Don't be too concerned about the marked contraction in revenues and earnings at the half-year stage at gemstone specialist Gemfields (GEM). There were no operational difficulties in the period and that headline slide largely reflected the fact that the group has slanted its auction sales heavily in favour of the second half - while deliberately building up inventories.
In November, Gemfields completed the $142m (£94m) acquisition of high-end jeweller Fabergé - a contributory factor in the decision to bolster inventories by 216 per cent year on year to $10.9m. In all, group cash profits fell 39 per cent year on year to $19.5m and Gemfields' revenue was also held in check by the fact that it held a single auction during the first half, against two in the comparative period. Three are scheduled - two emerald, one ruby - for the second half, however, so revenues should respond accordingly.
Gemfields also secured an option to acquire a 75 per cent interest in a second large ruby deposit in Mozambique. It boosted emerald and beryl production by 65 per cent to 14.5m carats, at an average unit cost of $0.57 a carat - a 31 per cent reduction on 2011.
Edison Investment Research expects adjusted EPS of 3.4¢ for 2013 (from 6.9¢ in 2012) and expects net present value (NPV) of 47.7p.
| GEMFIELDS (GEM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 29.5p | MARKET VALUE: | £159m | |
| TOUCH: | 29.5-30.8p | 12-MONTH HIGH: | 45p | LOW: 25p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 1 | |
| NET ASSET VALUE: | 30¢ | NET CASH: | $20m | |
| Half-year to 31 December | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 45.7 | 31.1 | 5.00 | nil |
| 2012 | 27.7 | 9.41 | 1.00 | nil |
| % change | -39 | -70 | -80 | - |
£1=$1.50 | ||||
