Wrap Text
Unaudited condensed interim financial results for the half year ended 30 June 2016
HWANGE COLLIERY COMPANY LIMITED
ZSE Share Code: HCCL.ZW0009011934
JSE Share Code: HWA ISIN: ZW0009011934
LSE Share Code: HWA ISIN: ZW0009011934
Unaudited condensed interim financial results for the half year ended 30 June 2016
CHAIRMAN’S STATEMENT
On behalf of the Board of Directors, I present the unaudited condensed financial results of Hwange
Colliery Company Limited for the half year ended 30 June 2016.
FINANCIAL RESULTS
The sales revenue for the six (6) months under review was US$24.5 million compared to the US$35.3
million revenue recorded during the same period last year. The operating loss was US$25.9 million
compared to an operating loss of US$48.0 million for the comparative period last year. The Company
incurred a loss after taxation of US$22.7 million compared to the US$44.1 million loss recorded for the
same period in 2015.
There was a notable decrease in administrative costs resultant from the cost containment measures
adopted by the Company. Finance costs for the period amounted to US$1.8 million compared to US$1.1
million for the same period last year. The burden of servicing debts continued to strain the Company`s
cash flows thereby presenting working capital challenges to the Company.
Total non-current assets decreased by 5% from US$172.5 million to US$163.2 million.
PERFORMANCE
The company’s performance over the last six month fell short of budgetary targets due to low
production levels that were attributable to working capital constraints. Monthly production average was
113,862 tonnes compared to the budgeted monthly production of 340,000 tonnes. Consequently the
company could not meet the market demand occasioned by product stock-outs.
Total sales tonnage was 585,689against a budget of 1,771,820 and an actual of 842 871 for the same
period last year. HCC/HIC coal sales during the period decreased by 35% from 326 075 tonnes to 211
858tonnes. There was a decrease in the sales of coal fines and breeze from 109 110 tonnes to 64 413
tonnes for the comparative periods. Coke sales volume decreased from 7 584tonnes achieved in the first
half of 2015 to 1 040 tonnes for the period under review. This was attributed to the cancellation of toll
coking arrangements.
SCHEME OF ARRANGEMENT
The company is consummating a scheme of arrangement with its creditors in order to present a
structured plan of liquidating amounts owed. The Company was granted leave by the High Court of
Zimbabwe to convene scheme meetings with its Creditors. The scheme is due to be finalised with the
Company’s creditors in the last quarter of this financial year. It is predicted that the Scheme will ensure
that there is a structured plan for paying the Company’s debts.
OUTLOOK
Once the Scheme of Arrangement is achieved, the Company’s outlook is anchored on the following;
Cost reduction
The company is in the process of implementing comprehensive cost reduction initiatives that seek to
return it to profitability in 2017. The cost reduction initiatives are targeted at ensuring that the Company
turns around from the current gross loss to a gross profit on its production. In addition the overhead
structure is being addressed in a manner which should result in the Company achieving a net profit in
2017.The Company enjoys the competitive advantage of naturally differentiated coal because of its high
quality.
The Company is currently only producing thermal and industrial coal. It is imperative and envisaged that
underground operations commence in early 2017. This will not only make the Company benefit from
higher margins in coking coal but will also avail coal for coke production which achieves the highest
margins.
Open Cast Productivity
Open Cast production has been constrained by inadequate working capital. In parallel to the avenues
being explored to secure working capital from financial institutions, the Company has stepped up its
recovery efforts from its Debtors and disposal of coal fines to increase open cast production.
Resuscitation of Underground Mine Operations
The resuscitation of this operation requires approximately US$6.3 million for the refurbishment of a
Continuous Miner and supply of new supporting equipment. The suppliers agreed to be paid a deposit
towards the refurbishment which is expected to take between three (3) and four (4) months. The
Company is engaged in discussions with a financial institution aimed at securing the required deposit.
Coke Production
Once the Scheme of Arrangement is put in place and the Balance Sheet restructuring is completed, it will
make it easier for the Company to raise funding to resuscitate its coke oven battery. Apart from
producing coke, the coke oven battery will also supply coke oven gas to Hwange Power Station which
will substitute expensive diesel for starting up the boilers. The Coke Oven Battery also produces by-
products utilised by Zimchem in its processes.
Zimbabwe Power Company’s Stage 3 Expansion
The expansion of Zimbabwe Power Company’s Stage 3 shall result in increased coal demand where it is
expected that the Company shall supply an additional 200,000 tonnes of coal per month for power
generation purposes. In order to meet this additional demand, HCCL will conduct exploration and mine
development of the Western Areas Concession.
Coal Bed Methane Gas Opportunities
The current concessions as well as the Lubimbi Concessions have a large quantity of coal bed methane
gas deposits. The quantity and quality of these deposits is still to be determined. However, given the
maturity of coal bed methane technology, it is envisaged that the Company will beneficiate the coal bed
methane gas into domestic gas and supply a coal bed methane gas fired power station.
TURNAROUND STRATEGY
Scheme of Arrangement
As indicated above, the starting point of the turnaround strategy is the implementation of a scheme of
arrangement which is at an advanced planning stage.
Balance Sheet Restructuring
It is envisaged that the scheme of arrangement will be implemented at the same time with conversion
of some debts into long term financial instruments. It is planned to convene an Extra Ordinary General
Meeting (EGM) in the next two months at which detailed proposals will be tabled for approval by
shareholders.
Cost Reduction
Cost reduction initiatives have been underway for a while and will continue to be implemented. Current
projections are that the Company will be able to turnaround operations from a gross loss situation to a
gross profit situation in 2017. The cost reduction exercise will also entail a major overhaul of the
Company’s overhead structures, details to be contained in the EGM documents.
Raising Capital
Once the scheme of arrangement and Balance Sheet restructuring are achieved, discussions are already
underway to raise short, medium and long term capital to operate at optimum capacity and to
implement strategies contained in this statement
Increase and Re-Alignment Of
Production
Once the above is put in place, it is imperative that:-
a) The Company produces at optimum capacity.
b) The Company resuscitates production of high margin products being coking coal and coke and also
benefit from coke by product sales.
c) The Company benefits from low hanging fruits, being duff, currently stockpiled, which shall be sold to
generate cash.
Realisation Of Potential
Strategic plans to unearth the Company’s potential are being developed and these include:-
a) Development of Western Areas coal concessions.
b) Development of the coal bed methane opportunity.
c) Explore the potential, if any of converting coal into fuels.
DIRECTORATE
During the period under review, Messrs N. S. Chibhanguza and I. C. Haruperi resigned from the Board of
Directors with effect from 29 February 2016. Mr J. Chininga who was Acting Board Chairman also
resigned from the Board effective 13 May 2016.
The Company as a consequence appointed Mr Wencelaus T. Kutekwatekwa, Mrs Ntombizodwa Masuku
and myself to the Board effective 13 May 2016. I was subsequently elected Board Chairman on the 19th
of May 2016.
The Company acknowledges the contribution made by the three retired Directors and welcomes the
three newly appointed Directors. The Company is particularly grateful for the contribution made by Mr
J. Chininga who acted in the capacity of Managing Director when the Company was going through a
recruitment process and also acted in the capacity of Board Chairman following the resignation of the
immediate past Chairman.
CORPORATE GOVERNANCE
The stewardship of the Company is vested in the Board, which is accountable for the affairs of the
Company. It is the Board’s responsibility to oversee compliance with good corporate governance. As
alluded to in the 2015 half year results of the Company, the board is going through an effectiveness
review process of the company’s Corporate Governance Approach. This review process is still underway
and recommendations coming out of this process will be communicated to shareholders accordingly.
APPRECIATION
Whilst the half year results are disappointing the continued support the Company and Board is getting,
should result in a significant turnaround in 2017, mainly centred on the foregoing outline.
I would like to express my gratitude to my fellow Directors, Management and Staff for their collective
efforts and dedication to Hwange Colliery Company Limited despite all the challenges. I also count on all
the support as we turn around the Company. I also appreciate the support we continue to receive from
our shareholders, customers, creditors and other stakeholders.
W. CHITANDO
CHAIRMAN
18 September 2016
REGISTERED OFFICE
7th Floor, Coal House
17 Nelson Mandela Avenue
P 0 Box 2870, Harare
Zimbabwe
CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the six (6)
months ended 30 June 2016
Note 30 June 2016 USD 30 June 2015 USD 31 December
Unaudited Unaudited 2015 USD
Audited
Revenue 5 24 481 645 35 349 513 67 576 220
Cost of sales (42 783 403 ) (47 591 594) (101 345 965)
Gross loss (18 301 758 ) (12 242 081 ) (33 769 745 )
Other income 218 534 212 560 470 858
Other gains and - (18 452 ) (19 007 )
losses (net)
Marketing costs (292 314 ) (673 169 ) (1 314 953 )
Administration (7 491 862 ) (35 277 577 ) (60 628 370 )
costs
Impairment loss - - (4 465 881 )
Operating loss (25 867 400 ) (47 998 719 ) (99 727 098 )
Finance costs (1 852 830 ) (1 110 496 ) (5 548 984 )
Share of loss from (765 952 ) (110 348 ) (413 134 )
equity accounted
investments
LOSS BEFORE TAX (28 486 182 ) (49 219 563 ) (105 689 216 )
Income tax 6 - 5 113 418 (9 367 557)
LOSS FOR THE (28 486 182 ) (44 106 145 ) (115 056 773 )
PERIOD/ YEAR
Other
comprehensive
income:
Other - - -
comprehensive
income for the
period/year, net
of tax
TOTAL (28 486 182 ) (44 106 145 ) (115 056 773 )
COMPREHENSIVE
LOSS
FOR THE
PERIOD/YEAR
Attributable loss 7.1 (0.16 ) (0.24 ) (0.63)
per share - basic
- diluted 7.2 (0.16 ) (0.24 ) (0.63)
Headline loss per 7.3 (0.16 ) (0.24 ) (0.61 )
share - basic
- diluted 7.3 (0.16 ) (0.24 ) (0.61 )
CONDENSED STATEMENT OF FINANCIAL POSITION as at 30 June 2016
Note 30 June 2016 USD 30 June 2015 USD 31 December
Unaudited Unaudited 2015 USD
Audited
Non-current
assets
Property, plant 8 127 210 600 155 104 414 136 344 524
and equipment
Investment 9 3 700 000 3 700 000 3 700 000
property
Investments 10 15 415 582 16 484 320 16 181 534
accounted for
using the equity
method
Intangible assets 11 1 131 940 1 483 610 1 238 371
Deferred tax asset - 14 480 975 -
Inventories non - 15 009 021 - 15 009 021
current portion
162 467 143 191 253 319 172 473 450
Current assets
Stripping activity 12 4 804 187 8 412 361 4 849 819
asset
Inventories 13 25 470 961 42 156 247 29 389 463
Trade and other 14 30 778 163 27 291 466 31 887 617
receivables
Cash and cash 5 360 488 312 252 502 630
equivalents
61 413 799 78 172 326 66 629 529
Total assets 223 880 942 269 425 645 239 102 979
EQUITY AND
LIABILITIES
Capital and
reserves
Share capital 16 45 962 789 45 962 789 45 962 789
Non-distributable 4 358 468 4 358 468 4 358 468
reserves
Share premium 577 956 577 956 577 956
Revaluation 39 948 518 39 948 518 39 948 518
reserve
Accumulated (197 168 532 ) (97 731 335 ) (168 681 963 )
losses
(106 320 801 ) (6 883 604 ) (77 834 232)
Non-current
liabilities
Lease liability 17.1 2 013 044 15 043 461 3 834 644
Borrowings 18.1 17 237 866 5 990 629 25 824 359
19 250 910 21 034 090 29 659 003
Current liabilities
Lease liability 17.2 19 949 799 6 951 547 17 491 624
Borrowings 18.2 12 589 456 17 187 926 3 960 469
Trade and other 19 256 199 532 219 680 588 241 505 888
payables
Provisions 20 12 157 196 11 051 598 14 265 377
Current tax 10 054 850 403 500 10 054 850
liability
310 950 833 255 275 159 287 278 208
Total equity and 223 880 942 269 425 645 239 102 979
liabilities
CONDENSED STATEMENT OF CASH FLOWS for the six (6) months ended 30 June 2016
Note 30 June 2016 USD 30 June 2015 USD 31 December
Unaudited Unaudited 2015 USD
Audited
Cash generated
from operating
activities
Loss before (28 486 182 ) (49 219 563 ) (105 689 216 )
taxation
Adjustment for 11 820 010 36 510 712 34 072 543
non-cash items
Net effect of 16 523 635 12 569 868 70 035 717
changes in
working capital
Net cash utilised (142 537 ) (138 983 ) (1 580 956)
in operations
Interest paid (28 656 ) (126 274 ) (571 910 )
Net cash utilised (171 193 ) (265 257 ) (2 152 866 )
in operating
activities
Cash flows from
investing
activities
Purchase of (13 443 ) (30 804 938 ) (30 804 938 )
property, plant
and equipment
Net cash utilised (13 443 ) (30 804 938 ) (30 804 938 )
in investing
activities
Cash flows from
financing
activities
Proceeds from - 30 804 938 33 095 739
borrowings
Repayment of (125 000 ) (410 310 ) (433 882 )
borrowings
Net cash (utilised (125 000 ) 30 394 628 32 661 857
in)/generated
from
financing
activities
Net decrease in (309 636 ) (675 567 ) (295 947 )
cash and cash
equivalents
Cash and cash 465 977 761 924 761 924
equivalents at
beginning
of the period/year
Cash and cash 15 156 341 86 357 465 977
equivalents at
end of
period/year
CONDENSED STATEMENT OF CHANGES IN EQUITY for the six (6) months ended 30 June 2016
Share capital Non- Share Revaluation Accumulated Total USD
USD distributab premium reserve USD losses USD
le reserves USD
USD
Balance at 1 45 962 789 4 358 468 577 956 39 948 518 (168 682 350) (77 834 619)
January 2016
Total - - - - (28 486 182) (28 486 182)
comprehensive
loss
for the period
(unaudited)
Balance at 30 45 962 789 4 358 468 577 956 39 948 518 (197 168 532) (106 320 801)
June 2016
(unaudited)
Balances at 30
June 2015
(unaudited) 45
962 789 4 358
468 577 956
39 948 518 (97
731 335) (6
883 604)
Balance at 1 45 962 789 4 358 468 577 956 39 948 518 (53 625 190) 37 222 541
January 2015
Total - - - - (44 106 145) (44 106 145)
comprehensive
loss
for the period
(unaudited)
Balance at 1 45 962 789 4 358 468 577 956 39 948 518 (53 625 190) 37 222 541
January 2015
Total - - - - (115 056 773) (115 056 773)
comprehensive
loss
for the year
(audited)
Balances at 31 45 962 789 4 358 468 577 956 39 948 518 (168 681 963) (77 834 232)
December
2015 (audited)
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS for the six (6) months ended 30 June
2016
1. Nature of operations
Hwange Colliery Company Limited extracts, processes and distributes coal and coal products. The
Company operates a coal mine situated at Hwange and sells mainly within Zimbabwe and elsewhere in
Sub Saharan Africa.
2 Basis of preparation of the condensed financial statements
The condensed interim financial statements for the six months ended 30 June 2016 have been prepared
in accordance with IAS 34, ‘Interim financial reporting’. They do not include all of the information
required for full annual financial statements and should be read in conjunction with the audited annual
financial statements for the year ended 31 December 2015, which have been prepared in accordance
with International Financial Reporting Standards; Companies Act(Chapter 24:03) and the relevant
statutory instruments (SI 33/99 and SI 62/96).
This condensed interim financial information has been reviewed, not audited.
3 Significant accounting policies
The interim financial statements have been prepared in accordance with the accounting policies
adopted in the Company’s most recent annual financial statements for the year ended 31 December
2015.
4 Estimates
In preparing the condensed interim financial statements, the significant judgements made by
management in applying the Company’s accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the audited annual financial statements for the year
ended 31 December 2015.
6 months 6 months 30 June Year to 31 December
30 June 2015 Tonnes 2015
2016
Tonnes
5 Revenue
Coal sales
HCC/HIC 125 544 225 396 503 706
HPS coal 378 321 409 843 887 273
Coal fines and breeze 41 982 45 045 113 421
Total coal sales 545 847 680 284 1 504 400
Coke tonnes 39 842 5 475 53 874
Total sales 585 689 685 759 1 558 274
USD USD USD
Mining 20 460 370 30 333 672 57 966 532
Estates 3 645 564 4 486 687 8 610 557
Medical services 375 711 529 154 999 131
Total 24 481 645 35 349 513 67 576 220
6 months 30 June 6 months 30 June Year to 31 December
2016 2015 Unaudited 2015 Audited
Unaudited
6 Taxation
Current tax - - -
Deferred tax - 5 113 418 9 367 557
- 5 113 418 9 367 557
As at period end, the Company had assessed tax losses amounting to USD 224 567 703 (31 December
2015: USD 208 322 404).The amount of deferred taxation asset recognised in relation to the assessed
loss has been limited to the amount of deferred taxation liabilities due to recurring losses and
unavailability of future taxable temporary differences.
7 Loss per share
7.1 Basic
Basic loss per share is calculated by dividing the loss attributable to shareholders by the weighted
average number of ordinary shares in issue during the period/year.
6 months 30 June 6 months 30 June Year to 31 December
2016 2015 Unaudited 2015 Audited
Unaudited
Loss attributable to (28 486 182 ) (44 106 145 ) (115 056 773 )
shareholders
Weighted average 183 757 366 183 757 366 183 720 699
number of ordinary
shares in issue
Basic loss per share (0.16 ) (0.24 ) (0.6 3)
7.2 Diluted
Loss used to determine (28 486 182 ) (44 106 145 ) (115 056 773 )
diluted loss per share
The weighted average number of ordinary shares for the purpose of diluted loss per share are the same
as the weighted average number of ordinary shares used in the calculation of basic loss per share.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS for the six (6) months ended 30 June
2016
7 Loss per share
6 months 30 June 2016 6 months 30 June 2015 Year to 31 December
Unaudited Unaudited 2015 Audited
7.2 Diluted
Weighted average 183 757 366 183 757 366 183 720 699
number of ordinary
shares
for diluted loss per
share
Diluted loss per share (0.16 ) (0.24 ) (0.63 )
7.3 Headline loss per
share
Headline loss per share
excludes all items of
a capital nature and
represents an after tax
amount. It is calculated
by dividing the
headline
loss shown below by
the number of shares
in issue during the year
Reconciliation
between headline loss
and basic loss:
IAS 33 - Losses (28 486 182) (44 106 145) (115 056 773)
Non - recurring items: (7 307) (25 108 ) (50 463 )
Proceeds on sale of
scrap
Impairment of - - 4 465 881
property, plant and
equipment
Tax effect of the above - - (1 136 970 )
Headline losses (28 493 489 ) (44 131 253 ) (111 778 325 )
Weighted average 183 757 366 183 757 366 183 720 699
number of ordinary
shares in issue:
Headline loss per share (0.16 ) (0.24 ) (0.61)
8 Property, plant and
equipment
Carrying amount at the 136 344 524 129 078 977 129 078 977
beginning
of the period/year
Depreciation charge for
the period/year (8 089
973 ) (6 285 948 ) (16
707 109 )
Impairment - - (4 347
147 )
Carrying amount at the
end of the period/year
127 210 600 155 104
414 136 344 524
Additions 31 425 32 311 385 32 680 228
Disposals (1 075 376 ) - -
Charge to profit or loss - - (4 360 425 )
9 Investment property
Fair value 3 700 000 3 700 000 3 700 000
9.1 The following
amounts relating to
Investment
property have been
recognised in profit or
loss:
Rental income 124 795 136 298 336 303
10 Investment in
equity accounted
investments
Investments in 174 982 335 857 231 148
associates (note 10.1)
Investments in joint 15 240 600 16 148 463 15 950 386
venture (note 10.2)
15 415 582 16 484 320 16 181 534
10.1 Investments in
associates
Carrying amount as at 231 148 446 205 446 205
beginning of
period/year
Share of loss (56 166 ) (110 348 ) (215 057 )
Carrying amount at the 174 982 335 857 231 148
end of the period/year
The Company holds a
49% voting and equity
interest in Clay
Products (Private)
Limited. The Company
also holds a 44% voting
and equity interest in
Zimchem Refineries
(Private) Limited. The
investments are
accounted for using the
equity method.
The financial
information for
Zimchem
Refiners (Private)
Limited was not
available for inclusion
in these financial
statements.
10.2 Investment in
joint venture
Carrying amount as at 15 950 386 16 148 463 16 148 463
1 January
Share of loss (709 786 ) - (198 077 )
Carrying amount at the 15 240 600 16 148 463 15 950 386
end of the period/year
Hwange Coal
Gasification Company
(Private)
Limited is the only
jointly controlled entity
and the ultimate
ownership interest is
25%. The investment in
the joint venture has
been accounted for
using the equity
method.
11 Intangible assets
Opening carrying 1 238 371 1 590 041 1 590 041
amount
Additions - - 7 705
Impairment losses - - (118 734 )
Amortisation charge (106 431 ) (106 431 ) (240 641 )
Closing carrying 1 131 940 1 483 610 1 238 371
amount
12 Stripping activity
asset
Carrying amount at 1 4 849 819 7 290 468 7 290 468
January
(Charge)/credit to cost
of sales (510 032 ) 109
145 (2 668 474 )
Closing carrying
amount 4 804 187 8
412 361 4 849 819
Pre-stripping costs 464 400 1 012 748 227 825
incurred
13 Inventories
Finished goods
Raw materials 6 683 507 5 039 725 9 430 728
Consumables 1 082 677 - -
Coal and coal fines 15 098 800 34 129 814 16 763 667
Coke 2 605 977 2 986 708 3 195 068
25 470 961 42 156 247 29 389 463
14 Trade and other
receivables
Trade 26 469 495 20 010 166 33 338 281
Allowance for credit (9 751 845 ) (7 743 731 ) (9 751 845 )
losses
16 717 650 12 266 435 23 586 436
Other 14 060 513 15 025 031 8 301 181
30 778 163 27 291 466 31 887 617
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS for the six (6) months ended 30 June
2016
15 Cash and cash equivalents
6 months 6 months 30 June Year to 31 December
30 June 2015 Unaudited 2015 Audited
2016
Unaudited
For the purposes of
statement of cash
flows,
cash and cash
equivalents include
cash on
hand and in banks, net
of outstanding bank
overdrafts as follows:
Bank and cash balances 360 488 312 252 502 630
Bank overdrafts (204 147 ) (225 895 ) (36 653 )
156 341 86 357 465 977
16 Share capital
Authorised
204 000 000 ordinary 51 000 000 51 000 000 51 000 000
shares of USD0.25 each
Issued and fully paid
110 237 432 Ordinary 27 559 358 27 559 358 27 559 358
shares of USD0.25 each
5 925 699 Ordinary 1 514 039 1 514 039 1 514 039
shares issued under
share option scheme
29 073 397 29 073 397 29 073 397
67 557 568 ‘’A’’ 16 889 392 16 889 392 16 889 392
Ordinary shares of
USD0.25 each
45 962 789 45 962 789 45 962 789
17 Lease liability
17.1 Non current
Finance lease liabilities 2 013 044 15 043 461 3 834 644
due after one year
17.2 Current
Finance lease liabilities 19 949 799 6 951 547 17 491 624
due within one year
18 Borrowings
18.1 Non current
Loans due after one 17 237 866 5 990 629 25 824 359
year
18.2 Current
Bank overdraft 204 147 225 895 36 653
Loans payable within 12 385 309 16 962 031 3 923 816
one year
12 589 456 17 187 926 3 960 469
19 Trade and other
payables
Trade 121 801 922 78 944 668 127 836 638
Other 134 397 610 140 735 920 113 669 250
256 199 532 219 680 588 241 505 888
20 Provisions
20.1 Provision for
rehabilitation
At the beginning of the 5 726 693 4 893 360 4 893 360
period/year
Additional provision 499 999 500 000 833 333
made during the
period/year
At the end of the 6 226 692 5 393 360 5 726 693
period/year
20.2 Other provisions
Leave pay and other 5 930 504 5 658 238 8 538 684
provisions
Total provisions 12 157 196 11 051 598 14 265 377
21 Segment reporting
Management currently identifies the Company’s three business units as its operating segments. These
operating segments are monitored by the Company’s Board of Directors and strategic decisions are
made on the basis of adjusted segment operating results.
Segment information for the reporting periods is as follows:
Mining USD Estates USD Medical services Total USD
USD
30 June 2016
Revenue
From external 20 460 390 3 645 564 375 711 24 481 645
customer
From other - 580 713 967 166 1 547 879
segments
Total segment 20 460 370 4 226 277 1 342 877 26 029 524
revenues
Segment (46 092 838 ) (791 099 ) (1 114 782 ) (47 998 719 )
operating loss
Segment assets 253 806 655 7 612 572 8 006 418 269 425 645
Segment liabilities 215 072 830 16 310 785 16 433 718 247 817 333
31 December
2015
Revenue
From external 57 966 532 8 610 557 999 131 67 576 220
customers
From other - 823 559 2 802 723 3 626 282
segments
Total segment 57 966 532 9 434 116 3 801 854 71 202 502
revenues
Segment (99 754 470 ) 24 295 3 077 (99 727 09)
operating
(loss)/profit
22 Going concern
In view of the above, the Directors have assessed the ability of the Company to continue to operate as a
going concern and are of the view that the preparation of these interim financial statements on a going
concern basis is appropriate as supported by the following plans which are intended to address these
challenges:
22.1 Gross loss and net loss for the period
The Company incurred a gross loss of USD 18 301 758 (30 June 2015: 12 242 081; 31 December 2015:
USD 33 769 745) and a net loss for the period of USD 28 486 182 (30 June 2015: 44 106 145; 31
December 2015: 115 056 773). This was attributable to a reduction in the production volumes from 879
954 tonnes in 2015 to 683 171 tonnes in 2016 on the backdrop of high fixed overheads associated with
the Company’s operations. The losses were also a result of challenges experienced with the new
equipment commissioned in July 2015 resulting in an increase in depreciation of assets without a
corresponding increase in output.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS for the six (6) months ended 30 June
2016
22.2 Negative equity
As at 30 June 2016 the Company’s total liabilities exceeded total assets resulting in a negative equity
position of USD 106 320 801 (30 June 2015: USD 6 883 604; 31 December 2015: USD 77 834 232. This
was attributable to recurring losses which eroded the capital and reserves.
22.3 Litigation cases
The Company had litigation cases brought against it during the period. The summary of significant legal
cases for Hwange Colliery Company Limited as at 30 June 2016 are as follows:
USD
Value of cases with writs of execution 3 655 350
Value of cases for which judgement has been 24 269 178
passed against the Company
Estimated value of cases pending judgements at 16 987 709
the courts
Total value of litigation cases 44 912 237
The lawsuits that have been taken against the Company by various creditors including applications,
summons and writs of execution are currently suspended by virtue of a High Court order granted on 1
June 2016. The effect of the court order is to grant the Company leave to convene a scheme meeting of
secured and unsecured creditors of the Company in terms of Section 191(1) of the Companies Act
(Chapter 24:03) (Scheme of arrangement).
22.4 Debt/lease covenants not met
As part of the ZAMCO loan agreement, the Company was obliged to insure all its movable assets and
stocks valued at USD 15 000 000 as part of collateral for the loan of USD 14 868 435. The Company has
not been able to insure these assets due to liquidity constraints.
The Company has been facing challenges in meeting scheduled repayments on loans and leases owing to
liquidity challenges.
22.5 Low machine availability
The Company acquired mining equipment worth USD 12 879 740 which was commissioned in July 2015.
There was sub optimal usage of the equipment due to a combination of factors such as alignment,
equipment design and working capital constraints.
In view of the above, the Directors have assessed the ability of the Company to continue to operate as a
going concern and are of the view that the preparation of these interim financial statements on a going
concern basis is appropriate as supported by the following plans which are intended to address these
challenges:
Balance Sheet restructuring
The government has agreed to restructure short term obligations of USD 87.9 million into long term
financial instruments. This will provide immediate relief to the constrained working capital position. The
Company is still pursuing balance sheet restructuring options, details of which are to be advised in due
course.
Settlement of creditors
The High Court of Zimbabwe granted the Company an Order to convene scheme meetings with its
Creditors on 1 June 2016. In terms of the Court Order, all lawsuits against the Company are temporarily
suspended pending the outcome of the scheme of arrangement. The Creditors will be advised of the
scheme meeting date. The scheme document detailing the structure of the schemeand proposal to
liquidate creditor claims shall also be availed to creditors. Tied to the Scheme of Arrangement, is a wider
business plan aimed at ensuring growth in production and sales. This plan should bring the working
capital position of the Company back to normal levels.
Working capital facilities
The Company is working on securing the following working capital facilities:
a) A prepayment from one of the Company’s major customers through a local bank amounting to
USD 7.5 million for working capital; and
b) A working capital facility with a local bank amounting to USD 3.5 million.
Review of contractor pricing
Management have initiated negotiations with major contractors to reduce charges in line with the
Company’s current business activity and macro-economic conditions. This is expected to result in a
reduction in the cost of sales as well as improving product profitability.
Equipment refurbishment
The Company continues to source approximately USD 6.3 million to refurbish the continuous miner,
shuttle cars and other equipment necessary for the underground mining operations. The continuous
miner broke down in August 2015 and management believes that the resumption of the underground
mining operations will add high value coal and coke to the Company’s product mix. This refurbishment
exercise is expected to be completed in the first quarter of 2017.
Restructuring of Company’s management
Following the adoption of a leaner management structure in May 2016, cost containment measures
continue to be taken. Board fees and executive management, middle level management and low level
management salaries were reduced by 50%, 25% and 20% respectively for the six(6) month period to
September 2016. The Company expects to extend the reduction of salaries for another six(6) months
from September 2016.
As a consequence, the Directors believe that the Company will continue to operate as a going concern
and that the realisation of assets and the settlement of liabilities will occur in the ordinary course of
business. These financial statements have therefore been prepared on a going concern basis.
23 Financial risk management objectives and policies
The Company’s principal financial liabilities comprise finance lease liabilities, loans payable, bank
overdrafts and trade payables. The main purpose of these financial liabilities is to raise finance for the
Company’s operations. The Company has various financial assets such as trade receivables and cash and
short term deposits, which arise directly from its operations. Exposure to credit, interest rate and
currency risk arises in the normal course of Company’s business and these are the main risks arising
from the Company`s financial instruments.
23.1 Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing
basis. The Company assumes foreign credit risk only on customers approved by the Board and follows
credit review procedures for local credit customers.
Investments are allowed only in liquid securities and only with approved financial institutions. At the
reporting date there were no significant concentrations of credit risk. The maximum exposure to credit
risk is represented by the carrying amounts of each financial asset in the statement of financial position.
23.2 Interest rate risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the
Company’s long and short term debt obligations and bank overdrafts. The Company’s policy is to
manage its interest cost using a mix of fixed and variable rate debts
23.3 Currency risk
The Company is exposed to foreign currency risk on transactions that are denominated in a currency
other than the United States Dollar. The currency giving rise to this risk is primarily the South African
Rand.
In respect of all monetary assets and liabilities held in currencies other than the United States Dollar, the
Company ensures that the net exposure is kept to an acceptable level, by buying or selling foreign
currencies at spot rates where necessary to address short-term imbalances.
The Company’s exposure to foreign currency changes for all the other currencies is not significant.
24 Events after the reporting date
No adjusting or significant no adjusting events have occurred between the reporting date and the date
of authorisation of these financial statements.
Directors: W Chitando (Chairman), S T Makore (Managing Director), W T Kutekwatekwa, N Masuku, J
Muskwe, V Vera
3 October 2016
Zimbabwe
Sponsor: Sasfin Capital (a division of Sasfin Bank Limited)
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