| Wed 16 Apr 2008, 7:00 | | IWE - Interwaste Holdings - Audited Condensed Fina |
|
IWE
IWE
IWE - Interwaste Holdings - Audited Condensed Financial Results For The Year
Ended 31 December 2007
Interwaste Holdings Limited
(formerly Mentor Trading and Investment 66 (Pty) Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2006/037223/06)
(JSE code: IWE & ISN: ZAE000097903)
("Interwaste Holdings" or "the company" or "the group")
AUDITED CONDENSED FINANCIAL RESULTS FOR THE YEAR ENDED 31 December 2007
Condensed Group Income Statement
Audited Pro forma
December 2007 Unaudited
12 months December 2006
R`000 (1)
12 months
R`000
Revenue 335 545 250 062
Cost of sales (174 841) (107 831)
Gross profit 160 704 142 231
Other income 7 296 151
Operating expenses (106 978) (75 422)
Earnings before interest, tax, 61 022 66 960
depreciation and amortisation
("EBITDA")
Depreciation (19 048) (16 056)
Profit before interest and taxation 41 974 50 904
Income from equity accounted - 158
investments
Dividend received 1 268 -
Net interest paid (11 429) (6 249)
Profit before taxation 31 813 44 813
Taxation (8 435) (14 907)
Profit after taxation 23 378 29 906
Outside shareholders` interest (948) (814)
Profit attributable to ordinary 22 430 29 092
shareholders
Reconciliation of headline earnings:
Profit attributable to ordinary 22 430 29 092
shareholders
Adjusted for profit on disposal of (2 411) -
property, plant and equipment
Headline earnings attributable to 20 019 29 092
ordinary shareholders
Weighted average number of shares in 301 310 508 254 579 551
issue (2)
Basic earnings per share (cents) 7.4 11.4
Adjusted for -
Profit on disposal of property, (0.8) -
plant and equipment (after tax)
(cents)
Headline earnings per share (cents) 6.6 11.4
Adjusted weighted average number of 211 310 508 164 579 551
shares in issue (5)
Basic earnings per share (cents) 10.6 17.7
Headline earnings per share (cents) 9.5 17.7
Weighted average number of shares in 301 310 508 254 579 551
issue
Treasury shares 3 835 617 -
Fully diluted weighted average 305 146 125 254 579 551
shares in issue
Fully diluted earnings per share 7.4 11.4
(cents)
Fully diluted headline earnings per 6.6 11.4
share (cents)
Adjusted fully diluted weighted 215 146 125 164 579 551
average number of shares in issue
(5)
Fully diluted basic earnings per 10.4 17.7
share (cents)
Fully diluted headline earnings per 9.3 17.7
share (cents)
Notes:
(1) The numbers in the "Pro forma Unaudited December 2006" column were
extracted from the prospectus dated 5 June 2007 ("the prospectus").
(2) The pro forma weighted average number of shares in issue for
31 December 2006 is based on the sub-division and increase in the ordinary
shares in issue into 254 579 551 shares on the last practicable date as
set out in the prospectus.
(3) The group incurred a once-off non-recurring profit after taxation of
R7.3 million in 2006.
(4) Interwaste Holdings acquired the entire issued share capital of Inter-
Waste (Pty) Limited ("Inter-Waste") and Enviro-Fill (Pty) Limited ("Enviro-
Fill") with effect from 1 January 2007 in terms of the group restructuring
as set out in the prospectus and as detailed below under the heading
Business Combinations.
(5) Had the cancellation of shares or such appropriate mechanism been
implemented to reduce the number of shares ("cancellation of shares"), as
set out in more detail in point 1 of the "Financial Results" commentary
below, with the Inter-Waste (Proprietary) Limited ("Inter-Waste) vendors,
Enviro-Fill (Proprietary) Limited ("Enviro-Fill") vendors and the Ex-Waste
(Proprietary) Limited ("Ex-Waste"), being The Wilco Family Trust, GL Share
Trust, Kusasa Trust, Tibiyo Ta Mbuyze Trust, Frilma Family Trust and Ex-
Waste (collectively "the vendors") for the year ended 31 December 2007,
the company`s earnings and headline earnings per share for the year ended
31 December 2007 would have been 10.6 cents and 9.5 cents respectively and
therefore down by 10% and 19.5% compared to the forecast earnings per
share and headline earnings per share per the prospectus. The
cancellation of the shares is defined as a related party transaction in
terms of the JSE Limited ("JSE") Listings Requirements and will be subject
to shareholders` approval and other relevant regulatory requirements.
Such shareholders` approval shall be requested of shareholders in due
course. Failing such shareholders` approval the terms of the agreement
shall be deemed to be of no force and effect and the vendors shall then be
entitled to the full number of Interwaste Holdings shares issued and
allotted to them.
Condensed Group Balance Sheet
Audited Pro forma
December 2007 Unaudited
R`000 December
2006
R`000
ASSETS
Non-current assets 244 077 171 860
Property, plant and equipment 195 566 126 283
Goodwill 48 332 45 577
Intangible assets 179 -
Current assets 155 271 70 588
Inventories 24 562 11 349
Trade and other receivables 91 116 54 735
Taxation - 94
Shareholders` loans 1 200 -
Deposits 2 311 -
Bank and cash 36 082 4 410
Total assets 399 348 242 448
EQUITY AND LIABILITIES
Equity attributable to equity 199 000 97 027
holders of company
Issued capital 34 26
Share premium 177 269 97 001
Reserves 667 -
Accumulated profits 21 030 -
Minority interest 2 337 1 663
Total equity 201 337 98 690
Non-current liabilities 85 112 65 743
Other financial liabilities and 67 976 48 047
operating lease liabilities
Deferred taxation 17 136 17 696
Current liabilities 112 899 78 015
Other financial liabilities 46 027 28 671
Trade and other payables 49 731 29 301
Dividend payable 158 -
Taxation 4 267 12 001
Bank overdraft 12 716 8 042
Total equity and liabilities 399 348 242 448
Number of shares in issue at period 343 979 551 254 579 551
end (1)
Net asset value per share (cents) 57.9 38.1
Net tangible asset value per share 43.8 20.2
(cents)
Adjusted number of shares in issue 253 979 551 164 579 551
at period end (2)
Net asset value per share (cents) 78.4 59.0
Net tangible asset value per share 59.3 31.3
(cents)
Notes:
(1) The pro forma number of shares in issue at 31 December 2007 is based on
the sub-division and increase of the ordinary shares in issue into
254 579 551 shares on the last practicable date as set out in the
prospectus.
(2) Had the cancellation of shares been in place at 31 December 2007 as set
out in Note 5 to the condensed group income statement, the company`s net
asset value and net tangible asset value per share at 31 December 2007
would have been 78.4 cents and 59.3 cents, respectively.
Condensed Group Statement of Changes in Equity
Share Share Share-based Retained
capital premium payment income
R`000 R`000 reserve R`000
R`000
Balance 1 - - - -
January 2007
Net income / - - - -
(expenses)
recognised
directly in
equity
Profit for - - - 22 430
the year
Total - - - 22 430
recognised
income and
expenses for
the year
Issue of 34 184 269 - -
shares
Employee - - 667 -
share option
scheme
Treasury - (7 000) - -
shares
Dividends - - - (1 400)
paid (1)
Total changes 34 177 269 667 21 030
Balance at 31 34 177 269 667 21 030
December 2007
Total Minority Total equity
attributable interest R`000
to equity R`000
holders of the
group
R`000
Balance 1 - - -
January 2007
Net income / - 1 389 1 389
(expenses)
recognised
directly in
equity
Profit for 22 430 948 23 378
the year
Total 22 430 2 337 24 767
recognised
income and
expenses for
the year
Issue of 184 303 - 184 303
shares
Employee 667 - 667
share option
scheme
Treasury (7 000) - (7 000)
shares
Dividends (1 400) - (1 400)
paid (1)
Total changes 199 000 2 337 201 337
Balance at 31 199 000 2 337 201 337
December 2007
Note:
(1) The dividend was paid by Enviro-Fill prior to the group restructuring as
set out in the prospectus.
Condensed Group Cash Flow Statement
Audited Pro forma
December 2007 Unaudited
12 months December 2006
R`000 12 months
R`000
Cash flows from operating 566 43 485
activities
Cash flow from investing (86 759) (43 426)
activities
Cash flow from financing 109 559 2 059
activities
Net increase in cash and cash 23 366 2 118
equivalents
Cash and cash equivalents at - (5 750)
beginning of period
Cash and cash equivalents at end 23 366 (3 632)
of period
Abridged Segment Report
Audited Pro forma
December 2007 Unaudited
12 months December 2006
R`000 12 months
R`000
Gross revenue
Waste management 177 636 159 900
Compost manufacturing and sales 44 995 23 289
Landfill management, construction 112 914 66 873
and rehabilitation
335 545 250 062
Profit before interest and
taxation
Waste management 23 955 40 490
Compost manufacturing and sales 919 1 377
Landfill management, construction 17 100 9 037
and rehabilitation
41 974 50 904
Depreciation
Waste management 13 858 13 175
Compost manufacturing and sales 981 250
Landfill management, construction 4 209 2 631
and rehabilitation
19 048 16 056
Segment assets
Waste management 266 419 156 760
Compost manufacturing and sales 47 518 24 221
Landfill management, construction 85 411 61 467
and rehabilitation
399 348 242 448
Segment liabilities
Waste management 130 837 102 370
Compost manufacturing and sales 19 148 8 873
Landfill management, construction 48 026 32 515
and rehabilitation
198 011 143 758
Note:
No geographical segments are reported as the company operates mainly in South
Africa and the international operations do not meet the thresholds for
reportable segments as per IAS 14.
OVERVIEW
The results for the period were characterised by a combination of positive and
negative factors. On the positive side the group experienced significant growth
in revenue despite difficult market conditions and competitive pressure. It
made substantial investments in the business in the form of both capital
equipment, and the establishment of new depots and a metals recovery business.
On the negative side, the group incurred higher landfill and fuel costs which
have only begun to be passed on to customers in the 2008 financial year. As a
consequence of cost pressures, earnings for the period were below those
forecast in the prospectus and agreements for the cancellation of 90 000 000
shares issued to the vendors on listing, as discussed under "Financial Results"
have been entered into.
BUSINESS COMBINATIONS
Interwaste Holdings acquired the entire issued share capital of, and a portion
of shareholders` claims on loan account against Inter-Waste and Enviro-Fill,
from the existing shareholders and Inter-Waste with effect from 1 January 2007
for an aggregate consideration of R102 107 047.50, which was discharged by
Interwaste Holdings by the issue and allotment of 249 555 871 ordinary shares,
credited as fully paid, at an issue price equal to the par value of such
ordinary shares plus a premium of R96 750 994. The balance of the aforesaid
consideration constitutes a claim on loan account owing by Interwaste Holdings
to Inter-Waste, which claim is payable on demand.
Inter-Waste acquired the business of Ex-Waste with effect from 1 January 2007
for a consideration of R251 184. The aforesaid consideration was discharged
by Interwaste Holdings on behalf of Inter-Waste by the issue and allotment of
5 023 680 ordinary shares, credited as fully paid, at an issue price equal to
the par value of such shares plus a premium of R250 681.
FINANCIAL RESULTS
Group revenue increased by 34% to R335.5 million (2006: R250.1 million). The
Inter-waste group which specialises in waste management increased revenue by
11% to R177.6 million (2006: R159.9 million) and the Enviro-Fill group which
specialises in landfill management, construction and rehabilitation grew
revenue by 69% to R112.9 million (2006: R66.9 million). Strong revenue growth
was also experienced in the compost manufacturing division which increased
revenue by 93% to R45 million (2006: R23.3 million).
Gross profit increased to R160.7 million for the 2007 year end, however gross
profit margins decreased 9% from 56.9% to 47.9% mainly as a result of
substantially higher landfill costs which were not recovered from customers.
EBITDA decreased by 8.8% to R61 million (2006: R66.7 million) and EBITDA
margins decreased to 18.2% (2006: 26.8%) as a result of costs incurred ahead of
breakeven revenues in establishing two new Transport Depots in Durban and
Kempton Park. The Kempton Park site performed well and was making a positive
monthly contribution by year end. Management expect the Durban depot to start
contributing to the group during the 2008 financial year. Further costs were
incurred to establish the Metals Recovery Business which will enhance the
group`s recycling portfolio.
The unaudited, comparative pro forma results for the year ended 31 December
2006 (`2006 year end") include once-off non-recurring profits of R7.3 million.
The group mainly utilised the funding raised from the private placement to grow
its specialised fleet of trucks and trailers, lifting and other specialized
equipment, bins and containers and composting equipment (R77.5 million) and not
to reduce debt. While this was an important investment in the business, it
negatively affected other operational charges and net interest paid relative to
the 2007 forecast. The full benefit in terms of better service delivery to
customers, efficiencies and returns from the assets will become evident in
2008.
The prospectus contained a forecast of attributable earnings of R34.7 million.
This was not achieved and 90 000 000 of the shares issued to the original Inter-
Waste vendors, Enviro-Fill vendors and Ex-Waste on listing will be cancelled to
address this. Had the cancellation of shares or such appropriate mechanism,
which is described in more detail below, been in place for the full 2007 year
the company`s earnings and headline earnings per share would have been 10.6
cents and 9.5, cents respectively, down by 10% and 19.7% respectively, when
compared to the forecast.
The actions taken to address the failure to meet the forecast are as follows:
1. Agreements have been entered into with the vendors to the effect that
90 000 000 Interwaste Holdings ordinary shares issued to the vendors will
be cancelled as a result of which the issued ordinary share capital of
Interwaste Holdings will be reduced by 90 000 000 ordinary shares. The
cancellation of the shares will be subject to shareholders` approval and
other relevant regulatory requirements. Such shareholders` approval shall
be requested of shareholders in due course. Failing such approval the
terms of the agreement shall be deemed to be of no force and effect and
the vendors shall then be entitled to the full number of Interwaste
Holdings shares issued and allotted to them.
2. In the event that the company`s headline earnings for the year ending 31
December 2008 exceed R32.8 million then the Wilco Family Trust, GL Share
Trust, Kusasa Trust, Tibiyo Ta Mbuyze Trust, Frilma Family Trust and Ex-
Waste will be entitled to a pro-rata claw-back of the ordinary shares
cancelled and the relevant number of Interwaste Holdings ordinary shares
will be re-issued. The pro rata claw-back will be based on headline
earnings achieved in excess of R32.8 million and up to a maximum of
R43.3 million, the latter being the forecast headline earnings for the
year ending 31 December 2008 presented in the profit forecast.
3. Prices to customers of the waste management business were increased in the
first quarter of 2008.
4. A constant focus on asset utilisation and on cost control with the
emphasis on the timely recovery of escalating costs from customers, in
line with contracts.
5. There will be an increased focus on effective working capital management.
The directors of Interwaste Holdings are confident that the actions
implemented above will address the effects of the cost pressures in the waste
management business.
PROSPECTS
The group is still experiencing strong revenue growth because of its successful
market penetration strategy followed in 2007. The group will continue to seek
acquisition opportunities where synergies can be extracted. Significant focus
will be placed on optimising the current operations to increase operating cash
flows.
The landfill management, construction and rehabilitation business performed
exceptionally well during the 2007 year and was awarded the "Ethekweni
Municipality landfill gas extraction tender" which will further increase
profitability.
During the past twelve months, Enviro-Fill increased its annual turnover
through the supply and installation of gas fields, gas wells, flares and gas
engines on landfills for the municipalities of Ekhuruleni and Durban Solid
Waste to enable carbon trading for the account of the individual
municipalities. Durban Solid Waste was the first municipality to generate
electricity from waste.
Enviro-Fill recently acquired a 39% shareholding in a mine residue handling
company, Cyclone Engineering Projects (Pty) Limited to become one of four
players in the local industry to manage mine residue using the process of
cycloning. The company has secured two long-term contracts with one of the
large mining houses and is actively exploring other opportunities.
Waste management was one of the areas recently identified by Government where
a lack of expertise exists. With the entry of new managers into local
Government sectors, a need exists to provide education and training in the
proper handling and disposal of waste. Enviro-Fill, after years of
development, recently received its accreditation for the National
Qualification Framework ("NQF") levels 1 to 4, making it the only landfill
management company in Southern Africa to receive such an accreditation. This
provides Enviro-Fill with the opportunity to share its expertise with other
Government sectors to ensure a cleaner and healthier environment for the
future. Enviro-Fill is identifying training institutions to partner in order
to maximise exposure and training opportunities.
SHARE CAPITAL
Prior to the date of listing on ALTX, an offer was made to the group`s
employees to acquire shares in the company through the Interwaste Holdings
Share Incentive Trust. The 7 000 000 shares allocated have been treated as
"treasury" shares in the share capital of the company and deducted from
equity.
DIVIDEND POLICY
It is the intention of the company to reconsider its dividend policy once the
group has achieved mature growth and periodically thereafter to take account
of prevailing circumstances and future cash requirements. Initially all
earnings generated by the group will be utilised to fund future growth and
development.
BASIS OF PREPARATION
The condensed financial statements comprise a consolidated balance sheet at 31
December 2007, a consolidated income statement, consolidated statement of
changes in equity and summarised consolidated cash flow statement for the year
ended 31 December 2007. The condensed financial statements have been prepared
in accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS") and the presentation and disclosure
requirements of IAS 34, Interim Financial Reporting, JSE Listings Requirements
and South African Companies Act.
The accounting policies applied for the year are consistent with those applied
in the pro forma prior year figures.
These consolidated financial statements incorporate the financial statements
of the company and its subsidiaries that in substance are controlled by the
group. Results of subsidiaries are included from the effective date of
acquisition or up to the effective date of disposal. All significant
transactions and balances between group enterprises are eliminated on
consolidation.
AUDIT OPINION
The auditors, RSM Betty & Dickson (Johannesburg), have audited these results.
A copy of their unqualified audit opinion is available for inspection at the
company`s registered office.
SUBSEQUENT EVENTS
The waste management business was recently awarded three tenders to the value
of approximately R7 million over a two year period from Portnet, Metro Rail
Johannesburg and the City of Cape Town Electricity Department. These tenders
will not require any additional capital expenditure.
The group received a record of decision from the Gauteng Department of
Agriculture, Conservation, Environment and Land Affairs comprising the approval
of a permit to operate a hazardous waste treatment / processing / storage
facility at Inter-Waste`s Germiston Transport Depot. This is a strategic step
and allows the group to process hazardous waste streams and offer many more
large industrial customers waste treatment alternatives which are cost
effective and in line with an integrated waste management approach (waste
prevention, waste minimization, resource recovery, treatment and then
disposal).
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the going-concern basis since
the directors have every reason to believe that the company has adequate
resources in place to continue in operation for the foreseeable future.
By order of the Board
15 April 2008
WAH Willcocks CR Venter
Chief Executive Officer Chief Financial Officer
CORPORATE INFORMATION
Non executive directors: EG Dube (Chairperson), S M
Jewaskiewitz
Registration number: 2006/037223/06
Registered address: Corner of Avocet and Bromhof
Roads, Bromhof, 2154
Postal address: PO Box 73503, Fairlands, 2030
Company secretary: Allen de Villiers
Telephone: (011) 792 9330
Facsimile: (011) 792 8998
Transfer secretaries: Computershare Investor
Services 2004 (Pty) Limited
Designated Adviser: Vunani Corporate Finance
Date: 16/04/2008 07:00:06 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
