Wescoal Holdings Limited - Reviewed Condensed Consolidated Results For The Year Ended 31 March 2015Release 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
("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
for the for the
year ended year ended
31 March 31 March
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
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
(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
for the for the
year ended year ended
31 March 31 March
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
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
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
for the for the
year ended year ended
31 March 31 March
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
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
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
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.
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
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.
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%
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
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
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
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.
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
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.
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
The analysis below details the contribution of the two main divisions within the group:
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
(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.
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
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
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.
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
Acting Chief Executive Officer
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
Date: 23/06/2015 07:40:00 Supplied by www.sharenet.co.za
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