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WSL
WSL
WSL - Wescoal Holdings - Reviewed Interim Results For The Six Months Ended
30 September 2008
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 2008
HIGHLIGHTS
Revenue up 54%
Operating profits up 65%
Headline earnings up 78%
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
The reviewed interim results for the six months ended 30 September 2008, with
comparative results for the period ended 2007 and the audited results for the
year ended 31 March 2008 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 2008
September September R`000
2008 2007
R`000 R`000
Revenue 298 911 194 519 376 088
Gross Profit 33 727 18 465 34 180
Other operating income 244 193 296
Other operating costs (15 731) (7 573) (16 436)
Profit from operations 18 240 11 085 18 040
Acquisition expenses (172) (26) (899)
written off
Profit on sale of fixed - 319 319
assets
Finance costs (52) (673) (1 245)
Profit before taxation 18 016 10 705 16 215
Taxation (5 166) (3 (4 385)
063)
Profit for the period 12 850 7 642 11 830
Attributable to:
Equity holders of the
group
13 120 7 642 11 830
Minority interest (270) - -
Profit for the period 12 850 7 642 11 830
Headline earnings
reconciliation:
Net profit for the period
13 120 7 642 11 830
Less: Profit on sale of - (220) (290)
fixed assets 123 19 639
Plus: Acquisition expenses
written off
Headline earnings for the 13 243 7 441 12 179
period
Ordinary shares in issue
(000`s)
-Total at period end 145 931 105 931 105 931
-Weighted average shares 126 068 104 972 105 450
in issue
-Fully diluted weighted 127 466 105 472 106 086
average shares in issue
(Note 1)
Earnings per share:
Attributable earnings per 10.4 7.3 11.2
ordinary share (cents)
Headline earnings per 10.5 7.1 11.5
share (cents)
Fully diluted attributable 10.3 7.2 11.2
earnings per share(cents)
Fully diluted headline 10.4 7.1 11.5
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 2008
2008 September R`000
R`000 2007
R`000
ASSETS
Non-current assets 87 133 51 839 78 014
Property, plant 25 470 13 010 14 703
and equipment
Goodwill and 58 546 36 711 36 726
license fees
Prepayment on - - 24 000
investment
Deferred taxation 3 117 2 118 2 585
Current assets 160 356 68 998 78 246
Total assets 247 489 120 837 156 260
EQUITY AND
LIABILITIES
Total 155 570 54 146 58 333
Shareholders`
funds
Long-term debt 5 064 3 894 20 044
Current 86 855 62 797 77 883
liabilities
Total equity and 247 489 120 837 156 260
liabilities
Net asset value 106.61 51.11 55.07
per share (cents)
Tangible net asset 66.49 16.46 20.40
value per share
(cents)
Condensed Consolidated Statement of Changes in Equity
Share Share Distribut Total
Capital Premium able R`000
R`000 R`000 Reserve
R`000
Balance at 1 106 39 357 18 870 58 333
April 2008
Share issued 40 85 810 - 85 850
Share issue expenses - (1 463) - (1 463)
Earnings attributable - - 12 850 12 850
to shareholders
Balance as at 30 146 123 704 31 720 155 570
September 2008
Condensed Consolidated Cash Flow Statements
Reviewed Reviewed Audited
interim interim results for
results results for the year
for the six the six ended
months months ended 31 March
ended 30 September 2008
30 2007 R`000
September R`000
2008
R`000
Cash generated from 10 982 12 009 9 903
operations
Interest Income 1 357 216 436
Finance costs (1 408) (889) (1 681)
Taxation paid (3 778) (1 152) (949)
Net cash from operating 7 153 10 184 7 709
activities
Investing activities (11 011) (4 217) (32 416)
Financing activities 61 759 493 24 712
Net increase/(decrease) 57 901 6 460 5
in cash and cash
equivalents
Cash and cash 1 221 1 216 1 216
equivalents at
beginning of period
Cash and cash 59 122 7 676 1 221
equivalents at end of
period
Commentary
Operations and market review
The results are in line with expectations and Wescoal expects the positive
momentum to continue for the full year to March 2009. Coal demand remained
strong from the industrial users but due to the mild winter experienced,
domestic demand declined reducing overall seasonal volumes.
Despite the mild winter, trading again posted improved performances with
revenues, margins and profit from operations showing substantial increases.
These results were mainly driven by price increases and the incorporation of the
Express Coal acquisition from 1 April 2008. Our entry into the Western Cape
market induced severe competition which, coupled with the inability of Spoornet
to provide rolling stock, depleted the margins that were expected from the
region. The logistical issues have been satisfactorily addressed and will result
in reduced input costs to the Western Cape.
The washing operation was once again hampered by irregular quantity and quality
of run of mine supply and, with the exception of much needed volumes, showed a
small operating loss during the period under review. As announced during October
2008, we are now receiving run of mine from our own opencast operation that will
resolve this problematic area.
Factors that will further enhance earnings for the second half of the financial
year are;
A 24% increase in the price of coal effective 1 October 2008 bringing the total
increase for the 2008 calendar year to 102%.
The bulk of the run of mine for the washing plant being sourced from our own
Schoongezicht opencast operation.
Overheads showed a 108 % increase due to the incorporation of Express Coal,
additional provisions and the employment of experienced personnel to strengthen
the management structures needed for future growth.
The gross margin improved by 2.2 percentage points to 11.3% compared to the
previous financial year and by 1.8 percentage points compared to the comparative
period. The improvement is due to additional focus being placed by management on
margin retention in this highly price inflationary environment.
As announced during July 2008, the group successfully raised R80,5 million
capital with the issue of 35 million shares for cash that was earmarked for
specific capital projects. With the subsequent worldwide credit crunch and the
stressed state of the world economy, each project is being carefully evaluated
before any commitments are made. Further announcements will be made in due
course.
Segment Analysis
The analysis below, details the contribution of the two main divisions within
the Group:
R`000
30 September 2008
Income Statement Trading Washing Non Total
and operating
Mining
Revenue 282 112 - 298 911
Profit from 18 599 16 799 - 18 240
Operations 13 881 (359) (123) 13 243
Headline earnings (515)
R`000
30 September 2008
Balance Sheet Trading Washing and Elimination Total
Mining entries
Current assets 142 697 17 659 - 160 356
Non current assets 36 956 12 221 (20 590) 28 587
Goodwill 56 086 - 2 460 58 546
Shareholders Funds 155 462 (2 352) 2 460 155 570
Non current 3 073 22 581 (20 590) 5 064
liabilities 77 204 9 651 - 86 855
Current liabilities
R`000
30 September 2007
Income Statement Trading Washing Non Total
and Operating
Mining
Revenue 179 215 - 194 519
Profit from 10 339 15 304 - 11 085
Operations 6 681 746 201 7 441
Headline earnings 559
R`000
30 September 2007
Balance Sheet Trading Washing and Elimination Total
Mining entries
Current assets 58 359 10 639 - 68 998
Non current assets 19 841 9 470 (14 183) 15 128
Goodwill 34 251 - 2 460 36 711
Shareholders Funds 54 105 ( 2 419) 2 460 54 146
Non current 333 17 744 (14 183) 3 894
liabilities 58 013 4 784 - 62 797
Current liabilities
Prospects
With the exception of the metallurgical industries, currently local demand for
coal remains at high levels however, international demand has softened resulting
in reduced API#4 and NEWC prices. We foresee a possible reduction in local
demand due to the economic climate and no substantial price increases until
October 2009. To negate the potential impact, the group has entered into
favourable supply contacts and earnings growth will come from additional
volumes, reduced input cost at the washing operation, overall cost controls and
the focused investment of the capital raised. Shareholders can therefore look
forward to continued earnings growth despite the negative economic climate.
The planning of the new production facility for Wescoal Mineral Recovery to
increase production of briquettes from 2,000 to 20,000 tons per month is far
advanced and construction should begin early in 2009.The downturn in the
construction industry has been advantageous to the project as all brick makers
are increasingly seeking lower cost product.
Resource Statement.
All major prospecting projects have been down scaled to conserve capital.
Preference will be given to projects that have short term earnings enhancement.
There has been no change in the resource statement as included in the Annual
Report for the year ended 31 March 2008.
Black Empowerment
Wescoal`s black shareholding currently stands at 26.4%. Wescoal remains strongly
committed to BEE and is constantly striving to increase black ownership of the
group.
67% of Wescoal`s workforce is black and emphasis is placed on training suitable
candidates to accelerate promotion to management level. In addition, two non-
executive directors on the company`s board are black.
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
2008 are prepared in accordance with International Financial Reporting Standards
("IFRS") and the presentation as well as the disclosure requirements of IAS34 -
Interim Financial Reporting in compliance with the Listing Requirements of the
JSE Limited as well as the Companies Act.
The interim results incorporate 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 judgements 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
5 December 2008
M.R. Ramaite A.R. Boje
Chairman Chief Executive Officer
CORPORATE INFORMATION
Non-Executive MR Ramaite
directors: JG Pansegrouw
MJ Sikhosana
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 Adviser: Exchange Sponsors (Pty) Limited
Date: 05/12/2008 10:48:01 Produced by the JSE SENS Department.
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