| Mon 11 Jul 2005, 8:59 | | Wescoal Holdings Limited - Abridged Prospectus |
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Wescoal Holdings Limited - Abridged Prospectus
Wescoal Holdings Limited
(previously known as `Abrina 724 Limited`)
(Incorporated in the Republic of South Africa)
(Registration number 2005/006913/06)
(JSE code: WSL ISIN: ZAE000069639)
(`Wescoal` or `the company`)
ABRIDGED PROSPECTUS
Listing of Wescoal ordinary shares (`shares`) on JSE Limited (`the JSE`).
Warning: The listing of ordinary shares in the company is on ALTx. Investors
are advised of the risks of investing in a company listed on ALTx. Investors are
advised that the JSE does not guarantee the viability or the success of a
company listed on ALTx. In terms of the Listings Requirements, the company is
obliged to appoint and retain a Designated Adviser, which is required to, inter
alia, attend all board meetings held by the company to ensure that all the
Listings Requirements and applicable regulations are complied with, approve the
Financial Director of the company and guide the company in a competent,
professional and impartial manner. If the company fails to retain a Designated
Adviser, it must make arrangements to appoint a new Designated Adviser within 10
business days, failing which the company faces suspension of trading of its
securities. If a Designated Adviser is not appointed within 30 days of its
suspension, the company faces the termination of its listing without the
prospect of an appropriate offer to minority shareholders.
This abridged prospectus is not an invitation to the public to subscribe for
shares in Wescoal, but is issued in compliance with the Listings Requirements of
the JSE for information purposes only. The information in this abridged
prospectus has been extracted from a full prospectus issued by Wescoal on 7 July
2005 (`the detailed prospectus`), which is available as set in paragraph 8. At
the date of listing the authorised share capital of Wescoal comprises 500
million ordinary shares with a par value of 0.1 cent each, of which, after a
private placement of 14 million ordinary shares at 50 cents per share (`the
placement`), 100 million shares will be in issue.
1. INTRODUCTION AND HISTORY
1.1. The Wescoal directors and management have 60 years` experience in the
coal industry with some exceptional skills in coal marketing, coal
procurement and steam generation, which surpasses other suppliers in
its market.
1.2. The Wescoal group has grown from a turnover of R16 million in its
first year of operation in 1997, to turnover of R195 million per annum
in eight years.
1.3. With effect from 1 April 2005 Abrina 724 Limited (`Abrina`) acquired
100% of the shares in West Rand Coal (Pty) Limited, trading as
Chandler (`Chandler`), a coal trading company, in a `share-for-share
deal`. The acquisition resulted in the original Chandler shareholders
obtaining 69.8% of the shares in Abrina with the remainder of 30.2%
being owned by Fikza Investment Holdings (Pty) Limited (`Fikza`), a
90% Black Economic Empowerment (`BEE`) company, prior to the private
placement.
1.4. The Abrina name was changed to Wescoal on 14 June 2005.
2. NATURE OF BUSINESS
Historically coal trading has been the main business and driving force
behind the success of Chandler and it is envisaged that it will continue to
be so in future.
2.1 Coal trading
2.1.1 Chandler provides the logistical requirements for the
sourcing, distribution and delivery of coal products to the
manufacturing industry with emphasis on road transportation.
Chandler operates primarily in the provinces of Gauteng,
Mpumulanga, Limpopo and North West. In addition Chandler
supplies approximately 90% of industry in Swaziland with
coal products.
2.1.2 Chandler focuses on smaller domestic users that have a total
consumption of 6 million tons per annum. For the year ended
31 March 2005, Chandler sold approximately 960 000 tons of
coal, translating into a 16% share of this specific market.
2.2 Coal washing
2.2.1 Wescoal Mining (Pty) Limited (`Wesmine`), the 34% associate
company of Chandler, is involved in the washing of coal.
The existing coal washing facility was upgraded and a new
cyclone washing plant was commissioned in May 2005, which
increased the capacity significantly and ensured the
profitability of the associate company.
2.2.2 The existing coal washing facility and the cyclone washing
plant operate at 40% capacity and washes 20 000 tons of raw
coal per month. These facilities can achieve a capacity of
50 000 tons per month at optimal production levels.
2.3 Coal mining
2.3.1 Wesmine, a coal washing company and associate of Chandler,
is considering the securing of small unmined, but viable,
coal deposits for extraction, processing and distribution
through Chandler. Due to the uncertainty of these prospects
no profits have been included from potential mining
activities in the profit forecasts.
3. PROSPECTS
3.1 Coal mining
3.1.1 Consensus opinion amongst the major global investment banks
appears to be that the Chinese and Indian economies are
expected to grow in excess of 5% for at least another
decade, with substantial benefits for iron ore and coal
suppliers. The growth in these two economies have already
resulted in the bulk of coal mined domestically being
exported to these countries, thereby resulting in increased
demand in the domestic coal market.
3.1.2 With most mining companies not showing interest in mining
small coal deposits of less than 15 million tons, and all
the larger deposits already taken up, an opportunity exists
for the Wescoal group to mine these small coal deposits and
to meet the domestic demand created by the focus of large
players in the export market.
3.1.3 Wescoal will gain access to the consumers, such as local
government and parastatals, outside of the `Merchant`
segment, through Fikza its BEE shareholder, which currently
consumes approximately 175 million tons of coal per annum,
at higher prices and margins. Fikza, a 90% BEE company and
shareholder of Wescoal will assist Wescoal with the
preparation and submission of tenders for local government
and various parastatals. Wescoal will now qualify to tender
for these contracts which were previously not accessible to
Wescoal due to a lack of BEE.
3.1.4 No potential profits to be derived from mining activities or
BEE participation have been included in the profit forecasts
as presented in paragraph 4 below.
3.2 Coal washing
3.2.1 A new cyclone washing plant was commissioned in May 2005 at
a cost of R2 million, which was funded by Chandler. This
upgrade increased the capacity significantly and should
ensure the profitability of Wesmine. This increase in
capacity is expected to result in an increase in gross
profit margins from 8.6% currently to around 10.5% in the
2007/8 financial years once the plant is operated at optimal
capacity.
3.2.2 It is anticipated that a further R3 million will be utilised
from the private placement funds on the moving and upgrading
of the washing plant. The moving of the plant will achieve
cost savings on haulage of R4 million per annum that has not
been accounted for in the profit forecast.
4. FINANCIAL INFORMATION AND PROFIT FORECASTS
The summary of the historical, pro forma and forecast financial information
of Chandler, Wescoal and its subsidiaries for the financial periods ended
31 March 2005, ending 31 March 2006 and 31 March 2007 are set out below.
Chandler Unaudited pro Wescoal Wescoal
(2) forma group Forecast Forecast
Audited after the
Chandler and
private
placement
adjustments(7)
31 March 31 March 2005 31 March 31 March
2005 2006 2007
R`000 R`000 R`000 R`000
Revenue 194 786 194 786 214 029 245 230
Cost of sales (178 110) (178 110) (195 704) (224 234)
Gross profit 16 676 16 676 18 325 20 996
Other income 154 154 134 150
Operating expenses (8 066) (8 066) (9 018) (9 649)
Loss/(profit) from (437) (437) 788 708
associate
Profit before 8 327 8 327 10 229 12 205
interest and
taxation
Net interest (161) 242 368 (150)
(paid)/received
Profit before 8 166 8 569 10 597 12 055
taxation
Taxation (3 370) (3 491) (3 073) (3 496)
Earnings 4 796 5 078 7 524 8 559
attributable to
ordinary
shareholders
Pro forma weighted 60 000 000 100 000 000 95 961 538 100 000 000
average shares in
issue (1)
Pro forma earnings 8.0 5.1 7.8 8.6
per share (cents)
Pro forma headline 8.0 5.1 7.8 8.6
earnings per share
(cents)
Pro forma dividend 10.5 6.3 - -
per share (cents)
Notes:
(1). Pro forma calculation for 31 March 2005 is based on the conversion of the
original 100 ordinary shares in issue to 60 000 000 under the new group
structure.
(2). Wescoal was incorporated on 3 March 2005 as the holding company of the
group.
(3). Forecasts revenue is based on business relationships from which historical
revenue has been arrived, and takes into account revenue earned from long-
term contracts as well as revenue earned from new contracts and sales
transactions. New contracts and sales transactions will only contribute 3%
to the forecast revenue of the group
(4). The gross margin for 2006 and 2007 is based on margin achieved during the
previous financial year and implies that price increases received from
suppliers will be passed on to customers.
(5). Income received from coal washing activities are not consolidated but
merely accounted for at 34% of the total profit on the equity accounting
basis.
(6). Forecast expenses are based on historical costs and adjusted for changes in
capacity implemented prior to listing on ALTx. Inflation is assumed at 6%
per annum. The forecasts ensure that the cost base is sufficient to match
the capacity required to meet the forecasted revenue. The forecasts also
take account of additional expenses of maintaining a listing on ALTx.
(7). The unaudited pro forma income statement was prepared on the basis that the
private placement was completed on 1 April 2004 and a total of R7 million
less estimated costs were raised for the company. A further 26 000 000
ordinary shares were issued to Fikza on 1 April 2005.
5. DIRECTORS, COMPANY SECRETARY AND REGISTERED OFFICE
The full names, ages, occupation and business addresses of the directors of
Wescoal are outlined below:
Director Age Occupation Business address
Thuthukile Edy 50 Executive 337 Aries Street,
Skweyiya Chairperson Waterkloof Pretoria
Jacobus Gustavus 44 Businessman 7 Tuin Avenue
Pansegrouw * Robindale
Randburg
Thembeka Athlinda 52 Public Affairs 20th Floor SABC
Tulwana * Director of Radio Park Henley
Uthingo Road,
Management Auckland Park
(Pty) Limited
Johannes Marthinus 41 Businessman 65 Coral Road,
Nieman * Bloubergrand
(Alternate to T Cape Town
Tulwana)
Andre Russell Boje 49 Managing 108 Bell Drive
Director Noordkruin
Krugersdorp
Petrus Janse van 46 Financial 382 Texas Street
Rensburg Director Faerie Glen Ext 2,
Pretoria
* Non-executive.
All directors are South African citizens.
5.2 Company secretary and registered office are:
Middel & Partners
74 von Brandis Street
Krugersdorp, 1740
(PO Box 25498, Monument Park, 0105))
6. THE PLACEMENT
6.1 Salient features
6.1.1 The salient features of the private placement are as
follows:
Offer price per ordinary share (cents) 50
Par value per ordinary share (cents) 0.1
Premium per ordinary share (cents) 49.9
Number of ordinary shares offered in 14 000 000
terms of private placement
Issue consideration before expenses R7 million
The opening and closing dates of the private placement are as
follows:
Opening date of the private placement at Monday, 11 July 2005
09:00 on
Closing date of private placement at Friday, 15 July 2005
12:00 on
Anticipated listing date on ALTx on Wednesday, 20 July 2005
Safe custody accounts at CSDP or broker Wednesday, 20 July 2005
updated in respect of dematerialised
shareholders on or about
Posting of share certificates in respect Wednesday, 20 July 2005
of certificated shareholders on or about
Refund of surplus private placement Friday, 22 July 2005
application monies received (where
applicable) on
Note:
These dates are subject to change at the discretion of the company. Any
changes will be released on SENS.
6.2 Wescoal holds irrevocable undertakings from various selected investors
to subscribe for 14 000 000 shares in terms of the private placement,
amounting to 100% of the private placement shares.
6.3 Should the private placement be oversubscribed the directors will
allocate 10 000 000 ordinary shares to the selected investors that
have given irrevocable undertakings and the balance of 4 000 000
ordinary shares will be allocated on an equitable basis in Wescoal`s
sole discretion.
6.4 The placement has not been underwritten and is not subject to a
minimum subscription, being achieved.
7. LISTING ON THE JSE
The JSE has approved the listing of 100 million shares on ALTx with effect
from the commencement of business on Wednesday, 20 July 2005. The shares
will trade under the abbreviated name `Wescoal` and the JSE code `WSL`.
8. COPIES OF THE PROSPECTUS
Copies of the prospectus, in English, may be obtained, during business
hours, prior to the closing of the private placement, from the registered
offices of Wescoal, Exchange Sponsors and the transfer secretaries, details
of which are set out below:
- the registered office of the company - 74 von Brandis Street
Krugersdorp, 1740;
- the offices of Exchange Sponsors (Pty) Limited - 39 First Road, Hyde
Park, 2196;
- the offices of Computershare Investor Services (Pty) Limited - Ground
Floor, 70 Marshall Street, Johannesburg, 2001;
- the web-site of Wescoal at www.wescoal.com.
Johannesburg
11 July 2005
Designated Adviser
Exchange Sponsors
Attorneys
Kim Warren, Rambau & Associates
Auditors and reporting accountants
Middel & Partners
www.wescoal.com
Date: 11/07/2005 07:05:42 AM
Produced by the JSE SENS Department
