Wrap Text
Reviewed condensed interim consolidated results for the six months ended 30 September 2016
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 2016
Preparation of condensed interim consolidated financial statements
The condensed interim consolidated financial statements for the six months ended 30 September 2016 have been reviewed
in terms of the Companies Act of South Africa. 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 28 November 2016 and can be found on the
company's website.
Salient features
- Revenue from continuing operations R580 million (1H FY16 - R563 million)
- R63 million debt repaid
- HEPS from continuing operations 13 cents per share up from 2.6 cents
- Operating profit from continuing operations of R78 million (1H FY16 - R59 million)
- Integrated Water Use Licence granted for Moabsvelden
- R31 million gain on conclusion of a settlement agreement with the IDC
- Total borrowings decreased by R82 million
Commentary
Dear shareholder
The six months ended 30 September 2016 (the period or 1H FY17) were characterised by continued steady-state operations
at Vanggatfontein and the placing of loss making Vaalkrantz Colliery on care and maintenance from 1 May 2016 whilst
awaiting section 11 ministerial consent for its disposal. Following the end of the reporting period, the Moabsvelden
Project was finally awarded its Integrated Water Use Licence. The significant recovery in global coal prices has given
the group flexibility to pursue alternative options in respect of the Moabsvelden offtake.
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 FY17, Vanggatfontein reported an improved progressive rolling
LTIFR per 200 000 man hours worked of 0.46 (Q1 FY17: 0.92) and Vaalkrantz a LTIFR of 0.00 (Q1 FY17: 0.01). However,
this operation was placed on care and maintenance on 1 May 2016 and thus the numbers are not comparable.
Operational review
Vanggatfontein delivered 1.139Mt of washed 2 and 4-Seam thermal coal to Eskom (1H FY16: 1.192Mt), a decrease of 52 372t
or 4%. Temporary pit sequencing constraints were largely responsible for the decrease in Eskom sales. 5-Seam
metallurgical coal sales decreased 36% over the comparable period to 35 961t from 56 156t in line with the geological
model. Discard and slurry sales were 242 415t (1H FY16: 17 704t).
Group financial performance
During the six months, Vanggatfontein generated revenue of R434.6 million from coal sales (1H FY16: R453.5 million).
The decrease in revenue was as a result of reduced 5-Seam and Eskom sales volumes. The reduced Eskom sales were however
offset by the annual contractual price adjustment. Transport revenue for the period was R145.8 million (1H FY16:
R109.8 million) as a result of longer delivery distances. Transport cost paid to suppliers similarly increased. The
gross profit from continuing operations was R89.5 million or 15% of revenue (1H FY16: R119.2 million or 21% of revenue).
The decrease was as a result of the reduced 5-Seam sales discussed above, a decrease in yields achieved on the Eskom
product and a higher than planned strip ratio.
Other income of R31.7 million for the six months is mainly attributable to the recognition of a once-off credit of
R30.8 million after concluding a settlement agreement with the Industrial Development Corporation (IDC). The company
reached an agreement with the IDC on 31 August 2016 to acquire their preference shares in LME for R8.8 million in
full and final settlement of the preference share liability of R39.6 million.
Net profit before taxation from continuing operations was R50.4 million (1H FY16: R33.8 million). Earnings and headline
earnings per share from continuing operations were 13.0 cents (1H FY16: 2.6 cents).
Cash and cash equivalents, which includes discontinued operations, decreased by R14.6 million during the six months to
R34.3 million. Operations generated net cash of R228.3 million (1H FY16: R307.4 million). The main reason for the
decrease of R79.1 million is the decrease in gross profit explained above. Investing activities utilised cash of
R190.5 million during the six months (1H FY16: R277.5 million). This is mainly due to additions to property, plant and
equipment of R200.1 million (1H FY16: R241.5 million) primarily spent on ongoing mine development at Vanggatfontein.
This was offset by a net withdrawal from restricted cash/investments of R9.3 million (1H FY16: R9.9 million). Financing
activities utilised cash of R52.4 million during the six months (1H FY16: R34.1 million), due to borrowings of
R54.4 million (1H FY16: R34.1 million) being repaid, offset by an additional drawdown of R2 million on the Investec Bank
Limited working capital facility (1H FY16: Rnil).
Coal Resource and Coal Reserve statement
Other than normal coal depletion as a result of mining activities during the six months to 30 September 2016, there were
no significant changes to the previously reported group Coal Resource and Reserve estimates as reported in the
31 March 2016 Integrated Annual Report.
Looking ahead
In the short term, our growth focus will be on securing both an offtake agreement and development funding for the
Moabsvelden Project along with obtaining the long awaited section 11 consent for the LME transaction. Our operational
focus will remain on ensuring Vanggatfontein’s consistent performance.
With the pending attractive Vanggatfontein/Moabsvelden expansion and a significantly simplified and lean corporate
structure we are well placed for the future.
On behalf of the Board
David Salter Mandi Glad
Non-Executive Chairman Chief Executive Officer
Bryanston
25 November 2016
Condensed interim consolidated statement of profit or loss and other comprehensive income
Six months ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 Notes (Reviewed) (Reviewed) (Audited)
CONTINUING OPERATIONS
Revenue 2 580 405 563 286 1 032 080
Cost of sales (490 861) (444 054) (868 777)
Gross profit 2 89 544 119 232 163 303
Other income 3 31 750 626 41 192
Mining and related expenses (20 332) (10 758) (181 966)
Administrative expenses (22 630) (50 309) (139 036)
Operating profit/(loss) before net finance cost 78 332 58 791 (116 507)
Net finance cost (27 889) (24 953) (54 160)
Finance income 2 165 1 557 4 046
Finance cost (30 054) (26 510) (58 206)
Net profit/(loss) before taxation 50 443 33 838 (170 667)
Income taxation (expense)/credit 4 (12 191) (24 319) 2 168
Net profit/(loss) from continuing operations 38 252 9 519 (168 499)
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of taxation 5 (17 240) (106 461) (128 776)
Net profit/(loss) for the period 21 012 (96 942) (297 275)
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation reserve gain 106 249 1 841
Total comprehensive income 21 118 (96 693) (295 434)
Net profit/(loss) attributable to:
Owners of the company 20 835 (66 252) (250 588)
Non-controlling interest 177 (30 690) (46 687)
21 012 (96 942) (297 275)
Total comprehensive income attributable to:
Owners of the company 20 941 (66 003) (248 747)
Non-controlling interest 177 (30 690) (46 687)
21 118 (96 693) (295 434)
Earnings per share
Basic earnings per share (cents) 6 7.1 (29.4) (99.7)
Diluted earnings per share (cents) 6 7.1 (29.4) (99.7)
Earnings per share - continuing operations
Basic earnings per share (cents) 6 13.0 2.6 (62.2)
Diluted earnings per share (cents) 6 13.0 2.5 (62.2)
Condensed interim consolidated statement of financial position
At At At
30 September 31 March 30 September
2016 2016 2015
R'000 Notes (Reviewed) (Audited) (Reviewed)
ASSETS
Property, plant and equipment 7 646 280 668 297 691 106
Intangible assets 503 665 504 568 662 808
Investments and loans 5 221 5 221 5 216
Restricted cash 7 423 7 423 10 986
Restricted investments 30 326 35 226 32 616
Total non-current assets 1 192 915 1 220 735 1 402 732
Restricted cash - 4 168 -
Inventory 34 394 36 651 49 230
Trade and other receivables 128 564 105 149 102 002
Taxation - 917 898
Cash and cash equivalents 34 251 43 379 58 249
Assets held-for-sale 8 63 056 83 812 120 281
Total current assets 260 265 274 076 330 660
Total assets 1 453 180 1 494 811 1 733 392
EQUITY
Stated capital 850 051 850 051 701 977
Share-based payment reserve 35 616 33 665 29 567
Other reserves 21 031 20 925 19 334
Accumulated loss (444 975) (465 810) (54 903)
Total equity attributable to owners of the company 461 723 438 831 695 975
Non-controlling interest 54 189 54 012 7 621
Total equity 515 912 492 843 703 596
LIABILITIES
Borrowings 9 183 128 189 605 228 796
Mine closure and environmental rehabilitation provision 264 161 263 472 238 104
Vendor liability 31 769 30 226 30 987
Deferred taxation 130 810 124 275 153 475
Deferred income - - 5 418
Total non-current liabilities 609 868 607 578 656 780
Borrowings 9 125 913 201 682 111 552
Trade and other payables 129 341 106 183 145 423
Taxation 7 793 2 732 -
Liabilities held-for-sale 8 64 353 83 793 116 041
Total current liabilities 327 400 394 390 373 016
Total equity and liabilities 1 453 180 1 494 811 1 733 392
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Condensed interim consolidated statement of changes in equity
Total
(Accu- equity
Share- mulated attributable Non-
based loss)/ to owners controlling
Stated payment Other retained of the interest Total
R'000 capital reserve reserves earnings company (NCI) equity
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 9 048 - - - 9 048 - 9 048
Share-based payments - 3 021 - - 3 021 - 3 021
Change in ownership interest in subsidiaries - - - (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
Balance at 31 March 2016 850 051 33 665 20 925 (465 810) 438 831 54 012 492 843
Net profit for the period - - - 20 835 20 835 177 21 012
Other comprehensive income for the period - - 106 - 106 - 106
Transactions with owners of the company
recognised directly in equity
Share-based payments - 1 951 - - 1 951 - 1 951
Balance at 30 September 2016 850 051 35 616 21 031 (444 975) 461 723 54 189 515 912
Condensed interim consolidated statement of cash flows
Six months ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 (Reviewed) (Reviewed) (Audited)
Cash flows from operating activities(1) 228 302 307 397 470 184
Cash flows from investing activities(2) (190 468) (277 523) (404 356)
Cash flows from financing activities(3) (52 440) (34 102) (89 489)
Net decrease in cash and cash equivalents (14 606) (4 228) (23 661)
Cash and cash equivalents at the beginning of the period 48 885 72 546 72 546
Cash and cash equivalents at the end of the period 34 279 68 318 48 885
(1) Operations generated net cash of R228.3 million during the six months (30 September 2015: R307.4 million) after
taking net finance cost of R7.4 million (30 September 2015: R13.2 million) into account. Refer to note 2 for
additional information regarding the reasons for the decrease in cash generated by operations.
(2) Investing activities utilised cash of R190.5 million during the six months (30 September 2015: R277.5 million).
This is mainly due to cash additions to property, plant and equipment of R200.1 million (30 September 2015:
R241.5 million) which was offset by a net withdrawal from restricted cash/investments of R9.3 million
(30 September 2015: R9.9 million).
(3) Financing activities utilised cash of R52.4 million during the six months (30 September 2015: R34.1 million).
This is mainly due to borrowings repaid of R54.4 million (30 September 2015: R34.1 million) which was offset
by an additional drawdown of R2 million on the Investec Bank Limited working capital facility
(30 September 2015: Rnil).
Segment report
Revenue Operating profit/(loss) before depreciation/amortisation
Six months ended Year ended Six months ended Six months ended Year ended Six months ended
R'000 30 September 2016 31 March 2016 30 September 2015 30 September 2016 31 March 2016 30 September 2015
Vanggatfontein Colliery(1)(4) 580 405 1 032 080 563 286 285 766 620 228 343 875
Vaalkrantz Colliery(1)(5)(7) 18 626 176 822 103 082 (16 574) (138 870) (113 842)
Sterkfontein Project - - - - - -
Keaton Energy Holdings
Limited(2) 61 784 130 082 52 260 7 884 (169 248) (84 520)
Keaton Administrative and
Technical Services
Proprietary Limited(2) 18 174 35 621 24 255 2 673 (9 378) (2 151)
Leeuw Braakfontein Project - - - 3 390 (174 518) (10 738)
Koudelager Project(7) - - - - - -
Moabsvelden Project(2) - - - 3 374 (59 428) (297)
Other segments(3)(8) - - - (57 766) (19) (2 851)
Total segments 678 989 1 374 605 742 883 228 747 68 767 129 476
Reconciliation to statements
of profit or loss and other
comprehensive income and
financial position
Intersegment, deferred
taxation and other
consolidation adjustments (79 958) (165 703) (76 515) 59 343 134 723 65 672
599 031 1 208 902 666 368 288 090 203 490 195 148
Net finance cost(6)
Elimination of discontinued operations
Net profit/(loss) before taxation
Total assets and liabilities
Segment report continued
Depreciation/amortisation Operating profit/(loss) after depreciation/amortisation
Six months ended Year ended Six months ended Six months ended Year ended Six months ended
R'000 30 September 2016 31 March 2016 30 September 2015 30 September 2016 31 March 2016 30 September 2015
Vanggatfontein Colliery(1)(4) (225 473) (442 377) (238 118) 60 293 177 851 105 757
Vaalkrantz Colliery(1)(5)(7) (107) (3 992) (3 080) (16 681) (142 862) (116 922)
Sterkfontein Project - - - - - -
Keaton Energy Holdings
Limited(2) - - - 7 884 (169 248) (84 520)
Keaton Administrative and
Technical Services
Proprietary Limited(2) (1 525) (3 267) (1 620) 1 148 (12 645) (3 771)
Leeuw Braakfontein Project - - - 3 390 (174 518) (10 738)
Koudelager Project(7) - - - - - -
Moabsvelden Project(2) - - - 3 374 (59 428) (297)
Other segments(3)(8) - - - (57 766) (19) (2 851)
Total segments (227 105) (449 636) (242 818) 1 642 (380 869) (113 342)
Reconciliation to statements
of profit or loss and other
comprehensive income and
financial position
Intersegment, deferred
taxation and other
consolidation adjustments 107 863 - 59 450 135 586 65 672
(226 998) (448 773) (242 818) 61 092 (245 283) (47 670)
Net finance cost(6) (27 889) (54 160) (24 953)
Elimination of discontinued operations 17 240 128 776 106 461
Net profit/(loss) before taxation 50 443 (170 667) 33 838
Total assets and liabilities
Segment report continued
Segment assets Segment liabilities
At At At At At At
R'000 30 September 2016 31 March 2016 30 September 2015 30 September 2016 31 March 2016 30 September 2015
Vanggatfontein Colliery(1)(4) 863 549 881 547 933 996 1 025 295 1 051 402 1 094 843
Vaalkrantz Colliery(1)(5)(7) 116 293 137 063 149 508 489 978 469 253 437 401
Sterkfontein Project 66 007 66 043 66 064 76 615 74 971 74 201
Keaton Energy Holdings
Limited(2) 996 054 954 511 932 764 58 680 24 009 69 827
Keaton Administrative and
Technical Services
Proprietary Limited(2) 13 011 11 623 25 176 57 335 56 444 53 210
Leeuw Braakfontein Project 154 285 153 527 311 664 123 027 124 129 116 925
Koudelager Project(7) 3 730 3 730 5 785 - - -
Moabsvelden Project(2) 304 494 342 107 340 433 96 072 134 367 72 934
Other segments(3)(8) 21 873 334 043 322 098 67 822 129 485 117 268
Total segments 2 539 296 2 884 194 3 087 488 1 994 824 2 064 060 2 036 609
Reconciliation to statements
of profit or loss and other
comprehensive income and
financial position
Intersegment, deferred
taxation and other
consolidation adjustments (1 086 116) (1 389 383) (1 354 096) (1 057 556) (1 062 092) (1 006 813)
1 453 180 1 494 811 1 733 392 937 268 1 001 968 1 029 796
Net finance cost(6)
Elimination of discontinued operations
Net profit/(loss) before taxation
Total assets and liabilities 1 453 180 1 494 811 1 733 392 937 268 1 001 968 1 029 796
(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 95% (31 March 2016 and 30 September 2015: 92%).
(5) Coal sales to a major customer as a percentage of revenue amounted to 100% (31 March 2016: three major customers
73%, 14% and 10%. 30 September 2015: two major customers 67% and 19%).
(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 5.
(8) Amalahle Exploration Proprietary Limited and the Balgray prospecting rights included in other segments are
classified as discontinued operations, refer to note 5.
Notes to the condensed interim consolidated financial statements
1 Basis of preparation and accounting policies
The condensed consolidated interim financial statements 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 applied in the previous annual
financial statements.
2 Revenue and gross profit
Vanggatfontein delivered 1.139Mt of washed 2- and 4-Seam thermal coal to Eskom (30 September 2015: 1.192Mt and for
the year ended 31 March 2016: 2.238Mt), a decrease of 52 372t or 4%. Sales of 5-Seam metallurgical coal decreased by 36%
over the comparable period to 35 961t in line with the geological model (30 September 2015: 56 156t and for the year
ended 31 March 2016: 98 252t). Production of B-grade coal was discontinued as reported previously (30 September 2015 and
for the year ended 31 March 2016: 25 951t).
During the six months Vanggatfontein generated revenue of R434.6 million from coal sales (30 September 2015: R453.5 million
and for the year ended 31 March 2016: R830 million). The decrease in revenue was as a result of reduced 5-Seam and Eskom
sales volumes. The impact of reduced sales volumes to Eskom was offset by the annual contractual price adjustment.
Transport revenue for the period was R145.8 million (30 September 2015: R109.8 million and for the year ended 31 March 2016:
R202.1 million). The increase in transport revenue was as a result of longer delivery distances.
The gross profit from continuing operations was R89.5 million or 15% of revenue (30 September 2015: R119.2 million or 21% of
revenue and for the year ended 31 March 2016: R163.3 million or 16% of revenue). The decrease was as a result of the reduced
5-Seam and B-grade sales discussed above, a decrease in yields achieved on the Eskom product and a higher than expected strip
ratio impacted by a temporary sequencing constraint in the two pits.
3 Other income
Other income of R31.7 million for the six months ended 30 September 2016 is mainly attributable to the recognition
of a once-off credit of R30.8 million after concluding a settlement agreement with the Industrial Development Corporation
(IDC) for the Leeuw Mining and Exploration Proprietary Limited (LME) preference share obligation.
During November 2004, the IDC subscribed for 60 cumulative redeemable preference shares in LME. In terms of the agreement,
LME had to pay, on each dividend date, the relevant preference dividend and had to commence redeeming the preference shares
in equal instalments during the 2008 financial year. During the 2011 financial year, the IDC agreed to reschedule repayments
on the preference shares when the company acquired LME, and an addendum to the preference shares agreement was concluded with
the new settlement date, being 31 October 2015. Due to the operational underperformance of LME, the liability could not be
settled on 31 October 2015. During the 2016 financial year, the company entered into a Sale of Shares and Claims Agreement
with Bayete Energy Resources Proprietary Limited (BER) to dispose of LME (refer to note 5). The IDC preference shares were
specifically excluded from the sale and the company agreed to take over this liability from LME.
The company reached an agreement with the IDC on 31 August 2016 to acquire the preference shares from the IDC for R8.8 million
in full and final settlement of the preference share liability of R39.6 million. In terms of the agreement the R8.8 million is
payable in five equal monthly instalments, which commenced in October 2016.
4 Income taxation expense
The income taxation expense of R12.2 million for the six months ended 30 September 2016 is mainly attributable to Keaton Mining
Proprietary Limited's normal taxation expense of R5.7 million as well as deferred taxation expense of R6.7 million, driven by
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 2016.
5 Discontinued operations
As reported in the prior year, the Board of Directors committed to a plan to dispose of the Vaalkrantz operation, Balgray
Project, Koudelager Project as well as the Mooiklip Project. This disposal group is classified as a discontinued operation
as it is part of a single coordinated plan to dispose of the group's anthracite assets (separate major line of business)
which are all situated in KwaZulu-Natal (geographic area of operations).
The Braakfontein Thermal Coal Project, held by Leeuw Braakfontein Colliery Proprietary Limited (LBC), a wholly owned
subsidiary of LME, is specifically excluded. LBC, which will be unbundled from LME, will become a direct wholly owned
subsidiary of the company.
The company entered into a Sale of Shares and Claims Agreement with BER on 11 February 2016 to dispose of the disposal group.
Only one material suspensive condition has to be met for the sale to become effective, being the section 11 consent from the
Minister of Mineral Resources in terms of the Mineral Petroleum and Resources Development Act, 28 of 2002 (MPRDA). The company
also simultaneously entered into a management agreement with Witbank Mineral Resources Proprietary Limited (WMR), a related
party to BER, for the management of LME up to and until the Sale of Shares and Claims Agreement with BER becomes unconditional.
As a consequence of the occurrence of a force majeure event, namely the drought, management decided to place Vaalkrantz Colliery
on care and maintenance with effect from 1 May 2016. The Sale of Shares and Claims Agreement as well as the Management Agreement
are still effective although some of the clauses of the Management Agreement have been temporarily suspended as a result of the
force majeure event.
Results - discontinued operations
Six months ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 (Reviewed) (Reviewed) (Audited)
DISCONTINUED OPERATIONS
Revenue 18 626 103 082 176 822
Cost of sales (30 311) (130 197) (209 022)
Gross loss (11 685) (27 115) (32 200)
Other income - - 4 715
Operating expenses (4 966) (79 487) (99 651)
Operating loss before net
finance (cost)/income (16 651) (106 602) (127 136)
Net finance (cost)/income (589) 141 (1 640)
Finance income 710 417 1 102
Finance cost (1 299) (276) (2 742)
Net loss before taxation (17 240) (106 461) (128 776)
Taxation - - -
Loss from discontinued operations, net of taxation (17 240) (106 461) (128 776)
Net loss attributable to:
Owners of the company (17 240) (72 011) (94 326)
Non-controlling interest - (34 450) (34 450)
(17 240) (106 461) (128 776)
No gain or loss was recognised for the 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 - discontinued operations
Six months ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 (Reviewed) (Reviewed) (Audited)
Cash flows from operating activities (21 420) (18 702) (36 921)
Cash flows from investing activities 77 (10 964) (13 700)
Cash flows from financing activities (29) (8) (74)
6 Earnings and net asset value per share
The calculation of basic and diluted earnings per share is based on a profit for the six months ended 30 September
2016 (attributable to owners of the company) of R20.8 million (30 September 2015: loss of R66.3 million and for the year
ended 31 March 2016: loss of R250.6 million). The weighted average number of shares used in calculating basic earnings
per share for the year was 292 million (30 September 2015: 225.5 million and for the year ended 31 March 2016:
251.3 million). The weighted average number of shares used in calculating diluted earnings per share for the six months
was 292.4 million (30 September 2015: 229 million and for the year ended 31 March 2016: 251.3 million).
Six months ended Year ended
30 September 30 September 31 March
2016 2015 2016
(Reviewed) (Reviewed) (Audited)
Basic earnings per share (cents) 7.1 (29.4) (99.7)
Continuing operations 13.0 2.6 (62.2)
Discontinued operations (5.9) (32.0) (37.5)
Diluted earnings per share (cents)(1) 7.1 (29.4) (99.7)
Continuing operations(2) 13.0 2.5 (62.2)
Discontinued operations(3) (5.9) (32.0) (37.5)
Headline earnings per share (cents) 7.1 (6.2) (26.9)
Continuing operations 13.0 2.6 (16.5)
Discontinued operations (5.9) (8.8) (10.4)
Diluted headline earnings per share (cents)(1) 7.1 (6.2) (26.9)
Continuing operations(2) 13.0 2.6 (16.5)
Discontinued operations(3) (5.9) (8.8) (10.4)
(1) Anti-dilutive for the period ended 30 September 2015 and for the year ended 31 March 2016.
(2) Anti-dilutive for the year ended 31 March 2016.
(3) Anti-dilutive.
Six months ended Year ended
30 September 30 September 31 March
2016 2015 2016
R'000 (Reviewed) (Reviewed) (Audited)
Reconciliation of headline earnings (net of tax and NCI):
Continuing operations
Net profit/(loss) for the period attributable to owners of the company 38 075 5 759 (156 262)
(Profit)/loss on disposal of property, plant and equipment (15) 109 135
Impairment of intangible assets - - 114 596
Headline earnings - continuing operations 38 060 5 868 (41 531)
Discontinued operations
Net loss for the period attributable to owners of the company (17 240) (72 011) (94 326)
Profit on disposal of property, plant and equipment (39) - -
Impairment of assets - 52 095 68 308
Headline earnings - discontinued operations (17 279) (19 916) (26 018)
Total headline earnings 20 781 (14 048) (67 549)
Net asset value per share
Number of shares in issue (millions) 292.0 228.3 292.0
Net asset value per share (cents) 177 308 169
7 Property, plant and equipment
The net decrease of R22 million from 31 March 2016 is mainly attributable to capital investments at Vanggatfontein
of R199.4 million (attributable mainly to mine development of R195.4 million). The rehabilitation assets increased by
R4 million, relating to changes in estimates associated with the environmental rehabilitation liability.
These were offset by depreciation charges of R225.3 million.
8 Disposal group held-for-sale
As disclosed in note 5, the Board committed to a plan to sell Vaalkrantz Colliery, the Balgray Project, the Koudelager
Project and the Mooiklip Project (disposal group).
The disposal group comprised of the following assets and liabilities:
At At At
30 September 31 March 30 September
2016 2016 2015
R'000 (Reviewed) (Audited) (Reviewed)
Assets
Property, plant and equipment 25 513 26 578 38 097
Intangible assets 5 962 5 962 9 155
Restricted investments 30 125 29 651 26 219
Inventory 578 4 633 8 829
Trade and other receivables 850 11 482 26 929
Taxation - - 983
Cash and cash equivalents 28 5 506 10 069
63 056 83 812 120 281
Liabilities
Borrowings 45 72 97
Mine closure and environmental rehabilitation provision 34 971 34 649 31 285
Trade and other payables 9 052 28 787 59 999
Provisions 20 285 20 285 24 660
64 353 83 793 116 041
At 30 September 2016, the fair value less costs to sell of the disposal group was unchanged at Rnil. No additional
impairment loss was recognised. There are no cumulative income or expenses included in OCI relating to the disposal
group.
9 Borrowings
Total borrowings decreased by R82.2 million, mainly as a result of debt repayments to the value of R62.9 million
(R48.6 million on the Investec Bank Limited term loan, R7.4 million on the Vitol loan, R3.9 million on the Investec
Bank Limited working capital facility and R3 million on the Gunvor loan (a related party)). Borrowings further
decreased by R30.8 million as a result of the agreement reached with the IDC regarding the LME preference shares
(refer to note 3) and by R7.5 million as a result of foreign exchange gains included in profit or loss. The decrease
was offset by finance costs of R16.4 million.
10 Commitments and contingencies
The group’s capital commitments are:
At At At
30 September 31 March 30 September
2016 2016 2015
R'000 (Reviewed) (Audited) (Reviewed)
Exploration and mine development expenditure authorised and contracted 4 752 5 696 2 681
Exploration and mine development expenditure authorised but not contracted 17 725 22 629 23 014
22 477 28 325 25 695
All contracted amounts will be funded through existing funding mechanisms within the group and cash generated from
operations.
Shareholders are referred to note 32 (iii) of the Annual Financial Statements for the year ended 31 March 2016, included
in the company’s Integrated Annual Report. The litigation was successfully defended with Thebe Mining Resources Proprietary
Limited and Main Street 1055 Proprietary Limited’s claims dismissed, as announced on 11 October 2016.
There have been no significant changes to the status of the group’s other contingent liabilities. For detailed disclosure on
all contingent liabilities refer to Keaton Energy’s Integrated Annual Report for the year ended 31 March 2016, available on
the group’s website at www.keatonenergy.co.za.
11 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;
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
2016 2016 2015
R'000 (Reviewed) (Audited) (Reviewed)
Fair value through profit or loss
Level 1(1) 60 451 64 877 58 835
Level 2(2) - - (2 504)
(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 RMB, Peregrine, 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 related 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, vendor liability and trade and other payables approximate their fair
values.
12 Change in interests in subsidiaries
During the period, the company restructured certain subsidiaries in the group. As a result the following subsidiaries
which were indirectly held through Xceed Resources Limited (Australian company) are now directly owned by Keaton Energy
Holdings Limited:
- Focus Coal Investments Proprietary Limited (100%)
- Neosho Trading 86 Proprietary Limited (74%)
- Ausco Finance Proprietary Limited (100%)
- Ausco Services Proprietary Limited (100%)
There were no changes in the percentage shareholdings in any of the above mentioned subsidiaries.
13 Significant events after 30 September 2016 up to the date of this report
- The company successfully defended the Thebe Mining Resources Proprietary Limited and Main Street 1055 Proprietary
Limited's claims, as disclosed in note 10.
- The company agreed revised repayment terms with Gunvor, as disclosed in note 15.
There have been no significant changes to the status of the group's other contingent liabilities. For detailed disclosure
on all contingent liabilities refer to Keaton Energy's Integrated Annual Report for the year ended 31 March 2016,
available on the group's website at www.keatonenergy.co.za.
14 Dividends
No dividends have been declared nor are any proposed for the period ended 30 September 2016 (30 September 2015: Rnil
and for the year ended 31 March 2016: Rnil).
15 Going concern
At 30 September 2016, the group's current liabilities exceeded its current assets by R67.1 million (30 September 2015:
R42.4 million and for the year ended 31 March 2016: R120.3 million). Further to the going concern position disclosed
in note 40 to the company's Integrated Annual Report for the year ended 31 March 2016, current liabilities decreased
during the current period due to a significant portion of the Gunvor liability being reclassified to non-current
liabilities. Subsequent to 30 September 2016, the company and Gunvor (the Parties) again entered into negotiations to
further revise the previously agreed repayment terms. Accordingly, the Parties agreed an extension to the tenor of
repayment, which will further alleviate the group's net current liability position. Current borrowings further decreased
during the period as a result of the agreement reached with the IDC regarding the LME preference shares (refer to notes
3 and 9).
The group continues to generate cash from its long-life Vanggatfontein Colliery whereby it delivers coal under a
long-term offtake agreement to Eskom and through sales to its domestic metallurgical customers. Cash generated from this
operation, together with the disposal of the significant loss making Vaalkrantz Colliery, the directors' ability to issue
further shares for cash and the group's undrawn overdraft facility will ensure adequate funding for the group to continue
to operate for the foreseeable future. Accordingly, the consolidated financial statements continue to be prepared on
the going concern basis.
Review report
These condensed consolidated financial statements for the period ended 30 September 2016 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 financial statements identified in the auditor's report. The auditor's
report does not necessarily report on all of the information contained in this announcement/financial results.
Shareholders are therefore advised, that in order to obtain a full understanding of the nature of the auditor's engagement they
should obtain a copy of the auditor's report together with the accompanying financial information from the company's
registered office.
Registered office
Ground Floor, Eland House, The Braes, 3 Eaton Avenue
Bryanston, 2191
Postnet Suite 464, Private Bag X51, Bryanston, 2021
Tel: +27 11 317 1700
Telefax: +27 11 463 4759
Email: 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
AC 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.
KPMG Hillside, corner of Hillside Street and Klarinet Road,
Lynnwood, Pretoria, 0081
PO Box 11265, Hatfield, 0028
www.keatonenergy.co.za
Date: 28/11/2016 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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