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

Release Date: 02/12/2010 08:00:04      Code(s): WSL
WSL - Wescoal Holdings Limited - Reviewed interim results for the six months    
ended 30 September 2010                                                         
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 2010             
SALIENT FEATURES - CONTINUING OPERATIONS                                        
Revenue up 54%                                                                  
EBITDA of R27,8m up 168%                                                        
Operating profits up 212%                                                       
Headline earnings per share - 8.3 cents - up 137%                               
Cash from operation activities - R14.3 m                                        
CONDENSED REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010   
The interim results for the six months ended 30 September 2010, with            
comparative results for the period ended 2009 and the audited results for the   
year ended 31 March 2010 are presented.                                         
Condensed consolidated statement of comprehensive income                        
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           2010                        
                           September   September    R`000                       
2010        2009                                     
                           R`000       R`000                                    
Continuing operations                                                           
                                                                                
Revenue                        334 303     217 451     386 549                  
Gross profit                    42 412      22 700      40 586                  
Other operating income              62       1 289       1 432                  
Operating costs             (14 641)    (13 606)     (27 270)                   
Earnings before interest,       27 833      10 383      14 748                  
tax, depreciation and                                                           
amortisation                                                                    
Depreciation                (3 624)     (2 416)      (5 902)                    
Amortisation                (6 631)     (2 324)             -                   
Earnings before interest,       17 578       5 643       8 846                  
tax and other costs                                                             
Profit on sale of assets           416       3 616       3 294                  
Impairment of assets                 -           -   (3 716)                    
Investment income                   93       1 274       1 459                  
Finance costs               (736)       (320)        (1 339)                    
Profit before taxation          17 351      10 213       8 544                  
Taxation                    (4 971)        (2 872)   (2 836)                    
Profit for the period from      12 380       7 341       5 708                  
continuing operations                                                           
                                                                                
Discontinued operations     (719)                -           -                  
Loss after tax from                                                             
discontinued operations -                                                       
Wescoal Mineral Recoveries                                                      
(Note 1)                                                                        
Profit for the period           11 661       7 341       5 708                  
                                                                                
Attributable to:                11 805       7 574       6 672                  
(144)       (233)        (964)                       
Equity holders of the                                                           
group                                                                           
Minority interest                                                               
Profit for the period           11 661       7 341       5 708                  
                                                                                
Headline earnings                                                               
reconciliation:                                                                 

Net profit for the period       11 661       7 341       5 708                  
Less: Profit on sale of     (329)       ( 2 604)     (2 566)                    
assets                                                                          
Plus: Impairment of assets           -           -       2 140                  
Plus: Minority interest            144         233         964                  
Headline earnings for the       11 476       4 970       6 246                  
period                                                                          
Ordinary shares in issue                                                        
(000`s)                                                                         
                                                                                
- Total at period end          145 931     145 931     145 931                  
- Weighted average shares                                                       
 in issue                     145 931     143 673     145 931                   
- Fully diluted weighted       147 558     145 853     146 314                  
 average shares in issue                                                        
(Note 2)                                                                       
Earnings per share:                                                             
                                                                                
Attributable earnings per          8.1  5.3          4.6                        
ordinary share (cents)                                                          
Headline earnings per              7.9  3.5          4.3                        
ordinary share (cents)                                                          
Fully diluted attributable         8.0  5.2          4.6                        
earnings per ordinary                                                           
share (cents)                                                                   
Fully diluted headline             7.8  3.4          4.3                        
earnings per ordinary                                                           
share (cents)                                                                   
                                                                                
Earnings from continued                                                         
operations                                                                      
Attributable earnings per          8.5  5.3          4.6                        
ordinary share for                                                              
continuing operations                                                           
(cents)                                                                         
Headline earnings per              8.3  3.5          4.3                        
ordinary share for                                                              
continuing operations                                                           
(cents)                                                                         
Fully diluted attributable         8.4  5.2          4.6                        
earnings per ordinary                                                           
share for continuing                                                            
operations (cents)                                                              
Fully diluted headline             8.2  3.4          4.3                        
earnings per ordinary                                                           
share (cents)                                                                   
                                                                                
Earnings from discontinued                                                      
operations                                                                      
Attributable earnings per   (0.4)       -            -                          
ordinary share for                                                              
discontinued operations                                                         
(cents)                                                                         
Headline earnings per       (0.4)       -            -                          
ordinary share for                                                              
discontinued operations                                                         
(cents)                                                                         
Fully diluted attributable  (0.4)       -            -                          
earnings per ordinary                                                           
share for discontinued                                                          
operations (cents)                                                              
Fully diluted headline      (0.4)       -            -                          
earnings per ordinary                                                           
share for discontinued                                                          
operations (cents)                                                              
Notes:                                                                          
1.   Discontinued Operations - Wescoal Mineral Recoveries                       
In March 2010, the Board of directors made a decision to discontinue the    
    operations of Wescoal Mineral Recoveries (Pty) Ltd. The major assets of     
    the company were disposed of subsequent to the reporting period and will    
    not impact significantly on earnings for the second half of this            
financial year.                                                             
2.   Fully diluted earnings per share information is reflected showing the      
    potential effect of dilution for 8.47 million options held in terms of      
    the share incentive trust by the directors and employees to subscribe       
for new shares in Wescoal.                                                  
Condensed consolidated statement of financial position                          
                      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           2010                         
2010         September     R`000                        
                      R`000          2009                                       
                                     R`000                                      
ASSETS                                                                          

Non-current assets     145 260        99 311        128 670                     
                                                                                
Property, plant and    49 047         26 958        49 557                      
equipment                                                                       
Mine establishment     18 496         -             -                           
costs                                                                           
Investment property    709            709           709                         
Goodwill               54 513         54 513        54 513                      
Intangible assets      18 191         13 614        19 743                      
Deferred taxation      4 304          3 517         4 148                       
Current assets         160 386        111 143       116 454                     
Inventories and work   29 002         22 175        37 449                      
in progress                                                                     
Trade and other        111 302        54 146        67 624                      
receivables                                                                     
Cash and cash          20 082         34 822        11 381                      
equivalents                                                                     
Non-current assets     -              -             3 058                       
held for sale                                                                   
Total assets           305 646        210 454       248 182                     
                                                                                
EQUITY AND                                                                      
LIABILITIES                                                                     

Total Shareholders`    178 515        167 471       166 655                     
funds                                                                           
                                                                                
Non-current            14 635         3 123         10 145                      
liabilities                                                                     
Current liabilities    112 496        39 860        71 382                      
Trade and other        106 885        37 286        66 870                      
payables                                                                        
Current portion of     5 611          2 574         4 512                       
long-term liabilities                                                           
                                                                                
Total equity and       305 646        210 454       248 182                     
liabilities                                                                     
                                                                                
Net asset value per    122.33         114.76        114.20                      
share (cents)                                                                   
Tangible net asset     72.51          68.08         63.32                       
value per share                                                                 
(cents)                                                                         
Condensed Consolidated Statement of Changes in Equity                           
                      Attributable to equity holders of the company             
                      Share     Share premium  Retained      Share              
                      capital   R`000          earnings      options            
R`000                    R`000         reserves           
                                                             R`000              
Balance at 1 April     146       123 704        44 033        305               
2010                                                                            
Earnings               -         -              11 804        200               
attributable to                                                                 
shareholders                                                                    
Balance as at 30       146       123 704        55 837                          
September 2010                                                                  
                                                             505                
                 Minority   Total                                               
                 interests  equity                                              
Balance at 1                                                                    
April 2010        (1 533)    166 655                                            
Earnings                                                                        
attributable to                                                                 
shareholders      (144)      11 860                                             
Balance as at 30                                                                
September 2010                                                                  
                 (1 677)    178 515                                             
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  2010                         
                        30           2009          R`000                        
September    R`000                                      
                        2010                                                    
                        R`000                                                   
Net cash from operating       9 593        10 209        22 804                 
activities before                                                               
working capital changes                                                         
Working capital changes       4 784   (28 119)      (33 161)                    
Net cash from operating      14 377   (17 910)      (10 357)                    
activities after                                                                
working capital changes                                                         
                                                                                
Investing activities     (9 220)         (3 248)    (41 161)                    

Financing activities          3 544    (656)              6 262                 
Net increase/(decrease)       8 701   (21 814)      (45 256)                    
in cash and cash                                                                
equivalents                                                                     
Cash and cash                11 381        56 637        56 637                 
equivalents at                                                                  
beginning of period                                                             
Cash and cash                20 082        34 823        11 381                 
equivalents at end of                                                           
period                                                                          
Operations, Market and Financial Review                                         
Mining Division                                                                 
The Khanyisa Colliery ("Khanyisa") continues to perform well and in the         
period April to September 2010 produced 887,000 tons of which 546,000 tons      
was supplied to Eskom. The operation is well on track to mine the stated        
target of 1,2 million tons of ROM by the financial year end on 31 March 2011    
and it is forecast to have supplied Eskom 900,000 tons in the same period.      
The division has however incurred additional overheads related primarily to     
health and safety and environmental issues with specific focus on water use     
and management. The division`s performance in these areas has been excellent    
and management wants it to remain so and where possible, improve further.       
During this period the group has secured long-term contracts to supply          
product to major users in both the cement and lime and municipal power          
generation sectors which has only been made possible by the group`s move to a   
primary producer with sustainable resources.                                    
The recently announced acquisition of the Elandspruit reserve, situated         
approximately five kilometres south-west of Middelburg, Mpumalanga, will        
ensure coal sustainability for the next few years. It has an indicated          
resource level of 11,6 million tons of which 4,3 million tons is                
metallurgical type coal, 4,1 million tons is thermal coal suitable for the      
inland and/or export markets the remainder is Eskom type product.               
The group`s coal washing operations at Blesboklaagte was again unprofitable     
for the six month period. The company is currently evaluating various options   
to get this operating at a profitable level.                                    
There have been no material changes in the resources of the company save for    
the acquisition of Elandspruit reserve which is expected to become              
unconditional in early 2011.                                                    
Trading Division                                                                
A positive result was experienced in the division with volumes up 17% as        
compared to the comparative six month period and a definite reversal of the     
downward trend experienced during the period September 2009 to March 2010.      
The positive developments for the trading environment are the API#4 export      
price being steady at $100 coupled to Transnet Freight Rail ("TFR") achieving   
record delivery rates to Richards Bay Coal Terminal ("RBCT") since July 2010.   
These developments have contributed to the first local price increase since     
mid 2008 of 10% on 1 July 2010 and management expects a further 10 to 15%       
during 2011 but expects margins to remain under pressure.                       
In addition the division is experiencing increased demand from the local        
manufacturing industries which indicates an improved performance going          
forward.                                                                        
Financial                                                                       
Overall the group achieved a turnover increase of R117 million (54%) due        
mainly to the incorporation of Khanyisa for the full period under review. The   
increased turnover, together with a margin increase to 9,9% from 8,6% and       
strict cost controls, resulted in a R5,0 million (69%) increase in profit       
from continuing operations.                                                     
The company achieved an EBITDA of R27.8m which represents an increase of 168%   
as compared to the prior interim period. This is mainly due to the inclusion    
of mining profits earned by Khanyisa.                                           
Headline earnings per share ("HEPS") from continued operations of 8,3 cents     
reflects a 137% increase as compared to the prior interim period.               
Segment analysis from continuing operations                                     
The analysis below details the contribution of the two main divisions within    
the Group:                                                                      
R`000                                                                           
30 September 2010                                                               
Income Statement      Trading Mining    Elimination Total                       
of                                       
                                       intergroup                               
                                                                                
Revenue               174 126 249 303   (89 126)    334 303                     
Profit from             3 036 14 542             -  17 578                      
operations                                                                      
Headline earnings     2 186   10 657    (463)       12 380                      
                                                                                
R`000                                                                           
30 September 2010                                                               
Balance Sheet        Trading  Mining    Elimination Total                       
                                       of                                       
intergroup                               
Current assets       81 006   79 380             -  160 368                     
Non current assets   115 804  62 020    (105 268)   72 556                      
Goodwill and         70 244   -              2 460                              
intangibles                                         72 704                      
Shareholders funds   162 540  13 515         2 460                              
Non current                                         178 515                     
liabilities          52 158   69 613    (105 268)   16 503                      
Current liabilities  52 356   58 272             -  110 628                     
                                                                                
R`000                                                                           
30 September 2009                                                               
Income Statement     Trading    Mining Elimination  Total                       
                    and               of                                        
                    other             intergroup                                
                                                                                
Revenue              191 412  50 038   (23 999)     217 451                     
Profit from                                                                     
operations           4 583    1 060             -   5 643                       
Headline earnings    7 012    562      (2 604)      4 970                       

R`000                                                                           
30 September 2009                                                               
Balance Sheet        Trading   Mining   Elimination Total                       
and                of                                       
                    other              intergroup                               
Current assets       83 195    27 948            -  111 143                     
Non current assets   164 755   10 668   (144 239)   31 184                      
Goodwill and                                                                    
intangibles          65 667         -        2 460  68 127                      
                                                                                
Shareholders funds   167 436  ( 2 425)       2 460  167 471                     
Non current                                                                     
liabilities          113 274   34 088   (144 239)   3 123                       
Current liabilities  32 907     6 953            -  39 860                      
Prospects                                                                       
The mining division will continue to improve as non-recurring costs were        
incurred during the reporting period and further savings are expected from      
the replacement of rented equipment with company-owned equipment and other      
cost-saving initiatives.                                                        
The trading division experienced a poor second half of the prior financial      
year, ended 31 March 2010, however the encouraging developments in the          
trading division experienced during the period under review will ensure this    
is not repeated.                                                                
With the incorporation of Khanyisa into the mining division, the trading        
division will no longer generate the bulk of the group`s profit.                
The Elandspruit feasibility is at an advanced stage and should be completed     
with the transaction becoming unconditional early in 2011.                      
Black Empowerment                                                               
Waterberg Portion Property Investments (Pty) Limited ("WPP") and the major      
shareholders of WPP, Mr Robinson Ramaite and Mr Erik Mzimela holds 34.9% of     
the issued share capital of Wescoal Holdings Limited. WPP is a BEE Company      
operating in the minerals and energy space.                                     
Corporate Governance                                                            
The Group subscribes to and is in the process of implementing, where            
applicable, the principal recommendations of the King III 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 2010 are prepared in accordance with International Financial          
Reporting Standards ("IFRS"), and in a manner required by the Companies Act,    
and 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                                                           
2 December 2010                                                                 
M.R. Ramaite                  A.R. Boje                                         
Chairman                      Chief Executive Officer                           
CORPORATE INFORMATION                                                           
Non-Executive directors:      MR Ramaite                                        
                             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:            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: 02/12/2010 08:00:03 Supplied by www.sharenet.co.za                     
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