Shaft Sinkers posts 75 per cent plunge in profits

Shares in Shaft Sinkers sank on Monday morning after it said 2012 revenue declined 15 per cent and pre-tax profit plunged 75 per cent on the back of operational difficulties and the depreciation of the Rand.

The majority of Shaft's South African clients were serverly affected by labour disputes throughout 2012 and it was unable to escape the effects of these, the firm said.

It was also hit by underperformance at some of its Impala operations, caused by poor planning, excessive overtime and logistical congestion that together culminated in target production not being met.

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Pre-tax profit declined to £3.4m (2011: £13.5m) on revenue of £192.5m (2011: £226.5m), with earnings per share declining to 18.3p from 4.9p.

Alon Davidov, Chief Executive Officer of Shaft Sinkers, said: "This has been a challenging year due to operational difficulties, which are in the process of being resolved, and a number of external factors including labour disputes, pressures on the platinum price and the depreciation of the Rand that have all impacted materially on the year.

"Against this backdrop the company has delivered on its strategic objectives by expanding internationally and into new markets including gold and zinc. This is not a short term change for the company but, as evidenced by the strength of our order book and pipeline, we believe we are becoming truly global and mineral agnostic which will help us capitalise on the many opportunities that exist.

"Even if there are pressures on mining capital expenditure, mining companies are still reacting to growing global demand and therefore our technological expertise will be in demand as new projects come online and mines get ever deeper, making us all the more confident of delivering value to shareholders in the future."

The company is now conducting a review of its activities with a view to ensuring that costs are effectively managed and that the group's support structures are commensurate with its level of activity and growth prospects. It has already identified several areas of potential cost savings.

The group paid an interim dividend of 2.4p but did not recommend paying a final dividend for the year, although said it 'remains optimistic' about the company's long term prospects for growth and plans to resume its dividend policy 'in due course'.

The share price fell 17.65% to 35p by 09:10 on Monday.

NR