Interim Results
17 October 2005
BISICHI MINING PLC
Interim Results to 30 June 2005
GOOD PERFORMANCE IN THE FIRST HALF OF 2005
2005 2004
Profit before tax under UK GAAP up 48% £1,077,000 £726,000
EPS up 40% 7.24 p 5.17 p
EPS diluted up 38% 7.01 p 5.07 p
* Profit before tax and adjustment for IFRS for the first six months breaks
through £1 million mark for the first time in the company's history
* A number of growth objectives achieved in the period reported including:
*
+ Acquisition of the Pegasus Coal Reserve, an approx 12 million in-situ
tonnes of export grade and low phosphorous coal. Production scheduled
to start in 2007
+ Major efficiency improvements at Black Wattle Colliery resulting in
significantly higher production output on a sustainable basis
+ 19% price increase achieved for Black Wattle coal in the South African
domestic market. Majority of export coal prices underpinned by a price
fix to 2007
+ Senior management strengthened with the appointment of Wayne Koonin as
Finance Director, South Africa
+ Numis Securities appointed as the company's broker
Commenting on the results, Bisichi Mining PLC's chairman, Michael Heller, said:
'I said at the end of 2004 that the next challenge for Bisichi would be to
leverage our successful position in South Africa in order to generate
sustainable growth in our core markets and to develop opportunities in related
markets. In the first half of this year we have achieved a number of objectives
that are key to delivering that vision. There is much still to do, but I am
confident that we will continue to be successful.'
END
For further information, please call:
Andrew Heller
Robert Corry Bisichi Mining PLC 020 7415 5030
Christopher Joll MJ2 Ltd 020 7491 7776
17 October 2005
Bisichi Mining Plc
CHAIRMAN'S REVIEW
I am pleased to report that in the 6 months ended 30 June 2005, Bisichi Mining
made a profit on ordinary activities before taxation and before adjustments for
the new International Financial Reporting Standards (IFRS) of £1,077,000 (2004:
£726,000). This performance is 48% higher than the equivalent period in 2004
and is principally due to increased production at the Black Wattle Colliery and
our success in achieving premium prices for our coal. The new International
Financial Reporting Standards have been adopted for the first time and the
conversion to the new standards has increased profit by £1,000 to £1,078,000
for the first six months of 2005.
During the period under review, we achieved a number of our objectives which
the directors believe will have a significant impact on our growth prospects in
South Africa.
The most significant was the acquisition, in concert with our black empowerment
partner Endulwini Resources, of the Pegasus Coal Reserve from Ingwe Collieries
Limited, a wholly-owned subsidiary of BHP Billiton. This reserve contains
approximately 12 million in situ tonnes of export grade and low phosphorous
coal. We are currently applying for conversion of the mining rights under South
Africa's new Mineral and Petroleum Resources Development Act and we plan to
begin opencast operations at the site in 2007. The geological characteristics
of the Pegasus reserve give us confidence that this will be a low-cost and high
yielding operation that will continue well into the next decade. In addition,
the entire reserve can be mined using the opencast mining method.
Second, our operations at Black Wattle Colliery have undergone a substantial
improvement in production and efficiency. In particular, we have introduced
improvements in our working practices, which have led to a dramatic increase in
production. These changes were implemented after an extensive operational
review that focussed on improving production techniques and practices by our
management during the first half. Additionally investment has been made in the
mine's infrastructure, including the installation of a surge bin and feeder
breaker to accommodate the increased tonnage from all sections and the
commissioning of a mechanical face drill for use in one of the conventional
drill and blast sections. I can report that the average monthly production of
coal being achieved at Black Wattle Colliery at the end of September 2005 is
32% higher than in the comparable period in 2004.
Following the improvements in production, the Group had record profits in the
second quarter.
We have been successful in marketing our products both to the international and
to the domestic marketplace. As reported in the 2004 Annual Report and
Accounts, in June 2004 we fixed through to 31 March 2007 the coal price for
272,000 tonnes of our export coal. As a result, most of our export contract has
not been affected by the decline in international coal prices from their record
peaks in the second quarter of 2004. In July 2005, we also achieved a 19%
increase in the price of our domestic coal supply contract to the ferrochrome
industry.
During the first half of 2005, we have also made an important personnel
appointment. With the expansion of our operations in South Africa, and in
particular the acquisition of Pegasus, I am pleased to announce the appointment
of Wayne Koonin as Finance Director, South Africa. Wayne, who is a Chartered
Accountant, has considerable experience in the South African mining industry.
His expertise has already had an impact on our South African business, working
in conjunction with Robert Grobler (the General Manager) and his team.
As previously announced, Numis Securities has been appointed as the company's
stockbroker and financial adviser.
Our UK retail property portfolio, which is managed by London & Associated
Properties PLC, has continued to provide us with reliable income. The sale of a
retail parade of shops in a Leeds suburb was our single major property
transaction during this period. The equities portfolio in Mineral Products
continues to provide us with a ready source of cash should it be needed.
Finally, following the acquisition of Pegasus and the improvements in
production at Black Wattle, I look forward to the future with confidence.
Michael Heller
Chairman
Bisichi Mining Plc
CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2005
Notes 6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2005 2004 2004
£'000 £'000 £`000
Group and share of joint ventures 7,833 5,117 13,267
turnover
Less: joint ventures (1,149) - (1,719)
Group Turnover 1 6,684 5,117 11,548
Operating costs (5,616) (4,192) (9,117)
Operating profit before 1 1,068 925 2,431
adjustments
Gains on financial assets 12 - -
Increase in value of investment - - 1,868
property - Group
- Joint venture - - 192
Profit on disposal of property 132 - -
Share based payments charge (5) - (6)
Operating profit after 1 1,207 925 4,485
adjustments
Share of operating profit/(loss) 75 45 (34)
in joint venture
Interest receivable 40 8 25
Interest payable (244) (210) (399)
Profit before tax 1,078 768 4,077
Taxation - Group 2 (62) (234) (788)
- Joint venture 2 (18) (10) (7)
Profit for the period 998 524 3,282
Profit attributable to minority 241 (16) 437
interest
Profit attributable to equity 757 540 2,845
shareholders
998 524 3,282
Earnings per share 3 7.24p 5.17p 27.22p
3
Diluted earnings per share 7.01p 5.07p 26.51p
Bisichi Mining Plc
CONSOLIDATED BALANCE SHEET
As at 30 June 2005
Notes 6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2005 2004 2004
£'000 £'000 £'000
Assets
Non-current assets
Value of properties attributable 4 14,659 13,092 14,990
to group
Fair value of head lease 343 359 343
Property 15,002 13,451 15,333
Plant and equipment 4,528 3,814 5,046
Investments in Joint Ventures 1,588 1,442 1,536
Other Investments 376 352 384
Deferred tax 219 232 243
Total non-current assets 21,713 19,291 22,542
Current assets
Inventories 161 33 36
Trade and other receivables 3,379 2,027 2,533
Financial assets 574 453 403
- held for trading investments
- derivative financial 81 - -
instruments
Cash and cash equivalents 259 246 950
4,454 2,759 3,922
Liabilities
Current liabilities
Financial liabilities - (680) (608) (1,490)
borrowings
Trade and other payables (3,961) (4,214) (3,629)
Current tax liabilities (275) (621) (315)
(4,916) (5,443) (5,434)
Non-current liabilities
Financial liabilities - (5,219) (4,523) (5,580)
borrowings
Provisions (343) (359) (343)
Deferred tax (2,093) (1,580) (2,048)
Net assets 13,596 10,145 13,059
Equity
Share capital 1,045 1,045 1,045
Share option reserve 11 - 6
Translation reserve (119) 149 278
Other reserves 86 86 86
Retained earnings 12,045 9,005 11,310
Total shareholders' equity 13,068 10,285 12,725
Minority interest in equity 528 (140) 334
Total equity 13,596 10,145 13,059
Bisichi Mining Plc
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2005
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Cash flows from operating
activities
Operating profit after 1,207 925 4,359
adjustments
Depreciation 349 275 644
Gain on held for trading (9) (81) (83)
investment
Gain on disposal of investment (132) - -
property
Increase in value of investment - - (1,934)
property
Share based payment expense 11 - 6
Increase in net current (1,472) 875 651
liabilities
Net interest paid (204) (202) (374)
Income taxes paid (47) (58) (466)
Net receipts/payments held for (23) - 99
trading investments
Net cash from operating (320) 1,734 2,902
activities
Cash flows from investing 130 (706) (2,250)
activities
Cash flows from financing (37) (34) 1,003
activities
Net (decrease)/increase in cash (227) 994 1,655
and cash equivalents
Cash and cash equivalents at 507 (1,179) (1,179)
beginning of period
Exchange adjustment - - 31
_______ _______ _______
Cash and cash equivalents at 280 (185) 507
end of period
Bisichi Mining Plc
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months ended 30 June 2005
Share Translation Share Other Retained Total Minority Total
reserve option earnings
capital reserve reserves interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 1,045 - - 86 8,653 9,784 (116) 9,668
January 2004
Profit for the - - - 540 540 (16) 524
period
Exchange - 149 - - - 149 (8) 141
adjustments
______ ______ ______ _____ _____ ______ ______ ______
1,045 149 - 86 9,193 10,473 (140) 10,333
Dividend - - - - (188) (188) - (188)
______ ______ ______ _____ _____ ______ ______ ______
Balance at 30 1,045 149 - 86 9,005 10,285 (140) 10,145
June 2004
______ ______ ______ ______ ______ ______ ______ ______
Balance at 1 1,045 - - 86 8,653 9,784 (116) 9,668
January 2004
Profit for the - - - - 2,845 2,845 437 3,282
period
Exchange - 278 - - - 278 13 291
adjustment
Share option - - 6 - - 6 - 6
charge
______ ______ ______ _____ _____ ______ ______ ______
1,045 278 6 86 11,498 12,913 334 13,247
Dividend - - - - (188) (188) - (188)
______ ______ ______ _____ _____ ______ ______ ______
Balance at 31 1,045 278 6 86 11,310 12,725 334 13,059
December 2004
______ ______ ______ _____ _____ ______ ______ ______
Profit for - - - - 757 757 241 998
period
Exchange - (397) - - - (397) (47) (444)
adjustment
Share option - - 5 - - 5 - 5
charge
______ ______ ______ _____ _____ ______ ______ ______
1,045 (119) 11 86 12,067 13,090 528 13,618
Increase in - - - - 187 187 - 187
value
financial
assets at 1
January 2005
Dividend - - - - (209) (209) - (209)
______ ______ ______ _____ _____ ______ ______ ______
Balance at 30 1,045 (119) 11 86 12,045 13,068 528 13,596
June 2005
Bisichi Mining Plc
ACOUNTING POLICIES AND NOTES TO ACCOUNTS
BASIS OF ACCOUNTING
The results for the six months ended 30th June 2005 have been prepared in
accordance with those International Financial Reporting Standards (IFRS) which
are expected to be endorsed by the European Union and to apply to the 2005 full
year results. The reported comparative period results have been restated on
this basis. The financial statements have been prepared under the historical
cost convention, except for the revaluation of certain properties and financial
instruments. The principal accounting policies are described below.
BASIS OF CONSOLIDATION
The group accounts incorporate the accounts of Bisichi Mining Plc and all of
its subsidiary undertakings, together with the group's share of the results of
its joint ventures and associates.
In preparing these financial statements, advantage has been taken of the
exemptions allowed by IFRS1, first-time adoption of IFRS as follows:
Financial Instruments: Recognition and Measurement (IAS 39)
The comparative periods have not been restated for IAS39, particularly in
respect of financial instruments. The fair value of these instruments at the
start of 2005 was passed through reserves, and the subsequent movement in the
first half of 2005 is reported in the group income statement. The group has not
applied the hedge accounting treatment that would allow such movements to be
deferred in equity.
Business Combinations that occurred before the opening IFRS balance sheet date
(IFRS 3 'Business Combinations')
Bisichi has elected not to apply IFRS 3 retrospectively to business
combinations that took place before the transition date of 1 January 2004. As a
result, all prior business combination accounting has been frozen at the
transition date. This includes any goodwill that was previously recognised as a
deduction from equity.
Share-based Payments (IFRS 2 'Share-based Payment')
Bisichi has elected only to apply IFRS 2 to all share option schemes where
options have been granted since 7 November 2002 and were not fully vested at 1
January 2005.
Exchange differences arising on consolidation (IAS 21 'Foreign Currencies')
Bisichi has elected to deem the cumulative amount of exchange differences
arising on consolidation of the net investments in subsidiaries at 1 January
2004 to be zero.
TURNOVER
Turnover comprises sales of coal and property rental income. Turnover is
recognised when delivery of the product or service has been made and when the
customer has a legally binding obligation to settle under the terms of the
contract and has assumed all significant risks and rewards of ownership.
Turnover is only recognised on individual sales when all of the significant
risks and rewards of ownership have been transferred to a third party. In most
instances turnover is recognised when the product is delivered to the locationspecified by the customer, which is typically when loaded into transport, where
the customer pays the transportation costs.
Rental income is recognised in the group income statement on a straight-line
basis over the term of the lease.
PROPERTY PLANT AND EQUIPMENT
The cost of property, plant and equipment comprises its purchase price and any
costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in accordance with agreed
specifications. Freehold land is not depreciated. Other property, plant and
equipment is stated at historical cost less accumulated depreciation.
Mine development
The purpose of mine development is to establish secure working conditions and
infrastructure to allow the safe and efficient extraction of recoverable
reserves. Depreciation on mine development is not charged until full production
commences or the assets are put to use. On commencement of full production,
depreciation is charged over the life of the mine on a straight-line basis.
Surface mine development and restoration assets
Expenditure incurred prior to the commencement of working surface mine sites,
net of any residual value and
taking into account the likelihood of the site being mined, is capitalised
within property, plant and equipment and charged to the income statement over
the recoverable reserves of the scheme.
Other assets
The cost, less estimated residual value, of other property, plant and equipment
is written off on a straight-line basis over the asset's expected useful life.
Residual values and useful lives are reviewed, and adjusted if appropriate, at
each balance sheet date. Changes to the estimated residual values or useful
lives are accounted for prospectively. Heavy surface mining and other plant and
equipment is depreciated at varying rates depending upon its expected usage.
EMPLOYEE BENEFITS
Share based remuneration
The company operates a long-term incentive plan and share option scheme. The
fair value of the conditional awards of shares granted under the long-term
incentive plan and the options granted under the share option scheme are
determined at the date of grant. This fair value is then expensed on a
straight-line basis over the vesting period, based on an estimate of the number
of shares that will eventually vest. At each reporting date, the fair value of
the non-market based performance criteria of the long-term incentive plan is
recalculated and the expense is revised. In respect of the share option scheme,
the fair value of options granted is calculated using a binomial model.
Pensions
The company operates a defined contribution pension scheme. The contributions
payable to the scheme are expensed in the period to which they relate.
FOREIGN CURRENCIES
Monetary assets and liabilities are translated at year end exchange rates and
the resulting exchange rate differences are included in the consolidated income
statement within the results of operating activities if arising from trading
activities and within finance cost/income if arising from financing.
For consolidation purposes, income and expense items are included in the
consolidated income statement at average rates, and assets and liabilities are
translated at year end exchange rates. Where foreign operations are disposed
of, the cumulative exchange differences of that foreign operation are
recognised in the consolidated income statement when the gain or loss on
disposal is recognised.
FINANCIAL INSTRUMENTS
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the group
balance sheet at the amounts drawn on the particular facilities. Interest
payable on those facilities is expensed as a finance cost in the period to
which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held under a
leasehold interest and accounted for as investment property. The liability is
initially calculated as the present value of the minimum lease payments,
reducing in subsequent reporting periods by the apportionment of payments to
the lessor, as described above under the heading for lease payments.
Interest rate derivatives
The group uses derivative financial instruments to manage the interest rate
risk associated with the financing of the group's business. No trading in such
financial instruments is undertaken.
At each reporting date, these interest rate derivatives are recognised at fair
value, being the estimated amount that the group would receive or pay to
terminate the agreement at the balance sheet date, taking into account current
interest rates and the current credit rating of the counterparties. The gain or
loss at each fair value remeasurement is recognised immediately in the group
income statement.
Financial assets/liabilities held for trading or short-term gain are measured
at fair value and movements in fair value are charged/credited to the
consolidated income statement in the period.
INVESTMENT PROPERTIES
Investment properties comprise freehold and long leasehold land and buildings.
Investment properties are carried at fair value in accordance with IAS 40
`Investment Properties'. Properties are recognised as investment properties
when held for long-term rental yields, and after consideration has been given
to a number of factors including length of lease, quality of tenant and
covenant, value of lease, management intention for future use of property,
planning consents and percentage of property leased. Investment properties are
revalued annually by professional external surveyors and included in the
balance sheet at their fair value. Gains or losses arising from changes in the
fair values of assets are recognised in the consolidated income statement. In
accordance with IAS 40, investment properties are not depreciated. The
difference between the book value of the investment property and the first
valuation on recognition as an investment property is taken to reserves in
accordance with IAS 40. Properties held for use in the business or in the
course of restoration, renovation or held for development or sale, are not
recognised as investment properties and are held at depreciated historical
cost.
JOINT VENTURES
Investments in joint ventures, being those entities over whose activities the
group has joint control, as established by contractual agreement, are included
at cost together with the group's share of post acquisition reserves, on a net
equity basis.
ASSOCIATES
Undertakings in which the group has a participating interest of not less than
20% in the voting capital and over which it has the power to exert significant
influence are defined as associated undertakings. The financial statements
include the appropriate share of the results and reserves of those
undertakings.
INVESTMENTS
Fixed asset investments of the company are stated in the balance sheet at cost
less provisons for impairment. Profits or losses on the disposal of these
investments and provisions for impairment are taken to the income statement in
the period of disposal/impairment.
DEFERRED TAX
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the tax computations, and is
accounted for using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. In respect of the deferred tax on the revaluation
surplus, this is calculated on the basis of the chargeable gains that would
crystallise on the sale of the investment portfolio as at the reporting date.
The calculation takes account of indexation on the historical cost of the
properties and any available capital losses.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the group income statement, except when it relates to
items charged or credited directly to equity, in which case it is also dealt
with in equity.
DIVIDENDS
Dividends payable on the ordinary share capital are recognised as a liability
in the period in which they are approved.
CASH AND CASH EQUIVALENTS
Cash comprises cash in hand and on-demand deposits. Cash equivalents comprises
short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in
value.
1 SEGMENTAL ANALYSIS 6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
£ £ £
Revenue
Mining 6,025 4,476 10,317
Property 539 531 1,054
Other 120 110 177
6,684 5,117 11,548
Operating profit before
adjustments
Mining 823 593 1,855
Property 237 245 487
Other 8 87 89
1,068 925 2,431
Operating profit after
adjustments
Mining 823 593 1,855
Property 387 245 2,541
Other (3) 87 89
1,207 925 4,485
2 TAXATION 6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
£ £ £
Based on the results for the
year:
Corporation tax at 30% (2004: 57 234 272
30%)
Adjustment in respect of prior - - 26
years -UK
Joint venture 18 10 7
75 244 305
Deferred tax 5 - 490
80 244 795
* EARNING PER SHARE
Both the basic and diluted earnings per share calculations are based on a
profit of £757,000 (2004: £540,000) The basic earnings per share have been
calculated on 10,451,506 (2004: 10,451,506) ordinary shares being in issue
during the period. The diluted earnings per share have been calculated on the
number of shares in issue of 10,451,506 (2004: 10,451,506) plus the dilutive
potential ordinary shares arising from share options of 352,471 (2004: 200,088)
totalling 10,803,977 (2004: 10,651,594).
* PROPERTIES
Properties are included at valuation as at 31 December 2004.
* FINANCIAL INFORMATION
The above financial information does not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985. Statutory accounts for
the year ended 31 December 2004 which were prepared under UK generally accepted
accounting principles (UKGAAP), have been delivered to the Registrar of
Companies; the report of the auditors on those accounts was unqualified and did
not contain a statement under Section 237(2) or (3) of the Companies Act 1985.
* BOARD APPROVAL
These interim results were approved by the Board of Bisichi Mining PLC on 17
October 2005.
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