8 May 2014 07:00
LONDON, 8 May 2014
EAST WEST RESOURCES PLC
Preliminary Results for the year ended 31 December 2013
East West Resources plc ("EWR" or the "Company" with its subsidiaries, the "Group") today announces its audited consolidated results for the twelve months ended 31 December 2013.
Financial highlights
· Profit before tax of US$ 4.15 million (31 December 2012, loss of US$ 1.82 million from continuing activities)
· Profit after tax of US$ 3.92 million (31 December 2012, loss of US$ 1.97 million from continuing activities)
· Net profit per share for the year US$ 3.9 cents (2012: net loss US$ 1.9 cents from continuing operations)
· Net asset value per share was US$ 28.8 cents as at 31 December 2013 (US$ 24.6 cents as at 31 December 2012).
Commenting on the results, Charles Crick, non-executive Chairman, stated:
"This is an excellent result for the year with revenues more than doubled in our physical metals business. Gross trading revenues for the first four months of the current year are in line with the same period last year. Our focus remains on copper but we are increasing our footprint in other metals and have recently opened an office in Taiwan. As previously reported, we continue to look for ways to increase our asset base and diversify our revenue streams."
Enquiries
East West Resources plc | |
Roger Clegg | + 44 (0)20 7634 4700 |
Cenkos Securities plc | |
Neil McDonald Derrick Lee | + 44 (0)20 7397 8900 + 44 (0)131 220 9100 |
Notes to Editors
EWR is primarily active in the physical trading of base metals (primarily copper). It sources and supplies a variety of commodities to end users all over the world. Supported by its offices in London, Shanghai, Taipei and a network of agents in North and South America, Asia and the Middle East, EWR provides producers and consumers with its marketing insight whilst emphasizing the financing and risk management aspect of its trading activities. EWR also holds and manages a number of equity investments. EWR is quoted on the AIM section of the London Stock Exchange under the ticker symbol EWR.
Further information on East West Resources plc is available on the Company's website: www.ewrplc.com
CHAIRMAN'S STATEMENT
Introduction
2013 was an excellent year for the Group. Following on from our figures for the half year, I am pleased to report that the Group sustained its performance through to the year ended 31 December 2013.
The result is attributable to the success of the Group's metal trading business over the period, justifying our decision last year to focus on that division. That business over the period exceeded our expectations but its performance needs to be put in the context of relatively favourable trading conditions over the year which cannot be guaranteed for future years.
Since the year end, the metals division has opened an office in Taiwan and we look forward to that making a positive contribution to the Company in the future.
Other significant features occurring since the year end include the surrender of our head office lease at Old Change House in the City of London, the open offer by our major shareholder Consolidated General Minerals plc ("CGM") and changes to the Board. I refer to all of these matters below.
Results
For the year ended 31 December 2013, Ambrian Metals Limited ("AML"), our metal trading business had a record year. AML net revenues for the year rose to $13.68 million, more than double those of the previous year ($6.68 million) and the company recorded an operating profit before intra Group charges and tax of $7.95 million for the year (2012: $1.57 million).
The Group recorded an overall pre-tax profit of $4.15 million, compared with a pre-tax loss for the year ended 31 December 2012 of $1.82 million (from continuing operations). The Group's post tax profit of $3.92 million for the year ended 31 December 2013 compares with an after tax loss from continuing operations for the previous year of $1.97 million.
This is a significant turnaround for the Group but, as mentioned in my introduction, the results do need to be put into context. Trading conditions were relatively favourable and gave rise to a significant increase in tonnages of copper shipped by AML in the year and higher premiums. A large part of the tonnage increase resulted from spot market transactions. These transactions are in their nature unpredictable and opportunistic and there is no assurance that they can be replicated year on year. Trading activity generally is also significantly dependent upon global demand - particularly from the Far East and the Middle East; so, the result for the year ended 31 December 2013 should not be treated as a necessary indicator of future performance. More detail on the results is contained in the Strategic Report which follows this statement.
Consolidated General Minerals plc
Over the year ended 31 December 2013, CGM continued to make progress with the construction of its cement mill in Mozambique. As reported to its shareholders, construction was delayed in 2013 but towards the end of the year momentum picked up and most of the civil works were complete by the end of the year. We understand that, subject to unforeseen delays, commissioning of the cement mill is now anticipated for September 2014.
In January 2014, we participated in the open offer of CGM to its shareholders and increased our stake in the company from 11.36 per cent to 11.95 per cent. The open offer was made at a price of 17 pence (US 28 cents) per share which compares with the 26 pence (US 43 cents) share price at which the Group's initial stake in the company was purchased. As a result of this, we are required to revalue our total investment in CGM at the open offer price. This gives rise to a write down in our investment of $0.88 million which is included in the Group's results for the year. This is a technical accounting matter as a result of the application of a Tier 1 valuation basis according to IFRS and does not reflect the Board's opinion of the value of CGM and our investment which we consider to be substantially in excess of 17 pence per share.
The Board considers that the Group's investment in CGM is a major strategic investment for the Group and that its relationship with CGM is of importance for the future development of the Group.
Premises
Most recently, the Company has entered into an agreement to surrender the lease on its head office premises at Old Change House which is due to expire in June 2015. We are expecting to vacate the premises before the end of June 2014. Concurrently, the Group has entered into a new lease on other premises in the City of London. The new premises will result in an economy of costs on an ongoing basis, although in the current year the savings are likely to be largely off-set by the cost of the move.
Board changes
Since the year end we have appointed two additional Non-executive Directors to the Board, Kevin Lyon and Ed Marlow.
Kevin is a chartered accountant, with over 30 years of experience in private equity and senior directorate positions within a number of companies. He spent approximately 17 years with the 3i Group, responsible for their core private equity business across the UK. He is currently Chairman of Mono Global Group, Cutis Developments and NextEnergy Solar Fund Limited and also serves as an independent Director of DCK Group. He is also a member of the Institute for Turnaround Professionals and won the Institute of Directors Scotland, Non-executive Director of the Year Award in March 2013.
Ed was, until July 2011, a Managing Director at Credit Suisse and was previously Global Head of Coverage for Principal Investments at HSBC. He has over 10 years of specific investment and advisory experience in sub-Saharan Africa with a particular emphasis on natural resources. He also has considerable experience of the UK and Canadian resource markets and is currently Non-executive Director of Sanatana Resources Inc (TSX) and a Non-executive Director of Thor Explorations Ltd (TSX). He is also Chief Executive Officer of African Potash Limited, an AIM traded company.
Kevin and Ed are already making a valuable contribution to the Group in helping to develop its long term future.
At the same time as Kevin and Ed joined the Board, Rob Ashley retired as a Non-executive Director. The Board is grateful to Rob for his contribution to the Group.
Personnel
We thank all our staff for their considerable loyalty, commitment and efforts during the year in contributing to the successful result of the Group for the 2013 financial year.
Outlook
AML has made a good start to the current financial year with trading conditions continuing to be favourable and its performance over the first four months of the current year is in line with that for the previous year. The company's focus remains on the trading of copper but it is expanding its footprint into other metals (particularly zinc and aluminium) and the intention is to continue this expansion.
Whilst the Group's current asset base is sufficient for its present purposes and offers some scope for expansion, the Board's view is that in order to achieve a step change in the future growth and development of the Group it needs to increase its asset base and diversify its revenue streams. The Board continues to look at ways of achieving this.
Charles Crick
Chairman
STRATEGIC REPORT
The Directors of the Company and its subsidiary undertakings (which together comprise the "Group") present their Strategic Report for the year ended 31 December 2013.
Overview of the Group
The Group's focus is to continue to grow the sourcing and marketing of physical metals. We will do this by nurturing existing client relationships, seeking out new opportunities in other metals, risk management of the business expansion and retention of key staff within the business. We also continue to seek ways of increasing the Group's asset base and to diversify its revenue streams.
With the shift in focus of the Group, we also have elected to change the reporting currency of the financial statements. It was felt that with the functional currency of the Group is now predominantly US Dollars based, a fairer representation of the business performance would be to present the financial statements in US Dollars as opposed to our prior year presentation of Pounds Sterling.
Business review and future prospects
The Group had a successful year from both a financial and operational perspective. Operationally we began to feel the positive effects of the downsizing of non-core business units from the previous year. This further allowed the core business unit (the metals trading business) to enhance its importance to not only the Group, but also external stakeholders. We are now a more streamlined Group, aided by our financial success during 2013. We saw increased support from our long standing financing relationships as well as the introduction of new facilities. We continued to see growth on a tonnage basis of the sales made by AML. This growth was supported by an increase in our long term relationships with clients and an increase in spot business.
In the first few months of 2013 the copper price was relatively stable compared to 2012. However this stability was short-lived as copper prices began to decline in the middle part of the year. The price per tonne between the start of the year and the end of June 2013 saw a high of $8,242 and a low of $6,870 (2012: $8,765 high: $7,220 low).
In the second half of the year, there were a few key factors that kept the copper price subdued. First, there was a lot of uncertainty regarding the global economic recovery, especially for the world's largest consumers of copper - China and the U.S.A. The second factor that contributed to this was copper's elevated stockpiles. This was largely driven by China and its restocking of copper inventory.
AML continued to build its reputation globally and thus, in spite of the softening commodity prices, it saw an increase in both the long term customer sales and spot business. In 2013, AML supplied 30 per cent more total refined copper than in 2012.
Demand in the Middle East saw a turn of fortune from 2012 where the anticipated demand never arrived. Given the decrease in geopolitical tensions during 2013, demand for both refined copper and semi-finished product in the region increased. The increase of sales in this region was once again an indication of AML's ability to continue to develop its existing client base, with expansion in current contracts, as well as new clientele emerging within the sales portfolio.
During the second half of 2013, efforts to increase AML's footprint generically were implemented successfully and AML intends further to expand and diversify its activities in the zinc, lead and tin business sectors during 2014.
Performance management and business development
Our key performance indicators include, but are not limited to, both financial metrics and operational metrics. Indicators of the financial metrics are profit before tax, revenue by segment, own cash, tangible net asset value and tangible net asset value per share. This is discussed in greater detail below under the Financial performance of the Group.
The operational metrics that further demonstrate the positive year within the trading business have been the increase in tonnage bought and sold; the continued support of our financing banks and the increase in their facilities and the retention and addition of clients to the books of AML. AML continues to maintain its strict controls around cashflow management and client health. These controls were evidenced by another year with no bad debts in the books of AML. Further, as a Group we continue to strive for a sustainable approach to our operations.
Financial performance of the Group
The Group recorded a profit after tax of $3.92 million (2012: $7.10 million loss).
Total income from continuing operations was $12.43 million for the year ended 31 December 2013 compared with $6.45 million for the year ended 31 December 2012, an increase of more than 100 per cent resulting from higher revenues in our metals trading.
Operating costs from continuing operations of $8.29 million were in line with operating costs for the same period last year of $8.27 million.
The Group reported a profit attributable to shareholders from continuing operations before tax of $4.15 million, a significant improvement on the loss of $1.82 million for the same period last year. As is clear from the above, the significant improvement in results was due to higher revenues from our metals trading business.
There were no discontinued activities during 2013. The losses from discontinued activities in the previous year resulted from the disposal of Ambrian Energy GmbH, our fossil fuels business.
Overall, the Group reported a post-tax profit of $3.92 million for the year compared to a loss for the year ended 31 December 2012 including discontinued activities, of $7.10 million.
Ambrian Metals Limited
Net revenue from AML, our physical metals trading business, was $13.68 million for the year ended 31 December 2013 (2012: $6.68 million), a doubling of revenues over the year. This was due to a greater volume of business both in long term contracts and spot contracts and a higher level of premiums. This had a significant impact on profits for this activity with pre-tax profits of $7.95 million (before intra Group interest and management charges) (2012: $1.57 million). Net assets of AML at 31 December 2013 were $26.50 million (2012: $17.23 million).
AML continued to benefit from the strong support of its bankers.
In the first half of the year, AML repaid the subordinated loan of $3.00 million which it had received from the Company's major shareholder, Consolidated General Minerals plc ("CGM").
Principal Investments
In the 12 months ended 31 December 2013, our investment portfolio recorded a pre-tax loss of $1.53 million compared with a pre-tax loss in 2012 of $0.89 million. Included in the current loss of $1.53 million is a write down of $0.88 million on our investment stake in CGM, referred to above in the Chairman's statement.
Following the Board's decision last year to substantially reduce the Group's exposure to junior resource stocks, the total value of the Group's investment portfolio, including all net assets, held by Ambrian Principal Investments Limited ("APIL") at 31 December 2013 was $0.44 million (2012: $1.63 million). The investment portfolio itself was valued at $0.22 million at 31 December 2013 (2012: $0.75 million).
At 31 December 2013, APIL had five holdings with the largest being Cominco Resources ($0.19 million). Two of the holdings are unquoted.
The Company continues to hold an interest in CGM (which in turn holds a near 30 per cent interest in the Company). As at 31 December 2013, the interest was 11.36 per cent. CGM is managed and part-owned by employees of Ambrian Resources AG ("ARAG") which was established in February 2010 in partnership with a team of three former executives of Glencore International AG, one of whom, Nicolas Rouveyre, is now a Director of the Company. ARAG employees are charged to CGM. CGM continues to focus on developing its clinker grinding mill and cement packaging plant in Beira, Mozambique.
Commissioning of the cement mill is anticipated for September 2014. The Board considers its interest in CGM a core holding for the future development of the Group and the Company's investment in CGM has been valued at $1.71 million as a result of the application of a Tier 1 valuation basis according to IFRS.
It is to be emphasized that there is a high degree of subjectivity (and therefore uncertainty) involved in the valuation of unquoted investments. This applies to all of the Group's unquoted investments.
Expenses
Administrative expenses attributable to the Group's continuing operations for the year ended 31 December 2013 were $8.29 million (2012: $8.27 million), which included provisions for year-end profit related bonuses. Like for like expenses were broadly in line with those for last year but the expenses for 2012 included professional fees related to the disposal of certain activities and a number of one off costs.
Remuneration expenses attributable to continuing operations were $4.95 million for the 12 months ended 31 December 2013 (2012: $5.45 million). Total headcount in our continuing operations at 31 December 2013 was 34 (31 December 2012: 32).
Balance Sheet
Total net assets of the Group at 31 December 2013 were $28.97 million, up by 17.2 per cent from 31 December 2012. This increase was principally driven by the significantly improved results from AML and no losses arising from discontinued activities.
The Group's own cash resources totalled $22.07 million at 31 December 2013 (2012: $28.22 million). The cash resources at 31 December 2012 included a $3.00 million loan from CGM to AML which was repaid during the course of 2013.
Net tangible asset value per share at 31 December 2013 was 28.79 cents (2012: 24.57 cents). Net tangible asset value is based on 100,602,104 ordinary shares outstanding at 31 December 2013 (excluding Treasury shares and shares held by the Ambrian Capital Employee Benefit Trust) (2012: 100,602,104 shares).
Risk Management and Financial Risk
The Group attaches great importance to effective risk management. The principal business unit (being Ambrian Metals Limited) operates through its own management committee which meets fortnightly and is also attended by the Group's senior management. The Group's principal exposures are monitored daily and reviewed by the Group's senior management. The Group also operates a Risk Committee which is responsible for recommending risk strategy to the Board and the Group's risk management framework.
The key business risks to which the Group is exposed are as follows:
Competition
The Group operates in a competitive environment with a limited customer base and is therefore vulnerable to losing business to third parties able and willing to offer more competitive terms. We aim to mitigate this risk by maintaining close relationships with our customers, seeking to expand our customer base and providing differentiating services.
Premium risk
The prime determinant of the profitability of the metals business is the premium margin made on the sale of the metal, which in turn is a function of supply and demand and availability for delivery. Premiums also vary on a regional basis. A significant reduction in the premium margin or a material change in market dynamics would be likely to have a materially adverse effect on the Group. We manage this risk through diversification of our clients and suppliers on a geographical and political basis.
Commodity concentration and disintermediation
The Group's principal business is focused on commodities which is a cyclical sector, while acting as an intermediary. Any material change in demand for relevant commodities could have an adverse impact on the Group's performance. This is mitigated by the business keeping the majority business focussed on long term contracts with clients.
Loss of key staff
Retaining key staff, including, in particular, significant current and future revenue generators, is essential to the long-term health and growth of the business. The Group's policies on remuneration are devised to engender loyalty and promote performance by such staff. These policies include payment of bonuses and share option awards where appropriate. Succession management is also of importance to preserve key customer relationships. The Group seeks to ensure that these relationships will be maintained notwithstanding the loss of key personnel.
Operational risk
The value of some of the Group's trades particularly in its physical businesses is significant. The Group is accordingly exposed to the risk of material loss through operational errors in conducting those trades. We manage this risk by a combination of well established procedures, an experienced and well-trained operations team, and sophisticated trade capture systems which are designed to minimise the risk of loss through such errors.
Information technology risk
All of our businesses depend upon robust, effective and efficient IT support. We have in place appropriate back up procedures to safeguard the loss of information and records arising from IT failure. We also seek to ensure that our own material data and service providers have appropriate back up and disaster recovery procedures in place to overcome or mitigate any damage to us resulting from their failure.
Legal risk
Legal risk is inherent in most transactions affecting our businesses. This is managed by the use of external legal advisers where appropriate and the adoption of industry standard documentation.
John M Coles
Finance Director
Year to 31 December 2013 | Year to 31 December 2012 | |||
US $ | US $ | |||
Turnover | 2,565,693,966 | 1,798,378,863 | ||
Cost of sales | (2,551,784,668) | (1,791,167,713) | ||
Net revenue | 13,909,298 | 7,211,150 | ||
Investment portfolio losses | (1,476,342) | (759,413) | ||
Total income | 12,432,956 | 6,451,737 | ||
Administrative expenses | (8,284,565) | (8,270,294) | ||
Profit/(loss) before tax from continuing operations | 4,148,391 | (1,818,557) | ||
Taxation | (228,226) | (147,858) | ||
Profit/(loss) after tax from continuing operations | 3,920,165 | (1,966,415) | ||
(Loss) on discontinued operations net of tax | - | (5,129,574) | ||
Profit/(loss) after tax from continuing and discontinued operations | 3,920,165 | (7,095,989) | ||
Other comprehensive income | ||||
Exchange (loss)/profit arising from translation of foreign operations | 284,843 | 1,092,610 | ||
Total other comprehensive profit/(loss) | 284,843 | 1,092,610 | ||
Total comprehensive profit/(loss) | 4,205,008 | (6,003,379) | ||
Profit/(loss) for the period attributable to: | ||||
Owners of the parent | 3,915,109 | (7,089,984) | ||
Non-controlling interest | 5,056 | (6,005) | ||
3,920,165 | (7,095,989) | |||
Total comprehensive profit/(loss) attributable to: | ||||
Owners of the parent | 4,199,952 | (5,997,374) | ||
Non-controlling interest | 5,056 | (6,005) | ||
4,205,008 | (6,003,379) | |||
Basic earnings per share in USD cents: | ||||
Earnings per share from continuing and discontinued operations | 3.89 | (7.09) | ||
Continuing operations | 3.89 | (1.97) | ||
Diluted earnings per share | 3.86 | (1.97) | ||
Share capital | Share premium account | Treasury shares | Retained earnings | Share based payments reserve | Employee benefit trust | Exchange reserve | Total equity attributable to the owner of the parent | Non-controlling interest | Total equity | |
US $ | US $ | US $ | US $ | US $ | US $ | US $ | US $ | US $ | US $ | |
Balance at31 December 2011 (Restated) |
17,665,294 | 18,043,816 | (1,986,574) | 3,444,902 | 7,504,944 | (11,009,670) | (2,912,480) | 30,750,232 | (65,504) | 30,684,728 |
Comprehensive income | ||||||||||
(Loss) for the year | - | - | - | (7,089,984) | - | - | - | (7,089,984) | (6,005) | (7,095,989) |
Recycled on disposal | - | - | - | (305,543) | - | - | 305,543 | - | - | - |
Transfer between reserves | - | - | - | - | 477,603 | (477,603) | - | - | 32 | 32 |
Foreign currency adjustments | - | - | - | 19,995 | (8,384) | 40,829 | 1,040,170 | 1,092,610 | - | 1,092,610 |
Total comprehensive income/(loss) for the year | - | - | - | (7,375,532) | 469,219 | (436,774) | 1,345,713 | (5,997,374) | (5,973) | (6,003,347) |
Transactions with owners | ||||||||||
Share-based payment charge | - | - | - | - | 39,444 | - | - | 39,444 | - | 39,444 |
Transactions with owners | - | - | - | - | 39,444 | - | - | 39,444 | - | 39,444 |
Balance at31 December 2012 (Restated) | 17,665,294 | 18,043,816 | (1,986,574) | (3,930,630) | 8,013,607 | (11,446,444) | (1,566,767) | 24,792,302 | (71,477) | 24,720,825 |
Comprehensive income | ||||||||||
Profit for the year | - | - | - | 3,915,109 | - | - | - | 3,915,109 | 5,056 | 3,920,165 |
Foreign currency adjustments | - | - | - | - | - | - | 284,843 | 284,843 | - | 284,843 |
Total comprehensive income for the year | - | - | - | 3,915,109 | - | - | 284,843 | 4,199,952 | 5,056 | 4,205,008 |
Transactions with owners | ||||||||||
Share-based payment charge | - | - | - | - | 38,803 | - | - | 38,803 | - | 38,803 |
Transactions with owners | - | - | - | - | 38,803 | - | - | 38,803 | - | 38,803 |
Balance at31 December 2013 | 17,665,294 | 18,043,816 | (1,986,574) | (15,521) | 8,052,410 | (11,446,444) | (1,281,924) | 29,031,057 | (66,421) | 28,964,636 |
As at 31 December 2013 | As at 31 December 2012 | As at 31 December 2011 | |||
ASSETS | US $ | US $ | US $ | ||
Non-current assets | |||||
Property, plant and equipment | 68,596 | 87,404 | 274,672 | ||
Deferred tax asset | 601,875 | 54,043 | 358,619 | ||
670,471 | 141,447 | 633,291 | |||
Current assets | |||||
Financial assets at fair value through profit or loss | 1,925,612 | 3,613,949 | 7,481,491 | ||
Inventory | 208,872,237 | 362,377,398 | 276,847,937 | ||
Trade and other receivables | 59,633,460 | 109,257,698 | 91,369,981 | ||
Cash and cash equivalents | 22,074,881 | 28,217,608 | 23,764,639 | ||
292,506,190 | 503,466,653 | 399,464,048 | |||
Total assets | 293,176,661 | 503,608,100 | 400,097,339 | ||
LIABILITIES | |||||
Current liabilities | |||||
Financial liabilities at fair value through profit or loss | (2,371,159) | (971,228) | (7,740,361) | ||
Short term borrowings | (176,889,933) | (237,876,724) | (246,023,387) | ||
Short term liabilities under sale & repurchase agreements | (33,054,823) | (175,578,090) | (69,627,576) | ||
Trade and other payables | (51,095,655) | (64,441,230) | (45,524,011) | ||
Current tax payable | (800,455) | (20,003) | (497,276) | ||
Total liabilities | (264,212,025) | (478,887,275) | (369,412,611) | ||
Total net assets | 28,964,636 | 24,720,825 | 30,684,728 | ||
CAPITAL AND RESERVES | |||||
Share capital | 17,665,294 | 17,665,294 | 17,665,294 | ||
Share premium account | 18,043,816 | 18,043,816 | 18,043,816 | ||
Treasury shares | (1,986,574) | (1,986,574) | (1,986,574) | ||
Retained earnings | (15,521) | (3,930,630) | 3,444,902 | ||
Share-based payment reserve | 8,052,410 | 8,013,607 | 7,504,944 | ||
Employee benefit trust | (11,446,444) | (11,446,444) | (11,009,670) | ||
Exchange reserve | (1,281,924) | (1,566,767) | (2,912,480) | ||
Total equity attributable to the owner of the parent | 29,031,057 | 24,792,302 | 30,750,232 | ||
Non-controlling interest | (66,421) | (71,477) | (65,504) | ||
Total equity | 28,964,636 | 24,720,825 | 30,684,728 |
Year to 31 December 2013 | Year to 31 December 2012 | |||
US $ | US $ | |||
Profit/(Loss) for the year | 3,920,165 | (7,095,989) | ||
Adjustments for: | ||||
Depreciation of property, plant and equipment | 18,808 | 31,362 | ||
Amortisation of intangible assets | - | - | ||
Foreign exchange gains | (375,025) | 49,720 | ||
Taxation expense | 228,226 | 147,858 | ||
Unrealised (loss)/gains on financial assets designated at fair value | 1,577,022 | 490,109 | ||
Realised loss/(gain) on financial assets designated at fair value | 12,795 | (899,613) | ||
Net cost on acquisition of financial assets designated at fair value | - | 3,470,603 | ||
Proceeds of sale from disposal of financial asset at fair value through profit and loss | 224,578 | - | ||
Decrease/(increase) in inventories | 153,505,161 | (71,890,453) | ||
Decrease/(increase) in trade and other receivables | 46,923,695 | (10,317,739) | ||
Unrealised (losses) on financial liabilities at fair value | 1,399,930 | (7,026,480) | ||
Decrease/(increase) in trade and other payables | (13,345,575) | 16,613,869 | ||
Share-based payment charge | 38,803 | 39,444 | ||
Loss on disposal of subsidiaries | - | 1,297,000 | ||
Cash used in operations | 194,128,583 | (75,090,309) | ||
Taxation (paid) | - | - | ||
Net cash flow generated/(used) in operating activities | 194,128,583 | (75,090,309) | ||
Investing activities | ||||
Disposal of subsidiary undertakings | 2,700,544 | (910,116) | ||
Purchase of property, plant and equipment | - | (3,850) | ||
Disposal of property, plant and equipment | - | 47,559 | ||
Net cash (used) in investing activities | 2,700,544 | (866,407) | ||
Financing activities | ||||
Purchase of shares by employee benefit trust | - | - | ||
Increase/ (decrease) in short term liabilities under sale and repurchase agreements | (142,523,267) | 100,299,361 | ||
(Decrease) in short term borrowings | (60,986,791) | (20,465,675) | ||
Dividends paid to owners of the parent | - | - | ||
Net (cash) used in financing activities | (203,510,058) | 79,833,686 | ||
Net increase in cash and cash equivalents | (6,680,931) | 3,876,970 | ||
Cash and cash equivalents at the beginning of the year | 28,217,608 | 24,994,931 | ||
Effect of foreign exchange rate differences on cash and cash equivalents | 538,204 | (654,293) | ||
Cash and cash equivalents at the end of the year | 22,074,881 | 28,217,608 |
1. Basis of preparation
The financial information set out in this announcement does not constitute the Group's statutory accounts for the year ended 31 December 2013 or 2012 but is derived from those accounts. Statutory accounts for the 2012 have been delivered to the Registrar of the Companies, and those for 2013 will be delivered in due course.
The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006. The results for the year ended 31 December 2013 were approved by the Board of Directors on 7 May 2014 and are audited.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of international Financial Reporting Standards (IFRS's) as endorsed for use in the European Union, this announcement does not itself contain sufficient information to comply with IFRS's. The accounting policies adopted in this announcement have been consistently applied and are consistent with the policies used in the preparation of the statutory accounts for the period ending 31 December 2013.
The consolidated financial statements of the Group have been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRS) as developed and published by the International Accounting Standards Board (IASB) as adopted by the European Union (EU).
Presentational currency
The financial statements have been presented in US Dollars which is the functional currency of the company's principal trading subsidiary, Ambrian Metals Limited. Until 31 December 2012, the company presented its financial statements in Pounds Sterling. Figures for comparative periods have been converted from Pounds Sterling into US Dollars as set out below:
· Assets and liabilities denominated in non-US Dollar currencies were translated into US Dollars at closing rates of exchange. Non-US Dollar trading results were translated into US Dollars at average rates of exchange. Differences resulting from the retranslation of the opening net assets and the results for the year have been taken to the translation reserve; and
· Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions.
The exchange rates of Pounds Sterling to US Dollar over the periods included in the financial statements are as follows:
US Dollar exchange rate /Pound Sterling
| 31/12/2012 | 31/12/2011 | ||
Closing rate | 1.6253 | 1.5453 | ||
Average rate | 1.5928 | 1.6084 |
2. Segmental analysis
The Group has two reportable segments attributable to its continuing operations and unallocated central revenues and costs:
· Physical metals - comprises Ambrian Metals Limited, a physical metals merchant.
· Investment portfolio - comprises the Group's principal investment portfolio held in Ambrian Principal Investments Limited.
· Head office costs relate to overheads incurred in connection with operating the public limited company and include the share-based payment charges in relation to the staff share option schemes, the remuneration of the Directors of East West Resources plc and the costs of Ambrian Resources AG.
During 2012 the Group disposed of its Asset Management business and Biofuels business. In 2012, the Group closed down its fossil fuels activities. As a result of these disposals and closures, the three divisions were treated as discontinued activities of the Group for 2012.
The measurement of the segmental revenue, profit before tax, capital expenditure, depreciation, total assets, total liabilities and net assets have been prepared using consistent accounting policies across the segments.
Continuing operations | Physical Metals | Investment Portfolio | Head office costs | Total | |||
2013 | 2013 | 2013 | 2013 | ||||
US $ | US $ | US $ | US $ | ||||
Turnover | 2,565,463,074 | - | 230,892 | 2,565,693,966 | |||
Cost of Sales | (2,551,784,668) | - | - | (2,551,784,668) | |||
Revenue | - | (1,476,342) | - | (1,476,342) | |||
13,678,406 | (1,476,342) | 230,892 | 12,432,956 | ||||
Physical Metals | Investment Portfolio | Head office costs | Total
| ||||
2012 | 2012 | 2012 | 2012 | ||||
US $ | US $ | US $ | US $ | ||||
Turnover | 1,797,847,859 | - | 531,004 | 1,798,378,863 | |||
Cost of Sales | (1,791,167,713) | - | - | (1,791,167,713) | |||
Revenue | - | (759,413) | - | (759,413) | |||
6,680,146 | (759,413) | 531,004 | 6,451,737 |
Discontinued operations | Year to 31 December 2013 | Year to 31 December 2012 | |
US $ | US $ | ||
Biofuels | - | 265,431 | |
Fossil Fuels | - | 742,922 | |
Asset Management | - | 48,300 | |
- | 1,056,653 |
Year to 31 December 2013 | Year to 31 December 2012 | ||
Investment portfolio losses represents: | US $ | US $ | |
Unrealised (losses)/ gains on financial assets designated at fair value | (1,463,547) | 444,176 | |
Realised (losses) on financial assets designated at fair value | (12,795) | (1,240,849) | |
Dividends, distributions and other | - | 37,260 | |
(1,476,342) | (759,413) |
Year to 31 December 2013 | Year to 31 December 2012 | ||
Profit/(loss) before tax | US $ | US $ | |
Continuing operations | |||
Physical metals | 7,948,910 | 1,572,551 | |
Investment portfolio | (1,527,089) | (885,560) | |
Head office costs | (2,273,430) | (2,505,548) | |
4,148,391 | (1,818,557) | ||
Year to 31 December 2013 | Year to 31 December 2012 | ||
Discontinued operations (after tax) | US $ | US $ | |
Biofuels | - | (4,268,999) | |
Fossil Fuels | - | (724,877) | |
Asset Management | - | (135,698) | |
- | (5,129,574) | ||
Year to 31 December 2013 | Year to 31 December 2012 | ||
Total assets | US $ | US $ | |
Physical metals | 288,779,249 | 494,485,643 | |
Investment portfolio | 436,892 | 1,802,884 | |
Head office | 3,960,520 | 7,279,188 | |
Fossil fuels* | - | 40,385 | |
293,176,661 | 503,608,100 | ||
Total liabilities | |||
Physical metals | 252,280,511 | 477,256,310 | |
Investment portfolio | 524 | 178,321 | |
Head office | 1,930,990 | 1,412,655 | |
Fossil fuels* | - | 39,989 | |
264,212,025 | 478,887,275 |
The majority of the Group's non-current assets are located in the UK.
3. Earnings per ordinary share
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year, excluding shares held in the Employee Benefit Trust and Treasury shares.
The calculation of diluted earnings per share is based on the basic earnings per share adjusted to allow for the issue of shares through share option schemes on the assumed conversion of all dilutive options.
Options exercisable in 2012 have been excluded from the diluted earnings per share calculation because they are antidilutive.
Reconciliations of the earnings and weighted average number of shares in the calculations are set out below.
The profit/(loss) attributable to the owners of the company for continuing and discontinued operations used in the above calculation is that presented in the consolidated statement of comprehensive income.
2013 | 2012 | ||
Continuing and discontinued operations | |||
Profit/(Loss) Attributable to shareholders | $ 3,915,109 | $ (7,089,984) | |
Diluted profit/(loss) attributable to shareholders | $ 3,915,109 | $ (7,089,984) | |
Weighted average number of shares | 100,602,104 | 100,007,699 | |
Dilutive effect of share options | 916,300 | - | |
Basic earnings per share US $ cents | 3.89 | (7.09) | |
Diluted earnings per share US $ cents | 3.86 | (7.09) | |
Continuing operations | |||
Profit/(Loss) Attributable to shareholders | $ 3,915,109 | $ (1,966,415) | |
Diluted profit/(loss) attributable to shareholders | $ 3,915,109 | $ (1,966,415) | |
Weighted average number of shares | 100,602,104 | 100,007,699 | |
Dilutive effect of share options | 916,300 | - | |
Basic earnings per share US $ cents | 3.89 | (1.97) | |
Diluted earnings per share US $ cents | 3.86 | (1.97) |
4. Financial assets at fair value through profit or loss
2013 | 2012 | ||
US $ | US $ | ||
Listed: | |||
Investment portfolio | - | 444,898 | |
Unlisted: | |||
Investment portfolio | 1,925,612 | 3,169,051 | |
1,925,612 | 3,613,949 |
Included in the unlisted investment portfolio is the Company's stake in CGM valued at $1.71 million. This valuation is based upon the most recent open offer to shareholders. The directors believe the value of the project on a risked NPV basis significantly exceeds this value but recognise that accounting standards have a hierarchy of basis values which places greater emphasis on observable market inputs such as an open offer.
All amounts presented in respect of unlisted securities have been determined with reference to financial information available at the time of the original investment updated to reflect all relevant changes to that information at the reporting date. This determination requires significant judgement in determining changes to fair value since the last valuation date. In making this judgement the Board evaluates, among other factors, changes in the business outlook affecting a particular investment, performance of the underlying business against original projections and valuations of similar quoted companies and the most recent fund raise achieved by the investee company.
5. Non-controlling interest
The non-controlling interest disclosed in the statement of comprehensive income and statement of financial position represents a 20% minority interest in Ambrian Resources AG held by shareholders other than East West Resources plc.
6. Post balance sheet events
On 2 May 2014, East West Resources plc entered into an agreement for the surrender of the lease of its office premise which is due to expire in June 2015. It will vacate its premises before 30 June 2014.
On the same date, Ambrian Metals Limited entered into a ten year lease (with a break clause after 5 years) for office premises in the City of London.