Audited results for the year ended 31 March 2009

 

Trans Hex Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1963/007579/06
ISIN: ZAE000018552
JSE share code: TSX   
 NSX share code: THX
(“Trans Hex” or “the group”)
 
Audited results for the year ended 31 March 2009
 
 
Audited consolidated income statement
 
 
2009
2008
 
Notes
R’000
R’000
Continuing operations
 
 
 
Sales revenue
 
637 301
880 900
Cost of goods sold
 
(786 799)
(702 934)
Gross (loss)/profit
 
(149 498)
177 966
Royalties: Namaqualand Diamond Fund Trust
 
(24 103)
(31 386)
Selling and administration costs
 
(61 698)
(76 899)
Mining (loss)/income
 
(235 299)
69 681
Exploration costs
 
(52 557)
(39 345)
Other (losses)/gains
1
(62)
5 660
Finance income
 
28 332
23 014
Finance costs
 
(20 042)
(5 963)
Impairment of assets
2
(536 913)
19 513
Impairment of available-for-sale investment
3
(2 433)
(26 360)
Share of results of associated companies
 
(7)
(7)
(Loss)/profit before income tax
 
(818 981)
46 193
Income tax
 
58 596
(47 683)
Loss for the year from continuing operations
 
(760 385)
(1 490)
Discontinued operations
 
 
 
Loss for the year from discontinued operations
4
(37 188)
(16 972)
Loss for the year
 
(797 573)
(18 462)
 
 
 
 
Loss per share for continuing operations
 
 
 
*       Basic
 
(719,4)
(1,4)
*       Diluted
 
(719,4)
(1,4)
Loss per share for discontinued operations
 
 
 
*       Basic
 
(35,2)
(16,1)
*       Diluted
 
(35,2)
(16,1)
Dividend per share (cents)
 
 
 
*       Interim
 
-
5,0
*       Final
 
-
5,0
 
 
-
10,0
 
 
 
 
Total number of shares in issue (’000)
 
105 699
105 699
Weighted average issued shares (’000)
 
105 699
105 643
 
Headline (loss)/earnings per share (cents)
*       Continuing operations
 
(585,1)
8,6
*       Discontinued operations
 
(17,2)
(16,1)
 
 
 
 
Adjusted headline (loss)/earnings per share (cents)
 
 
 
*       Continuing operations
 
(248,4)
 8,6
*       Discontinued operations
 
(15,8)
 (16,1)
 
Abridged audited consolidated balance sheet
 
 
2009
2008
 
Notes
R’000
R’000
Assets
 
 
 
Property, plant and equipment
 
526 198
656 262
Goodwill
 
-
37 096
Financial assets
 
40 197
270 176
Current assets
 
415 179
428 160
Inventories
6
160 223
112 720
Trade and other receivables
 
23 057
57 051
Current income tax
 
-
24 401
Financial assets
 
-
11 588
Cash and cash equivalents
 
231 899
222 400
Non-current assets classified as held for sale
 
3 111
153 595
 
 
984 685
1 545 289
Equity and liabilities
 
 
 
Total shareholders’ interest
 
186 298
994 472
Long-term borrowings
7
151 368
22 489
Deferred income tax liabilities
 
173 698
203 819
Provisions
 
65 999
54 844
Deferred income
 
24 508
-
Current liabilities
 
382 814
261 427
Trade and other payables
 
265 193
203 091
Borrowings
7
91 060
30 088
Bank overdraft
 
26 561
28 248
Liabilities directly associated with non-current assets classified
 as held for sale
 
 
-
 
8 238
 
 
984 685
1 545 289
 
 
 
 
Net asset value per share (cents)
 
176
941
 
Abridged audited consolidated statement of changes in equity
 
 
2009
2008
 
R’000
R’000
Balance at 1 April
994 472
1 009 435
Net loss attributable to ordinary shareholders
(797 573)
(18 462)
Dividends paid
(5 303)
(17 996)
Translation differences on foreign subsidiaries
(5 298)
(3 699)
Fair value adjustment on available-for-sale financial assets
-
26 360
Share-based payments
-
48
Treasury shares held by group
-
(1 816)
Issue of share capital
-
602
Balance at end of year
186 298
994 472
 
Abridged audited consolidated cash flow statement
 
2009
2008
 
R’000
R’000
Cash (utilised by)/generated from operations
(148 131)
151 619
Movements in working capital
10 308
45 485
Taxation received/(paid)
8 507
(51 043)
Dividend paid
(5 303)
(17 996)
Cash (utilised in)/generated from operating activities
(134 619)
128 065
Cash flows from investing activities
23 453
(166 463)
*       Proceeds from disposal of property, plant and equipment
129 466
14 794
*       Replacement of property, plant and equipment
(70 121)
(152 077)
*       Addition to property, plant and equipment
(41 198)
(29 180)
*       Proceeds from sale of financial assets
5 306
-
Cash flows from financing activities
122 352
(16 720)
Borrowings
189 851
(18 061)
Investments, loans and issue of capital
(67 499)
1 341
 
 
 
Net increase/(decrease) in cash and cash equivalents
11 186
(55 118)
 
Notes
 
 
 
 
2009
2008
 
 
 
R’000
R’000
 
1.
Other (losses)/gains
 
 
 
 
*       Net foreign exchange profit
9 366
8 871
 
 
*       Loss on other financial assets at fair value through profit and loss
(6 282)
(912)
 
 
*       Rehabilitation provision – unwinding of discount
(3 146)
(2 299)
 
 
 
(62)
5 660
 
 
 
 
 
 
2.
Impairment of assets
 
 
 
 
 
 
 
 
 
As a result of the global economic slowdown and a subsequent decrease in rough diamond prices, the group reviewed the carrying amounts of its assets. The review indicated impairment to the value of these assets and the value of these assets was reduced during the 2009 financial year.
 
 
 
 
 
 
 
 
 
In the prior year, due to the subsequent sale of the Tirisano Mine (September 2007) the value of the operation was reassessed, resulting in an impairment reversal in the prior period of R19,5 million.
 
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
Details of the impairment (charge)/reversal are as follows:
 
 
 
 
 Goodwill
(37 096)
-
 
 
 Land and buildings
(3 087)
-
 
 
 Mining rights
(71 504)
12 064
 
 
 Mine development
(6 660)
-
 
 
 Mining plant and equipment
(50 419)
4 462
 
 
 Long-term receivable from Angolan joint  ventures
(345 546)
-
 
 
 Net current assets
(22 601)
2 987
 
 
 Impairment (charge)/reversal of assets before taxation
(536 913)
19 513
 
 
 Taxation
47 401
-
 
 
 Net asset impairment (charge)/reversal
(489 512)
19 513
 
 
 
 
 
 
 
 
 
 
 
 
 
2009
2008
 
 
 
R’000
R’000
 
 
Discontinued operations
 
 
 
 
Details of the impairment (charge) are as follows:
 
 
 
 
 Mining plant and equipment
(27 058)
-
 
 
 Net current assets
(2 131)
-
 
 
 Impairment (charge) of assets before taxation
(29 189)
-
 
 
 Taxation
596
-
 
 
 Net asset impairment (charge)
(28 593)
-
 
 
 
 
 
 
3.
Impairment of available-for-sale investment
(2 433)
(26 360)
 
 
In light of a significant and prolonged decline in the fair value of the shares held in Diamond Fields International Ltd, the cumulative loss previously recognised in equity, has been reclassified to the income statement.
 
 
 
 
 
 
 
 
 
4.
 
Loss for the year from discontinued operations
 
 
 
 
The group resolved on 7 March 2008 to discontinue the deep water marine operations as a result of continued losses sustained. These operations consisted of two mining vessels of which one has been sold. This loss includes the net asset impairment disclosed above under note 2. The results of these operations were as follows :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
660
48 255
 
 
Expenses
(17 603)
(78 232)
 
 
 
(16 943)
(29 977)
 
 
Impairment of assets
(29 189)
-
 
 
Profit on sale of assets
8 217
-
 
 
Loss before income tax
(37 915)
(29 977)
 
 
Income tax
727
13 005
 
 
Loss for the year
(37 188)
(16 972)
 
 
 
 
 
 
5.
Reconciliation of headline earnings
 
 
 
 
Continuing operations
 
 
 
 
Loss for the year
(760 385)
(1 490)
 
 
Loss on sale of assets
8 000
3 141
 
 
Impairment of assets
168 766
(19 513)
 
 
Impairment of available-for-sale investments
2 433
26 360
 
 
Taxation impact
(37 203)
596
 
 
Headline (loss)/earnings
(618 389)
9 094
 
 
Impairment of assets
368 148
-
 
 
Taxation impact
(12 298)
-
 
 
Adjusted headline (loss)/earnings
(262 539)
9 094
 
 
Headline (loss)/earnings per share (cents)
(585,1)
8,6
 
 
Adjusted headline (loss)/earnings per share (cents)
(248,4)
8,6
 
 
 
 
 
 
 
Discontinued operations
 
 
 
 
Loss for the year
(37 188)
(16 972)
 
 
Profit on sale of assets
(8 217)
-
 
 
Impairment of assets
27 057
-
 
 
Taxation impact
150
-
 
 
Headline loss
(18 198)
(16 972)
 
 
Impairment of assets
2 132
-
 
 
Taxation impact
(597)
-
 
 
Adjusted headline (loss)/earnings
(16 663)
(16 972)
 
 
Headline loss per share (cents)
(17,2)
(16,1)
 
 
Adjusted headline loss per share (cents)
(15,8)
(16,1)
 
 
 
 
 
 
6.
Inventories
 
 
 
 
Diamonds
128 583
75 188
 
 
Consumables
31 640
37 532
 
 
 
160 223
112 720
 
 
 
 
 
 
 
The carrying value of diamond inventories carried at net realisable value amounted to R89,0 million (2008: R12,3 million)
 
 
 
 
 
 
 
 
7.
Interest bearing borrowings
 
 
 
 
Total interest bearing borrowings increased by R190 million, primarily as a result of the replacement of earth moving equipment at the Group's Lower Orange operations.
 
 
 
 
 
 
 
 
 
The effect of the increase in borrowings is an increase in the loss per share and headline loss per share of 1,9 cents.
 
 
 
 
 
 
 
 
8.
Capital commitments
 
 
 
 
(including amounts authorised, but not yet contracted)
46 334
161 937
 
 
These commitments of the group will be financed from its own resources or borrowed funds.
 
 
 
 
 
 
 
 
9.
Contingent liabilities
 
 
 
 
The group is subject to claims which arise in the ordinary course of business. The Group has provided performance guarantees to banks and other third parties amounting to R11,5 million (2008: R10,9 million).
 
The Group has been advised that a potential foreign claim exists in respect of a guarantee on a loan from a financial institution of R84,8 million. The directors have been advised that such a claim would be very unlikely to succeed.
 
 
 
 
 
 
 
 
10.
Defaults and breaches
 
 
 
 
As at 31 March 2009 borrowings with a principal amount of R91,2 million and accrued interest of R4,9 million due by joint ventures to external credit providers, were in default.
 
 
 
 
 
 
 
 
 
 
 
 
 

11.
Segment information
 
Primary segments
 
 
 
Continuing
Dis-continued
 
 
South
 
 
 
 
 
 
Africa
Angola
Liberia
Total
Namibia
 
2009
R’000
R’000
R’000
R’000
R’000
 
Revenue
588 326
48 975
-
637 301
660
 
Operating income/(loss)
13 478
(98 059)
-
(84 581)
(8 726)
 
Depreciation
(118 630)
(32 078)
(10)
(150 718)
-
 
Mining loss
(105 152)
(130 137)
(10)
(235 299)
(8 726)
 
Net financial income/(expense)
18 080
(9 852)
-
8 228
-
 
Exploration costs
(5 805)
(43 276)
(3 476)
(52 557)
-
 
Impairment of assets
(69 403)
(460 284)
(7 226)
(536 913)
(29 189)
 
Share of associates’ results
(7)
-
-
(7)
-
 
Profit/(loss) before taxation
(162 287)
(643 549)
(10 712)
(816 548)
(37 915)
 
 
Impairment of available-for-sale investment (other)
-
-
-
(2 433)
-
 
 
(162 287)
(643 549)
(10 712)
(818 981)
(37 915)
 
Assets
898 127
82 581
866
981 574
-
 
Non-current assets classified
as held-for-sale
 
-
 
-
 
-
 
-
 
3 111
 
Liabilities
545 529
252 858
-
798 387
-
 
Capital expenditure
78 039
33 280
-
111 319
-
 
Net asset value per share (cents)
333
(161)
1
173
3
 
 
 
 
 
 
 
 
2008
 
 
 
 
 
 
Revenue
791 891
89 009
–
880 900
48 255
 
Operating income/(loss)
226 220
(37 425)
–
188 795
(20 308)
 
Depreciation
(82 282)
(36 832)
–
(119 114)
(7 197)
 
Mining income/(loss)
143 938
(74 257)
–
69 681
(27 505)
 
Net financial income/(expense)
31 917
(9 206)
–
22 711
–
 
Exploration costs
(4 691)
(25 900)
(8 754)
(39 345)
(2 472)
 
Reversal of impairment of assets
19 513
–
–
19 513
–
 
Share of associates’ results
(7)
–
 
–
(7)
–
 
Profit/(loss) before taxation
190 670
(109 363)
(8 754)
72 553
(29 977)
 
Impairment of available-for-sale investment (other)
 
–
 
–
 
–
 
(26 360)
 
–
 
 
190 670
(109 363)
(8 754)
46 193
(29 977)
 
Assets
1 014 779
358 057
5 234
1 378 070
13 624
 
Non-current assets classified
as held-for-sale
 
96 675
 
542
 
6 558
 
103 775
 
49 820
 
Liabilities
401 619
147 440
–
549 059
1 758
 
Capital expenditure
177 607
5 454
–
183 061
–
 
Net asset value per share (cents)
672
200
11
883
58
 
12.
 
The accounting policies are consistent with those applied in the previous year in accordance with International Financial Reporting Standards. The abridged financial statements comply with IAS 34 “Interim Financial Reporting”.
 
 
13.
 
Report of independent auditor
 
 
The external auditors, Pricewaterhouse Coopers Inc. have audited the group’s annual financial statements and the abridged financial statements contained herein for the year ended 31 March 2009. Copies of their unqualified audit reports are available on request at the company’s registered office.
 
Trading statement
The trading statement released on 19 May 2009 reflected the loss per share for continuing operations of 690,3 cents. This excluded the impairment of mining rights for the marine operations, which had been incorrectly allocated to discontinued operations. This has now been allocated to continuing operations, which results in the reported loss per share for continuing operations of 719,4 cents per share, and for discontinued operations of 35,2 cents per share.
 
Detailed project information - 2009
 
Detailed project information
(Unaudited)
2009
Average grade per 100m3
Carats produced
Average carats per stone
Average price per carat achieved (US dollar)
South Africa
 
 
 
 
Baken
1.46
55,847
1.04
765
Richtersveld Operations
2.34
27,201
1.79
1,047
Shallow Water
n/a
5,874
0.35
376
Angola
 
 
 
 
Fucauma
11.86
30,423
0.32
156
Luarica
12.97
48,338
0.35
215
 
Detailed project information - 2008
 
Detailed project information
(Unaudited)
2008
Average grade per 100m3
Carats produced
Average carats per stone
Average price per carat achieved (US$)
South Africa
 
 
 
 
Baken
1.63
71,856
1.03
905
Richtersveld Operations
1.8
24,083
1.57
1,391
Shallow Water
n/a
11,366
0.4
478
Angola
 
 
 
 
Fucauma
12.35
41,800
0.37
181
Luarica
12.57
88,500
0.58
312
 
Overview
The Group has over the past three years been actively pursuing operating cost reductions as well as the fixing, closing or sale of unprofitable operations. As a result, the Middle Orange River operations were sold during 2008 and the Group’s deep water mining vessels ceased operations in April 2008. One mining vessel has been sold and the remaining mining vessel has been docked pending sale.
 
Diamond prices dropped significantly from September 2008 to February 2009 and the demand for rough diamonds fell to record lows due to the adverse effect on the diamond market of the global economic crisis in the latter part of 2008. This necessitated further and urgent cost cutting and rationalisation of operations which was immediately implemented.
 
The Group’s tender sale in March 2009 resulted in all production being sold and an increase in average prices achieved from the November 2008 lows. Indications for the May 2009 tender sale reflect strengthened demand for Trans Hex’s product.
 
The Group’s cash position remains solid at R205 million which, despite the severe impact of the global economic crises, is higher than the prior year cash balance of R194 million.
 
Response to the Global Economic Crisis
 
The following response to the global economic crisis was implemented:
 
*       The PK production plant, a satellite operation to the Baken Central Plant, became cash flow negative, and was closed
*       South African production was stopped during December 2008 and January 2009
*       The Shallow Water Marine operations are in the process of being placed under care and maintenance
*       The Fucauma operation in Angola, of which Trans Hex has management control, has been placed under care  and maintenance
*       No funding is being provided for the Luarica investment in Angola
*       All Head Office costs have been reviewed and reduced where possible as has non essential capital expenditure
 
Financial Results
 
*       Net cash position at year end R205 million. (2008: R194 million)
*       Sales revenue of R637 million (2008: R881 million) was significantly impacted by the lower diamond prices achieved in the second half of the financial year
*       Impairment of assets R569 million of which R460 million relates to the Angolan operations
*       Loss for the year from continuing operations before impairments and taxation amounted to R280 million
*       Adjusted headline loss per share for continuing operations of 248,4 cents
 
Operating performance
 
*       South African carat production decreased from 107 305 carats in 2008 to 88 933, as a result of lower grades achieved in the first half and the cessation of production during December 2008 and January 2009
*       Total sales amounted to US$73 million of which US$67 million was attributed to the South African operations
*       Average price of sales from South Africa was US$805 per carat
*       Feasibility study completed at Luana
 
Outlook
 
*       The grade achieved at Baken is anticipated to improve as planned mining operations move to areas which are expected to produce higher grades
*       The production of high quality and large size stones at the Richtersveld operations of Nxodap and Bloeddrif, should continue
*       South African Land operations production of approximately 100 000 carats is anticipated for the 2009/2010 financial year
*       The mining contract negotiations at the Luana project in Angola should be concluded during the financial year
*       The demand for and the strengthening in prices for the Group’s product is anticipated to continue through out the 2009/2010 financial year
*       Costs will be controlled to ensure the sustainability of the Group in current market conditions
 
 
Change in directorship
 
As previously reported, Mr Denis Martin Falck resigned from the board of directors effective 15 September 2008, following his retirement as financial director of Remgro Limited. Advocate Theodore van Wyk, a Remgro Executive Director, was appointed as a non-executive director on 15 September 2008.
 
The board announces the appointment of Mr Jan Willem Dreyer as a non-executive director with effect from 25 May 2009. Mr Dreyer is an executive director of Remgro Limited.
 
Dividend declaration
 
In order to maintain cash resources and until such time as the global economic crisis situation stabilises, the directors deem it prudent not to declare a dividend.
 
Shareholders’ diary
The annual report will be mailed before 30 June 2009 and the annual general meeting is scheduled for 7 August 2009.
 
By order of the board
PL Zim
Chairman
 
L Delport
Chief executive officer
 
Parow
26 May 2009
 
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
 
Registered office
405 Voortrekker Road, Parow 7500 PO Box 723, Parow 7499
Transfer secretaries
South Africa
Computershare Investor Services (Pty) Limited
PO Box 61051, Marshalltown 2107
Namibia
Transfer Secretaries (Pty) Ltd
PO Box 2401, Windhoek
 
Directorate
PL Zim (chairman), BR van Rooyen (deputy chairman), L Delport (chief executive officer), MJ Carstens, T de Bruyn, JW Dreyer, E de la H Hertzog, AR Martin, AG Muller, PC Pienaar, T van Wyk
GJ Zacharias (company secretary)