EGM's Parthian shot

Pan African Resources 19 July 2018 Update
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Pan African Resources

EGM's Parthian shot

Operational update

Metals & mining

19 July 2018

Price

7.95p

Market cap

£178m

ZAR17.6631/£, ZAR13.3595/US$, US$1.3217/£

Net debt at end-December 2017 (£m) excluding ZAR52.3m (£3.0m) of MC Mining shares (formerly Coal of Africa)

42.2

Shares in issue*

2,234.7m

*Effective 1,928.3m post-consolidation

Free float

86%

Code

PAF

Primary exchange

JSE/AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.2

11.6

(45.4)

Rel (local)

1.8

6.4

(47.7)

52-week high/low

15.8p

6.5p

Business description

Pan African Resources has four major producing or near-producing precious metals assets in South Africa: Barberton (target output 95koz Au pa), the Barberton Tailings Retreatment Project (20koz), the Evander Tailings Retreatment Project (10koz) and Elikhulu (55koz).

Next events

FY18 results

August/ September 2018

Analyst

Charles Gibson

+44 (0)20 3077 5724

Pan African Resources is a research client of Edison Investment Research Limited

On 12 July 2018, Pan African Resources (PAF) announced that production to the end of June was 160,421oz cf prior guidance of 157-160koz for the year, with the outperformance exclusively attributable to underground operations at Evander (EGM). More significantly, for the first time management provided guidance of 170koz for FY19, which was materially above our prior expectation of 140koz on account of construction at Elikhulu continuing to progress “ahead of schedule”, such that it is now entering the commissioning phase with first gold expected in August ahead of a two-month ramp-up to full production. As a result, we have increased our EPS forecasts modestly for FY18 (although large in percentage terms) and materially for FY19.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/16

168.4

45.9

2.08

0.88

3.8

11.1

06/17

167.8

19.4

1.22

0.45

6.5

5.7

06/18e

152.5

3.2

0.27

0.00

29.5

0.0

06/19e

165.9

38.1

1.55

0.67

5.1

8.4

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, and exceptional items.

Rand weakness compensates for gold weakness

In the near term, our gold price forecast for FY19 remains unchanged at US$1,291/oz. However, Pan African will benefit from the recent 8.6% decline in the value of the South African rand against the US dollar since H218.

Elikhulu compensates for EGM

In the longer term, the development of Elikhulu should increase output to a steady-state level of c 181koz and, as such, it will largely replace production lost from Evander underground – albeit at a much higher margin.

Valuation: On a rising trend again

Updating our long-term forecasts, our headline absolute valuation of PAF has risen by 0.42p to 13.01p. Including new projects and other assets, however, our all-in valuation has risen by 0.96p to 17.53p plus the value of c 20.1m underground Witwatersrand ounces, which could lie anywhere in the range 0.17-4.15p per share, depending on market conditions. At the same time, if PAF’s average price to normalised current year EPS ratio of 9.7x in the period FY10-17 is applied to our forecasts, then its share price should be 15.1p in FY19 and 18.7p in FY20. In addition, it remains cheaper than its South African- and London-listed gold mining peers on at least 41% of valuation measures on the basis of our forecasts, or 58% on the basis of consensus forecasts. Based on our assumptions, its FY19 dividend yield is also the third-highest of the 65 ostensibly precious metals’ companies paying dividends (see Exhibit 11). It is also trading below its interim book value of 11.8p per share (H118).

Operational update

On 12 July 2018, Pan African Resources released an operational update stating that production for the group for the 12 months to 30 June was 160,421oz, compared with prior guidance of 157-160koz for the year, with the outperformance exclusively accounted for by underground operations at Evander. A comparison of our prior expectations for both H218 and FY18 (which had previously been towards the bottom of management’s guidance range) and actual production figures is provided in Exhibit 1, below. More significantly, for the first time management has provided guidance for the FY19 financial year. This was 29,659oz, or 21.1%, above our prior expectations, at 170,000oz, reflecting that construction at Elikhulu has continued to progress “ahead of schedule” such that the construction teams are now entering the commissioning phases of the project in anticipation of a two-month ramp-up to full production and first gold being produced in August 2018. A summary of our production expectations, by business segment (and now aligned with management guidance) is as follows:

Exhibit 1: PAF group-wide production, actual and forecast, FY14-FY19e (oz)

Operation

FY14

FY15

FY16

FY17

H118

H218e

(previous)

H218e (current)

FY18e
(previous)

FY18e (current)

FY19e (previous)

FY19e (current)

Barberton

88,738

81,493

84,690

71,763

32,159

40,885

40,885

73,044

73,044

94,641

84,641

Evander

76,556

63,558

73,496

43,304

32,734

13,266

17,185

46,000

49,919

0

0

BTRP

22,885

24,283

28,591

26,745

8,452

9,115

9,132

17,567

17,584

20,000

20,000

ETRP

0

6,523

18,151

29,473

11,937

9,063

7,937

21,000

19,874

10,000

20,000

Elikhulu

0

0

0

0

0

0

0

0

0

15,700

45,359

Total

188,179

175,857

204,928

173,285

85,282

72,329

75,139

157,611

160,421

140,341

170,000

Source: Edison Investment Research, Pan African Resources. Note: Numbers may not add up owing to rounding.

Note that, all things being equal, the implied level of production from Elikhulu for FY19 suggests 81% capacity utilisation during the year or, alternatively, that it will operate at the equivalent of full capacity for 9.7 months out of the 12-month period.

Incidental equity raising

On 31 May 2018, Pan African Resources announced it had been notified that PAR Gold had disposed of 130m shares in PAF, representing 5.8% of the issued share capital of the company, at a price of ZAR1.15 per share. In the aftermath of the disposal, PAR Gold has continued to hold 306.36m Pan African Resources shares, representing 13.7% of the issued share capital of the company. The Pan African Resources shares held by PAR Gold are treated as treasury shares and eliminated on consolidation for the purposes of calculating earnings per share. Following the disposal, the number of shares issued by PAF is therefore as follows:

Exhibit 2: Pan African Resources’ shares outstanding

Number of shares

Total issued shares

2,234,687,537

Less share held by PAR Gold (subsequent to disposal)

306,358,058

Shares taken into account for EPS purposes

1,928,329,479

Total issued shares

Less share held by PAR Gold (subsequent to disposal)

Shares taken into account for EPS purposes

Number of shares

2,234,687,537

306,358,058

1,928,329,479

Source: Pan African Resources

As an indirect 49.9% shareholder in PAR Gold and, given the economic rights attached to its shareholding, Pan African has received the majority of the proceeds from this disposal, amounting to approximately ZAR126m, net of costs and capital gains taxes, which it will use for general corporate and liquidity purposes and to fund the expansion of the Elikhulu project’s throughput to 1.2Mtpm.

Short-term financial forecasts

As a result of the considerations outlined above, our detailed financial forecasts for PAF for H218 and FY18 are now as in Exhibit 3. Note that, as previously, the ZAR160m (£9.5m, US$13.0m) cost relating to the closure of the Evander 8 Shaft underground operation has been included under other income/(expenses) in H218 (and therefore also FY18). As such, it is included in our forecast of EPS and HEPS, but not in our forecast of normalised EPS (also in Exhibit 15 on page 9). In the meantime, group net assets attributable to Evander (excluding goodwill) amounted to £177.6m as at 31 December 2017, of which Edison estimates that the majority were accounted for by Evander underground operations (as opposed to the ETRP). The decision to close Evander underground operations could therefore result in an impairment in this order of magnitude (which has also been excluded from our forecasts below). When Pan African does report its FY18 results in September therefore, it may also opt to disclose them with Evander 8 Shaft underground reflected as a discontinued operation. Our estimates of PAF’s FY18e results, excluding the contribution from underground operations at Evander, is shown in the penultimate column below.

Exhibit 3: PAF underlying P&L statement by half-year (H115-H218e) actual and expected

£000s (unless otherwise indicated)

H216

H117

H217

H118

H218

(previous)

H218 (current)

FY18e (previous)

FY18e (current)

FY18e (excl Evander)

FY19e

Mineral sales

93,728

105,046

64,538

82,900

68,809

71,933

151,709

154,833

104,410

166,110

Realisation costs

(687)

(1,548)

(278)

(1,500)

(765)

(800)

(2,265)

(2,300)

(1,551)

(206)

Realisation costs (%)

0.73

1.47

0.43

1.81

1.11

1.11

1.49

1.49

1.49

0.12

On-mine revenue

93,041

103,498

64,261

81,400

68,043

71,133

149,443

152,533

102,860

165,904

Gold cost of production

(51,102)

(65,188)

(67,851)

(69,600)

(63,568)

(63,400)

Pt cost of production

(1,796)

(2,300)

(2,721)

0

Coal cost of production

(10,568)

(11,188)

0

Cost of production

(57,637)

(78,056)

(55,950)

(69,600)

(63,568)

(63,400)

(133,168)

(133,000)

(74,346)

(105,106)

Depreciation

(5,180)

(6,450)

(4,043)

(5,900)

(9,309)

(9,277)

(15,209)

(15,177)

(9,433)

(14,598)

Mining profit

30,225

18,992

4,267

5,900

(4,833)

(1,544)

1,067

4,356

19,081

46,199

Other income/(expenses)

(8,697)

2,175

(4,178)

(800)

(9,486)

(9,486)

(10,286)

(10,286)

(800)

(1,252)

Loss in associate etc

0

256

5,352

(400)

(400)

(400)

(400)

Loss on associate disposal

0

0

(4,854)

0

0

0

0

Impairment costs

0

0

0

Royalty costs

(1,606)

(968)

(367)

(300)

42

(234)

(258)

(534)

(875)

(1,623)

Net income before finance items

19,923

20,455

221

4,400

(14,277)

(11,263)

(9,877)

(6,863)

17,006

43,325

Finances income

299

70

222

700

 

 

Finance costs

(891)

(1,079)

(1,736)

(800)

 

 

Net finance income

(592)

(1,009)

(1,514)

(100)

(529)

(529)

(629)

(629)

(629)

(6,459)

Profit before taxation

19,331

19,446

(1,293)

4,300

(14,806)

(11,792)

(10,506)

(7,492)

16,377

36,866

Taxation

(4,754)

(5,475)

5,232

(1,000)

1,386

2,688

386

1,688

13,468

(8,132)

Marginal tax rate (%)

26

28

404.8

23.3

9.4

22.8

3.7

22.5

82.2

22.1

Deferred tax

0

Profit after taxation

14,577

13,970

3,940

3,300

(13,420)

(9,104)

(10,120)

(5,804)

6,285

28,734

EPS (p)

0.82

0.93

0.24

0.18

(0.75)

(0.50)

(0.56)

(0.32)

0.35

1.49

Normalised EPS (p)

1.31

0.78

0.50

0.23

0.02

0.27

0.41

1.55

HEPS* (p)

0.82

0.91

0.28

0.20

(0.75)

(0.50)

(0.56)

(0.32)

0.35

1.49

Normalised HEPS (p)

1.31

0.77

0.54

0.24

0.02

0.27

0.41

1.55

Diluted EPS (p)

0.82

0.93

0.24

0.18

(0.73)

(0.49)

(0.55)

(0.31)

0.34

1.46

Diluted HEPS* (p)

0.82

0.91

0.28

0.20

(0.73)

(0.49)

(0.55)

(0.31)

0.34

1.46

Diluted normalised HEPS (p)

1.31

0.77

0.54

0.24

0.02

0.26

0.40

1.52

Source: Pan African Resources, Edison Investment Research. Note: As reported basis; *HEPS = headline earnings per share (company adjusted basis).

Edison’s FY18 EPS forecasts (above) compare with a mean consensus estimate of 0.643p (cf 0.886p in May) and a median consensus estimate of 0.426p within the range 0.000-2.400p (source: Bloomberg, 13 July 2018).

Our (normalised) forecast of 1.55p for FY19 compares with our previous forecast of 0.92p and with a mean consensus of 1.217p (cf 1.392p/share in May) and a median consensus estimate of 1.000p within a range of 0.669-2.900p/share. Note that our gold price forecast for FY19 remains unchanged at US$1,291/oz.

In the meantime, management is reviewing the merits of mining the Evander 8 Shaft pillar, which may extend the final closure date of the shaft, generate positive cash flows and provide further employment opportunities for those affected by the Evander Section 189 retrenchment process. In addition, in recognition of the possibility that operations at Evander’s existing infrastructure could cease in the foreseeable future, on 28 March PAF announced it would reassess the feasibility study on the Egoli project (see A second glance at the first half, published in April 2018) as a standalone project, and this reassessment is expected to be completed imminently. Otherwise, the Evander Tailings Retreatment Project (ETRP) effectively represents a substantial pilot plant, designed to prove metallurgical recovery and cost parameters, before the development of the much larger Elikhulu project (see A second glance at the first half, published in April 2018). To benefit from Elikhulu’s economies of scale; however, management has stated that Elikulu’s capacity will be increased by 200ktpm from December 2018 to incorporate the existing ETRP throughput. The additional construction associated with this initiative will increase capex by c ZAR65m (US$4.9m, or £3.7m at prevailing forex rates), which is assumed to have occurred in H218 and H119 (as previously), but is not expected to alter the timeline at Elikhulu, with first gold still expected in August 2018 and full commissioning at the end of September 2018. However, management will continue to source material for toll-treatment with grades higher than the ETRP’s reserve and resource grades, thereby taking commercial advantage of the fact that it is the only retreatment operator in the area and is therefore (effectively) the buyer of choice – or even the buyer of last resort – for tailings assets in the region.

Long-term forecasts and absolute valuation

Three producing assets plus Elikhulu

The development of Elikhulu (which is now entering commissioning) should increase output to c 181koz in FY20. As such, it will largely replace production lost from Evander underground (see Exhibit 1) – albeit at a much higher margin – which underpins our longer-term earnings and cash-flow expectations.

Exhibit 4: Edison estimate of PAF production, FY17-FY20e (oz)

Source: Edison Investment Research

In the meantime, the value of the South African rand has fallen 8.6% against the US dollar and 4.4% against sterling compared to the average rate prevailing in H218 (ie January-June 2018), with the result that our absolute value of PAF (based on its three producing assets plus Elikhulu) has increased from 12.59p per share (see Finishing unfinished business, published on 16 May 2018) to 13.01p per share, based on the present value of our estimated maximum potential stream of dividends payable to shareholders over the life of its mining operations (applying a 10% discount rate).

Exhibit 5: PAF estimated life of operations diluted EPS and (maximum potential) DPS

Source: Edison Investment Research, Pan African Resources

Other assets

In the wake of the Evander underground closure, PAF could continue to count the Evander underground resources as one of its assets, albeit one that would be valued as an in-situ resource, rather than, as previously, on the basis of future earnings, cash flows, dividends etc. At the current time, we estimate the underground resource at Evander (including 7 Shaft vamping, Rolspruit, Poplar and Evander South, but excluding 8 Shaft and Egoli, which is valued separately – see Exhibit 8) to be 20.1Moz, categorised as follows:

Exhibit 6: Evander underground resource estimate

Resources

Tonnes (kt)

Grade (g/t)

Moz

Measured

0

0.00

0.000

Indicated

48,276

10.24

15.892

Inferred

18,350

7.18

4.236

Total

66,626

9.40

20.127

Source: Pan African Resources, Edison Investment Research

The value of Witwatersrand basin resources (where Evander is located) has proved persistently difficult to place within a global context – a problem exacerbated by an absence of pure Wits basin exploration companies. PAF bought Evander from Harmony in mid-2012 at a price equivalent to US$5.26 per resource ounce (albeit the gold price was then materially higher, averaging US$1,668/oz in that year). Since then, we estimate that PAF has mined 415,840oz from Evander excluding the ETRP (389,229oz from underground sources), ie implying only 1.2% depletion relative to the acquired underground resource of 32.52Moz. More recently, Sibanye acquired Wits Gold (although then not a pure exploration company) at a price equivalent to US$0.22/oz, at a time when the gold price was c US$1,225/oz. Otherwise, a value for in-situ Witwatersrand gold ounces may be imputed from the US$2.78/oz value calculated by us for Bushveld platinum equivalent ounces (there still being pure platinum explorers in South Africa) in our report, Mining overview: Unlocking the price to NPV discount, published in November 2017 – contingent on investors accepting the similarities between Bushveld and Witwatersrand geology in terms of depth, reef width and continuity, mining methods etc. On the basis of these three valuation points, the in-situ value of the Evander underground assets could range from 0.23-5.49 US cents per PAF share, as shown below:

Exhibit 7: EGM underground

Valuation basis

Wits Gold acquisition in December 2012

Bushveld PtE exploration oz (Edison November 2017)

PAF acquisition of EGM in 2012

In-situ value (US$/oz)

0.22

2.78

5.26

Implied EGM underground valuation (US$m)

4.4

56.0

105.9

Ditto (US cents per share)

0.23

2.90

5.49

Source: Edison Investment Research

Note that, relative to the equivalent valuation in our note Finishing unfinished business published on 16 May 2018, the only change in our valuation here reflects the increased number of shares effectively in issue as a result of the PAR Gold sale of Pan African shares detailed on pages 2-3.

Including its growth projects, as discussed in our note A second glance at the first half, published in April 2018, a summary of our overall valuation of PAF is therefore now as follows:

Exhibit 8: PAF absolute valuation summary

Project

Current valuation

(pence/sh)

Previous valuation

(pence/sh)

Existing three producing assets plus Elikhulu

13.01

12.59

Egoli

3.91

3.31

Fairview Sub-Vertical Shaft Project

0.46

0.43

MC Mining shares*

0.15

0.24

Sub-total

17.53

16.57

EGM underground resource

0.17-4.15

0.18-4.27

Total

17.70-21.68

16.75-20.84

Source: Edison Investment Research

Note that the valuation changes to Egoli and the Fairview Sub-Vertical Shaft project reflect changes to timing (ie rolling forward our base valuation year for the purposes of our dividend discount model from FY18 to FY19), the number of shares in issue and prevailing foreign exchange rates only.

Historic and relative valuation

Historic

Exhibit 9, below, depicts PAF’s average share price in each of its financial years, from FY10 to FY17 and compares this with normalised HEPS in the same year. For FY18 to FY20, the current share price (of 7.95p) is compared with Edison’s forecast normalised HEPS for FY18 to FY20. Although PAF’s price to normalised HEPS ratio for FY18 is above the top of its recent historical range (based on our forecasts – see Exhibit 9, below), it once again falls well below it in FY19 (based on our upgraded estimates) and falls further below it in FY20, by which time we expect Elikhulu to be operating at full capacity.

Exhibit 9: PAF historical price to normalised HEPS ratio, FY10-FY20e

Source: Edison Investment Research, Bloomberg. Note: *Completed historic years calculated with respect to average share price within the year shown and normalised HEPS; zero normalisation assumed before 2016.

Stated alternatively, if PAF’s average contemporary price to normalised EPS ratio of 9.7x in the period FY10-17 is deemed to be ‘correct’, then its share price should be 15.1p in FY19 and 18.7p in FY20.

Relative

In the meantime, over the next two years PAF remains cheaper than its South African and London-listed gold mining peers on at least 41% of valuation measures (15 out of 36 measures in the table below on an individual company basis) using our forecasts, or 58% of measures (21 out of 36 measures) using consensus forecasts:

Exhibit 10: Comparative valuation of PAF with respect to South African peers

EV/EBITDA (x)

P/E (x)

Yield (%)

 

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

AngloGold Ashanti

4.0

3.8

12.4

10.4

1.2

1.5

Gold Fields

3.6

3.2

22.7

14.4

2.9

3.9

Sibanye

3.5

2.9

9.5

5.8

0.6

2.0

Harmony

2.8

2.4

6.5

8.5

1.2

1.7

Randgold Resources

9.8

8.9

22.1

19.7

4.4

5.3

Centamin

4.1

3.4

14.7

12.4

4.3

5.9

Average (excluding PAF)

4.6

4.1

14.6

11.8

2.4

3.4

PAF (Edison)

10.3

3.3

29.5

5.1

0.0

8.4

PAF (consensus)

6.3

3.2

13.1

6.5

3.8

5.1

Source: Edison Investment Research, Bloomberg. Note: Peers priced at 13 July 2018.

Dividend

PAF has a target dividend pay-out ratio of 40% of net cash generated by operating activities, after allowing for the cash flow effect of sustaining capital, contractual debt repayments and one-off items. On the basis of this policy, coupled with our expectations, we estimate that the company will be capable of paying a dividend of 0.67p per share in FY19, in which case it will have the third highest FY19 dividend yield of the 65 ostensibly precious metals’ companies paying dividends to shareholders:

Exhibit 11: Global gold mining companies ranked by forecast dividend yield (%)

Source: Bloomberg (BEst Div Yld BF12M) for peers, Edison Investment Research for PAF FY19. Note: Consensus data for peers priced 13 July 2018.

Financials

PAF had £42.2m of net debt on its balance sheet as at 31 December 2017 after the payment of a net £8.1m final dividend in late December (cf £7.0m as at June 2017, £33.2m as at December 2016, £22.8m as at 30 June 2016, £16.2m as at 31 December 2015 and £18.0m as at 30 June 2015). As such, at the interim stage, net debt equated to a gearing (net debt/equity) ratio of 19.9% and a leverage (net debt/[net debt + equity]) ratio of 16.6%.

PAF’s major immediate capital requirements relate to the development of the Elikhulu project. At end December 2017, ZAR511.7m in capex had been expended on the project and ZAR671.4m is expected by mid-February 2018 (excluding capitalised borrowing costs). Including the project to expand Elikulu’s throughput capacity by 200ktpm from December 2018 to incorporate the existing ETRP feed (see page 4), our forecasts for PAF’s immediate future capital expenditure commitments for the project are as follows:

Exhibit 12: Estimated Elikhulu capex requirements by financial year, FY19-23

£000s

FY19

FY20

FY21

FY22

FY23

Total capex*

36,221

7,203

16,069

16,069

5,084

Source: Pan African Resources, Edison Investment Research. Note: *Includes sustaining capex, but excludes phase 3 capex, which commences in FY26.

As a result, after investing activities we estimate that PAF will experience a net negative cash flow in FY18 and FY19, before a positive trend sets in once again from FY20 onwards. Maintaining a dividend policy of 40% of free cash flows less sustaining capital, debt repayments and exceptional items, PAF’s net debt funding requirement, on our estimates, will evolve as follows in the period from FY16 to FY22e:

Exhibit 13: PAF estimated funding requirement, FY16 to FY23e

Source: Edison Investment Research, Pan African Resources

Note that Edison’s estimate of PAF’s maximum net debt funding requirement of £65.7m (cf £90.3m previously) in FY19 equates to ZAR1,160m at prevailing forex rates, or contemporary gearing (debt/equity) of 28.0% and leverage (debt/[debt+equity]) of 21.9% (cf 42.0% and 29.6% previously, respectively).

Debt is financed via a ZAR1bn revolving credit facility (£56.6m at current exchange rates), of which ZAR676.6m (£38.3m) was drawn down as at end-H118, plus a banking facility. To ensure the group has adequate working capital and continuation of funding for operations and growth projects, Pan African has also finalised an additional standby facility of approximately ZAR100m. Also, in the past Rand Merchant Bank (a division of First Rand) has provided PAF with all the necessary approval for a ZAR1bn underwritten five-year debt facility for Elikhulu.

The group’s revolving credit facility (RCF) debt covenants and their actual recorded levels within recent history are as follows:

Exhibit 14: PAF group debt covenants

Measurement

Constraint

H118
(actual)

FY17
(actual)

H117
(actual)

FY16*
(actual)

HY16
(actual)

Net debt:equity

Must be less than 1:1

0.19:1

0.01:1

0.17:1

0.35:1

0.50:1

Net debt:EBITDA

Must be less than 2.5:1

2.25:1

0.05:1

0.48:1

0.12:1

0.13:1

Interest cover ratio

Must be greater than four times

4.62:1

10.00

21.99

23.98

18.08

Debt service cover ratio

Must be greater than 1.3:1

1.85:1

N/A

N/A

N/A

N/A

Source: Pan African Resources. Note: *Subsequently restated for disposals.

Note that on our FY18 forecasts, we predict that PAF will ‘break’ its net debt:EBITDA and interest cover covenants. However, this contingency has already been pre-empted by management and the providers of the RCF, which have agreed to temporarily waive the net debt:EBITDA condition during the period in which capex relating to Elikhulu is at its most intense.

Exhibit 15: Financial summary

£'000s

2012

2013

2014

2015

2016

2017

2018e

2019e

2020e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

100,905

133,308

154,202

140,386

168,404

167,759

152,533

165,904

187,283

Cost of sales

(46,123)

(71,181)

(106,394)

(110,413)

(108,223)

(134,007)

(133,000)

(105,106)

(105,767)

Gross profit

54,783

62,127

47,808

29,973

60,181

33,752

19,533

60,798

81,516

EBITDA

 

 

45,018

53,276

44,165

28,448

57,381

32,417

18,999

59,175

78,894

Operating profit (before GW and except.)

41,759

47,278

34,142

18,110

46,925

21,924

3,822

44,577

64,273

Intangible amortisation

0

0

0

0

0

0

0

0

0

Exceptionals

(48)

7,232

(12)

(198)

(12,183)

(1,248)

(10,686)

(1,252)

(1,252)

Other

0

0

0

0

0

0

0

0

0

Operating profit

41,711

54,510

34,130

17,912

34,742

20,676

(6,863)

43,325

63,021

Net interest

516

197

(191)

(2,109)

(1,006)

(2,523)

(629)

(6,459)

(5,910)

Profit before tax (norm)

 

 

42,274

47,475

33,951

16,001

45,919

19,401

3,193

38,118

58,363

Profit before tax (FRS 3)

 

 

42,226

54,707

33,939

15,803

33,736

18,153

(7,492)

36,866

57,112

Tax

(12,985)

(12,133)

(7,155)

(4,133)

(8,234)

(243)

1,688

(8,132)

(21,116)

Profit after tax (norm)

29,290

35,342

26,796

11,868

37,685

19,158

4,882

29,985

37,247

Profit after tax (FRS 3)

29,242

42,574

26,785

11,670

25,502

17,910

(5,804)

28,734

35,995

Average number of shares outstanding (m)

1,445.2

1,619.8

1,827.2

1,830.4

1,811.4

1,564.3

1,809.2

1,928.3

1,928.3

EPS - normalised (p)

 

 

2.03

2.18

1.46

0.64

2.08

1.22

0.27

1.55

1.93

EPS - FRS 3 (p)

 

 

2.02

2.63

1.47

0.64

1.41

1.14

(0.32)

1.49

1.87

Dividend per share (p)

0.00

0.83

0.82

0.54

0.88

0.45

0.00

0.67

0.94

Gross margin (%)

54.3

46.6

31.0

21.4

35.7

20.1

12.8

36.6

43.5

EBITDA margin (%)

44.6

40.0

28.6

20.3

34.1

19.3

12.5

35.7

42.1

Operating margin (before GW and except.) (%)

41.4

35.5

22.1

12.9

27.9

13.1

2.5

26.9

34.3

BALANCE SHEET

Fixed assets

 

 

86,075

249,316

223,425

220,150

230,676

273,635

328,147

354,683

351,662

Intangible assets

23,664

38,628

37,040

37,713

38,682

41,425

43,161

44,897

46,634

Tangible assets

62,412

209,490

185,376

181,533

190,725

224,687

277,463

302,263

297,506

Investments

0

1,199

1,010

905

1,269

7,523

7,523

7,523

7,523

Current assets

 

 

41,614

26,962

23,510

17,218

22,016

37,090

21,862

23,072

25,370

Stocks

1,869

6,596

5,341

3,503

4,399

7,583

5,161

5,537

6,251

Debtors

6,828

15,384

12,551

10,386

14,891

14,813

11,453

12,288

13,872

Cash

19,782

4,769

5,618

3,329

2,659

9,447

0

0

0

Current liabilities

 

 

(11,062)

(24,066)

(24,012)

(22,350)

(32,211)

(31,251)

(68,265)

(79,588)

(59,876)

Creditors

(11,062)

(23,202)

(19,257)

(17,301)

(25,230)

(27,105)

(19,041)

(26,214)

(26,348)

Short-term borrowings

0

(864)

(4,755)

(5,049)

(6,981)

(4,146)

(49,224)

(53,374)

(33,528)

Long-term liabilities

 

 

(14,001)

(80,004)

(63,528)

(67,850)

(69,506)

(62,893)

(63,448)

(63,966)

(64,993)

Long-term borrowings

(869)

(11,133)

(8,141)

(16,313)

(18,456)

(12,290)

(12,290)

(12,290)

(12,290)

Other long-term liabilities

(13,132)

(68,871)

(55,387)

(51,537)

(51,049)

(50,603)

(51,158)

(51,676)

(52,702)

Net assets

 

 

102,626

172,208

159,396

147,167

150,975

216,581

218,296

234,201

252,164

CASH FLOW

Operating cash flow

 

 

49,092

61,618

45,996

26,423

47,130

29,945

8,413

51,058

75,478

Net Interest

516

314

(606)

(2,109)

(1,006)

(2,141)

(629)

(6,459)

(5,910)

Tax

(11,616)

(13,666)

(8,536)

(3,943)

(7,777)

(8,003)

2,243

(7,614)

(20,090)

Capex

(17,814)

(27,197)

(21,355)

(19,554)

(14,097)

(36,748)

(69,268)

(41,135)

(11,600)

Acquisitions/disposals

(1,549)

(96,006)

0

(760)

(30,999)

8,364

5,210

0

0

Financing

259

47,112

349

(235)

15,207

34,638

7,519

0

0

Dividends

(7,416)

0

(14,684)

(15,006)

(9,882)

(13,290)

(8,014)

0

(18,032)

Net cash flow

11,471

(27,826)

1,164

(15,184)

(1,425)

12,764

(54,525)

(4,150)

19,846

Opening net debt/(cash)

 

 

(9,943)

(18,913)

7,228

7,278

18,033

22,778

6,989

61,514

65,664

Exchange rate movements

(1,813)

594

(839)

(276)

812

238

0

0

0

Other

(688)

1,090

(375)

4,705

(4,131)

2,787

0

0

0

Closing net debt/(cash)

 

 

(18,913)

7,228

7,278

18,033

22,778

6,989

61,514

65,664

45,818

Source: Company sources, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Pan African Resources and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Pan African Resources and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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