| Tue 29 Mar 2011, 12:07 | | IWE - Interwaste Holdings Limited - Reviewed condensed preliminary results for |
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IWE
IWE
IWE - Interwaste Holdings Limited - Reviewed condensed preliminary results for
the year ended 31 December 2010
Interwaste Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2006/037223/06)
(JSE code: IWE ISIN:ZAE000097903)
("the company" or "the Group")
Reviewed condensed preliminary results for the year ended 31 December 2010
Condensed Consolidated Statement of Comprehensive Income for the year ended 31
December 2010
Reviewed % Restated Audited
Dec 2010 Change Dec 2009 Dec 2009
R`000 R`000 R`000
Revenue 442 674 8.7 407 259 407 259
Cost of sales (290 032) (226 406) (215 658)
Gross profit 152 642 (15.6) 180 853 191 601
Other income 2 082 2 483 2 483
Operating expenses (123 401) (122 390) (122 390)
Earnings before interest, 31 323 60 946 71 694
tax, depreciation &
amortisation
Depreciation& amortisation (38 816) 11.3 (34 872) (25 967)
(Loss)/profit before (7 493) 26 074 45 727
interest&taxation
Investment income 5 298 3 388 3 388
Share of profit in equity 55 1 113 1 113
accounted joint venture
Net interest paid (13 235) (26) (17 881) (13 860)
(Loss)/profit before (15 375) 12 694 36 368
taxation
Taxation credit/(expense) 3 419 (2 651) (10 653)
Total comprehensive (11 956) 10 043 25 715
(loss)/income for the year
Comprehensive (loss)/income
for the year attributable
to:
- ordinary shareholders (12 067) 9 299 24 971
- non controlling interests 111 744 744
Reconciliation of headline
(loss)/earnings
Comprehensive (loss)/income (12 067) 9 299 24 971
attributable to ordinary
shareholders
Profit on disposal of (4 254)
subsidiary
Impairment of goodwill 1 432
Impairment of investment in 1 416
joint venture
Loss / (profit) on disposal 2 398 (1 817) (1 817)
of property, plant &
equipment
Headline (loss)/earnings (11 075) 7 482 23 154
attributable to ordinary
shareholders
Weighted average number of 329 311 210 307 205 722 307 205 722
shares in issue on which
earnings per share are
based
Basic (loss)/earnings per 3.03 8.13
share (cents) (3.66)
Loss/(profit) on disposal 0.73 (0.59) (0.59)
of property, plant &
equipment (after tax)
(cents)
Impairment of goodwill 0.43 - -
Impairment of investment in 0.43 - -
joint venture
Profit on disposal of (1.29) - -
subsidiary (after tax)
(cents)
Headline (loss)/earnings (3.36) 2.44 7.54
per share (cents)
Prior year adjustment
Adjustment Tax After Tax
effect
Unrecorded liabilities (6 930) 1 940 (4 990)
Inventory valuation (3 818) 1 069 (2 749)
Depreciation (8 904) 2 493 (6 411)
Tax, interest & penalties (4 022) 2 500 (1 522)
Total (23 674) 8 002 (15 672)
The comparative results for the year ended 31 December 2008 have not been
presented as required by IAS1, as the prior year adjustment had no effect on the
results previously reported.
Condensed Consolidated Statement of Changes in Equity for the year ended 31
December 2010
Reviewed Restated Audited
Dec 2010 Dec 2009 Dec 2009
R`000 R`000 R`000
Total comprehensive (loss)/income for the (11 956) 10 043 25 715
year
Disposal of subsidiary (non-controlling (1 575) (689) (689)
interest)
Dividends paid to non-controlling (244) (465) (465)
interest
Share based payment expense 143 - -
Equity at beginning of year 250 413 241 524 241 524
Equity at end of year 236 781 250 413 266 085
Made up as follows :
Share capital issued 25 25 25
Share premium 175 466 175 466 175 466
Share based payment reserve 1 715 1 572 1 572
Retained earnings 57 801 69 129 84 801
Non controlling interests 1 774 4 221 4 221
Total equity 236 781 250 413 266 085
Condensed Consolidated Statement of Financial Position as at 31 December 2010
Reviewed Restated Audited
Dec 2010 Dec 2009 Dec 2009
R`000 R`000 R`000
Assets
Non-current assets 296 552 316 975 325 879
Property, plant and equipment 248 540 263 544 272 448
Goodwill 179 185 185
Intangible assets 47 001 49 590 49 590
Investment in joint venture 110 1 471 1 471
Deferred taxation asset 722 2 185 2 185
Current assets 119 902 137 347 141 564
Inventories 15 717 33 607 37 425
Loans to related companies 7 347 1 441 1 441
Tax receivable 6 947 10 256 10 655
Trade and other receivables 80 581 86 212 86 212
Cash and cash equivalents 9 310 5 831 5 831
Total assets 416 454 454 322 467 443
Equity and liabilities
Equity 236 781 250 413 266 085
Share capital 175 491 175 491 175 491
Share based payment reserve 1 715 1 572 1 572
Retained earnings 57 801 69 129 84 801
Non controlling interests 1 774 4 221 4 221
Non-current liabilities 66 710 80 852 85 231
Interest bearing borrowings 47 739 54 285 54 285
Deferred taxation liability 18 971 26 567 30 946
Current liabilities 112 963 123 057 116 127
Trade and other payables 37 949 46 624 39 694
Interest bearing borrowings 51 547 50 172 50 172
Taxation payable - 881 881
Bank overdrafts 23 467 25 380 25 380
Total liabilities 179 673 203 909 201 358
Total equity and liabilities 416 454 454 322 467 443
Number of share in issue at year end 329 311 208 329 311 208 329 311 208
Net asset value per share (cents) 71.4 74.8 79.5
Net tangible asset value per share 57.1 59.7 64.5
(cents)
Condensed Consolidated Statement of Cash Flow for the year ended 31 December
2010
Reviewed Restated Audited
Dec 2010 Dec 2009 Dec 2009
R`000 R`000 R`000
Cash flows from operating activities 38 424 41 214 41 214
Cash flows utilised by investing activities (34 948) (54 383) (54 383)
Cash flows generated from/(utilised by) 1 916 (19 296) (19 296)
financing activities
Net increase/(decrease) in cash and cash 5 392 (32 465) (32 465)
equivalents
Cash and cash equivalents at beginning of (19 549) 12 916 12 916
year
Cash and cash equivalents at end of year (14 157) (19 549) (19 549)
Condensed Consolidated Segment Report for the year ended 31 December 2010
Reviewed Restated Audited
Dec 2010 Dec 2009 Dec 2009
R`000 R`000 R`000
Gross revenue 442 674 407 259 407 259
Waste management 270 566 216 200 216 200
Metals recovery 37 469 39 548 39 548
Organics 56 755 57 146 57 146
Landfill management, 77 884 94 365 94 365
construction&rehabilitation
Profit/(loss) before interest and taxation (7 493) 26 074 45 727
Waste management 14 307 32 668 41 402
Metals recovery (13 126) (6 551) (1 173)
Organics (5 588) (3 641) (1 542)
Landfill 3 598 7 040
management,construction&rehabilitation (3 086)
Depreciation 38 816 34 872 25 967
Waste management 23 378 22 179 16 737
Metals recovery 1 786 1 804 1 050
Organics 1 826 3 193 2 051
Landfill management, construction 11 826 7 696 6 129
&rehabilitation
Geographical segments are not reported as the company operates mainly in South
Africa and its international operations do not meet the IFRS 8 thresholds for
reportable segments.
Overview
The last year has been difficult for the Group. While the waste management
business performed acceptably, the landfill business was affected by a number of
asset impairments, the organic business was negatively affected by the strong
Rand and the metals recovery business ("MRC") felt the impact of lower metal
prices.
In addition, in the preparation of the results for the year the following was
determined:
- the results for the prior year were overstated by R15.7m(after tax). This
comprised an overstatement of property, plant and equipment of R6.4m, an
overstatement of inventory of R2.7m, and an under accrual of liabilities,
including taxation, of R6.6m.
- a number of significant asset impairments were required in the current
year. These comprised:
- an impairment of R4.7m to inventory held by MRC;
- R11.5m of accelerated depreciation on property, plant and equipment;
- an impairment of R3.2m in respect of redundant property, plant and
equipment;
- an impairment of R5.8m to receivables;
- an impairment of R1.4m to goodwill, and
- a R1.4m impairment to the investment in a joint venture.
The current and prior year adjustments resulted from a combination of accounting
errors, deficiencies in the system of internal financial controls and losses in
the value of certain of the assets held by the Group.
The following details are relevant:
- MRC`s stockholding was reduced to nil by the end of the financial year.
The controls relating to inventory purchases and sales have been tightened
substantially and strict limits have been imposed on maximum inventory
levels;
- a detailed review of the fixed asset register was performed and non
performing assets were identified and impaired. The controls to ensure
that non-performing assets are timeously indentified and impaired have been
strengthened;
- all receivables assessed as non recoverable, or as likely to be non
recoverable, or a portion of which is likely to be non recoverable, were
impaired, or the relevant portion was impaired. The Group transacts with a
number of municipalities and government departments and certain of the
amounts due from these entities have been outstanding for a considerable
period. While our experience has been that a large proportion of the
outstanding amounts will be recovered over time, given the constrained
economic climate and the financial difficulties being experienced by a
number of these entities, a conservative approach was adopted to assessing
the recoverability of longer outstanding amounts.
There have been significant changes and upgrades to the finance team and the
internal financial control deficiencies have been addressed. Where appropriate,
changes to general management have been made and divisional operating policies
have been adjusted.
Divisional results
The waste management division performed well at an operational level. It
produced a profit before interest, tax and impairments of R27.9m and after tax,
interest and impairments of R4.4m. The new fleet rendered good returns, in line
with expectations, with improved operational efficiencies and reduced
maintenance costs. Disposal costs have increased significantly and the Group`s
strategy of reducing the actual disposal cost through recycling and more
effective classification of waste streams will be an increasingly important
contributor to profitability and client service.
The landfill division`s revenue decreased by 5% due to the termination of low
margin contracts, (excluding the reduction due to the sale of Envirofill
Namibia).Profit before taxation decreased due to a number of asset impairments.
The division transacts, inter alia, with a number of municipalities, which
regularly extend repayment terms and require considerable management. The
division invested heavily in the FG Landfill site in Midrand and the investment
should yield profits and cash flow over the next few years.
The organic manufacturing division had a difficult year with revenue decreasing
by 1% over the prior year and losses before interest and tax increasing by 53%.
Trading conditions for the division remain difficult with consumer lines moving
slowly in the current economic climate and export sales being substantially
reduced as a result of the strong Rand. The installation of new process
equipment during the year improved operational efficiencies and reduced
operating costs.
The metals recycling division was problematic and produced a loss of R13.1m
(before interest and tax). The business was de-stocked in the latter part of the
financial year and there were significant impairments to the carrying value of
inventory. The manner in which the division operates has been changed with
strict controls over inventory purchases and sales and the imposition of limits
on maximum inventory levels and tolerable exposures to changes in metal prices.
Financial
Group revenue increased by 9% to R442m (2009: R407m).
Gross profit decreased by 16% to R152m (2009: R181m).
EBITDA decreased by 48% to R31m (2009: R61m).
The Group has moved a significant portion of its fleet onto full maintenance
leases. A consequence of this is that the lease cost is included in cost of
sales, which depresses gross margin percentages, but depreciation and finance
costs reduce correspondingly.
The Group continued to invest in the business during the year. Operating
activities generated cash of R38.4m and R35m of this was invested in operating
assets. Encouragingly, the Group generated net cash of R5.4m after reducing
liabilities.
In January 2010 the Group disposed of its Namibian subsidiary which had
generated revenue of R12.8 million and headline earnings of R500 219 in the
comparative period. On a like for like basis, Group revenue increased by 12%
(R47.8m).
Prospects
Despite the note of caution in the interim announcement, the results for the
year are a disappointment. Significant effort was applied to improving
efficiencies and reducing costs in the operating businesses and while the
efforts bore fruit, the results thereof were outweighed by the impairments
recorded.
Management`s focus for 2011 is:
- to continue to maintain and grow the Group`s market share. We will pursue
growth where the returns justify the investment and the revenue from the
contracts can be collected within reasonable periods;
- cost and productivity improvements. Progress has been made in this area
and further gains are targeted. The move to a new fleet has resulted in a
sustained reduction in maintenance costs and an improvement in operational
efficiencies;
- effective management of working capital. Growth in the business and the
difficult economic environment have meant that working capital levels are
often strained and active management of the Group`s funding requirements is
critical;
- management of asset growth. Historically all surplus cash has been
invested in property, plant and equipment and working capital, to
facilitate growth. These investments will continue to be made where
appropriate, however there is considerable emphasis on more effective
leveraging of the existing asset base.
While the economic environment remains difficult, the current year has begun
positively for the Group.
Changes to the board of directors
Funani Mojono joined the board as an independent non-executive director in June
2010.
Ethan Dube resigned as chairman at the end of July 2010 and was replaced by
Andisiwe Kawa who is the independent non-executive chairperson. The board
extends its gratitude to Ethan for the contribution he made to the company.
The board also accepted the resignation of Ivan John during the period and
welcomed Andre Broodryk as the Group`s new financial director.
Bronwyn Willcocks announced her retirement as executive human resources director
with effect from 30 September 2010 and changed her status to that of a non-
executive member of the board. The board thanks her for an invaluable
contribution over a long period.
Dividend
The Group will not pay a dividend for the year.
Platinum Waste Resources (Pty) Ltd, a partly owned subsidiary, paid dividends of
R243 940 to non-controlling shareholders.
Accounting policies
Basis of preparation
These reviewed condensed consolidated financial statements are prepared in
accordance with the framework concepts and the recognition and measurement
criteria of International Financial Reporting Standards (IFRS), its
interpretations adopted by the International Accounting Standards Board (IASB),
the presentation and the disclosure requirements of IAS 34 Interim Financial
Reporting, the AC 500 standards as issued by the Accounting Practices Board, the
Listings Requirements of the JSE Limited and the requirements of the South
African Companies Act 61 of 1973, as amended. The condensed consolidated
financial results are prepared in accordance with the going concern principle
under the historical cost basis as modified by the fair value accounting of
certain assets and liabilities where required or permitted by IFRS.
The condensed consolidated financial statements are presented in South African
Rand.
Changes in accounting policies
The accounting policies are in terms of IFRS and are consistent with those
adopted in the previous year.
Prior year adjustment
In the preparation of the financial statements it was noted that the results for
the prior year were overstated. The overstatement was corrected by way of a
prior year adjustment which had the following impact:
31 December 31 December
2009 Prior year 2009
As previously adjustment Restated
reported
Property, plant and equipment 272 448 (8 904) 263 544
Inventories 37 425 (3 818) 33 607
Trade and other payables 39 694 6 930 46 624
Tax receivable 10 655 (399) 10 256
Deferred taxation liability 30 946 (4 379) 26 567
Profit before taxation 36 368 (23 674) 12 694
Taxation (10 653) 8 002 (2 651)
Comprehensive income for the period
attributable to:
ordinary shareholders 24 971 (15 672) 9 299
non controlling shareholders 744 - 744
Statement on going concern
The financial statements have been prepared on the going concern basis as the
directors believe that the Group has adequate resources to continue in operation
for the foreseeable future.
Report of the independent auditors
The condensed group financial statements of Interwaste Holdings Limited for the
year ended 31 December 2010 have been reviewed by the company`s auditor, KPMG
Inc. In their review report dated 29 March 2011, which is available for
inspection at the Company`s Registered Office, KPMG Inc state that their review
was conducted in accordance with the International Standard on Review
Engagements 2410, Review of Interim Information Performed by the Independent
Auditor of the Entity, which applies to a review of preliminary group financial
information, and have expressed an unmodified conclusion on the condensed
preliminary group financial statements.
Appointment of new auditors
RSM Betty & Dickson (Johannesburg) resigned as the Group`s auditors, with effect
from 16 September 2010, and KPMG Inc. were appointed as the Group auditors for
the 2010 financial year.
Thanks
The Board extends its gratitude to our employees, our customers and our
investors for the effort and support during the year. We have been through
tough times but we are tough people.
On behalf of the Board
29 March 2011
WAH Willcocks A Broodryk
Chief Executive Financial Director
CORPORATE INFORMATION
Independent non-executive directors: A Kawa (Chairperson) (appointed 01.08.10),
G Tipper, PF Mojono (appointed 01.06.10), BL Willcocks
Executive directors: WAH Willcocks (MD); A Broodryk (FD) (appointed 01.06.10);
LC Grobbelaar;
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: 29/03/2011 12:07:09 Produced by the JSE SENS Department.
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