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WSL 201510210005A
Unaudited condensed consolidated interim results for the six months ended 30 September 2015
WESCOAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2005/006913/06)
Share code: WSL
ISIN: ZAE000069639
(“Wescoal” or "the Company")
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2015
FINANCIAL AND OTHER SALIENT FEATURES
- Elandspruit mine operational and proven expected production capacity and quality as
anticipated.
- Trading division’ operating EBITDA at R28,2 million is an increase of 39,8%.
- Total Revenue down 15,6% or R139,7 million to R758,1 million (2014: R897,8 million).
- HEPS down 66,4% to 5,1 cents (2014: 15,2 cents)
- Operational EBITDA down 54,1% to R38,7 million (2014: R84,3 million)
- No interim dividend declared
Waheed Sulaiman, Acting CEO of Wescoal said: “Our trading division performed well but earnings
overall were negatively impacted by several factors, including domestic trading conditions which
remain challenging. We are pleased with progress at Elandspruit which has to date been funded
from internally generated cash flows. The recently announced rights issue will allow Wescoal to be
better positioned to conclude this project, take advantage of other growth opportunities and to
rebalance our internal cash flows.”
The unaudited interim results for the six months ended 30 September 2015 (“the Period”), with
comparative unaudited results for the six months ended 30 September 2014 (“the Prior Period”) and
the audited results for the year ended 31 March 2015 are presented below.
Condensed consolidated statement of comprehensive income
30 September 2015
Unaudited interim Unaudited interim
results for the six results for the six
months ended months ended Audited results for
30 September 2015 30 September 2014 the year ended 31
(R'000) (R'000) March 2015 (R'000)
TURNOVER 758 138 897 791 1 674 372
COST OF SALES (660 838) (777 435) (1 454 728)
GROSS PROFIT 97 300 120 356 219 644
OTHER INCOME 672 412 1 557
PROFIT ON SALE OF ASSETS 682 64 696
OPERATING COSTS (80 103) (72 418) (175 660)
OPERATING PROFIT 18 551 48 414 46 237
INTEREST RECEIVED 691 1 470 1 588
INTEREST PAID (7 978) (9 927) (10 742)
NET PROFIT BEFORE TAXATION 11 264 39 957 37 084
TAXATION (1 478) (11 892) (8 130)
NET PROFIT FOR THE PERIOD 9 786 28 065 28 954
OTHER COMPREHENSIVE INCOME - - -
TOTAL COMPREHENSIVE INCOME 9 786 28 065 28 954
Attributable to:
Owners of the parent 9 786 28 065 28 954
Non-controlling interest - 0 0
9 786 28 065 28 954
Headline Earnings reconciliation
Net Profit for the year 9 786 28 065 28 954
Profit on sale of assets (491) (64) (696)
Headline earnings for the year 9 295 28 001 28 258
Ordinary shares in issue (R'000)
Total at period end 183 571 183 571 183 571
Weighted average shares in issue 183 571 184 287 183 929.0
Fully diluted weighted average shares in issue 185 770 186 443 185 809.6
Basic earnings per ordinary share (cents) 5.3 15.2 15.7
Fully diluted basic earnings per ordinary share 5.3 15.1 15.6
Headline earnings per ordinary share (cents) 5.1 15.2 15.4
Fully diluted headline earnings per ordinary share (cents) 5.0 15.0 15.2
EBITDA reconciliation
Operating profit 18 551 48 414 46 238
Depreciation – included in Cost of sales 14 398 29 733 46 276
Depreciation and amortisation – included in Operating expenses 6 412 6 208 15 224
Earnings before interest, taxation, depreciation and amortisation
("EBITDA") 39 361 84 356 107 738
(Profit) / Loss on sale of assets (682) (64) (696)
Operational EBITDA 38 679 84 292 107 042
Condensed consolidated statement of financial position
30 September 2015
Unaudited interim Unaudited interim
results for the six results for the six Audited results for
months ended months ended the year ended
30 September 2015 30 September 2014 31 March 2015
(R'000) (R'000) (R'000)
ASSETS 952 044 783 654 823 243
NON-CURRENT ASSETS 615 189 386 204 474 673
Property, plant and equipment 458 531 253 958 324 740
Investment Property 709 709 709
Investments 17 602 9 714 14 218
Goodwill and intangible assets 100 435 107 882 104 539
Other receivables 12 837 13 772 12 909
Deferred taxation 25 075 169 17 558
CURRENT ASSETS 336 855 397 450 348 570
Inventories and work in progress 73 007 65 662 82 852
Trade and other receivables 211 126 237 088 238 741
Cash and cash equivalents 52 722 94 700 26 977
EQUITY AND LIABILITIES (952 044) (783 654) (823 243)
CAPITAL AND RESERVES (290 419) (288 823) (279 821)
Share Capital (161 465) (161 338) (161 465)
Share Based Payment Reserve (6 254) (3 809) (5 479)
Minority Interest - - 0
Opening Balance Retained Income (112 877) (103 627) (91 477)
(Retained income)/Accumulated loss (9 823) (20 049) (21 400)
NON - CURRENT LIABILITIES (90 685) (97 337) (97 137)
Interest bearing debt - long-term (32 906) (42 418) (50 837)
Instalment sale agreements (3 940) (2 505) (2 636)
Deferred Tax (7 154) (27 815) (5 101)
Provision for Rehabilitation (46 685) (24 599) (38 563)
CURRENT LIABILITIES (570 940) (397 494) (446 285)
Trade and other payables (271 126) (209 458) (218 947)
Bank overdraft (16 391) (14 779) (16 827)
Taxation payable (43 731) (13 232) (39 899)
Instalment sale agreements (4 035) (1 682) (2 718)
Interest bearing debt - short-term (235 657) (158 343) (167 894)
0 0 0
Net asset value per share (cents) 158.20 156.72 152.43
Tangible net asset value per share (cents) 103.49 98.57 95.48
Condensed consolidated statement of changes in equity
as at 30 September 2015
Share-based
payment Retained Non-controlling
Attributable to the owners of the parent Stated Capital reserve earnings Total interest Total equity
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 31 March 2014 166 715 3 059 91 515 261 289 (177) 261 113
Issue of shares 21 750 - - 21 750 - 21 750
Repurchase of shares (27 000) - - (27 000) - (27 000)
Change in ownership (177) (177) 177 -
Total comprehensive income for the year - - 28 954 28 954 - 28 954
Dividends declared - - (7 416) (7 416) - (7 416)
Employees share option scheme - 2 420 - 2 420 - 2 420
Balance at 31 March 2015 161 465 5 479 112 877 279 821 - 279 821
Shares issued - - - - - -
Shares cancelled - - - - - -
Change in ownership - - - - - -
Total comprehensive income for the year - - 9 823 9 823 - 9 823
Dividends declared - - - - - -
Employees share option scheme - 775 - 775 - 775
Balance at 30 September 2015 161 465 6 254 122 700 290 419 - 290 419
Condensed Consolidated statement of cash flows
30 September 2015
Unaudited interim Unaudited interim
results for the six results for the six Audited results for
months ended months ended the year ended 31
30 September 2015 30 September 2014 March 2015
(R'000) (R'000) (R'000)
Cash flows from operating activities 118 697 73 881 76 097
Cash generated in operations 129 092 88 301 94 505
Finance income 691 1 470 1 588
Finance costs (7 978) (8 903) (8 399)
Income Tax paid (3 109) 852 (4 181)
Dividends paid - (7 839) (7 416)
Cash flows from investing activities (144 969) (72 713) (125 457)
Purchase of property, plant and equipment (138 518) (51 342) (98 865)
Proceeds from sale of Property, plant and equipment 1 559 68 4 656
Purchase of business - - (24 443)
Rehabilitation (4 698) -
Purchase of mineral assets - (17 526) -
Purchase of financial assets (3 312) (3 913) (6 805)
Cash flows from financing activities 52 454 26 766 7 523
Movements in interest bearing 52 454 24 043 4 673
Shares issued - 2 723 2 850
Net increase in cash and cash equivalents 26 182 27 934 (41 837)
Cash and cash equivalents at beginning of period 10 150 51 987 51 987
Cash and cash equivalents at end of period 36 331 79 921 10 150
Operations and market review
Local and global market conditions remain volatile and challenging. The global mining industry has
experienced significant value erosion over the past 12 months, and global thermal coal prices
specifically are at multi-year lows. Pricing pressures, power constraints, labour related disruptions,
challenges in the construction sectors and high household debt levels, among others, have impacted
on conditions in the South African business environment.
Mining division
The Elandspruit project was commissioned during the second quarter of the Period. Run of Mine
(“ROM”) from Elandspruit mine was effectively processed at the nearby processing plant and the
beneficiated product sold to end users. Overall the Elandspruit project is on track and has already
demonstrated its ability to generate approximately 2 million tons of ROM per annum on an
annualised basis. Debottlenecking and optimisation projects at the Elandspruit mine and processing
plant continue in order to increase production capacity and reduce operational risk. Focus is on
water management systems and improving road networks in the mining area to reduce operational
risk.
The mining division revenue of R238,3 million (2014: R297,9 million) was negatively impacted by
delays in concluding long term Eskom contracts and lower short term Eskom contracted sales. Eskom
sales totalled approximately 362 000 tons during the Period compared to 906 000 tons during the
Prior Period. Total coal sales from the mining division was approximately 698 000 tons during the
Period (2014: 934 000 tons).
Gross profit in the mining division was R35,1 million (2014: R56,3 million). The mining division is
undergoing an expansion phase as resources to operate the Elandspruit mine and processing plant
are put in place. Increased operational expenses flowing from this have been offset by streamlining
activities at Intibane and Khanyisa collieries, cost saving initiatives and optimisation projects
resulting in mining costs reducing by 50% compared to the Prior Period.
Wescoal regards the safety of employees and duty of care to the environment and host communities
as part of its key responsibilities and operational imperatives. Relevant safety controls and related
compliance monitoring have been expanded at the operations. No major deviations were identified
during the compliance audits at Khanyisa and Intibane. One lost time injury was recorded during the
Period. The lost time injury frequency continued to trend downward during the Period and is better
than the industry norm. The division’s social and labour programmes are being reviewed in
consultation with stakeholders to ensure they meet the needs of our host communities.
In line with its drive to ensure a sustainable business model, Wescoal is committed to minimising the
negative impact of mining activities. In pursuit of this, R4,7 million was spend on rehabilitation
activities to meet licensing conditions and to manage environmental impacts. In addition, the
rehabilitation provision was increased by R12,8 million, for future rehabilitation of Elandspruit.
Trading division
Wescoal’s trading division exceeded expectations in a difficult business environment delivering a
very strong first half performance. Operating EBITDA at R28,2 million is an increase of 39,8% over
the Prior Period. The division’s national footprint continues to be a key differentiator and source of
value. The close working relationship with the mining division also creates operational flexibility and
optionality.
Sales from the trading division totalled 550 000 tons during the Period (2014: 626 000 tons). The
12,1% reduction is mainly attributable to a more conservative credit policy and the prevailing
business environment. Bad debts reduced from R1,8 million to R1,2 million, mainly as a result of the
improved credit controls and active debtor management.
Gross margins decreased 3,3% to R62,0 million (2014: R64,1 million) as a result of a downward price
pressures which were partially compensated for by cost saving and productivity initiatives. Cost
saving of 19,9% were achieved through reducing expenditure on non-income generating activities
and better utilisation of existing resources.
Financial overview
Revenue from all operations which includes coal mining, processing and trading reflected a decrease
of 15,6% to R758,1 million during the Period (2014: R897,8 million) and gross profit of R97,3 million
(2014: R120,4 million). Margins reduced to 12,8% from 13,4%, a consequence of reduced Eskom
sales and challenging trading conditions which were partially offset by cost savings and productivity
initiatives.
Profit from operations totalled R18,6 million compared to R48,4 million during the Prior Period. Basic
earnings and Headline earnings per ordinary share decreased by 65,1% and 66,4% respectively
compared to the Prior Period.
Operational assets and mining production capacity virtually doubled with addition of Elandspruit
mine. The total capital investment of R138,5 million during the Period was funded internally from
operating cash flows. This strategy has to date enabled the development of the project without long
term debt funding or equity injection. However, the internally funded growth impacted the Group’s
financial position and the debt equity ratio has increased to 100,9% (2014: 76,1%). Alternative
capital sources are required for continued development of Elandspruit, to facilitate the realisation of
additional growth opportunities at the Group’s disposal and to improve Wescoal’s gearing level. The
recently announced rights issue, as well as ongoing efforts to raise additional funding are
instrumental in assisting with this objective.
Prospects
Wescoal is in the final stages of its stated strategy to bed down the Elandspruit project before
embarking on additional major projects. The management team is cognisant of the volatile business
environment and believes it is appropriate to consider future projects conservatively and with care.
Wescoal is assessing a number of organic and inorganic growth opportunities. Some of these focus
on augmenting the Intibane and Khanyisa resource bases and others on potentially creating a new
mining complex. Debottlenecking projects at the processing plant will ultimately increase the
throughput capacity of the plant and reduce operating costs. The last phase of the Elandspruit
project includes initiatives to reduce operational risk by optimising and upgrading water
management and road network systems – these are considered important given the coming rainy
season.
The challenging environment, specifically in the local coal sector, present opportunities for corporate
activity. Consolidation in the junior coal sector is part of the natural evolution of the sector and
Wescoal sees itself as a significant participant in this process.
While the overall results for the Period are somewhat disappointing, they are understandable in the
context of the broader economic climate and delays in concluding Eskom contracts. Earnings per
share attributable to the Period (5,3 cents) represents an increase of 960% compared to the 0,50
cents per share attributable to the immediately preceding six month period between 1 October 2014
and 31 March 2015 (15,7 cents per share for full year to 31 March 2015 less 15,2 cents per share for
the period ranging from 1 April 2014 to 30 September 2014). Earnings per share attributable to the
month of September 2015 was 2,50 cents per share, mainly on the back of the Elandspruit Eskom
contract.
Segmental Analysis
30 September 2015
Trading Mining Other Total
Statement of Comprehensive Income (R'000) (R'000) (R'000) (R'000)
30 September 2015
Total segment revenue 533 060 238 348 958 772 367
Inter-segment revenue - 13 530 698 14 228
External revenues 533 060 224 818 260 758 138
Profit from operations 21 795 (2 619) (1 306) 17 869
Operational EBITDA 28 156 11 741 (1 219) 38 679
30 September 2014
Total segment revenue 601 004 297 890 - 898 894
Inter-segment revenue - 1 103 - 1 103
External revenues 601 004 296 787 - 897 791
Profit from operations 14 018 38 095 (3 763) 48 350
Operational EBITDA 20 139 67 828 (3 676) 84 292
Resources and reserves statement
The most recent Competent Persons Report, issued by DS Coetzee (PhD Geology, Pr. Sci. Nat.:
400136/00) in compliance with SAMREC was published in full on the Wescoal website during
September 2015 and we confirm that with release of our Interim results there are no changes to the
report.
The report covers the new order mining rights at the following operating collieries and prospects:
- Khanyisa Colliery (including Sarie Marais) (Mining Right number MP30/5/1/2/2/107MR)
covering portions 96, 97 and 103 of the farm Heuwelfontein 215 IR;
- Intibane Colliery (Mining Rights MP 30/5/1/1/2/483 MR & MP 30/5/1/1/2/476 MR) covering
portion 2 & 16 of the farm Vlakvarkfontein 213 IR;
- Elandspruit Prospect (Mining Right number MP30/1/1/2/10035MR) covering portions 29,
30,32, 33, 34, 36 and 40 of the farm Elandspruit 291 JS;
- Silverbank Prospect (Mining Right number MP30/1/1/2/10037MR) covering the entire farm
Silverbank 611 IR, excluding portions 1, 10, 12 and 14; and
- Verblyden Prospect (Mining Right number MP30/1/1/2/10036MR) covering the entire farm
Verblyden 387 IS, excluding portions 18 and 35.
The water use licences for the Khanyisa and Intibane collieries are in the process of being renewed.
The water use license for Elandspruit Colliery was granted during March 2015.
Dividends
No dividends have been declared for the Period.
Basis of preparation
The unaudited condensed consolidated interim financial information for the six months ended 30
September 2015 has been prepared in accordance with IAS 34, "Interim Financial Reporting", the
Companies Act, No 71 of 2008, and the Listings Requirements of the JSE Limited.
The accounting policies adopted are consistent with those applied in the annual financial statements
for the year ended 31 March 2015. This report was compiled under the supervision of the Acting
Financial Director, Izak van der Walt CA (SA). The condensed consolidated interim financial
information does not include all the information and disclosures required in the annual financial
statements, and should be read in conjunction with the group's annual financial statements as at 31
March 2015, which have been prepared in accordance with International Financial Reporting
Standards ("IFRS").
The directors are of the opinion that the group has adequate resources to continue in operation for
the foreseeable future and, accordingly, the unaudited condensed consolidated interim financial
results have been prepared on a going-concern basis.
Further inquiries may be directed via investor relations contact, Jaques de Bie (082 691 5384).
By order of the Board
Wescoal Holdings Limited
21 October 2015
Sponsor
Nedbank CIB
8
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