Wrap Text
Reviewed condensed consolidated interim results for the six months ended 30 September 2017
WESCOAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2005/006913/06)
Share code: WSL
ISIN: ZAE000069639
(“Wescoal” or "the Company" or “the Group”)
REVIEWED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2017
SALIENT FEATURES
- Conclusion of acquisition of Keaton Energy Holdings Limited (“Keaton Energy”)
- Mining ROM production up 100% to 3.132mt
- Total resources increased to 318 mt
- Secured long term debt facility
- Revenue up 55% to R1.610bn (HY17: R1.039bn)
- Gross Profit up 42% to R267.1m (HY17: R188.0m)
- Total comprehensive income up 41% to R87.6m (HY17: R62.0m)
- EPS of 22.5cps down 18%*
- EPS (normalised) of 27.3 cps **
- Dividend of R14m equating to 3.1cps
* mainly due to increased shares issued for the BEE and Keaton Energy transactions of 125m and
88m respectively.
** excluding non-recurring costs and dilutive effect of additional shares in issue prior to acquisition
Wescoal CEO, Waheed Sulaiman said: “The past six months have been productive and encouraging
in some tough operating conditions. We concluded the Keaton Energy acquisition and continue to
bed that down. Our recently secured long term debt facility and stronger cash flows position us to
take advantage of internal and external growth opportunities. We are on track to meet our medium-
term objective of eight million ROM tonnes per annum.”
Introduction
The reviewed condensed consolidated results for the six months ended 30 September 2017 (“the
period”) reflect a strong operating performance with ROM production, revenue and gross profit all
demonstrating substantial increases of 100%, 55% and 42%, respectively compared to the six
months ended 30 September 2016 (’the prior period’). Headline earnings per share and earnings per
share values declined 27% and 18%, respectively mainly as a result of the issue of 125 million BEE
shares and some 88 million shares as part of the purchase consideration for Keaton Energy.
During the period the acquisition of Keaton Energy was concluded, which has added impetus to the
growth of Wescoal’s revenue, production and sales strategies across domestic and export markets as
well as diversification and optionality in contracts and off-take negotiations. The enlarged business
has coal resources in excess of 300mt, four operating mines and three processing plants. Combined
annual ROM production from the Group is expected to exceed 7mtpa.
Operational review
Wescoal continues to outperform amid challenging local and global market conditions.
The Keaton Energy integration programme is progressing well with the Group restructuring
alignments and redeployment process on track and within the regulatory framework. Key technical
and mining skills have been retained successfully. While operational and financial performance to
date from the Keaton Energy business units are in line with expectations, opportunities for
improvement exist.
The combined Group is well positioned to meet increased demand, from Eskom as well as other
domestic and export customers. The flexibility of the enlarged resource base and associated mine
infrastructure, lends itself to increased production capacity and product variations to service the
market as and when required. Overall the ROM production target of 8 million tonnes per annum to
be achieved in the medium term is on track.
The mining division’s revenue of R1.017 billion (HY17: R482 million) realised EBITDA of R250 million
(HY17: R116 million). Sales were positively impacted by opportunistic short-term coal sales. Eskom
sales during the period totalled 1.3 million tons compared to 0.7 million tons during the prior period.
Total coal sales from the mining division was 2. 4 million tons during the period (HY17: 1.3 million
tons). The Khanyisa complex start-up added 0.1 million tons ROM to monthly ROM production
capacity. The complex is well-located close to strategic infrastructure (Kendal siding, RBCT rail route,
Kendal and Kusile power stations).
Wescoal’s trading division has successfully been re-aligned and continues to thrive in challenging
trading conditions. A solid first half performance was underpinned by sales revenue of R593 million
(HY17: R558 million).
The Group is implementing new and upgraded IT technology across the enlarged organisation as
part of its business optimisation and risk management programmes.
Financial overview
Profitability
The consistent strong operational performance helped increase Group revenue by 55% to R1.610
billion (HY17: to R1.039 billion). Gross profit also improved significantly with a 42% increase to R267
million (HY17: R188 million) while maintaining gross profit margin at 17% (FY17: 18 %).
Total comprehensive income (Net Profit After Tax) for the period increased by 42% to R88 million
(HY17: R62 million). EPS declined 18% to 22.5 cps (HY17: 27.6 cps) mainly due to a 5.8 cps impact of
non-recurring costs and the additional shares issued since September 2016 in terms of the BEE
capital raise and Keaton Energy transactions. The additional capital enabled significant progress on
the growth strategy in the acquisition of Keaton Energy which boosted production capacity by 74%
and added more than 250mt to Wescoal’s resource base.
Cash generation
The improved profitability translated into strong cash generation, with R206 million in cash
generated from operations (HY17: R98 million). The cash generated from operations was largely
applied to fund capital expenditure (R37 million), reduce interest-bearing debt (R82 million) and to
reward shareholders with dividend payments (R12 million).
Capital expenditure
Wescoal invested R37 million in projects to improve and expand operations, with immediate
benefits already seen in operational performance. The main focus areas were the Wescoal
processing plant, the diversion of the D20 road at Elandspruit and development to enable access to
resources in the Catwalk area of the Khanyisa mine.
Capital structure
The Group’s strengthened balance sheet maintained a gearing ratio of 34% after the acquisition of
Keaton Energy (HY17: 22%, FY17: 27%). Net asset value per share increased to 216c compared to
190c at 30 September 2016 and 196c at 31 March 2017. Strong cash flows from operations have
allowed Wescoal to repay expensive short-term debt while continuing to pay dividends to
shareholders.
During October 2017 Wescoal concluded a long-term debt funding arrangement with Nedbank
which facilitated the consolidation and optimisation of various debt instruments. The facility of R440
million secured for 4 years, significantly strengthened the Group’s liquidity and overall balance sheet
position and places the Group in a good position to take advantage of acquisition opportunities
when they arise.
Transformation
Wescoal maintained its minimum 51% BEE ownership subsequent to the June 2017 shares issue -
this will be further entrenched through an employee-centric broad-based ownership scheme in the
future.
Distributions
The board of directors in considering the Company’s financial position and consistent strong
performance, continued its progressive increase of dividends and resolved to declare an interim
dividend of R14 million to shareholders. This is the 4 consecutive reporting period the Company has
announced dividend payments to shareholders. The full dividend declaration will be announced on
SENS in due course.
Resources and reserves statement
The most recent SAMREC compliant Resource and Reserve Statements of the Group are available on the
Wescoal website (www.wescoal.com). The respective Resource and Reserve Statements contain details of
all the competent persons, their professional memberships, qualifications and experience.
Dividends
Two dividend tranches were declared during the period:
- Final dividend of R12 million for the year ended 31 March 2017
- The board resolved to declare an interim dividend of R14 million for the period ended 30
September 2017
Prospects
With the Keaton Energy acquisition, the Group continues to grow into a multifaceted Group with a
presence in the domestic and international thermal coal markets, as well as coal logistics
infrastructure. We will continue to take advantage of value enhancing opportunities to further
diversify and grow revenue streams in FY18.
Study work associated with the Moabsvelden resource is expected to be completed in January 2018
following which the Company will be in a position to make an informed investment decision.
Acquisition targets continue to present themselves and the board of directors continues to assess
these with a view to sustainably growing the business. Delivery of the eight million tonne ROM
medium term objective is still on track.
Basis of preparation
The condensed consolidated interim financial statements are prepared in accordance with
International Financial 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 the 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 [consolidated] annual financial statements.
These condensed consolidated interim financial statements for the period have been reviewed by
PricewaterhouseCoopers Inc., who expressed an unmodified conclusion thereon.
A copy of the auditor’s report on the condensed consolidated interim financial statements 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.
By order of the Board
Wescoal Holdings Limited
21 November 2017
Sponsor
Nedbank CIB
Investor Relations, Singular IR Jacques de Bie 082 691 5384.
Corporate information:
Non-executive chairman: MR Ramaite
Lead independent non-executive director: DMT van Gaalen
Non-executive independent directors: MH Mathe, KM Maroga, JG Pansegrouw
Non-executive directors: ET Mzimela, C Maswanganyi
Executive directors: W Sulaiman, IJ van der Walt, T Tshithavhane
Company secretary: Vikesh Dhanooklal
Registration number: 2005/006913/06
Registered address: 1st Floor, Building 10, 142 Western Service Road, Woodmead
Postal address: PO Box 1962, Edenvale, 1610
Telephone: 011 049 8611
Transfer secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Nedbank Corporate and Investment Banking
Website: www.wescoal.com
Wescoal Holdings Limited
Condensed consolidated interim
Balance sheet
As at 30 September 2017 Unaudited
Reviewed interim Audited
nterim results for
results for the six results for the
the six months
months ended year ended
ended
30 September 2017 31 March
30 September
(R'000) 2017 (R'000)
2016 (R'000)
ASSETS 2 732 795 1 066 580 1 591 857
NON-CURRENT ASSETS 2 128 454 625 893 818 273
Property, plant and equipment 1 932 639 504 108 641 198
Investment Property 709 709 709
Investments 26 050 14 266 17 909
Goodwill and intangibles 91 389 92 387 95 989
Other financial assets 64 756 10 238 52 935
Deferred taxation 12 911 4 185 9 533
CURRENT ASSETS 604 341 437 364 773 584
Inventories and work in progress 103 621 72 159 56 861
Prepaid Royalty 1 275 1 262 1 272
Trade and other receivables 438 272 259 291 280 647
Cash and cash equivalents 61 173 104 652 84 411
Restricted cash - - 350 393
Non-current Assets Held for Sale - 3 323 -
EQUITY AND LIABILITIES (2 732 795) (1 066 580) (1 591 857)
CAPITAL AND RESERVES (951 677) (428 459) (684 632)
Share Capital (679 836) (213 441) (500 222)
Share Based Payment Reserve (10 692) (7 498) (8 676)
Minority Interest (9 258) - -
Retained income (251 891) (207 520) (175 734)
NON - CURRENT LIABILITIES (950 545) (166 037) (277 918)
Interest bearing debt - long-term (171 323) (75 554) (60 553)
Instalment sale agreements (258) (1 485) (552)
Deferred Tax (351 508) (40 673) (62 113)
Other financial liabilities (5 467) - (6 494)
Provision for Rehabilitation (421 989) (48 325) (148 206)
CURRENT LIABILITIES (830 573) (472 084) (629 307)
Trade and other payables (436 202) (296 776) (331 863)
Provision for rehabilitation (9 260) (5 299) (9 365)
Bank overdraft (15 702) (16 664) (17 098)
Taxation payable (44 945) (23 762) (13 486)
Other financial liabilities (1 019) - (1 019)
Instalment sale agreements (1 644) (2 304) (2 355)
Interest bearing debt - short-term (321 801) (127 279) (254 121)
Net asset value per share (cents) 216.37 190.40 196.00
Tangible net asset value per share
(cents) 195.6 149.35 168.00
Wescoal Holdings Limited
Condensed consolidated interim
Income Statement
Reviewed Unaudited
For the six months ended 30 interim results interim results Audited results
September 2017 for the six for the six for the year
months ended months ended ended
30 September 30 September 31 March 2017
2017 2016 (R'000)
(R'000) (R'000)
Turnover 1 610 120 1 039 442 2 118 020
Cost of sales (1 343 025) (851 438) (1 750 562)
Gross profit 267 095 188 004 367 458
Negative goodwill 6 637 - -
Other income 15 880 1 509 3 845
Profit on sale of assets 2 145 456 933
Operating costs (130 897) (88 996) (167 212)
Bee discount - - (82 280)
Operating profit 160 860 100 973 122 744
Net finance expense (25 700) (13 083) (22 850)
Net profit before taxation 135 160 87 890 99 894
Taxation (47 520) (25 907) (69 694)
Net profit for the period 87 640 61 983 30 200
Other comprehensive income - - -
Total comprehensive income 87 640 61 983 30 200
Attributable to:
Owners of the parent 88 157 61 983 30 200
Non-controlling interest (517) - -
87 640 61 983 30 200
Headline Earnings reconciliation
Net Profit for the period 87 640 61 983 30 200
Net profit on sale of assets (2 145) (456) (933)
Impairment of assets - 1 077 -
Negative goodwill (6 637) - -
Headline earnings for the year 78 858 62 604 29 267
Ordinary shares in issue ('000)
Total at period end 437 856 225 030 350 025
Weighted average shares in issue 392 266 224 913 259 559
Fully diluted weighted average
shares in issue 392 266 225 084 260 058
Basic earnings per ordinary share
(cents) 22.5 27.6 11.6
Fully diluted basic earnings per
ordinary share (cents) 22.5 27.5 11.6
Headline earnings per ordinary share
(cents) 20.2 27.8 11.3
Fully diluted headline earnings per
ordinary share (cents) 20.2 27.8 11.3
Wescoal Holdings Limited
Condensed consolidated interim
Statement of changes in equity
for the six months ended 30
September 2017
Non-
Share-based controlli
Attributable to the owners of the Share payment Retained ng
parent Capital reserve earnings Total Equity interest Total equity
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 31 March 2016 213 156 7 263 164 642 385 061 - 385 061
General issue of shares 286 781 - - 286 781 - 286 781
Total comprehensive income for the
period - - 30 200 30 200 - 30 200
Dividends declared - - -19 108 -19 108 - -19 108
Employee share option scheme 285 1 413 - 1 698 - 1 698
Balance at 31 March 2017 500 222 8 676 175 734 684 632 - 684 632
General issue of shares 179 614 - - 179 614 - 179 614
Total comprehensive income for the
period - - 88 157 88 157 (517) 87 640
Non-controlling interest on
acquisition of subsidiary - - - - 9 775 9 775
Dividends declared - - (12 000) (12 000) 0 (12 000)
Employee share option scheme - 2 016 - 2 016 - 2 016
Balance at 30 September 2017 679 836 10 692 251 891 942 419 9 258 951 677
Wescoal Holdings Limited
Condensed Consolidated interim Statement of cash flows
Unaudited
interim
Reviewed
results for Audited results
interim results
the six for the year
for the six
months ended 31
months ended
ended 30 March 2017
30 September
September (R'000)
2017
For the six months ended 30 2016
(R'000)
September 2017 (R'000)
Cash flows from operating activities 136 283 78 870 187 041
Cash generated from operations 206 111 98 330 253 515
Net finance cost (25 700) (11 284) (20 327)
Income tax paid (44 128) (8 176) (46 147)
Cash flows from investing activities (63 553) (34 053) (437 755)
Purchase of property, plant and equipment (37 075) (48 890) (98 924)
Proceeds from sale of Property, plant and
equipment 2 145 6 366 7 243
Divestment of rehabilitation investment 8 142 - 11 759
Acquisition of subsidiary, net of cash
acquired (375 799) - -
Transfer from / (transfer to) restricted cash 350 393 - (350 393)
(Purchase of) / proceeds from other
financial assets (11 359) 8 471 (7 440)
Cash flows from financing activities (94 572) (42 227) 232 629
Movement in interest bearing borrowings (82 185) (32 960) 77 999
Dividends paid (12 000) (9 552) (19 108)
Share issue cost (3 174)
Shares/right issued 2 787 285 173 738
Net (decrease) / increase in cash and cash
equivalents (21 842) 2 590 (18 085)
Cash and cash equivalents at beginning of
year 67 313 85 398 85 398
Cash and cash equivalents at end of year 45 471 87 988 67 313
Wescoal Holdings
Limited
Segmental Analysis
Trading Mining* Other Total
(R'000) (R'000) (R'000) (R'000)
For the six months
ended 30 September
2017 -
Total segment
revenue 593 078 1 062 579 50 410 1 706 067
Inter-segment
revenue - (45 627) (50 320) (95 947)
External revenues 593 078 1 016 952 90 1 610 120
EBITDA 31 573 250 365 (7 771) 274 167
Operating profit /
(loss) 26 110 144 005 (9 255) 160 860
For the six months
ended 30 September
2016
Total segment revenue 557 629 496 026 2 861 1 056 516
Inter-segment revenue - (14 452) (2 622) (17 074)
External revenues 557 629 481 574 239 1 039 442
EBITDA 32 152 115 702 (8 533) 139 321
Operating profit /
(loss) 26 435 83 141 (8 603) 100 973
*Keaton Energy’s revenue and EBITDA included in the Mining segment above amounted to R321m
and R 73m respectively
Acquisition of Keaton Energy
On 20 June 2017 (the effective date), the Group acquired the entire issued share capital of
Keaton Energy for a total consideration of R564m.
The acquisition of Keaton Energy was accounted for in terms of IFRS 3 (revised), Business
Combinations, and consequently the results of Keaton Energy was consolidated by Wescoal
from the acquisition date.
The consideration payable by Wescoal to Keaton shareholders was partly settled in cash at
R1.20 per Keaton Energy share, a once-off cash payment of R30.2 million (in terms of the
ESOP Waiver Payments) paid to Keaton Energy employees who held share incentive
instruments and an ad-hoc cash amount which was paid to certain dissenting shareholders.
The remaining purchase consideration was settled in Wescoal ordinary shares in the ratio of
0.30 Wescoal shares for every 1 Keaton Energy share held.
The cash portion of the consideration amounted to R384m, which was funded by the
Company through a combination of internal cash resources, existing debt facilities and the
cash raised by the Company through its BEE transaction implemented in December 2016.
The share portion of the consideration amounted to R180m at a market price of R2.05 per
share. The Company issued 87.8m shares to Keaton Energy shareholders.
The provisional determination of the fair value of net asset acquired amounted to R581m
before minority interest of R9.8m, resulting in negative goodwill being recorded in the
statement of profit or loss for the period of R7m.
A provisional determination of the fair values of identifiable assets and liabilities acquired
has been done and comprise of:
Rm
Property, plant and equipment 1,346,250
Other non-current assets 20,473
Non-current borrowings (109,399)
Environmental provisions (244,066)
Deferred tax liabilities (301,279)
Other non-current liabilities (30,987)
Net working capital (100,433)
Net assets acquired 580,557
Transaction costs (non-recurring) of R31.2 million relating to the acquisition were allocated
as follows:
- R27.6 million were expensed; and
- R3.6 million were capitalised to equity (relating to the issue of Wescoal shares).
Date: 21/11/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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