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Wsl - Wescoal Holdings Limited - Condensed Consolidated Audited Results For The

Release Date: 29/06/2011 13:27:01      Code(s): WSL
WSL - Wescoal Holdings Limited - Condensed consolidated audited results for the 
year ended 31 March 2011                                                        
Wescoal Holdings Limited                                                        
(Incorporated in the Republic of South Africa)                                  
(Registration number 2005/006913/06)                                            
(JSE code: WSL ISIN: ZAE000069639)                                              
("Wescoal" or "the group")                                                      
CONDENSED CONSOLIDATED AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2011         
The audited results for the year ended 31 March 2011, with comparative audited  
results for the year ended 31 March 2010 are presented.                         
Condensed consolidated statement of comprehensive income                        
Audited  Audited                
                                        results for the  results for            
                                             year ended  the year               
                                               31 March  ended                  
2011       31 March          
                                                  R`000           2010          
                                                                 R`000          
 CONTINUING OPERATIONS                                                          
Revenue                                        557 614        353 900          
 Gross profit                                    25 731         58 511          
 Other operating income                             644            332          
 Operating costs                               (35 232)       (29 205)          
(Loss)/Profit from operations                  (8 857)         29 638          
 Depreciation                                   (3 438)        (1 946)          
 Amortisation                                   (9 744)        (2 323)          
 (Loss)/Earnings before interest, tax          (22 039)         25 370          
and other costs                                                                
 Profit on sale of assets                            90          2 917          
 Impairment of assets                           (4 776)              -          
 Investment revenue                                 175          1 456          
Finance costs                                  (2 655)          (795)          
 (Loss)/Profit before taxation                 (29 205)         28 948          
 Taxation                                        12 158        (2 936)          
 (Loss)/Profit for the year from               (17 047)         26 012          
continuing operations                                                          
                                                                                
 DISCONTINUED OPERATIONS                       (26 714)       (20 304)          
 Loss after tax from discontinued                                               
operations                                                                     
                                                                                
 (Loss)/Profit for the year from all           (43 761)          5 708          
 operations                                                                     
Attributable to:                                                               
                                                                                
 Owners of the parent                          (43 617)          6 672          
 Non-controlling interest                         (144)          (964)          
(43 761)          5 708          
                                                                                
                                                                                
                                               (43 761)          5 708          
Headline earnings reconciliation:                                              
 (Loss)/Profit for the year for all                                             
 operations                                                                     
 Less: Profit on sale of assets                   (501)        (2 566)          
Plus: Impairment of assets                       4 776          2 140          
 Plus: Minority interest                            144            964          
 Headline (loss)/profit for the year           (39 342)          6 246          
 Continued operations - (Loss)/Profit          (12 218)         24 792          
Discontinued operations - (Loss)              (27 124)       (18 546)          
                                                                                
 Ordinary shares in issue (000`s)                                               
 -Total at period end                           157 931        145 931          
-Weighted average ordinary shares in           150 271        145 931          
 issue                                                                          
 -Fully diluted weighted average                151 931        146 314          
 ordinary shares in  issue (Note 1)                                             

 Basic earnings per ordinary share                                              
 (cents):                                                                       
 (Loss)/Profit from continuing                   (11.2)           18.5          
operations                                                                     
 Loss from discontinued operations               (17.8)         (13.9)          
 (Loss)/Profit attributable to                   (29.0)            4.6          
 ordinary owners                                                                
Fully diluted earnings per ordinary                                            
 share (cents):                                                                 
                                                                                
 (Loss)/Profit from continuing                   (11.1)           18.5          
operations                                                                     
 Loss from discontinued operations               (17.6)         (13.9)          
 (Loss)/Profit attributable to                   (28.7)            4.6          
 ordinary owners                                                                
Headline earnings per                                                          
 ordinary share (cents):                                                        
                                                                                
 (Loss)/Profit from continuing                    (8.1)           17.0          
operations                                                                     
 Loss from discontinued operations               (18.1)         (12.7)          
 (Loss)/Profit attributable to                   (26.2)            4.3          
 ordinary owners                                                                
Fully diluted headline earnings per                                            
 ordinary share (cents):                                                        
                                                                                
 (Loss)/Profit from continuing                    (8.0)           16.9          
operations                                                                     
 Loss from discontinued operations               (17.9)         (12.6)          
 (Loss)/Profit attributable to                   (25.9)            4.3          
 ordinary owners                                                                
Note:                                                                           
1    Fully diluted earnings per share information is reflected showing the      
    potential effect of dilution for 8.87 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                          
                                        Audited results        Audited          
                                           for the year    results for          
ended       the year          
                                               31 March          ended          
                                                   2011       31 March          
                                                  R`000           2010          
R`000          
ASSETS                                                                          
                                                                                
Non-current assets                               144 919        128 670         

Property, plant and equipment                     62 140         49 557         
Investment property                                  709            709         
Intangible assets                                 16 871         19 743         
Goodwill                                          49 737         54 513         
Deferred taxation                                 15 462          4 148         
                                                                                
Current assets                                   121 602        116 454         

Inventories and work in progress                  13 032         37 449         
Trade and other receivables                       77 230         67 624         
Cash and cash equivalents                         31 340         11 381         

Non-current assets held for sale                   2 079          3 058         
                                                                                
TOTAL ASSETS                                     268 600        248 182         

EQUITY AND LIABILITIES                                                          
                                                                                
Total equity                                     136 632        166 654         

Equity attributable to owners of the             136 809        168 188         
parent                                                                          
Non-controlling interest                           (177)        (1 534)         

Non-current liabilities                           22 700         10 148         
                                                                                
Instalment sale agreements                        19 233          8 106         
Rehabilitation provision                           3 368            716         
Deferred tax                                          99          1 326         
                                                                                
Current liabilities                              109 268         71 380         

Trade and other payables                          96 737         66 869         
Current portion of interest bearing               12 531          4 511         
debt                                                                            

TOTAL EQUITY AND LIABILITIES                     286 600        248 182         
                                                                                
Net asset value per share (cents)                  86.51         114.20         
Tangible net asset value per share                 44.34          63.32         
(cents)                                                                         
Condensed consolidated statement of changes in equity                           
                      Attributable to owners of the                             
parent                                                    
             Share    Share     Retain Change  Share  Total  Non-    Total      
             Capital  Premium   ed     in      optio  R`000  Control Equity     
             R`000    R`000     Earnin Owners  ns            ling               
gs     hip     reser         Interes            
                                R`000          ves           ts                 
                                               R`000                            
Balance at 1  146      123 704   44 033                168                      
April 2010                              -       305    188    (1 534) 166 654   
Shares        21       21 921    -      -       -      21     -       21 942    
issued                                                 942                      
Treasury      (9)      (8 373)   -      -       -      (8     -       (8 382)   
shares                                                 382)                     
Capital       -        (318)     -      -       -      (318)  -       (318)     
raising                                                                         
costs                                                                           
Share based   -        -         -                     498                      
payment                                 -       498           -       498       
reserve                                                                         
Change  in    -        -         -      (1      -      (1     1 501   -         
ownership                               501)           501)                     
Total         -        -         (43                                            
comprehensiv                     618)                  (43                      
e income for                            -              618)   (144)   (43       
the year                                                              762)      
Balance as    158      136 934   415                   136                      
at 31 March                             (1      803    809    (177)   136 632   
2011                                    501)                                    
Condensed Consolidated Cash Flow Statements                                     
                                       Audited results         Audited          
                                          for the year     results for          
                                                 ended  the year ended          
31 March 2011   31 March 2010          
                                                 R`000           R`000          
Net cash from operating                        (30 493)          22 641         
activities before                                                               
changes in working                                                              
capital                                                                         
Change in working                                42 600        (33 152)         
capital                                                                         
Net cash from operating                          12 107        (10 511)         
activities after                                                                
changes in working                                                              
capital                                                                         
Investing activities                           (24 857)        (41 007)         
Financing activities                             32 709           6 262         
Net increase in cash                             19 959        (45 256)         
and cash equivalents                                                            
Cash and cash                                    11 381          56 637         
equivalents at                                                                  
beginning of year                                                               
Cash and cash                                    31 340          11 381         
equivalents at end of                                                           
year                                                                            
Commentary                                                                      
Operations, market and financial impacts                                        
The poor results are predominantly due to issues that arose in the quarter ended
31 March 2011 resulting in a board decision to account for them in the following
manner:                                                                         
*    The write off of all mining costs totaling R29,3 million incurred at the   
Sutha Civils (Pty) Limited. ("Sutha") operation at Khanyisa Colliery;       
*    Accelerated write off of R7,5 million of mine establishment costs and      
    mining in progress; and                                                     
*    Impairment of goodwill of R4,8 million in Chandler Coal (Pty) Limited      
("Chandler Coal").                                                          
In addition to these write offs, the reduced production and increased costs     
relating to flooding accelerated losses especially at the Blesboklaagte washing 
plant that incurred an operating loss of R22, 6 million.                        
To date, no action has been launched by Sutha to substantiate and demand the    
money, which they very publicly claimed was due to them. Wescoal did however    
approach the court in March 2011 to interdict Sutha from continuing to make     
unsubstantiated and derogatory statements to the media. An interim order was    
granted and should be made final during July 2011.                              
Whilst legal opinion suggests any potential claim has a limited chance of       
success, provisions have been made for this eventuality.                        
Mining Division                                                                 
The mining division achieved a revenue of R242,8 million on the back of a mined 
tonnage of 967,000 and supply to Eskom of 885,000 tons of coal. Profits were    
severely affected by the write offs resulting in an operating loss of R10,7     
million and a headline loss of R36.1 million for the division. Meaningful       
comparisons are not possible as the prior year consisted of only two operating  
months at the major contributor to the division, Khanyisa Colliery.             
Khanyisa Colliery regained full production during April 2011 and the            
Blesboklaagte washing operation was closed on 31 March 2011 with the division`s 
focus now to maximize product supply to Eskom and Municipal power generators.   
Mining methods have been changed to prevent a reoccurrence of the problems      
caused by excessive rainfall during the quarter ended 31 March 2011 and         
management is confident of achieving stated targets of 1, 4 million tons total  
tonnage supplied for the 2011/2012 financial year.                              
Trading Division                                                                
A positive result was generated from the division with both volumes and revenue 
up 15% on the last financial year and the division positively contributing at   
operating profit level, however the impairment of goodwill in Chandler Coal     
relating to the Express Coal investment, affected headline earnings.            
Subsequent to the reporting period, producers implemented further price         
increases and the API#4 export price remains in excess of US$110 per ton.       
Product shortages are forecast as some producers are once again focusing on the 
export market and others have dwindling reserves in both quality and quantity.  
Increased demand from the manufacturing sector is still being experienced       
indicating further improvements in volumes going forward. Management is however 
increasing focused on margin improvement and cost reductions.                   
Financial review                                                                
The following operations are reported on as discontinued operations in the      
consolidated statement of comprehensive income:                                 
-    Wescoal Mineral Recoveries` briquetting plant; and                         
-    Wescoal Mining`s (Blesboklaagte) beneficiation plant.                      
These two operations contributed R26.7 million to the attributable loss of R43.8
million of the group for the year under review. The briquetting plant was sold  
during the year and the sale of the Blesboklaagte plant is currently being      
finalized.                                                                      
The loss for the year from continuing operations of R17 million includes an     
impairment of R4.8m of goodwill in the trading division. Management felt it     
prudent to provide for this impairment due to reduced margins being achieved.   
Overall the group achieved a revenue increase of R204 million (58%) due mainly  
to the incorporation of the Khanyisa operation for the full period under review.
For the first time, since the decrease in coal prices started in the 2008/2009  
financial year, the group experienced price increases in the latter part of the 
year under review. This will have a positive effect on revenue from the trading 
division in the new financial year. Gross profit decreased by R32.8m due to     
reduced trading margins, the write off of mining costs incurred by the Sutha    
operation, reduced production and increased costs due to flooding.              
Overheads increased by R6 million (21%) due to the establishment of a regional  
office for the mining division, acquisition costs incurred and normal           
inflationary pressure.                                                          
Net finance costs increased by R3.1 million due the demand from the mining      
division for additional materials handling equipment. Management identified     
material cost savings in this area and decided to purchase new equipment rather 
than to continue sub-contacting resulting in the debt from financing of the new 
equipment increasing by R19 million                                             
Segment analysis                                                                
The analysis below, details the contribution of the two main divisions within   
the group:                                                                      
Income statement                           Trading        Mining         Total  
                                                                                
Revenue from continued operations          314 745       242 869       557 614  
Loss from continued operations               1 849      (10 706)       (8 857)  

Income statement                           Trading        Mining         Total  
                                                                                
                                          272 532        81 368       353 900   
Revenue from continued operations            8 901        20 737        29 638  
Profit from continued operations                                                
Prospects                                                                       
Whilst the write offs and other actions mentioned in the review above were      
severe, the losses at Blesboklaagte will not reoccur and the potential profit   
from the sale of the plant should be realized in the new financial year.        
In addition the group balance sheet has been cleared of potential pitfalls that 
could affect earnings going forward.                                            
The termination of the Elandspruit 291JS transaction was disappointing but      
nevertheless necessary. Following an intensive due diligence, it was decided    
that sufficient value was not present for the transaction to proceed and the    
associated risks were not warranted.                                            
The group continues to seek opportunities to obtain coal resources and is       
currently evaluating some options on this front. An application for a mining    
right on the Vlakvarkfontein 213 IR reserve near Khanyisa has been submitted    
and, on granting, will extend the life of Khanyisa by 12 months or more.        
The board is positive that the measures taken and the renewed focus by both the 
trading and mining divisions will return the group to the expected              
profitability.                                                                  
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 III Code of Corporate Governance.     
Dividends                                                                       
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 2011 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 offices.                 
By order of the Board                                                           
29 June 2011                                                                    
M.R. Ramaite                       A.R. Boje                                    
Chairman                           Chief Executive Officer                      
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                                        
Postal address:                      PO Box 133                                 
                                    Krugersdorp                                 
                                    1740                                        
Company secretary:                   CIS Company Secretaries (Pty) Ltd          
Telephone:                           011 - 954 2721                             
Facsimile:                           011 - 954 6737                             
Transfer secretaries:                Computershare Investor Services            
(Pty) Limited                               
Sponsor:                             Exchange Sponsors (2008) (Pty)             
                                    Limited                                     
Date: 29/06/2011 13:27:01 Supplied by www.sharenet.co.za                     
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