Salungano Group Limited · JSE:SLG
Salungano — Wescoal Holdings — FY2018 Earnings Presentation
40 slides from Salungano's earnings presentation, March 2018
Slide 1: Annual Results Presentation for the Year Ended 31 March 2018
ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2018 growing sustainably
Slide 2: Contents
CONTENTS 1. KEY HIGHLIGHTS & OPERATIONAL REVIEW 2. FINANCIAL PERFORMANCE 3. STRATEGIC UPDATE, INVESTMENT CASE AND PROSPECTS 2
Slide 3: Key Highlights & Operational Review
KEY HIGHLIGHTS & OPERATIONAL REVIEW 3
Slide 4: Industry Update
INDUSTRY UPDATE • Global economy gradually recovering • SA GDP growth of 1.21% (Mining 2.8%) • SA downgrade avoided • Volatility of ZAR • SA mining regulation uncertainty • Stable but competitive coal trading environment 4
Slide 5: LT Coal, South African Export Price | ZAR & USD
LT COAL, SOUTH AFRICAN EXPORT PRICE | ZAR & USD ZAR USD 1,250 100 1,200 95 1,150 90 1,100 85 1,050 80 1,000 75 950 70 Feb 2017 Sep 2017 Feb 2018 Jan 2017 May 2017 Jun 2017 Aug 2017 Nov 2017 Jan 2018 Mar 2017 Jul 2017 Oct 2017 Mar 2018 Apr 2017 Dec 2017 Apr 2018 Rand USD Source: Singular Systems 5
Slide 6: Key Highlights of 2018
KEY HIGHLIGHTS OF 2018 • RESOURCE base increased to + 300 mt (RESERVES increased to +95 mt) • ROM production up 100% to 6.8 mt (7.6 mt annualised) • REVENUE up 67% to R3 527 million • CASH FLOW GENERATED YIELD of 51% • CASH GENERATED FROM OPERATING ACTIVITIES up 41% to R359 million • NPAT up 569% to
Slide 7: Operational Highlights of 2018
OPERATIONAL HIGHLIGHTS OF 2018 • Acquired Keaton Energy Holdings and realised savings of +R40 million per annum • Mining production increased 100% to 6.8 mt (FY17: 3.4 mt) • Operational EBITDA increased 162% to R538 million (FY17: R205 million) 166 • Net profits of R202 million and a three year comp
Slide 8: Profitability
PROFITABILITY NPAT/EBITDA year on year Rm 600 538 Consistent rapid growth of 91% per annum for the past three years: 400 Milestone events: 296 • Macphail acquisition • Processing plant acquisition 202 200 175 150 • Elandspruit start-up 107 121 86 • Khanyisa extension 52 29 • Elandspruit expansion 0
Slide 9: Who We Are and What We Do
WHO WE ARE AND WHAT WE DO Wescoal Holdings Limited mines, processes, supplies, sells and distributes coal and coal-related products through its two divisions – Mining and Trading Divisional contribution to revenue The Mining Division consists of four mines and four processing plants located in the M
Slide 10: Our Operations
OUR OPERATIONS Part of Wescoal’s strategy is to consolidate the junior mining sector. This has been progressed through the acquisition of Keaton Energy Holdings. Wescoal’s current operation consists of four mines and four processing plants FY18 Life of mine ROM Production Wescoal Trading areas of ac
Slide 11: Segmental Contributions (as at 31 March 2018)
SEGMENTAL CONTRIBUTIONS (AS AT 31 MARCH 2018) Revenue Operational EBITDA 13% 35% 65% 87% Mining Mining Trading Trading 11
Slide 12: Revenue Diversity - Group
REVENUE DIVERSITY - GROUP (FOR THE YEAR ENDED 31 MARCH 2018) FY18 FY17 FY16 FY15 30% 29% 29% 47% 53% 70% 71% 71% Eskom Eskom Eskom Eskom Other Other Other Other 12
Slide 13: Revenue Diversity - Mining Segment
REVENUE DIVERSITY - MINING SEGMENT (FOR THE YEAR ENDED 31 MARCH 2018) FY18 FY17 29% 37% 71% 63% Eskom Eskom Other Other 13
Slide 14: Mining Division
MINING DIVISION Mining Division Revenue Mining Division EBITDA 5 year track record 5 year track record Rm Rm Three year compound growth rate of 57% Three year compound growth rate of 73% 2,500 2,309 600 488 2,000 500 400 1,500 1023 300 249 1,000 673 596 627 200 125 500 99 94 100 0 0 FY14 FY15 FY16 F
Slide 15: Mining Division Update | Going from Strength to Strength
MINING DIVISION UPDATE | GOING FROM STRENGTH TO STRENGTH Elandspruit Intibane Khanyisa Vanggatfontein* Total FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY18 FY17 Safety: Lost-time injury frequency rate (LTIFR) 0.2 0.3 0.4 - 0.3 - - Production (ROM kt) 3 066 2 516 864 855 468 - 2 418 6 816 3 371 Sales (kt) 2
Slide 16: Mining Division Update | Continued
MINING DIVISION UPDATE | CONTINUED Sales • Sales tons up by 86% on the back of the Keaton acquisition as well as increased sales for domestic market and export • Eskom and export customer contracts • Diversity of revenue streams – Eskom sales contribution increasing from 30% of total revenue in FY17
Slide 17: Trading Division Update
TRADING DIVISION UPDATE RIGHT SIZING EXERCISE COMPLETE • The Trading division continued to build on its strategy of reducing its fixed cost base • The division’s national footprint continues and reducing its operational footprint, while maintaining profits and improving the to be a key differentiato
Slide 18: Keaton Integration
KEATON INTEGRATION • Keaton integration completed on schedule • Key technical and mining skills retained enabled seamless transition • Corporate office integrated • Synergies target of R20 million exceeded, R30 million savings during the first nine months • Operational improvement initiatives are de
Slide 19: Financial Performance
WESCOAL FINANGIAL PERFORMANCE
Slide 20: Financial Highlights
FINANCIAL HIGHLIGHTS UoM FY18 FY17 % change Mining ROM production mt 6.8 3.4 100 • ROM production volumes doubled for the Revenue Rm 3 527 2 118 67 second consecutive year Gross profit Rm 565 367 54 • Revenue increased 67% year on year • HEPS increased in excess of 100% Operational EBITDA before the
Slide 21: Statement of Comprehensive Income
STATEMENT OF COMPREHENSIVE INCOME FY18 FY17 R000 R000 % Change Revenue 3 527 2 118 67 Gross profit 565 367 54 Operational EBITDA before the impact of non-recurring costs 538 296 82 Non-recurring costs¹ - 91 (100) Operational EBITDA 538 205 >100 Net finance cost 61 23 >100 Taxation 90 70 29 Total com
Slide 22: Headline Earnings Per Share
HEADLINE EARNINGS PER SHARE 5 year track record Cps 70 260 60 53.37* 419 50 46.4 40 197 30 27.1 170 184 20 15.2 15.4 11.28 10 0 FY14 FY15 FY16 FY17 FY18 HEPS HEPS normalised Weighted average number of shares (million) Linear (HEPS ) * Excluding BEE discount and associated share volume dilution and t
Slide 23: 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 2,118 214* 2,000 200 1,674 1,590 1,147 123 101 1,000 100 45 46 0 0 FY14 FY15 FY16 FY17 FY18 Revenue Operating profits Normalised operating profits • Sustained three year compound operating p
Slide 24: Cash Flow Generation
CASH FLOW GENERATION Cash generated from operations Re-investment of cash generated from operations Rm Cps Rm 400 100 400 359 359 86 80 300 300 254 254 240 240 60 200 200 40 95 95 102 100 100 72 20 60 55 47 47 40 44 39 35 16 23 0 0 0 FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 Cashflow generat
Slide 25: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Acquired business 31 March 2018 31 March 2018 31 March 2017 Rm Rm Rm Non-current assets 2 180 1 333 819 Notes: Property, plant and equipment 1 949 1 312 642 • The balance sheet growth was a result Investments 49 21 18 of the acquisition of Keaton during Goodwill and i
Slide 26: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Audited Acquired Business Audited 31 March 2018 31 March 2018 31 March 2017 Rm Rm Rm Total shareholders’ funds 1 047 657 685 Notes: Non-current liabilities 1 063 612 278 • The balance sheet growth was a result Interest bearing loans 197 61 61 of the acquisition of Kea
Slide 27: PPE and Utilisation of Interest Bearing Debt
Rm PPE 500 1,000 1,500 2,000 0 85 NBV Mar 13 94 Interest Elandspruit acquisition bearing debt 60 Elandspruit development McPhail acquisition 136 Other additions & Depreciation (55) NBV Mar 14 181 320 30 Elandspruit development development Macphail acquisition 59 Elandspruit processing facility Eland
Slide 28: Funding Profile
FUNDING PROFILE Facility Drawn down Drawn down (Rm) (Rm) (Rm) FY18 FY17 Maturity Non-current liabilities 197 61 Nedbank RCF 220 164 - Four years, equal annual instalments IDF facilities are confirmed Investec acquisition finance - 51 Repaid October 2017 beyond 12 months, yet Investec property financ
Slide 29: Statement of Cash Flows
STATEMENT OF CASH FLOWS Audited Audited 31 March 2018 31 March 2017 Rm Rm Net cashflows from operating activities 213 188 Notes: Cash generated from operating activities 358 254 • Strong cash generated from enlarged Net interest (30) (20) group Tax paid (115) (46) • Cash generation of 86 cents per s
Slide 30: Value Distribution
VALUE DISTRIBUTION Rm 4,000 3,425 (2,838) 3,000 2,000 1,000 (76) (31) (18) (11) (93) (30) (175) (31) 0 Cash generated Contractors Employees Employees Communities Expansion Capex and Finance cost Government Shareholders operational corporate other investments 30
Slide 31: Strategic Update, Investment Case and Prospects
STRATEGIC UPDATE, INVESTMENT CASE AND PROSPECTS 31
Slide 32: Risks and Mitigations
RISKS AND MITIGATIONS A A. HDSA status: Key strategic objective is to be the leading HDSA controlled mining entity. HDSA ownership targets maintained post the Keaton acquisition and BEE B level 2 contributor. B. Funding and capital structure: Key to growth objective and the level of risk has C D dec
Slide 33: Strategic Update
STRATEGIC UPDATE Strategic priorities • To retain the focus and priority of health, safety, environment and communities • To maintain solid and predictable operational and financial performance • To continue growing and strengthening Wescoal as class leading HDSA business and consolidator of the sec
Slide 34: Looking Ahead
LOOKING AHEAD Wescoal • Management team experienced and systems in place for informed decision-making • Clear strategies for business growth, funding and financial management • Well positioned as a sector consolidator + disposals of non-core assets • Progress Moabsvelden • Maximise economies of scal
Slide 35: Wescoal Share Performance
0 100 200 300 Jan 2017 cps Feb 2017 Close Source: Singular Systems Mar 2017 Apr 2017 High May 2017 Jun 2017 Low Jul 2017 Aug 2017 Volume Sep 2017 WESCOAL SHARE PERFORMANCE Oct 2017 Nov 2017 Dec 2017 Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 ‘000 Volume 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,
Slide 36: Market Cap January 2015 - May 2018
0 200 400 600 800 1,000 1,200 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 WSL Market Cap 2015 – 2018 – closing price Jan 2016 Feb 2016 Mar 2016 Apr 2016 May 2016 Jun 2016 Jul 2016 Aug 2016 Sep 2016 Oct 2016 MARKET CAP JANUARY 2
Slide 37: In Summary: Key Highlights of 2018
IN SUMMARY: KEY HIGHLIGHTS OF 2018 • RESOURCE base increased to + 300 mt (RESERVES increased to +95 mt) • ROM production up 100% to 6.8 mt (7.6 mt annualised) • REVENUE up 67% to R3 527 million • CASH FLOW GENERATED YIELD of 51% • CASH GENERATED FROM OPERATING ACTIVITIES up 41% to R359 million • NPA
Slide 38: Conclusion
CONCLUSION “I’m delighted to report that Wescoal has grown into a substantial mining and resource trading enterprise having successfully integrated Keaton. The business continues to seek ways to increase its presence as a key component of our country’s energy supply chain while looking at various di
Slide 39: Mineral Resource and Reserves March 2018
MINERAL RESOURCE AND RESERVES MARCH 2018 Measured Resource Indicated 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 40: Questions?
QUESTIONS?