REG - Shaft Sinker Hdg plc - Half Yearly Report

Thu Aug 30, 2012 2:01am EDT

* Reuters is not responsible for the content in this press release.

RNS Number : 0496L
Shaft Sinkers Holdings Plc
30 August 2012
 



30 August 2012

Shaft Sinkers Holdings plc

 

("Shaft Sinkers"; "the Group" or the "Company")

 

Half year results and Board changes

 

Shaft Sinkers Holdings plc (LSE:SHFT), the international shaft sinking and underground construction group, today announces its half year results for the six months ended 30 June 2012.

 

Key Points

·     Revenue of GBP100.4 million (H1 2011 : GBP112.3 million), 10.6% lower than H1 2011.

·     Revenue in our key South African market remains strong

·     Gross margin reduced to 10.5% (H1 2011 : 17.0%)

·     Effective tax rate lower at 26.9% (H1 2011 : 35.0%)

·     EPS lower at 1.6p (H1 2011 : 8.5p, 12.0p on an underlying basis)

·     Net debt of GBP8.6 million (31 December 2011 : Net cash GBP6.1 million), improved post period-end by GBP16.3 million cash inflows

·     Interim dividend declared of 2.4p per share, reflecting confidence in future prospects

·     Appointment of Mr. Stephen Oke as Chairman following the departure of Mr. Amre Youness

Operational Summary

·     Award of Hindustan Zinc Limited contract, building on Indian presence and increasing project diversity

·     Award of additional contracts at Impala

·     Order book up to GBP347.9 million (31 December 2011 : GBP301.1 million)

·     Strong and diversified tender pipeline of over GBP1.1 billion (31 December 2011 : GBP1.0 billion)

·     Appointment of Louis Germishuys as Group COO and MD of South African operations

 

Commenting on the results Alon Davidov, CEO of Shaft Sinkers Holdings plc, said:

"The first half of the year has been disappointing, in large part due to operational issues in South Africa, and while we anticipate meeting our revenue expectations for the full year, it is uncertain that we will fully make up the first half profit shortfall. The appointment of our new Group COO and MD South Africa, Louis Germishuys, will enhance our efforts to improve profitability. We have started to see signs of success in our international expansion programme and in diversifying the industries to which we are exposed. We believe that our Hindustan Zinc contract win is a sign of good things to come, and our order book is growing once more. Despite the current challenges, we remain confident of our prospects."

Commenting on the Board changes Mr. Youness said, "It has been an honour being the Chairman of Shaft Sinkers these last years. I believe that I leave the Company and the Board in strong and capable hands."

Mr Oke, the new Chairman of Shaft Sinkers, added, "I am pleased to accept this role and look forward to continuing the good leadership of my predecessor in achieving the strategic goals and ambitions set by the Company, its Board and Management."

 

A call for sell-side analysts will be held at 14:00 hours. For details contact M:Communications.

 

Enquiries

Shaft Sinkers Holdings plc


Alon Davidov, Chief Executive Officer


+27 82 566 1165

Chris Hall, Chief Financial Officer


+ 44 787 595 1362



M:Communications

+44 (0)20 7920 2330

Ann-marie Wilkinson


Elly Williamson


Matthew Neal




 

 

Chief Executive Officer's statement

In the first half of 2012 revenues dropped by 10.5% despite the termination of the EuroChem contract. However, in South Africa revenues remained relatively strong.. This, combined with the weaker Rand, resulted in revenues of GBP100.4 million as compared to GBP 112.3 million for the comparative interim period in 2011.

 

The drop of gross margin from 17.0% in H1 2011 to 10.5% in H1 2012 is attributable both to our underperformance at the Impala 16 and 17 shafts and Lonmin Karee 3 operations as well as the absence of higher margin contracts in H1 2012.

 

Operating expenses were kept within budget.  Profit from operations fell short of managements' mid-year expectations.

 

Management has implemented an action plan to correct our operational performance at the Impala 16 and 17 projects and the company is in discussions regarding the K3 project with the client. Performance at Styldrift operations is back to our expected levels.

 

New contracts were announced at the beginning of the period for Impala 16 capital development and extension at Leeuwkop, as well as the start of the Hindustan Zinc Limited (HZL) contract in May 2012. There was no material contribution from the HZL contract in H1 2012 and the benefits of this contract are expected to come through in H2 2012. Management expects revenues to meet budgeted targets for the year and this trend is expected to continue in line with a growing pipeline of projects. However, with the delayed start of certain higher margin projects management expects year end results could fall short of expectations.

 

Basic earnings per share fell to 1.6p (H1 2011: 8.5p, 12.0p on an underlying basis).

 

Capital expenditure has been below planned spend due to the delayed start of new projects. The increase in trade receivables is primarily the result of outstanding receivables from the EuroChem contract as well as unpaid claims for work done on the Impala 16 and 17 shafts, which are expected to be recovered before the year end. Net debt, which at 30 June 2012 was GBP8.6 million (31 December 2011: net cash of GBP6.1 million), has significantly improved after 30 June 2012 by GBP16.3 million.

 

In line with our stated dividend policy, the Board has today declared an interim dividend of 2.4p per share, which reflects our confidence in the prospects of the business.  This will be payable on 5 October 2012 to shareholders on the register at the close of business on 7 September 2012.

 

Order Book and Tendering Activity

At 30 June 2012 the order book was GBP347.9 million, an increase of 16% on GBP301.1 million as quoted at 31 December 2011 and compared to GBP425.3 million at 30 June 2011.

 

An analysis of our order book in terms of exposure to different commodities shows that our reliance on the platinum industry has fallen from 58% at 31 December 2011 to 49% at 30 June 2012. Geographically, 52.3% of the order book was South African and 47.7 % the Rest of World.

 

Management continues to actively pursue a number of new tenders with geographic and commodity diversity, now showing an approximate 10% growth of outstanding tenders or price submissions rising to GBP1.1 billion from GBP1.0 billion at 31 December 2011, including the award of the HZL contract. The Company believes it is well placed to secure a number of these tenders.

 

Safety

Regrettably, Mr Salamão Chunguane was fatally injured on the 7th of June at Impala 17 Fridge Shaft.

 

Safety remains of paramount importance for Shaft Sinkers, and our statistics for the first half of 2012 show an improvement in our lost time injury frequency rate of 0.86 down from 1.58 at the end of 2011.

 

Management has launched various new safety campaigns, including the "Bamba Thaita" (Hold Tight) safety campaign, which was launched to emphasise focus and commitment to doing daily tasks in a safe and responsible manner. This campaign has also resulted in a significant boost to morale among the work force.

 

South African Operations

In the first half of 2012, the lower than expected ramp up of the mining development and shaft equipping contracts at Impala 16 was attributable to logistical problems at the shafts. Both these operations are serviced through the ventilation shaft which, in its current sinking configuration, is hampering operational efficiency. Management has identified the causes of the logistical problems and, in conjunction with the client, is in the process of addressing these issues. The second half of the year at Impala 16 is expected to show an improvement in operational efficiency and productivity.

 

The fatality at Impala 17 shaft resulted in a prolonged stoppage.

 

Pre-sink and mobilisation work at Afplats' Leeuwkop main shaft progressed well

 

The Lonmin shafts at Hossy and Saffy also performed well. We have subsequently been notified of Lonmins' termination of works at Hossy, the impact of which is not material.

 

The Karee 3 contract, which was tendered on low rates, is currently under review and we are in discussions with the client.

 

Performance at the Styldrift project showed a marked improvement as a result of changes to the sinking methodology and the improvement of the skills employed on the project. The cycle times have improved to be consistent in the region of our benchmark.

 

Our project at AngloGold Ashanti's Moab shaft continued to perform well and is expected to reach completion by the end of 2012.

 

Hernic Ferrochrome's Bokfontein project continues to perform well. Rental revenues for the winders used at the Kalagadi Manganese project are expected to continue until the end of the contract period in 2013

 

International Operations

Demobilisation from our Teesta III hydroelectric project in India has been completed during the first half of 2012, coinciding with the mobilisation of the Rampura Agucha shaft sinking project for Hindustan Zinc Limited, which was announced in May. The contract, awarded by Hindustan Zinc Limited, a Vedanta Group company, includes the sinking of the main shaft as well as the north and south ventilation shafts at the Rampura Agucha mine, located in the Bhilwara district, which is in the state of Rajasthan in north-west India.  The pre-sink of both the main shaft and north ventilation shaft will commence during H2 2012.

 

The full demobilisation of our EuroChem project is expected to be completed during the second half of 2012. Discussions continue with EuroChem to recover the amounts owing to the company.

 

Mining Engineering and Technical Services (METS) division

METS was awarded a "design and manage" contract for a shaft sinking project in Peru and work on this project will start during the second half of this year.  Our presence there could potentially lead us to new opportunities in the region.

 

Black Economic Empowerment

The implementation of our BEE strategy has been acknowledged by the receipt of a rating certificate indicating compliance with the ownership criteria.  We are pleased to have created a broad based structure in South Africa that includes our work force and qualifies us to fully meet the South African BEE requirements.

Board and Management Changes

Shaft Sinkers is pleased to announce that Mr. Stephen Oke, Senior Independent Director since IPO, has been appointed Chairman of the Group with immediate effect. Stephen has been with the company since IPO and has over 35 years' experience in the metals and mining industry, including the current Chairmanship of African Mining and Exploration Plc.   Stephen has held senior positions in the investment banking industry for Smith New Court, Merrill Lynch, NM Rothschild and Sons and Standard Bank, specialising in the metals and mining sector, where he advised on a number of transactions and equity capital fund raisings worldwide. Mr Amre Youness is stepping down due to his increasing commitments in other roles. The Board wishes to thank Mr Youness for his valued support and contribution over the past 3 years and would like to wish him all the very best for the future. The board welcomes Mr. Oke as Chairman and looks forward to his continued, valuable contribution.

As announced previously we have appointed Louis Germishuys as Group COO who has recently been appointed Managing Director of the South African operation.  Louis brings excellent operational experience to contribute towards solving some of the challenges currently facing the South African operations.  Management has identified the causes of operational underperformance and is implementing changes to personnel and working methods to improve efficiencies.

Research and Development

Our research and development programmes are progressing in line with previous announcements in this regard. Development work on the SightPower shaft scanning technology we have invested in continues and we are nearing the introduction of the beta version, which will be the prototype for marketing to our clients.

 

Market Overview and Prospects

We continue to actively seek and respond to queries and tenders from both the South African and International markets. We are seeing increased activity in the gold, diamond and base metal markets and a slowdown in the platinum market, in all likelihood due to prevailing market conditions. The emergence of this trend reinforces our diversification strategy.

 

The award of the HZL contract in India has been an important step in diversifying our order book both in terms of commodity and geography. Although recent unrest at South African mines has so far had a limited impact on the Company's operations, management is assessing and monitoring the potential industry impact on its South African operations. The CIS office is now fully established and is pursuing various projects in the region. We continue to be positive about prospects in this region. In addition, we are seeing opportunities in other regions across the globe, such as South America, but we wish to maintain our focus on the markets in which we have invested and built networks for the present.

 

Despite a disappointing first half of the year, the Board is optimistic that the second half will produce an improved performance, and expects to meet expectations for revenue for the full year. However, although the lumpiness of our business makes the full year outlook difficult to forecast, it is uncertain that the Company will fully make up the first half profit shortfall caused by the operational difficulties and delays to commencing new projects.

 

Alon Davidov

Chief Executive Officer

 

 

Financial review

Introduction

The first half of 2012 was adversely impacted by poor operational performance and delays in the award of new contracts.

 

In addition, the weakening Rand against the Pound has impacted the overall financial results for the period. The average exchange rate of the ZAR to the GBP in the first six months of 2012 was 12.49 compared to 11.10 in H1 2011. This had the effect of decreasing H1 2012 revenues by GBP12.5 million and profit before income tax by GBP0.1 million.

 

Basis of preparation

The financial information presented has been prepared on a basis consistent with and using the same accounting policies which will be used in the preparation of the financial statements for the 2012 financial year end. There have been no changes in accounting policy or new standards applied which have had a material effect on reported performance in comparison to the prior periods.

 

Analysis of results

Revenues dropped by 10.5% in GBP terms to GBP100.4 million in H1 2012 (H1 2011 : GBP112.3 million) primarily as a result of the weakening Rand. 

 

Gross profit margins fell to 10.5% (H1 2011 : 17.0%). The decrease was due to poor operational performance at the Impala 16 and 17 shafts as well as the Karee 3 project yielding poor returns due to contractually low rates charged to the client, despite good operational performance. Besides the mentioned poor operational performance in 2012, H1 2011 included the higher margins on the EuroChem and Teesta contracts which have subsequently come to an end.

 

Operating expenses were within budget and were 20% lower than H1 2011 at a rate of 10.7% of revenues (H1 2011 : 11.9%). However, excluding the first tranche of the IPO bonus paid in H1 2011 of GBP2.3 million (included in H1 2011 operating expenses), there has been a modest decrease of 3.5% in operating expenses in H1 2012.

 

Profit from operations amounted to GBP1.7 million in H1 2012 (H1 2011 : GBP7.2 million,  GBP9. 5 million before the IPO bonus of GBP2.3 million).

 

Net finance expenses decreased by 31.2% to GBP0.6 million (H1 2011 : GBP0.9 million).  Interest bearing debt of GBP15.9 million (2011 : GBP16.2 million) which was entirely ZAR denominated, carries interest rates of  approximately 9 per cent per annum.

 

Income taxes reduced to an effective rate of 26.9% (H1 2011 : 35.0%), largely due to the fact that it was not necessary to declare intra-company dividends from the group's subsidiaries to the holding company during this period, while in H1 2011 a dividend from the South African operations to the holding company in the Isle of Man suffered a 10% secondary tax on dividends.

 

Basic earnings per share before one-off items decreased to 1.6p (H1 2011 : 8.5p, underlying 12.0p).

 

EBITDA

Earnings before interest, tax and depreciation decreased 56.4% to GBP5.5 million (2011 : GBP12.5 million).

 

Dividend policy

The Group's progressive dividend policy is to keep dividends broadly in line with earnings over time. Dividends are expected to be paid semi-annually in respect of each year with an interim dividend paid in October and a final dividend paid in May of the following year. Interim dividends are expected to represent around one third and final dividends around two thirds of the full year dividend for each year.  Annual dividends are expected to be covered some 2.5 to 3.0 times by earnings per share.

 

Despite the lower results for the first 6 months of 2012, the Board has declared an interim dividend of 2.4 pence per share which reflects its confidence in the Group's ability to generate progressive earnings over time. This will be payable on 5 October 2012 to shareholders on the register at the close of business on 7 September 2012.

 

Financial position

Total assets decreased slightly after depreciation of GBP3.5 million (H1 2011: GBP5.3 million) to GBP139.0 million (31 December 2011 : GBP143.8 million).

 

New additions to property, plant and equipment amounted to GBP3.2 million (H1 2011 : GBP4.1 million).

 

Other intangible assets of GBP1.3 million (31 December 2011 : GBPNil) includes primarily funds invested in Intellectual Property being developed for the Group by the Canadian company, SightPower, for use in mine inspection technology.

 

Net debt (comprising cash minus interest bearing debt and overdraft) was GBP8.6 million at 30 June 2012 (31 December 2011 : net cash of GBP6.1 million). Net cash on hand at 30 June 2012 was GBP5.2 million (31 December 2011 : GBP22.3 million). Subsequent to the reporting date, the Group's cash has improved by GBP16.3 million relating to funds received in advance on new projects.

 

Net current assets decreased to GBP9.2 million at 30 June 2012 (31 December 2011 : GBP16.8 million). Inventories remained at a high level of GBP15.8 million (31 December 2011 : GBP16.2 million) due to the grouting materials at our former client EuroChem. Trade and other receivables rose further to GBP61.1 million (31 December 2011 : GBP49.0 million) largely due to the slow recovery of extraordinary claims for work done at our Impala 16 and 17 projects and the delay in payment by EuroChem. Net current assets decreased as a result of the drop in cash and cash equivalents by GBP17.1 million.

 

Interest-bearing debt has decreased to GBP15.9 million (31 December 2011 : GBP16.2 million), resulting in a debt to equity ratio of 34.9% (31 December 2011 : 33.7%).

 

Order book

The Group's order book, representing outstanding revenues for contractually committed projects, excluding any escalation which is typically built into the contracts, increased to GBP347.9 million (31 December 2011 : GBP301.1 million). The increase is attributable to the award of new projects for Impala and Hindustan Zinc. 

 

The order book represented a split by geography as to 52.3% South Africa and 47.7 % Rest of World (31 December 2011 : 68.7% and 31.3% respectively).

 

Commodities represented in the order book were:

 

Commodity

30 June 2012

31 December 2011

Platinum

49%

58%

Gold

3%

8%

Chrome

1%

3%

Potash

-

31%

Zinc

47%

-

 

The potential pipeline of outstanding tenders and contract awards has increased to GBP1.1 billion (31 December 2011 : GBP1.0 billion).

 

The effect of translating foreign financial statements into the Group's reporting currency is a reduction in equity of GBP1.1 million (H1 2011 : GBP2.5 million).

 

Cash flow

Cash and cash equivalents have decreased by GBP17.1 million in the first 6 months of 2012 largely as a result of:

·     an increase in trade and other receivables of GBP14.5 million;

·     dividends paid of GBP2.3 million;

·     an increase in Intellectual Property being developed of GBP1.0 million;

·     expenditure on plant and equipment GBP3.2 million;

·     repayment of interest bearing borrowings of GBP1.9 million;

mitigated by:

·     an increase in deferred revenue received of GBP4.7 million;

·     cash from operations of GBP0.7 million.

 

Subsequent to the reporting date, the net cash position has improved by GBP16.3 million relating to funds received in advance on new projects which will be utilised to procure assets for the new projects over the months ahead.

 

Safety risk

Safety is one of the cornerstones of the Group's success. As a result, executive management adopt a daily monitoring of safety statistics with weekly presentations should any incident arise resulting in lost time injuries. The Safety, Health, Environment and Quality (SHEQ) Committee reviews the performance on a quarterly basis and reports to the Board with recommendations should they be required. A comprehensive set of safety procedures is regularly reviewed and updated for any new risks identified.

 

Financial risk

The risk of inadequately funding or inappropriately managing the funding of the business is a primary business risk. Regular daily reviews of cash management with rolling forecasts and strong controls over the management of cash are implemented by the executive management. The Board sets prudent policies for the hedging of currency and interest rate risk and the Audit and Risk Committee reviews these aspects on a quarterly basis. Insurance is taken to protect the Group against the risk of fraud or theft of funds.

 

Other significant financial risks include the safeguarding of assets, inappropriate tendering prices that could cause the Group to lose potential contracts, corrupt procurement practices resulting in excessive costs and mismanagement of expenditures. For each of these the Group has implemented appropriate policies and procedures and executive management regularly reviews performance against set targets. The Group has recently upgraded most its information systems to further enhance controls, improve the efficiency of reporting of information and to ensure its tendering process has the latest most accurate information on costs with less time and effort required. Some work remains on fully implementing the new systems in regard to payroll and time and attendance management.

 

Market risk

Market risk is the risk that changes in the market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

 

Foreign currency risk

The Group is exposed to currency risk on contract revenue, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group, primarily the South African Rand (ZAR), U.S. Dollar (USD), Russian Rouble (RUR), the United Arab Emirate Dirham (Dirham), the Euro (EUR) and the Indian Rupee (INR).

 

The Group ensures that its net exposure is kept to an acceptable level by buying and selling foreign currencies at forward rates where necessary to address short term imbalances. Where possible, the Group invoices in foreign currencies where its cost base is also in foreign currencies in order to

achieve a natural hedge position.

 

Interest rate risk

The Group is exposed to interest rate risk as it borrows and invests excess funds at both fixed and floating interest rates. The risk is managed by maintaining an appropriate mixture between fixed and floating rate borrowings and deposits within the Group's policy on counterparty risk parameters. The Group may occasionally use interest rate swaps, where deemed necessary to hedge its exposure to floating interest rates.

 

Exposure to credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers.

 

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer as well as the demographics of the Group's customer base, including the default risk of the industry and country in which the customers operate.

 

Management has established a strategy of spreading the customer base outside of Africa and into the CIS, Eastern and Western Europe and India. This will contribute towards avoiding geographical concentration of credit risk.

 

The Board of Directors has established parameters which, if these are to be exceeded, prior approval from the Board is required before submission of a tender to the potential new customer. These parameters are based on items such as the value of the contract, the type of contract, and location of the contract.

 

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main component of this allowance is a specific loss component that relates to individually significant exposure and a collective loss component established of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

 

Principal risks and uncertainties

The Group faces many risks in the operation of its business. The Group's strategy takes into account known risks, but not all risks are known to the group at any one time. Refer to pages 18 to 20 of the 2011 Annual Report and Accounts which is available from the Company's website, www.shaftsinkersgroup.com for a discussion on the principal risks and uncertainties facing the Group.

 

Chris Hall

Chief Financial Officer

 

 

 

Directors' responsibilities statement in respect of the condensed consolidated interim financial statements

The directors are responsible for preparing the condensed consolidated interim financial statements in accordance with applicable law and regulations. In addition, the directors have elected to prepare the condensed consolidated interim financial statements in accordance with International Financial Reporting Standards.

The condensed consolidated interim financial statements are required to state the affairs of the Group and of the profit or loss of the Group for that period.

 

In preparing condensed consolidated interim financial statements, the Directors are required to:

·     select suitable accounting policies and then apply them consistently;

·     make judgements and estimates that are reasonable and prudent;

·     state whether they have been prepared in accordance with International Financial Reporting Standards; and

·     prepare the condensed consolidated interim financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and to allow for the preparation of consolidated interim financial statements. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

We confirm that to the best of our knowledge:

·     the condensed set of consolidated interim financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the IASB; and

·     the interim management report includes a fair review of the information required by the DTR:

(a)    DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

Non Executive Chairman

Amre Youness

29 August 2012



Chief Financial Officer

Christopher Hall

29 August 2012

 

 

 

 

 

Independent Review Report to Shaft Sinkers Holdings PLC

Introduction

We have been engaged by the company to review the condensed consolidated set of financial statements in the half-yearly financial report of the Company and its subsidiaries (together "the Group") for the six months ended 30 June 2012, which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated set of interim financial statements.

 

This report is made solely to the Company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this 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 conclusions we have reached.

 

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 DTR of the UK FSA.

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as issued by the IASB. The condensed consolidated set of interim financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the IASB.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated set of interim 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 UK. 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 consolidated set of interim financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as issued by the IASB and the DTR of the UK FSA.

 

29 August 2012

 

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street

Douglas

Isle of Man

IM99 1HN

 

 

Condensed consolidated statement of income

for the period ended 30 June 2012

 


 

 

 

 

Note

 

Six months to 30 June 2012 (Reviewed)

GBP

 

Six months to 30 June 2011 (Reviewed) GBP

Year ended

31 December 2011

(Audited)

GBP

Revenue


100 419 840

112 305 360

226 539 543

Direct expenses


(89 863 971)

(93 230 855)

(188 262 281)

Gross profit


10 555 869

19 074 505

38 277 262

Operating income


1 880 908

1 486 400

5 190 993

Operating expense


(10 722 059)

(13 407 410)

(28 143 045)

Profit from operations

4

1 714 718

7 153 495

15 325 210

Finance income


 127 343

 148 893

 394 850

Finance expense


(768 284)

(1 080 732)

(2 213 950)

Profit before income tax


1 073 777

6 221 656

13 506 110

Income tax

5

(288 330)

(2 175 287)

(4 789 730)

Profit for the period


 785 447

4 046 369

8 716 380






Attributable to:





Owners of the Company


754 539

4 046 369

8 698 114

Non-controlling interest


 30 908

-

 18 266

Profit for the period


785 447

4 046 369

8 716 380






Earnings per share


 Pence

 Pence

 Pence

Basic earnings per share

6

1.6

8.5

 18.3

Diluted earnings per share

6

1.6

8.5

 18.2

 

The Directors consider all results derived from continuing operations.

The accompanying notes form an integral part of the condensed consolidated interim financial statements.

 

Condensed consolidated statement of comprehensive income

for the period ended 30 June 2012

 



 

Six months to 30 June 2012 (Reviewed)

GBP

 

Six months to 30 June 2011 (Reviewed) GBP

Year ended

31 December 2011

(Audited)

GBP

Profit for the period


785 447

4 046 369

8 716 380






Other comprehensive income





Revaluation of property, plant and equipment


-

-

412 145

Income tax on revaluation of property, plant and equipment


-

-

(88 747)

Foreign currency translation differences for foreign operations


(1 067 319)

(2 455 044)

(6 960 314)

Other comprehensive (loss) / income for the period, net of tax


(1 067 319)

(2 455 044)

(6 636 916)

Total comprehensive (loss) / income for the period


(281,872)

1 591 325

2 079 464






Attributable to:





Owners of the Company


(312 780)

1 591 325

2 061 198

Non-controlling interest


30 908

-

18 266

(Loss) / profit for the period


(281,872)

1 591 325

2 079 464

 

The accompanying notes form an integral part of the condensed consolidated interim financial statements.

 

Condensed consolidated statement of financial position

at 30 June 2012

 


 

 

 

 

Note

 

Six months to 30 June 2012 (Reviewed) GBP

 

Six months to 30 June 2011 (Reviewed)  GBP

Year ended

31 December 2011

(Audited)

GBP

Assets





Non-current assets


53 315 182

59 372 542

54 892 004

Property, plant and equipment

7

44 264 664

51 607 212

46 332 700

Goodwill

8

2 121 520

2 491 319

 2 172 667

Other intangible assets

9

1 297 897

-

-

Other unlisted investments


820

156 191

845

Loan to related party


33 624

45 706

-

Loans receivable


 -

-

320 238

Deferred taxation


4 635 028

4 122 028

4 872 910

Finance lease receivables


 961 629

950 086

1 192 644

Current assets


85 646 440

99 157 908

88 955 344

Inventories


15 805 008

13 393 493

16 244 485

Trade and other receivables


61 076 486

53 979 655

48 995 514

Finance lease receivables


485 842

452 700

474 440

Loans receivable


82 123

-

 39 861

Income taxation


904 658

-

902 653

Cash and cash equivalents


7 292 323

31 332 061

22 298 391

Total assets


 138 961 622

 158 530 450

143 847 348

Equity and liabilities





Equity 


45 639 572

48 536 413

48 024 094

Ordinary share capital


56 563 799

56 563 799

56 563 799

Retained earnings


36 376 467

34 390 183

37 901 928

Foreign currency translation reserve


(454 520)

4 902 716

574 557

Common control reserve


(48 965 631)

(48 965 631)

(48 965 631)

Share based payment reserve


475 215

455 876

389 235

Revaluation reserve


1 297 515

1 189 470

1 335 757

Equity attributable to owners of the Company


45 292 845

48 536 413

47 799 645

Non-controlling interest


346 727

-

224 449

Non-current liabilities


16 914 773

31 434 600

23 652 104

Deferred taxation


   6 238 641

1 378 541

6 795 749

Deferred revenue


855 190

6 278 901

4 174 100

Interest bearing borrowings

10

9 471 063

14 416 887

12 305 185

Interest free advances from clients


-

8 924 500

-

Post retirement benefit obligation


349 879

435 771

377 070

Current liabilities


76 407 277

78 559 437

72 171 150

Trade and other payables, including derivatives


33 892 712

38 417 418

34 908 849

Deferred revenue


10 262 274

13 118 681

8 595 742

Income taxation


1 613 316

4 091 264

344 471

Interest bearing borrowings

10

4 397 851

6 297 182

3 888 492

Interest free advances from clients


24 180 560

13 234 509

24 433 596

Bank overdraft


2 060 564

3 400 383

-

Total equity and liabilities


138 961 622

158 530 450

143 847 348

 

The accompanying notes form an integral part of the condensed consolidated interim financial statements.

 

Condensed consolidated statement of changes in equity

for the period ended 30 June 2012

 

 


 

 

 

 

 

 

 

Ordinary share capital

     GBP

 

 

Retained earnings

 GBP

Foreign currency translation reserve

GBP

 

Common control reserve

GBP

Share based payment reserve GBP

 

 

Revaluation reserve GBP

 

Non-controlling interest

GBP

 

 

 

 

Total GBP

Balance at 1 January 2011


56 563 799

30 343 814

7 275 524

(48 965 631)

20 669

1 271 706

-

46 509 881

Share based payment transactions






435 207



 435 207

Profit for the period



4 046 369






4 046 369

Other comprehensive income










Foreign currency translation differences for foreign operations



-

(2 372 808)



(82 236)


(2 455 044)











Total comprehensive income for the period


-

4 046 369

(2 372 808)

-

-

 (82 236)

-

1 591 325

Balance at 30 June 2011


56 563 799

34 390 183

4 902 716

(48 965 631)

455 876

1 189 470

-

48 536 413

Share based payment transactions






(66 641)



(66 641)

Dividend paid



(1 140 000)






(1 140 000)

Acquisition of non-controlling interest in Shaft Sinkers Mining (Pty) Limited by black economic empowerment partners








206 183

206 183

Profit for the period



4 651 745





18 266

4 670 011

Other comprehensive income










Revaluation of property, plant and equipment







 412 145


 412 145

Deferred taxation on property, plant and equipment







 (88 747)


(88 747)

Foreign currency translation differences for foreign operations




(4 328 159)



(177 111)


(4 505 270)











Total comprehensive income for the period


-

4 651 745

(4 328 159)

-

-

146 287

224 449

694 322











Balance at 31 December 2011


56 563 799

37 901 928

 574 557

(48 965 631)

389 235

1 335 757

224 449

48 024 094

Dividends paid



(2 280 000)






(2 280 000)

Share based payment transactions






85 980



85 980

Arising of issue of shares to minorities








91 370

91 370

Profit for the period



754 539





30 908

 785 447

Other comprehensive income










Foreign currency translation differences for foreign operations




(1 029 077)



 (38 242)


(1 067 319)

Revaluation of property, plant and equipment




















Total comprehensive income for the period


-

754 539

(1 029 077)

-

-

 (38 242)

30 908

 (281 872)











Balance at 30 June 2012


56 563 799

36 376 467

(454 520)

(48 965 631)

475 215

1 297 515

346 727

45 639 572

 

The accompanying notes form an integral part of the condensed consolidated interim financial statements.

 

Condensed consolidated statement of cash flows

for the period ended 30 June 2012

 


Note

 

Six months to

30 June 2012 (Reviewed) GBP

 

Six months to

30 June 2011 (Reviewed) GBP

Year ended

31 December 2011

(Audited)

GBP

Increase in inventories


(31 298)

(5 533 462)

(10 285 447)

Increase in trade and other receivables


(14 528 612)

(6 983 253)

(10 884 495)

(Decrease) / increase in trade and other payables


(111 279)

1 483 265

2 690 170

Increase in deferred revenue and advances from clients


4 748 661

1 532 954

12 242 558

Payment of retirement benefit obligation


(16 955)

(21 344)

(43 352)

Cash (utilised in) / generated by operations


(9 234 367)

3 446 140

12 016 686

Interest paid


(768 284)

(1 080 732)

(1 969 425)

Interest received


127 343

148 893

394 850

Dividends paid


(2 280 000)

 -

(1 140 000)

Income taxation refunded / (paid)


731 676

(2 010 171)

(4 514 977)

Net cash (outflow) / inflow from operating activities


(11 423 632)

504 130

4 787 134

Cash flows from investing activities





Plant and equipment acquired


(3 219 335)

(4 106 250)

(10 373 338)

Improvements to land and buildings


 -

 -

(132 229)

Proceeds from disposal of property, plant and equipment


256 258

 -

1 012 458

Increase in other intangible assets


(975 659)

-

-

Proceeds from disposal of non-controlling interest in subsidiary


-

-

107 039

Loans granted to third parties


 -

 -

 (363 434)

Increase in unlisted investments


 -

 (200 385)

 -

Decrease / (increase) in finance lease receivables


177 751

155 364

(331 807)

Repayments received from joint venture partners


 -

 -

634

Repayments received on related party loans


 -

 -

432 770

Net cash outflow from investing activities


(3 760 985)

(4 151 271)

(9 647 907)

Cash flows from financing activities





Repayments made on interest bearing borrowings


(1 907 983)

(2 113 792)

(3 943 731)

Repayments made on finance lease obligations


(16 661)

 -

(117 308)

Related party loans granted


(33 624)

 -

 (435 822)

Net cash inflow/(outflow) from investing activities


(1 958 268)

(2 113 792)

(4 496 861)

Net decrease in cash and cash equivalents


(17 142 885)

(5 760 934)

(9 357 634)

Cash and cash equivalents at the beginning of the period


22 298 391

35 559 630

35 559 630

Effect of exchange rate differences on cash and cash equivalents


76 253

(1 867 018

(3 903 605)

Total cash and cash equivalents at the end of the period


5 231 759

27 931 678

22 298 391

 

The accompanying notes form an integral part of the condensed consolidated interim financial statements.

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2012

 

1

Reporting entity





Shaft Sinkers Holdings plc ("the Company") is domiciled in the Isle of Man. The condensed consolidated interim financial statements of the Company as at and for the six months ended to 30 June 2012 comprise the Company and its subsidiaries (together referred to as the Group) and the Group's interests in jointly controlled entities.






2

Basis of preparation









2.1

Statement of compliance





The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting, as issued by the IASB. As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed consolidated set of interim financial statements have been prepared by applying the accounting policies that were applied in the preparation of the Group's consolidated annual financial statements for the year ended 31 December 2011, and will be applied for the preparation of the consolidated annual financial statements for the year ended 31 December 2012.







The condensed consolidated interim financial statements do not include all of the information and disclosures required for the Group's annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 31 December 2011. The consolidated annual financial statements for the year ended 31 December 2011 are available upon request from the Company's registered office at 18 Athol Street, Douglas, Isle of Man, IM1 JA1.







These condensed consolidated interim financial statements were approved by the Board of Directors on 29 August 2012.






2.2

Estimates










The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.







In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2011.

2.3

Going concern










In assessing the Group's ability to continue as a going concern the Board of Directors has reviewed the Group's latest forecasts for the period 2012 to 2014. These forecasts focus both at a profit level as well as on the cash flow and liquidity levels of the Group. The forecasts were then subjected to a stress test whereby all non-secured forecasted items were eliminated from the current Group forecast. Based on this evaluation as well as taking cognisance of the available facilities of the Group, the condensed consolidated interim financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future.






3

Significant accounting policies





The accounting policies applied by the Group in these condensed consolidated interim financial statements are substantially  the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2011, except as detailed below:







On 1 January 2012 the Group changed its accounting policy governing the measurement of inventory from the first in first out method (FIFO) to the weighted average cost formula. The change in accounting policy has been applied prospectively from 1 January 2012. The change in accounting policy had no material impact on the current and prior reporting periods.






4

Profit from operations










The following items form part of the Group's financial performance and, due to their significance, has been disclosed to assist in the understanding of the financial performance achieved by the Group for consistency with prior periods.

 


 

Six months to

30 June 2012 (Reviewed)

GBP

 

Six months to

30 June 2011 (Reviewed)

GBP

Year ended

31 December 2011

(Audited)

GBP

Impairment allowances on trade and other receivables




- raised

 1 272 989

 -

 2 284 658

- reversed

 (687 682)

 -

 (174 923)

Impairment loss recognised on plant and equipment

 279 710

 -

 -

IPO bonuses paid

 -

 2 296 182

 3 133 771

Depreciation of property, plant and equipment

 3 459 413

5 345 985

 9 603 430

 

5

Income tax










The effective tax rate decreased to 27% in H1 2012 from 35% in 2011. The decrease in the effective tax rate is due to the fact that no dividends were declared during H1 2012 from the South African subsidiaries to the Isle of Man company as was the case in 2011. The dividend declared in 2011 gave rise to a South African tax on dividends being levied in 2011 that amounted to GBP0.6 million, which was not repeated in H1 2012.











6

Earnings per share










Basic earnings per share










The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders of GBP754,539 (30 June 2011: GBP4,046,369 and 31 December 2011: GBP8,698,114) and a weighted average number of ordinary shares outstanding of 47,500,000 (30 June 2011: 47,500,000 and 31 December 2011: 47,500,000)







Diluted earnings per share










The calculation of diluted earnings per share is based on profit attributable to ordinary shareholders of GBP754,539 (30 June 2011: GBP4,046,369 and 31 December 2011: GBP12,633,185) and a weighted average number of ordinary shares outstanding of 47,750,000 (30 June 2011: 47,750,000 and 31 December 2011: 47,688,545).

 

 

 

The weighted average number of ordinary shares was calculated as follows:



 


 

Six months to 30 June 2012 (Reviewed) GBP

 

Six months to 30 June 2011 (Reviewed) GBP

Year ended  31 December 2011  (Audited)  GBP

Weighted average number of ordinary shares at the end of the period used in the computation of basic earnings per share

 47 500 000

 47 500 000

 47 500 000

Shares that may potentially be issued in terms of the LTIP scheme as described in note 11

250 000

  250 000

  188 545

Weighted average number of ordinary shares at the end of the period

 47 750 000

47 750 000

 47 688 545

 

7

Property, plant and equipment



7.1

Reconciliation of property, plant and equipment

 


 

 

Plant and equipment

 

 

 

Land

 

 

 

Buildings

Furniture, fittings and office equipment

 

 

Motor vehicles

 

 

 

Total

2012







Cost or valuation







Balance at beginning of period

60 425 544

2 614 189

4 239 621

3 212 588

1 037 888

71 529 830

Additions

2 756 199

-

46 209

233 384

183 543

3 219 335

Revaluation

-

-

-

-

-

-

Disposals

(2 017 493)

-

-

(17 070)

(186 223)

(2 220 786)

Effect of exchange differences on translation from functional to presentation currency

(1 754 303)

(74 842)

(122 901)

(99 111)

(29 624)

(2 080 781)

Balance at end of the period

59 409 947

2 539 347

4 162 929

3 329 791

1 005 584

70 447 598








Depreciation and impairment losses







Balance at beginning of period

21 868 225

-

452 190

2 311 533

565 182

25 197 130

Depreciation

3 072 835

-

44 017

236 874

105 687

3 459 413

Impairment

279 710

-

-

-

-

279 710

Disposals

(1 947 650)

-

-

(9 301)

(16 757)

(1 973 708)

Effect of exchange differences on translation from functional to presentation currency

(672 414)

-

(14 398)

(73 685)

(19 114)

(779 611)

Balance at end of the period

22 600 706

-

481 809

2 465 421

634 998

26 182 934








Carrying value







Balance at beginning of period

38 557 319

2 614 189

3 787 431

901 055

472 706

46 332 700

Additions

2 756 199

-

46 209

233 384

183 543

3 219 335

Revaluation

-

-

-

-

-

-

Disposals

(69 843)

-

-

(7 769)

(169 466)

(247 078)

Depreciation for the period

(3 072 835)

-

(44 017)

(236 874)

(105 687)

(3 459 413)

Impairment

(279 710)

-

-

-

-

(279 710)

Effect of exchange differences on translation from functional to presentation currency

(1 081 889)

(74 842)

(108 503)

(25 426)

(10 510)

(1 301 170)

Balance at end of the period

36 809 241

2 539 347

3 681 120

864 370

370 586

44 264 664

 

7.2

Change in estimate










During the period under review the useful lives of items of plant and equipment were reassessed resulting in an increase in useful life and a reduction in depreciation charge of GBP0.8 million (2011: GBP Nil) being processed.

 

8

Goodwill









8.1

Impairment testing





An impairment test was performed on the goodwill balance of the Group on 30 June 2012, whereby the recoverable amount of the Group's underlying assets was based on the value in use, which was determined using a discounted cash flow model.

 







The recoverable amount was compared to the carrying amount of goodwill and it was found that the recoverable amount significantly exceeded the carrying amount.






8.2

Key assumptions used in the discounted cash flow projections









The budgeted and forecast earnings before interest, taxation, depreciation, inflation and amortisation for the period 2012 to 2014 are consistent with budgets and forecasts approved by the Board of Directors, whilst for the 2015 financial year a growth rate of 10% on earnings achieved in 2014 was forecasted; and

 







A weighted average cost of capital of 15.51% was used as the pre-tax discount rate in determining the present value of future cash flows.






9

Other intangible assets




 


 

Six months to

 30 June 2012 (Reviewed)

GBP

 

Six months to

 30 June 2011 (Reviewed)

GBP

Year ended

31 December 2011

(Audited)

GBP


Development costs capitalised

 1 297 897

-

-

 


During the period under review the Group concluded an agreement with SightPower Incorporated, whereby the parties agreed to further develop intellectual property relating to automated mine shaft inspection, through a subsidiary of the Group.







Since the development of the intellectual property is still continuing no amortisation or impairment losses have been raised against the development costs incurred to date as the current net book value is deemed to be fully recoverable once the development of the technology is complete.






10

Loans and borrowings










During the period under review the Group repaid a total of GBP1.9 million (2011: GBP2.1 million) of capital and GBP0.4 million (GBP0.9 million) of interest in respect of interest bearing borrowings of the Group.

 

11

Share based payment arrangements










Description of the share based payment arrangements










On 23 December 2010 three executive directors of the Company were given awards over a number of ordinary shares of the Company. This share based payment arrangement is to be satisfied at the end of the vesting periods and will be effected through the transfer of ordinary shares to the qualifying participants. This share based payment arrangement is therefore considered to be equity settled as defined in IFRS 2 - Share based payments

 

On 19 July 2011, Mr RN Schroder resigned as Chief Operating Officer of the Company. Due to his resignation the portion of the ordinary shares that was awarded to him is forfeited and these ordinary shares are returned to the scheme for possible future allocation.







Terms and conditions of the share based payment arrangements









The share based payment arrangements comprise of two performance conditions that will be measured in stages over the vesting periods. The performance conditions, described below, are independent of each other and therefore have been accounted for as separate share based payment arrangements.







The performance conditions that are applied for the share based payment arrangements are as follows:







- growth in earnings per share ("EPS") of the Company





- growth in the Company's share price










EPS share based payment arrangement










In order for the shares attributable to the growth in earning per share of the Company to vest, the Group has to achieve a cumulative growth in earnings for each of the financial years ending 31 December 2011 to 31 December 2013 of at least 20 per cent per annum. In the event that the growth in earnings is between 10 and 20 per cent per annum, between 50 to 100 per cent of the shares will vest on a straight line basis. In the event that the growth in earnings is less than 10 per cent, none of the shares will vest.







In the event that the compounded growth per annum over the three year period is 20 per cent per annum all of the shares will vest to the participants despite not having achieved the targeted growth rate in a particular year.












Share price based payment arrangement










In order for the shares attributable to the growth in share price of the Company to vest, the share price of the Company has to achieve cumulative growth of at least 26 per cent per annum for each of the financial years ending 31 December 2011 to 31 December 2013. The base price for the financial year ending 31 December 2011 is the placing price at which the Company's shares were listed i.e. GBP 1.24 per share. In the event that the growth in share price is between 13 and 26 per cent per annum, between 50 to 100 per cent of the shares will vest on a straight line basis. In the event that the share price growth rate is less than 13 per cent per annum, none of the relevant shares will vest.







In the event that the closing share prices over the 30 days following the announcement of the Group's audited results for the financial year ending 31 December 2013 is 100 per cent or more above the placing price, despite not having achieved the 26 per cent per annum growth in its share price in any year, the share price performance criteria will be deemed to have been achieved and the participants will be entitled to 100 per cent of the share awards.







Inputs for measurement of grant date fair values










The grant date fair value of the share based payment arrangements was measured based on the Monte Carlo Simulation option pricing model. Volatility was based on the historical share price data of the constituents of the Oil services and equipment sector on the London Stock Exchange. The inputs used in the measurement of the fair values at grant date of the share based payment arrangements were as follows:






 

 

Description

 

Fair value per share right

 

Assumed vesting date

 

Share price at grant date

 

Number of days

 

Number of shares

 Weighted average volatility

 


GBP


GBP




 

Share price growth







 

1st tranche

0.63

10 April 2012

 1.24

 474

 375 000

52.51%

 

2nd tranche

0.52

10 April 2013

 1.24

 839

 375 000

52.51%

 

3rd tranche

0.72

10 April 2014

 1.24

 1 204

 375 000

52.51%

 








 

EPS shares







 

1st tranche

1.22

10 April 2012


 474

 250 000

52.51%

 

2nd tranche

1.11

10 April 2013


 839

 250 000

52.51%

 

3rd tranche

0.99

10 April 2014


 1 204

 250 000

52.51%

 

 

 

12

Contingent liabilities

 

Six months to

 30 June 2012 (Reviewed) 

GBP

 

Six months to

30 June 2011 (Reviewed)

GBP

Year ended 31 December

2011

 (Audited)

 GBP







Contractual performance and/or retention guarantees and payment bonds held by contracted clients and service providers at the reporting date

 24 520 789

 5 094 063

 5 010 092







During the period under review the Group increased its guarantee facilities with the Standard Bank of South Africa Limited. A portion of the increased facilities were used to issue guarantees for the Group's newly awarded project in India in exchange for advance payments that were received subsequent to the interim reporting date.











13

Capital commitments

 

Six months to

30 June 2012 (Reviewed) 

GBP

 

Six months to 30 June 2011 (Reviewed)

 GBP

Year ended

 31 December 2011 

(Audited)

GBP







Capital expenditure authorised and:





- contracted for

 -

 -

 1 000 000


- not yet contracted for

 7 515 020

 11 265 805

 5 507 744

 

 

14

Segmental reporting












Information about reportable segments












The Group has two reportable segments, as described below, which are the Group's strategic divisions. The strategic divisions of the Group are geographically different and are managed separately due to the unique challenges and risks that are present when operating in different jurisdictions. Although the METS division is a strategically important part of the business it is not regarded as a separate operating segment as defined in IFRS 8 due to the fact that the profits that the METS division contributes to the Group is less than 10% of the total contribution of the Group's contracting activities.








The following describes the Group's operating segments:












- South Africa - Contract services provided to clients within the Republic of South Africa




- Rest of world - Contract services provided to clients outside of the borders of the Republic of South Africa.









The Group's foreign revenues are mostly derived from contract services provided in Russia and India, with the revenues generated from Russia making up the majority of foreign revenues.








Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax as described below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group's executive management. The information is prepared under IFRS and is consistent with the Group's accounting policies. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments taking into consideration the unique risk characteristics of each of these segments.








Other corporate activities comprise activities that do not by definition form part of the operating segments as well as the head office activities which could not be assigned to an individual segment. Inter segment transactions are concluded on an arm's length basis.







 


South Africa

Rest of world

Other corporate activities

Total

30 June

2012

2011

2012

2011

2012

2011

2012

2011


GBP

GBP

GBP

GBP

GBP

GBP

GBP

GBP

External revenues

89 338 529

92 660 654

11 081 311

19 644 706

-

-

100 419 840

112 305 360

Gross profit

9 149 851

13 223 332

1 406 018

5 851 173

-

-

10 555 869

19 074 505

Depreciation and amortisation

2 988 691

3 683 425

426 706

1 617 897

44 016

44 663

3 459 413

5 345 985

Finance income

93 956

145 012

623

-

32 764

3 881

127 343

148 893

Finance expense

67 115

1 016 327

900

64 405

700 269

-

768 284

1 080 732

Reportable segment profit before income tax

5 190 734

7 535 031

786 086

4 645 214

(4 903 043)

(5 958 589)

1 073 777

6 221 656

Reportable segment assets

84 481 081

95 276 781

41 075 044

44 878 592

13 405 497

22 069 690

138 961 622

162 225 063

Capital expenditure

3 173 126

3 477 576

-

648 239

46 209

-

3 219 335

4 125 815

Reportable segment liabilities

55 275 180

62 787 629

25 112 002

24 156 626

12 934 868

26 744 395

93 322 050

113 688 650

 

All of the Group's segments are considered fully operational and have, accordingly, not been reclassified as discontinued operations.

 





 

15

Related parties










During the period ended 30 June 2012 the Group registered the following new subsidiaries to conduct the operations of the Group in the various jurisdictions in which the Group operates. These subsidiaries are all entities formed by the Group and therefore do not constitute a business combination as defined by IFRS 3 - Business combinations.








% interest

Country of

incorporation


- Shaft Sinkers Cooperatief UA

100

Netherlands



- Shaft Sinkers International BV

100

Netherlands



- Shaft Sinkers Mauritius Limited

100

Mauritius



- Gartly Resources Limited

80

Isle of Man



- Shaft Sinkers Kazakhstan LLP*

25

Kazakhstan








* The Group controls the company through a shareholders agreement with the majority shareholder and the company is therefore considered to be a subsidiary even though the Group's interest is below 50%. The majority shareholder of Shaft Sinkers Kazakhstan LLP is not related to IMR BV, the largest shareholder of Shaft Sinkers Holdings plc.






 

16

Reconciliation of cash generated by operating activities before working capital changes



 



 

Six months to 30 June

2012 (Reviewed)

GBP

 

Six months

to 30 June 2011 (Reviewed)

GBP

 

Year ended 31 December

2011

(Audited)

GBP







Profit from operations per statements of comprehensive income

 1 714 718

 7 153 495

 15 325 210


Adjustments for non-cash items included in:





Depreciation of property, plant and equipment and impairment

 3 459 413

 5 345 985

 9 603 430


(Loss) / profit on disposal of property, plant and equipment

 (9 181)

 -

 35 060


Impairment losses recognised on plant and equipment

 279 710

 -

 -


Impairment allowance on trade and other receivables raised/(reversed)

 585 307

-

 2 109 735


Raising/(reversal) of write down of inventory to net realisable value

 4 836

 (1 767)

 29 532


Deferred revenue released during the year

 (6 079 348)

 (8 421 080)

 (14 123 528)


Raising of impairment loss on loans to joint venture partners

 -

 35 060

 51 708


Loss on disposal of interest in Shaft Sinkers Mining (Proprietary) Limited

 44 884

 -

 117 925


Fair value gain on revaluation of unlisted investment

 -

 -

 (126)


Unrealised foreign exchange difference

 618 797

 -

 4 515 411


Share based payment expense arising on share based payment arrangements

 85 980

 -

 368 566


Share based payment expense arising on black economic empowerment transaction in respect of Shaft Sinkers Mining (Proprietary) Limited

 -

 -

 244 665


Increase in retirement benefit obligation

 -

 435 207

 19 664


Cash generated by operations before working capital changes

 705 116

 4 546 900

 18 297 252

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR PGUQPRUPPPUB
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.