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Basically, they forgot to deduct exceptional costs on the p&L account. (or add them, adding a negative to me means a deduction to the world of high finance they deduct a negative) whoever invented EBITDA and adjusted EBTIDA expected everyone to have a large stock of headache tablets nearby. To their credit the answer was instant but they may look at this again, Stewart did say it was uncharacteristic of them. On the question of a claim against the Company on environmental issues it appears that Natural Resources, RosPrirodNadzor were seeking further payments for the disposal of 'Extra" waste materials dating back to 2016 the claim was disputed by and the courts decided in favour of TSG in October 2019. The NRP made an appeal to the courts decision and to avoid continuance they reached a settlement.
artrader was keen to tell us that TSG is a UK company (something we already knew, but know-all oafs like that do like to think that they know everything and others know nothing) - so artrader, here are a few paragraphs about UK company law from Fresnillo's results, out yesterday -
The Directors are responsible for preparing the annual report and the Group and parent company financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards (IFRS) pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and enable them to ensure that the financial statements comply with the Companies Acts 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable UK law and regulations the Directors are responsible for the preparation of a Directors' report, Directors' remuneration report and corporate governance report that comply with that law and regulations. In addition the Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Neither the Company nor the Directors accept any liability to any person in relation to the annual financial report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.
Reply “We split out the exceptional costs separately on the face of the P&L but when we calculated EBITDA we used an old formula which assumed that exceptionals were included within admin expenses, so we did not deduct them in the EBITDA calcs. We then adjusted EBITDA by adding the exceptionals back. Exceptional costs shouldn’t have been deducted from EBITDA. From adjusted EBITDA those costs were then deducted twice”
I sent an email Dear Sirs I note today’s RNS mentions that exceptional expenses were deducted twice, if this is the case then wouldn’t the EBITDA be $2m higher?” “ Upon further internal review, it has been identified that due to exceptional expenses being deducted twice, the EBITDA figures were erroneously reported. The correct figures are EBITDA of $11.3m and Adjusted EBITDA of $13.4m. This error is standalone and all other details in the 2020 Interim Results remain unchanged.”
Many thanks if you would kindly explain. Kind Regards
It did strike me that the best way TSG could capitalise on bad news was to buy back shares. And the bad news just keeps on coming. I also am a little uncomfortable with the amount of 'private' ownership here. Memories of HGM still recent. Once they have the million or so shares, then it wouldn't take much to take the company back private. You could look at this 'phase' of the buy back as dirt cheap. The RNS about the fund restructuring has a group of them at 55%, with 22% in the treasury... I'm sure the accident was exactly that, but they are definitely up to something now.
The exceptional expenses relate entirely to the claim from the Federal Service for Supervision of Use of Natural Resources, RosPrirodNadzor ('RPN') over the payments for disposal of waste materials following a site inspection in 2016. The claim was disputed by management and was brought before the first instance court who decided in TZ's favour on 4 October 2019. Subsequently, RPN appealed the decision and the claim settlement in the amount of $1,987,000 was agreed in August 2020.
Watching TSG of late purely because I'm keen to understand the implications of V25 and how the company is likely to stack up this year without that resource or a delayed contribution etc.
The Share buy back will certainly help stabilise the share price but it worries a little as it spanks of 'defending' against further declines. Of course the alternative to a share buy back is to issue 'great news'. If the latter waa coming, then perhaps the SBB would not be required in forst place.
Conlusion... I think there's more issues ahead for V25 and it doesn't look straight forward based on timelines thus far.
It's not the EBITDA error although that's not trivial. No it's the aftermath of the accident in vein 25. The Russians are past masters at extracting rent from these situations. If the company is at fault then obviously a proportionate fine is in order. However, I note from previous RNS resulting from an inspection of the company's operations a large bill was presented to the company due to inadequate clean-up. The company disputed this put still paid up a sizeable amount in the end. The sooner we know what the consequences are the for the company the better....