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Wescoal Holdings Limited - Summarised Audited Consolidated Results For The Year Ended 31 March 2017

Release Date: 28/06/2017 07:30:00      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 Company" or "the Group")

SUMMARISED AUDITED CONDENSED CONSOLIDATED RESULTS
for the year ended 31 March 2017

Highlights and
key indicators

Excluding non-recurring costs:

HEPS INCREASED           
96.9% to 53.4 cps        
(2016: 27.1 cps)         
                          
OPERATIONAL             
EBITDA (R'000)          
up 93.5% to R294 298    
(2016: R152 107)        

MINING ROM PRODUCTION  
up 82.1% to 3 371.0 kt  
(2016: 1 851.0 kt)      
                            
REVENUE (R'000)       
up 33.2%              
R 2 118 020           
(2016: R1 589 870)    

OPERATIONAL             
EBITDA (R'000)          
up 33.8% to R203 518    
(2016: R152 107)        

HEPS                
down 58.4%          
11.3 cps            
(2016: 27.1 cps)    

EPS
down 55.7%
11.6 cps
(2016: 26.2 cps)

Consolidated income statement                                      2017          2016
for the year ended 31 March 2017                                  R'000         R'000
Turnover                                                      2 118 020     1 589 870
Cost of sales                                               (1 750 562)   (1 338 150)
Gross profit                                                    367 458       251 720
Other income                                                      3 845         1 512
Profit/(loss) on sale of assets                                     933         (154)
Operating costs                                               (167 212)     (152 155)
BEE discount                                                   (82 280)             -
Operating profit                                                122 744       100 923
Interest received                                                 6 775         1 004
Finance costs                                                  (29 625)      (21 923)
Net profit before taxation                                       99 894        80 004
Taxation                                                       (69 694)      (28 239)
Net profit for the year                                          30 200        51 765
Other comprehensive income                                            -             -
Total comprehensive income                                       30 200        51 765
Attributable to:                                                                     
  Owners of the parent                                           30 200        51 765
  Non-controlling interest                                            -             -
                                                                 30 200        51 765                                                          
Headline earnings reconciliation                                                     
  Net profit for the year                                        30 200        51 765
  Less: Net (profit)/loss on sale of assets                        (933)          154
  Impairment on investment property                                   -         1 486
Headline earnings for the year                                   29 267        53 405
Ordinary shares in issue (R'000)                                                      
  Total at period end (excl. treasury shares)                   350 025       224 804
  Weighted average shares in issue                              259 559       197 361
  Fully diluted weighted average shares in issue                260 058       197 399
Basic earnings per ordinary share (cents)                          11.6          26.2
Fully diluted basic earnings per ordinary share (cents)            11.6          26.2
Headline earnings per ordinary share (cents)                       11.3          27.1
Fully diluted headline earnings per ordinary share (cents)         11.3          27.1

Consolidated balance sheet                                         2017          2016
as at 31 March 2017                                               R'000         R'000
ASSETS                                                        1 591 857     1 019 969
Non-current assets                                              818 273       631 121
Property, plant and equipment                                   641 198       496 350
Investment property                                                 709           709
Investments                                                      17 909        22 023
Goodwill and intangibles                                         95 989        96 301
Other receivables                                                52 935        11 366
Deferred taxation                                                 9 533         4 372
Current assets                                                  773 584       384 448
Inventories and work in progress                                 56 861        57 668
Prepaid royalty                                                   1 272           874
Trade and other receivables                                     280 647       224 727
Cash and cash equivalents                                        84 411       101 179
Restricted cash                                                 350 393             -
Non-current assets held for sale                                      -         4 400
EQUITY AND LIABILITIES                                      (1 591 857)   (1 019 969)
Capital and reserves                                          (684 632)     (385 061)
Share capital                                                 (500 222)     (213 156)
Share-based payment reserve                                     (8 676)       (7 263)
Retained income                                               (175 734)     (164 642)
Non-current liabilities                                       (277 918)      (86 932)
Interest-bearing debt - long term                              (60 553)      (18 533)
Instalment sale agreements                                        (552)       (2 907)
Deferred tax                                                   (62 113)      (19 306)
Other financial liabilities                                     (6 494)             -
Provision for rehabilitation                                  (148 206)      (46 186)
Current liabilities                                           (629 307)     (547 976)
Trade and other payables                                      (331 863)     (272 578)
Provision for rehabilitation                                    (9 365)      (13 890)
Bank overdraft                                                 (17 098)      (15 781)
Taxation payable                                               (13 486)      (27 585)
Other financial liabilities                                     (1 019)             -
Instalment sale agreements                                      (2 355)       (2 856)
Interest-bearing debt - short term                            (254 121)     (215 286)
                                                                        
                                                                      -             -
Net asset value per share (cents)                                   196           171
Tangible net asset value per share (cents)                          168           128

Consolidated statement of changes in equity
for the year ended 31 March 2017

                                                    Share-based
                                            Share       payment   Retained      Total
Attributable to the owners                capital       reserve   earnings     equity
of the parent                               R'000         R'000      R'000      R'000
Balance at 31 March 2015                  161 465         5 479    112 877    279 821
Rights share issue net of
transaction cost                           39 254             -          -     39 254
General issue of shares                    12 437             -          -     12 437
Total comprehensive income for
the year                                        -             -     51 765     51 765
Employee share option scheme                    -         1 784          -      1 784
Balance at 31 March 2016                  213 156         7 263    164 642    385 061
General issue of shares                   286 781             -          -    286 781
Total comprehensive income for
the period                                      -             -     30 200     30 200
Dividends declared                              -             -   (19 108)   (19 108)
Employee share option scheme                  285         1 413          -      1 698
Balance at 31 March 2017                  500 222         8 676    175 734    684 632

Consolidated statement of cash flows                                 2017        2016
for the year ended 31 March 2017                                    R'000       R'000
Cash flows from operating activities                              187 041     207 731
Cash generated from operations                                    253 515     239 590
Finance income                                                      5 621       1 004
Finance costs                                                    (25 948)    (19 701)
Income tax paid                                                  (46 147)    (13 162)
Cash flows from investing activities                            (437 755)   (176 061)
Purchase of property, plant and equipment                        (98 924)   (169 644)
Proceeds from sale of property, plant and equipment                 7 243       1 023
Rehabilitation                                                     11 759           -
Transfer to Restricted cash                                     (350 393)           -
Purchase of financial assets                                      (7 440)     (7 440)
Cash flows from financing activities                              232 629      43 578
Movements in interest-bearing borrowings                           77 999     (8 113)
Dividends paid                                                   (19 108)           -
Shares/right issued                                               173 738      51 691
Net (decrease)/increase in cash and            
cash equivalents                                                 (18 085)      75 248
Cash and cash equivalents at beginning of year                     85 398      10 150
Cash and cash equivalents at end of year                           67 313      85 398

Segmental analysis
Statement of                            Trading      Mining       Other         Total
comprehensive income                      R'000       R'000       R'000         R'000
For the year ended
31 March 2017                                                                       
Total segment revenue                 1 094 265   1 113 845    (90 090)     2 118 020
Inter-segment revenue                         -    (90 444)      90 444             -
External revenues                     1 094 265   1 023 401         354     2 118 020
EBITDA                                   39 734     249 265    (85 481)       203 518
Operating profit/(loss)                  29 977     179 032    (86 265)       122 744
For the year ended
31 March 2016                                                                        
Total segment revenue                   988 183     627 185    (25 498)   (1 589 870)
Inter-segment revenue                         -      (26 033)    26 033             -
External revenues                       988 183     601 152         535   (1 589 870)
EBITDA                                   31 904     124 686     (4 483)       152 107
Operating profit/(loss)                  19 153       88 117    (6 347)       100 923

CHIEF EXECUTIVE OFFICER'S REPORT 

Milestone achievements realised on a solid platform
The results of our capital allocation programme are evident at the Elandspruit operations which
have matured into the stable, predictable flagship operation originally contemplated. Production
from the Elandspruit Mine has consistently averaged more than 200ktpm during FY17. Intibane
is averaging 75 ktpm and with all regulatory consents now in place Khanyisa is expected to
contribute 290kt during the first half of FY18.

The Trading division has benefited from a concerted optimisation and well-executed
right-sizing exercise.

We achieved significant successes in securing multiple coal supply contracts during FY17, including a
much anticipated coal supply agreement with Eskom which will see the delivery of some 7.8 million
tons of coal over a five-year period. New business development ventures have seen us secure
increased revenues from other domestic and export customers. Our business is no longer focused on
a single commodity and single client. We have grown into a multifaceted Group with a presence in
the domestic and international thermal coal markets, as well as coal logistics infrastructure. We see
opportunities to further diversify and grow revenue streams in FY18.

Acquisition of Keaton offers the benefits of consolidation, alignment of infrastructure, regional
synergies and also offers opportunities to expand existing markets and enter new ones. Once
concluded, it will result in an enlarged business with coal resources in excess of 150mt, four operating
mines and two processing plants.

During April 2017, regulatory approvals were obtained allowing Wescoal to consummate a joint
venture at the Khanyisa Complex. The joint venture company, which is 35% owned by Wescoal, owns
resources contiguous to existing wholly-owned Wescoal resources. The transaction secures additional
resources next to Wescoal's Khanyisa Mine and also unlocks operational synergies in the area.

Our transformation agenda was spearheaded by the implementation of a BEE transaction which not
only guaranteed black shareholding of more than 50% for the next five years, but also injected about
R176 million new equity.

Some R1.9 million has been allocated to enterprise development. The company has also made an
investment of approximately R5.6 million in local economic development initiatives aligned with the
needs of our host communities. In the period under review the company undertook Corporate Social
Investment initiatives ranging from community upliftment projects to renovation of primary school
facilities within host communities.

I am excited and optimistic about Wescoal's future. We have a solid operational platform, blossoming
track record of repeatable financial outcomes, de-risked business model and excellent growth options,
all overseen by a highly skilled and motivated management team.

CHIEF FINANCIAL OFFICER'S REVIEW

Introduction
The year under review has seen the company achieve milestones which are significant from a financial
point of view.

- The execution of key long-term supply contracts allowed us to translate strong operational
  performance into consistent and predictable financial performance.
- Our BEE transaction secured our supply contract with Eskom while providing fresh equity
  funding into the business.
- The predictable financial performance and the equity injection provide a platform for us to
  further strengthen our balance sheet and advance discussions to secure long-term debt funding.
- All the above allows us to now focus on our strategic growth path starting with the close out of
  the Keaton acquisition transaction and the successful integration of the two businesses.

Profitability
The strong operational performance in our mining division underpinned by our flagship Elandspruit
Colliery at steady state and the consistent performance from our trading division has seen group
revenue increase by 33% from R1.59 billion in 2016 to R2.12 billion in 2017.

Gross profit margins for the group have improved from 15.8% in 2016 to 17.4% in 2017 as the mining
division benefited from improved unit costs on the back of increased production while the trading
division's rationalisation resulted in better margins.

EBITDA for the group was impacted by non-recurring costs relating to a non-cash BEE discount of
R82 million as a result of our BEE transaction (being the difference between the market value of the
BEE subscription shares and the BEE proceeds) as well as Keaton acquisition transaction expenses
of R8.5 million incurred in the year under review. Excluding the impact of these non-recurring costs
EBITDA for the group at R294 million, was 94% above that of 2016.

Headline earnings per ordinary share of 11c for year ended 31 March 2017 reflect the impact on
earnings of the non-cash BEE discount of 32c, the dilution impact of the BEE transaction's increase
in the number of issues shares of 7c as well the one-off Keaton acquisition transaction costs of 3c.
Therefore, headline earnings per ordinary share before the impact of non-recurring costs and the BEE
share dilution amounted to 53c for the year.

Cash generation
Cash generated from operations increased from R240 million in 2016 to R254 million in 2017 on the
back of improved profitability. The cash generated from operations was largely applied to fund capital
expenditure (R99 million), towards higher tax payments on increasing profits (R46 million), to reward
shareholders with dividends (R19 million) and alongside drawn debt facilities and BEE transaction
proceeds to fund the cash portion of the Keaton acquisition. At 31 March 2017, R350 million had
been set aside for this acquisition.

Total cash at 31 March 2017 (including an amount of R350 million set aside for the cash portion of
the Keaton acquisition) amounted to R435 million while net cash after deducting bank overdraft
and drawn debt facilities amounted to R103 million compared to a net debt position of R148 million
at 31 March 2016.

Capital expenditure
Capital expenditure for the year amounted to R113 million (excl. rehab asset). At Elandspruit the main
components of spend were the construction of the D20 road and pollution control dam as well as
the purchase of an adjacent mining void for improved access to our reserves. While at Intibane we
purchased an XRT machine for improved processing.

Capital structure
The group improved its balance sheet strength through the BEE transaction which was completed
in December 2016 injecting R176 million of fresh equity into the business and locking in BEE equity
ownership of 58.93%.

Dividends
Wescoal in considering the Company's financial position and strong annual performance, has agreed
to distribute R12 million to shareholders as a dividend for the period. The full dividend declaration will
be announced on SENS in due course.

RESOURCE AND RESERVE SUMMARY

The resource and reserve summary is an extract of the SAMREC compliant, competent person's
report as compiled by Leonardt Raaths as Lead CP (BTech Mining degree from UJ, a BSc in
Operations Research from Unisa and an MBL from Unisa SBL) registered with SAIMM (registration
number 702015). 

The totals for FY17 exclude specific restricted environmental sensitive areas, servitudes and areas
subject to further project work.

- 98% of FY17 Coal Resources are classified as Measured
- 96% of FY17 Coal Reserves are in the Proved category
- 15% of FY17 Resources for underground (8% of Reserves)
- MTIS-Mineable Tons in Situ (Resource Air Dried Basis)
- ROM-Run of Mine Tons (Reserve As Received Basis)
- All tonnages expressed in Millions of Tons

                                                                         FY17        FY17        FY16
                                                                      Reserve    Resource    Resource
                                                                     (ROM AR)   (MTIS AD)   (MTIS AD)
Khanyisa Complex*                                                         5.8         8.0        11.3
Intibane Complex                                                          1.9         2.1         2.6
Elandspruit                                                              21.3        21.5        33.1
Total                                                                    28.9        31.6        47.0
Wescoal Attributable                                                     25.9        27.2        40.5
 
*Khanyisa includes Triangle area to which Wescoal has 35% interest.

SALES AND PRODUCTION PERFORMANCE
 
                                                                                 FY17    FY16    FY15
Wescoal Mining Sales                                                       kt   2 917   1 734   1 731
Wescoal Trading Sales                                                      kt   1 120   1 057   1 153
Wescoal
Mining Production                                                          kt   3 371   1 851   1 519

BASIS OF PREPARATION

The condensed consolidated financial information for the year ended 31 March 2017 has been
prepared in accordance with the framework concepts and the recognition and measurement criteria
of International Financial Reporting Standards ("IFRS"), the preparation and disclosure requirements of
IAS 34; "Interim financial reporting", SAICA 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 the prior year. The preparation of these financial results was
done under the supervision of Izak van der Walt (CA)SA.

Any reference to the future financial performance has not been reviewed or reported on by the
Group Auditors.

The directors are of 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
This summarised report is extracted from audited information, but is not itself audited. The annual
financial statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified
opinion thereon. The audited annual financial statements and the auditor's report thereon are
available for inspection at the company's registered office. The directors take full responsibility for the
preparation of the abridged report and that the financial information has been correctly extracted
from the underlying annual financial statements.

By order of the board

MR Ramaite                                           W Sulaiman
Chairman                                             Chief Executive Officer

(28 June 2017)                                        

Corporate information
Non-executive chairman: MR Ramaite Lead independent non-executive director: DMT van Gaalen
Non-executive independent directors: MH Mathe, KM Maroga Non-executive director: JG Pansegrouw
Executive directors: W Sulaiman, B Mazarura, T Tshithavhane Registration number: 2005/006913/06
Registered address: 1st Floor, Building 10, 142 Western Service Road, Woodmead Postal address: PO Box 1962, 
Edenvale, 1610 Company secretary: Vikesh Dhanooklal Telephone: 011 049 8611, Facsimile: 011 570 5848 
Transfer secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Nedbank Corporate and Investment Banking Website: www.wescoal.com

Date: 28/06/2017 07:30:00 Supplied by www.sharenet.co.za                     
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