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Wescoal Holdings Limited - Unaudited Condensed Interim Results For The Six Months Ended 30 September 2014

Release Date: 04/11/2014 07:15:00      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 2014


FINANCIAL AND OTHER HIGHLIGHTS
- Revenue up 92,8% to R897,8 million (2013: R465,7 million)
- HEPS up 33,3% to 15,2 cents (2013: 11,4 cents)
- Operational EBITDA up 73,2% to R84,3 million (2013: R48,7 million)
- Muhanga coal processing plant acquisition unconditional
- Acquired mining right for Intibane phase 2
- Funding secured for the Elandspruit project

The unaudited interim results for the six months ended 30 September 2014, 
with comparative unaudited results for the six months ended 30 September 2013 
and the audited results for the year ended 31 March 2014 are presented below:


Condensed consolidated statement of comprehensive income

                                         Unaudited      Unaudited        Audited
                                       results for    results for        results 
                                        six months     six months        for the
                                             ended          ended     year ended
                                      30 September   30 September       31 March
                                              2014           2013           2014
                                             R'000          R'000          R'000
Continuing operations                      
Revenue                                    897 791        465 679      1 147 444
Gross profit                               120 356         53 867        125 529
Other operating income                         412            419         (1 174)
Profit on sale of assets                        64         71 273         75 773
Operating costs                            (72 418)       (27 577)       (81 259)
Operating profit                            48 414         97 982        118 869
Investment income                            1 470            202            265
Finance costs                               (9 927)        (3 175)        (9 615)
Profit before taxation                      39 957         95 009        109 519
Taxation                                   (11 892)       (18 301)       (22 839)
Profit for the year from                                                   
continuing operations                       28 065         76 708         86 680
Total comprehensive income                  28 065         76 708         86 680
Attributable to:                                                       
Owners of the parent                        28 065         58 806         69 764
Non-controlling interest                         -         17 902         16 916
Profit for the period/year                  28 065         76 708         86 680
Headline earnings reconciliation:                                      
Net profit for the period/year              28 065         76 708         86 680
Less: Profit on sale of assets                 (64)       (58 651)       (60 030)
Headline earnings for the period/year       28 001         18 057         26 650
Ordinary shares in issue (000's)                                       
- Total at period/year end                 183 571        157 931        184 771
- Weighted average shares in issue         184 287        157 931        170 067
- Fully diluted weighted average                                       
shares in issue (Note 1)                   186 443        160 638        173 484
Basic earnings per ordinary                                            
share (cents):                                15.2           37.2           41.0
Fully diluted basic earnings per              
ordinary share (cents):                       15.1           36.6           40.2
Headline earnings per ordinary                                              
share (cents):                                15.2           11.4           15.7
Fully diluted headline earnings per           
ordinary share (cents):                       15.0           11.2           15.4
Note:                                             
(1) Fully diluted earnings per 
share information reflected shows the 
potential effect of dilution for 
14,8 million options held in terms of 
the share incentive trust by the 
directors and employees of the Group.      
Reconciliation of EBITDA:                         
Operating profit                            48 414         97 982        118 869
Depreciation - included in cost                                         
of sales                                    29 733         11 159         41 483
Depreciation and amortisation -             
included in operating costs                  6 208         10 791          4 729                           
Earnings before interest, taxation,                                     
depreciation and amortisation ("EBITDA")    84 356        119 932        165 081
Profit on sale of assets                       (64)       (71 273)       (75 773)
Operational EBITDA                          84 292         48 659         89 308


Condensed consolidated statement of financial position

                                         Unaudited      Unaudited        Audited
                                       results for    results for        results 
                                        six months     six months        for the
                                             ended          ended     year ended
                                      30 September   30 September       31 March 
                                              2014           2013           2014
                                             R'000          R'000          R'000
ASSETS
Non-current assets                         386 204        239 341        355 752
Property, plant and
equipment                                  135 314         69 246        116 004
Investment property                            709            709            709
Investments                                  9 714          3 199          6 664
Investment in associates                         -              -         19 365
Goodwill and intangible assets             107 882         51 209        111 722
Mineral rights and coal reserves           118 644        113 744        101 118
Other receivables                           13 772              -              -
Deferred taxation                              169          1 234            170
Current assets                             397 450        300 114        368 391
Inventories and work in progress            65 662         47 175         60 839
Trade and other receivables                237 088        158 932        255 389
Cash and cash equivalents                   94 700         94 007         52 163
Total assets                               783 654        539 455        724 143
EQUITY AND LIABILITIES                                                 
Total shareholders' funds                  288 823        239 196        273 225
Stated capital                             161 338        137 092        166 715
Retained earnings                          123 676         82 669        103 627
Employee share option reserve                3 809          1 710          3 059
Non-controlling interest                         -         17 725           (176)
Non-current liabilities                     97 337         33 552         96 471
Interest bearing debt                       44 923          3 311         57 113
Deferred tax                                27 815          7 859         15 076
Rehabilitation provision                    24 599         22 382         24 282
Current liabilities                        397 494        266 707        354 447
Trade and other payables                   209 458        196 536        220 211
Bank overdraft                              14 779          4 942            176
Taxation payable                            13 232              -         10 268
Interest bearing debt                      160 025         65 229        123 792
Total equity and liabilities               783 654        539 455        724 143
Net asset value per share                 
(cents)                                     156.72         151.46         147.87
Tangible net asset value per share        
(cents)                                      98.57         119.03          87.41


Condensed consolidated statement of changes in equity

Attributable to owners of the parent
                                                           Share-
                                                            based
                                            Stated        payment        Retained
                                           capital        reserve        earnings
                                             R'000          R'000           R'000
Balance as at 31 March 2013                137 092          1 355          39 050
Shares issued                               29 623              -               -
Total comprehensive income                       
for the year                                     -              -          69 764
Dividends declared                               -              -          (5 187)
Employees share option scheme                    -          1 704
Balance as at 31 March 2014                166 715          3 059         103 627
Shares issued                               21 623              -               -
Shares cancelled                           (27 000)             -               -
Change in ownership                              -              -            (177)
Total comprehensive income                       
for the year                                     -              -          28 064
Dividends declared                               -              -          (7 839)
Employees share option scheme                    -            750               -
Balance at 30 September 2014               161 338          3 809         123 675

Attributable to owners of the parent
                                                             Non-           
                                             Total    controlling           Total
                                             R'000      interests          Equity
Balance as at 31 March 2013                177 498           (177)        177 321
Shares issued                               29 623              -          29 623
Total comprehensive income                  
for the year                                69 764         16 916          86 680
Dividends declared                          (5 187)       (16 916)        (22 103)
Employees share option scheme                1 704              -           1 704
Balance as at 31 March 2014                273 402           (177)        273 225
Shares issued                               21 623              -          21 623
Shares cancelled                           (27 000)             -         (27 000)
Change in ownership                           (177)           177               -
Total comprehensive income                  
for the year                                28 064              -          28 064
Dividends declared                          (7 839)             -          (7 839)
Employees share option scheme                  750              -             750
Balance at 30 September 2014               288 823              -         288 823


Condensed consolidated statement of cash flows
                                              Unaudited      Unaudited        Audited
                                            results for    results for        results 
                                             six months     six months        for the
                                                  ended          ended     year ended
                                           30 September   30 September       31 March  
                                                   2014           2013           2014
                                                  R'000          R'000          R'000
Cash flow from operating activities:             73 881         63 086         29 810
Cash generated by operations                     88 301         84 746         47 134
Finance income                                    1 470            202            265
Finance costs                                    (8 903)        (3 175)        (7 715)
Tax paid                                            852         (3 500)        (4 687)
Dividends paid                                   (7 839)       (15 187)        (5 187)
Cash flows from investing activities:           (72 713)       (53 447)      (175 426)
Purchase of property, plant                     
and equipment                                   (51 342)        (5 151)      (103 542)
Proceeds from the sale of                   
property, plant                                                           
and equipment                                        68             59          8 049
Purchase of a business                                -              -        (70 784)
Purchase of investment in associate                                  -         (5 000)
Purchase of mineral asset and                   
capitalised development costs                   (17 526)      (128 637)             -                          
Proceeds on disposal of mineral asset                 -         81 120              -
Purchase of financial asset                      (3 913)          (838)        (4 149)
Cash flows from financing activities             26 766         58 056        176 233
Movements in interest bearing debt               24 043         58 610        170 975
Investment in acquisition activities                  -           (554)             -
Shares issued                                     2 723              -          5 258
Total cash, cash equivalents and                 
bank overdrafts movement for                   
the period/year                                  27 934         67 695         30 617
Total cash, cash equivalents and                 
bank overdrafts at beginning of                
the period/ year                                 51 987         21 370         21 370
Total cash, cash equivalents and                 
bank overdrafts at end of the period/year        79 921         89 065         51 987

Operations, market and financial review
Wescoal produced an excellent set of results clearly indicating the contribution from 
MacPhail that was acquired in November 2013. This acquisition has breathed new life 
into the trading division and places the Wescoal group in the unique position of having 
a sophisticated trading division servicing the domestic market together with a mining 
division.

Highlights for the period include the finalisation of the Intibane phase 2 transaction 
and the acquisition of the Muhanga coal processing plant near Middelburg.

Group revenues increased by 92,8% to R897,8 million (2013: R465,7 million), operational 
EBITDA of R84,3 million is a significant increase of 73,2% over the corresponding period 
(2013: R48,7 million) and headline earnings increased by 55,1% to R28,0 million 
(2013: R18,1 million) which in addition, exceeds headline earnings the full financial 
year to March 2014.

Mining division
The acquisition of the Intibane phase 2 mining right is a significant achievement in 
that it extends the life of this highly profitable operation to the end of 2016 and 
negotiations are taking place for a similar acquisition at the Khanyisa mining operation.

The division assumed ownership of the Muhanga coal processing plant on 1 November 2014 
albeit that the Elandspruit project has not yet been commissioned. The plant will begin 
production on 6 November 2014 for the purpose of supplying the existing customer base 
whom source from the operation. Excess run of mine in the market has been acquired for 
this purpose and management are excited about the potential contribution from this 
project whilst Elandspruit is being established and commissioned. The operation will 
be rebranded with no future reference to the Muhanga name as the vendors have retained 
the right to the name.

Following the securing of funding from Investec, the only outstanding issue at Elandspruit 
is the water used licence. However, the regulatory authorities have been sensitised as to 
the impact of the continued delay in the issuing of this. We have been assured of a sharp 
focus on the finalisation of this matter.

The division increased production by 5%, however, EBITDA contribution increased by 38,7% 
due to the bulk of the volume being delivered from the Intibane colliery. Wescoal Mining 
produced 942 291 tons of coal for the six months (2013: 895 185 tons). The division 
produced revenues of R296,8 million (2013: R261,7 million) an increase of 13,4%, 
operational EBITDA of R67,8 million (2013: R48,9 million) and profit from operations 
of R38,0 million (2013: R27,7 million).

Trading division
The division's results emphasise the importance of, and the contribution from the 
acquisition of the MacPhail operations. The division has been rebranded as one, 
under the banner Wescoal Trading and, with a few exceptions the integration of 
the operations is complete. Outstanding matters are scheduled for completion by 
the end of the calendar year.

Meaningful comparisons to the corresponding period are not possible due to the 
incorporation of the MacPhail operation, save to say that management are more 
than satisfied with the MacPhail contribution to overall results with an operational 
EBITDA contribution of R20,3 million.

The Trading division sold 625 949 tons for the six months ended 30 September 2014, 
a 187% increase compared to the prior period (2013: 217 831) which excludes the 
MacPhail acquisition. The division achieved revenues of R601,0 million 
(2013: R204,0 million), operational EBITDA of R20,3 million (2013: R3,7 million) 
and profit from operations of R14,2 million (2013: R2,9 million).

Financial overview
Revenue from all operations which includes coal mining, processing and trading 
reflected an increase of 92,8% to R897,8 million from the comparative financial 
period due primarily to the incorporation of the MacPhail acquisitions. 
Both divisions performed well resulting in gross profit of R120,4 million 
(2013: R53,9 million). Margins increased to 13,4% from 11,6%, an especially 
pleasing result when considering the substantial revenue increases.

Operating costs increased to R72,4 million (2013: R27,6 million) due once again 
primarily to the incorporation of the MacPhail acquisition and, in addition, the 
Intibane Colliery for the full period.

Group operational EBIDTA of R84,3 million (2013: R48,7 million) is an excellent result 
leading to profit from operations reaching R48,4 million (2013: R26,7 million). Finance 
costs unfortunately showed an expected threefold increase due to the financing of the 
MacPhail acquisition and working capital requirements.

Headline earnings and headline earnings per share are respectively 55,7% and 32,9% up 
on the comparative period. HEPS has been influenced by the effect of the shares issued 
for Wescoal Mining acquiring the remaining 70% of the total issued share capital of 
Proudafrique in terms of the first Minoscape transaction as well as the cancellation of 
the shares issued in terms of the second Minoscape transaction.

The group's financial position strengthened during the financial period with total shareholders' 
funds increasing by 20,8% from the September 2013 results to R288,8 million. The debt equity 
ratio increased to 76,1% (2013: 30,1%) due to the MacPhail acquisition, the acquisitions of 
Elandspruit Properties, Proudafrique shares and the mining infrastructure at the Intibane Colliery.

Successful acquisition of remaining 70% shareholding in Proudafrique Trading 147 (Pty) Ltd
On 14 July 2014, Wescoal Mining successfully acquired the remaining 70% shareholding in 
Proudafrique Trading 147 (Pty) Ltd for R25,6 million and a royalty fee of R3,50 per ton
of saleable coal mined at the Elandspruit Mining area.

Acquisition of Muhanga Coal Processing Plant
In June 2014, Wescoal announced the intention to acquire the Muhanga coal processing plant. 
The acquisition gives Wescoal immediate access to a fully-fledged beneficiation asset that 
is currently operational, has all the necessary regulatory approvals and extensive 
infrastructure to allow for a multi-product operation whilst regulatory approvals are 
awaited for the Elandspruit site.

The plant comprises inter alia Portion 6 of the farm Goedenhoop 315 JS the Access Servitude, 
the coal washing plant situated thereon and the National Environmental Management Act 
("NEMA") authorisation and those provisions of the Muhanga Water Use Licence and the 
assumed liabilities being inter alia the environmental liabilities and rehabilitation 
obligation as defined in the Sale of Asset Agreement.

The total purchase price was R42,5 million payable upon over a period of time as described 
in the SENS announcement dated 24 June 2014. All conditions of the purchase were met on 
10 October 2014.

Acquisition of a Mining Right for Intibane Phase 2
In August 2014, Wescoal announced the acquisition of a mining right adjacent to the 
Intibane Colliery which extends the life of Intibane by a further 2,25 million tons 
and life of mine to the end of 2016. The current Intibane mine infrastructure will 
be used to mine the reserve.

"The Mining Area" comprises the area described as Portion 2 of the farm Vlakvarkfontein 
213 IR measuring 170,1362 hectares in extent, situated in the Magisterial District of 
Delmas in the Mpumalanga province.

"The Mining Right" means the right to mine for coal in, on and under the Mining Area, 
held by Mintirho with reference number MP30/5/1/2/2/476MR to be registered in the 
Mining Titles Office in respect of coal in, on and under the Mining Area, which 
Mining Right is to be transferred from Mintirho to Wescoal Mining.

The mining right was acquired by Wescoal for a cash payment of R7,98 million 
inclusive of VAT.

Funding secured with Investec Bank Limited for Elandspruit
On 30 October 2014, Wescoal concluded a financing facility with Investec Bank Limited, 
acting through its Corporate and Institutional Banking division ("Investec"), for a 
R180 million five-year term loan and a R20 million five-year working capital facility 
subject to fulfilment of conditions precedent customary for a financing of this 
nature. R70 million will be used to retire the current Investec term facility and 
R110 million will be used for commissioning of the Elandspruit project, including 
the acquisition of the Muhunga plant, mine operational infrastructure, surface rights 
and production start-up costs. The working capital facility of R20 million is 
available for general purposes.

Prospects
There is immense excitement with regard to production starting at Elandspruit early 
in 2015 that secures a life of mine at this operation in excess of 15 years. Coupled 
with production at the Muhanga coal processing plant, Wescoal will be in a position 
to service existing and potential customers immediately as well as derive earnings 
from this acquisition.

There is a probability that Khanyisa's life of mine can be further extended into 
2017 by acquiring adjacent mineral rights with far-reaching effect on results 
going forward. Wescoal management will inform shareholders as these negations progress.

With the integration of MacPhail into Wescoal Trading, we believe the division will 
go from strength to strength and we aim for even greater customer diversification.

Wescoal management will continue to build on the base of the trading division servicing 
the domestic market together with a mining division - a combination which warrants that 
Wescoal has sufficient product and diversity to ensure sustainability into the future. 
Marketing efforts have ensured brand recognition and visibility and have resulted in 
greater sales and this marketing drive is set to continue.

Segment analysis
The analysis below details the contribution of the two main divisions within the Group:
                                                           R'000                                     
                                                    30 September 2014                         
Statement of comprehensive income      Trading      Mining     Other        Total
Total segment                                                           
Revenue                                601 004     297 890         -      898 894
Inter-segment revenue                        -       1 103         -        1 103
External revenues                      601 004     296 787         -      897 791
Profit from operations                  14 019      38 095    (3 764)      48 350
Operational EBITDA                      20 141      67 828    (3 677)      84 292

                                                          R'000
                                                    30 September 2013
Statement of comprehensive income      Trading      Mining     Other        Total
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
Operational EBITDA                       3 649      48 874    (3 864)      48 659

Note:                                     
(1) Profit from operations excludes profit or losses on the sale of property, plant, 
equipment, mineral assets, finance income and finance costs.
(2) Operational EBITDA excludes profit or losses on sale of assets.

Resources and reserves statement
The resources and reserves statement below is an extract from the full SAMREC 
compliant report issued by DS Coetzee (PhD Geology, Pr. Sci. Nat.: 400136/00).

The report covers the new order mining right at the following operating collieries 
and prospects:
- Khanyisa Colliery (including Sarie Marais) (Mining Right number MP30/5/1/2/2/107MR) 
covering portions 96, 97 and 103 of the farm Heuwelfontein 215 IR;
- Intibane Colliery (Mining Right number MP30/5/1/1/2/483MR) covering portion 16 
of the farm Vlakvarkfontein 213 IR;
- Elandspruit Prospect (Mining Right number MP30/1/1/2/10035MR) covering portions 
29, 30, 32, 33, 34, 36 and 40 of the farm Elandspruit 291 JS;
- 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.

The water use licences for Khanyisa Colliery (WUL 04/B20F/ABGJ/1507) and Intibane 
Colliery (WUL 04/B20E/AGJ/2149) have been reviewed. A water use licence for Elandspruit 
has been applied for, but is still pending.

The information contained in the table below is an update to the geological information 
in the Competent Person's Report ("CPR") dated April 2014. The full CPR as at March 2014 
will be published with the Integrated Annual Report and will be made available on the 
Wescoal website.

Area                     Seam        GTIS    Reconnais-     MTIS(1)      ROM(2)
                                                  sance
Khanyisa               4 Seam        0.02                      0.02        0.02
                    2 Seam OC        0.09                      0.09        0.08
                    2 Seam UG        0.60                      0.36        0.34
                    2 Seam PP        0.43                      0.39        0.19
Sub-total                            1.15                      0.86        0.63
Intibane               4 Seam        0.01                      0.01        0.01
                       2 Seam        0.81                      0.73        0.69
Sub-total                            0.82                      0.74        0.70
Elandspruit           4L Seam        2.96                      2.66        2.53
                       3 Seam        1.28                      1.15        1.09
                      2U Seam        8.78                      7.90        7.51
                      2L Seam       11.17                     10.05        9.55
                       1 Seam       15.98                     14.38       13.66
Sub-total                           40.17                     36.15       34.35
Silverbank             2 Seam      281.00         67.45
Verblyden              4 Seam       54.30         13.03
Total                              377.44         80.48       37.75       35.67


Black economic empowerment
Waterberg Portion Property Investments Proprietary Limited ("WPP") headed by 
Mr Robinson Ramaite and other BEE shareholders hold 31,59% of the issued share 
capital of Wescoal Holdings Limited. WPP is a BEE company operating in the minerals 
and energy space.

Corporate governance
The Wescoal Board of Directors continues to be mindful and cognisant that corporate 
governance is essential to protect the interests of all stakeholders, and remains 
committed to compliance with legal requirements and sound corporate governance 
principles. The Group subscribes to and is in the process of implementing where 
applicable, the principal recommendations of the King III Code of Corporate Governance.

Directorate and secretary
The following changes took place during the six months:
- P Janse van Rensburg - resigned as Chief Financial Officer on 17 April 2014 with 
effect from the 30 June 2014;
- M du Plessis - appointed as Acting Chief Financial Officer on 6 May 2014 with 
effect from 1 July 2014. Morne has now been appointed as Chief Financial Officer; and
- W Khumalo - resigned as an executive director with effect from 30 November 2014.

The board wishes to thank Piet as well as Wiseman for the valuable contribution 
made to the company, and wishes them all the best in future endeavours.

Dividends
No dividends have been declared for the interim period.

Basis of preparation
The unaudited condensed consolidated interim financial information for the six months 
ended 30 September 2014 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 2014, 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 Acting Financial Director, 
Morne du Plessis 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
2014, 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.

By order of the board

29 October 2014

MR Ramaite
Chairman

AR Boje
Chief Executive Officer


CORPORATE INFORMATION
Non-executive chairman:
MR Ramaite

Lead independent director:
DMT van Gaalen

Independent non-executive directors
JG Pansegrouw
MH Mathe
KM Maroga

Executive directors:
AR Boje
W Khumalo
M du Plessis

Registration number:
2005/006913/06

Registered address:
Unit A3 Isando Business Park
Corner of Gewel and Hulley Road
Isando
1600

Postal address:
PO Box 1962
Edenvale
1610

Company secretary:
I de Wet

Telephone:
011 570 5800

Facsimile:
011 570 5848

Transfer secretaries:
Computershare Investor Services (Pty) Limited

Sponsor:
Exchange Sponsors (2008) (Pty) Limited

Website:
www.wescoal.com






Date: 04/11/2014 07:15:00 Supplied by www.sharenet.co.za                     
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