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Wescoal Holdings Limited - Unaudited Condensed Consolidated Results For The Six Months Ended 30 September 2013

Release Date: 04/11/2013 07:05:00      Code(s): WSL     
Wescoal Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/006913/06)
(JSE code: WSL ISIN: ZAE000069639)
("Wescoal" or "the Group")

Unaudited condensed
consolidated interim results
for the six months ended 30 September 2013

Financial and other highlights

Revenue
up 32,5%

EBITDA
R48,7 million (2012:
R27,8 million) up 74,9%

Headline earnings
R18,1 million (2012:
10,9 million) up 66,0%

HEPS
11,4 cents (2012:
6,9 cents) up 62,3%

Cash reserves
R89,1 million

Health and safety
Substantial achievements in
compliance, health and safety

Unaudited condensed consolidated interim results
for the six months ended 30 September 2013

The unaudited interim results for the six months ended 30 September 2013, with comparative
unaudited results for the six months ended 30 September 2012 and the audited results for the
year ended 31 March 2013 are presented.

Condensed consolidated statement of comprehensive income

                                                     Unaudited        Unaudited
                                               interim results  interim results           Audited
                                                   for the six      for the six   results for the
                                                  months ended     months ended        year ended
                                                  30 September     30 September          31 March
                                                          2013             2012              2013
                                                         R'000            R'000             R'000

Revenue                                                465 679          351 361           676 927
Cost of sales                                        (411 812)        (314 225)         (604 253)
Gross profit                                            53 867           37 136            72 674
Other income                                               419              987             3 883
Profit on sale of mineral assets                        71 273                                 
Operating expenses                                    (27 577)         (21 081)          (48 849)
Operating profit                                        97 982           17 042            27 708
Finance income                                             202               33               695
Finance costs                                          (3 175)          (1 947)           (3 358)
Profit before taxation                                  95 009           15 128            25 045
Taxation                                              (18 301)          (4 440)           (5 338)
Profit for the period                                   76 708           10 688            19 707
Attributable to:
Owners of the parent                                    58 806           10 688            19 707
Non-controlling interest                                17 902                                 
Profit for the period                                   76 708           10 688            19 707
Headline earnings reconciliation:
Net profit for the period                               76 708           10 688            19 707
Less: Profit on sale of mineral assets                (58 602)                                 
Less: Profit on sale of assets                            (49)              187             (380)
Headline earnings for the period                        18 057           10 875            19 327
Ordinary shares in issue (000's)
 Total at period-end                                  157 931          157 931           157 931
 Weighted average shares in issue                     157 931          157 931           157 931
 Fully diluted weighted average shares in
  issue (note 1)                                       160 638          158 272           158 306
Basic earnings per ordinary share (cents):                37,2              6,8              12,5
Fully diluted basic earnings per ordinary
share (cents)                                             36,6              6,8              12,4
Headline earnings per ordinary share (cents):             11,4              6,9              12,2
Fully diluted headline earnings per
ordinary share (cents):                                   11,2              6,9              12,2

Note 1:
Fully diluted earnings per share information as reflected shows the potential effect of dilution for 14,97 million
options held in terms of the share incentive trust by the directors and employees of the Wescoal Holdings group.

Condensed consolidated statement of financial position

                                                 Unaudited        Unaudited
                                           interim results  interim results          Audited
                                               for the six      for the six  results for the
                                              months ended     months ended       year ended
                                              30 September     30 September         31 March
                                                      2013             2012             2013
                                                     R'000            R'000            R'000
ASSETS
Non-current assets                                 239 341          125 729          142 176
Property, plant and equipment                       69 246           47 583           57 704
Investment property                                    709              709              709
Investments                                          3 199            1 580            2 293
Goodwill and intangible assets                      51 209           50 655           50 655
Mineral assets                                     113 744           20 692           27 096
Deferred taxation                                    1 234            4 510            3 719
Current assets                                     300 114          178 840          146 948
Inventories and work in progress                    47 175           22 222           15 986
Trade and other receivables                        158 932          116 808          109 592
Cash and cash equivalents                           94 007           39 810           21 370
Total assets                                       539 455          304 569          289 124
EQUITY AND LIABILITIES
Total shareholders' funds                          239 196          167 749          177 321
Stated capital                                     137 092          137 092          137 092
Retained earnings                                   82 669           30 031           39 050
Employee share option reserve                        1 710              803            1 355
Non-controlling interest                            17 725            (177)            (176)
Non-current liabilities                             33 552           12 152           15 368
Instalment sale agreements                           3 087            3 191              786
Interest-bearing loans                                 224              446              338
Rehabilitation provision                            22 382            8 414           14 188
Deferred tax                                         7 859              101               56
Current liabilities                                266 707          124 668           96 435
Trade and other payables                           196 536          110 174           87 630
Bank overdraft                                       4 942            3 647                
Current portion of interest-bearing loans           60 547              199              210
Current portion of instalment sale
agreements                                           4 682           10 648            8 595

Total equity and liabilities                       539 455          304 569          289 124
Net asset value per share (cents)                   151,46           106,22           112,28
Tangible net asset value per share (cents)
(note 1)                                            119,03            74,14            80,20

Note 1:
Regulatory approved mineral rights are now classified as tangible assets and included in the tangible net asset
value per share calculation. The comparative figures have been adjusted accordingly.

Condensed consolidated statement of cash flows

                                                 Unaudited           Unaudited
                                           interim results     interim results           Audited
                                               for the six         for the six   results for the
                                              months ended        months ended        year ended
                                              30 September        30 September          31 March
                                                      2013                2012              2013
                                                     R'000               R'000             R'000

Cash flows from operating activities                63 086              25 981            35 654
Cash generated in operations                        84 746              27 400            38 456
Finance income                                         202                  33               696
Finance costs                                      (3 175)             (1 415)           (3 358)
Income tax paid                                    (3 500)                (37)             (140)
Dividends paid                                    (15 187)                                    
Cash flows from investing activities              (53 447)             (5 081)          (24 992)
Purchase of property, plant and
equipment                                          (5 151)               (978)          (13 371)
Sale of property, plant and equipment                   59                 180               863
Capitalised development costs                     (34 827)             (3 913)          (11 519)
Purchase of mineral assets                        (93 810)                                    
Proceeds on disposal of mineral assets              81 120                                    
Purchase of financial assets                         (838)               (370)             (965)
Cash flows from financing activities                58 056             (4 650)           (9 205)
Movements in interest-bearing debt                  60 223                (92)             (189)
Investment in acquisition activities                 (554)                                    
Movements in instalment sale agreements            (1 613)             (4 558)           (9 016)
Net increase in cash and cash equivalents           67 695              16 250             1 457
Cash and cash equivalents at beginning
of period                                           21 370              19 913            19 913
Cash and cash equivalents at end
of period                                           89 065              36 163            21 370

Condensed consolidated statement of changes in equity
Attributable to owners of the parent

                                   Stated    Retained    Employee share                     Non-
                                  capital    earnings    option reserve      Total   controlling       Total
                                    R'000       R'000             R'000      R'000     interests      equity

Balance as at 1 April 2011        137 092     (1 259)               803    136 636         (176)     136 460
Profit for the period                         20 602                      20 602                   20 602
Balance as at 31 March 2012       137 092      19 343               803    157 238         (176)     157 062
Share-based payment reserve                                       552        552                      552
Profit for the period                         19 707                      19 707                   19 707
Balance as at 31 March 2013       137 092      39 050             1 355    177 497         (176)     177 321
Share-based payment reserve                                       355        355                      355
Dividends paid                               (15 187)                   (15 187)                 (15 187)
Profit for the period                         58 806                      58 806        17 902      76 708
Balance as at 30 September 2013   137 092      82 669             1 710    221 471        17 725     239 196

Operations, market and financial review

An excellent set of financials for the six-month period with further improvements expected going
forward. Additional highlights included the finalisation of the Elandspruit transaction with
Glencore Xstrata, the proposed acquisition of the business unit of MacPhail Distributors, award of
a Quattro export allocation and the securing of a R180 million debt facility from Investec Bank.

Group results exceeded the comparable period ending September 2012 with revenues of
R465,7 million (2012: R351,4 million), EBITDA of R48,7 million (2012: R27,8 million) and
headline earnings of R18,1 million (2012: R10,9 million) an increase in headline earnings of
66,0%. Profit for the period of R76,7 million (2012: R10,7 million) includes R58,6 million after
tax profit on the sale of the Vlaklaagte mineral asset to Xstrata.

Mining division

The commissioning of the Intibane Colliery in June 2013 contributed significantly to the
excellent results from the division producing 350 234 tons of the 895 185 tons total production.
Both Khanyisa and Intibane are now at full production and will continue so for life of mine.

Mining revenues are R261,7 million (2012: R143,1 million) and profit from continuing operations
R27,7 million (2012: R16,5 million). Operating costs are however up 64%, a high figure despite
the increased production and revenue. We are focusing on reducing mining costs.

Eskom has placed significant emphasis on moving of coal transport from road to rail and to
this end the division has increased the rail delivery to 45% of recent sales to the utility.

Mining increased focus during the reporting period on safety, health and environmental
management. Results from these changes are monitored on a regular basis and significant
positive results have been reported from this action plan. The most important achievements
reported thus far includes:

 no critical compliance areas;
 a reduction in the lost time injury rate; and
 improved housekeeping.

Trading division

The division delivered disappointing results however as this was anticipated, structural change
to the trading operation has been undertaken to fully realise the benefits of the integration
of the business unit of MacPhail Distributors and to reduce costs.

For the reporting period, trading revenues are flat at R204 million (2012: R208 million) and
profit from operations of R2,9 million (2012: R6,7 million) is 57% down. The reduced
profitability is directly related to the volume reduction of 13% to 217 831 tons (2012: 250 127).

There has been an unexpected spike in the RBCT API#4 export price to $91 from around $82
which may lead to increased domestic pricing and restricted product availability.

Financial overview

Revenue from all operations which includes coal mining, processing and trading reflects an
increase of R114,3 million up 32,5% from the comparative financial period. Revenue from the
trading division was 2,1% down from the prior period. The mining division increased revenue
by 82,9% to R261,7 million.

Gross profit increased by R16,7 million to R53,9 million. Margins improved by 1% to 11,6%.
This improvement was mainly driven by price and volume increases in the mining division.
Sales volumes in the trading division decreased by 12,9% but it managed to increase sales
prices by an average of 12,4%.

Operating expenses increased by 30,8% to R27,6 million due primarily to inflationary factors
and a strategic increase in corporate head office expenses.

Group EBITDA ended on R48,7 million up 74,9% on the comparative period. The operating
profit of R97,9 million includes the profit on the sale of mineral assets of R71,3 million. The
operating profit from normalised business activities increased by R9,7 million up 56,7% on the
comparative period.

Net finance costs increased by 55,3% mainly due to the funding of the following projects:
  
 Intibane capital expenditure                                     R20,3 million  
 Khanyisa underground mining infrastructure                       R18,4 million  
 Elandspruit reserve acquisition net of the sale proceeds
  of the Vlaklaagte reserve                                        R12,7 million

The group's financial position strengthened substantially during the reporting period with
total shareholders' funds increasing by 34,9% to R239,2 million. Net asset value per share and
net tangible asset value per share increased by 34,9% and 48,4%, respectively.

Debt levels increased by R58,7 million but the debt equity ratio of 28,6% remain at an
acceptable level.

The group generated R84,7 million cash from operations which is 209,3% up on prior year.

Prospects

Intibane Colliery was commissioned during June 2013 and the increased contribution during
the second half of the financial year should lead to increased volumes to March 2014.

The Elandspruit transaction with Glencore Xstrata became unconditional on 2 August 2013 and
management is progressing the required environmental authorisations in terms of the National
Environmental Management Act, National Water Act, National Environmental Management:
Waste Act and National Heritage Resources Act and has commenced negotiations with surface
right owners. These processes are expected to be completed during the first half of 2014
following which the commissioning of the Elandspruit mine will commence with production
expected to begin during the last quarter of 2014.

The only outstanding condition on the acquisition of MacPhail Distributors is Competition
Commission approval. This approval is expected before the middle of November 2013. The
integration of the two trading units will begin immediately after the transaction becomes
unconditional. This will fundamentally enhance the trading division adding to volumes,
revenue, management and group profitability. Funding for the transaction has been secured
from Investec Bank.

Major coal producers are reviewing all mineral assets on an ongoing basis and will dispose of
non-core operations. This could potentially bring opportunity for Wescoal to further enhance
it's asset base and sustainability.

Segment analysis

The analysis below, details the contribution of the two main divisions within the group:

                                    Trading   Mining      Other     Total
Statement of comprehensive income     R'000    R'000      R'000     R'000
30 September 2013
Total segment revenue               203 986   261 693    65 627   531 306
Inter-segment revenue                                  65 627    65 627
External revenues                   203 986   261 693            465 679
Profit from operations                2 894    27 682   (3 925)    26 651
EBITDA                                3 649    48 874   (3 864)    48 659
30 September 2012
Total segment revenue               208 311   143 050    20 488   371 849
Inter-segment revenue                                  20 488    20 488
External revenues                   208 311   143 050            351 361
Profit from operations                6 664    16 541   (5 945)    17 260
EBITDA                                7 629    26 119   (5 922)    27 826

Profit from operations excludes profit or losses on the sale of property, plant, equipment,
mineral assets, finance income and finance costs.

Resources and reserves statement

The resources and reserves statement is issued by DS Coetzee (PhD Geology, Pr. Sci. Nat.:
400136/00).

The report covers the new order mining right at the operating collieries and prospects of:
   
- Khanyisa Colliery (including Sarie Marais) (Mining Right number MP30/5/1/2/2/107MR)
  covering Portions 96, 97 and 103 of the farm Heuvelfontein 215 IR;   
- Intibane Colliery (Mining Right number MP30/5/1/1/2/483MR) covering Portion 16 of the
  farm Vlakvarkfontein 213 IR;   
- Elandspuit (Mining Right number MP30/5/1/2/2/351MR) covering mineral area no. 7 of
  mineral area no. 5 situated on portion 29, mineral area no. 8 of mineral area no. 6 situated
  on portions 32, 30, 33, 34, 36 and 40, all of the farm Elandspruit 291 J.S;   
- Silverbank Prospect (Mining right number MP30/1/1/2/10037MR) covering the entire farm
  Silverbank 611 IR excluding Portions 1, 10, 12 and 14; and   
- Verblyden Prospect (Mining right number MP30/1/1/2/10036MR) covering the entire farm
  Verblyden 387 IS excluding Portions 18 and 35.

All details regarding the geology, topography, climate, rainfall, drainage, veld type, land type and
land use are contained within the full resources and reserves statement on the Wescoal website.

Total summary of resources and reserves (million tons)

                                               Resources               Reserves
                                              Recon-
Area                      Seam       GTIS  naissance  Measured    Total    MTIS     ROM
Khanyisa                4 Seam       0,00                 0,00     0,00    0,00    0,00
                        2 Seam       0,25                 0,24     0,24    0,24    0,21
Sarie Marais            2 Seam       0,00                 0,00     0,00    0,00    0,00
Sub-total                            0,25                 0,24     0,24    0,24    0,21
Khanyisa UG
Project Sarie Marais    2 Seam       0,74                 0,66     0,66    0,66    0,35
Pillar Project          2 Seam       0,58                 0,52     0,52    0,52    0,25
Sub-total                            1,32                 1,18     1,18    1,18    0,60
Intibane                4 Seam       0,18                 0,16     0,16    0,16    0,05
                        2 Seam       1,74                 1,57     1,57    1,57    1,00
Sub-total                            1,92                 1,73     1,73    1,73    1,05
Elandspruit            4L Seam       2,31                 2,08     2,08    2,08    1,83
                        3 Seam       0,97                 0,88     0,88    0,88    0,77
                       2U Seam       6,20                 5,60     5,60    5,60    4,90
                       2L Seam       9,74                 8,79     8,79    8,79    7,70
                        1 Seam      14,35                12,92    12,92   12,92   11,34
Sub-total                           33,57                30,27    30,27   30,27   26,54
Silverbank              2 Seam     281,06      67,45
Verblyden               4 Seam      54,30      13,03
Total                              372,42      80,48     33,42    30,42   30,42   28,40

Black Economic Empowerment

Waterberg Portion Property Investments Proprietary Limited ("WPP"), headed by Mr Robinson
Ramaite and other BEE shareholders hold 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.

Subsequent events

The only outstanding condition on the acquisition of MacPhail Distributors is Competition
Commission approval. This approval is expected before the middle of November 2013.

Dividends

No interim dividend has been declared.

Basis of preparation

The unaudited condensed consolidated interim financial information for the six months ended
30 September 2013 has been prepared in accordance with IAS 34, "Interim Financial Reporting",
the Companies Act, No. 71 of 2008, and the Listings Requirements of the JSE Limited.

The accounting policies adopted are consistent with those applied in the annual financial
statements for the year ended 31 March 2013, except for these standards that became
effective during the reporting period. The adoption of the standards had no effect on the
results. This report was compiled under the supervision of the Financial Director, Piet Janse van
Rensburg CA(SA). The condensed consolidated interim financial information does not include
all the information and disclosures required in the annual financial statements, and should be
read in conjunction with the group's annual financial statements as at 31 March 2013, which
have been prepared in accordance with International Financial Reporting Standards ("IFRS").

The directors are of the opinion that the group has adequate resources to continue in
operation for the foreseeable future and, accordingly, the condensed consolidated interim
financial results have been prepared on a going-concern basis.

Directorate
MH Mathe and KM Maroga were appointed to the board during the period under review.

By order of the board

MR Ramaite	                     AR Boje
Chairman	                     Chief Executive Officer

4 November 2013

Corporate information

Non-Executive directors: MR Ramaite, JG Pansegrouw

Lead independent director: DMT van Gaalen

Independent Non-Executive Directors: MH Mathe, KM Maroga

Executive directors: AR Boje, P Janse van Rensburg, W Khumalo

Registration number: 2005/006913/06

Registered address: 228 Voortrekker Street, Krugersdorp, 1740

Postal address: PO Box 133, Krugersdorp, 1740

Company secretary: I de Wet

Telephone: 011 954 2721

Facsimile: 011 954 6737

Transfer secretaries: Computershare Investor Services Proprietary Limited

Sponsor: Exchange Sponsors (2008) Proprietary Limited
Date: 04/11/2013 07:05:00 Supplied by www.sharenet.co.za                     
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