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Wsl - Wescoal Holdings - Reviewed Interim Results For The Six Months Ended

Release Date: 05/12/2008 10:48:02      Code(s): WSL
WSL - Wescoal Holdings - Reviewed Interim Results For The Six Months Ended      
                             30 September 2008                                  
Wescoal Holdings Limited                                                        
(Incorporated in the Republic of South Africa)                                  
(Registration number 2005/006913/06)                                            
(JSE code: WSL       ISIN: ZAE000069639)                                        
("Wescoal" or "the Group")                                                      
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008             
HIGHLIGHTS                                                                      
Revenue up 54%                                                                  
Operating profits up 65%                                                        
Headline earnings up 78%                                                        
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008             
The reviewed interim results for the six months ended 30 September 2008, with   
comparative results for the period ended 2007 and the audited results for the   
year ended 31 March 2008 are presented.                                         
Condensed Consolidated Income Statements                                        
                           Reviewed    Reviewed     Audited                     
                           interim     interim      results                     
results for results for  for the                     
                           the six     the six      year                        
                           months      months       ended                       
                           ended       ended         31 March                   
30          30           2008                        
                           September   September    R`000                       
                           2008        2007                                     
                           R`000       R`000                                    

Revenue                     298 911     194 519      376 088                    
Gross Profit                33 727      18 465       34 180                     
Other operating income      244         193          296                        
Other operating costs       (15 731)    (7 573)      (16 436)                   
Profit from operations      18 240      11 085       18 040                     
Acquisition expenses        (172)       (26)         (899)                      
written off                                                                     
Profit on sale of fixed     -           319          319                        
assets                                                                          
Finance costs               (52)        (673)        (1 245)                    
Profit before taxation      18 016      10 705       16 215                     
Taxation                    (5 166)          (3      (4 385)                    
                                       063)                                     
Profit for the period       12 850      7 642        11 830                     
                                                                                

Attributable to:                                                                
                                                                                
Equity holders of the                                                           
group                                                                           
                                                                                
                           13 120      7 642        11 830                      
Minority interest           (270)       -            -                          

Profit for the period       12 850      7 642        11 830                     
                                                                                
                                                                                
Headline earnings                                                               
reconciliation:                                                                 
                                                                                
Net profit for the period                                                       

                           13 120      7 642        11 830                      
Less: Profit on sale of     -           (220)        (290)                      
fixed assets                123          19          639                        
Plus: Acquisition expenses                                                      
written off                                                                     
Headline earnings for the   13 243      7 441        12 179                     
period                                                                          

Ordinary shares in issue                                                        
(000`s)                                                                         
                                                                                
-Total at period end        145 931     105 931      105 931                    
-Weighted average shares    126 068     104 972      105 450                    
in issue                                                                        
-Fully diluted weighted     127 466     105 472      106 086                    
average shares in issue                                                         
(Note 1)                                                                        
                                                                                
Earnings per share:                                                             

Attributable earnings per   10.4        7.3          11.2                       
ordinary share (cents)                                                          
Headline earnings per       10.5        7.1          11.5                       
share (cents)                                                                   
Fully diluted attributable  10.3        7.2          11.2                       
earnings per share(cents)                                                       
Fully diluted headline      10.4        7.1          11.5                       
earnings per share(cents)                                                       
Note:                                                                           
Fully diluted earnings per share information is reflected showing the potential 
effect of dilution for 2.2 million options held in terms of the share incentive 
trust by the directors and employees to subscribe for new shares in Wescoal.    
Condensed Consolidated Balance Sheets                                           
                   Reviewed       Reviewed      Audited                         
                   interim        interim       results for                     
results for    results for   the year                        
                   the six        the six       ended                           
                   months ended   months ended  31 March                        
                   30 September    30           2008                            
2008           September     R`000                           
                   R`000          2007                                          
                                  R`000                                         
ASSETS                                                                          

Non-current assets  87 133         51 839        78 014                         
                                                                                
Property, plant     25 470         13 010        14 703                         
and equipment                                                                   
Goodwill and        58 546         36 711        36 726                         
license fees                                                                    
Prepayment on       -              -              24 000                        
investment                                                                      
Deferred taxation   3 117          2 118         2 585                          
                                                                                
Current assets      160 356        68 998        78 246                         

Total assets        247 489        120 837       156 260                        
                                                                                
EQUITY AND                                                                      
LIABILITIES                                                                     
                                                                                
Total               155 570        54 146        58 333                         
Shareholders`                                                                   
funds                                                                           
                                                                                
Long-term debt      5 064          3 894         20 044                         
                                                                                
Current             86 855         62 797        77 883                         
liabilities                                                                     
                                                                                
Total equity and    247 489        120 837       156 260                        
liabilities                                                                     
                                                                                
Net asset value     106.61         51.11         55.07                          
per share (cents)                                                               
Tangible net asset  66.49          16.46         20.40                          
value per share                                                                 
(cents)                                                                         
Condensed Consolidated Statement of Changes in Equity                           
Share   Share     Distribut  Total                      
                        Capital Premium   able       R`000                      
                        R`000   R`000     Reserve                               
                                          R`000                                 
Balance at 1             106     39 357    18 870     58 333                    
April 2008                                                                      
Share issued             40      85 810    -          85 850                    
Share issue expenses     -       (1 463)   -          (1 463)                   
Earnings attributable    -       -         12 850     12 850                    
to shareholders                                                                 
Balance as at 30         146     123 704   31 720     155 570                   
September 2008                                                                  
Condensed Consolidated Cash Flow Statements                                     
                        Reviewed     Reviewed      Audited                      
                        interim      interim       results for                  
                        results      results for   the year                     
for the six  the six       ended                        
                        months       months ended   31 March                    
                        ended        30 September  2008                         
                        30           2007          R`000                        
September    R`000                                      
                        2008                                                    
                        R`000                                                   
Cash generated from      10 982       12 009        9 903                       
operations                                                                      
Interest Income          1 357        216           436                         
Finance costs            (1 408)      (889)         (1 681)                     
Taxation paid            (3 778)      (1 152)       (949)                       
Net cash from operating  7 153        10 184        7 709                       
activities                                                                      
Investing activities     (11 011)     (4 217)       (32 416)                    
Financing activities     61 759       493           24 712                      
Net increase/(decrease)  57 901       6 460         5                           
in cash and cash                                                                
equivalents                                                                     
Cash and cash            1 221        1 216         1 216                       
equivalents at                                                                  
beginning of period                                                             
Cash and cash            59 122       7 676         1 221                       
equivalents at end of                                                           
period                                                                          
Commentary                                                                      
Operations and market review                                                    
The results are in line with expectations and Wescoal expects the positive      
momentum to continue for the full year to March 2009. Coal demand remained      
strong from the industrial users but due to the mild winter experienced,        
domestic demand declined reducing overall seasonal volumes.                     
Despite the mild winter, trading again posted improved performances with        
revenues, margins and profit from operations showing substantial increases.     
These results were mainly driven by price increases and the incorporation of the
Express Coal acquisition from 1 April 2008. Our entry into the Western Cape     
market induced severe competition which, coupled with the inability of Spoornet 
to provide rolling stock, depleted the margins that were expected from the      
region. The logistical issues have been satisfactorily addressed and will result
in reduced input costs to the Western Cape.                                     
The washing operation was once again hampered by irregular quantity and quality 
of run of mine supply and, with the exception of much needed volumes, showed a  
small operating loss during the period under review. As announced during October
2008, we are now receiving run of mine from our own opencast operation that will
resolve this problematic area.                                                  
Factors that will further enhance earnings for the second half of the financial 
year are;                                                                       
A 24% increase in the price of coal effective 1 October 2008 bringing the total 
increase for the 2008 calendar year to 102%.                                    
The bulk of the run of mine for the washing plant being sourced from our own    
Schoongezicht opencast operation.                                               
Overheads showed a 108 % increase due to the incorporation of Express Coal,     
additional provisions and the employment of experienced personnel to strengthen 
the management structures needed for future growth.                             
The gross margin improved by 2.2 percentage points to 11.3% compared to the     
previous financial year and by 1.8 percentage points compared to the comparative
period. The improvement is due to additional focus being placed by management on
margin retention in this highly price inflationary environment.                 
As announced during July 2008, the group successfully raised R80,5 million      
capital with the issue of 35 million shares for cash that was earmarked for     
specific capital projects. With the subsequent worldwide credit crunch and the  
stressed state of the world economy, each project is being carefully evaluated  
before any commitments are made. Further announcements will be made in due      
course.                                                                         
Segment Analysis                                                                
The analysis below, details the contribution of the two main divisions within   
the Group:                                                                      
R`000                                                                           
30 September 2008                                                               
Income Statement       Trading  Washing  Non        Total                       
                               and      operating                               
                               Mining                                           
Revenue                282 112           -          298 911                     
Profit from            18 599   16 799   -          18 240                      
Operations             13 881   (359)    (123)      13 243                      
Headline earnings               (515)                                           
                                                                                

R`000                                                                           
30 September 2008                                                               
Balance Sheet          Trading   Washing and     Elimination  Total             
Mining          entries                         
                                                                                
                                                                                
Current assets         142 697   17 659          -            160 356           
Non current assets     36 956    12 221          (20 590)     28 587            
Goodwill               56 086    -               2 460        58 546            
Shareholders Funds     155 462   (2 352)         2 460        155 570           
Non current            3 073     22 581          (20 590)     5 064             
liabilities            77 204    9 651           -            86 855            
Current liabilities                                                             
                                                                                
R`000                                                                           
30 September 2007                                                               
Income Statement       Trading  Washing   Non       Total                       
                               and       Operating                              
                               Mining                                           
Revenue                179 215            -         194 519                     
Profit from            10 339   15 304    -         11 085                      
Operations             6 681    746       201       7 441                       
Headline earnings               559                                             

                                                                                
R`000                                                                           
30 September 2007                                                               
Balance Sheet        Trading    Washing and Elimination  Total                  
                               Mining      entries                              
                                                                                
Current assets       58 359     10 639      -            68 998                 
Non current assets   19 841     9 470       (14 183)     15 128                 
Goodwill             34 251     -           2 460        36 711                 
Shareholders Funds   54 105     ( 2 419)    2 460        54 146                 
Non current          333        17 744      (14 183)     3 894                  
liabilities          58 013     4 784       -            62 797                 
Current liabilities                                                             
                                                                                
                                                                                

                                                                                
Prospects                                                                       
With the exception of the metallurgical industries, currently local demand for  
coal remains at high levels however, international demand has softened resulting
in reduced API#4 and NEWC prices.  We foresee a possible reduction in local     
demand due to the economic climate and no substantial price increases until     
October 2009. To negate the potential impact, the group has entered into        
favourable supply contacts and earnings growth will come from additional        
volumes, reduced input cost at the washing operation, overall cost controls and 
the focused investment of the capital raised. Shareholders can therefore look   
forward to continued earnings growth despite the negative economic climate.     
The planning of the new production facility for Wescoal Mineral Recovery to     
increase production of briquettes from 2,000 to 20,000 tons per month is far    
advanced and construction should begin early in 2009.The downturn in the        
construction industry has been advantageous to the project as all brick makers  
are increasingly seeking lower cost product.                                    
Resource Statement.                                                             
All major prospecting projects have been down scaled to conserve capital.       
Preference will be given to projects that have short term earnings enhancement. 
There has been no change in the resource statement as included in the Annual    
Report for the year ended 31 March 2008.                                        
Black Empowerment                                                               
Wescoal`s black shareholding currently stands at 26.4%. Wescoal remains strongly
committed to BEE and is constantly striving to increase black ownership of the  
group.                                                                          
67% of Wescoal`s workforce is black and emphasis is placed on training suitable 
candidates to accelerate promotion to management level. In addition, two non-   
executive directors on the company`s board are black.                           
Corporate Governance                                                            
The Group subscribes to and is in the process of implementing where applicable, 
the principal recommendations of the King II Code of Corporate Governance.      
Dividends                                                                       
No interim dividend has been declared.                                          
Accounting policies and presentation                                            
The unaudited interim financial statements for the six months ended 30 September
2008 are prepared in accordance with International Financial Reporting Standards
("IFRS") and the presentation as well as the disclosure requirements of IAS34 - 
Interim Financial Reporting in compliance with the Listing Requirements of the  
JSE Limited as well as the Companies Act.                                       
The interim results incorporate responsible disclosure in line with the         
accounting philosophy of the group. The financial statements are based on       
appropriate accounting policies consistently applied and supported by           
responsible and prudent judgements and estimates.                               
Review opinion                                                                  
The group`s auditors, Middel & Partners have reviewed the financial information 
in terms of Rule 3.18 of the listing requirements of the JSE. Their unqualified 
review opinion is available for inspection at Wescoal`s offices.                
By order of the Board                                                           
5 December 2008                                                                 
M.R. Ramaite                       A.R. Boje                                    
Chairman                           Chief Executive Officer                      
CORPORATE INFORMATION                                                           
Non-Executive          MR Ramaite                                               
directors:             JG Pansegrouw                                            
                      MJ Sikhosana                                              

Executive directors:   AR Boje                                                  
                      P Janse van Rensburg                                      
Registration number:   2005/006913/06                                           
Registered address:    228 Voortrekker Street                                   
                      Krugersdorp                                               
                      1740                                                      
Postal address:        PO Box 133                                               
Krugersdorp                                               
                      1740                                                      
Company secretary:     P Janse van Rensburg                                     
Telephone:             011 - 954 2721                                           
Facsimile:             011 - 954 6737                                           
Transfer secretaries:  Computershare Investor Services (Pty)                    
                      Limited                                                   
Designated Adviser:    Exchange Sponsors (Pty) Limited                          
Date: 05/12/2008 10:48:01 Supplied by www.sharenet.co.za                     
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