Wescoal shares rise as the mining group embarks on a share buy-back programme
Wescoal, which is valued at R577million, said details of the share buy-back programme would be announced in the next few weeks.
Wescoal chief executive Reginald Demana said the repurchase programme was in line with a resolution passed at the annual general meeting in January.
“During the year, Wescoal, in terms of the share repurchase programme, acquired 5.6million shares in line with shareholder approval,” he said.
He said the programme would be beneficial for shareholders.
“We are not satisfied with the current share price. We think it is undervalued. While we have not declared a dividend, we think that the share buy-back is necessary and signifies we are investing in the business,” said Damana.
Keith McLachlan, a fund manager at Alpha Wealth, said the share buyback was a positive development.
“At the current share price, I believe a measured share buy-back would have large benefits for the group from enhancing earnings going forward, lifting the group's locked-in BEE (black economic empowerment) shareholding and lifting implied returns going forward,” said McLachlan.
The group posted a poor performance in the year to March 2019 due to labour disruptions, heavy rainfall and the meltdown of the economy. Headline earnings a share declined by 62percent to 17.5cents, while earnings a share plummeted 58percent to 20.2c a share.
Wescoal said the group performance in the year to March was impacted by the suspension of the underground mining section in Elandspruit and above-average seasonal rainfall also contributed to the drop in group performance.
Demana said the contractor changeover at the Vanggatfontein mine led to labour disruptions with an adverse impact on production and overall performance.
“It has been a tough and challenging year for Wescoal and the mining sector as a whole. The second half performance was weaker than the first half and overall we are disappointed with the results,” Demana said.
The cancellation of the project to acquire Universal Coal after an extended period of negotiation also resulted in a negative impact on the group.
Despite the setbacks, the group posted strong cash flows from operations allowing it to repay debt. Net debt was cut by 41percent to R269m, enabling Wescoal to commit R335m to pursuing its planned growth strategy.
The company also concluded new long-term R1billion debt facilities.
In terms of acquisitions, Wescoal acquired Arnot Mine, which will produce coal exclusively for Eskom’s Arnot power station and 100percent of the Khanyisa Triangle Operation.
Other highlights include the 29percent increase in cash flow generated from operations to R462.2m.