| Thu 18 Sep 2008, 16:22 | | IWE - Interwaste Holdings - Reviewed Financial Results For The Six Months |
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IWE
IWE
IWE - Interwaste Holdings - Reviewed Financial Results For The Six Months
Ended 30 June 2008
Interwaste Holdings 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")
- Revenue up 65%
- Attributable earnings up 27%
- Headline earnings up 33%
- Earnings per share up 11%
Strong operating cash flow
REVIEWED GROUP INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2008
Abridged income statement
Reviewed Restated(1
6 months )
June 2008 Reviewed
R`000 6 months
June 2007
R`000
Revenue 238 691 144 259
Cost of sales (163 555) (76 565)
Gross profit 75 136 67 694
Other income 863 1 826
Administration expenses (39 043) (38 195)
Earnings before interest, tax, 36 956 31 325
depreciation and amortisation
Depreciation and amortisation (7 411) (9 863)
Profit before interest and taxation 29 545 21 462
Net interest paid (7 403) (4 266)
Profit before taxation 22 142 17 196
Taxation (6 666) (5 003)
Profit after taxation 15 476 12 193
Minority interests (581) (487)
Profit attributable to ordinary 14 895 11 706
shareholders
Reconciliation of headline earnings
Profit attributable to ordinary 14 895 11 706
shareholders
Profit on disposal of property, plant (245) (663)
and equipment
Headline earnings attributable to 14 650 11 043
ordinary shareholders
Weighted average number of shares in 297 419 259 771
issue on which earnings per share are 110 880
based (2)
Basic earnings per share (cents) 4.5
5.0
-
Profit on disposal of property, plant (0.1) (0.2)
and equipment (after tax) (cents)
Headline earnings per share (cents) 4.9 4.3
Weighted average number of shares in 297 419 259 771
issue on which earnings per share are 110 880
based
Share trust shares (3) - 306 849
Equity instrument 39 560 -
439
Fully diluted weighted average shares 336 979 260 078
in issue (4) 549 729
Fully diluted earnings per share 4.4 4.5
(cents)
Fully diluted headline earnings per 4.4 4.3
share (cents)
Notes:
(1) Certain reclassifications were made to gross profit and administrative
expenses.
(2) The weighted average number of shares in issue includes a pro rata
portion, namely 50 439 561 shares, of the 90 000 000 shares which were
cancelled in terms of an agreement dated 11 April 2008. Ratification of
the cancellation of the shares occurred subsequent to 30 June 2008, as
detailed in the Post Balance Sheet Adjusting Event paragraph.
(3) 7 000 000 ordinary shares held by the Interwaste Holdings Share
Incentive Scheme have been treated as treasury shares. The shares have
not been added back in the current period as the fair value is less than
the strike price.
(4) The fully diluted weighted average number of shares in issue includes
the 90 000 000 shares referred to in note 2 above. Should the company`s
headline earnings for the year ending 31 December 2008 exceed R32,8
million the Inter-Waste (Pty) Limited ("Interwaste"), Enviro-Fill (Pty)
Limited ("Envirofill") and Ex-Waste (Pty) Limited ("Ex-Waste") vendors
will be entitled to a claw-back, pro-rata to where headline earnings
fall in the range between R32,8 million and R43,3 million, of the 90 000
000 ordinary shares previously cancelled, in pursuance of which the
relevant number of Interwaste Holdings ordinary shares will be re-
issued.
Abridged balance sheet
Reviewed Reviewed
June 2008 June 2007
R`000 R`000
ASSETS
Non-current assets 261 606 208 210
Property, plant and equipment 207 101 152 955
Goodwill 48 534 47 464
Intangible assets 1 579 -
Other financial assets 1 845 7 791
Deferred tax 2 547 -
Current assets 153 368 144 189
Inventories 35 182 22 602
Current tax receivable 2 938 -
Trade and other receivables 90 158 54 311
Bank and cash 25 090 67 276
Total assets 414 974 352 399
EQUITY AND LIABILITIES
Equity 216 190 196 741
Issued capital 34 34
Share premium 99 568 183 048
Reserves 77 744 -
Retained earnings 35 926 11 605
Minority interest 2 918 2 054
Non-current liabilities 79 891 74 478
Other financial liabilities 59 002 54 858
Shareholder loan 150 -
Deferred taxation 20 739 19 620
Current liabilities 118 893 81 180
Loans payable 550 4 596
Trade and other payables 60 821 38 595
Current portion of non-current 46 307 37 648
liabilities
Taxation 3 094 341
Bank overdraft 8 121 -
Total equity and liabilities 414 974 352 399
Number of shares in issue at period 246 979 336 979
end (1) 551 551
Net asset value per share (cents) 86.4 57.8
Net tangible asset value per share 66.1 43.7
(cents)
Adjusted number of shares in issue at 246 979 246 979
period end (2) 551 551
Adjusted net asset value per share 86.4 78.8
(cents)
Adjusted net tangible asset value per 66.1 59.6
share (cents)
Notes:
(1) 7 000 000 ordinary shares held by the Interwaste Holdings Share
Incentive Scheme have been treated as treasury shares.
(2) 90 000 000 shares were cancelled in terms of an agreement dated 11 April
2008 which was ratified by shareholders on 25 August 2008. The adjusted
number of shares in issue is provided for illustrative purposes and
shows the effect of the cancellation.
As set out above there is a claw back of the cancelled shares if certain
earnings conditions are met. The fair value of this equity instrument,
R76,5 million is reflected against the treasury shares.
Abridged statement of changes in equity
Reviewed Reviewed
6 months 6 months
June 2008 June 2007
R`000 R`000
Balance at beginning of period 201 337 -
Net profit for the period 14 895 11 706
Issue of share capital - 34
Share premium (1 202) 183 048
Treasury shares (76 500) -
Equity instrument 76 500 -
Share based reserves 579 -
Purchase of Earth 2 Earth (Pty) - 1 299
Limited minority interest
Dividend paid - (1 400)
Minority interests 581 2 054
Balance at end of period 216 190 196 741
Abridged cash flow statement
Reviewed Reviewed
6 months 6 months
June 2008 June 2007
R`000 R`000
Cash flow from operating 26 090 9 164
activities
Cash flow from investing (24 564) (142 995)
activities
Cash flow from financing (7 923) 201 107
activities
Net (decrease)/increase in cash (6 397) 67 276
and cash equivalents
Cash and cash equivalents at 23 366 -
beginning of period
Cash and cash equivalents at end 16 969 67 276
of period
Abridged segment report
Reviewed Reviewed
6 months 6 months
June 2008 June 2007
R`000 R`000
Gross revenue
Waste management 123 200 93 405
Metals recovery 36 546 -
Landfill management, construction and 78 945 50 854
rehabilitation
238 691 144 259
Profit before interest and taxation
Waste management 13 737 11 054
Metals recovery 8 615 -
Landfill management, construction and 7 193 10 408
rehabilitation
29 545 21 462
Depreciation
Waste management 6 882 9 836
Metals recovery 407 -
Landfill management, construction and 122 27
rehabilitation
7 411 9 863
Geographical segments are not reported as the company operates mainly in
South Africa and its international operations do not meet the IAS 14
thresholds for reportable segments.
OVERVIEW
The directors of Interwaste Holdings are pleased to present the reviewed
interim financial results for the six months ended 30 June 2008 ("the interim
period"). While increasing inflation, high interest rates, the rising fuel
prices, blackouts and the general tightening of conditions in the South
African economy made the period difficult, the group performed well growing
both revenue and earnings.
The Interwaste Waste Management division experienced excellent growth largely
as a result of organic growth from existing clients and several major new
contracts in the municipal, industrial and resources sectors. A Record of
Decision was received to operate a hazardous waste treatment facility in
Gauteng. This plant is expected to be operational in the second half of 2008
and will strengthen not only the division`s earnings but also its strategic
service offerings to its Gauteng customer base.
The Organics division, which forms part of the Waste Management division for
segmental reporting purposes, consolidated its Mpumalanga manufacturing
facilities which will result in long term cost-savings. Reasonable sales
were experienced into the export markets and the division began to build
inventory levels in anticipation of the significantly busier spring and
summer seasons.
This Metals Recovery business unit was established towards the end of 2007 to
expand the group`s recycling offerings. Delays experienced in the
importation of specialised equipment hampered initial growth, however since
the commissioning of the equipment in mid-April 2008 the division`s
performance has been outstanding. An investment has been made to establish a
metal recovery facility in the Western Cape.
The Landfill management, construction and rehabilitation division grew sales
in the first half of the year as a result of short-term contracts for
industry-related bulk earthworks activities. These projects were concluded
but did not yield the desired returns and negatively affected the division`s
profitability. The division has refocused its efforts and anticipates a
better second half.
The Interwaste Holdings board was strengthened during the period with the
appointment of Ivan John as the new group financial director and Gavin Tipper
as a non executive director.
FINANCIAL RESULTS
Group revenue increased by 65% to R238.7 million (2007: R144.3 million). The
Inter-waste group grew turnover by 71% and the Enviro-Fill group by 55%.
Gross profit increased by 11% to R75.1 million (2007: R67.7 million),
EBITDA grew by 18% to R36.9 million (2007: R31.3 million).
Rising input costs, particularly fuel costs, reduced margins during the first
part of the period. Steps were taken to manage this and normal operating
margins were substantially restored by the latter part of the period.
Headline earnings of R14.7 million were achieved against R11.0 million for
the comparative interim period, while profit attributable to ordinary
shareholders rose 27% to R14.9 million (2007: R11.7 million).
Had the 90 million shares referred to above not been cancelled, the group`s
earnings per share would have been fractionally down and its headline
earnings per share fractionally up.
Operating activities were strongly cash generative and the resultant cash
flow was reinvested to support the growth in the business.
The group has a number of exciting opportunities for growth and considerable
attention is being paid to gearing and working capital levels and the optimal
use of capital.
PROSPECTS
Growth prospects remain strong for the remainder of 2008.
The imminent advent of the Waste Bill will present growth opportunities for
the Waste Management division which is well placed in terms of geographic
footprint, expertise, resources, high operating standards and a 20 year track
record. The division has solid long-term relationships with many of its
clients and these, together with its ability to continually innovate, bode
well for future growth.
We anticipate strong revenue growth in the organics division in the second
half which should establish this division as a dominant player in the
industry.
Additional metal recovery facilities will be established in both Gauteng and
Mpumalanga in the near future and continued strong growth in revenue and
earnings from this area is expected.
The Landfill Management, Construction and Rehabilitation division has been
awarded several major landfill management contracts at good margins. These
will come into effect in the second half of the year. The division has also
acquired access to, but in accordance with its policy not ownership of, 3.5
million cubic metres of landfill space at a centralised facility in Gauteng,
which will facilitate the group`s disposal needs for the medium term at very
competitive rates. The division continues to focus on Waste-to-Energy
projects and has been awarded landfill gas installations at three major
landfill facilities in Gauteng and the operation and management thereof for
five years. The construction and rehabilitation of mine tailings dams was
previously identified as a growth area and an associate has won two large
management contracts for these services.
The recent decreases in the fuel price will affect the group positively. A
number of small acquisitions are being considered and other acquisition
opportunities will be contemplated.
DIVIDEND POLICY
All earnings generated by the group are currently utilised to fund growth.
The company will reconsider its dividend policy on an annual basis as the
business matures.
BASIS OF PREPARATION
The interim results have been prepared in accordance with IAS 34 (Interim
Financial Reporting). The accounting policies used to prepare these interim
financial statements are consistent with those applied in the prior interim
period and at previous year-end and are in accordance with International
Financial Reporting Standards.
POST BALANCE SHEET ADJUSTING EVENT
An agreement was entered into on 11 April 2008, and ratified by shareholders
on 25 August 2008, with the original Inter-Waste, Enviro-Fill and Ex-Waste
vendors, being the Wilco Family Trust, GL Share Trust, Kusasa Trust, Tibiyo
Ta Mbuyze Trust, Frilma Family Trust and Ex-Waste, which had the effect that
90 000 000 Interwaste Holdings ordinary shares previously issued to the
vendors were cancelled.
If the company`s headline earnings for the year ending 31 December 2008
exceed R32,8 million the vendors will be entitled to a pro rata claw-back of
the cancelled ordinary shares, in pursuance of which the relevant number of
Interwaste Holdings ordinary shares will be re-issued. The pro rata claw-back
is based on the original profit forecast for the period ending 31 December
2008 as set out in the prospectus and will be based on headline earnings
achieved in excess of R 32.8 million and up to R43.3 million.
As the transaction was ratified on 25 August 2008, it has been accounted for
in these interim results as an adjusting post balance sheet event.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the going-concern basis as the
directors have every reason to believe that the company has adequate
resources in place to continue in operation for the foreseeable future.
AUDITORS` REVIEW
The auditors, RSM Betty & Dickson (Johannesburg), have reviewed these interim
results. A copy of their unqualified review opinion is available for
inspection at the company`s registered office.
APPRECIATION
The directors would like to thank our staff for their extended efforts and
our clients for their support during the period. The growth in revenue we
achieved has made the group one of the largest waste management companies in
southern Africa, a position of which we are proud.
On behalf of the Board
18 September 2008
WAH Willcocks I John
Managing Director Financial Director
CORPORATE INFORMATION
Non executive directors: EG Dube (Chairperson), G Tipper
Executive directors: WAH Willcocks (MD); I John (FD); LC Grobbelaar; BL
Willcocks; 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 (Pty) Limited
Designated Adviser: Vunani Corporate Finance
Date: 18/09/2008 16:22:41 Produced by the JSE SENS Department.
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