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Randgold: sales, cash and profits all up

Randgold is a big beast, but the gold miner’s half-year numbers point to a nimble performance
August 3, 2017

Every time it updates the market, Randgold Resources (RRS) has an irritating habit of editorialising its own results. “Strong first-half performance positions Randgold to deliver on 2017 targets,” ran this week’s RNS headline, accompanying a puffy press release-cum-article on the miner’s recent profit growth. Note the third-person inflection.

IC TIP: Hold at 7280p

While we’d rather corporates left investors to make their judgments at a critical distance, we’re not going to lob any accusations of ‘fake news’ here. These were a very strong set of figures. With limited help from an average gold price of $1,237 – essentially flat on last year – and despite a small uptick in exploration and corporate expenses, Randgold managed to juice net profits by 53 per cent to $188m (£143m). Three drivers were key: a 16 per cent climb in production, an even higher jump in sales, and a 13 per cent drop in total cash costs to $595 per ounce.

The latter figure sounds wildly profitable, but excludes three crucial lines before shareholders’ take: $33.7m in royalties, $23.7m in exploration and corporate costs, and an income tax charge which at $82.1m represented a 4.6 percentage point increase on the same period in 2016. Still, cash flow was sufficiently robust for net cash to climb 11 per cent since the end of the year, even accounting for May’s $94m dividend payment.

Consensus forecasts are for adjusted pre-tax profit of $478m and EPS of $3.13 this year, compared with $403m and $2.61 in 2016.

RANDGOLD RESOURCES (RRS)  
ORD PRICE:7,280pMARKET VALUE:£ 6.84bn
TOUCH:7,280-7,290p12-MONTH HIGH:9,155pLOW: 5,410p
DIVIDEND YIELD:1.0%PE RATIO:30
NET ASSET VALUE:3,802¢NET CASH:$573m
Half-year toTurnover   Pre-taxEarnings perDividend
30 Jun($m) profit ($m)share (¢) per share (¢)
2016544165110nil
2017654270164nil
% change+20+63+49-
Ex-div:n/a   
Payment:n/a   
£1=$1.32