TIDMELX
RNS Number : 8827C
El Oro Ltd
03 October 2018
The El Oro Group's operating loss before taxation for the year
ended 30 June 2018 was GBP1,618,854 (operating profit before
taxation for the year ended 30 June 2017: GBP7,426,687). The
Group's net assets at 30 June 2018 were GBP53,668,935 or 85.0p per
share (net assets at 30 June 2017: GBP55,680,730 or 88.1p per
share).
Shareholders will naturally look askance at a loss occurring in
a year of generally favourable returns, albeit skewed towards
holders of the FAANGS, whose funds have appreciated around 48% in
the past 18 months, as against 11% for value oriented funds. We
have, however, taken a particularly conservative look at our
unlisted investments, some entered into many years ago, which
explains some of the size of the write-downs precipitating the
loss.
Whilst your Company approaches the denouement of the vote passed
in November 2016, it faces its future (whatever that may be) in
much finer fettle than for several years. The remainder of the
borrowings from Lloyds Bank were paid off in May 2018, although to
achieve that we have sacrificed some of our better stocks,
including part of our Young and Co. holding.
The only bugbear on the horizon is the pernicious issue of
swaps: these were regrettably purchased to protect the Company from
a rise in interest rates: in fact the opposite occurred and a 9
year experiment in 'quantitive easing' ensued: achieving an
increase in asset prices, the solvency of banks and income levels
of the already wealthy, but seemingly little for the working man.
Although we bought a Swap expiring in 2029, and the recent rise in
rates by the Bank of England has reduced its liability, Lloyds has
now peremptorily decided to ask for repayment in November 2018.
Although already accounted for in our figures, this cash will need
to be found through the realisation of investments.
Of share losses, there have been the occasional disappointments,
not least PZ Cussons, where currency tribulations and a fall in
sales have affected its main market in Nigeria despite improvements
elsewhere. We take a somewhat sanguine view that such a large and
growing population will occasionally need to wash, and hence are
holding for the time being, despite its disappointing performance
in comparison to its peers such as Unilever and Procter and Gamble.
Even Reckitt Benckiser, with its range of household products,
continues to thrive.
Amongst other fallers, Pantheon Resources has given back all its
gains of earlier years, due to a combination of dry wells and
equipment failures, whilst Amerisur struggles in Colombia despite
the improving price of oil. Central Asian Metals retains its
generous dividend yield, but the price has retreated recently as
copper falls in the face of the Trump tariffs upon China. Bacanora
withdrew its proposed funding round for its Sonora lithium project,
despite support from its main Japanese shareholder; given
traditional Japanese patience and loyalty, we would expect a
recovery in due course, unless the appeal of lithium were to prove
illusory. We also retain our holding in Critical Elements in
Canada, with its Lithium deposit, and continue to believe that we
will in due course be rewarded.
The Gold market has been described as 'moribund' and the inertia
induced by the hot summer and strength of the US Dollar will for
some time do little to dispel this state of affairs. Despite this
disappointment, Hummingbird has succeeded in bringing its mine in
Mali into production, and at some point we may yet be rewarded for
our patience.
Many investors in Canada and the United States, have been
seduced by Bitcoin, cryto-currencies and cannabis stocks. Vanguard
is renaming its precious metals fund the Global Capital Cycle Fund
after a 24% loss over the past year. We are obstinate or foolish
enough to believe that the darkest hour is just before dawn.
Amongst sideways movers, James Halstead continues to perform
admirably, although its share price less so: M.P.Evans has met most
of the market's expectations, with increasing production and
dividend flow, whilst KLK bides its time having recently increased
its holding in M.P. Evans to 15%. REA Holdings may yet surprise on
the upside, even if for now it remains a laggard. Whilst Hurricane
Energy has regained some of its composure, we remain hopeful that
with the rig ordered and under construction, we will see production
in 2019. We are encouraged to hear that Hurricane is now in
alliance with Spirit Energy, a subsidiary of Centrica, which will
be separately funding exploration of one of its areas. This has
sent the share price higher, and underpins the value spotted by
Crystal Amber two years ago. We believe, given reasonable
production once it commences next year, and a stable oil price,
that higher levels should be achievable. Crystal Amber retains the
bulk of its stake, and together we rely on the flow of 'Stranded
Oil'.
Those with longer memories before the onset of the Mining
malaise, will recall our holding in Reservoir Minerals, which was
taken over by Nevsun Resources a few years ago, the prize being its
copper deposit at Timok in Serbia, adjoining Freeport McMoRan's
existing mine. Lundin bid C$4.75 earlier in the year, an offer that
was rejected by Nevsun. Lundin's offer has now been topped by Zjjin
Mining, at $6. We are encouraged to see value emerging on this
scale: more visible, it would seem to Asians with the Belt and Road
glint in their eyes, than the more cautious West. This illustrates
once again the need for patience and vision in Mining, or any
natural resource for that matter, where there is sometimes an
extended period between the first concept and its realisation.
Momentum and FAANG investors will naturally prefer the promise of
more dramatic returns such as recently experienced.
Amongst our other holdings, pride of place as so often before
belongs to Young and Co, who now threaten to breach the GBP18 mark,
scant comfort to Sir Ron Brierley whose holding period until
thwarted by his Antipodean Board was apparently 'forever'. We
hesitate to add more praise to Patrick Dardis, Stephen Goodyear and
their team, but can at least add our thanks for such superb
stewardship and the enhancement of our NAV and dividend flow.
Abraham Lincoln is quoted as saying "I am a firm believer in the
people. If given the truth they can be depended upon to meet any
national crisis. The great point is to bring them the real facts,
and beer." A quotation perhaps even more relevant for our own
fraught times.
Along with the superlative Young's, Goodwin has soared after
confounding the sceptics and producing excellent results and a
significantly improved dividend. Victrex continues to thrive, and
North Atlantic Smaller Companies under its idiosyncratic
leadership, not necessarily to everyone's taste, flourishes. Hansa
Trust has begun to benefit from its new format and the improved
results from Ocean Wilsons, and AJ Mucklow grows consistently with
its Midlands property portfolio. RWS reaps the reward from its
patent portfolio and its recent acquisition, whilst Chesnara and
Phoenix produce copious quantities of cash from zombie Pension
portfolios. Amongst the Bs, Berkshire Hathaway has seen the Wisdom
of Age rewarded for its investment in Apple, after a false start
with IBM, and Burford Capital continues to defy gravity with its
litigation fund seemingly going from strength to strength. Some
compensation for failing to hold onto FeverTree after 2016's Brexit
vote.
Whilst we believe our portfolio offers breadth and strength, we
are concerned that the political scene in Britain lacks those
characteristics, as recently described by Peter Hargreaves. Two
able proponents of the people's will in the recent Referendum have
now departed from the Cabinet; the composer of the epithet 'the
Nasty Party' for now rules the roost, having handled negotiations
with her European colleagues with a finesse that would shame a
Rhinoceros. We are supposed to support an agreement that ties us to
European suzerainty and jurisdiction without participation. Even
contemplating such an offer is abhorrent, and we can only hope that
true visionaries and free marketeers will emerge to lead Britain
once more to the broad, sunlit uplands. Businesses have already
suffered enough, including your own company, from intrusive
European regulations, of which PRIIPS, MIFID2 and GDPR, are 3
egregious examples; all stemming from a culture that enhances the
role of the State, and its all-knowing power, rather than that of
the entrepreneur and single trader. Not to mention KIDs which is
supposedly endorsed by the Association of Investment Trust Managers
with the caption 'burn before reading'. So many of our great
inventors and business builders, such as Steve Jobs, Bill Gates,
Tim Martin and others have failed to finish University courses, and
yet in Britain half the country is now expected to complete a
degree of some sort. The Dead Hand of Bureaucracy prevails, and the
most elementary tasks, such as driving or sitting on a local
council, now require one or a sequence of training courses.
Sadly the former home secretary's obsession with immigration
numbers is hampering the growth of our education exports, and we
have been superseded by the US, which has educated more leaders
than the United Kingdom for the first time. Our education
establishments were at the forefront of teaching in the world, and
need to be restored to their pre-eminence with opportunities for
work in the United Kingdom for their alumni. This will strengthen
the position of the UK in an increasingly competitive world.
An individual is no longer considered capable of selecting a
bond suitable for their own needs, but must buy a Prudential
Reserve Bond: once interest rates resume their rise or original
levels, these will invariably fall by a substantial margin.
Moreover, it now appears that the issuance of BBB grade bonds has
risen from 30% to 50% in recent years: not an encouraging scenario
if pressure once again is applied to bond yields.
In China, it is now said that there will be bankruptcies amongst
many Chinese companies if the trade war over tariffs is exacerbated
whilst the Chinese eased their lending terms to accommodate those
struggling in the pre-election Trump tourniquet.
Britain's determination to persist with the hyper-expensive HS2
despite various accounting bodies warning of its cost-over-runs
likely to exceed 60%, alongside the funds already committed to
Hinkley Point, and the commitment to phase out energy produced from
coal by 2025, ensures an ingrained cost disadvantage to all our
manufacturing sector: the Greens whose economic illiteracy was once
mocked are truly running the asylum.
Our politicians would be well advised to dwell on the dismissal
of Malcolm Turnbull as Prime Minister of Australia whose obsession
with a 'green' energy agenda is now being replaced by a new energy
minister keen to utilise Australia's vast resources of coal. The
essential goal being to supply cheap and consistent energy to the
people as a whole. Nothing undertaken in Britain in recent years by
green zealots will meet that objective.
The Home Secretary recently overruled his own Inspector's
recommendation to allow mining at Druridge Bay as a 'not
sustainable development' despite it meeting those time constraints
and providing hundreds of jobs.
As a result of Health and Safety provisions, the Fire Service
waited 2 hours to attend the Manchester Arena attack, in case there
was a terrorist lurking. Whilst Japan and China increase their
building of coal fired power stations, Lloyds Bank has said it will
no longer lend to suppliers of coal companies, leaving begging the
question of where our energy will emerge from during the sunless
days of winter or windless days of summer such as recently.
Cambridge University may well live to regret losing its
investment team as the student body calls for disinvestment from
carbon fuels. We have increased our exposure and hope all
shareholders will benefit in the near term.
Meanwhile, in the United States, the economy grows, strengthened
by the long-overdue tax cuts initiated by President Trump, and
Jerome Powell raises interest rates, much to the irritation of the
President. His main reward for a booming economy would appear to be
impeachment if Russian collusion in ensuring his election is
proved. Whatever his achievements in Syria and the World Cup, we
suspect such an achievement and bamboozling the US Electorate
beyond even Putin's fabled powers.
Jeopardising our trade with Russia over a deplorable but
unsuccessful assassination plot would appear to us an inadequate
approach to a once great country craving respect and a return to
its ancient glories. We would encourage genuine diplomacy and a
mutual respect for our shared culture and beliefs aligned with
clear boundaries.
The knife inserted into the entrails of El Oro in November 2016
has been remorselessly turned; Theresa May's abnegation of the free
market is blurring the distinction for the young between Corbyn and
Macdonnell's Venezuelan Marxist model for the British economy, and
that of a richly productive low tax/ low regulation Capitalist
alternative. Concurrent with these potential calamities, a Hard or
No-deal Brexit threatens, according to the soothsayers, untold
misery and hardship for the British economy and people.
How lucky we have been at Cheval Place to be supported by the
inestimable Abbie, ably assisted by Nick and Nancy, whilst Una
performs her wizardry with the accounts. A more loyal and capable
crew it would be hard to replicate.
The Board continues to review the opportunities available to the
company in light of the vote taken in November 2016 to liquidate
following the 2018 AGM. We hope to make an announcement soon.
Robin Woodbine Parish
2 October 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June
30 June 2018 30 June 2017
GBP GBP
Revenue 1,356,339 1,483,710
Net (losses) / gains on investments (671,812) 7,946,532
------------- -------------
Total investment income 684,527 9,430,242
Expenses (1,841,092) (1,263,440)
------------- -------------
(Loss) / profit before finance costs
and taxation (1,156,565) 8,166,802
Finance costs (462,289) (740,115)
------------- -------------
(Loss) / profit before taxation (1,618,854) 7,426,687
Taxation credit / (charge) 19,251 (634,608)
(Loss) / profit for the financial
year (1,599,603) 6,792,079
------------- -------------
Earnings per share (2.5p) 10.8p
------------- -------------
Other comprehensive income - Items
that will not be reclassified to profit
and loss
Revaluation of property 1,405,604 -
Income tax on items that will not (297,574) -
be reclassified to profit and loss
------------- -------------
Other comprehensive income net of 1,108,030 -
tax
Total Comprehensive (loss) / income (491,573) 6,792,079
------------- -------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
30 June 2018 30 June 2017
GBP GBP
Opening capital and reserves attributable
to equity holders 55,680,730 50,598,883
Total comprehensive income and (loss)
/ profit for the financial year (491,573) 6,792,079
Decrease of share capital on cancellation
of shares - (2,826)
Increase of capital redemption reserve
on cancellation of shares - 2,826
Decrease of retained earnings on cancellation
of shares - (194,306)
Dividends paid (net) (1,520,222) (1,515,926)
Closing capital and reserves attributable
to equity holders 53,668,935 55,680,730
------------- -------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June
30 June 2018 30 June 2017
GBP GBP
Non-current assets
Property 1,950,000 551,899
Plant and equipment 55,207 59,348
Investment in artwork - 500,000
Intangible asset - 18,400
2,005,207 1,129,647
------------- -------------
Current assets
Investment in artwork held for resale 250,000 -
Trade and other receivables 562,335 818,216
Investments held at fair value through
profit or loss 55,551,575 63,599,004
Cash and cash equivalents 765,187 913,260
------------- -------------
Total current assets 57,129.097 65,330,480
Current liabilities
Trade and other payables 914,583 567,320
Financial liabilities at fair value
through profit or loss 2,719,192 3,094,600
Current tax liability 240,190 716,280
Total current liabilities 3,873,965 4,378,200
------------- -------------
Net current assets 53,255,132 60,952,280
------------- -------------
Non-current liabilities
Borrowings - 4,600,000
Deferred tax liabilities 1,591,404 1,801,197
------------- -------------
Total non-current liabilities 1,591,404 6,401,197
------------- -------------
Net assets 53,668,935 55,680,730
------------- -------------
Capital and reserves attributable to
equity holders
Share capital 434,906 434,906
Reserves
Share premium 6,017 6,017
Capital redemption reserve 359,641 359,641
Merger reserve 3,564 3,564
Revaluation reserve 1,108,030 -
Retained earnings 51,756,778 54,876,602
------------- -------------
Total equity 53,668,935 55,680,730
------------- -------------
Net asset value per share 85.0 p 88.1 p
------- -------
The Board of Directors approved and authorised the Group's
financial statements for issue on 2 October 2018.
Signed on behalf of the Board by: CRW Parish (Director) and RAR
Evans (Director).
CONSOLIDATED STATEMENT OF CASH FLOW
For the year ended 30 June
30 June 2018 30 June 2017
GBP GBP
Operating activities
(Loss) / profit before tax (1,618,854) 7,426,687
Adjustments for:
Depreciation 14,954 14,715
Net unrealised losses / (gains) on
fair value investments through the
profit or loss 608,527 (8,000,879)
Finance costs (includes amortisation
of capitalised loan note fee) 462,289 740,115
------------- -------------
Cash flow from operations before changes
in working capital (533,084) 180,638
Decrease in financial assets at fair
value through the profit or loss 7,313,494 10,317,093
(Decrease) / increase in trade and
other receivables 255,881 (451,973)
Increase / (decrease) in trade and
other payables 372,250 (347,255)
------------- -------------
Cash flow from operations 7,408,541 9,698,503
Income taxes paid (964,207) (650,684)
------------- -------------
Net cash generated from operating
activities 6,444,334 9,047,819
Investing activities
Purchase of property, plant and equipment (3,310) (16,746)
Net cash used in investing activities (3,310) (16,746)
------------- -------------
Financing activities
Interest paid (468.875) (699,991)
Net dividends paid to Shareholders (1,520,222) (1,517,459)
Repayment of borrowing (4,600,000) (6,400,000)
Purchase of own shares subsequently
cancelled - (194,306)
Net cash used in financing activities (6,589,097) (8,811,756)
------------- -------------
Net (decrease) / increase in cash and cash equivalents (148.073) 219,317
Cash and cash equivalents at the beginning of the year 913,260 693,943
Cash and cash equivalents at the end of the year 765,187 913,260
------------- -------------
The Annual Report is available at www.eloro.com
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/8827C_1-2018-10-3.pdf
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END
FR LLFEVIVLVIIT
(END) Dow Jones Newswires
October 03, 2018 10:30 ET (14:30 GMT)
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