| Wed 10 Sep 2008, 15:57 | | ENV - EnviroServ - Audited results for the year ended 30 June 2008 |
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ENV
ENV
ENV - EnviroServ - Audited results for the year ended 30 June 2008
EnviroServ Holdings Limited
(Registration number 1994/000280/06)
("EnviroServ")
JSE code: ENV ISIN: ZAE000010989
Making the difference
AUDITED RESULTS
for the year ended 30 June 2008
Revenue up 33% to R1 160 million
Operating profit up 23% to R170 million
Headline earnings up 18% to R113 million
AUDITED ABRIDGED GROUP INCOME STATEMENT
for the year ended 30 June 2008
2008 % 2007
R000 change R000
Revenue 1 159 874 33 873 840
Operating profit before 182 055 15 158 461
impairment and amortisation of
assets
Impairment and amortisation of (12 419) (41) (21 024)
assets
Operating profit 169 636 23 137 437
Finance income 14 289 97 7 269
Finance cost (32 597) 69 (19 261)
Share of profit in associate 69 (96) 1 614
company
Profit before taxation 151 397 19 127 059
Taxation (37 058) 11 (33 395)
Profit for the year 114 339 22 93 664
Attributable to:
Equity holders of the parent 113 942 93 664
Minority interests 397 -
114 339 93 664
Diluted headline earnings per 99,3 17 84,9
share (cents)
Headline earnings per share 106,2 15 92,5
(cents)
Diluted earnings per share 100,2 20 83,4
(cents)
Earnings per share (cents) 107,2 18 90,9
Weighted average number of 113 666 033 112 297 562
shares in issue during the year
- diluted
Weighted average number of
shares in issue
during the year - net of 106 278 267 103 089 709
treasury shares
Number of shares in issue at 111 642 646 109 554 122
year-end - net of treasury
shares
Reconciliation of headline R000 R000
earnings
Net profit attributable to 113 942 93 664
ordinary shareholders
Adjusted by:
Negative goodwill on (1 492) -
acquisition of subsidiary
Impairment of goodwill - 261
Loss on disposal of property 514 2 016
plant and equipment
112 964 95 941
Taxation on aforementioned (143) (585)
adjustments
Headline earnings 112 821 18 95 356
AUDITED ABRIDGED GROUP CASH FLOW STATEMENT
for the year ended 30 June 2008
2008 % 2007
R000 change R000
Operating activities
Operating profit adjusted for non- 325 307 33 244 389
cash flow items
Movement in working capital (51 855) (10 846)
Cash generated from operations 273 452 17 233 543
Spent from environmental (14 627) (8 510)
remediation provision
Taxation paid (51 298) (35 589)
Net cash flows from operating 207 527 10 189 444
activities
Investing activities
Acquisition of subsidiaries, (27 875) (5 093)
associates, joint ventures and
operations, net of cash acquired
Additions to property, plant and (232 233) 53 (151 923)
equipment
Proceeds on disposal of property, 13 650 9 495
plant and equipment
Cost of contracts purchased (3 000) -
Loans granted by the Share (5 894) (22 202)
Incentive Scheme
Net financing effect of employee 12 959 1 626
Share Incentive Scheme
Finance income received 14 289 7 269
Dividend received from associate - 918
Net cash flows used in investing (228 104) (159 910)
activities
Financing activities
Proceeds from issue of share - 16 536
capital
Share options bought financed by (2 860) (4 248)
share premium
Proceeds from borrowings 54 060 59 455
Cash distribution (31 574) 34 (23 501)
Finance cost (30 454) (17 110)
Net cash flows (used)/generated by (10 828) 31 132
financing activities
Net (decrease)/increase in cash and (31 405) 60 666
cash equivalents
Net foreign exchange difference 8 473 (3 112)
Balance at the beginning of the 132 078 74 524
year
Balance at the end of the year 109 147 132 078
AUDITED ABRIDGED GROUP BALANCE SHEET
as at 30 June 2008
2008 2007
R000 R000
Assets
Non-current assets 627 763 469 357
Property, plant and equipment 553 842 413 980
Intangible assets 48 389 29 599
Investment in associate 4 697 4 628
Deferred taxation 20 835 21 150
Current assets 525 698 390 008
Inventories 25 620 18 198
Trade and other receivables 347 335 202 029
Share incentive trust loans 43 597 37 703
Cash and cash equivalents 109 146 132 078
Total assets 1 153 461 859 365
Equity and liabilities
Equity attributable to equity holders of the parent 463 793 363 575
Ordinary share capital and share premium 35 102 25 003
Foreign currency translation reserve 10 080 2 329
Distributable reserves 418 611 336 243
Minority interests 1 898 0
Total equity 465 691 363 575
Non-current liabilities 351 012 307 673
Environmental remediation provision 143 892 132 369
Interest-bearing borrowings 177 122 127 358
Deferred taxation 15 309 23 212
Deferred income 14 689 24 734
Current liabilities 336 758 188 117
Trade and other payables 237 207 107 034
Environmental remediation provision 25 728 9 878
Interest-bearing borrowings 61 824 49 970
Taxation owing 11 999 21 235
1 153 461 859 365
Net asset value per share (cents) 440 347
Net interest bearing debt/equity ratio 27,9% 12,4%
Net interest bearing debt (R000) 129 800 45 250
AUDITED ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2008
2008 2007
R000 R000
Ordinary Share Capital
At beginning of the year, net of treasury shares 1 096 1 063
Shares issued during the year - 17
Net movement in treasury shares 19 16
At end of the year 1 115 1 096
Share premium
At beginning of the year 23 907 22 336
On shares issued during the year - 16 519
Cash distribution - (12 310)
On net movement in treasury shares and share options 10 080 (2 638)
At end of the year 33 987 23 907
Foreign currency translation reserve
At beginning of the year 2 329 5 441
Currency translation differences 7 751 (3 112)
At end of the year 10 080 2 329
Distributable Reserves
At beginning of the year 336 243 253 770
Ordinary dividend (31 574) (11 191)
Profit for the year 113 942 93 664
At end of the year 418 611 336 243
Minority Interests
Acquired in a business combination 1 501 -
Profit for the year 397 -
At end of the year 1 898 -
Operational review
Overview
Demand for EnviroServ`s waste management services continued to grow during the
year under review. This demand was driven by an increase in waste volumes
generated by the major industries which produce industrial waste, intensified
focus from authorities in reducing legacy waste stockpiles and ongoing
commitment by blue chip companies to improve the management of their waste and
to reduce their overall carbon footprint. Revenue has grown by 33% in total, of
which 30% was organic.
Profit margins before interest and tax, reduced to 14.6% (2007: 15.7%) as a
result of losses incurred in the rationalisation of Millennium Waste Management
and in the start up of a new acquisition EnviroServ Polymer Solutions, high fuel
prices and increasing inflationary cost push factors. However the impact on the
margin of these negative factors was tempered by the increased volumes.
Cash generated by operations improved by 33% to R325 million. Increased revenue
and an increase in debtors` payment days impacted working capital which grew by
R52 million. R103 million was spent on replacement of treatment and disposal
facilities and plant and equipment with a further R129 million spent to increase
capacity. The net interest bearing debt to equity ratio at year end of 28%
(2007: 12%) is within the group`s historical norms and management`s target
range.
Industrial Waste Management
Management of industrial waste makes up approximately 70% of the group`s revenue
and approximately 90% of the group`s profit, making it EnviroServ`s core
business. The group`s landfill sites received record tonnages of hazardous waste
in the year, which formed the basis of the growth in revenue and profit of the
group. 1 034 830 tonnes of hazardous waste were treated and disposed of by the
group this year compared to 653 873 tonnes in the previous year. The growth in
tonnage was driven by increased enforcement of environmental legislation which
stipulates that a number of historical waste piles in various industries should
be treated, disposed of, and rehabilitated, and that ongoing waste arisings
should no longer be placed onto these stockpiles. This activity has increased
the need for EnviroServ`s responsible, holistic waste management services.
The Commercial division`s approach of partnering with customers in developing
solutions to their waste management requirements secured a number of significant
contracts with further contracts currently under negotiation.
This business is volume sensitive due to the relatively high fixed cost base.
The increased activity enabled the margins to be maintained despite the diesel
price increasing by 102% and experiencing high inflationary pressure in
construction costs at the landfill facilities. Volume growth led to increased
transport activity and accelerated the group`s capital expenditure plans for new
trucks and for the replacement of cells in our landfill sites. EnviroServ spent
R84 million on new and replacement trucks to transport waste, and R36 million on
the construction of additional cells in existing landfill facilities.
Waste Beneficiation
A key focus area of the group is the beneficiation of waste either into saleable
products or as a replacement for fuel or raw materials. Chargold, which
beneficiates carbonaceous waste particularly for the ferrous metals industry,
reported slightly lower profits this year as its margins reduced. EnviroServ
Polymer Solutions which was acquired in August 2007 is still in its start-up
phase and has yet to record a profit. Growth prospects for this business are
exciting underpinned by the production of pallets from waste plastic.
Tailings
In January 2008 the group acquired the Brollo group of companies, which has now
been incorporated under EnviroServ Tailings. Specialising in the construction
and management of tailings dams for mines, EnviroServ Tailings has added another
important service offering to EnviroServ`s client base and has unlocked some
synergies within the group as the Treatment and Disposal division has regular
requirements for the construction of containment dams. The tailings business has
contributed R32 million to the group`s revenue and added R3 million to operating
profit.
Plant Hire Services
The group`s compaction plant hire division, which includes Conquip and Burma
Plant Hire, continued to produce solid growth in revenue and profits. Revenue
increased 86% whilst operating profit grew by 115%. Operating margins improved
as the business changed its mix to longer term hire at large customers, with
some dedicated plant performing bulk materials handling on site at customers`
premises. The division has the majority of its work derived from waste disposal
sites, bulk materials handling and mining operations. In addition to providing
the group`s landfilling operations with their plant requirements in-house,
Conquip are now also supplying EnviroServ Tailings with a large portion of their
plant needs. This division`s capital expenditure of R84 million during the
financial year, has brought the average age of its plant fleet down considerably
and has created sufficient capacity for the forthcoming financial year.
International Operations
EnviroServ`s international operations` revenue was up 18%, as the domestic waste
collection contract in Luanda grew by 12% and the operations in Namibia and
Mozambique began to expand. While operating conditions in Angola continued to be
difficult, acceptable margins were maintained. Although the group remains
confident that opportunities exist for EnviroServ in the Gulf region no new work
was secured during the year.
Changes in Directorate
Mr CLA Coppings was appointed as an Executive Director on 1 June 2008.
Basis of preparation
The consolidated financial statements have been prepared on a historical cost
basis except for the measurement at fair value of financial instruments.
The consolidated financial statements of EnviroServ and its subsidiaries have
been prepared in accordance with IAS 34 - Interim Financial Reporting. The
accounting policies have been applied consistently to all periods presented in
the financial statements except that the group has adopted IFRS 7 - Financial
Instruments: Disclosures and IAS 1 - Presentation of Financial Statements
(Amendment). The adoption of these standards did not have any effect on the
financial performance or position of the group. They did however give rise to
additional disclosures.
Segmental reporting
Given that the group does not operate in more than one material business or
geographical segment other than waste management in Southern Africa, both
primary and secondary segmental disclosure requirements are included in the
financial statements.
Audit opinion
The consolidated annual financial results have been audited by the company`s
auditors Ernst & Young Inc. Registered Auditors. Their unqualified audit opinion
is available for inspection at the company`s registered office.
Special Dividend
The directors have on 4 August 2008 declared a special cash dividend of 35 cents
per share to be paid on Monday, 29 September 2008. The last day to trade in
order to participate in the dividend (cum dividend) will be Thursday, 18
September 2008. The shares of the company will commence trading "ex" the
dividend from the commencement of business on Friday, 19 September 2008. The
record date on which the shareholders must be registered in order to participate
in the dividend will be Friday, 26 September 2008. Share certificates may not be
dematerialised or rematerialised between Friday, 19 September and Friday, 26
September 2008 both dates inclusive.
Events subsequent to the year end
On 4 August 2008 Parchment Trading 72 (Pty) Ltd proposed a scheme of arrangement
between EnviroServ and its shareholders which, if implemented, would result in
the company delisting from the JSE on or about 27 October 2008.
A McLean DK Gordon
Chairman Chief Executive
10 September 2008
Directors
A McLean (Chairman), DK Gordon (Chief Executive), PF Crowley*, CLA Coppings, MBN
Dube*, E Gombault, B Joffe*, D Lavarinhas, PM Mandela*, EK Motebang, JL
Pamensky*, RP Rocher, AC Salomon*
*Non-executive
Secretary: O Deftereos (ACIS, CA (SA))
Registered office
Brickfield Road, Meadowdale, Germiston 1401
Sponsor
Investec Bank Limited
100 Grayston Drive, Sandton 2196
PO Box 785700, Sandton 2146
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg 2001
Date: 10/09/2008 15:57:03 Produced by the JSE SENS Department.
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