WSL - Wescoal Holdings Limited - Reviewed Interim Results For The Six
Months Ended 30 September 2009
Wescoal Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/006913/06)
(JSE code: WSL ISIN: ZAE000069639)
("Wescoal" or "the Group")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009
SALIENT FEATURES
- Revenue down 27%
- Operating profit down 69%
- Headline earnings down 62%
The interim results for the six months ended 30 September 2009, with
comparative results for the period ended 2008 and the audited results for
the year ended 31 March 2009 are presented.
Condensed Consolidated Income Statements
Reviewed Reviewed Audited
interim interim results
results for results for for the
the six the six year
months months ended
ended ended 31 March
30 30 2009
September September R'000
2009 2008
R'000 R'000
Revenue 217 451 298 911 570 561
Gross Profit 18 857 33 727 56 352
Other operating income 1 289 244 1 621
Operating costs (14 503) (15 731) (32 696)
Profit from operations 5 643 18 240 25 277
Acquisition expenses - (172) (557)
written off
Profit on sale of share 3 616 - -
investment
Investment income 1 274 1 356 3 367
Finance costs (320) (1 407) (2 080)
Profit before taxation 10 213 18 017 26 007
Taxation (2 872) (5 167) (8 086)
Profit for the period 7 341 12 850 17 921
Attributable to: 7 574 13 120 18 491
Equity holders of the
group
Minority interest (233) (270) (570)
Profit for the period 7 341 12 850 17 921
Headline earnings 7 341 12 850 17 921
reconciliation:
Net profit for the period
Less: Profit on sale of (2 604) - -
share investment
Plus: Minority interest 233 270 570
Headline earnings for the 4 970 13 120 18 491
period
Ordinary shares in issue
(000's)
-Total at period end 145 931 145 931 137 323
-Weighted average shares 143 673 126 068 129 950
in issue
-Fully diluted weighted 145 853 127 466 132 139
average shares in issue
(Note 1)
Earnings per share:
Attributable earnings per 5.3 10.4 14.2
ordinary share (cents)
Headline earnings per 3.5 10.5 14.2
share (cents)
Fully diluted attributable 5.2 10.3 14.0
earnings per share(cents)
Fully diluted headline 3.4 10.4 14.3
earnings per share(cents)
Note:
Fully diluted earnings per share information is reflected showing the
potential effect of dilution for 2.2 million options held in terms of the
share incentive trust by the directors and employees to subscribe for new
shares in Wescoal.
Condensed Consolidated Balance Sheets
Reviewed Reviewed Audited
interim interim results for
results for results for the year
the six the six ended
months ended months ended 31 March
30 September 30 2009
2009 September R'000
R'000 2008
R'000
ASSETS
Non-current assets 99 311 87 133 98 776
Property, plant 26 958 25 470 26 686
and equipment
Investment 709 - 709
property
Goodwill 54 513 54 513 54 513
Intangible assets 13 614 4 033 13 614
Deferred taxation 3 517 3 117 3 254
Current assets 111 143 160 356 151 454
Total assets 210 454 247 489 250 230
EQUITY AND
LIABILITIES
Total 167 471 155 570 154 421
Shareholders'
funds
Long-term debt 3 123 5 064 4 072
Current 39 860 86 855 91 737
liabilities
Total equity and 210 454 247 489 250 230
liabilities
Net asset value 114.76 106.61 112.45
per share (cents)
Tangible net asset 68.08 66.49 62.84
value per share
(cents)
Condensed Consolidated Statement of Changes in Equity
Attributable to equity holders of the
company
Share Share Retained Share Total Minority Total
Capital Premium Earnings options R'000 Interests Equity
R'000 R'000 R'000 reserve
s
R'000
Balance 138 117 299 37 361 193 154 991 (570) 154 421
At
1 April 2009
Share 8 5 701 - 5 709
issued - 5 709
Earnings - - 7 574 7 574 (233) 7 341
attribut
able to
sharehol
ders
Balance 146 123 000 44 935 193 168 274 (803) 167 471
as at 31
March
2009
Condensed Consolidated Cash Flow Statements
Reviewed Reviewed Audited
interim interim results for
results for results for the year
the six the six ended
months months ended 31 March
ended 30 September 2009
30 2008 R'000
September R'000
2009
R'000
Net cash from operating (17 910) 7 153 28 754
activities
Investing activities (3 248) (11 011) (26 678)
Financing activities (656) 61 759 53 340
Net increase/(decrease) (21 814) 57 901 55 416
in cash and cash
equivalents
Cash and cash 56 637 1 221 1 221
equivalents at
beginning of period
Cash and cash 34 823 59 122 56 637
equivalents at end of
period
Commentary
Operations and market review
Turnover for the period reduced by R 81m (27.3%). The reduction in revenue
is due to the following factors:
The decline in manufacturing activity because of the economic melt down.
Reduction in selling prices as a result of:
- Export product dumping on the domestic market.
- The decrease in the dollar price of export coal.
- Excess availability of stockpiles.
- Strong Rand : Dollar exchange rate.
Low margin entrants into the merchant market.
Gross margin reduced to 8.7% from 11.3% in the comparative period mainly
due to the competitiveness experienced in the pricing explained above. The
group has adopted a retention of volumes policy and margins will therefore
remain under pressure for the next twelve months. This policy will however
ensure a strong customer base when pricing and volumes turn in the soon
expected upturn in the domestic coal market.
In anticipation of the coal price decrease and the lower demand from
industry the group started a cost reduction strategy. As a result operating
costs are 7.8% down on prior year and this campaign will be intensified
during the second half of the financial year. Additional cost saving items
have been identified and will be maximised as soon as possible.
During the previous financial year management identified the possibility of
releasing the debt linked to the purchase of a coal reserve with the
repurchase of Wescoal shares. This exercise realised a pre tax profit of R
3.6m which is not reflected as headline earnings but contribute a
significant amount to group earnings.
The analysis below, details the contribution of the two main divisions
within the Group:
R'000
30 September 2009
Income Statement Trading Washing Non Total
and operating
Mining
Revenue 191 403 26 048 - 217 451
Profit from 4 583 1 060 - 5 643
Operations 7 012 562 (2 604) 4 970
Headline earnings
R'000
30 September 2009
Balance Sheet Trading Washing Non Total
and operating
Mining
Current assets 83 195 27 948 - 111 143
Non current assets 164 755 10 668 (144 239) 31 184
Goodwill and 65 667 - 2 460 68 127
intangibles 167 436 (2 425) 2 460 167 471
Shareholders Funds 113 274 34 088 (144 239) 3 123
Non current 32 907 6 953 - 39 860
liabilities
Current liabilities
R'000
30 September 2008
Income Statement Trading Washing Non Total
and operating
Mining
Revenue 282 112 16 799 - 298 911
Profit from 18 599 (359) - 18 240
Operations 13 881 (515) (123) 13 243
Headline earnings
R'000
30 September 2008
Balance Sheet Trading Washing Non Total
and operating
Mining
Current assets 142 697 17 659 - 160 356
Non current assets 36 956 12 221 (20 590) 28 587
Goodwill and 56 086 - 2 460 58 546
intangibles 155 462 ( 2 352) 2 460 155 570
Shareholders Funds 3 073 22 581 (20 590) 5 064
Non current 77 204 9 651 - 86 855
liabilities
Current liabilities
Trading Division:
Trading conditions have remained depressed during 2009 despite the general
bullish view on coal for the long term. Volumes are down in line with the
national decline in manufacturing activity and the increased competition
including the producers who traditionally favoured export over local sales.
The scale of the competition from the primary producers was unexpected and
exposed the vulnerability of the reliance on one major revenue generating
division.
Compounding factors that influenced the industry were:
- Manufacturing, the division's primary source of revenue, down by 20%
Inland pricing down 34%
- Export prices down 50% thereby favouring domestic supply over export.
- General oversupply increasing competitive activity from new entrants.
- Export prices have increased but this is currently being negated by
the strong local currency and no improvements in trading conditions are
expected until the latter half of 2010.
Mining and Washing1 Division:
A more positive result from the division with the following highlights.
- The successful commissioning of the Jig plant at Blesboklaagte
- The Khanyisa Mine acquisition becoming effective after the period
under review
- Securing of a rail siding.=
- Additional washing facility possible at Khanyisa Mine
A Jig plant was commissioned at Blesboklaagte during August 2009 to process
discard that was previously waste, the benefits of which will flow through
during the balance of the financial year.
With the Khanyisa Mine acquisition now effective, positive results will2
start flowing through following commissioning of the operation and, and in
conjunction with the rail facility and siding, offers many opportunities to
the group to increase volumes and gain market share in previously un-
serviced markets.
Prospects
Emphasis is being placed on trading and securing a number of smaller
consumers to broaden the customer base, entering new markets and aggressive
cost cutting in all areas.
In addition Wescoal will focus on developing the mining operation into the
major revenue generator for the group. Goals set in order to achieve this
include the following:
- Commencing early 2010, a ramp up of run of mine production at Khanyisa
- Mine from 450,000 to 1,2 million tons per annum3.
- Producing Eskom product at Khanyisa Mine
- Beneficiation of coal at both Blesboklaagte and Khanyisa Mines
- Increase of saleable product produced from 220,000 to 550,000 tons per
annum.
The group is rapidly moving towards being a primary producer with a strong
trading arm rather than the historical trader with a production facility.
This will have a number of benefits but, most importantly, will reduce the
vulnerability of having a single major revenue generating division.
Black Empowerment
Waterberg Portion Property Investments (Pty) Limited, headed by Mr.
Robinson Ramaite hold 23.8% of the issued share capital of Wescoal Holdings
Limited.
Corporate Governance
The Group subscribes to and is in the process of implementing where
applicable, the principal recommendations of the King II Code of Corporate
Governance.
Dividends
No interim dividend has been declared.
Accounting policies and presentation
The unaudited interim financial statements for the six months ended 30
September 2009 are prepared in accordance with International Financial
Reporting Standards ("IFRS"), and in a manner required by the Companies
Act, and incorporates responsible disclosure in line with the accounting
philosophy of the group. The financial statements are based on appropriate
accounting policies consistently applied and supported by responsible and
prudent judgments and estimates.
Review opinion
The group's auditors, Middel & Partners have reviewed the financial
information in terms of Rule 3.18 of the listing requirements of the JSE.
Their unqualified review opinion is available for inspection at Wescoal's
offices.
By order of the Board
2 December 2009
M.R. Ramaite A.R. Boje
Chairman Chief Executive Officer
CORPORATE INFORMATION
Non-Executive MR Ramaite
directors: JG Pansegrouw
T van Gaalen
W Khumalo
Executive directors: AR Boje
P Janse van Rensburg
Registration number: 2005/006913/06
Registered address: 228 Voortrekker Street
Krugersdorp
1740
Postal address: PO Box 133
Krugersdorp
1740
Company secretary: P Janse van Rensburg
Telephone: 011 - 954 2721
Facsimile: 011 - 954 6737
Transfer secretaries: Computershare Investor Services (Pty)
Limited
Designated Advisor: Exchange Sponsors (2008) (Pty) Limited
Date: 02/12/2009 10:49:03 Produced by the JSE SENS Department.
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