently the directors feel that such foreign exchange impacts should be treated as special. 4. Net finance costs 2006 2005 $m $m________________________________________________________________________________Finance income: 12 11 ________ ________Interest receivable | 2 | | 2 |Return on defined benefit pension scheme assets | 8 | | 8 |Movement in fair value of non-current other receivables | 2 | | 1 | |________| |________| Finance expenses: (34) (37) ________ ________On bank loans and overdrafts | (35)| | (24) |Bank fees | (3)| | (2) |Capitalised interest | 16 | | 1 |Discounting on provisions | (2)| | (2) |Unwind of discounting on convertible bond | - | | (1) |Interest costs of defined benefit pension scheme | (6)| | (7) |Exchange differences on net debt | (4)| | (2) | | _______| |________| Special items: (206) (8) ________ ________Prior years capitalised interest (note 3) | 21 | | - |Movement in fair values of derivative financial | | | |instruments (note 3) | (227)| | (8) | |________| |________| ________________________________________________________________________________Total finance expenses (240) (45)________________________________________________________________________________Net finance costs (228) (34)________________________________________________________________________________ 5. Taxation 2006 2005 $m $m________________________________________________________________________________United Kingdom:Current tax expense at 30% (2005 - 30%) 122 53Less amount of the benefit arising from double tax relief available (122) (53) ________________________________________________________________________________Total UK tax expense - -________________________________________________________________________________Overseas:Current tax expense at 29% (2005 - 29%) 259 99 _______ _______Excluding tax on local currency exchange profits | 217 | | 81 |Tax on dividends remitted | 43 | | 19 |Prior year items | (1) | | (1) | |_______| |_______|Deferred tax expense 21 30 _______ _______ Origination and reversal of temporary differences | 21 | | 30 | |_______| |_______|Special items (note 3) (78) (11) _______ _______ Deferred tax on sale of houses | 4 | | - |Tax on reorganisation costs | - | | (2) |Exchange on current taxation | (15) | | (3) |Change in South African corporate tax rate to 29% (from | | | |1 October 2004) | - | | (11) |Exchange on deferred taxation | (67) | | 5 | |_______| |_______| ________________________________________________________________________________Actual tax charge 202 118===============================================================================Tax charge excluding special items (note 3) 280 129===============================================================================Tax rate 32% 37%===============================================================================Effective tax rate excluding special items (note 3) 34% 38%=============================================================================== A reconciliation of the standard tax charge to the tax charge wasas follows: 2006 2006 2005 2005 % $m % $m____________________________________________________________________________________Tax charge at standard tax rate 29 % 184 29 % 93Overseas taxes on dividends remitted by subsidiary companies 7 % 43 6 % 19Change in South African corporate tax rate - - (3)% (11)Exchange on current and deferred tax (13)% (82) 1 % 2Tax effect of movements in the fair values of financial instruments 10 % 66 1 % 2Tax effect of capitalised interest adjustment (note 3) (1)% (6) - -Tax effect of other timing differences - (3) 3 % 13____________________________________________________________________________________Actual tax charge 32 % 202 37 % 118==================================================================================== The Group's primary operations are based in South Africa. Therefore, therelevant standard tax rate for the Group was the South African statutory taxrate of 29% (2005 - 29%). The secondary tax rate of the dividends remitted bySouth African companies was 12.5% (2005 - 12.5%). 6. Earnings per share Earnings per share have been calculated on the profit attributable to equityshareholders amounting to $313 million (2005 - $158 million) using a weightedaverage number of 142,594,539 ordinary shares in issue (2005 - 141,727,124ordinary shares). Diluted earnings per share are based on the weighted average number of ordinaryshares in issue adjusted by dilutive outstanding share options and sharesissuable on conversion of the convertible bonds. Shares issuable on conversionof the convertible bonds were anti-dilutive in the current and prior year andhave been excluded from diluted earnings per share in accordance with IAS 33 -Earnings Per Share. 2006 2005________________________________________________________________________________________________ Profit for Per share Profit for Per share the year Number of amount the year Number of amount $m shares cents $m shares cents________________________________________________________________________________________________Basic EPS 313 142,594,539 219.5 158 141,727,124 111.5Share option schemes - 2,021,331 (3.1) - 290,375 (0.2)________________________________________________________________________________________________Diluted EPS 313 144,615,870 216.4 158 142,017,499 111.3================================================================================================ 2006 2005________________________________________________________________________________________________ Profit for Per share Profit for Per share the year Number of amount the year Number of amount $m shares cents $m shares cents________________________________________________________________________________________________Underlying EPS 445 142,594,539 312.1 168 141,727,124 118.5Share option schemes - 2,021,331 (4.4) - 290,375 (0.2)________________________________________________________________________________________________Diluted underlying EPS 445 144,615,870 307.7 168 142,017,499 118.3================================================================================================ Underlying earnings per share have been presented as the Directors consider itto give a fairer reflection of the underlying results of the business.Underlying earnings per share are based on the profit attributable to equityshareholders adjusted to exclude special items (as defined in note 3) asfollows: 2006 2005________________________________________________________________________________________________ Profit for Per share Profit for Per share the year Number of amount the year Number of amount $m shares cents $m shares cents________________________________________________________________________________________________Basic EPS 313 142,594,539 219.5 158 141,727,124 111.5Special items (note 3) 132 - 92.6 10 - 7.0________________________________________________________________________________________________Underlying EPS 445 142,594,539 312.1 168 141,727,124 118.5================================================================================================ 7. Dividends 2006 2005 ___________________ ____________________ $m Cents per $m Cents per share share____________________________________________________________________________________Prior year final dividend, paid 60 42.0 60 42.0in the yearInterim dividend, paid in the year 64 45.0 42 30.0____________________________________________________________________________________Total dividend paid in the year 124 87.0 102 72.0====================================================================================Interim dividend, paid in the year 45.0 30.0Proposed final dividend for the year 55.0 42.0____________________________________________________________________________________Total dividend in respect of the year 100.0 72.0==================================================================================== 8. Cash and cash equivalents 2006 2005 $m $m________________________________________________________________________________Bank balances 24 8Call deposits 37 3________________________________________________________________________________Cash and cash equivalents 61 11Bank overdraft used for cash management purposes (18) (1)________________________________________________________________________________Cash and cash equivalents in the statement of cash flows 43 10================================================================================ 9. Net debt As at As at 1 October Subsidiary Non-cash 30 September 2005 acquired Cash flow movements 2006 $m $m $m $m $m________________________________________________________________________________________________ Cash and cash equivalents 11 - 54 (4) 61 Overdrafts (1) - (17) - (18) ________________________________________________________________________________________________ 10 - 37 (4) 43 Current borrowings (86) - 86 - - Non-current borrowings (296) - 8 - (288) Convertible bonds (213) - - - (213) ________________________________________________________________________________________________ Net debt as defined by the Group (585) - 131 (4) (458) ================================================================================================ As at As at 1 October Subsidiary Non-cash 30 September 2004 acquired Cash flow movements 2005 $m $m $m $m $m________________________________________________________________________________________________ Cash and cash equivalents 20 - (9) - 11 Overdrafts (22) - 21 - (1) ________________________________________________________________________________________________ (2) - 12 - 10 Current borrowings (1) - (85) - (86) Non-current borrowings (56) (60) (178) (2) (296) Convertible bonds (212) - - (1) (213) ________________________________________________________________________________________________ Net debt as defined by the Group (271) (60) (251) (3) (585) ================================================================================================ 10. Total equity Equity shareholders' funds_____________________________________________________________________________ Called up Share share premium Other Retained Minority Total capital account reserves earnings Total interests equity $m $m $m $m $m $m $m_________________________________________________________________________________________________At 1 October 2004 142 6 88 529 765 150 915Total recognised income and expense - - - 165 165 43 208Dividends - - - (102) (102) (27) (129)Share based payment - - - 4 4 - 4Shares issued on exercise of share options - 6 - - 6 - 6_________________________________________________________________________________________________At 30 September 2005 142 12 88 596 838 166 1,004=================================================================================================At 1 October 2005 142 12 88 596 838 166 1,004Total recognised income and expense - - (4) 354 350 117 467Buy out of minority interests in Messina - - - - - 1 1Dividends - - - (124) (124) (62) (186)Deferred tax on items taken directly to equity - - - 7 7 1 8Share based payment - - - 3 3 - 3Shares issued on exercise of share options 1 14 - - 15 - 15_________________________________________________________________________________________________At 30 September 2006 143 26 84 836 1,089 223 1,312_________________________________________________________________________________________________ During the year 850,301 share options were exercised on which $15 million ofcash was received (2005 - $6 million). Other reserves represents the capital redemption reserve of $88 million (2005 -$88 million) and a hedging reserve of $4 million (2005 - $nil). Minority equity interests represented an 18% shareholding in Eastern PlatinumLimited and Western Platinum Limited throughout the year and, from 29 June2006, an 18% shareholding in Messina limited. 11. Business combinations The Group has made no acquisitions during the year. Finalisation of fair values on acquisition in 2005 and purchase of minorityinterest in 2006 In the prior year the Group acquired 100% of Southern Platinum Corporation(SPC). During the year the Group has taken the opportunity to reassess the fairvalue of the assets and liabilities acquired as a result of the acquisition on15 June 2005. In accordance with the treatment prescribed by IFRS 3 - BusinessCombinations this has resulted in prior year adjustment as detailed below. On 6 February 2006 the Group purchased the remaining 8.5% minority interest inMessina. The difference between the purchase consideration and the net assetsacquired has been capitalised as goodwill. This has not been treated as abusiness combination. Fair value as at 30 September Fair value as at Purchase of Fair value as at 2005 Prior year 1 October additional 30 September (i) adjustment 2005 interest 2006 $m $m $m $m $m_________________________________________________________________________________________________________________Goodwill - 60 60 13 73Intangible assets 46 7 53 - 53Property, plant and equipment 216 (67) 149 - 149Net debt, working capital and provisions (70) - (70) - (70)_________________________________________________________________________________________________________________ 192 - 192 13 205================================================================================================================= Footnote: (i) As reported in the IFRS transition document published on 15 February 2006. 12. Transition to International Financial Reporting Standards As stated in note 1 to the financial statements, Accounting Policies, this isthe Lonmin Group's first consolidated financial report prepared in accordancewith IFRS. The Group published its transition document on 15 February 2006explaining the balance sheet, income statement and cash flow impact for theGroup of the transition to IFRS. Included within the document is areconciliation of the income statement and cash flow statement from UK GAAP toIFRS for the year ended 30 September 2005 and a reconciliation of equity at thetransition date (1 October 2004) and 30 September 2005. The document alsoprovides details of the Group's accounting policies under IFRS that are expectedto be effective at 30 September 2006 and the exemptions applied by the Group inaccordance with IFRS 1 - First-time Adoption of International FinancialStandards on transition to IFRS. The most significant changes at the date of the transition to IFRS for the Groupbetween reporting on a UK GAAP basis and IFRS are as follows: • the recognition, on the balance sheet, of pension scheme assets; • the inclusion of a fair value charge in respect of outstanding employee share options; • the cessation of goodwill amortisation; • the recognition, on the balance sheet, of all financial instruments as either financial assets or financial liabilities; • the separate accounting treatment, as a liability, of the embedded derivative in the convertible bond; • no longer recognising proposed dividends as a liability at the balance sheet date; • the recognition of the change in measurement basis of in-process inventory as a change in accounting policy. 13. Statutory Disclosure The financial information set out above is taken from, but does not constitute,the company's statutory accounts for the years ended 30 September 2006 and 2005.The comparative figures for the financial year ended 30 September 2005 are notthe statutory accounts of Lonmin Plc for that financial year. Those accounts,which were prepared under UK Generally Accepted Accounting Principles (UK GAAP)have been delivered, and for statutory accounts for 2006 which have beenprepared under IFRS will be delivered, to the Registrar of Companies. TheAuditors have made unqualified reports on those accounts and such reports didnot contain a statement under Section 237 (2) or (3) of the Companies Act 1985. Copies of the 2006 Lonmin Accounts will be posted to shareholders and will beavailable at the Companies registered office before the end November 2006. 14. Final Dividend Timetable The Board of Lonmin Plc has recommended a final dividend for the year ended 30September 2006 of 55.0 US cents per share. The dividend timetable in respect of this dividend, assuming shareholderapproval at the AGM, is as follows:- Last day to trade cum div SA Friday 5 January 2007 UK Tuesday 9 January 2007 Shares commence trading ex div SA Monday 8 January 2007 UK Wednesday 10 January 2007 Dividend record date Friday 12 January 2007 Last date for receipt of new applications to participate in DividendRe-investment Plan SA Friday 26 January 2007 UK Friday 26 January 2007 Dividend payment date Friday 9 February 2007 1) No transfers between the UK principle register and the SA branchregister will be permitted from the date on which the USD/Rand exchange rate isannounced to the record date, both dates inclusive (i.e. last date to transferThursday 28 December 2006). 2) The SA branch register will be closed for the purposes of trades(dematerialisation and rematerialisation) from Monday 8 January 2007 to Friday12 January 2007, both dates inclusive. The dividend will be paid :- 1) In Rand to shareholders on the SA branch register calculated at the Rand toUS Dollar exchange rate on Friday 29 December 2006, which rate will be announcedon that day and 2) In sterling to share holders domiciled in the UK (unless they elect toreceive US Dollar dividends) calculated at the US Dollar to sterling exchangerate on Friday 19 January 2007, which rate will be announced on that day 3) In Dollars to all other overseas share holders (unless they elect to receiveSterling dividends or have mandated their dividends to a UK bank or participatein TAPS). Elections to receive an alternative currency (Dollars or Sterling) shouldcomprise a signed request to Lloyds TSB Registrars to be received by 1700hours on 12 January 2007. 15. Annual General Meeting The 2007 Annual General Meeting will be held on Thursday 25 January 2007 at theQueen Elizabeth II Conference Centre, Board Sanctuary, Westminster, London SW1P3EE. 16. Availability of this report This report is available on the Lonmin website (www.lonmin.com) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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