Wrap Text
WSL - Wescoal Holdings Limited - Condensed consolidated audited results for the
year ended 31 March 2011
Wescoal Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/006913/06)
(JSE code: WSL ISIN: ZAE000069639)
("Wescoal" or "the group")
CONDENSED CONSOLIDATED AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2011
The audited results for the year ended 31 March 2011, with comparative audited
results for the year ended 31 March 2010 are presented.
Condensed consolidated statement of comprehensive income
Audited Audited
results for the results for
year ended the year
31 March ended
2011 31 March
R`000 2010
R`000
CONTINUING OPERATIONS
Revenue 557 614 353 900
Gross profit 25 731 58 511
Other operating income 644 332
Operating costs (35 232) (29 205)
(Loss)/Profit from operations (8 857) 29 638
Depreciation (3 438) (1 946)
Amortisation (9 744) (2 323)
(Loss)/Earnings before interest, tax (22 039) 25 370
and other costs
Profit on sale of assets 90 2 917
Impairment of assets (4 776) -
Investment revenue 175 1 456
Finance costs (2 655) (795)
(Loss)/Profit before taxation (29 205) 28 948
Taxation 12 158 (2 936)
(Loss)/Profit for the year from (17 047) 26 012
continuing operations
DISCONTINUED OPERATIONS (26 714) (20 304)
Loss after tax from discontinued
operations
(Loss)/Profit for the year from all (43 761) 5 708
operations
Attributable to:
Owners of the parent (43 617) 6 672
Non-controlling interest (144) (964)
(43 761) 5 708
(43 761) 5 708
Headline earnings reconciliation:
(Loss)/Profit for the year for all
operations
Less: Profit on sale of assets (501) (2 566)
Plus: Impairment of assets 4 776 2 140
Plus: Minority interest 144 964
Headline (loss)/profit for the year (39 342) 6 246
Continued operations - (Loss)/Profit (12 218) 24 792
Discontinued operations - (Loss) (27 124) (18 546)
Ordinary shares in issue (000`s)
-Total at period end 157 931 145 931
-Weighted average ordinary shares in 150 271 145 931
issue
-Fully diluted weighted average 151 931 146 314
ordinary shares in issue (Note 1)
Basic earnings per ordinary share
(cents):
(Loss)/Profit from continuing (11.2) 18.5
operations
Loss from discontinued operations (17.8) (13.9)
(Loss)/Profit attributable to (29.0) 4.6
ordinary owners
Fully diluted earnings per ordinary
share (cents):
(Loss)/Profit from continuing (11.1) 18.5
operations
Loss from discontinued operations (17.6) (13.9)
(Loss)/Profit attributable to (28.7) 4.6
ordinary owners
Headline earnings per
ordinary share (cents):
(Loss)/Profit from continuing (8.1) 17.0
operations
Loss from discontinued operations (18.1) (12.7)
(Loss)/Profit attributable to (26.2) 4.3
ordinary owners
Fully diluted headline earnings per
ordinary share (cents):
(Loss)/Profit from continuing (8.0) 16.9
operations
Loss from discontinued operations (17.9) (12.6)
(Loss)/Profit attributable to (25.9) 4.3
ordinary owners
Note:
1 Fully diluted earnings per share information is reflected showing the
potential effect of dilution for 8.87 million options held in terms of the
share incentive trust by the directors and employees to subscribe for new
shares in Wescoal.
Condensed consolidated statement of financial position
Audited results Audited
for the year results for
ended the year
31 March ended
2011 31 March
R`000 2010
R`000
ASSETS
Non-current assets 144 919 128 670
Property, plant and equipment 62 140 49 557
Investment property 709 709
Intangible assets 16 871 19 743
Goodwill 49 737 54 513
Deferred taxation 15 462 4 148
Current assets 121 602 116 454
Inventories and work in progress 13 032 37 449
Trade and other receivables 77 230 67 624
Cash and cash equivalents 31 340 11 381
Non-current assets held for sale 2 079 3 058
TOTAL ASSETS 268 600 248 182
EQUITY AND LIABILITIES
Total equity 136 632 166 654
Equity attributable to owners of the 136 809 168 188
parent
Non-controlling interest (177) (1 534)
Non-current liabilities 22 700 10 148
Instalment sale agreements 19 233 8 106
Rehabilitation provision 3 368 716
Deferred tax 99 1 326
Current liabilities 109 268 71 380
Trade and other payables 96 737 66 869
Current portion of interest bearing 12 531 4 511
debt
TOTAL EQUITY AND LIABILITIES 286 600 248 182
Net asset value per share (cents) 86.51 114.20
Tangible net asset value per share 44.34 63.32
(cents)
Condensed consolidated statement of changes in equity
Attributable to owners of the
parent
Share Share Retain Change Share Total Non- Total
Capital Premium ed in optio R`000 Control Equity
R`000 R`000 Earnin Owners ns ling
gs hip reser Interes
R`000 ves ts
R`000
Balance at 1 146 123 704 44 033 168
April 2010 - 305 188 (1 534) 166 654
Shares 21 21 921 - - - 21 - 21 942
issued 942
Treasury (9) (8 373) - - - (8 - (8 382)
shares 382)
Capital - (318) - - - (318) - (318)
raising
costs
Share based - - - 498
payment - 498 - 498
reserve
Change in - - - (1 - (1 1 501 -
ownership 501) 501)
Total - - (43
comprehensiv 618) (43
e income for - 618) (144) (43
the year 762)
Balance as 158 136 934 415 136
at 31 March (1 803 809 (177) 136 632
2011 501)
Condensed Consolidated Cash Flow Statements
Audited results Audited
for the year results for
ended the year ended
31 March 2011 31 March 2010
R`000 R`000
Net cash from operating (30 493) 22 641
activities before
changes in working
capital
Change in working 42 600 (33 152)
capital
Net cash from operating 12 107 (10 511)
activities after
changes in working
capital
Investing activities (24 857) (41 007)
Financing activities 32 709 6 262
Net increase in cash 19 959 (45 256)
and cash equivalents
Cash and cash 11 381 56 637
equivalents at
beginning of year
Cash and cash 31 340 11 381
equivalents at end of
year
Commentary
Operations, market and financial impacts
The poor results are predominantly due to issues that arose in the quarter ended
31 March 2011 resulting in a board decision to account for them in the following
manner:
* The write off of all mining costs totaling R29,3 million incurred at the
Sutha Civils (Pty) Limited. ("Sutha") operation at Khanyisa Colliery;
* Accelerated write off of R7,5 million of mine establishment costs and
mining in progress; and
* Impairment of goodwill of R4,8 million in Chandler Coal (Pty) Limited
("Chandler Coal").
In addition to these write offs, the reduced production and increased costs
relating to flooding accelerated losses especially at the Blesboklaagte washing
plant that incurred an operating loss of R22, 6 million.
To date, no action has been launched by Sutha to substantiate and demand the
money, which they very publicly claimed was due to them. Wescoal did however
approach the court in March 2011 to interdict Sutha from continuing to make
unsubstantiated and derogatory statements to the media. An interim order was
granted and should be made final during July 2011.
Whilst legal opinion suggests any potential claim has a limited chance of
success, provisions have been made for this eventuality.
Mining Division
The mining division achieved a revenue of R242,8 million on the back of a mined
tonnage of 967,000 and supply to Eskom of 885,000 tons of coal. Profits were
severely affected by the write offs resulting in an operating loss of R10,7
million and a headline loss of R36.1 million for the division. Meaningful
comparisons are not possible as the prior year consisted of only two operating
months at the major contributor to the division, Khanyisa Colliery.
Khanyisa Colliery regained full production during April 2011 and the
Blesboklaagte washing operation was closed on 31 March 2011 with the division`s
focus now to maximize product supply to Eskom and Municipal power generators.
Mining methods have been changed to prevent a reoccurrence of the problems
caused by excessive rainfall during the quarter ended 31 March 2011 and
management is confident of achieving stated targets of 1, 4 million tons total
tonnage supplied for the 2011/2012 financial year.
Trading Division
A positive result was generated from the division with both volumes and revenue
up 15% on the last financial year and the division positively contributing at
operating profit level, however the impairment of goodwill in Chandler Coal
relating to the Express Coal investment, affected headline earnings.
Subsequent to the reporting period, producers implemented further price
increases and the API#4 export price remains in excess of US$110 per ton.
Product shortages are forecast as some producers are once again focusing on the
export market and others have dwindling reserves in both quality and quantity.
Increased demand from the manufacturing sector is still being experienced
indicating further improvements in volumes going forward. Management is however
increasing focused on margin improvement and cost reductions.
Financial review
The following operations are reported on as discontinued operations in the
consolidated statement of comprehensive income:
- Wescoal Mineral Recoveries` briquetting plant; and
- Wescoal Mining`s (Blesboklaagte) beneficiation plant.
These two operations contributed R26.7 million to the attributable loss of R43.8
million of the group for the year under review. The briquetting plant was sold
during the year and the sale of the Blesboklaagte plant is currently being
finalized.
The loss for the year from continuing operations of R17 million includes an
impairment of R4.8m of goodwill in the trading division. Management felt it
prudent to provide for this impairment due to reduced margins being achieved.
Overall the group achieved a revenue increase of R204 million (58%) due mainly
to the incorporation of the Khanyisa operation for the full period under review.
For the first time, since the decrease in coal prices started in the 2008/2009
financial year, the group experienced price increases in the latter part of the
year under review. This will have a positive effect on revenue from the trading
division in the new financial year. Gross profit decreased by R32.8m due to
reduced trading margins, the write off of mining costs incurred by the Sutha
operation, reduced production and increased costs due to flooding.
Overheads increased by R6 million (21%) due to the establishment of a regional
office for the mining division, acquisition costs incurred and normal
inflationary pressure.
Net finance costs increased by R3.1 million due the demand from the mining
division for additional materials handling equipment. Management identified
material cost savings in this area and decided to purchase new equipment rather
than to continue sub-contacting resulting in the debt from financing of the new
equipment increasing by R19 million
Segment analysis
The analysis below, details the contribution of the two main divisions within
the group:
Income statement Trading Mining Total
Revenue from continued operations 314 745 242 869 557 614
Loss from continued operations 1 849 (10 706) (8 857)
Income statement Trading Mining Total
272 532 81 368 353 900
Revenue from continued operations 8 901 20 737 29 638
Profit from continued operations
Prospects
Whilst the write offs and other actions mentioned in the review above were
severe, the losses at Blesboklaagte will not reoccur and the potential profit
from the sale of the plant should be realized in the new financial year.
In addition the group balance sheet has been cleared of potential pitfalls that
could affect earnings going forward.
The termination of the Elandspruit 291JS transaction was disappointing but
nevertheless necessary. Following an intensive due diligence, it was decided
that sufficient value was not present for the transaction to proceed and the
associated risks were not warranted.
The group continues to seek opportunities to obtain coal resources and is
currently evaluating some options on this front. An application for a mining
right on the Vlakvarkfontein 213 IR reserve near Khanyisa has been submitted
and, on granting, will extend the life of Khanyisa by 12 months or more.
The board is positive that the measures taken and the renewed focus by both the
trading and mining divisions will return the group to the expected
profitability.
Black Economic Empowerment.
Wescoal`s black shareholding currently stands at 34%. Wescoal remains strongly
committed to BEE and is constantly striving to increase black ownership of the
group. 75% of Wescoal`s workforce is black and two Non-executive Directors on
the company`s board are black.
Corporate Governance
The group subscribes to and is in the process of implementing where applicable,
the principal recommendations of the King III Code of Corporate Governance.
Dividends
No dividend has been declared. The Board reviews the dividend policy on an
ongoing basis and use new projects, possible acquisitions and the group`s
financial position as indicators in this decision taking process.
Basis of preparation
The annual financial statements for the year ended 31 March 2011 are prepared in
accordance with International Financial Reporting Standards, and in a manner
required by the Companies Act, and incorporates responsible disclosure in line
with the accounting philosophy of the group. The financial statements are based
on appropriate accounting policies consistently applied and supported by
responsible and prudent judgments and estimates.
Audit opinion
The group`s auditors, Middel & Partners have audited the financial information
in terms of Rule 3.18 of the listing requirements of the JSE. Their unqualified
audit opinion is available for inspection at Wescoal`s offices.
By order of the Board
29 June 2011
M.R. Ramaite A.R. Boje
Chairman Chief Executive Officer
CORPORATE INFORMATION
Non-Executive directors: MR Ramaite
JG Pansegrouw
WN Khumalo
DMT van Gaalen
Executive directors: AR Boje
P Janse van Rensburg
Registration number: 2005/006913/06
Registered address: 228 Voortrekker Street
Krugersdorp
1740
Postal address: PO Box 133
Krugersdorp
1740
Company secretary: CIS Company Secretaries (Pty) Ltd
Telephone: 011 - 954 2721
Facsimile: 011 - 954 6737
Transfer secretaries: Computershare Investor Services
(Pty) Limited
Sponsor: Exchange Sponsors (2008) (Pty)
Limited
Date: 29/06/2011 13:27:01 Supplied by www.sharenet.co.za
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