Twelve months ago, Gem Diamonds (GEMD) was "pleased to announce" results for 2015. Exactly a year on, the miner dropped all reference to pleasure, as it revealed the damaging effects of lower prices and fewer big stone recoveries. And while revenues weren't impacted by the post-period decision to indefinitely suspend production from the Ghagoo mine in Botswana, Gem booked a $171m (£138m) impairment against the asset within the 2016 accounts, thereby pushing up the heavy reported loss.
Exclude exceptional items and pre-tax profit would still have been 47 per cent down on the previous year, which tallied with the 26 per cent drop in average prices at Letšeng and a reduction from $210 to $142 per carat in the smaller category of diamonds found at Ghagoo. When those markets will recover is anyone's guess, though Gem Diamonds believes the medium to long-term demand outlook remains "favourable".
Until that point, cash has been deemed too tight for dividends, as the company hunkers down to see how many multi-million rough diamonds Letšeng can throw out. It was on this abject note that chairman Roger Davis announced he will step down in June.
FinnCap, which argues the stock "is priced as if it will never recover another large diamond at Letšeng", is asking for adjusted pre-tax profits of $54m and EPS of 17.5¢ this year, against £54m and 17.5¢ in 2016.
GEM DIAMONDS (GEMD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 110p | MARKET VALUE: | £152m | |
| TOUCH: | 109-110p | 12-MONTH HIGH: | 145p | LOW: 100p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 96¢ | NET CASH: | $3m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 202 | 35.0 | -74.0 | nil |
| 2013 | 213 | 59.0 | 15.3 | nil |
| 2014 | 271 | 95.4 | 24.0 | 5 |
| 2015 | 249 | 109 | 37.6 | 5* |
| 2016 | 190 | -124 | -115 | nil |
| % change | -24 | - | - | - |
Ex-div: na Payment: na £1=$1.22. *Excludes special dividend of 3.5¢ per share | ||||
