In an article back in April entitled ‘Here’s a Stock So Terrible It’s Too Late To Short It‘ I took a quick look at savannah Resources Plc (LSE: SAV) results for the period ending 31 December 2015 which they published on 25 February.
Savannah reported an operating loss of £1,917,190 as well as a ‘comprehensive loss’ of £2,191,872 due to the write down of an investment into another mining outfit Alecto Minerals Plc:
During the year we increased our shareholding in AIM listed Alecto Minerals Plc (‘Alecto’) by 42.8% via the conversion of a loan note and the divestment of the Company’s legacy Mali projects (Karan and Diatissan) to Alecto in March 2014 for GBP250,000 worth of shares in Alecto. At the end of 2014 we had a 19.6% shareholding in Alecto and as of 23 February 2015 the shareholding had reduced to 14.5%.
The reported loss of GBP1.92m for 2014 was only slightly less than 2013’s loss of GBP2.04m:
for which the significant driver is the write down in the value of the Company’s investment in Alecto, whose share price had been at a 2 1/2 year high at the end of 2013
You can see the damage not only from this poor ‘investment’ but also from huge administrative expenses quite clearly from the income statement:
Also where are the revenues!?!
Just take a look at the top line again in the income statement above and you will notice zero revenues for the past two years.
Digging a little deeper you can also see the lack of revenue for the PAST FIVE YEARS as shown below:
The five year record of Savannah Resources (LSE: SAV) courtesy of Morningstar.co.uk
Zero revenue from Savannah Resources over the past five years means that it is an entity run purely to furnish executive remuneration. Note how some of this expense (remuneration) ends up as an asset on the balance sheet:
£18,643 (2013: Nil) of Directors’ Remuneration… was capitalised as an intangible asset in relation to the provision of specific technical services.
I got this little nugget from the notes to the 2014 accounts available on the Savannah Resources website here but they were strangely not included in the RNS.
Were management trying to hide something?
Not only that but just look at the equity dilution throughout 2014:
The notes to the accounts also have a similar looking table that shows the number of warrants and options issued throughout the financial year but it is simply too ugly to reproduce here. If you’re really interested and if you can stomach it, you can take a look here.
Since the publication of these accounts, Savannah has issued two sets of placings
- 3 March 2015 – A professional group providing Savannah with consulting and investing services were issued with 2,805,589 of shares at 2.139p per share in lieu of consulting fees due in cash. An additional 270,000 in relation to a placing in 2014 that was short some shares totalling 3,075,589
- 27 April 2015 – A professional group providing Savannah with consulting and investing services will be issued with 888,889.
As a result of all this financial carnage I’m afraid that Savannah Resources RNS announcements have yet to provide shareholders with anything remotely resembling revenues and so it remains a very terrible stock indeed.