Interim Results

29th Aug 2008 07:00



Anglo Pacific Group PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30th JUNE 2008

CHAIRMAN'S STATEMENT

Anglo Pacific Group PLC, the natural resources royalties company, today announces its interim results for the six months ended 30th June 2008. In the half year under review the Group has again produced record results with both an increase in earnings and a significant valuation uplift in the Group's royalty, mining and exploration interests.

 

Commenting on the Interim Results, Peter Boycott, Chairman of Anglo Pacific Group PLC said:

"I am pleased to report record results for the first six months of 2008 and the acquisition of new royalties to enhance future cashflows in due course. The Board expects increased royalty receipts in the second half of 2008 after an increase in the underlying royalty rate and the over threefold increase in coking coal prices earlier on in the year."

"Recent market setbacks and the Group's increased cash position now present the Board with more opportunities to expand the Group's royalty and strategic mining interests."

"The Group will continue to pay a substantial proportion of its earnings as dividends to shareholders."

Enquiries:

Brian Wides / Peter Boycott / Matthew Tack Anglo Pacific Group PLC

020 7318 6360

Chris Bowman / Katherine Burgdorf Liberum Capital

020 3100 2000

Stephen Scott / James Harris / James O'Shaughnessy Scott Harris

0207 653 0030

Website www.anglopacificgroup.com

  Review and Results for six months ended 30th June 2008

The first six months of 2008 have seen volatility in the banking and property sectors spreading into the broader economy. Combined with the strong rise in the oil price, this has increased the prospect of weaker growth across the western economies.  Stock markets are now adjusting to the prospect of continuing soft and hard commodity price inflation.

Although consolidation and takeover activity has continued amongst the mining majors, the erosion of confidence in world stock markets, driven by increasing liquidity problems, has resulted in sharp setbacks in both the major and junior sectors of the mining market.  Nevertheless, in the first half of 2008, the Chinese economy grew at an annualised rate of over ten percent and mining sources expect similar growth rates for the next five or more years.  This and commodity demand pressures from other developing countries has resulted in coking and steaming coal prices increasing over threefold between June 2007 and June 2008.

These price rises, together with the change from 1st July 2008 to the Queensland coking coal royalty rate from seven to ten percent on coal prices above US$100 per ton, have resulted in the Group's coal royalty interests being independently valued at 30th June 2008 at £96.8 million compared to £60.9 million at 31st December 2007 and £59 million at 30th June 2007. Royalty receipts in the first half were lower due to worker access problems as a result of flooding, reduced output at the Crinum mine and port constraints.

More recently the price of uranium has started to increase again after the falls experienced earlier in the year caused mainly by hedge fund liquidation.  During the period the prices of gold and other precious metals maintained their high levels and gold again threatened to breach the US$1,000 per ounce mark.

These buoyant metal markets have enabled the Group to realise record capital gains of £13.5 million for the period from the sale of non-core interests.  After royalty receipts, this has produced record earnings of 14.14p per share for the half year.

The value of the Group's private mining interests and quoted stakes in mining projects increased to £101.5 million at 30th June 2008 compared to £87.1 million a year ago.

 

Furthermore, the Group had no borrowings and nearly £23.5 million of cash in the bank at 30th June 2008.

These record results reflect the Group's policy of focusing on energy, coking coal and precious metal projects, whilst continuing to actively support management in the development of these opportunities.

Strategy and Progress

Despite the volatility of world markets the Group's overall corporate strategy remains unchanged.  The Group aims to increase the total value of its mining interests in order to maximise shareholder value and develop new royalty flows.

  

In the period under review the Group's cash and strategic investments increased in value to £124.9 million.  Together with the recent valuation of the Group's coal royalty at £96.8 million, the Group's total assets at 30th June 2008 were in excess of £221 million with no debt. Furthermore, this did not include any increase in value over cost attributable to the real value of the Group's expanding private coal interests in Canada where, during the period, the Group acquired a shareholding in an unlisted company developing a number of coking coal projects.  The Groundhog and Trefi coalfields in British Columbia remain on the balance sheet at cost and are now the focus of the Group's expanded in-house mining and technical team.

The Group's quoted equity interests disclosed on the LSE, ASX and TSX, where initial equity stake disclosure levels are 3%, 5% and 10% respectively, amount to £70 million in twenty three different holdings. The balance of quoted holdings of £23 million is made up of a further twenty eight incubator investments. The split of the Group's strategic interests by commodity is now on the Group's website at www.anglopacificgroup.com where links to all the equity disclosures can be accessed.

The Group continues its policy of maintaining a substantial level of liquidity to finance early-stage mining developments and further royalty purchases.  Following its acquisition in August 2007 of a package of Canadian uranium royalty interests, the Group reached agreement in March 2008 to acquire a 2.5% royalty for C$7.5 million from Kinbauri Gold Corp. on its gold deposit in northern Spain.  Recent encouraging drill results point to an increasing resource to which this royalty will apply.

The Group still remains committed to a strategy of paying a substantial proportion of its earnings as dividends to shareholders. On 1st August 2008 a final cash dividend of 4.35p per share for the year ended 31st December 2007 was paid. The Board has now decided to bring forward the announcement and payment of both interim and final dividends. The Group will announce its interim dividend for the year ending 31st December 2008 in October 2008, when a scrip dividend alternative will again be available to shareholders. The payment date will now be in mid December 2008. The final dividend will be announced as usual with the 2008 prelims at the end of February 2009 with payment in mid June 2009.

Outlook

The Group expects substantially increased royalty flows in the second half of 2008 following both an increase in the royalty rate and the sharp rise in coking coal prices. Energy and coking coal prices are expected to remain buoyant despite the recent correction in mining markets.  The Board remains confident of the Group's ability to exploit the mining finance opportunities that are increasingly available. 

P. M. Boycott

Chairman

29th August 2008

  

In accordance with Disclosure and Transparency Rules (DTRs), Periodic Financial Reporting DTR 4.2.7R, the Group confirms that the principal risks and uncertainties that could affect the Group's performance have not changed. These are: a major slow down in the world economy; a reduction in commodity prices; a tightening of interest rates and; currency volatility. For more information regarding these risks and uncertainties please refer to page 10 of the 2007 Annual Report.

No related party transactions occurred in the first six months of the year that would require disclosure in accordance with DTR 4.2.8R.

We confirm to the best of our knowledge:

The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' and give a true and fair view of assets and liabilities, financial position and profit and loss;

the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).

By order of the Board

M. J. Tack

Finance Director

29th August 2008

  

CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30th JUNE 2008

		Six months		Six months		Year ended
		ended 30th		ended 30th		31st December
		June 2008		June 2007		2007
		£'000		£'000		£'000
Royalty income		3,726		4,176		8,439
Other operating income		13		80		191
Profit on sale of mining and exploration interests		13,532		11,202		25,612
Finance income		411		204		623
		17,682		15,662		34,865
Net operating expenses		(1,237)		(563)		(1,097)
Profit before tax		16,445		15,099		33,768
Tax		(1,434)		(948)		(4,028)
Profit attributable to equity holders		15,011		14,151		29,740
Basic earnings per share		14.14p		13.90p		28.72p
Fully diluted earnings per share		14.13p		13.90p		28.72p

  

CONSOLIDATED BALANCE SHEET

AS AT 30th JUNE 2008

		30th June 2008				30th June 2007				31st December 2007
		£'000		£'000		£'000		£'000		£'000		£'000
Non-current assets
Property plant and equipment		842				835				832
Coal royalties (at valuation)		96,828				59,012				60,874
Mining and exploration interests		101,512				87,081				95,750
				199,182				146,928				157,456
Current assets
Trade and other receivables		3,804				2,659				1,874
Cash at bank		23,417				12,726				18,904
				27,221				15,385				20,778
Total assets				226,403				162,313				178,234
Current liabilities
Taxation		3,014				720				2,538
Trade and other payables		213				629				262
Dividends payable		4,618				3,818				-
				7,845				5,167				2,800
Non-current liabilities
Deferred tax		30,932				18,641				19,252
				30,932				18,641				19,252
Total liabilities				38,777				23,808				22,052
Capital and reserves attributable to shareholders
Share capital				2,124				2,037				2,113
Share premium				18,604				12,427				17,742
Coal royalty revaluation reserve				61,901				41,583				40,899
Investment revaluation reserve				30,081				37,371				33,104
Share based payment reserve				78				33				48
Foreign currency translation reserve				7,563				591				2,224
Special reserve				632				632				632
Retained earnings				66,643				43,831				59,420
				187,626				138,505				156,182
Total equity and liabilities				226,403				162,313				178,234

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30th JUNE 2008

		Share	Share	Coal	Investment	Share based	Foreign	Special	Retained	Total
		capital	premium	royalty	revaluation	payment	currency	reserve	earnings	equity
				revaluation	reserve	reserve	translation
				reserve			reserve
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1st January 2007		2,032	12,112	35,403	27,078	27	(1,930 )	632	36,140	111,494
Coal Royalties:
Royalties valuation movement taken to equity		-	-	8,600	-	-	2,545	-	-	11,145
Deferred tax on valuation		-	-	(2,420)	-	-	(680)	-	-	(3,100)
Available-for-sale investments:
Valuation movement taken to equity		-	-	-	17,972	-	606	-	-	18,578
Deferred tax on valuation		-	-	-	(781)	-	23	-	-	(758)
Transferred to income statement on disposal		-	-	-	(6,898)	-	-	-	-	(6,898)
Foreign currency translation		-	-	-	-	-	27	-	-	27
Net income recognised direct into equity		-	-	6,180	10,293	-	2,521	-	-	18,994
Profit for the period		-	-	-	-	-	-	-	14,151	14,151
Total recognised income and expenses		-	-	6,180	10,293	-	2,521	-	14,151	33,145
Dividends paid		-	-	-	-	-	-	-	(6,460)	(6,460)
Scrip Dividend		5	315	-	-	-	-	-	-	320
Equity share options issued		-	-	-	-	6	-	-	-	6
Balance at 30th June 2007		2,037	12,427	41,583	37,371	33	591	632	43,831	138,505
Coal Royalties:
Royalties valuation movement taken to equity		-	-	159	-	-	1,702	-	-	1,861
Deferred tax on valuation		-	-	(843)	-	-	(454)	-	-	(1,297)
Available-for-sale investments:
Valuation movement taken to equity		-	-	-	6,806	-	331	-	-	7,137
Deferred tax on valuation		-	-	-	462	-	(8)	-	-	454
Transferred to income statement on disposal		-	-	-	(11,535)	-	-	-	-	(11,535)
Foreign currency translation		-	-	-	-	-	62	-	-	62
Net income recognised direct into equity		-	-	(684)	(4,267)	-	1,633	-	-	(3,318)
Profit for the period		-	-	-	-	-	-	-	15,589	15,589
Total recognised income and expenses		-	-	(684)	(4,267)	-	1,633	-	15,589	12,271
Dividends paid		-	-	-	-	-	-	-	-	-
Scrip Dividend		13	1,035	-	-	-	-	-	-	1,048
Issue of share capital		63	4,280	-	-	-	-	-	-	4,343
Equity share options issued		-	-	-	-	15	-	-	-	15
Balance at 31st December 2007		2,113	17,742	40,899	33,104	48	2,224	632	59,420	156,182

  

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30th JUNE 2007

		Share	Share	Coal	Investment	Share based	Foreign	Special	Retained	Total
		capital	premium	royalty	revaluation	payment	currency	reserve	earnings	equity
				revaluation	reserve	reserve	translation
				reserve			reserve
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1st January 2008		2,113	17,742	40,899	33,104	48	2,224	632	59,420	156,182
Coal Royalties:
Royalties valuation movement taken to equity		-	-	30,033	-	-	5,921	-	-	35,954
Deferred tax on valuation		-	-	(9,031)	-	-	(1,671)	-	-	(10,702)
Available-for-sale investments:
Valuation movement taken to equity		-	-	-	7,423	-	1,008	-	-	8,431
Deferred tax on valuation		-	-	-	(557)	-	7	-	-	(550)
Transferred to income statement on disposal		-	-	-	(9,889)	-	-	-	-	(9,889)
Foreign currency translation		-	-	-	-	-	74	-	-	74
Net income recognised direct into equity		-	-	21,002	(3,023)	-	5,339	-	-	23,318
Profit for the period		-	-	-	-	-	-	-	15,011	15,011
Total recognised income and expenses		-	-	21,002	(3,023)	-	5,339	-	15,011	38,329
Dividends paid		-	-	-	-	-	-	-	(7,788)	(7,788)
Scrip Dividend		11	862	-	-	-	-	-	-	873
Equity share options issued		-	-	-	-	30	-	-	-	30
Balance at 30th June 2008		2,124	18,604	61,901	30,081	78	7,563	632	66,643	187,626

CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30th JUNE 2008

		Six months		Six months		Year ended
		ended 30th		ended 30th		31st December
		June 2008		June 2007		2007
		£'000		£'000		£'000
Cashflows from operating activities
Profit before taxation		16,445		15,099		33,768
Adjustments for:
Interest received		(411)		(204)		(623)
Unrealised foreign currency loss		54		27		89
Depreciation of property, plant and equipment		7		6		10
(Gain) on disposal of mining and exploration interests		(13,532)		(11,202)		(25,612)
Share based payments		30		6		21
		2,593		3,732		7,653
(Increase) in trade and other receivables		(1,930)		(826)		(40)
Increase / (Decrease) in trade and other payables		(49)		374		7
Cash generated from operations		614		3,280		7,620
Income taxes paid		(622)		(1,388)		(2,883)
Net cash from operating activities		(8)		1,892		4,737
Cash flows from investing activities
Proceeds on disposal of mining and exploration interests		20,336		21,485		44,945
Purchase of mining and exploration interests		(13,930)		(18,366)		(36,145)
Interest received		411		204		623
Net cash generated from investing activities		6,817		3,323		9,423
Cash flows from financing activities
Proceeds from issue of share capital		-		-		-
Dividends paid		(2,296)		(2,325)		(5,092)
Net cash used in financing activities		(2,296)		(2,325)		(5,092)
Net increase in cash and cash equivalents		4,513		2,890		9,068
Cash and cash equivalents at beginning of period		18,904		9,836		9,836
Cash and cash equivalents at end of period		23,417		12,726		18,904

  

NOTES TO THE ACCOUNTS

1. Basis of preparation

The interim, condensed consolidated financial statements of Anglo Pacific Group PLC have been prepared on the basis of the accounting policies set out in the Group's latest annual financial statements for the year ended 31st December 2007 and are in compliance with IAS 34 'Interim Financial Reporting'. These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted by the European Union (EU).  The interim financial statements do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial statements have been reviewed by the Company's auditors. The comparative figures for the year ended 31st December 2007 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. Those accounts received an unqualified audit report which did not contain statements under section 237(2) or (3) of the Companies Act 1985. The interim review report is set out on page 12.

2. Non-current Assets

(a) Coal Royalty Investments

The Group's coal royalty investments comprise the Kestrel and Crinum coal royalties in Queensland, Australia. The Group commissioned a valuation of the coal royalties as at 30th June 2008, based on a net present value of the pre-tax cashflow discounted at a rate of 7%, which produced a valuation of A$201.5 million (£96.8 million). At present the net royalty income is taxed in Australia at a rate of 30%. Were the coal royalties to be realised at the revalued amount there are £4 million (A$8 million) of capital losses potentially available to offset against taxable gains. These losses have been included in the deferred tax computation. There is currently no value attributed in the valuation to the Crinum coal royalty rights as mining exhausts the reserves on the Group's private ground.

(b) Mining and Exploration Interests

The investments in securities included above represent investments in listed and unlisted equity securities which are acquired as part of the Group strategy to acquire new royalties. Gains may be realised where it is deemed appropriate by the Investment Committee. The fair values of these securities are based on quoted market prices for listed securities and cost for unlisted securities based on the variability of cashflows being so significant that an alternative valuation technique would not provide a useful value. In the statement of changes in equity these interests are classified as "available- for- sale investments". During the period to 30th June 2008 a number of opportunities arose which allowed the Group to expand its mining interests, particularly in listed securities. For a full explanation of the Group's accounting policies in relation to the Mining and Exploration interests please see the 2007 Annual Report.

The market value of the quoted Mining and Exploration Interests at 30th June 2008 was £92,776,000. The directors' valuation of the unquoted Mining and Exploration Interests was £8,736,000.

3. Earnings per ordinary share

The earnings per ordinary share is calculated on the Company's profit after tax of £15,011,000 and 106,172,139 shares. Fully diluted earnings per shares is calculated on a profit after tax of £15,011,000 and 106,217,805 shares.

  

4. Segment Information

	Six months ended 30th June 2008
	Royalty		Mining Interests		Unallocated		Total
	£'000		£'000		£'000		£'000
Revenue	3,726		-		13		3,739
Operating profit	3,726		-		(1,217)		2,509
Profit on sale of mining and exploration interests	-		13,532		-		13,532
Interest received	-		-		411		411
Depreciation	-		-		(7)		(7)
Tax	-		-		(1,434)		(1,434)
Segment Result	3,726		13,532		(2,247)		15,011
Segment Assets	96,828		101,512		28,063		226,403
Segment Liabilities	(28,253)		(2,679)		(7,845)		(38,777)
Net Segment Assets	68,575		98,833		20,218		187,626
Capital Expenditure	-		-		6		6
	Six months ended 30th June 2007
	Royalty		Mining Interests		Unallocated		Total
	£'000		£'000		£'000		£'000
Revenue	4,176		-		80		4,256
Operating profit	4,176		-		(478)		3,698
Profit on sale of mining and exploration interests	-		11,202		-		11,202
Interest received	-		-		204		204
Depreciation	-		-		(5)		(5)
Tax	-		-		(948)		(948)
Segment Result	4,176		11,202		(1,227)		14,151
Segment Assets	59,012		87,081		16,220		162,313
Segment Liabilities	(16,150)		(2,491)		(5,167)		(23,808)
Net Segment Assets	42,862		84,590		11,053		138,505
Capital Expenditure	-		-		1		1

  

4. Segment Information (continued)

	Year ended 31st December 2007
	Royalty		Mining Interests		Unallocated		Total
	£'000		£'000		£'000		£'000
Revenue	8,439		-		191		8,630
Operating profit	8,439		-		(896)		7,543
Profit on sale of mining and exploration interests	-		25,612		-		25,612
Interest received	-		-		623		623
Depreciation	-		-		(10)		(10)
Tax	-		-		(4,028)		(4,028)
Segment Result	8,439		25,612		(4,311)		29,740
Segment Assets	60,874		95,750		21,610		178,234
Segment Liabilities	(17,215)		(2,037)		(2,800)		(22,052)
Net Segment Assets	43,659		93,713		18,810		156,182
Capital Expenditure	-		-		3		3

Revenue consists of Royalty income and other operating income.

5. This statement will be sent to shareholders and will be available at the Company's registered office at 17 Hill Street, London, W1J 5NZ.

   

INDEPENDENT REVIEW REPORT TO ANGLO PACIFIC GROUP PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the consolidated balance sheet, consolidated income statement, consolidated statement of changes in equity, consolidated cash flow and notes 1 to 5. We have read the other information contained in the half yearly financial report which comprises only the Highlights and Chairman's statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union.

Our responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

GRANT THORNTON UK LLP

CHARTERED ACCOUNTANTS

London

29th August 2008

ENDIR ILFVETLITFIT

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