Wrap Text
Reviewed condensed interim consolidated results for the six months ended 30 September 2015
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 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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