Salungano Group Limited · JSE:SLG
Salungano — Wescoal Holdings — H1 2019 Earnings Presentation
43 slides from Salungano's earnings presentation, Nov 13, 2018
Slide 1: Interim Results Presentation
INTERIM RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018 13 NOVEMBER 2018 growing sustainably
Slide 2: Disclaimer
DISCLAIMER This presentation is published solely for informational purposes and does not constitute investment, legal, tax or other advice nor is it to be relied upon in making an investment decision. Information contained herein has been taken from sources considered by Wescoal Holdings Limited to
Slide 3: Contents
CONTENTS 1. KEY GROUP HIGHLIGHTS/PERFORMANCE DELIVERY 2. OPERATIONAL SALIENT FEATURES 3. FINANCIAL PERFORMANCE 4. STRATEGIC UPDATE INVESTMENT CASE AND PROSPECTS 3
Slide 4: Health, Safety and Environmental Highlights
HEALTH, SAFETY AND ENVIRONMENTAL HIGHLIGHTS HEALTH AND SAFETY ENVIRONMENTAL • Wescoal remains committed to creating and • Appointment of an environmental team to increase maintaining a safe work environment for all our the focus on one of our largest liabilities as a employees and contractors compan
Slide 5: Key Group Highlights/Performance Delivery
KEY GROUP HIGHLIGHTS/ PERFORMANCE DELIVERY 5
Slide 6: Industry Update
INDUSTRY UPDATE • Global economy growth slowing down • SA GDP growth of 0.7% per annum • SA downgrade avoided • Volatility of ZAR continues • SA mining regulation uncertainty • Stable but competitive coal trading environment • Increase in resources in the market in SA 6
Slide 7: LT Coal, South African Export Price | ZAR and USD
LT COAL, SOUTH AFRICAN EXPORT PRICE | ZAR AND USD ZAR USD 1,300 105 1,250 100 1,200 95 1,150 90 1,100 85 1,050 80 1,000 75 950 70 May 2017 May 2018 Sep 2017 Jan 2017 Oct 2017 Jan 2018 Jun 2017 Jul 2017 Nov 2017 Dec 2017 Feb 2017 Apr 2017 Feb 2018 Apr 2018 Mar 2017 Mar 2018 Aug 2017 ZAR USD Source: S
Slide 8: Key Highlights September 2018
KEY HIGHLIGHTS 30 SEPTEMBER 2018 • RESOURCE base approximately 300mt • ROM production up 3% to 3.2mt • REVENUE up 28% to R2 064 million • CASH GENERATED FROM OPERATING ACTIVITIES up 41% to R291 million • NPAT up 23% to R108 million • HEPS up 16% to 23.5 cents per share 8
Slide 9: Operational Salient Features
OPERATIONAL SALIENT FEATURES 9
Slide 10: Operational Highlights of HY18
OPERATIONAL HIGHLIGHTS OF HY18 • Mining production increased 3% to 3.2mt (HY18: 3.1mt) • Operational EBITDA increased 6% to R298 million (HY18: R282 million) • Net profits increased 23% to R108 million (HY18: R88 million) 165 permanent employees Elandspruit processing plant Vanggatfontein Moabsvelde
Slide 11: Profitability
PROFITABILITY NPAT/EBITDA year on year/period on period Rm 600 538 Net profit after tax growth of 23% EBITDA growth of 10% 400 Milestone events: 296 301 274 • Keaton group integration 202 200 175 • Intibane Collieries disposal 150 107 121 108 • Leeuw Braakfontein held for sale 86 88 52 • Universal C
Slide 12: Group Structure
GROUP STRUCTURE Wescoal Holdings Limited mines, processes, supplies, sells and distributes coal and coal-related products through its two divisions – Mining and Trading Divisional The Mining division consists of three operating mines, three processing plants and three projects located in the Mpumala
Slide 13: Group Operations
GROUP OPERATIONS Part of Wescoal’s strategy is to consolidate HY19 ROM the junior mining sector Life of mine production MINING Employees Contractors (years) (kt) Wescoal Trading areas of activity Elandspruit Colliery 18 425 6.5 1 419 Wescoal Mining Intibane Colliery disposed disposed disposed 133 1.
Slide 14: Segmental Contributions
SEGMENTAL CONTRIBUTIONS (FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018) Revenue Operational EBITDA 17% 38% 62% 83% Mining Mining Trading Trading 14
Slide 15: Revenue Diversity - Group
REVENUE DIVERSITY - GROUP (FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018) HY18 HY19 42% 50% 50% 58% Eskom Eskom Other Other 15
Slide 16: Mining Division
MINING DIVISION Mining division revenue Mining division EBITDA 5-year track record 5-year track record Rm Rm Period on period mining revenue growth rate of 23% 2,500 2,309 600 488 2,000 500 400 1,500 1,254 1,023 1,017 300 249 250 248 1,000 673 596 627 200 125 500 99 94 100 0 0 FY14 FY15 FY16 FY17 FY
Slide 17: Mining Division Update | Going from Strength to Strength
MINING DIVISION UPDATE | GOING FROM STRENGTH TO STRENGTH Elandspruit Intibane Khanyisa Vanggatfontein Total HY19 HY18 HY19 HY18 HY19 HY18 HY19 HY18* HY19 HY18 Safety: lost-time injury frequency rate 0.25 0.36 disposed 0.89 0.77 - 0.66 - (LTIFR) Production (ROM kt) 1 419 1 559 133 450 77 202 1 555 92
Slide 18: Mining Division Update | Continued
MINING DIVISION UPDATE | CONTINUED Sales • Sales tonnes up by only 3% due to additional sales from Vanggatfontein is largely offset by lower sales due to Intibane disposal • Diversity of revenue streams – Eskom sales contribution increasing from 42% in HY18 of total revenue to 50% in HY19 on the bac
Slide 19: Trading Division Update
TRADING DIVISION UPDATE • The Trading division continued to build on its strategy of controlling its fixed • The Trading division’s team and cost base and maintaining its operational footprint, whilst maintaining profits systems and controls continued to be and the quality of its debtors book, in a
Slide 20: Financial Performance
b ) WESCOAL ‘FINANCIAL PERFORMANCE
Slide 21: Financial Highlights
FINANCIAL HIGHLIGHTS • REVENUE increased by 28% to R2 064 million (HY18: R1 610 million) • OPERATING expenses decreased 21% to R104 million (HY18: R131 million) • OPERATING PROFIT increased 23% to R197 million (HY18: R161 million) • NPAT increased 23% to R108 million • CASH GENERATED from operating
Slide 22: Financial Highlights
FINANCIAL HIGHLIGHTS Unit HY19 HY18 % change Mining ROM production mt 3.2 3.1 3% • ROM production remained stable with a 3% increase Revenue Rm 2 064 1 610 28% • Revenue increased by 28% period on Gross profit Rm 276 267 3% period • HEPS increased by 16% Operating profit Rm 197 161 22% Total compreh
Slide 23: Statement of Comprehensive Income
STATEMENT OF COMPREHENSIVE INCOME HY19 HY18 Rm Rm % change Revenue 2 064 1 610 28% Gross profit 276 267 3% Operating profit 197 161 22% Net finance cost 38 26 46% Taxation 52 48 8% Total comprehensive income 108 88 23% EPS 25.2 22.5 12% 23
Slide 24: Headline Earnings per Share
HEADLINE EARNINGS PER SHARE 5-year track record Cps 70 260 60 53.37* 419 50 47.90 40 197 436 30 184 27.10 392 170 23.50 15.40 20.20 20 15.20 11.28 10 0 FY14 FY15 FY16 FY17 FY18 HY18 HY19 HEPS (FY) HEPS normalised (FY) HEPS (HY) Weighted average number of shares (million) * Excluding BEE discount and
Slide 25: Revenue and Operating Profit
REVENUE AND OPERATING PROFIT 5-YEAR TRACK RECORD Revenue Operating profit Rm Rm 4,000 400 3,527 344 3,000 300 2,118 2,064 197 2,000 200 1,674 1,590 1,610 161 1,147 123 101 1,000 100 45 46 0 0 FY14 FY15 FY16 FY17 FY18 HY18 HY19 Revenue (FY) Operating profit (FY) Revenue (HY) Operating profit (HY) 25
Slide 26: Cash Flow Generation
CASH FLOW GENERATION Cash generated from operations Rm CPS 400 180 359 160 291 140 300 254 240 120 206 100 200 66.8 80 52.5 60 95 100 40 47 20 0 0 FY14 FY15 FY16 FY17 FY18 HY18 HY19 Cash flow generated from operations (FY) Cash flow generated from operations (HY) Cash flow generated per share (HY) •
Slide 27: Segmental Report
SEGMENTAL REPORT Total after inter-segment Mining Trading Other eliminations Rm Rm Rm Rm 30 September 2018 Total segment revenue 1 325 808 51 2 064 Inter-segment revenue 71 - 49 - External revenues 1 254 808 2 2 064 Operational EBITDA 248 50 5 301 30 September 2017 Total segment revenue 1 063 593 50
Slide 28: Capital Expenditure
CAPITAL EXPENDITURE Total investment of R45 million in capital on expenditure (HY18: R37 million) in the following main categories: 6% 4% 2% 4% IT Hardware and software Mining development 34% Deferred stripping asset Exploration Vehicles 50% Plant and equipment 28
Slide 29: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Reviewed Reviewed Audited 30 Sept 2018 30 Sept 2017 31 Mar 2018 Rm Rm Rm Non-current assets 1 968 2 128 2 180 Notes: Property, plant and equipment 1 732 1 933 1 949 • Non-current assets decreased by Investments 51 27 49 R217 million since year-end due to Goodwill and
Slide 30: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Reviewed Reviewed Audited 30 Sept 2018 30 Sept 2017 31 Mar 2018 Rm Rm Rm Total shareholders’ funds 1 111 952 1 047 Notes: Non-current liabilities 1 051 951 1 063 • Movement in equity due to profit Interest-bearing loans 202 171 197 generated (+R108 million), FY18 fina
Slide 31: Statement of Cash Flows
STATEMENT OF CASH FLOWS Reviewed Reviewed Audited 30 Sept 2018 30 Sept 2017 31 Mar 2018 Rm Rm Rm Net cash flows from operating activities 236 136 213 Notes: Cash generated from operating activities 291 206 358 Net interest (19) (26) (30) Cash generated from operations Tax paid (36) (44) (115) increa
Slide 32: Value Distribution
VALUE DISTRIBUTION Rm 1 976 1 575 44 16 58 19 61 44 Value Contractors Staff costs Communities Capex and Finance cost Government Shareholders generated other investments 32
Slide 33: Strategic Update, Investment Case and Prospects
STRATEGIC UPDATE, INVESTMENT CASE AND PROSPECTS 33
Slide 34: Strategic Update
STRATEGIC UPDATE Strategic priorities: • To retain the focus and priority of health, safety, environment and community matters • To maintain solid and predictable operational and financial performance • To continue growing and strengthening Wescoal as a class-leading HDSA business and consolidator i
Slide 35: Looking Ahead
LOOKING AHEAD • Management team understand the asset base very well and how to maximise value from it • Revenue diversification strategy is embedded and has created value- enhancing opportunities in the coal value chain e.g. marketing, infrastructure, mining services • Moabsvelden development - Wesc
Slide 36: Wescoal Share Performance
100 200 300 0 Jan 2017 cps Feb 2017 Close Source: Singular Systems Mar 2017 Apr 2017 May 2017 High Jun 2017 Jul 2017 Low Aug 2017 Sep 2017 Oct 2017 Volume Nov 2017 WESCOAL SHARE PERFORMANCE Dec 2017 Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 Jun 2018 Jul 2018 Aug 2018 Sep 2018 Oct 2018 Volume ‘000
Slide 37: Market Cap January 2015 - October 2018
200 400 600 800 1,000 1,200 0 Jan 2015 Feb 2015 Millions Mar 2015 Apr 2015 May 2015 Jun 2015 Jul 2015 Aug 2015 Sep 2015 Oct 2015 Nov 2015 Dec 2015 Jan 2016 WSL Market Cap 2015 – 2018 – closing price Feb 2016 Mar 2016 Apr 2016 May 2016 Jun 2016 Jul 2016 Aug 2016 Sep 2016 Oct 2016 Nov 2016 Dec 2016 Ja
Slide 38: Conclusion
CONCLUSION “We are pleased with the operating performance, production and sales from the broader asset base in the first half. The management team has consistently progressed the disposal of non-core assets and actively sought out acquisitive value- enhancing opportunities in line with our strategy.
Slide 39: Appendices
> wa Ss EN WESCOAL ™ ~=APPENDICES
Slide 40: Funding Profile
FUNDING PROFILE Full facility Utilised Available (Rm) (Rm) (Rm) Maturity Loans 280 280 - Nedbank CIB 220 220 - Four years, equal annual instalments HY19 HY18 Guvnor SA 24 24 - 60% within 12 months; 40% within 2.5 years Vitol SA* 36 36 - 60% within 12 months; 40% within 2.5 years Debt service 2.5 0.8
Slide 41: Risks and Mitigations
RISKS AND MITIGATIONS A. HDSA status: Key strategic objective is to be the leading HDSA controlled mining A E entity. HDSA ownership targets maintained post the Keaton acquisition and BEE level 2 contributor. B. Community unrest: Political agendas, unemployment and poverty elevates risk of potential
Slide 42: Mineral Resource and Reserves March 2018
MINERAL RESOURCE AND RESERVES MARCH 2018 Measured Indicated Resource Resource Inferred Resource Total Resource Total Reserve (mt) (mt) (mt) (mt) (mt) Operating Elandspruit Colliery 19.06 - - 19.06 18.25 Intibane Colliery 1.26 - - 1.26 1.10 Khanyisa Colliery 4.62 0.13 - 4.75 4.34 Vanggatfontein Colli
Slide 43: Mineral Resource and Reserves September 2018
MINERAL RESOURCE AND RESERVES SEPTEMBER 2018 Measured Indicated Resource Resource Inferred Resource Total Resource Total Reserve (mt) (mt) (mt) (mt) (mt) Operating Elandspruit Colliery 17.97 - - 17.97 17.16 Intibane Colliery Intibane sold and no longer part of Wescoal resources and reserves Khanyisa