The Saracen Mineral Holdings Limited (ASX: SAR) share price could rise today as the company reported record profit in FY19. Here’s what you need to know.
About Saracen
Saracen is one of the larger gold miners listed on the ASX with an annual production of more than 300,000 ounces per year from its Carosue Dam Operation and its Thunderbox operation.
Here Are The Five Key Points
- Net profit after tax (NPAT) increased by 22% to $92.5 million
- Underlying NPAT was up 40% to $94.2 million
- EBITDA grew 11% to $219.5 million (the video below explains EBITDA)
- Gold production reached a record 355,077 oz, up 12%
- Saracen has indicated dividends will be paid for the first time from FY20
Analyst Estimates
Bell Potter analysts estimated NPAT of $93 million, which falls between the statutory and underlying NPAT figures reported by Saracen. The difference between the underlying and statutory figures was due to expensing of deferred exploration costs, a loss on disposal of fixed assets and an obsolete stock write down.
Dividend
Saracen has not paid a dividend before, but an inaugural dividend policy was announced this morning which will see a target payout ratio of 20-40% of NPAT from FY20 onwards, subject to Saracen maintaining a minimum cash balance of $150 million.
Management Commentary
Saracen Managing Director Raleigh Finlayson said Saracen performed well across the board.
“We have met or exceeded all our key guidance metrics, generating record production and profits in the process,” he said.
On dividends, Mr Finlayson said: “Our priority remains exploration and growth, however our growing free cash flow and strengthening balance sheet will enable us to also begin paying dividends to shareholders”.
Is Saracen A Buy?
Saracen has had an impressive year with record profit and the share price up nearly 35% year-to-date. The share price may be set to rise further today as shareholders react to news of dividends for the first time. Despite the impressive performance, Saracen is a price-taking business and relies on commodity prices to perform well. This makes me question how stable the dividend will be and whether it can be maintained. For now, I’d rather invest in one of the proven businesses in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
