Strengthening demand for coloured gemstones enabled Gemfields (GEM) to post higher revenues for the year to June, but the company's expansion has come at a price. With more feet on the ground, increased depreciation charges and higher royalty commitments, Gemfields revealed gross profits flat on the previous year at $85m (£56m).
The margin squeeze was exacerbated by a step-up in marketing initiatives that fed through into reduced earnings. But the miner is steadily and deliberately rebuilding the global market for coloured gemstones in a manner not dissimilar to De Beers' transformation of the retail diamond market in the late 1940s. Needless to say, it's a work in progress.
The increase in the scale of Gemfields' activities is reflected in higher borrowings and year-end inventories, together with a 50 per cent step-up in production at its key Kagem emerald mine in Zambia. That helped to bring down unit costs, but Gemfields had to contend with lower mining grades at the Montepuez ruby mine in Mozambique as it worked through lower-grade alluvial material.
SP Angel anticipates EPS of 3.3p for the year to June 2016, against 0.7p for FY2015.
| GEMFIELDS (GEM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 57p | MARKET VALUE: | £310m | |
| TOUCH: | 56-58p | 12M HIGH / LOW: | 69p | 45p |
| DIVIDEND YIELD: | nil | PE RATIO: | 87 | |
| NET ASSET VALUE: | 45¢* | NET DEBT: | 6% | |
| Year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 40.0 | 20.0 | 5.0 | nil |
| 2012 | 84.0 | 249 | 37.0 | nil |
| 2013 | 48.0 | -20.0 | -5.0 | nil |
| 2014 | 160 | 36.3 | 2.0 | nil |
| 2015 | 171 | 26.3 | 1.0 | nil |
| % change | +7 | -28 | -50 | - |
| £1 = $1.53. *Includes intangible assets of $45.5m, or 8¢ a share | ||||
