6th Dec 2006 07:02
Mwana Africa PLC06 December 2006 6 December 2006 Mwana Africa plc Results for the 6 months to 30th September 2006 London, 6th December 2006 - The Board of Mwana Africa plc ("The Board"), thepan-African resource company, is pleased to announce its unaudited interimfinancial results for the six months to 30th September 2006. Financial Highlights for the 6 month period • Group turnover of £46.05 million • Group profit before tax of £25.98 million (including £12.40 million of interest, denominated in Zimbabwean dollars, earned on Zimbabwean cash deposits) • Group profit after tax and minority interests of £10.53 million • Earnings per share (diluted) of 4.21p • Positive cashflow from operations of £9.39 million • Capital expenditure and financial investment of £12.65 million • Cash, denominated in £ or US$, at bank as at 30th September 2006 of £45 million Commenting on the announcement, Kalaa Mpinga, Chief Executive Officer of MwanaAfrica, said: "This half year we have begun to see the benefits of our persistent efforts tosustain and develop our operations in Zimbabwe, in spite of significant economicand operational difficulties. We will continue in our efforts to grow our nickeland gold operations in Zimbabwe and to support their long term viability as weare doing with the improvements to the life of the Trojan and Shangani mines. "Our exploration and near production activities, in particular in the DRC, arefull of potential and we believe justify continued investment. "We remain open to new opportunities across the whole continent of Africa andbelieve that now is an exceptionally promising time to be operating in thenatural resources business in Africa." David Fish, finance director, commented that: "A significant proportion of the Group's profit after tax and minority interestsis earned in Zimbabwean dollars both through regulated conversion of US dollarincome into Zimbabwean dollars and interest earned on Zimbabwean dollar deposits. "There are practical restrictions on converting Zimbabwean dollars into hardcurrency and hence £13 million of cash, denominated in Zimbabwean dollars,included in the balance sheet at 30th September 2006, cannot currently beconverted into hard currency or remitted out of Zimbabwe. However, Mwana hasreceived US$2.62 million from Bindura's interim dividend in the first half andanticipates receiving a second interim dividend which was declared and ispayable to shareholders registered on the 8th December 2006 of a similar amount." ENDS Enquiries: Kalaa Mpinga, CEO Tel. +44 207 654 5588Oliver Baring, Executive ChairmanMwana Africa plc Tom Randell or Maria Suleymanova Tel. +44 207 653 6620Merlin Copies of this statement will be available on the Company's website,www.mwanaafrica.com. Chairman's Statement It is now more than a year since the merger between African Gold and MwanaAfrica Holdings in September 2005 to create Mwana Africa plc. At this interimstage the growth and development of our production assets and the integration ofour strategic acquisitions are both proceeding well. We are in the enviableposition of being able to build on an already strong position in the DemocraticRepublic of the Congo where, directly and indirectly, we are one of thecountry's largest exploration licence holders. Our production assets have in thesix months to 30th September 2006 also generated strong cashflows that mean forthe first time we have achieved a healthy operating profit and cashflow, mostlyfrom our nickel operation at Bindura. Our strategy is to build a broad based African natural resources business withboth exploration and production assets and to grow this business across Africaby developing existing assets and taking them to production as well as byselected acquisitions. We look at all potential acquisitions or investmentproposals in the light of our strategy to have assets spread across a range ofcommodities, low costs of production, develop close and trusted long termpartnerships, build and support a high quality management team that willaccommodate the growth of the business, and expand into new countries across theAfrican continent. The current opportunities in Africa are many and diverse andas a result we can be highly selective about which we pursue. The strong nickel price during the period supported a substantial increase inprofitability at Bindura Nickel Corporation ("BNC"). We received a first interimdividend for US$2.62 million in the half year and a second interim dividendpayment has been declared of a similar amount. The strong cash flow has beenachieved in spite of the continuing challenges of a difficult operatingenvironment in Zimbabwe, where the managed exchange rate has mitigated againstthe high nickel price and the cash held in Zimbabwe cannot currently beconverted to other currencies. The value of Mwana's 53% stake in BNC, quoted onthe Harare Stock Exchange, alone equates to a large part of the marketcapitalisation of Mwana Africa plc. The proposed acquisition of Gravity Diamonds is a significant step towards ourgoal of creating a major integrated diamond exploration and production business.This followed the earlier acquisition in May of a 20% stake in MIBA whichbrought with it a significant attributable production of diamonds. We now intendto engage with the Government of the DRC, which holds 80%, in returningproduction to optimum capacity. Gravity's strong land position in the prolificKasai craton in the DRC supplements the attributable diamond production fromMIBA and Gravity's exploration team reinforces our experience in projectdevelopment and construction. Progress on the Freda Rebecca expansion project has been slower than expectedmainly due to the bureaucracy of the Zimbabwe investment approval system,sourcing materials and spares, and construction skills availability.Commissioning of the new and refurbished tankage should start in second quarterof 2007 with ramp up to 60,000 tons of ore and 4,000 ozs of gold per month. In the DRC at Kilbolwe drilling is programmed to start in December withcompletion in the first quarter. In Ghana, we have almost completed the drilling at Banka and the results shouldbe available shortly. At Ahanta we are completing a reassessment of the new RCdrilling within the context of all of the existing historical data. At Konongowe are examining all of our options against the background of the resourcereport prepared by RSG. Our £ and US$ cash resources remain strong, supported by operational cashflow,and we expect to soon be in a position to enter into a share buyback scheme ifwe believe this is in the interests of shareholders. On behalf of the Board I would like to express our gratitude to Hank Slack forhis service to the company prior to his resignation in October. We wish him allthe best with his business commitments in the US. Oliver BaringExecutive Chairman Consolidated profit and loss accountFor the six months ended 30 September 2006 (Unaudited) 6 months 6 months Year ended ended ended 30.09.2006 30.09.2005 31.03.2006 Note £000 £000 £000 ----------------------------------------------------------------------- Group Turnover 46,053 - 25,106 ---------- ---------- -------- Continuing operations 46,053 - 17 Acquisitions - - 25,089 ---------- ---------- -------- Cost of sales (29,819) - (12,908) ----------------------------------------------------------------------- Gross profit 3 16,234 - 12,198 Administrative expenses (3,097) (334) (9,710) ----------------------------------------------------------------------- Operating profit/(loss) 13,137 (334) 2,488 ---------- ---------- -------- Continuing operations 13,137 (334) (1,772) Acquisitions - - 4,260 ---------- ---------- -------- Interest receivable and similar income 3 13,254 - 225 Interest payable and similar (409) - (948) charges ----------------------------------------------------------------------- Profit/(loss) on ordinary activities before taxation 25,982 (334) 1,765 Tax on profit/(loss) on ordinary activities (5,041) - (700) ----------------------------------------------------------------------- Profit/(loss) on ordinary activities after taxation 20,941 (334) 1,065 Minority interest (10,414) - (1,165) ----------------------------------------------------------------------- Profit/(loss) for the financial period 10,527 (334) (100) ----------------------------------------------------------------------- Earnings per share - Basic 4.46p (1.10p)* (0.11p) - Diluted 4.21p (1.10p)* (0.11p) ----------------------------------------------------------------------- For a complete understanding of the financial situation of the group, referenceshould be made to note 3.* Restated for the share consolidation as per note 4. Consolidated balance sheetAs at 30 September 2006 (Unaudited) 6 months 6 months Year ended ended ended Note 30.09.2006 30.09.2005 31.03.2006 £000 £000 £000 ----------------------------------------------------------------------- Fixed assets Intangible assets 13,213 6,668 12,980 Tangible assets 61,751 308 65,365 Investments 8,879 - - ----------------------------------------------------------------------- 83,843 6,976 78,345 ----------------------------------------------------------------------- Current assets Stocks 8,333 1 8,773 Debtors 16,563 176 9,455 Short term deposits 3 10,884 - - Cash at bank and in hand 3 47,687 45 14,311 ---------------------------------------------------------------------- 83,467 222 32,539 Creditors: amounts falling (14,895) (779) (14,037) due within one year ----------------------------------------------------------------------- Net current assets 68,572 (557) 18,502 ----------------------------------------------------------------------- Total assets less current liabilities 152,415 6,419 96,847 Provision for liabilities (4,919) - (3,356) ----------------------------------------------------------------------- Total assets less liabilities 147,496 6,419 93,491 ----------------------------------------------------------------------- Capital and reserves Called up share capital 4 24,792 3,174 17,938 Share premium account 87,888 8,661 54,116 Profit and loss account 2,314 (5,416) (3,547) ----------------------------------------------------------------------- 114,994 6,419 68,507 Minority interest 32,502 - 24,984 ----------------------------------------------------------------------- Shareholders' funds - 147,496 6,419 93,491 equity ----------------------------------------------------------------------- For a complete understanding of the financial situation of the group, referenceshould be made to note 3. Consolidated cash flow statementFor the six months ended 30 September 2006 (Unaudited) 6 months 6 months Year ended ended ended 30.09.2006 30.09.2005 31.03.2006 £000 £000 £000 ---------------------------------------------------------------------- Cash flow statement Cash flow from operating activities 9,391 (257) 4,000 Returns on investments and servicing of finance 12,845 - (723) Taxation (2,622) - (493) Capital expenditure and financial investment (12,654) (730) (4,414) Acquisitions and disposals - - (4,366) Dividends paid to minority shareholders (1,319) - - Management of liquid resources (10,884) - - ---------------------------------------------------------------------- Cash outflow before financing (5,243) (987) (5,996) Financing 40,626 100 17,153 ---------------------------------------------------------------------- Increase/(decrease) in cash for the period 35,383 (887) 11,157 the period ---------------------=------------------------------------------------ Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash for the period 35,383 (887) 11,157 ---------------------------------------------------------------------- Movement in net funds for the period 35,383 (887) 11,157 Net funds at the start of the period 12,089 932 932 Translation differences 4 - - ---------------------------------------------------------------------- Net funds at the end of the period 47,476 45 12,089 ---------------------------------------------------------------------- For a complete understanding of the financial situation of the group, referenceshould be made to note 3. Consolidated statement of total recognised gains and lossesFor the six months ended 30 September 2006 (Unaudited) 6 months 6 months Year ended ended ended 30.09.2006 30.09.2005 31.03.2006 £000 £000 £000 --------------------------------------------------------------------- Profit/(Loss) for the period 10,527 (334) (100) Net exchange differences on the retranslation of net (4,742) (21) 941 investments --------------------------------------------------------------------- Total recognised gain/(loss) for the period 5,785 (355) 841 --------------------------------------------------------------------- Reconciliation of movements in shareholders' fundsFor the six months ended 30 September 2006 (Unaudited) 6 months 6 months Year ended ended ended 30.09.2006 30.09.2005 31.03.2006 £000 £000 £000 -------------------------------------------------------------------- Profit/(Loss) for the period 10,527 (334) (100) Credit in relation to share-based payments 76 - 674 New share capital subscribed (net of issue costs) 40,626 100 60,318 Net exchange differences on the retranslation of net investments (4,742) (21) 941 --------------------------------------------------------------------- Net addition to/(reduction in) 46,487 (255) 61,833 shareholders' funds Opening shareholders' funds 68,507 6,674 6,674 --------------------------------------------------------------------- Closing shareholders' funds 114,994 6,419 68,507 --------------------------------------------------------------------- Notes to the interim financial reportFor the six months ended 30 September 2006 (Unaudited) 1. GENERAL INFORMATION These interim consolidated financial statements are for the six months ended 30September 2006. The information for the year ended 31 March 2006 does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. A copy of the statutory accounts for that year, which were prepared underUK Generally Accepted Accounting Principles (GAAP), has been delivered to theRegistrar of Companies. The auditor's report on those accounts was unqualified. 2. BASIS OF PREPARATION The accounting policies applied in the preparation of this interim financialreport are consistent with the accounting policies and estimates applied in thepreparation of the Group's annual financial report for the year ended 31 March2006. The interim financial report is to be read in conjunction with the AnnualFinancial report for the year ended 31 March 2006 and any public announcementsmade by the Company and its subsidiaries during the half-year. 3. CURRENCY EXPOSURE 3.1. The Zimbabwean economy currently experiences hyper inflation and ismanaged under an official exchange rate which is fixed from time to time by theZimbabwean Reserve Bank. This has the effect of eroding both the Group's grossprofit margin and the buying power of cash balances held in Zimbabwean Dollars.This is partly compensated for by very high interest rates earned on ZimbabweanDollar denominated cash balances. "Interest receivable and similar income"includes £12.4m of interest earned on such Zimbabwean Dollar cash balancesduring the six months under review. Of the Group's £58.6m short term deposits and cash balances at the balance sheetdate, £13.4m was held in Zimbabwean Dollars. The remittance of cash fromZimbabwe is subject to foreign exchange controls and the limited availability offoreign exchange in the country. The Zimbabwean interest received and cash balances were converted fromZimbabwean Dollars into Sterling at the official exchange rate. The officialexchange rate is currently fixed at Zimbabwean Dollars 250: US Dollar 1. 3.2. The Group suffered a £6.3m exchange loss on the retranslation of its USDollar denominated assets into Sterling, of which £4.7m was attributable to themajority shareholders and £1.6m to the minority shareholders. The retranslationdifference was debited directly to Reserves. Notes to the interim financial reportFor the six months ended 30 September 2006 (Unaudited) 4. CALLED UP SHARE CAPITAL 6 months 6 months Year ended ended ended 30.09.2006 30.09.2005 31.03.2006 £000 £000 £000 --------------------------------------------------------------------- Authorised 276,500,000 ordinary shares of 10 pence each (2005: 1,000,000,000 ordinary 27,650 10,000 27,650 shares of 1 pence) --------------------------------------------------------------------- Allotted, called up and fully paid Opening balance 179,376,154 ordinary shares of 10 pence 17,938 3,124 3,124 each (2005: 312,397,889 shares of 1 pence each) Issued during the period, prior - 50 50 to the share consolidation (1) Issued during the period after 6,854 - 14,764 the share consolidation --------------------------------------------------------------------- Closing balance 247,920,654 ordinary shares of 10 pence 24,792 3,174 17,938 each (2005: 317,397,889 shares of 1 pence each) --------------------------------------------------------------------- (1) At an Extraordinary General meeting on 25 October 2005, the shareholdersapproved a share consolidation. The share consolidation took effect followingthe close of business on 25 October 2005, with shareholders receiving one newordinary share of 10p for every 10 existing shares of 1p held at the close ofbusiness on 25 October 2005. Trading of the new ordinary shares of 10p commencedon 26 October 2005. Movements in Issued Share Capital Issued priceDate Event £ Number of shares---------------------------------------------------------------------------1 April 2006 Opening balance 179,376,15421 April 2006 Exercise of share options 0.30 518,50026 April 2006 Exercise of share options 0.39 1,099,0002 May 2006 Placing for cash 0.63 66,900,00020 June 2006 Exercise of share options 0.16 27,000---------------------------------------------------------------------------30 September 2006 Closing balance 247,920,654--------------------------------------------------------------------------- Notes to the interim financial reportFor the six months ended 30 September 2006 (Unaudited) 5. POST BALANCE SHEET EVENTS On 17 November 2006 the Company announced, together with Gravity DiamondsLimited, their proposed merger to create a new diamond exploration business.This agreement follows the announcement in August 2006 that the Company acquireda 14.99% stake in Gravity. The merger will be implemented by schemes ofarrangement whereby, through a cash offer, Mwana will offer Gravity shareholders28 Australian cents for every Gravity share held or, through an equityalternative, Mwana will offer Gravity shareholders 1 Mwana share for every 4Gravity shares held. The merger is subject to Gravity shareholders' and Australian Court approval andshould be completed by the end of the first quarter of 2007. The total value ofthe transaction, including the shares already acquired, is expected to beapproximately £20m. 6. CONTINGENT LIABILITIES There were no significant changes to Group's exposure to contingent liabilitiessince 31 March 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Asa Resources