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Wescoal Holdings Limited - Reviewed Condensed Consolidated Results For The Year Ended 31 March 2015

Release Date: 23/06/2015 07:40:00      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")

Reviewed condensed consolidated results
for the year ended 31 March 2015

Financial and other salient features
- Revenue increases 46,0% to R1,67 billion (2014: R1,15 billion)
- Positive increase in margin percentage across both Mining and Trading
- 101% increase in cash generation
- Operational EBITDA increase of 5,7% to R107 million (2014: R101,3 million)
- Acquired mining assets securing the extension of the life of mine of existing operations
- Significant investment in Elandspruit development
- HEPS increase 1,3% to 15,4 cents (2014: 15,2 cents)

Reviewed condensed consolidated results for the year ended 31 March 2015
The reviewed results for the year ended 31 March 2015 with comparative audited results for 
the year ended 31 March 2014 are presented.


Condensed consolidated statement of comprehensive income

                                                                             Restated
                                                             Reviewed         audited
                                                              results         results 
                                                              for the         for the
                                                           year ended      year ended
                                                             31 March        31 March
                                                                 2015            2014
                                                                R'000           R'000
Revenue                                                     1 674 372       1 147 444
Cost of sales                                              (1 454 728)     (1 021 915)
Gross profit                                                  219 644         125 529
Other income/(expenses)                                         1 557          (1 174)
Profit on sale of assets                                          696          75 773
Operating expenses                                           (175 659)        (81 259)
Operating profit                                               46 238         118 869
Finance income                                                  1 588             265
Finance costs                                                 (10 742)        (10 716)
Profit before taxation                                         37 084         108 418
Taxation                                                       (8 129)        (22 531)
Profit for the year                                            28 955          85 887
Other comprehensive income                                          -               -
Total comprehensive income                                     28 955          85 887
Attributable to:                                                          
Owners of the parent                                           28 955          68 971
Non-controlling interest                                            -          16 916
Profit for the year                                            28 955          85 887
Headline earnings reconciliation:                                         
Net profit for the year                                        28 955          85 887
- Profit on the sale of assets                                   (696)        (60 030)
Headline earnings for the year                                 28 259          25 857
Ordinary shares in issue (000's)                                          
- Total at period end (Note 1)                                183 571         184 771
- Weighted average shares in issue                            183 929         170 067
- Fully diluted weighted average shares in issue (Note 2)     185 810         173 484
Basic earnings per ordinary share (cents)                        15,7            40,6
Fully diluted basic earnings per ordinary share (cents)          15,6            39,8
Headline earnings per ordinary share (cents)                     15,4            15,2
Fully diluted headline earnings per ordinary share (cents)       15,2            14,9
Note:
(1) Excludes shares held by the share incentive trust
(2) Fully diluted earnings per share information as reflected shows the potential effect 
of dilution for 11,83 million (2014: 11,52 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

                                                                             Restated
                                                             Reviewed         audited
                                                              results         results
                                                              for the         for the
                                                           year ended      year ended
                                                             31 March        31 March
                                                                 2015            2014
                                                                R'000           R'000
ASSETS                                                   
Non-current assets                                            474 673         355 752
Property, plant and equipment                                 324 740         217 122
Investment property                                               709             709
Investments                                                    14 218           6 664
Goodwill and intangible assets                                104 539         111 722
Investment in associates                                            -          19 365
Other receivables                                              12 909               -
Deferred taxation                                              17 558             170
Current assets                                                348 570         368 391
Inventories and work in progress                               82 852          60 839
Trade and other receivables                                   238 741         255 389
Cash and cash equivalents                                      26 977          52 163
Total assets                                                  823 243         724 143
EQUITY AND LIABILITIES                                       
Total Shareholders' funds                                     279 821         261 113
Stated capital                                                161 465         166 715
Retained earnings                                             112 877          91 515
Employee share option reserve                                   5 479           3 059
Non-controlling interest                                            -            (176)
Non-current liabilities                                       120 225         108 583
Interest-bearing loans                                         76 561          57 113
Rehabilitation provision                                       38 563          41 104
Deferred tax                                                    5 101          10 366
Current liabilities                                           423 197         354 447
Trade and other payables                                      218 946         220 211
Bank overdraft                                                 16 827             176
Taxation payable                                               39 899          10 268
Interest-bearing loans                                        147 525         123 792
Total equity and liabilities                                  823 243         724 143
Net asset value per share (cents)                              152,43          141,32
Tangible net asset value per share (cents)                      95,48           80,85


Condensed consolidated statement of changes in equity

                                                           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
Prior year adjustment                                -               -        (11 320)
Balance as at 31 March 2013 (restated)         137 092           1 355         27 730
Shares issued                                   29 623               -              -
Total comprehensive income for the year              -               -         68 971
Dividends declared                                   -               -         (5 187)
Employees share option scheme                        -           1 704              -
Balance as at 31 March 2014                    166 715           3 059         91 514
Shares issued                                   21 750               -              -
Shares cancelled                               (27 000)              -              -
Change in ownership                                  -               -           (177)
Total comprehensive income for the year              -               -         28 955
Dividends declared                                   -               -         (7 415)
Employees share option schemes                       -           2 420              -
Balance as at 31 March 2015                    161 465           5 479        112 877


                                                                  Non-
                                                 Total     controlling          Total
                                                 R'000       interests         equity
Balance as at 31 March 2013                    177 498            (177)       177 321
Prior year adjustment                          (11 320)              -        (11 320)
Balance as at 31 March 2013 (restated)         166 178            (177)       166 001
Shares issued                                   29 623               -         29 623
Total comprehensive income for the year         68 971          16 916         85 887
Dividends declared                              (5 187)        (16 916)       (22 103)
Employees share option scheme                    1 704               -          1 704
Balance as at 31 March 2014                    261 289            (177)       261 112
Shares issued                                   21 750               -         21 750
Shares cancelled                               (27 000)              -        (27 000)
Change in ownership                               (177)            177              -
Total comprehensive income for the year         28 955               -         28 955
Dividends declared                              (7 415)              -         (7 415)
Employees share option schemes                   2 420               -          2 420
Balance as at 31 March 2015                    279 821               -        279 821


Condensed Consolidated Statement of Cash Flows
                                                               Reviewed        Audited
                                                                results        results  
                                                                for the        for the
                                                             year ended     year ended
                                                               31 March       31 March
                                                                   2015           2014
                                                                  R'000          R'000
Cash flows from operating activities                             76 099         29 810
Cash generated from operations                                   94 505         47 134
Finance income                                                    1 588            265
Finance costs                                                    (8 399)        (7 715)
Income tax paid                                                  (4 180)        (4 687)
Dividends paid                                                   (7 415)        (5 187)
Cash flows from investing activities                           (125 459)      (175 426)
Purchase of property, plant and equipment and mineral                      
assets                                                          (98 862)      (103 542)
Sale of property, plant and equipment                             4 656          8 049
Purchase of business                                            (24 448)       (70 784)
Purchase of investment in associate                                   -         (5 000)
Purchase of financial assets                                     (6 805)        (4 149)
Cash flows from financing activities                              7 523        176 233
Movements in interest bearing loans                               4 673        170 975
Shares issued                                                     2 850          5 258
Net (decrease)/increase in cash and cash equivalents            (41 837)        30 617
Cash and cash equivalents at beginning of year                   51 987         21 370
Cash and cash equivalents at end of year                         10 150         51 987                                

Introduction
The main business of the Group is the mining, processing and the sale and supply 
of coal. Coal product is mined, sourced and supplied to end users including power 
generation, manufacturing and petro-chemicals sectors. The key strategic thrust of 
Wescoal is to be a leading coal miner with a sustainable resource base and a coal 
trading operation.

The final results for the 2015 financial year reflects a solid performance for the 
first nine months followed by a negative performance in the last three months as a 
result of a challenging business environment and due to delays in securing long-term 
coal supply contracts. Shareholders reviewing this set of results are advised that a 
direct comparison to the 2014 results is difficult due to the following:
i) the 2014 results include only four months of the MacPhail trading results compared 
to a full 12 month performance for 2015 and 
ii) the 2014 numbers include a once-off R75 million profit on sale of assets which 
relates to the Vlaklaagte sale to Xstrata in 2014.

Wescoal Trading's performance was highlighted by excellent cash generation in a 
challenging business environment. The year under review saw the MacPhail acquisition 
embedded into Wescoal.

Wescoal Mining is well positioned to operationalise the Elandspruit project in the next 
six months. Major regulatory consents are in place and contractors have been briefed and 
inducted.

Wescoal has embarked upon a strategy to position the company as an employer of choice, 
focusing on a number of initiatives including aiming for a zero lost time injury rate,
enhancement of the working environment and a more inclusive process for staff.

Financial overview
Operational revenue increased by 46,0% to R1,67 billion compared to the previous 
financial period (2014: R1,15 billion), due to the full year's contribution from 
MacPhail. The contribution to revenue from the Mining division was flat.

Pleasingly, margins increased for both segments. The margins in Mining, in particular 
were higher from a larger contribution to the sales mix by the Intibane Colliery, 
with its lower strip ratios. This was negated by the newly acquired Processing Plant 
operating on a breakeven basis in the last quarter and not contributing to the margin 
percentage earned. The margin from the Trading Division was stable to higher.

Operating costs are distorted by the full year impact of the acquired trading business 
of MacPhail as mentioned previously. The current year's expenditure was significantly 
affected by the inclusion of the outgoing executives exit packages, increased salary 
costs including additional provident fund benefits to staff, increased provisions for 
doubtful debts in the Wescoal Trading Division together with the full year effect of 
amortisation of intangible assets.

Operational EBITDA ended the year at R107 million (2014: R101,3 million). The increased 
margin attained has been negated by increased costs.

Finance charges increased from 2014 as a result of increased utilisation of funding to 
acquire assets in addition to internal cash generated. The majority of these costs relate 
to the Elandspruit Colliery development. In addition the full year effect of interest on 
the loans obtained to fund the MacPhail business and property acquisitions are included. 
In terms of accounting standards significant interest has also been capitalised to the 
Elandspruit project.

The group's funding facility is still not concluded mainly as result of the lack of 
long-term Eskom contracts.

The taxation rate for this financial period was the same as for the prior period.

The balance sheet reflects an increase in the fixed asset base coupled with lower 
cash reserves and higher debt levels. This is a consequence of the cash management 
and funding strategy which focused on securing assets and developing projects from 
internally generated cash. This strategy is being reviewed in line with creating an 
efficient and sustainable capital structure.

The Group's new management team has adopted a conservative, risk-based approach with 
a full evaluation of risks. In this process a rehabilitation provision relating to a 
washing plant previously owned and operated by Wescoal pre-2011 was discovered which 
should have been recorded. An amount of R11,3 million (net of tax) has been provided 
for and is recorded as a prior year adjustment.

Eskom contracts
Significant delays were experienced in concluding long-term contracts with Eskom 
due to the lack of an appropriate HDSA ("Historically Disadvantaged South Africans") 
structure in place at Wescoal. This in turn resulted in the Group's long-term funding 
package not being concluded as previously mentioned.

Wescoal purposely decided to spend considerable time aligning its strategy with 
Eskom's policy which is to contract with coal suppliers with more than 50% 
HDSA control.

Shareholders are advised that short-term contracts have been in place with Eskom 
since January 2015 and as such Wescoal continues to supply coal to Eskom. However, 
these short-term contracts are not optimal and do not allow the Group to raise 
long-term funding.

Wescoal is confident that these long-term contracts with Eskom will be awarded as 
Eskom has responded positively to commitments made by Wescoal in respect of 
HDSA ownership.

Wescoal Mining
The Company's revenues and resultant profitability was negatively impacted by lower 
sales to Eskom, specifically in the last quarter from the lack of long-term contracts. 
The Wescoal Processing Plant contributed to sales, but has not contributed significantly 
to overall profitability as it was operated on a breakeven business case. It has however 
been able to ensure the recovery of fixed costs associated with the running of the plant.
The Wescoal Processing Plant has continued to participate in sales to the market around 
the plant. Continued operation of the Processing Plant has also reduced the startup risk 
to the Elandspruit project.

Safety performance and compliance with licensing conditions is pivotal to the company. 
The water use license for the Elandspruit Colliery has been awarded. Wescoal has waited 
for this to occur so as not to operate illegally prior to the awarding of the licence. 
Wescoal prides itself in its strict adherence to the laws and regulations by which it 
is governed.

In addition the measurement of Lost Time Injury Rate is a key measure for Wescoal 
Mining. In this arena Wescoal has performed well compared to the industry achieving 
zero lost time injuries during the year. Management regards this measurement as 
indicative of a stable operation that minimises risk. Minimal downtime translated 
into profitability and efficiency while contributing towards staff morale and safe 
working conditions. It will remain an area of focus going forward.

Mining revenues are R557,3 million (2014: R556,2 million) with an operational EBITDA
of R94,7 million (2014: R101,2 million) being received.

Wescoal Trading
The takeover integration, consolidation and rationalisation of the MacPhail acquisition 
has been completed with the aim now being optimisation in the Trading division. 
Operation EBITDA has improved from 0,3% to 3,1% indicating the Trading business is 
operating more efficiently, is well integrated and benefiting from efficiencies due 
to the integration.

Wescoal Trading remains a significant player in the non-Eskom domestic coal sales market. 
It is taking advantage of its national logistics footprint with cost savings contribution 
to profits. Environmental and safety performance remain an area of focus in this part of 
the business too.

Trading revenues are again significantly higher at R1,1 billion (2014: R591,2 million) 
with operational EBITDA improving considerably to R34,3 million (2014: R1,6 million).

Post balance sheet events
On 11 June 2015 the Company announced that the agreement entered into with Mintirho 
Mining previously for the acquisition of a mining right for Intibane Phase 2 has lapsed 
and a new agreement had been entered into. The rationale for the acquisition is that it 
will enable Wescoal to extend the life of Intibane to the end of 2017.

Changes to the board of directors
The following changes have occurred to the Board of Directors:
1) Mr Andre Boje resigned as Chief Executive Officer ("CEO") and director of Wescoal 
effective from 14 April 2015.
2) Mr Waheed Sulaiman was appointed as the acting CEO with effective from 14 April.

The board of directors thanks Andre for his contribution to the Company and Group 
of which he was CEO since inception 18 years ago and wishes him well in his future 
endeavours.

The board is managing the appointment of a permanent CEO and this process is expected 
to conclude before December 2015. Shareholders will be updated accordingly should an 
appointment be made prior to this date.

Prospects
Wescoal Trading experienced a good trading year, but management envisages that the coming 
12 months will be challenging as competition increases, load shedding impacts the business 
and the state of the steel sector in South Africa comes under pressure with already reduced 
orders for coal being experienced.

Wescoal Mining will evolve the long-term strategy around the Eskom requirements of 
50%+ HDSA ownership to ensure finalisation of long-term coal supply contracts. 
Management remains cognisant of the fact that currently 80% of Wescoal reserves 
are of the Eskom-type of resource and therefore holds the view that most of 
Wescoal's business will continue to be built around Eskom. Additional avenues 
of coal supply are being explored as part of an assessment of the business's 
long-term strategy and risk management.

The new management team is committed to a continual review of business systems and 
risks and managing these in alignment with best practice. The omission of the recordal 
of a rehabilitation liability at a previous operation was identified and is being resolved. 
The management team feels that this review is prudent and will ensure that going forward, 
Wescoal is sustainable not only with regard to life of mine but also operates in line with 
best practices.

Segment analysis
The analysis below details the contribution of the two main divisions within the group:
                                                             R'000                                  
Statement of comprehensive income       Trading      Mining        Other         Total
31 March 2015                                                               
Total segment revenue                 1 116 958     595 576        1 995     1 714 529
Inter-segment revenue                         -     (38 298)      (1 859)      (40 157)
External revenues                     1 116 958     557 278          136     1 674 372
Operational EBIDTA                       34 338      94 665      (21 962)      107 041
Profit from operations                   22 083      45 591      (22 133)       45 540
31 March 2014                                                               
Total segment revenue                   591 199     672 691     (116 445)    1 147 445
Inter-segment revenue                         -    (116 445)    (116 445)            -
External revenues                       591 199     556 246            -     1 147 445
Operational EBITDA                        1 604     101 199       (1 511)      101 292
Profit from operations                   (2 997)     49 803       (1 638)       45 168
Note:
(1) Operational EBITDA excludes profit or losses on sale of assets.
(2) Profit from operations excludes profit or losses on the sale of property, plant, 
equipment, mineral assets, finance income and finance costs.

Resource Summary
The Resource Summary is an extract of the, SAMREC compliant, Resource Statement as 
compiled by DS Coetzee (PHD Geology, Pr. Sci. Nat.: 400136/00), dated March 2015. 
Included in this updated resources summary is the acquisition of Catwalk (1,86 million 
tons TTIS) and the acquisition of Intibane 2 (3,36 million tons TTIS).
- TTIS - Total Tons In Situ
- Measured - 350m x 350m Drilling Density
- Indicated - 500m x 500m Drilling Density
- All Tonnages expressed in Millions of Tons
                                                                  2015        2014
                                    Seam       Class              TTIS        TTIS
Khanyisa                            2          Measured           0,62        2,15
Intibane                            4          Measured           0,08        0,31
                                    2          Measured           0,82        3,05
Elandspruit                         4          Measured           2,66        2,66
                                               Indicated          0,16        0,16
                                    3          Measured           1,15        1,15
                                               Indicated          0,05        0,05
                                    2          Measured          17,95       17,95
                                               Indicated          0,21        0,21
                                    1          Measured          14,38       14,38
                                               Indicated          0,13        0,13
Silverbank                          2          Reconnaissance    65,00       65,00
Verblyden                           2          Reconnaissance    10,00       10,00
Total Measured Resources                                         38,21       41,65
Total Indicated Resources                                         0,54        0,54
Total Reconnaisance                                              75,00       75,00


Black Economic Empowerment
Waterberg Portion Property Investments Proprietary Limited ("WPP"), headed by Mr. 
Robinson Ramaite and other BEE shareholders previously held the BEE shares in the 
Group. During the financial year this entity was unbundled and the shares are now 
held directly by Mr Robinson Ramaite and other BEE shareholders. The shareholding 
totals 31,0%.

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 is 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.

Dividends
The board has decided not to declare a final dividend, opting to use cash to develop 
its mining assets.

Basis of preparation
The condensed consolidated financial information for the year ended 31 March 2015 
has been prepared in accordance with the recognition and measurement criteria of 
International Financial Reporting Standards ("IFRS"), the preparation and disclosure 
requirements of IAS 34; "Interim financial reporting", SAICA Financial Reporting 
Guides as issued by the Accounting Practices Committee and financial pronouncements 
as issued by Financial Reporting Standards Council, the JSE Listings Requirements 
and as per the requirements of the South African Companies Act, 2008, as amended, 
on the basis consistent with prior year.

The preparation of these financial results was done under the supervision of the 
Chief Financial Officer, Morne du Plessis CA(SA).

Any references to the future financial performance has not been reviewed or reported 
on by the Group's auditors.

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 
financial results have been prepared on a going concern basis.

Independent audit review
The preliminary financial statements have been reviewed by the Group's independent 
auditors, PricewaterhouseCoopers Inc. Their unmodified review opinion is available 
for inspection at the Company's registered office.

By order of the board

23 June 2015

MR Ramaite 
Chairman

W Sulaiman
Acting 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: W Sulaiman, M du Plessis

Registration number: 2005/006913/06

Registered address: Corner of Gewel and Hulley Road, Isando, 1600

Postal address: PO Box 1962, Edenvale, 1610

Company secretary: Computershare

Telephone: 011 570 5800, Facsimile: 011 570 5848

Transfer secretaries: Computershare Investor Services Proprietary Limited

Sponsor: Exchange Sponsors (2008) (Pty) Limited

Website: www.wescoal.com






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