Shaft Sinker Hdg plc (SHFT) - Interim Management Statement RNS Number : 1709R Shaft Sinkers Holdings Plc 15 November 2012 15 November 2012 Shaft Sinkers Holdings plc ("Shaft Sinkers"; the "Group" or the "Company") Interim Management Statement Shaft Sinkers Holdings plc (LSE:SHFT), the international shaft sinking and underground construction group, is pleased to issue the following Interim Management Statement covering the period from 1 July 2012 to today. Overall summary The recent illegal strikes in the mining industry in South Africa have been well documented both in the press and by companies with operations in the country. The Company experienced disruption to its operations at two projects, however, all of the illegal strikes have now ended and the situation in South Africa has in the main part returned to normal. The Company previously warned that the illegal strikes could have a negative impact on margins earned on its South African operations, and this, coupled with the depreciation of the Rand, the later start of international projects and operational issues highlighted at the half year, has impacted profitability in the second half of the current financial year. Despite the difficult working conditions, the Company has focused on resolving the operational issues that affected it in the first half, and was successful in securing another major international project during the period. The outlook for the rest of the current financial year remains positive notwithstanding the lower than expected results for this financial year. South African Operations South Africa labour situation The Company's operations in South Africa have largely returned to normal, although there are on-going discussions with its workers and unions to ensure a lasting agreement is reached and maintained. More broadly, the Labour situation in South Africa is improving every day, although there are still pockets where it remains unsettled. At Lonmin's Saffy shaft workers returned to work from the illegal strike on Monday 29 October. In total, 11 working days were lost as a result of this action, which resulted in a negative impact on the project's margins. At AngloGold Ashanti's Moab project, workers reported for duty and operations were back to normal on 30 October 2012. In total, 25 working days were lost as a result of this action. The Company is in discussions with the client regarding costs incurred during this period. Karee 3 Technically, the project continues to perform at expected levels and discussions with Lonmin are on-going with respect to the rates related to the project. Impala The Company's work at Impala 17 shaft showed improvement and has returned to normal operating levels. Management is satisfied with the progress made during this period. Although progress has been made at Impala 16 shaft, which is in the development phase, new management has been introduced to strengthen the experience of the workforce and continue to improve operational performance in order to return to profitability. We reported on 30 October 2012 that the Company had been awarded additional work on both shafts adding, in total, £17.25 million to the order book. The Leeuwkop project continues on-track, reaching a depth of 325 metres, and the Company is in discussions with Afplats regarding the next phases of the project. Styldrift The Styldrift project continues to perform in accordance with operational and financial targets. The project has reached a depth of 600 metres and both shafts have broken away in to the horizontal development phase. Hernic Ferrochrome The Hernic Ferrochrome project at the Bokfontein mine is on-track and performing in accordance with management's expectations. International Operations Hindustan Zinc Limited The main shaft box cut at the Rampura Agucha project has been completed and is in preparation for main sink. The excavation of the North ventilation shaft box cut has commenced. The first advance was received in August 2012, which made sufficient cash flow available to fund the first phase of capital procurement and working capital. Kibali Goldmines The Company announced on 20 September 2012 that it had been selected byKibali Goldmines, a joint venture between operator Randgold Resources Limited and AngloGold Ashanti Limited, to initiate mobilisation activities for the Kibali gold mine in the Democratic Republic of the Congo. This was followed by the announcement on Monday 12 November 2012 that the Company had been awarded the vertical shaft contract. The contract is scheduled to be completed in 2016 and is an "Agreed Target Cost" contract. The combined mobilisation and vertical shaft contracts have a total value of £82.3 million. EuroChem Update On 5 October 2012 the Company responded to the announcement by EuroChem that it had filed a claim against Shaft Sinkers (Pty) Ltd in relation to its project with EuroChem which was terminated with effect from 20 April 2012. The Company has reviewed the arbitration claims, and after consultation with legal counsel, continues to believe that the claims are without merit, and will contest them robustly. A claim for a net amount of $15 million has been submitted to EuroChem for amounts still owing under the contract. Safety Safety remains of paramount importance and the Group continues to ensure it is implementing best practice in this area. The Lost Time Injury Frequency Rate is currently at 1.36 compared to 0.86 for the second quarter to 30 June 2012, which is below the benchmark of 3.60. Board changes On 30 August 2012 the Company announced the appointment of Mr. Stephen Oke as Chairman of the Group, with Mr. Amre Youness resigning as director. Cash In the shaft sinking industry it is not uncommon for variation orders to arise and this may on occasion put pressure on cash balances where the nature of the variation orders require extended debate with the client before agreement is reached on the payment thereof. The Company is currently carrying an unusually high amount of approximately £21 million of variation orders in accounts receivable. Management is aiming to collect the majority of these amounts prior to the end of the current financial year. Gross cash balances are currently in the region of £8 million and debt is around £14 million. On 5 October 2012, the Company paid an interim dividend of 2.4 pence per share amounting to £1.2million. Outlook The profitability of the Company's South African operations in the second half has been impacted by the labour unrest. This has been partly offset by the gradual return to normal productivity levels at Impala 16 and 17 shafts and by the start-up of the Hindustan Zinc and Kibali projects. The weakening Rand compared to Sterling has also dampened results. The signing of new US Dollar-based contracts should help to offset the effect of the weakening Rand in the future. As a consequence, management expect results for the current financial year to be lower than previous market expectations. The tender pipeline for new work remains strong at approximately £1.1 billion. Speaking today, Alon Davidov, Chief Executive, said: "Shaft Sinkers is taking action to restore operational productivity and the Company is continuing to deliver on its strategy to diversify into new end markets alongside geographic expansion. Although recent performance has been disappointing, the board believes that we have addressed this year's shortcomings and we have the right strategy in place to deliver growth in 2013." Ends For further information: Shaft Sinkers Holdings plc +44 (0) 787 595 1362 Alon Davidov, Chief Executive Officer Chris Hall, Chief Financial Officer Media enquiries: M:Communications +44 (0) 20 7920 2330 Ann-marie Wilkinson Elly Williamson Matthew Neal Notes to editors Shaft Sinkers Shaft Sinkers Holdings specialises in the sinking of particularly deep and wide vertical and decline shafts and the development of underground infrastructure, used primarily in mining and hydropower applications. The Group is a world leader in vertical shaft sinking with a focus on particularly deep and/or wide vertical shafts. It has the capability to sink shafts through all types of rock strata, including running sands and clay. The Group works principally for established mining and infrastructure companies. Historically, the Group has completed projects in over 20 countries worldwide across Africa, Europe, South America, the Middle East, Asia and Australia. The Group was responsible for sinking one of the deepest ever man and material South African shafts, a secondary shaft at the Western Deep Levels to a depth of 3,131 metres below bank. Major current projects and customers include the Shaft 16 and 17 complexes for Impala Platinum, Leeuwkop for Afplats, the Styldrift project for Anglo Platinum and Royal Bafokeng Resources, the Lonmin projects include Karee 3, Hossy and Saffy, the Hernic Ferrochrome project, the Moab project for AngloGold Ashanti; Rampura Agucha for Hindustan Zinc Limited and Kibali Goldmines for Randgold Resources and AngloGold Ashanti. This information is provided by RNS The company news service from the London Stock Exchange END IMSGGGGAGUPPPGC -0- Nov/15/2012 07:01 GMT
Shaft Sinker Hdg plc SHFT Interim Management Statement
Press spacebar to pause and continue. Press esc to stop.