FINALLY, the long-suffering shareholders in Gemfields are starting to see a return on their investments after some 15 years in the wilderness since the company was created as the former Pallinghurst Resources.
Gemfields declared a maiden dividend of 1.7 US cents (about 25 South African cents) for the year to end December 2021 after what CEO Sean Gilbertson described as an “annus mirabilis” following the dreadful events of 2020 where Gemfields was forced to warn shareholders over threats to its “going concern” status.
The group generated a record $118.1m in free cash flow during financial 2021 and reported a taxed profit of $64.9m after losing $93.2 in 2020. Gemfields transformed the balance sheet taking net debt of $12.6m in 2020 to net cash of $62.9m at the end of 2021.
Gilbertson says Gemfields is “firing on all cylinders again complemented by the buoyant conditions in the coloured gemstone market”.
Gemfields proved its business model “is capable of mitigating the risks posed by any further Covid-19 outbreaks”, he said. He does not expect the war in Ukraine “to have an unmanageable material adverse impact on the group”.
“We are very conscious that it has been a long journey for many of our shareholders and, as we mark this long awaited and significant achievement for the group, we thank our shareholders for their loyalty and patience,” he said.
Shareholders will welcome their first-ever payout, but Gemfields has a lot of ground to catch up before any long-term investors in the company will get back into the black.
When Pallinghurst listed on the JSE back in 2007 it traded as high as R10 a share. From there it slumped to 230c by March 2008 and then carried on down to an all-time low of 103c in August 2020.
Had you bought then – taking a contrarian view – you would have trebled your money given the current Gemfields price of 360c following the recovery after the Covid crunch assisted by the actions of Assore which bought a 26.6% stake last year becoming the group’s largest “anchor shareholder” after Christo Wiese sold out.
The grounds for optimism going forward – in addition to the favourable outlook on the coloured gemstone market – include the evidence of Gemfields’ resilience in managing to survive the 2020 Covid crunch without resorting to raising new capital.
As Gibertson pointed out on today’s investment conference call: “Very few businesses could sustain a blow of that magnitude”.
What would provide a welcome, short-term fillip would be if Gemfields could sell its 6.54% stake in unlisted platinum operation Sedibelo Platinum Mines which the latest results statement has revised to a carrying value of $37.2m.
Gilbertson says Gemfields continues to look at all options one of which is the outcome of a study currently being carried out by Sedibelo looking at a possible IPO.