Wrap Text
Unaudited condensed interim results for the six months ended 30 September 2014
Wescoal Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/006913/06)
(JSE code: WSL ISIN: ZAE000069639)
("Wescoal" or "the Group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014
FINANCIAL AND OTHER HIGHLIGHTS
- Revenue up 92,8% to R897,8 million (2013: R465,7 million)
- HEPS up 33,3% to 15,2 cents (2013: 11,4 cents)
- Operational EBITDA up 73,2% to R84,3 million (2013: R48,7 million)
- Muhanga coal processing plant acquisition unconditional
- Acquired mining right for Intibane phase 2
- Funding secured for the Elandspruit project
The unaudited interim results for the six months ended 30 September 2014,
with comparative unaudited results for the six months ended 30 September 2013
and the audited results for the year ended 31 March 2014 are presented below:
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
results for results for results
six months six months for the
ended ended year ended
30 September 30 September 31 March
2014 2013 2014
R'000 R'000 R'000
Continuing operations
Revenue 897 791 465 679 1 147 444
Gross profit 120 356 53 867 125 529
Other operating income 412 419 (1 174)
Profit on sale of assets 64 71 273 75 773
Operating costs (72 418) (27 577) (81 259)
Operating profit 48 414 97 982 118 869
Investment income 1 470 202 265
Finance costs (9 927) (3 175) (9 615)
Profit before taxation 39 957 95 009 109 519
Taxation (11 892) (18 301) (22 839)
Profit for the year from
continuing operations 28 065 76 708 86 680
Total comprehensive income 28 065 76 708 86 680
Attributable to:
Owners of the parent 28 065 58 806 69 764
Non-controlling interest - 17 902 16 916
Profit for the period/year 28 065 76 708 86 680
Headline earnings reconciliation:
Net profit for the period/year 28 065 76 708 86 680
Less: Profit on sale of assets (64) (58 651) (60 030)
Headline earnings for the period/year 28 001 18 057 26 650
Ordinary shares in issue (000's)
- Total at period/year end 183 571 157 931 184 771
- Weighted average shares in issue 184 287 157 931 170 067
- Fully diluted weighted average
shares in issue (Note 1) 186 443 160 638 173 484
Basic earnings per ordinary
share (cents): 15.2 37.2 41.0
Fully diluted basic earnings per
ordinary share (cents): 15.1 36.6 40.2
Headline earnings per ordinary
share (cents): 15.2 11.4 15.7
Fully diluted headline earnings per
ordinary share (cents): 15.0 11.2 15.4
Note:
(1) Fully diluted earnings per
share information reflected shows the
potential effect of dilution for
14,8 million options held in terms of
the share incentive trust by the
directors and employees of the Group.
Reconciliation of EBITDA:
Operating profit 48 414 97 982 118 869
Depreciation - included in cost
of sales 29 733 11 159 41 483
Depreciation and amortisation -
included in operating costs 6 208 10 791 4 729
Earnings before interest, taxation,
depreciation and amortisation ("EBITDA") 84 356 119 932 165 081
Profit on sale of assets (64) (71 273) (75 773)
Operational EBITDA 84 292 48 659 89 308
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
results for results for results
six months six months for the
ended ended year ended
30 September 30 September 31 March
2014 2013 2014
R'000 R'000 R'000
ASSETS
Non-current assets 386 204 239 341 355 752
Property, plant and
equipment 135 314 69 246 116 004
Investment property 709 709 709
Investments 9 714 3 199 6 664
Investment in associates - - 19 365
Goodwill and intangible assets 107 882 51 209 111 722
Mineral rights and coal reserves 118 644 113 744 101 118
Other receivables 13 772 - -
Deferred taxation 169 1 234 170
Current assets 397 450 300 114 368 391
Inventories and work in progress 65 662 47 175 60 839
Trade and other receivables 237 088 158 932 255 389
Cash and cash equivalents 94 700 94 007 52 163
Total assets 783 654 539 455 724 143
EQUITY AND LIABILITIES
Total shareholders' funds 288 823 239 196 273 225
Stated capital 161 338 137 092 166 715
Retained earnings 123 676 82 669 103 627
Employee share option reserve 3 809 1 710 3 059
Non-controlling interest - 17 725 (176)
Non-current liabilities 97 337 33 552 96 471
Interest bearing debt 44 923 3 311 57 113
Deferred tax 27 815 7 859 15 076
Rehabilitation provision 24 599 22 382 24 282
Current liabilities 397 494 266 707 354 447
Trade and other payables 209 458 196 536 220 211
Bank overdraft 14 779 4 942 176
Taxation payable 13 232 - 10 268
Interest bearing debt 160 025 65 229 123 792
Total equity and liabilities 783 654 539 455 724 143
Net asset value per share
(cents) 156.72 151.46 147.87
Tangible net asset value per share
(cents) 98.57 119.03 87.41
Condensed consolidated statement of changes in equity
Attributable to owners of the parent
Share-
based
Stated payment Retained
capital reserve earnings
R'000 R'000 R'000
Balance as at 31 March 2013 137 092 1 355 39 050
Shares issued 29 623 - -
Total comprehensive income
for the year - - 69 764
Dividends declared - - (5 187)
Employees share option scheme - 1 704
Balance as at 31 March 2014 166 715 3 059 103 627
Shares issued 21 623 - -
Shares cancelled (27 000) - -
Change in ownership - - (177)
Total comprehensive income
for the year - - 28 064
Dividends declared - - (7 839)
Employees share option scheme - 750 -
Balance at 30 September 2014 161 338 3 809 123 675
Attributable to owners of the parent
Non-
Total controlling Total
R'000 interests Equity
Balance as at 31 March 2013 177 498 (177) 177 321
Shares issued 29 623 - 29 623
Total comprehensive income
for the year 69 764 16 916 86 680
Dividends declared (5 187) (16 916) (22 103)
Employees share option scheme 1 704 - 1 704
Balance as at 31 March 2014 273 402 (177) 273 225
Shares issued 21 623 - 21 623
Shares cancelled (27 000) - (27 000)
Change in ownership (177) 177 -
Total comprehensive income
for the year 28 064 - 28 064
Dividends declared (7 839) - (7 839)
Employees share option scheme 750 - 750
Balance at 30 September 2014 288 823 - 288 823
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
results for results for results
six months six months for the
ended ended year ended
30 September 30 September 31 March
2014 2013 2014
R'000 R'000 R'000
Cash flow from operating activities: 73 881 63 086 29 810
Cash generated by operations 88 301 84 746 47 134
Finance income 1 470 202 265
Finance costs (8 903) (3 175) (7 715)
Tax paid 852 (3 500) (4 687)
Dividends paid (7 839) (15 187) (5 187)
Cash flows from investing activities: (72 713) (53 447) (175 426)
Purchase of property, plant
and equipment (51 342) (5 151) (103 542)
Proceeds from the sale of
property, plant
and equipment 68 59 8 049
Purchase of a business - - (70 784)
Purchase of investment in associate - (5 000)
Purchase of mineral asset and
capitalised development costs (17 526) (128 637) -
Proceeds on disposal of mineral asset - 81 120 -
Purchase of financial asset (3 913) (838) (4 149)
Cash flows from financing activities 26 766 58 056 176 233
Movements in interest bearing debt 24 043 58 610 170 975
Investment in acquisition activities - (554) -
Shares issued 2 723 - 5 258
Total cash, cash equivalents and
bank overdrafts movement for
the period/year 27 934 67 695 30 617
Total cash, cash equivalents and
bank overdrafts at beginning of
the period/ year 51 987 21 370 21 370
Total cash, cash equivalents and
bank overdrafts at end of the period/year 79 921 89 065 51 987
Operations, market and financial review
Wescoal produced an excellent set of results clearly indicating the contribution from
MacPhail that was acquired in November 2013. This acquisition has breathed new life
into the trading division and places the Wescoal group in the unique position of having
a sophisticated trading division servicing the domestic market together with a mining
division.
Highlights for the period include the finalisation of the Intibane phase 2 transaction
and the acquisition of the Muhanga coal processing plant near Middelburg.
Group revenues increased by 92,8% to R897,8 million (2013: R465,7 million), operational
EBITDA of R84,3 million is a significant increase of 73,2% over the corresponding period
(2013: R48,7 million) and headline earnings increased by 55,1% to R28,0 million
(2013: R18,1 million) which in addition, exceeds headline earnings the full financial
year to March 2014.
Mining division
The acquisition of the Intibane phase 2 mining right is a significant achievement in
that it extends the life of this highly profitable operation to the end of 2016 and
negotiations are taking place for a similar acquisition at the Khanyisa mining operation.
The division assumed ownership of the Muhanga coal processing plant on 1 November 2014
albeit that the Elandspruit project has not yet been commissioned. The plant will begin
production on 6 November 2014 for the purpose of supplying the existing customer base
whom source from the operation. Excess run of mine in the market has been acquired for
this purpose and management are excited about the potential contribution from this
project whilst Elandspruit is being established and commissioned. The operation will
be rebranded with no future reference to the Muhanga name as the vendors have retained
the right to the name.
Following the securing of funding from Investec, the only outstanding issue at Elandspruit
is the water used licence. However, the regulatory authorities have been sensitised as to
the impact of the continued delay in the issuing of this. We have been assured of a sharp
focus on the finalisation of this matter.
The division increased production by 5%, however, EBITDA contribution increased by 38,7%
due to the bulk of the volume being delivered from the Intibane colliery. Wescoal Mining
produced 942 291 tons of coal for the six months (2013: 895 185 tons). The division
produced revenues of R296,8 million (2013: R261,7 million) an increase of 13,4%,
operational EBITDA of R67,8 million (2013: R48,9 million) and profit from operations
of R38,0 million (2013: R27,7 million).
Trading division
The division's results emphasise the importance of, and the contribution from the
acquisition of the MacPhail operations. The division has been rebranded as one,
under the banner Wescoal Trading and, with a few exceptions the integration of
the operations is complete. Outstanding matters are scheduled for completion by
the end of the calendar year.
Meaningful comparisons to the corresponding period are not possible due to the
incorporation of the MacPhail operation, save to say that management are more
than satisfied with the MacPhail contribution to overall results with an operational
EBITDA contribution of R20,3 million.
The Trading division sold 625 949 tons for the six months ended 30 September 2014,
a 187% increase compared to the prior period (2013: 217 831) which excludes the
MacPhail acquisition. The division achieved revenues of R601,0 million
(2013: R204,0 million), operational EBITDA of R20,3 million (2013: R3,7 million)
and profit from operations of R14,2 million (2013: R2,9 million).
Financial overview
Revenue from all operations which includes coal mining, processing and trading
reflected an increase of 92,8% to R897,8 million from the comparative financial
period due primarily to the incorporation of the MacPhail acquisitions.
Both divisions performed well resulting in gross profit of R120,4 million
(2013: R53,9 million). Margins increased to 13,4% from 11,6%, an especially
pleasing result when considering the substantial revenue increases.
Operating costs increased to R72,4 million (2013: R27,6 million) due once again
primarily to the incorporation of the MacPhail acquisition and, in addition, the
Intibane Colliery for the full period.
Group operational EBIDTA of R84,3 million (2013: R48,7 million) is an excellent result
leading to profit from operations reaching R48,4 million (2013: R26,7 million). Finance
costs unfortunately showed an expected threefold increase due to the financing of the
MacPhail acquisition and working capital requirements.
Headline earnings and headline earnings per share are respectively 55,7% and 32,9% up
on the comparative period. HEPS has been influenced by the effect of the shares issued
for Wescoal Mining acquiring the remaining 70% of the total issued share capital of
Proudafrique in terms of the first Minoscape transaction as well as the cancellation of
the shares issued in terms of the second Minoscape transaction.
The group's financial position strengthened during the financial period with total shareholders'
funds increasing by 20,8% from the September 2013 results to R288,8 million. The debt equity
ratio increased to 76,1% (2013: 30,1%) due to the MacPhail acquisition, the acquisitions of
Elandspruit Properties, Proudafrique shares and the mining infrastructure at the Intibane Colliery.
Successful acquisition of remaining 70% shareholding in Proudafrique Trading 147 (Pty) Ltd
On 14 July 2014, Wescoal Mining successfully acquired the remaining 70% shareholding in
Proudafrique Trading 147 (Pty) Ltd for R25,6 million and a royalty fee of R3,50 per ton
of saleable coal mined at the Elandspruit Mining area.
Acquisition of Muhanga Coal Processing Plant
In June 2014, Wescoal announced the intention to acquire the Muhanga coal processing plant.
The acquisition gives Wescoal immediate access to a fully-fledged beneficiation asset that
is currently operational, has all the necessary regulatory approvals and extensive
infrastructure to allow for a multi-product operation whilst regulatory approvals are
awaited for the Elandspruit site.
The plant comprises inter alia Portion 6 of the farm Goedenhoop 315 JS the Access Servitude,
the coal washing plant situated thereon and the National Environmental Management Act
("NEMA") authorisation and those provisions of the Muhanga Water Use Licence and the
assumed liabilities being inter alia the environmental liabilities and rehabilitation
obligation as defined in the Sale of Asset Agreement.
The total purchase price was R42,5 million payable upon over a period of time as described
in the SENS announcement dated 24 June 2014. All conditions of the purchase were met on
10 October 2014.
Acquisition of a Mining Right for Intibane Phase 2
In August 2014, Wescoal announced the acquisition of a mining right adjacent to the
Intibane Colliery which extends the life of Intibane by a further 2,25 million tons
and life of mine to the end of 2016. The current Intibane mine infrastructure will
be used to mine the reserve.
"The Mining Area" comprises the area described as Portion 2 of the farm Vlakvarkfontein
213 IR measuring 170,1362 hectares in extent, situated in the Magisterial District of
Delmas in the Mpumalanga province.
"The Mining Right" means the right to mine for coal in, on and under the Mining Area,
held by Mintirho with reference number MP30/5/1/2/2/476MR to be registered in the
Mining Titles Office in respect of coal in, on and under the Mining Area, which
Mining Right is to be transferred from Mintirho to Wescoal Mining.
The mining right was acquired by Wescoal for a cash payment of R7,98 million
inclusive of VAT.
Funding secured with Investec Bank Limited for Elandspruit
On 30 October 2014, Wescoal concluded a financing facility with Investec Bank Limited,
acting through its Corporate and Institutional Banking division ("Investec"), for a
R180 million five-year term loan and a R20 million five-year working capital facility
subject to fulfilment of conditions precedent customary for a financing of this
nature. R70 million will be used to retire the current Investec term facility and
R110 million will be used for commissioning of the Elandspruit project, including
the acquisition of the Muhunga plant, mine operational infrastructure, surface rights
and production start-up costs. The working capital facility of R20 million is
available for general purposes.
Prospects
There is immense excitement with regard to production starting at Elandspruit early
in 2015 that secures a life of mine at this operation in excess of 15 years. Coupled
with production at the Muhanga coal processing plant, Wescoal will be in a position
to service existing and potential customers immediately as well as derive earnings
from this acquisition.
There is a probability that Khanyisa's life of mine can be further extended into
2017 by acquiring adjacent mineral rights with far-reaching effect on results
going forward. Wescoal management will inform shareholders as these negations progress.
With the integration of MacPhail into Wescoal Trading, we believe the division will
go from strength to strength and we aim for even greater customer diversification.
Wescoal management will continue to build on the base of the trading division servicing
the domestic market together with a mining division - a combination which warrants that
Wescoal has sufficient product and diversity to ensure sustainability into the future.
Marketing efforts have ensured brand recognition and visibility and have resulted in
greater sales and this marketing drive is set to continue.
Segment analysis
The analysis below details the contribution of the two main divisions within the Group:
R'000
30 September 2014
Statement of comprehensive income Trading Mining Other Total
Total segment
Revenue 601 004 297 890 - 898 894
Inter-segment revenue - 1 103 - 1 103
External revenues 601 004 296 787 - 897 791
Profit from operations 14 019 38 095 (3 764) 48 350
Operational EBITDA 20 141 67 828 (3 677) 84 292
R'000
30 September 2013
Statement of comprehensive income Trading Mining Other Total
Total segment revenue 203 986 261 693 65 627 531 306
Inter-segment revenue - - 65 627 65 627
External revenues 203 986 261 693 - 465 679
Profit from operations 2 894 27 682 (3 925) 26 651
Operational EBITDA 3 649 48 874 (3 864) 48 659
Note:
(1) Profit from operations excludes profit or losses on the sale of property, plant,
equipment, mineral assets, finance income and finance costs.
(2) Operational EBITDA excludes profit or losses on sale of assets.
Resources and reserves statement
The resources and reserves statement below is an extract from the full SAMREC
compliant report issued by DS Coetzee (PhD Geology, Pr. Sci. Nat.: 400136/00).
The report covers the new order mining right at the following operating collieries
and prospects:
- Khanyisa Colliery (including Sarie Marais) (Mining Right number MP30/5/1/2/2/107MR)
covering portions 96, 97 and 103 of the farm Heuwelfontein 215 IR;
- Intibane Colliery (Mining Right number MP30/5/1/1/2/483MR) covering portion 16
of the farm Vlakvarkfontein 213 IR;
- Elandspruit Prospect (Mining Right number MP30/1/1/2/10035MR) covering portions
29, 30, 32, 33, 34, 36 and 40 of the farm Elandspruit 291 JS;
- Silverbank Prospect (Mining Right number MP30/1/1/2/10037MR) covering the entire
farm Silverbank 611 IR, excluding portions 1, 10, 12 and 14; and
- Verblyden Prospect (Mining Right number MP30/1/1/2/10036MR) covering the entire
farm Verblyden 387 IS, excluding portions 18 and 35.
The water use licences for Khanyisa Colliery (WUL 04/B20F/ABGJ/1507) and Intibane
Colliery (WUL 04/B20E/AGJ/2149) have been reviewed. A water use licence for Elandspruit
has been applied for, but is still pending.
The information contained in the table below is an update to the geological information
in the Competent Person's Report ("CPR") dated April 2014. The full CPR as at March 2014
will be published with the Integrated Annual Report and will be made available on the
Wescoal website.
Area Seam GTIS Reconnais- MTIS(1) ROM(2)
sance
Khanyisa 4 Seam 0.02 0.02 0.02
2 Seam OC 0.09 0.09 0.08
2 Seam UG 0.60 0.36 0.34
2 Seam PP 0.43 0.39 0.19
Sub-total 1.15 0.86 0.63
Intibane 4 Seam 0.01 0.01 0.01
2 Seam 0.81 0.73 0.69
Sub-total 0.82 0.74 0.70
Elandspruit 4L Seam 2.96 2.66 2.53
3 Seam 1.28 1.15 1.09
2U Seam 8.78 7.90 7.51
2L Seam 11.17 10.05 9.55
1 Seam 15.98 14.38 13.66
Sub-total 40.17 36.15 34.35
Silverbank 2 Seam 281.00 67.45
Verblyden 4 Seam 54.30 13.03
Total 377.44 80.48 37.75 35.67
Black economic empowerment
Waterberg Portion Property Investments Proprietary Limited ("WPP") headed by
Mr Robinson Ramaite and other BEE shareholders hold 31,59% of the issued share
capital of Wescoal Holdings Limited. WPP is a BEE company operating in the minerals
and energy space.
Corporate governance
The Wescoal Board of Directors continues to be mindful and cognisant that corporate
governance is essential to protect the interests of all stakeholders, and remains
committed to compliance with legal requirements and sound corporate governance
principles. The Group subscribes to and is in the process of implementing where
applicable, the principal recommendations of the King III Code of Corporate Governance.
Directorate and secretary
The following changes took place during the six months:
- P Janse van Rensburg - resigned as Chief Financial Officer on 17 April 2014 with
effect from the 30 June 2014;
- M du Plessis - appointed as Acting Chief Financial Officer on 6 May 2014 with
effect from 1 July 2014. Morne has now been appointed as Chief Financial Officer; and
- W Khumalo - resigned as an executive director with effect from 30 November 2014.
The board wishes to thank Piet as well as Wiseman for the valuable contribution
made to the company, and wishes them all the best in future endeavours.
Dividends
No dividends have been declared for the interim period.
Basis of preparation
The unaudited condensed consolidated interim financial information for the six months
ended 30 September 2014 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 2014, except for these standards that became effective
during the reporting period. The adoption of the standards had no effect on the results.
This report was compiled under the supervision of the Acting Financial Director,
Morne du Plessis 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
2014, which have been 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 condensed consolidated interim
financial results have been prepared on a going-concern basis.
By order of the board
29 October 2014
MR Ramaite
Chairman
AR Boje
Chief Executive Officer
CORPORATE INFORMATION
Non-executive chairman:
MR Ramaite
Lead independent director:
DMT van Gaalen
Independent non-executive directors
JG Pansegrouw
MH Mathe
KM Maroga
Executive directors:
AR Boje
W Khumalo
M du Plessis
Registration number:
2005/006913/06
Registered address:
Unit A3 Isando Business Park
Corner of Gewel and Hulley Road
Isando
1600
Postal address:
PO Box 1962
Edenvale
1610
Company secretary:
I de Wet
Telephone:
011 570 5800
Facsimile:
011 570 5848
Transfer secretaries:
Computershare Investor Services (Pty) Limited
Sponsor:
Exchange Sponsors (2008) (Pty) Limited
Website:
www.wescoal.com
Date: 04/11/2014 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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