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Wsl - Wescoal Holdings Limited - Reviewed Interim Results For The Six

Release Date: 02/12/2009 10:49:04      Code(s): WSL
WSL - Wescoal Holdings Limited - Reviewed Interim Results For The Six           
                                  Months Ended 30 September 2009                
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 2009             
SALIENT FEATURES                                                                
-    Revenue down 27%                                                           
-    Operating profit down 69%                                                  
-    Headline earnings down 62%                                                 
The interim results for the six months ended 30 September 2009, with            
comparative results for the period ended 2008 and the audited results for       
the year ended 31 March 2009 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           2009                        
September   September    R`000                       
                           2009        2008                                     
                           R`000       R`000                                    
Revenue                     217 451     298 911      570 561                    
Gross Profit                18 857      33 727       56 352                     
Other operating income      1 289       244          1 621                      
Operating costs             (14 503)    (15 731)     (32 696)                   
Profit from operations      5 643       18 240       25 277                     
Acquisition expenses        -           (172)        (557)                      
written off                                                                     
Profit on sale of share     3 616       -            -                          
investment                                                                      
Investment income           1 274       1 356        3 367                      
Finance costs               (320)       (1 407)      (2 080)                    
Profit before taxation      10 213      18 017       26 007                     
Taxation                    (2 872)     (5 167)      (8 086)                    
Profit for the period       7 341       12 850       17 921                     
Attributable to:            7 574       13 120       18 491                     
Equity holders of the                                                           
group                                                                           
Minority interest           (233)         (270)      (570)                      
Profit for the period       7 341       12 850       17 921                     
Headline earnings           7 341       12 850       17 921                     
reconciliation:                                                                 
Net profit for the period                                                       
Less: Profit on sale of     (2 604)     -            -                          
share investment                                                                
Plus: Minority interest     233         270          570                        
Headline earnings for the   4 970       13 120       18 491                     
period                                                                          
Ordinary shares in issue                                                        
(000`s)                                                                         
-Total at period end        145 931     145 931      137 323                    
-Weighted average shares    143 673     126 068      129 950                    
in issue                                                                        
-Fully diluted weighted     145 853     127 466      132 139                    
average shares in issue                                                         
(Note 1)                                                                        
Earnings per share:                                                             
Attributable earnings per   5.3         10.4         14.2                       
ordinary share (cents)                                                          
Headline earnings per       3.5         10.5         14.2                       
share (cents)                                                                   
Fully diluted attributable  5.2         10.3         14.0                       
earnings per share(cents)                                                       
Fully diluted headline      3.4         10.4         14.3                       
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           2009                            
                     2009         September     R`000                           
R`000          2008                                          
                                  R`000                                         
ASSETS                                                                          
Non-current assets  99 311         87 133        98 776                         
Property, plant     26 958         25 470        26 686                         
and equipment                                                                   
Investment          709            -             709                            
property                                                                        
Goodwill            54 513         54 513        54 513                         
Intangible assets   13 614         4 033         13 614                         
Deferred taxation   3 517          3 117         3 254                          
Current assets      111 143        160 356       151 454                        
Total assets        210 454        247 489       250 230                        
EQUITY AND                                                                      
LIABILITIES                                                                     
Total               167 471        155 570       154 421                        
Shareholders`                                                                   
funds                                                                           
Long-term debt      3 123          5 064         4 072                          
Current             39 860         86 855        91 737                         
liabilities                                                                     
Total equity and    210 454        247 489       250 230                        
liabilities                                                                     
Net asset value     114.76         106.61        112.45                         
per share (cents)                                                               
Tangible net asset  68.08          66.49         62.84                          
value per share                                                                 
(cents)                                                                         
Condensed Consolidated Statement of Changes in Equity                           
         Attributable to equity holders of the                                  
         company                                                                
         Share     Share    Retained   Share     Total  Minority   Total        
Capital   Premium  Earnings   options   R`000  Interests  Equity       
         R`000     R`000    R`000      reserve                                  
                                       s                                        
                                       R`000                                    
Balance   138       117 299  37 361     193       154 991  (570)   154 421      
At                                                                              
1 April 2009                                                                    
Share     8         5 701    -                    5 709                         
issued                                                      -      5 709        
Earnings  -         -        7 574                7 574    (233)   7 341        
attribut                                                                        
able to                                                                         
sharehol                                                                        
ders                                                                            
Balance   146       123 000  44 935     193       168 274    (803)  167 471     
as at 31                                                                        
March                                                                           
2009                                                                            
Condensed Consolidated Cash Flow Statements                                     
                        Reviewed     Reviewed      Audited                      
interim      interim       results for                  
                        results for  results for   the year                     
                        the six      the six       ended                        
                        months       months ended   31 March                    
ended        30 September  2009                         
                        30           2008          R`000                        
                        September    R`000                                      
                        2009                                                    
R`000                                                   
Net cash from operating  (17 910)     7 153         28 754                      
activities                                                                      
Investing activities     (3 248)      (11 011)      (26 678)                    
Financing activities     (656)        61 759        53 340                      
Net increase/(decrease)  (21 814)     57 901        55 416                      
in cash and cash                                                                
equivalents                                                                     
Cash and cash            56 637       1 221         1 221                       
equivalents at                                                                  
beginning of period                                                             
Cash and cash            34 823       59 122        56 637                      
equivalents at end of                                                           
period                                                                          
Commentary                                                                      
Operations and market review                                                    
Turnover for the period reduced by R 81m (27.3%). The reduction in revenue      
is due to the following factors:                                                
The decline in manufacturing activity because of the economic melt down.        
Reduction in selling prices as a result of:                                     
-    Export product dumping on the domestic market.                             
-    The decrease in the dollar price of export coal.                           
-    Excess availability of stockpiles.                                         
-    Strong Rand : Dollar exchange rate.                                        
Low margin entrants into the merchant market.                                   
Gross margin reduced to 8.7% from 11.3% in the comparative period mainly        
due to the competitiveness experienced in the pricing explained above. The      
group has adopted a retention of volumes policy and margins will therefore      
remain under pressure for the next twelve months. This policy will however      
ensure a strong customer base when pricing and volumes turn in the soon         
expected upturn in the domestic coal market.                                    
In anticipation of the coal price decrease and the lower demand from            
industry the group started a cost reduction strategy. As a result operating     
costs are 7.8% down on prior year and this campaign will be intensified         
during the second half of the financial year. Additional cost saving items      
have been identified and will be maximised as soon as possible.                 
During the previous financial year management identified the possibility of     
releasing the debt linked to the purchase of a coal reserve with the            
repurchase of Wescoal shares. This exercise realised a pre tax profit of R      
3.6m which is not reflected as headline earnings but contribute a               
significant amount to group earnings.                                           
The analysis below, details the contribution of the two main divisions          
within the Group:                                                               
                      R`000                                                     
30 September 2009                                         
Income Statement       Trading  Washing Non        Total                        
                               and     operating                                
                               Mining                                           
Revenue                191 403  26 048  -          217 451                      
Profit from            4 583    1 060   -          5 643                        
Operations             7 012    562     (2 604)    4 970                        
Headline earnings                                                               
R`000                                                      
                     30 September 2009                                          
Balance Sheet         Trading  Washing   Non        Total                       
                              and       operating                               
Mining                                            
Current assets        83 195   27 948    -          111 143                     
Non current assets    164 755  10 668    (144 239)  31 184                      
Goodwill and          65 667   -         2 460      68 127                      
intangibles           167 436  (2 425)   2 460      167 471                     
Shareholders Funds    113 274  34 088    (144 239)  3 123                       
Non current           32 907   6 953     -          39 860                      
liabilities                                                                     
Current liabilities                                                             
                      R`000                                                     
                      30 September 2008                                         
Income Statement       Trading Washing    Non       Total                       
and        operating                              
                              Mining                                            
Revenue                282 112  16 799    -         298 911                     
Profit from            18 599   (359)     -         18 240                      
Operations             13 881   (515)     (123)     13 243                      
Headline earnings                                                               
                    R`000                                                       
                    30 September 2008                                           
Balance Sheet        Trading  Washing   Non        Total                        
                             and       operating                                
                             Mining                                             
Current assets       142 697  17 659    -          160 356                      
Non current assets   36 956   12 221    (20 590)   28 587                       
Goodwill and         56 086   -         2 460      58 546                       
intangibles          155 462  ( 2 352)  2 460      155 570                      
Shareholders Funds   3 073    22 581    (20 590)   5 064                        
Non current          77 204   9 651     -          86 855                       
liabilities                                                                     
Current liabilities                                                             
Trading Division:                                                               
Trading conditions have remained depressed during 2009 despite the general      
bullish view on coal for the long term. Volumes are down in line with the       
national decline in manufacturing activity and the increased competition        
including the producers who traditionally favoured export over local sales.     
The scale of the competition from the primary producers was unexpected and      
exposed the vulnerability of the reliance on one major revenue generating       
division.                                                                       
Compounding factors that influenced the industry were:                          
-    Manufacturing, the division`s primary source of revenue, down by 20%       
Inland pricing down 34%                                                         
-    Export prices down 50% thereby favouring domestic supply over export.      
-    General oversupply increasing competitive activity from new entrants.      
-    Export prices have increased but this is currently being negated by        
the strong local currency and no improvements in trading conditions are         
expected until the latter half of 2010.                                         
Mining and Washing1 Division:                                                   
A more positive result from the division with the following highlights.         
-    The successful commissioning of the Jig plant at Blesboklaagte             
-    The Khanyisa Mine acquisition becoming effective after the period          
under review                                                                    
-    Securing of a rail siding.=                                                
-    Additional washing facility possible at Khanyisa Mine                      
A Jig plant was commissioned at Blesboklaagte during August 2009 to process     
discard that was previously waste, the benefits of which will flow through      
during the balance of the financial year.                                       
With the Khanyisa Mine acquisition now effective, positive results will2        
start flowing through following commissioning of the operation and, and in      
conjunction with the rail facility and siding, offers many opportunities to     
the group to increase volumes and gain market share in previously un-           
serviced markets.                                                               
Prospects                                                                       
Emphasis is being placed on trading and securing a number of smaller            
consumers to broaden the customer base, entering new markets and aggressive     
cost cutting in all areas.                                                      
In addition Wescoal will focus on developing the mining operation into the      
major revenue generator for the group. Goals set in order to achieve this       
include the following:                                                          
-    Commencing early 2010, a ramp up of run of mine production at Khanyisa     
-    Mine from 450,000 to 1,2 million tons per annum3.                          
-    Producing Eskom product at Khanyisa Mine                                   
-    Beneficiation of coal at both Blesboklaagte and Khanyisa Mines             
-    Increase of saleable product produced from 220,000 to 550,000 tons per     
annum.                                                                          
The group is rapidly moving towards being a primary producer with a strong      
trading arm rather than the historical trader with a production facility.       
This will have a number of benefits but, most importantly, will reduce the      
vulnerability of having a single major revenue generating division.             
Black Empowerment                                                               
Waterberg Portion Property Investments (Pty) Limited, headed by Mr.             
Robinson Ramaite hold 23.8% of the issued share capital of Wescoal Holdings     
Limited.                                                                        
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 2009 are prepared in accordance with International Financial          
Reporting Standards ("IFRS"), and in a manner required by the Companies         
Act, and incorporates 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 judgments 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                                                           
2 December 2009                                                                 
M.R. Ramaite                       A.R. Boje                                    
Chairman                           Chief Executive Officer                      
CORPORATE INFORMATION                                                           
Non-Executive          MR Ramaite                                               
directors:             JG Pansegrouw                                            
                      T van Gaalen                                              
                      W Khumalo                                                 
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 Advisor:    Exchange Sponsors (2008) (Pty) Limited                   
Date: 02/12/2009 10:49:03 Supplied by www.sharenet.co.za                     
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