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Keaton Energy Holdings Limited - Reviewed Condensed Interim Consolidated Results For The Six Months Ended 30 September 2015

Release Date: 19/11/2015 08:45:00      Code(s): KEH     
Keaton Energy Holdings Limited 
(incorporated in the Republic of South Africa) 
Registration number: 2006/011090/06
JSE share code: KEH ISIN ZAE000117420
(?Keaton Energy or ?the company? or ?the group?)

Reviewed condensed interim consolidated results 
for the six months ended 30 September 2015

Salient features

- Continued excellent performance at Vanggatfontein
- Gross profit from continuing operations of 21% (1H FY15: 19%)  
- R48 million of debt repaid
- Offer received for disposal of KZN anthracite assets
- EBITDA% from continuing operations of 53% (1H FY15: 48%) 
- Group restructuring - Flip up of minority interests completed
- Consistent cash generated from operations of R307 million
- HEPS from continuing operations of 2.6 cents per share down from 8.7 cents


Commentary
 
Dear Shareholder 
The six months ended 30 September 2015 ("the period" or "1H FY2016") remained a period marked by continued excellent performance
at one asset, Vanggatfontein, and a disappointing performance at the other, Vaalkrantz. The new management team at Vaalkrantz has 
made significant progress in restructuring the operation but has been faced with continuing geological difficulties and legacy 
issues surrounding the major coal theft disclosed previously.

However, we received an offer to purchase our KZN anthracite assets including Vaalkrantz Colliery, as announced on 29 September 2015.  
Negotiations are progressing and have led the board to classify the bulk of the KZN assets as held-for-Sale and discontinued 
operations as detailed below. 

Safety 
Safety remains a management focus area and Keaton continues to strive for a zero harm environment at all operations.  Safety 
statistics are released quarterly. During Q2 FY2016 Vanggatfontein reported a progressive rolling LTIFR for 200 000 man hours worked (LTIFR) 
of 0.38 (Q1 FY2016: 0.37) and Vaalkrantz a LTIFR of 0.17 (Q1FY2016: 0.28). 

Operational review 
In line with expectations Vanggatfontein delivered 1.192Mt of washed 2- and 4-seam thermal coal to Eskom during the period 
(1H FY2015: 1.196Mt), only 4 367t short of the previous year?s production record.  5-seam metallurgical coal sales decreased 14% to 
56 156t compared to 65 006t in the comparative period in line with the geological model.  Due to the current domestic market conditions,
B-grade sales were negligible at 25 951t, all in the first quarter.

Production of domestic and export anthracite at Vaalkrantz decreased to 176 089t from 191 898t in the comparative period. 

Assets held-for-sale and Discontinued Operations
As announced on 29 September 2015, Keaton received an offer to acquire the entire issued share capital and claims against Leeuw Mining 
and Exploration Proprietary Limited and Amalahle Exploration Proprietary Limited (collectively "the KZN Assets"). The KZN Assets 
consist of the operating Vaalkrantz Colliery and the Koudelager, Balgray and Mooiklip projects. The Braakfontein project held under 
Leeuw Braakfontein Colliery Proprietary Limited is specifically excluded.  The transaction remains under negotiation and shareholders 
will be updated in due course.

These assets were not previously classified as held-for-sale or as discontinued operations. As detailed in note 4 to the condensed 
interim consolidated financial statements, the comparative statements of profit or loss and other comprehensive income have been 
restated to show the discontinued operations separately from continuing operations.

Group financial performance
Revenue from continuing operations decreased by 12% to R563.3 million (1H FY2015: R638.4 million) due to a decrease in transport 
revenue as a result of shorter delivery distances to different Eskom power stations. Vanggatfontein performed according to plan in a 
consistent, strong manner with coal sales of R453.5 million (1H FY2015: R465.2 million).  Our continued focus on cost containment 
resulted in a decrease in cost of sales to R444.1 million (1H FY2015: R514.7 million).  Gross profit increased to 21% (1H FY2015: 19%) 
with a gross profit of R119.2 million (1H FY2015: R123.7 million).

Net profit before tax from continuing operations was R33.8 million (1H FY2015: R56.3 million). 

Earnings and headline earnings per share from continuing operations was 2.6 cents (1H FY2015: 8.7 cents). 

The loss of R106.5 million from discontinued operations (which included an impairment charge of R69.8 million) during the period 
resulted in the group recording a loss for the period of R96.9 million (1H FY2015: profit of R35.3 million).

Capital investment at Vanggatfontein totalled R227.1 million for the period (1H FY2015: R230.2 million), primarily spent on on-going 
mine development relating to stripping costs and the completion of the filter press plant.

During the period the group repaid debt of R48 million with R46.5 million being repaid against the Investec Bank term facility.

Cash and cash equivalents which includes discontinued operations decreased by R4.2 million to R68.3 million.  Cash generated 
from operating activities was R307.4 million (1H FY2015: R315.6 million), which was offset by cash outflows from investing activities of 
R277.5 million (1H FY2015: R282.9 million) and cash outflows from financing activities of R34.1 million (1H FY2015: inflow of 
R10.9 million).

Projects 
Moabsvelden 
The greenfields Moabsvelden Project remains the short-term growth priority. The initiation of construction of this expansion to 
Vanggatfontein awaits the grant of its Integrated Water Use Licence and the conclusion of a Coal Supply Agreement with Eskom.

Coal resource and reserve statement
Other than normal coal depletion as a result of mining activities during the six months to 30 September 2015, there were no significant
changes to the previously reported group Coal Resource and Reserve estimates as reported in the 31 March 2015 Integrated Annual 
Report.

Subsequent events
Significantly, as detailed in note 15 to the condensed interim consolidated financial statements, Rutendo Mining Proprietary Limited
became a 21.83% shareholder in Keaton post the end of the period. This, in conjunction with the various call options exercised in all 
but one of the subsidiaries elevated the BEE partners to the listed company and thus positions the company for future growth.

Looking ahead 
In the short-term our focus will be on the continued excellent operations at Vanggatfontein and concluding the disposal of the KZN 
assets.

With the company re-focussed on a single, profitable mine with a pending attractive expansion and a significantly simplified corporate 
structure it is well placed for the future.

Preparation of condensed interim consolidated financial statements
The condensed interim consolidated financial statements for the six months ended 30 September 2015 have been reviewed in terms of the
Companies Act 71, 2008. Their preparation was supervised by the Chief Financial Officer, Jacques Rossouw, a Chartered Accountant (SA). 
The directors of the company take responsibility for these results. The condensed interim consolidated financial statements were 
published on 19 November 2015 and can be found on the company?s website.

The auditor?s review does not necessarily report on all of the information contained in this announcement. Any reference to future 
financial information included in this announcement has not been reviewed or reported on by the auditors. Shareholders are advised, that
in order to obtain a full understanding of the nature of the auditor?s engagement they should obtain a copy of that review together with 
the accompanying financial information from the Company?s registered office.

On behalf of the Board

David Salter                        Mandi Glad
(Non-Executive Chairman)            (Chief Executive Officer)

Bryanston
18 November 2015            


Condensed interim consolidated statement of profit or loss and other comprehensive income 

                                                                   Six months ended         Year ended    
                                                            30 September   30 September       31 March    
                                                                    2015           2014           2015   
  R?000                                             Notes      (Reviewed)    (Restated)*    (Restated)*   
  Continuing operations                                                                               
  Revenue                                               2        563 286        638 369      1 181 054   
  Cost of sales                                                 (444 054)      (514 680)      (968 939)   
  Gross profit                                          2        119 232        123 689        212 115   
  Other income                                                       626         10 966         11 336   
  Mining and related expenses                                    (10 758)       (11 075)       (21 141)   
  Administrative expenses                                        (50 309)       (43 334)       (75 002)   
  Operating profit before net finance cost                        58 791         80 246        127 308   
  Net finance cost                                               (24 953)       (23 910)       (48 104)   
  Finance income                                                   1 557          2 798          5 277   
  Finance cost                                                   (26 510)       (26 708)       (53 381)   
  Net profit before taxation                                      33 838         56 336         79 204   
  Income taxation expense                               3        (24 319)       (29 235)       (42 189)   
  Net profit from continuing operations                            9 519         27 101         37 015   
  Discontinued operations                                                                                
  (Loss)/profit from discontinued operations,
  net of taxation                                       4       (106 461)         8 154       (108 870)   
  Net (loss)/profit for the period                               (96 942)        35 255        (71 855)   
  Other comprehensive income                                                                                       
  Items that may be reclassified to profit or loss                                                                 
  Foreign currency translation differences                           249             25           (130)   
  Total comprehensive income                                     (96 693)        35 280        (71 985)   
  Net (loss)/profit attributable to:                                                                             
  Owners of the company                                          (66 252)        28 735        (31 029)   
  Non-controlling interest                                       (30 690)         6 520        (40 826)   
                                                                 (96 942)        35 255        (71 855)   
  Total comprehensive income attributable to:                                                                    
  Owners of the company                                          (66 003)        28 760        (31 159)   
  Non-controlling interest                                       (30 690)         6 520        (40 826)   
                                                                 (96 693)        35 280        (71 985)   
  Earnings per share                                                                                            
  Basic earnings per share (cents)                      5          (29.4)          12.8          (13.8)   
  Diluted earnings per share (cents)                    5          (29.4)          12.6          (13.8)   
  Earnings per share - continuing operations                                                                    
  Basic earnings per share (cents)                      5            2.6            8.7           12.6   
  Diluted earnings per share (cents)                    5            2.5            8.5           12.4   
  The accompanying notes are an integral part of these condensed interim consolidated financial statements.                       
  * The audited 31 March 2015 annual results and the reviewed 30 September 2014 results have been restated 
    for the effects of the application of IFRS 5 Non-current Assets Held-for-sale and Discontinued Operations 
    following management?s decision to dispose of certain operations within the group (refer to note 4). The 
    consolidated statement of financial position and the consolidated statement of changes in equity for 
    these periods are not required to be restated.                                                               


Condensed interim consolidated statement of financial position

                                                                               At            At              At    
                                                                     30 September      31 March    30 September    
                                                                             2015          2015            2014    
  R?000                                                     Notes       (Reviewed)     (Audited)      (Reviewed)  
  Assets                                                                                                          
  Property, plant and equipment                               6,9         691 106       768 618         799 006   
  Intangible assets                                           7,9         662 808       716 434         702 071   
  Deferred taxation                                                             -             -          23 640   
  Investments and loans                                                     5 216         5 216           5 216   
  Restricted cash                                                          10 986        10 780           7 423   
  Restricted investments                                        9          32 616        68 306          56 320   
  Total non-current assets                                              1 402 732     1 569 354       1 593 676   
  Restricted investments                                                        -             -           3 512   
  Inventory                                                                49 230        54 110          43 837   
  Trade and other receivables                                 8,9         102 002       179 456         227 612   
  Taxation                                                                    898         1 903             868   
  Cash and cash equivalents                                                58 249        72 546         113 241   
  Assets held-for-sale                                          9         120 281             -               -   
  Total current assets                                                    330 660       308 015         389 070   
  Total assets                                                          1 733 392     1 877 369       1 982 746   
  Equity                                                                                                          
  Stated capital                                                          701 977       692 929         692 929   
  Share-based payment reserve                                              29 567        26 546          22 576   
  Other reserves                                                           19 334        19 085          19 240   
  (Accumulated loss)/retained earnings                                    (54 903)      103 073         162 837   
  Total equity attributable to owners of the company                      695 975       841 633         897 582   
  Non-controlling interest                                                  7 621       (3 375)          47 609   
  Total equity                                                            703 596       838 258         945 191   
  Liabilities                                                                                                     
  Borrowings                                                 9,11         228 796       251 741         312 020   
  Long-term financial liabilities                                               -             -             729   
  Mine closure and environmental rehabilitation provision       9         238 104       270 058         234 185   
  Provisions                                                               30 987        31 769          32 106   
  Deferred taxation                                             3         153 475       129 179         115 926   
  Deferred income                                                           5 418         5 418           5 418   
  Total non-current liabilities                                           656 780       688 165         700 384   
  Borrowings                                                 9,11         111 552       109 375          72 018   
  Short-term financial liabilities                                              -            68               -   
  Trade and other payables                                   9,12         145 423       216 843         265 153   
  Provisions                                                    9               -        24 660               -   
  Liabilities held-for-sale                                     9         116 041             -               -   
  Total current liabilities                                               373 016       350 946         337 171   
  Total equity and liabilities                                          1 733 392     1 877 369       1 982 746   
  The accompanying notes are an integral part of these condensed interim consolidated financial statements.                                                         

  
Condensed interim consolidated statement of changes in equity

                                                                                                                 Total              
                                                                                                                equity             
                                                                                                    (Accu-    attribu-        Non-             
                                                                             Share-               mulated     table to        con-             
                                                                              based                 loss)/      owners    trolling             
                                                                  Stated    payment      Other   retained       of the    interest       Total       
  R?000                                                 Note     capital    reserve   reserves    earnings     company        (NCI)     equity       
  Balance at 31 March 2014                                       692 929     18 788     19 215     134 102     865 034      51 183     916 217 
  Net profit for the period                                            -          -          -      28 735      28 735       6 520      35 255 
  Other comprehensive income for the period                            -          -         25           -          25           -          25 
  Dividends                                                            -          -          -           -           -    (10 094)    (10 094) 
  Transactions with owners of the company recognised   
  directly in equity                                                                          
  Share-based payments                                                 -      3 788          -           -       3 788           -       3 788 
  Balance at 30 September 2014                                   692 929     22 576     19 240     162 837     897 582      47 609     945 191 
                                                                                                                                               
  Balance at 31 March 2015                                       692 929     26 546     19 085     103 073     841 633     (3 375)     838 258 
  Net loss for the period                                              -          -          -     (66 252)    (66 252)    (30 690)    (96 942)
  Other comprehensive income for the period                            -          -        249           -         249           -         249 
  Transactions with owners of the company recognised   
  directly in equity                                                                          
  Ordinary shares issued(1)                                        9 048          -          -           -       9 048           -       9 048 
  Share-based payments                                                 -      3 021          -           -       3 021           -       3 021 
  Change in ownership interest in subsidiaries(2)         10           -          -          -     (91 724)    (91 724)     41 686    (50 038) 
  Balance at 30 September 2015                                   701 977     29 567     19 334     (54 903)    695 975       7 621     703 596 
  (1) Issue of 3 819 900 ordinary shares for R9 million at R2.37 per share in acquiring 26% of Labohlano Trading 46 Proprietary 
      Limited from the previous minority shareholder Moneybox Investments 156 Proprietary Limited. Refer to note 10.  
  (2) The premium paid for the non-controlling interests in Leeuw Mining and Exploration Proprietary Limited, Amalahle Exploration 
      Proprietary Limited and Labohlano Trading 46 Proprietary Limited was recorded as an adjustment against retained earnings in 
      terms of IFRS 10 Consolidated Financial Statements, due to the controlling interests of 74% held in these subsidiaries by the 
      group prior to the transactions. Had the group not held a controlling interest in these subsidiaries this premium would have 
      been allocated to the relevant assets and liabilities, based on fair value, with the residual being allocated to goodwill. 
      Refer to note 10 for additional information.  


Condensed interim consolidated statement of cash flows 
 
                                                               Six months ended            Year ended  
                                                         30 September    30 September        31 March  
                                                                 2015            2014            2015  
  R?000                                                     (Reviewed)      (Reviewed)       (Audited) 
  Cash flows from operating activities                        307 397         315 644         536 917  
  Cash flows from investing activities                       (277 523)       (282 899)       (508 883) 
  Cash flows from financing activities                        (34 102)         10 940         (25 044) 
  Net (decrease)/increase in cash and cash equivalents         (4 228)         43 685           2 990  
  Cash and cash equivalents at the beginning of the period     72 546          69 556          69 556  
  Cash and cash equivalents at the end of the period           68 318         113 241          72 546  
 
 
Segmental report

                                                                                              Operating profit/(loss)                
                                                                      Revenue             before depreciation/amortisation         Depreciation/amortisation  
                                                              Six                  Six        Six                     Six        Six                       Six  
                                                           months               months     months                  months     months                    months  
                                                               to    Year to        to         to     Year to          to         to      Year to           to  
                                                          30 Sept     31 Mar   30 Sept    30 Sept      31 Mar     30 Sept    30 Sept       31 Mar      30 Sept   
  R?000                                                      2015       2015      2014       2015        2015        2014       2015         2015         2014  
  Vanggatfontein Colliery(1)(4)                           563 286  1 181 055   638 369    343 875     626 861     346 431   (238 118)    (423 026)    (223 973) 
  Vaalkrantz Colliery(1)(5)(7)                            103 082    266 647   144 675   (113 842)    (88 810)     11 060     (3 080)     (18 328)      (9 861) 
  Sterkfontein Project                                          -          -         -          -           -           -          -            -            -  
  Keaton Energy Holdings Limited(2)                        52 260    144 701    81 571    (84 520)    (26 702)     54 935          -            -            -  
  Keaton Administrative and Technical Services 
  Proprietary Limited(2)                                   24 255     38 137    17 290     (2 151)      5 261        (351)    (1 620)        (900)        (417) 
  Leeuw Braakfontein Project                                    -          -         -    (10 738)     (8 644)     (4 050)         -            -            -  
  Koudelager Project(7)                                         -          -         -          -           -           -          -            -            -  
  Moabsvelden Project(2)                                        -         88        88       (297)        635        (944)         -            -            -  
  Other segments(2)(3)(8)                                       -        225       225     (2 851)     (3 454)    (11 853)         -          (18)         (15) 
  Total segments                                          742 883  1 630 853   882 218    129 476     505 147     395 228   (242 818)    (442 272)    (234 266) 
  Reconciliation to statements of profit or loss and 
  other comprehensive income and financial position               
  Intersegment, deferred taxation, assets and liabilities
  and other consolidation adjustments                     (76 515)  (183 152)  (99 174)    65 531     (26 021)    (78 458)         -            -            -  
                                                          666 368  1 447 701   783 044    195 007     479 126     316 770   (242 818)    (442 272)    (234 266) 
  Net finance cost(6)                           
  Elimination of discontinued operations  
  Net (loss)/profit before taxation             
  Total assets and liabilities                     
  (1) Revenue represents sales to external customers only.  
  (2) Revenue represents intersegment sales only.   
  (3) Includes the subsidiaries Amalahle Exploration Proprietary Limited, Labohlano Trading 46 Proprietary Limited, Ausco Finance 
      Proprietary Limited, Ausco Services Proprietary Limited, Focus Coal Investments Proprietary Limited, Xceed Resourced Limited 
      and the Balgray prospecting rights.                                                                                   
  (4) Coal sales to a major customer as a percentage of revenue exceeded 92% (90% at 31 March 2015 and 91% at 30 September 2014).    
  (5) Coal sales to major customers as a percentage of revenue equals 67% and 19% (31 March 2015: 39% and 37%. 30 September 2014: 47% and 20%).     
  (6) Net finance cost is not reported as forming part of each segment profit or loss as these are not measured or reported to the chief operating 
      decision maker (CODM) in connection with the segment but rather on a collective company/group basis.   
  (7) Classified as a discontinued operation, refer to note 4.                                               
  (8) Amalahle Exploration Proprietary Limited and the Balgray prospecting rights included in other segments are classified as discontinued 
      operations, refer to note 4.   


                                                              Operating profit/(loss) after
                                                                depreciation/amortisation                 Segment assets                          Segment liabilities  
                                                               Six                    Six                 
                                                            months                 months              
                                                                to    Year to          to            At          At          At             At          At         At   
                                                           30 Sept     31 Mar     30 Sept       30 Sept      31 Mar     30 Sept        30 Sept      31 Mar    30 Sept   
  R?000                                                       2015       2015        2014          2015        2015        2014           2015        2015       2014   
  Vanggatfontein Colliery(1)(4)                            105 757    203 835     122 458       933 996     937 241     969 367      1 094 843   1 150 739  1 205 592   
  Vaalkrantz Colliery(1)(5)(7)                            (116 922)  (107 138)      1 199       149 508     137 444     181 535        437 401     357 639    319 156   
  Sterkfontein Project                                           -          -           -        66 064      66 014      66 053         74 201      72 703     63 296   
  Keaton Energy Holdings Limited(2)                        (84 520)   (26 702)     54 935       932 764     961 941   1 020 779         69 827      23 967      4 893   
  Keaton Administrative and Technical Services 
  Proprietary Limited(2)                                    (3 771)     4 361        (768)       25 176      17 254      15 542         53 210      47 866     26 926   
  Leeuw Braakfontein Project                               (10 738)    (8 644)     (4 050)      311 664     305 465     334 284        116 925      98 614     89 380   
  Koudelager Project(7)                                          -          -           -         5 785      26 140      26 112              -           -          -  
  Moabsvelden Project(2)                                      (297)       635        (944)      340 433     339 985     337 487         72 934      72 454     71 684   
  Other segments(2)(3)(8)                                   (2 851)    (3 472)    (11 868)      322 098     333 232     330 913        117 268     113 421    111 729   
  Total segments                                          (113 342)    62 875     160 962     3 087 488   3 124 716   3 282 072      2 036 609   1 937 403  1 892 656   
  Reconciliation to statements of profit or loss and 
  other comprehensive income and financial position                                                                           
  Intersegment, deferred taxation, assets and liabilities
  and other consolidation adjustments                       65 531    (26 021)    (78 458)   (1 354 096) (1 247 347) (1 299 326)    (1 006 813)   (898 292)  (855 101)   
                                                           (47 811)    36 854      82 504     1 733 392   1 877 369   1 982 746      1 029 796   1 039 111  1 037 555   
  Net finance cost(6)                                      (24 812)   (49 743)    (24 876)                                                                               
  Elimination of discontinued operations                   106 461     92 093      (1 292)                                                                              
  Net (loss)/profit before taxation                         33 838     79 204      56 336                                                                               
  Total assets and liabilities                                                                1 733 392   1 877 369   1 982 746      1 029 796   1 039 111  1 037 555     
  (1) Revenue represents sales to external customers only.                   
  (2) Revenue represents intersegment sales only.     
  (3) Includes the subsidiaries Amalahle Exploration Proprietary Limited, Labohlano Trading 46 Proprietary Limited, Ausco Finance Proprietary Limited,
      Ausco Services Proprietary Limited, Focus Coal Investments Proprietary Limited, Xceed Resourced Limited and the Balgray prospecting rights.     
  (4) Coal sales to a major customer as a percentage of revenue exceeded 92% (90% at 31 March 2015 and 91% at 30 September 2014).                      
  (5) Coal sales to major customers as a percentage of revenue equals 67% and 19% (31 March 2015: 39% and 37%. 30 September 2014: 47% and 20%).        
  (6) Net finance cost is not reported as forming part of each segment profit or loss as these are not measured or reported to the chief operating 
      decision maker (CODM) in connection with the segment but rather on a collective company/group basis. 
  (7) Classified as a discontinued operation, refer to note 4.                                              


Notes to the condensed interim consolidated financial statements

  1.    Accounting policies                                     
        1.1 Basis of accounting               
        The condensed interim consolidated financial statements for the six months ended 30 September 2015 are prepared
        in accordance with International Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial 
        Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by 
        Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. The accounting 
        policies applied in the preparation of these interim financial statements are in terms of International Financial 
        Reporting Standards and are consistent with those described and applied in the previous consolidated audited financial 
        statements.                                     
                                                
        1.2 Held-for-sale accounting policy   
        In the current period the group classified assets as held-for-sale and discontinued operations for the first time. 
        The accounting policy for assets held-for-sale and discontinued operations is as follows:                                     
        A non-current asset or disposal group is classified as held-for-sale and stated at lower of carrying value and fair 
        value less cost to sell, when its carrying amount will be recovered principally through a sale transaction rather 
        than through continuing use. The classification as held-for-sale of a non-current asset or disposal group occurs 
        when it is available for immediate sale in its present condition and the sale is highly probable. A sale is 
        considered highly probable if management is committed to a plan to sell the non-current asset or disposal group, an 
        active programme has been initiated, the non-current assets or disposal group are marketed at a price reasonable to 
        its fair value and the disposal will be completed within one year from classification.                                     
                                                
        Upon classification of a non-current asset or disposal group as held-for-sale it is reviewed for impairment. The 
        impairment charged to profit or loss is the excess of the carrying value of the non-current asset or disposal group 
        over its expected fair value less costs to sell. At each subsequent reporting date, the carrying values are remeasured 
        for possible impairment. A reversal of impairment is recognised for any subsequent increase in fair value less costs 
        to sell but not in excess of the cumulative impairment loss already recognised.                                     
                                                
        No depreciation is provided on non-current assets from the date they are classified as held-for-sale. When a disposal 
        group is classified as held-for-sale it is also necessary to assess whether or not the criteria for discontinued operations 
        are met. If the criteria are met, the results of the disposal group are classified as discontinued operations in profit 
        or loss and the comparative amounts restated for all periods presented. No restatement of the statement of financial 
        position comparative amounts is done.                                     
                                           
  2.    Revenue and gross profit            
        Continuing operations               
        Vanggatfontein performed according to plan in a consistent, strong manner during the six months by delivering 1.192Mt of 
        washed 2- and 4-Seam thermal coal to Eskom, only some 4 367t short of last year?s production record (30 September 2014: 1.196Mt 
        and for the year ended 31 March 2015: 2.279Mt). Sales of 5-Seam metallurgical coal decreased 14% over the comparable period to 
        56 156t in line with the geological model (30 September 2014: 65 006t and for the year ended 31 March 2015: 126 107t). Due to 
        current domestic market conditions B-grade sales were negligible at 25 951t, all in the first quarter (30 September 2014: 22 029t 
        and for the year ended 31 March 2015: 46 554t).             
                                            
        During the six months Vanggatfontein generated revenue of R453.5 million from coal sales (30 September 2014: R465.2 million
        and for the year ended 31 March 2015: R865.7 million) and transport revenue of R109.8 million (30 September 2014: 
        R173.2 million and for the year ended 31 March 2015: R315.3 million). The decrease in transport revenue was as a result of 
        shorter delivery distances.            
                                            
        The gross profit from continuing operations was R119.2 million or 21% of sales (30 September 2014: R123.7 million or 19% of 
        revenue and for the year ended 31 March 2015: R212.1 million or 18% of revenue).            
                                            
        Discontinued operations             
        Production of domestic and export anthracite at Vaalkrantz decreased due to the factors disclosed previously to 176 089t 
        (30 September 2014: 191 898t and for the year ended 31 March 2015: 395 450t). During the six months Vaalkrantz generated revenue 
        of R103.1 million (30 September 2014: R144.7 million and for the year ended 31 March 2015: R266.6 million). Refer to note 4 for 
        additional disclosure on discontinued operations. 

  3.    Income taxation expense             
        Continuing operations               
        The income taxation expense of R24.3 million for the six months ended 30 September 2015 is mainly attributable to Keaton 
        Mining Proprietary Limited?s taxation expense of R24.2 million. This expense is as a result of the utilisation of unredeemed 
        capital expenditure due to the continued profitable performance at Vanggatfontein. The deferred taxation liability in the 
        statement of financial position accordingly increased when compared to the liability at 31 March 2015.             
                                            
        Discontinued operations             
        No current taxation or deferred taxation asset was recognised as the operations incurred taxation losses and future taxable 
        income is not expected from the discontinued operations.            

  4.   Discontinued operations                                                                                             
       The Vaalkrantz operation (part of Leeuw Mining and Exploration Proprietary Limited) continued experiencing challenging geological 
       conditions subsequent to 31 March 2015. This, coupled with the closure of two production sections as a result of safety and 
       difficult mining conditions, continued depressed coal prices, increased costs and lower than expected yields resulted in the 
       Board of Directors committing to a plan to dispose of the Vaalkrantz operation during September 2015. In addition, during 
       September 2015 a decision was taken to dispose of the Balgray Project and the Koudelager Project (also part of Leeuw Mining and
       Exploration Proprietary Limited) as they are seen as life extensions to the Vaalkrantz operation, which will utilise the existing 
       infrastructure on Vaalkrantz as well as the Mooiklip Coal project (part of Amalahle Exploration Proprietary Limited).    
                                                                                                                           
       As of date of this report the company has received an offer to purchase the above mentioned operations. Management expects that 
       the sale will be completed within the next 12 months.                                                           
                                                                                                                           
       These segments were not previously classified as held-for-sale or as discontinued operations. The comparative condensed 
       consolidated statements of profit or loss and other comprehensive income have been restated to show the discontinued operations 
       separately from continuing operations. 
       
       Results of discontinued operations                                                                                  
                                                                            Six months ended       Year ended   
                                                                      30 September  30 September     31 March     
                                                                              2015          2014         2015         
       R?000                                                             (Reviewed)    (Reviewed)   (Reviewed)   
       Discontinued operations                                                                                     
       Revenue                                                     2       103 082       144 675      266 647     
       Cost of sales                                                      (130 197)     (143 819)    (275 243)   
       Gross (loss)/profit                                                 (27 115)          856       (8 596)     
       Other income                                                              -         7 631        8 595       
       Operating expenses                                          9       (79 487)       (6 229)     (90 453)     
       Operating (loss)/profit before net finance income/(cost)           (106 602)        2 258      (90 454)    
       Net finance income/(cost)                                               141          (966)      (1 639)      
       Finance income                                                          417           442          873         
       Finance cost                                                           (276)       (1 408)      (2 512)      
       Net (loss)/profit before taxation                                  (106 461)        1 292      (92 093)     
       Income taxation credit/(expense)                            3             -         6 862      (16 777)    
       (Loss)/profit from discontinued operations for the period          (106 461)        8 154     (108 870)    
                                                                                                                      
       Net (loss)/profit attributable to:                                                                             
       Owners of the company                                               (72 011)        9 292      (59 194)     
       Non-controlling interest                                            (34 450)       (1 138)     (49 676)     
                                                                          (106 461)        8 154     (108 870)    
       No gain or loss was recognised for remeasurement in terms of IFRS 5 as the carrying amount of the disposal 
       group was lower than the fair value less costs to sell.                                                           
                                                                                                              
       Cash flows from discontinued operations                                                          
                                                Six months ended            Year ended   
                                            30 September   30 September       31 March     
                                                    2015           2014           2015         
       R?000                                   (Reviewed)     (Reviewed)     (Reviewed)   
       Cash flows from operating activities      (18 702)        27 006         20 785       
       Cash flows from investing activities      (10 964)       (11 800)       (28 266)     
       Cash flows from financing activities           (8)        (4 299)        (3 641)      

  5.   Earnings and net asset value per share                                                                                           
       The calculation of basic and diluted earnings per share is based on a loss for the six months ended 
       30 September 2015 (attributable to owners of the company) of R66.3 million (30 September 2014: profit of 
       R28.7 million and the year ended 31 March 2015: loss of R31 million). The weighted average number of shares 
       used in calculating basic earnings per share for the six months was 225.5 million (30 September 2014: 
       224.3 million and the year ended 31 March 2015: 224.4 million). The weighted average number of shares used 
       in calculating diluted earnings per share for the six months was 229 million (30 September 2014: 
       228.4 million and the year ended 31 March 2015: 228 million).   
 
                                                               Six months ended      Year ended      
                                                      30 September   30 September      31 March        
                                                              2015            2014         2015            
         R?000                                           (Reviewed)      (Reviewed)   (Reviewed)      
         Basic earnings per share                            (29.4)           12.8        (13.8)   
         Continuing operations                                 2.6             8.7         12.6   
         Discontinued operations                             (32.0)            4.1        (26.4)  
                                                                                                  
         Diluted earnings per share(1)                       (29.4)           12.6        (13.8)   
         Continuing operations                                 2.5             8.5         12.4   
         Discontinued operations(1)                          (32.0)            4.1        (26.4)  
         Headline earnings per share                          (6.2)           13.7          0.4   
         Continuing operations                                 2.6             8.7         12.5   
         Discontinued operations                              (8.8)            5.0        (12.1)  
         Diluted headline earnings per share(2)               (6.2)           13.4          0.4   
         Continuing operations                                 2.6             8.5         12.3   
         Discontinued operations(1)                           (8.8)            4.9        (12.1)             
         (1) Anti-dilutive in the current period and for the year ended 31 March 2015.                                                             
         (2) Anti-dilutive in the current period.                                                                                         
                                                                                                                             
                                                                                     Six months ended         Year ended      
                                                                               30 September   30 September      31 March        
                                                                                       2015           2014          2015            
         R?000                                                                    (Reviewed)     (Reviewed)    (Reviewed)      
         Reconciliation of headline earnings (net of tax and NCI):                                                       
         Continuing operations                                                                                           
         Net profit for the year attributable to owners of the company                5 759         19 443       28 165   
         Loss/(profit) on disposal of property, plant and equipment                     109              -         (36)   
         Headline earnings - continuing operations                                    5 868         19 443       28 129   
         Discontinued operations                                                                                          
         Net (loss)/profit for the year attributable to owners of the company       (72 011)         9 292      (59 194)  
         Loss on disposal of property, plant and equipment                                -          1 918        1 918   
         Impairment of assets                                                        52 095              -       30 120   
         Headline earnings - discontinued operations                                (19 916)        11 210      (27 156)  
         Total headline earnings                                                    (14 048)        30 653          973   
         Net asset value per share                                                                                        
         Number of shares in issue (millions)                                         228.3          224.3        224.4   
         Net asset value per share (cents)                                              308            421          373   

  6.     Property, plant and equipment                                                                                              
         The net decrease of R77.5 million from 31 March 2015 is mainly attributable to the following:        
         -  Capital investments at Vanggatfontein of R227.1 million (attributable mainly to mine development of 
         R220.7 million and the completion of the filter press plant of R6.4 million). The rehabilitation assets 
         decreased by R8.8 million, relating to changes in estimates associated with the environmental rehabilitation 
         liability.                                                             
         -  Capital investments at Vaalkrantz of R6.9 million. The rehabilitation assets decreased by R1.4 million, 
         relating to changes in estimates associated with the environmental rehabilitation liability.      
                                                                                                                                          
         These were further offset by depreciation charges of R241 million, the impairment charge of R22 million on 
         discontinued operations (discussed in note 9) and the reclassification of Vaalkrantz property, plant and 
         equipment of R38.1 million to assets held-for-sale (refer to note 9). 
 
  7.     Intangible assets                                                                                                                
         The net decrease of R53.6 million from 31 March 2015 is mainly attributable to the impairment charge of R47.8 million
         recognised on the discontinued operations as disclosed in note 9.                                                             
                                                                                                                                          
  8.     Trade and other receivables                                                                                                      
         The net decrease of R77.5 million from 31 March 2015 is mainly attributable to the following:          
         -  As disclosed in the 31 March 2015 Integrated Annual Report, the company entered into share purchase agreements 
         with JPI Leeuw and Associates Proprietary Limited (JPI) to acquire their equity interest held in Leeuw Mining and 
         Exploration Proprietary Limited. As at 31 March 2015, the acquisition of this equity interest had not yet become 
         effective and as such the purchase consideration paid at 31 March 2015 of R25.4 million was accounted for as a 
         prepayment in trade and other receivables. As at 30 September 2015 the acquisition has now become effective, and 
         therefore the purchase consideration is no longer accounted for as a prepayment. Refer to note 10 in this regard.        
         -  Reclassification of the discontinued operations? trade and other receivables of R26.9 million to assets held-for
            -sale (refer to note 9).                                                             
         -  Decrease in transport receivables of R13.4 million due to shorter delivery distances to Eskom?s power stations.
 
  9.     Disposal group held-for-sale                                                                                                     
         As disclosed in note 4, the Board committed to a plan to sell the Vaalkrantz Colliery, the Balgray Coal Project, the
         Koudelager Coal Project and the Mooiklip Coal Project (disposal group).                                                             
         As at 30 September 2015, the disposal group comprised the following assets and liabilities:
 
                                                                                          At    
                                                                                30 September   
                                                                                        2015   
         R?000                                                                     (Reviewed)  
         Assets                                                                                
         Property, plant and equipment                                                38 097   
         Intangible assets                                                             9 155   
         Restricted investments                                                       26 219   
         Inventory                                                                     8 829   
         Trade and other receivables                                                  26 929   
         Taxation                                                                        983   
         Cash and cash equivalents                                                    10 069   
                                                                                     120 281   
         Liabilities                                                                           
         Borrowings                                                                       97   
         Mine closure and environmental rehabilitation provision                      31 285   
         Trade and other payables                                                     59 999   
         Provisions                                                                   24 660   
                                                                                     116 041   
         An impairment loss of R22 million was recognised on property, plant and equipment and an impairment loss of 
         R47.8 million was recognised on intangible assets in terms of IAS 36 before the assets were classified as held-for-sale 
         in terms of IFRS 5. The recoverable amount was determined using fair value less costs to sell based on the offer received 
         for the discontinued operations. The impairment losses were recognised in operating expenses (refer to note 4 above).       
                                                                                                                                          
  10.    Change in interests in subsidiaries                                                                                              
         During the period the company purchased the following additional interests in subsidiaries:                 
         -  26% interest in Leeuw Mining and Exploration Proprietary Limited for R38.5 million. On group level, the NCI increased 
         by R40.6 million whilst retained earnings decreased by R79.1 million.                                                             
         -  26% interest in Amalahle Exploration Proprietary Limited for R1 million cash. On group level, the NCI increased by 
         R3.5 million whilst retained earnings decreased by R4.5 million.                                                             
         -  26% interest in Labohlano Trading 46 Proprietary Limited for R10.5 million (R1.5 million cash and shares issued of 
         R9 million). On group level, the NCI decreased by R2.4 million whilst retained earnings decreased by R8.1 million. 
 
  11.    Borrowings                                                                                                                       
         Total borrowings decreased by R20.8 million from 31 March 2015, mainly as a result of debt repayments to the value of 
         R48 million of which R46.5 million relates to the Investec Bank Limited term loan.                            
                                                                                                                                          
         The decrease was offset by finance costs of R16 million and a foreign exchange loss of R10.7 million included in 
         administrative expenses in profit or loss.    
 
  12.    Trade and other payables                                                                                                         
         The net decrease of R71.4 million from 31 March 2015 mainly relates to the reclassification of the discontinued operation?s
         trade and other payables of R60 million to liabilities held-for-sale (refer to note 9).                                                             
                                                                                                                                          
         Keaton vs Megacube Mining Proprietary Limited (Megacube)                                                                         
         Included in trade and other payables is an amount of R42.5 million owing to Megacube as reported in the 31 March 2015 
         Integrated Annual Report. This amount is still under legal dispute and there have been no significant changes to the status 
         as reported in our 31 March 2015 Integrated Annual Report.
 
  13.    Commitments and contingencies                                                                                                    
         The group?s capital commitments are:                                                                                             
                                                                   At            At             At              
                                                         30 September      31 March   30 September    
                                                                 2015          2015           2014            
         R?000                                              (Reviewed)     (Audited)     (Reviewed)      
         Exploration and mine development expenditure
         authorised and contracted                              2 681        16 830         34 902         
         Exploration and mine development expenditure
         authorised but not contracted                         23 014        44 549         28 512         
                                                               25 695        61 379         63 414         
         All contracted amounts will be funded both through existing funding mechanisms within the group and cash generated 
         from operations.                                                             
                                                                                                                                          
         There have been no significant changes to the status of the group?s contingent liabilities. For detailed disclosure on 
         all contingent liabilities refer to Keaton Energy?s Integrated Annual Report for the year ended 31 March 2015, available 
         on the group?s website at www.keatonenergy.co.za.                                                             
                                                                                                                                          
  14.    Financial risk management activities                                                                                             
         Fair value determination                                                                                                         
         The following table presents the group?s assets and (liabilities) that are measured at fair value by level within the 
         fair value hierarchy:                                                             
         Level 1: Quoted prices (unadjusted) in active markets for identical assets/(liabilities);                                                             
         Level 2:  Inputs other than quoted prices included within level 1 that are observable for the assets/(liabilities), 
         either directly or indirectly (that is, as prices) or indirectly (that is derived from prices); and                                                             
         Level 3:  Inputs for the assets/(liabilities) that are not based on observable market data (that is unobservable inputs). 
 
                                                        At           At             At              
                                              30 September     31 March   30 September    
                                                      2015         2015           2014            
         R?000                                   (Reviewed)    (Audited)     (Reviewed)      
         Fair value through profit or loss                                                  
         Level 1(1)                                 58 835       68 306         56 320   
         Level 2                                         -          (68)          (729)   
         Level 2(2)                                 (2 504)         433              -   
         (1) Level 1 financial assets relate to restricted investments which serve as collateral mainly for environmental 
         guarantees provided to the DMR. Contributions are mainly invested in Momentum, Stanlib and Sanlam. These underlying 
         funds invest in equity instruments and money market investments, both local and foreign. These investments are fair 
         value through profit or loss financial assets and recognised at fair value.
         (2) Level 2 financial (liabilities)/assets relate to Forward Exchange Contracts (FECs). The FECs were valued by an 
         independent financial institution using forward looking market rates until the realisation date of the relevant instruments.                                                             
                                                                                                                                          
         The carrying values (less any impairment allowance) of restricted cash, cash and cash equivalents, investments and loans, 
         trade and other receivables, borrowings, provisions and trade and other payables approximate their fair values.                                                             
                                                                                                                                          
  15.    Significant events after 30 September 2015 up to the date of this report                                                             
         - The agreement concluded with Rutendo Mining Proprietary Limited (Rutendo Mining), as disclosed in note 39 (vi) of Keaton 
         Energy?s Integrated Annual Report for the year ended 31 March 2015 became unconditional after period end. On 13 November 2015 
         an additional 63 731 714 Keaton Energy Holdings Limited shares were listed and issued to Rutendo Mining at R2.3638 per share. 
         As a result of this Rutendo Mining holds 21.83% of the issued shares of Keaton Energy Holdings Limited.                                                             
         - The option granted to Moneybox Investments 156 Proprietary Limited (Moneybox), as disclosed in note 39 (v) of Keaton Energy?s
         Integrated Annual Report for the year ended 31 March 2015 became effective after period end. The option is exercisable by 
         Moneybox until 31 January 2017.                                                             
                                                                                                                                          
         The 31 March 2015 Integrated Annual Report is available on the group?s website at www.keatonenergy.co.za. 
 
  16.    Dividends                                                                                                                        
         No dividends have been declared nor are any proposed for the period ended 30 September 2015 (30 September 2014: Rnil and for the
         year ended 31 March 2015: Rnil). 
 
  17.    Going concern                                                                                                                    
         At 30 September 2015, the group had adequate funding resources to continue to operate for the foreseeable future and has therefore
         continued to adopt the going-concern basis in preparing the financial statements. Funding resources are in the form of coal sales 
         secured through Eskom and other off-take agreements, the Investec Bank working capital facility and overdraft facilities. 
 
  18.    Review report                                                                                                                    
         These condensed consolidated financial statements for the period ended 30 September 2015 have been reviewed by KPMG Inc, who 
         expressed an unmodified review conclusion. A copy of the auditor?s review report is available for inspection at the company?s 
         registered office together with the condensed consolidated financial statements identified in the auditor?s report.                                                             


Registered Office
Ground Floor, Eland House, The Braes, 3 Eaton Avenue, Bryanston, South Africa 
Postnet Suite 464, Private Bag X51, Bryanston, 2021
Tel: +27 11 317 1700
Telefax: +27 11 463 4759
E-mail: info@keatonenergy.co.za

Directors
Non-executive
Dr JD Salter (Chairman)* 
LX Mtumtum (Lead Independent Director)
P Pouroulis** 
OP Sadler (Independent)
APE Sedibe
GH Kemp (Independent)
MT Witteveen***
HG Mai****
Executive
AB Glad (Chief Executive Officer)
J Rossouw (Chief Financial Officer)
*British **South African/Cypriot ***Dutch ****Swiss

Company Secretary
Anelia Schutte-Bouwer

Sponsor
Investec Bank Limited
100 Grayston Drive, Sandown, Sandton, 2196
South Africa
PO Box 785700, Sandton, 2146, South Africa

Transfer Secretaries
Computershare Investor Services South Africa Proprietary Limited 
Ground Floor, 70 Marshall Street, Johannesburg South Africa 
PO Box 61051, Marshalltown, 2107

Auditors
KPMG Inc. 1226 Francis Baard Street, Hatfield, Pretoria

www.keatonenergy.co.za

Date: 19/11/2015 08:45:00 Supplied by www.sharenet.co.za                     
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