A financial study of GOLDPLAT PLC - Free Essay Example

About the company Goldplat plc is an AIM-listed gold producer with operations across Africa. It aims to become a highly profitable mid-tier gold mining company, leveraged through revenue generated from its highly profitable gold recovery businesses. Goldplat is a profitable and highly cash generative gold producer focused in Africa with three primary assets: Goldplat Recovery (Pty) Limited SA South African gold recovery plant Gold Recovery Ghana Limited Ghanaian gold recovery plant Kilimapesa Gold Limited mining project in Kenya Goldplats two gold recovery businesses based in South Africa and Ghana fulfil an important aspect of a mines environmental management programme, by safely disposing mining by-products. The Company is the market leader in the recovery of precious metals in Africa and has secured a strong blue-chip client base consisting of many majors including Anglogold Ashanti, Goldfields and Harmony. The Company is also developing the Kilimapesa Gold mining project, located in the historically producing Migori Archaean Greenstone Belt in western Kenya. Kilimapesa Gold commenced operations in January 2009 and gold sales are expected in Q3 2009. An aggressive exploration and development programme has been implemented to define a JORC compliant resource at the project. Additionally Goldplat is evaluating various gold recovery operations in Tanzania and Zambia and has formed a joint venture with Black Economic Empowerment (BEE) partners to take advantage of mining opportunities in South Africa. Products and Operation Goldplat is a profitable and highly cash generative gold producer focused in Africa with three primary assets: Goldplat Recovery (Pty) Limited SA South African gold recovery plant Gold Recovery Ghana Limited Ghanaian gold recovery plant Kilimapesa Gold Limited mining project in Kenya Goldplats two gold recovery businesses based in South Africa and Ghana fulfil an important aspect of a mines environmental management programme, by safely disposing mining by-products. The Company is the market leader in the recovery of precious metals in Africa and has secured a strong blue-chip client base consisting of many majors including Anglogold Ashanti, Goldfields and Harmony. The Company is also developing the Kilimapesa Gold mining project, located in the historically producing Migori Archaean Greenstone Belt in western Kenya. Kilimapesa Gold commenced operations in January 2009 and gold sales are expected in Q3 2009. An aggressive exploration and development programme has been implemented to define a JORC compliant resource at the project. Additionally Goldplat is evaluating various gold recovery operations in Tanzania and Zambia and has formed a joint venture with Black Economic Empowerment (BEE) partners to take advantage of mining opportunities in South Africa. South Africa and Ghana The companys South African arm as well as the subsidiary in Ghana specialises in extraction of precious metals.Their are mainly two business segments,Processing and mining segment, which produces metals and Management segment, which includes companies that mange the producers. Kenya Goldplat is in joint venture with Kilimapesa Gold Ltd Lologerien project in Kenya the principle activity of which is production of Gold. A list of Customers of Goldplat Plc worldwide:-Names provided below of all mining companies that deals with Goldplat Plc.The company mainly issues letter of acceptance and /or through contract Anglogold Ashanti Goldfields Harmony Impala Platinum Lonmin Platinum Hartebeesfontein Buffelsfontein Blyvooruitzchict Driefontein Durban Roodepoort Deep Mogale Gold Avgold Kloof Background and Expertise of Management Board members are very experience and have many years of experience in diverse fields. Includes accountants,engineers,financial advisors etc.They bring loads of experience and helps in bettering the performance of Goldplat. Business risk and uncertainty Every business in the world is exposed to risks,so does Goldplat.The risks are discussed below Volatility in price of Gold Gold prices are highly volatile in nature.The main reason is the demand and supply.Such volatility of price effects the turn over of the business.Gold is traded in the market and hence the nature of the price is never stable.. Variation in forex market The company is listed in Uk and its work operandi is in Africa.Every day it has to face the variation in regard to Rand and GBP.No other day the rate are same .So the company is subjected to the daily fluctuations of the international forex market. The Current Economic Condition The present financial condition is extremely serious.Banks are not forthcoming in providing credit to the companies.Expansion and other business decisions are hampered. Improper Maintanance of Accounts The financial figures quoted in the balancesheet may be false and misleading.We have seen companies like Enron going bust because of incorrect and false reporting of figures and suppression of facts. Interest rate risk The Group generally adopts a policy of ensuring that its exposure to changes in interest rates is on a floating rate basis . Credit risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group primarily deals with reputable mining houses and is unlikely to suffer any losses from this risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Liquidity risk The Group reviews its facilities regularly to ensure that it has adequate funds for operations and expansion plans. Capital risk management The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders. Fair values The fair values of financial instruments, such as, interest-bearing loans and borrowings, finance lease liabilities, trade and other receivables/payables are substantially identical to carrying amounts reflected in the balance sheet Competitors analysis The following competitors of Goldplat plc are based in the United Kingdom and figures quoted as on June 2008. The current and quick ratios are significant parameters in understanding the financial health of the company.The current ratio and the liquid ratio are both at 3.2 respectively which is equal to the industry standard.Thus making it less risky and good company to invest in.The company is one of the few who has earned profit in the year 2009 so cost has been taken care off.The below chart depicts that the Goldplat has been able to beat the competition and the industry Record pre-tax profits of  £2.4 million for the year ended 30 June 2009 (2008:  £1.6 million) . Healthy cash position with  £2.2 million in the bank (2008:  £1.5 million).The company has been able to earn profit in such time of un precedented economic crisis speaks volume about the management.The company has been able to beat the market in generating profit and operating profit.They have been do ing this for last 3 years now and good indicator of a rising company The return on equity has been very steady for last 3 years.The below graph shows and constant uprising in the area. Even in ROI it is the clear market leader.Below I have shown the individual performance of ROA and on ROI of Goldplat Plc in last 3 years.The graph is s rising graph and speaks volumes about the management Return on Assets The management has been doing a good job in this parameter.The company has been able to earn sufficient return from its asset.The companys ROA has been up by more than 2percent since 2007 .Thus the management is able to maximise shareholders return From the above analysis through charts and figures it has been established that Goldplat is a growing concern and a profit manking.Per employee revenue is above industry standard and the management has done a commendable job in garnering motivation among its employees.The company has made an increase of sales in real terms ove r its earlier year by over 44%.While it has increased its sales it has also developed its asset base .Very focussed management.The sales figure has gone up to GBP 11,149 which has pushed the total revenue for the firm. The cost of sales has grown significantly to GBP 8225 which could be controlled and brought down to maximise profit.With an increase in sales the gross profit has shown an up ward movement. Hence the gross profit margin is at 26.2%. The net profit has also grown to 16.8 %.There has been a 22% rise in the capital employed figure too.In 2009 the PBIT has seen a sharp rise to 1,824 million.Credit given and credit taken are almost same of 64 days owing to high sales and high cost of good sold. Stock turn over has sen a decline from the last years .The current ratio and the quick ratio are both at industry standard and betterd this year over last year 3) Share price performance Record pre-tax profits of  £2.4 million for the year ended 30 June 2009 (2008:  £1.6 million) . Healthy cash position with  £2.2 million in the bank (2008:  £1.5 million) ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ South African and Ghanaian gold recovery plants performing strongly production totalled 21,068 oz of gold (2008: 19,322 oz) ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Stocks of materials for processing in South Africa and Ghana continued to increase securing future production 88,000 oz of contained gold in stockpiles ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Finalising agreement to acquire remaining 50% of Kilimapesa Gold (Pty) Limited in Kenya from International Gold Exploration AB for US$2.7 million ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¢ Developing Kilimapesa Hill gold mining project with a view to establishing a formal mining operation working towards a JORC compliant resource to clarify its economic potential.Thus It has been observed that the share price continues to grow and out perform its competitors.The earning per share has been growing steadily.So a very good option to invest keeping others things in mind. Corporate Governance The Directors recognise the importance of sound corporate governance commensurate with the size of the Company and the interests of the shareholders. As the Company grows, the Directors intend that it should develop policies and procedures which reflect the Principles of Good Governance and Code of Best Practice as published by the Committee on Corporate Governance (commonly known as the Combined Code). So far as is practicable, taking into account the size and nature of the Company, the Directors will take steps to comply with the Combined Code. Conclusion Goldplat Plcs revenue increased toGBP 111,149 during the months ended 30 June 2009.Increase in demand of the companys products and services has led to an increase in the revenue ,resulting in higher gross margin and finance income. As a result of which comp anies share price jumped significantly.Not only revenue but the gross profit,operating profit,profit before tax as well as profit has all seen a upward swing. Current market situation The Gold price has recently risen over $ 900( £600).The current economic downturn has significantly increased the demand of gold as investors perceive it as the best alternative investment .However ,the improvement in the equity market and strengthening of US dollar may negatively impact the gold prices. Silver price hit a record high of $21/ ounce in March 2009 but later plunged almost 60%.But in the first quarter of 2009 it increased again by 24% .Silver also performed fairy well during the crises period. Usage of silver among industries is 54% and the demand is expected to grow further. However, Silver has a very volatile market compared to gold.The company is a good option for investment Source: https://www.commodityonline.com/news/Silver-is-misunderstood-Silver-price-can-go-to-$25-17329-1-1.html