Wrap Text
Unaudited condensed consolidated interim results for the six months ended 30 September 2016
WESCOAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2005/006913/06)
Share code: WSL
ISIN: ZAE000069639
(“Wescoal” or "the Company" or “the Group”)
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2016
FINANCIAL AND OTHER SALIENT FEATURES
- Wescoal delivered a solid performance on the back of strong sales and operational
efficiencies from its flagship Elandspruit colliery*
- Revenue increased by 37.1% or R281.3 million to R1 039.4 million (2015: R758.1 million)
- EBITDA is up 254% to R139.3 million (2015: R39.4 million)
- HEPS increased 445% to 27.8 cents (2015: 5.1 cents)
- Special dividend of R10 million was declared during September 2016
* Elandspruit was not fully operational in the comparative 2015 period as reflected in comparison metrics.
Waheed Sulaiman, CEO of Wescoal says the mining division performed well driven primarily by
strong production and sales from operations at the flagship Elandspruit mine. “We are pleased with
cash generated from operations and to be in a stronger position for paying dividends to
shareholders. Wescoal remains an active participant in the consolidation of the domestic junior coal
mining sector with respect to reviewing value enhancing opportunities and we have largely de-risked
the cash flows and funding for further projects by securing Eskom off-take agreements and export
contracts. Our immediate priority, however, is to progress the BEE transaction which has been
proposed to shareholders. “
“These results reflect the way the management team has handled quality assets acquired. We
remain focussed on our top priorities, namely to strive for safe production, solid, predictable
operational and financial performances, the re-alignment of the trading business to Wescoal’s needs
and to maximise the utilisation and asset base values at Intibane and Khanyisa Collieries,” Sulaiman
concluded.
The unaudited interim results for the six months ended 30 September 2016 (’the Period’), with
comparative unaudited results for the six months ended 30 September 2015 (’the Prior Period’) and
the audited results for the year ended 31 March 2016 are presented below.
Wescoal Holdings Limited
Consolidated Income Statement
For the six months ended 30 September 2016
Unaudited interim Unaudited interim Audited
results for the six results for the six results for the
months ended months ended year ended
30 September 2016 30 September 2015 31 March 2016
(R'000) (R'000) (R'000)
TURNOVER 1,039,442 758,138 1,589,870
COST OF SALES (851,438) (660,838) (1,338,150)
GROSS PROFIT 188,004 97,300 251,720
OTHER INCOME 1,509 672 1,512
PROFIT/(LOSS) ON SALE OF ASSETS 456 682 (154)
OPERATING COSTS (88,996) (80,103) (152,155)
OPERATING PROFIT 100,973 18,551 100,923
NET FINANCE EXPENSE (13,083) (7,287) (20,919)
NET PROFIT BEFORE TAXATION 87,890 11,264 80,004
TAXATION (25,907) (1 478) (28,239)
TOTAL COMPREHENSIVE INCOME 61,983 9,786 51,765
Attributable to:
Owners of the parent 61,983 9,786 51,765
Headline Earnings reconciliation
Net Profit for the period 61,983 9,786 51,765
Net (Profit)/ loss on sale of assets (456) (491) 154
Impairment of assets 1,077 - 1,486
Headline earnings for the period 62,604 9,295 53,405
Ordinary shares in issue (R'000)
Total at period end 225,030 183,571 224,804
Weighted average shares in issue 224,913 183,571 197,361
Fully diluted weighted average shares in issue 225,084 185,770 197,399
Basic earnings per ordinary share (cents) 27.6 5.3 26.2
Fully diluted basic earnings per ordinary share 27.5 5.3 26.2
(cents)
Headline earnings per ordinary share (cents) 27.8 5.1 27.1
Fully diluted headline earnings per ordinary share (cents) 27.8 5.0 27.1
Earnings before interest, taxation, depreciation
and amortisation (EBITDA) reconciliation
Operating profit 100,973 18,551 100,923
Depreciation and amortization 38,348 20,810 51,029
Earnings before interest, taxation, depreciation and
amortisation (EBITDA) 139,321 39,361 151,952
Wescoal Holdings Limited
Consolidated Balance sheet
As at 30 September 2016
Unaudited interim Unaudited interim Audited
results for the six results for the six results for the
months ended months ended year ended
30 September 2016 30 September 2015 31 March 2016
(R'000) (R'000) (R'000)
ASSETS
NON-CURRENT ASSETS 625,893 615,189 631,121
Property, plant and equipment 504,108 458,531 496,350
Investment Property 709 709 709
Investments 14,266 17,602 22,023
Goodwill and intangibles 92,387 100,435 96,301
Prepaid Royalty 10,238 12,837 11,366
Deferred taxation 4,185 25,075 4,372
CURRENT ASSETS 437,364 336,855 384,448
Inventories and work in progress 72,159 73,007 57,668
Prepaid Royalty 1,262 - 874
Trade and other receivables 259,291 211,126 224,727
Cash and cash equivalents 104,652 52,722 101,179
Non-current Assets Held for Sale 3,323 - 4,400
TOTAL ASSETS 1,066,580 952,044 1,019,969
EQUITY AND LIABILITIES
CAPITAL AND RESERVES (428,459) (290,419) (385,061)
Share Capital (213,441) (161,465) (213,156)
Share Based Payment Reserve (7,498) (6,254) (7,263)
Retained Earnings (207,520) (122,700) (164,642)
NON - CURRENT LIABILITIES (166,037) (90,685) (86,932)
Interest bearing debt (75,554) (32,906) (18,533)
Instalment sale agreements (1,485) (3,940) (2,907)
Deferred Tax (40,673) (7,154) (19,306)
Provision for Rehabilitation (48,325) (46,685) (46,186)
CURRENT LIABILITIES (472,084) (570,940) (547,976)
Trade and other payables (296,776) (271,126) (272,578)
Provision for rehabilitation (5,299) - (13,890)
Bank overdraft (16,664) (16,391) (15,781)
Taxation payable (23,762) (43,731) (27,585)
Instalment sale agreements (2,304) (4,035) (2,856)
Interest bearing debt (127,279) (235,657) (215,286)
TOTAL EQUITY AND LIABILITIES (1,066,580) (952,044) (1,019,969)
Net asset value per share (cents) 190.40 158.20 171.29
Tangible net asset value per share (cents) 149.35 103.49 128.45
Wescoal Holdings Limited
Consolidated Statement of changes in equity
For the six months ended 30 September 2016
Share-based Retained
Attributable to the owners of the parent Share Capital payment reserve Earnings Total Equity
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 285 - - 285
Total comprehensive income for the period - - 61,983 61,983
Dividends declared - - (19,105) (19,105)
Employee share option scheme - 235 - 235
Balance at 30 September 2016 213,441 7,498 207,520 428,459
Condensed Consolidated statement of cash flows
For the six months ended 30 September 2016
Unaudited interim Unaudited interim Audited results for
results for the six results for the six the year ended 31
months ended 30 months ended 30 March 2016
September 2016 September 2015 (R'000)
(R'000) (R'000)
Cash flows from operating activities 78,870 118,697 207,731
Cash generated from operations 98,330 129,092 239,590
Net Finance expense (11,284) (7,287) (18,697)
Income tax paid (8,176) (3,108) (13,162)
Cash flows from investing activities (34,053) (144,969) (176,061)
Purchase of property, plant and equipment (48,890) (138,518) (169,644)
Proceeds from sale of Property, plant and equipment 6,366 1,559 1,023
Rehabilitation - (4,698) -
Proceeds from / (Purchase of) financial assets 8,471 (3,312) (7,440)
Cash flows from financing activities (42,227) 52,454 43,578
Movements in interest bearing borrowings (32,960) 52,454 (8,113)
Dividends paid (9,552) - -
Proceeds from shares issued 285 - 51,691
Net increase in cash and cash equivalents 2,590 26,182 75,248
Cash and cash equivalents at beginning of year 85,398 10,150 10,150
Cash and cash equivalents at end of year 87,988 36,331 85,398
Wescoal Holdings Limited
Segmental Analysis
For the six months ended 30 September 2016
Trading Mining Other Total
(R'000) (R'000) (R'000) (R'000)
30 September 2016
Total segment revenue 557,629 496,026 2,861 1,056,516
Inter-segment revenue - (14,452) (2,622) (17,074)
External revenues 557,629 481,574 239 1,039,442
EBITDA 32,152 115,702 (8,533) 139,321
Operating Profit/(loss) 26,435 83,141 (8,603) 100,973
30 September 2015
Total segment revenue 533,060 238,348 958 772,366
Inter-segment revenue - (13,530) (698) (14,228)
External revenues 533,060 224,818 260 758,138
EBITDA 28,908 11,692 (1,239) 39,361
Operating Profit/(loss) 22,547 (2,668) (1,328) 18,551
Operations review
Wescoal continues to outperform the norm amid challenging local and global market conditions.
Consistency in efficient operations following the ramp up in production at Elandspruit Colliery
enabled a 167% increase in ROM production volume to 1.6 million tons (2015: 0.6 million tons).
The long term Coal Supply Agreement with Eskom and recently secured export agreements de-risk
and diversify revenue streams.
Mining division
Wescoal regards the safety of employees and care for the environment and host communities as a
significant part of its key responsibilities and operational imperatives. The mining division had no
reportable accidents during the period and improved the LTIFR from 1.35 to 0.21. Wescoal and its
entire workforce strive towards zero injuries or environmental incidents. Relevant safety controls
and related compliance monitoring measures have been expanded at the operations. The division’s
community programmes are being reviewed in consultation with stakeholders to ensure they meet
the needs of our host communities.
Elandspruit colliery produced 1.3 million ROM tons during this period, compared with 0.3 million
tons during the start-up phase in 2015. The mine is now at steady state. Increased efficiencies and
optimisation projects at the nearby processing plant have been completed. Additional plant capacity
was brought on stream to increase total crushing capacity to 220 000 tons and beneficiation capacity
to 180 000 tons per month. The recently signed long term Eskom contract will ensure continuous
sales volumes from the plant.
Intibane produced 0.3 million ROM tons during this period to meet local sales demand secured in
the absence of an Eskom off-take agreement. It is ramping up production to match requirements of
the recently announced off-take agreements secured by Wescoal.
Khanyisa colliery was granted a 20 year Water Usage Licence by the Department of Water &
Sanitation. Additional regulatory consents remain pending from the Department of Mineral
Resources before mining activities can commence.
The mining division revenue of R496.0 million (2015: R238.3 million) realised gross profit of R123.5
million (2015: R35.1 million). Sales were positively impacted by short-term coal supply contracts
from Elandspruit and Intibane. Eskom sales during the period totalled 724 000 tons compared to 362
000 tons during the Prior Period. Total coal sales from the mining division were approximately 1.3
million tons during the Period (2015: 0.7 million tons).
Trading division
Wescoal’s trading division continued to perform well in a difficult business environment, delivering a
solid first half performance. Sales totalled 598 000 tons during the Period (2015: 550 000 tons). The
8.7% increase in sales tonnage contributed towards the 11.4% increase in EBITDA to R32.2 million
(2015: R28.9 million).
The focus for the division remains streamlining the business and creating a more robust operating
model. The close working relationship with the mining division has created operational flexibility and
optionality for both divisions.
Financial overview
The solid performance from the mining division on the back of strong production from Elandspruit
has seen Group Revenue increasing by 37.1% to R1 039.4 million (2015: R758.1 million).
Gross profit margins for the Group have improved significantly from 12.8% in 2015 to 18.1% for the
period under review while the operating cost base has been contained despite the significant
increase in mining production resulting in an improved Group operating profit margin of 10% (2015:
2%). The improvement in margins is largely driven by the mining division which achieved a gross
profit margin of 24.9% (2015: 14.7%) and an operating profit margin of 16.8% (2015: 1.1% loss).
Headline earnings per ordinary share increased to 27.8c compared to 5.1c for the Prior Period, with
net profit after tax having increased to R62.0 million from R9.8 million in 2015.
The improved profitability translated into strong cash generation, with R98.3 million in cash
generated from operations. Cash was mainly deployed to fund on-going capital expenditure (R48.9
million), reduce interest bearing debt (R33.0 million) and to reward shareholders with dividend
payments.
The Group’s improved balance sheet strength is reflected in its gearing ratio of 21.7% compared to
45.3% for the Prior Period and a net asset value per share of 190.4c compared to 171.3c at 31 March
2016.
Prospects
Wescoal has successfully operationalised Elandspruit colliery and implemented its planned de-risking
and de-bottlenecking projects. The Intibane colliery was effectively operationalised and significant
progress was made in augmenting the Khanyisa resource base.
Improvement projects at Elandspruit will continue in order to maximise value from this complex.
These projects include establishing a small underground mining operation at a minimal capital cost
and increasing overall capacity at the Processing Plant through modular expansions.
Optimisation and cost reduction initiatives in the trading division have resulted in the closure of the
Port Elizabeth business unit and downsizing of other business units. These initiatives have
streamlined the Company and contributed to improved earnings from the trading division. This work
is expected to be complete by the financial year end and will result in a more robust and simplified
trading business.
Significant progress has been made in concluding sales contracts – a five year Eskom coal supply
contract supplying some 7.5 million tons over a 5 year period has been signed and export contracts
for approximately 1 million tons per annum over the next three years have also been concluded.
Wescoal is focussed on acquiring additional resources and strategic interests in key logistic
infrastructure. These initiatives support Wescoal’s 8 million ton per annum of ROM aspirations and
its revenue diversification strategy. Wescoal will also continue to seek value in the coal export
market in a measured fashion. An immediate priority is to conclude the BEE transaction which will
see Wescoal meeting Eskom’s BEE ownership requirements and an injection of new capital into the
business.
Planning and executing projects in a conservative, risk-based manner will continue to form the basis
on which Wescoal will manage and realise value from growth options. Operationally, the Elandspruit
complex continues to deliver on its promise and will continue to be a core contributor to the Group’s
ongoing financial performance.
Resources and reserves statement
The most recent Competent Persons Report, issued by DS Coetzee (PhD Geology, Pr. Sci. Nat.:
400136/00) in partial compliance with SAMREC was published in full on the Wescoal website in May
2016 and we confirm that with the release of our Interim results there are no changes to the report.
The most recent report can be found on our website: www.wescoal.com
Dividends
Two dividend tranches were declared during the period:
- Final dividend of R10 million for the year ended 31 March 2016
- Special dividend of R10 million was declared during September 2016
Basis of preparation
The unaudited condensed consolidated interim financial information for the six months ended 30
September 2016 has been prepared in accordance with IAS 34, "Interim Financial Reporting", the
Companies Act, No 71 of 2008, and the Listings Requirements of the JSE Limited.
The accounting policies adopted are consistent with those applied in the annual financial statements
for the year ended 31 March 2016. This report was compiled under the supervision of the Financial
Director, Bothwell Mazarura CA (SA). The condensed consolidated interim financial information does
not include all the information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group's annual financial statements as at 31 March 2016,
which were prepared in accordance with International Financial Reporting Standards ("IFRS").
The directors are of the opinion that the Group has adequate resources to continue in operation for
the foreseeable future and, accordingly, the unaudited condensed consolidated interim financial
results have been prepared on a going-concern basis.
By order of the Board
Wescoal Holdings Limited
1 November 2016
Sponsor
Nedbank Corporate and Investment Banking
Investor Relations enquiries, Singular IR Jacques de Bie (082 691 5384).
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