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WSL - Wescoal - Condensed audited results for the year ended 31 March 2010

Release Date: 09/06/2010 07:05:02      Code(s): WSL
WSL - Wescoal - Condensed audited results for the year ended 31 March 2010      
WESCOAL HOLDINGS LIMITED                                                        
Wescoal Holdings Limited (Incorporated in the Republic of South Africa)         
(Registration number 2005/006913/06) (JSE code: WSL ISIN: ZAE000069639)         
("Wescoal" or "the group")                                                      
The audited results for the year ended 31 March 2010, with comparative          
audited results for the year ended 31 March 2009 are presented.                 
                                                       Audited       Audited    
                                                   results for   results for    
the year      the year    
                                                         ended         ended    
                                                      31 March      31 March    
                                                          2010          2009    
R`000         R`000    
Revenue                                                 386 549       570 561   
Gross Profit                                             36 618        56 352   
Other operating income                                    1 432         1 621   
Operating costs                                        (29 204)      (32 696)   
Profit from operations                                    8 846        25 277   
Acquisition expenses written off                              -         (557)   
Profit on sale of assets                                  3 294             -   
Impairment of assets                                    (3 716)             -   
Investment revenue                                        1 459         3 367   
Finance costs                                           (1 339)       (2 080)   
Profit before taxation                                    8 544        26 007   
Taxation                                                (2 836)       (8 086)   
Profit for the year                                       5 708        17 921   
Attributable to:                                                                
Equity holders of the group                               6 672        18 491   
Minority interest                                         (964)         (570)   
                                                         5 708        17 921    
Headline earnings reconciliation:                                               
Net profit for the year                                   6 672        18 491   
Less: Profit on sale of assets                          (2 566)             -   
Plus: Impairment of assets                                2 140             -   
Headline earnings for the year                            6 246        18 491   
Ordinary shares in issue (000`s)                                                
- Total at period end                                   145 931       137 323   
- Weighted average shares in issue                      145 931       129 950   
- Fully diluted weighted average shares in issue        146 314       132 139   
(Note 1)                                                                        
Earnings per share:                                                             
Attributable earnings per ordinary share (cents)            4,6          14,2   
Headline earnings per share (cents)                         4,3          14,2   
Fully diluted attributable earnings per share               4,6          14,0   
Fully diluted headline earnings per share (cents)           4,3          14,0   
(1)  Fully diluted earnings per share information is reflected showing the      
potential effect of dilution for 3,47 million options held in terms of      
    the share incentive trust by the directors and employees to subscribe       
    for new shares in Wescoal.                                                  
Audited       Audited    
                                                   results for   results for    
                                                      the year      the year    
                                                         ended         ended    
31 March      31 March    
                                                          2010          2009    
                                                         R`000         R`000    
Non-current assets                                      128 670        98 776   
Property, plant and equipment                            49 557        26 686   
Investment Property                                         709           709   
Intangible Assets                                        19 743        13 614   
Goodwill                                                 54 513        54 513   
Deferred taxation                                         4 148         3 254   
Current assets                                          119 512       151 454   
Total assets                                            248 182       250 230   
EQUITY AND LIABILITIES                                                          
Total Shareholders` funds                               166 654       154 421   
Long-term debt                                           10 146         4 072   
Current liabilities                                      71 382        91 737   
Total equity and liabilities                            248 182       250 230   
Net asset value per share (cents)                        114,20        112,45   
Tangible net asset value per share (cents)                63,32         62,84   
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS                                     
Audited       Audited    
                                                   results for   results for    
                                                      the year      the year    
                                                         ended         ended    
31 March      31 March    
                                                          2010          2009    
                                                         R`000         R`000    
Net cash from operating activities before changes        22 641        24 719   
in working capital                                                              
Change in working capital                              (33 152)         4 035   
Net cash from operating activities after changes       (10 511)        28 754   
in working capital                                                              
Investing activities                                   (41 007)      (26 678)   
Financing activities                                      6 262        53 340   
Net increase in cash and cash equivalents              (45 256)        55 416   
Cash and cash equivalents at beginning of year           56 637         1 221   
Cash and cash equivalents at end of year                 11 381        56 637   
                                  Attributable to equity holders of the         
Share      Share    Retained      Share   
                                    capital    premium    earnings   reserves   
                                      R`000      R`000       R`000      R`000   
Balance at                               138    117 299      37 361        193  
1 April 2009                                                                    
Shares issued                              8      6 405           -          -  
Share based payment                                                        112  
Earnings attributable to                   -          -       6 672             
Balance as at 31 March 2010              146    123 704      44 033        305  
                                                          Minority      Total   
Total   interests     equity   
Balance at                                      154 991       (570)    154 421  
1 April 2009                                                                    
Shares issued                                     6 413           -      6 413  
Share based payment                                 112           -        112  
Earnings attributable to                          6 672       (964)      5 708  
Balance as at 31 March 2010                     168 188     (1 534)    166 654  
OPERATIONS, MARKET AND FINANCIAL REVIEW                                         
Trading Division                                                                
Despite the strengthening of international coal markets, domestic volumes are   
down in line with the national decline in manufacturing activity and            
increased competition from producers who traditionally favoured exports over    
local sales. During the year under review, volumes and margins remained under   
pressure due to compounding factors such as:                                    
- Manufacturing sector, the division`s primary source of revenue, down by       
- Inland pricing down 34%;                                                      
- Export prices down 50% thereby favouring domestic supply over export;         
- General oversupply in the domestic market leading to increasing competitive   
activity from new entrants.                                                     
The division retained a volume retention approach that has affected margins     
but will bear fruit during the anticipated economic recovery.                   
Mining division                                                                 
During the last quarter of the financial year the mining division was boosted   
by the Khanyisa Mine ("Khanyisa") acquisition which achieved excellent          
results for the quarter. The Khanyisa acquisition became effective October      
2009, an initial blast was carried out in December 2009 and the first revenue   
flowed during February 2010. This revenue accounted for the bulk of the         
operating profit achieved by the division during the second half of the year.   
Highlights during the year included:                                            
- The successful commissioning of the Jig plant at Blesboklaagte;               
- The Khanyisa acquisition generating revenue and contributing significant      
profits during the period under review;                                         
- Securing of a rail siding;                                                    
- Additional washing facility processing run of mine at Khanyisa;               
- Delivery of the initial order of 100,000 tons on a three year Eskom           
Wescoal Mineral Recovery, the briquette making business, once again delivered   
disappointing results due to the subdued construction industry and under the    
circumstances an impairment on the project of R2,1 million was deemed           
Financial review                                                                
Overall the group suffered a decline in revenue of R184 million (32,3%) due     
to significantly reduced pricing structures and volume reduction to the         
manufacturing sector. These factors resulted in a reduction in gross profit     
of R19,7 million (35,0%) and  together with impairments, a reduction in         
operating profit of R16,4 million (65,0%). On the positive side, overheads      
reduced by R3,5 million (10,7%) due to increased focus on this area.            
Investment revenue reduced R 1.9m (56.7%) due to the investment in Khanyisa     
mine during October 2009. 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 realized an   
after tax profit of R 2.6m which is not reflected as headline earnings but      
contribute a significant amount to the group earnings.                          
Segmental analysis                                                              
The analysis below, details the contribution of the two main divisions within   
the group:                                                                      
Income statement                                                                
31 March 2010                                                 Non-              
R`000                             Trading       Mining   operating      Total   
Revenue                           273 727      112 822           -    386 549   
Profit from Operations                 41        8 805           -      8 846   
Headline earnings                     317        5 503         426      6 246   
31 March 2009                                                 Non-              
R`000                             Trading       Mining   operating      Total   
Revenue                           475 503       95 058           -    570 561   
Profit from Operations             24 882          395           -     25 277   
Headline earnings                  19 495      (1 004)           -     18 491   
Subsequent to the financial year under review, export prices have risen on      
the back of Asian demand and are steady at $US90 per ton that, coupled with     
an exchange rate of around R7.60 = $US1, should result in higher domestic       
pricing during the latter half of 2010. Subject to the logistical               
infrastructure surrounding the export market performing adequately, the         
commissioning of Phase V at Richards Bay Coal Terminal (RBCT) will reduce the   
amount of product available domestically and in turn will benefit the trading   
The trading division has proven to be the mainstay of the group for many        
years and will ultimately return to the levels achieved in the past.            
Due to the dynamics of the coal industry, the mining division will produce      
the bulk of the group`s profits going forward. The last two months of the       
financial year under review proved that this division can contribute            
significant profits when compared to other activities. This will continue       
going forward due to:                                                           
- The division is on track to achieve the stated production target of  1,2      
million tons per annum;                                                         
- Saleable washed product will increase from 220,000 tons to 558,000 tons for   
the coming year;                                                                
- The division secured new contracts to account for the majority of             
production output;                                                              
- In addition to the washed product, a proven capability of delivering the      
monthly Eskom contractual requirement.                                          
The group is currently busy with an active drilling and exploration program     
on its existing Khanyisa and nearby reserves to ensure that production can be   
maintained at the target of 1,2 million tons per annum. In addition to ensure   
future growth and sustainability, the group is assessing its existing rights    
and is exploring a number of additional opportunities that have arisen out of   
the pending expiry of rights issued to others in 2004 and 2005.                 
BLACK ECONOMIC EMPOWERMENT                                                      
Wescoal`s black shareholding currently stands at 34%. Wescoal remains           
strongly committed to BEE and is constantly striving to increase black          
ownership of the group.                                                         
75% of Wescoal`s workforce is black and 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. The Board appointed two independent directors during the past       
financial year.                                                                 
No dividend has been declared. The Board reviews the dividend policy on an      
ongoing basis and use new projects, possible acquisitions and the group`s       
financial position as indicators in this decision taking process.               
BASIS OF PREPARATION                                                            
The annual financial statements for the year ended 31 March 2010 are prepared   
in accordance with International Financial Reporting Standards, 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.                   
AUDIT OPINION                                                                   
The group`s auditors, Middel & Partners have audited the financial              
information in terms of Rule 3.18 of the listing requirements of the JSE.       
Their unqualified audit opinion is available for inspection at Wescoal`s        
By order of the board                                                           
MR Ramaite                         AR Boje                                      
Chairman                           Chief executive officer                      
8 June 2010                                                                     
Corporate information                                                           
Non-executive directors: MR Ramaite, JG Pansegrouw, WN Khumalo,                 
DMT van Gaalen  Executive directors: AR Boje, P Janse van Rensburg              
Registration number: 2005/006913/06                                             
Registered address: 228 Voortrekker Street, Krugersdorp, 1740                   
Company secretary: CIS Company Secretaries (Pty) Limited                        
Telephone: (011) 954 2721  Facsimile: (011) 954 6737                            
Transfer secretaries: Computershare Investor Services (Pty) Limited  Sponsor:   
Exchange Sponsors (2008) (Pty) Limited                                          
Date: 09/06/2010 07:05:02 Supplied by www.sharenet.co.za                     
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