A failure to pass distribution covenants prevented Petra Diamonds (PDL) from issuing a dividend with its preliminary results for the year to June. That was contrary to the expectations of most analysts, and undoubtedly many investors, although these numbers still provided sources of hope.
Against a "cautious outlook on the diamond market", early sales for the current financial year are encouraging, demonstrated by a recent tender offering this month which generated $94m (£72m) from the sale of 745,000 carats. Expansion is also progressing apace, with new caves at Finsch and Cullinan set to deliver a step change in earnings this year, even if the result is a more leveraged balance sheet.
By 30 June, net debt stood at 2.8 times cash profits, which would have tested maintenance covenants were it not for a renegotiation just before the end of the year. This should now start to decline, as production ramps up and capital expenditure drops to $218m this year, down from $324m in 2016. In fact, the company expects to have positive free cash flow in the first six months of 2017, which augurs well for debt repayments and reinstated distributions.
finnCap expects adjusted pre-tax profit of $159.6m and EPS of 16.4¢ for the year ending June 2017, up from $75.4m and 10.4¢ in 2016.
PETRA DIAMONDS (PDL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 115p | MARKET VALUE: | £604m | |
| TOUCH: | 115-116p | 12-MONTH HIGH: | 138p | LOW: 53p |
| DIVIDEND YIELD: | nil | PE RATIO: | 14 | |
| NET ASSET VALUE: | 96¢ | NET DEBT: | 70% | |
| Year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 317 | 8.4 | -0.5 | nil |
| 2013 | 393 | 74.0 | 10.4 | nil |
| 2014 | 472 | 124 | 12.8 | nil |
| 2015 | 425 | 85.0 | 9.5 | 3.00 |
| 2016 | 431 | 75.4 | 10.4 | nil |
| % change | +1 | -11 | +10 | - |
Ex-div: na Payment: na £1=$1.30 | ||||
