| Mon 26 Sep 2011, 11:24 | | IWE - Interwaste Holdings Limited - Unaudited condensed consolidated |
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IWE
IWE
IWE - Interwaste Holdings Limited - Unaudited condensed consolidated
financial results for the six months ended 30 June 2011
Interwaste Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2006/037223/06)
(JSE code: IWE ISIN: ZAE000097903)
("Interwaste" or "the Company" or "the Group")
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Unaudited Audited
Revised
6 months 6 months 6 months 12 months
June 2011 June 2010 June 2010 Dec 2010
R`000 R`000 R`000 R`000
Revenue 220 990 211 690 211 690 442 674
Cost of sales (129 382) (138 368) (132 012) (290 033)
Gross profit 91 608 73 322 79 678 152 641
Other income - 4 651 2 990 2 082
Operating expenses (66 828) (55 643) (50 759) (123 401)
Earnings before interest, tax, 24 780 31 909
depreciation and amortisation 22 330 31 322
Depreciation and amortisation (19 640) (23 544) (16 147) (38 814)
Profit/(loss) before interest 5 140 (1 214) 15 762 (7 492)
and taxation
Investment income - 464 464 5 298
Share of equity accounted 589 148 148 55
earnings of joint venture
Net interest paid (4 143) (5 070) (5 070) (13 236)
Profit/(loss) before taxation 1 586 (5 672) 11 304 (15 375)
Taxation (expense)/credit (429) 1 366 (3 055) 3 419
Total comprehensive 1 157 (4 306) 8 249 (11 956)
income/(loss) for the period
Comprehensive income for the
period attributable to:
Non-controlling interest (264) (372) (372) (111)
Comprehensive income/(loss) 893 7 877
attributable to equity holders (4 678) (12 067)
Reconciliation of headline
earnings/(loss)
Earnings/(loss) attributable to 893 (4 678) 7 877 (12 067)
ordinary shareholders
Adjusted for:
Profit on disposal of subsidiary - (4 254) (2 593) (4 254)
Loss on disposal of property, 289 827
plant and equipment 827 2 398
Impairment of investment in - 1 416 - 1 416
joint venture
Impairment of goodwill 1 432 1 432
Headline earnings/(loss) 1 182 6 111
attributable to ordinary (5 257) (11 075)
shareholders
Weighted average number of 329 311 329 311 329 311 329 311
shares in issue on which 210 210 210 210
earnings per share are based
Basic earnings/(loss) per share 0.27 (1.42) 2.39 (3.66)
(cents)
Loss on disposal of property, 0.09 0.25 0.25 0.73
plant and equipment
Impairment of goodwill - 0.43 - 0.43
Impairment of investment in - 0.43 - 0.43
joint venture
Profit on disposal of subsidiary - (1.29) (0.79) (1.29)
Headline earnings/(loss) per 0.36 (1.60) 1.85 (3.36)
share (cents)
Condensed Consolidated Statement of Changes in Equity
Unaudited Unaudited
Unaudited Audited
6 months Revised 6 months
June 2011 6 months June 2010 12 months
R`000 June 2010 R`000 Dec 2010
R`000 R`000
Total comprehensive income 1 157 (4 306) 8 249 (11 956)
for the period
Disposal of subsidiary (non- - (1 594) (1 594) (1 575)
controlling interest)
Dividends paid to minorities (105) (244) (244) (243)
Share option expense - - - 142
Equity at beginning of 236 781 266 085 266 085 250 413
period
Equity at end of period 237 833 259 941 272 496 236 781
Made up as follows:
Share capital issued 33 33 33 33
Share premium 175 458 175 458 175 458 175 458
Share based reserves 113 1 553 1 553 1 715
Retained income 60 287 80 861 93 416 57 801
Non controlling interest 1 942 2 036 2 036 1 774
Equity at end of period 237 833 259 941 272 496 236 781
Condensed Consolidated Statement of Financial Position
Unaudited Unaudited
Unaudited Audited
June 2011 Revised June 2010 12 months
R`000 June 2010 R`000 Dec 2010
R`000 R`000
ASSETS
Non-current assets 302 376 315 804 318 780 296 552
Property, plant and 253 866 257 319 264 716 248 540
equipment
Goodwill 47 001 50 381 50 381 47 001
Intangible assets 179 179 179 179
Investment in joint venture 700 1 619 1 619 110
Deferred tax asset 630 6 306 1 885 722
Current assets 117 308 140 418 145 113 119 902
Inventories 18 051 28 012 34 368 15 717
Other financial assets - 973 973 -
Loans to related companies 7 413 - - 7 347
Current tax receivable 2 254 4 202 4 202 6 947
Trade and other receivables 81 239 99 397 97 736 80 581
Cash and equivalents 8 351 7 834 7 834 9 310
Total assets 419 684 456 222 463 893 416 454
EQUITY AND LIABILITIES
Equity 237 833 259 941 272 496 236 781
Share capital 175 491 175 491 175 491 175 491
Share based payment 113 1 553 1 553 1 715
reserves
Retained earnings 60 287 80 861 93 416 57 801
Non-controlling interest 1 942 2 036 2 036 1 774
Non-current liabilities 58 942 76 578 76 578 66 710
Interest-bearing borrowings 40 172 47 782 47 782 47 739
Deferred tax liability 18 770 28 796 28 796 18 971
Current liabilities 122 909 119 703 114 819 112 963
Current tax payable 176 1 778 1 778 -
Interest-bearing borrowings 51 075 49 534 49 534 51 547
Trade and other payables 50 475 38 901 34 017 37 949
Bank overdrafts 21 183 29 490 29 490 23 467
Total liabilities 181 851 196 281 191 397 179 673
TOTAL EQUITY & LIABILITIES 419 684 456 222 463 893 416 454
Number of shares in issue 329 311 329 311 329 311 329 311
at period end 208 208 208 208
Net asset value per share 71.6 78.3 82.1 71.4
(cents)
Net tangible asset value 57.4 63.0 66.8 57.1
per share (cents)
Condensed Consolidated Statement of Cash Flow
Unaudited Unaudited Unaudited Audited
Revised
6 months 6 months 6 months 12 months
June 2011 June 2010 June 2010 Dec 2010
R`000 R`000 R`000 R`000
Cash inflow from operating 34 398 15 317 15 317 38 424
activities
Cash outflow on investing (25 033) (17 369) (17 369) (34 948)
activities
Cash (outflow)/ inflow from (8 040) (55) (55) 1 916
financing activities
Total cash movement for the 1 325 (2 107) (2 107) 5 392
period
Cash at beginning of period (14 157) (19 549) (19 549) (19 549)
Cash at end of period (12 832) (21 656) (21 656) (14 157)
Condensed Consolidated Segment Report
Unaudited Unaudited Unaudited Audited
Revised Original
6 months 6 months 6 months 12 months
June 2011 June 2010 June 2010 Dec 2010
R`000 R`000 R`000 R`000
Gross revenue
Waste management 155 888 130 340 130 340 270 566
Metals recovery 10 771 21 979 21 979 37 469
Organics 14 115 19 510 19 510 56 755
Landfill 40 216 39 861 39 861 77 884
220 990 211 690 211 690 442 674
Profit/ (Loss)
before interest and
taxation
Waste management 3 625 4 331 13 793 14 307
Metals recovery (2 006) (7 630) (2 713) (13 126)
Organics (1 648) (2 879) (2 338) (5 588)
Landfill 5 169 4 964 7 020 (3 085)
5 140 (1 214) 15 762 (7 492)
Depreciation
Waste management 12 440 14 732 10 103 23 377
Metals recovery 1 954 548 376 1 786
Organics 1 658 1 722 1 181 1 825
Landfill 3 588 6 542 4 487 11 826
19 640 23 544 16 147 38 814
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 six month period continued to be challenging for the Group. We
reported that the 2010 financial year had been difficult and conditions
during the current period again reflected a lack of growth in the parts of
the economy we operate in.
Interwaste produced a small profit for the period. Encouragingly, the
Group produced strong cash flows from operations which were reinvested into
the business.
The annual report for the year ended 31 December 2010 included a note that
a number of impairments had been made in that financial year. Certain of
the impairments related to the six month period to 30 June 2010 and the
comparative figures have been restated to reflect those impairments.
Details of the adjustments are set out in the "Financial" section below.
The waste management division grew revenue by 19,6% over the comparative
period but saw a 16,3% decrease in earnings before interest and taxation.
The decline in profits was a function of higher landfill costs, some of
which could not be passed on to customers, an increase in salary costs,
including the cost of new depots/businesses which will yield commensurate
returns as they develop, and higher fuel and vehicle operating costs.
Substantial increases in landfill disposal costs have characterised the
industry over the last few years and are likely to continue. In an
increasing number of cases we have been successful in developing alternate
disposal options for our customers which limited their cost increases and
protected our margins; this will become an increasingly important part of
our business. The development of a cell in our landfill which will be able
to accept waste from many of our clients will significantly contribute to
the Group`s future profitability.
MRC`s revenue decreased as operations in the division were scaled back.
This, together with substantially lower inventory write offs, resulted in a
reduction in the loss generated by the division.
Revenue in the organics division declined by 27,7% and the loss before
interest and tax reduced by 42,3%. We have appointed a new chief executive
to the division and we are confident that he should have a positive impact
on the second half of the year, which is the primary season for this
business.
Turnover in the landfill division was flat as were earnings. The division
is the largest landfill manager in the country and we need to make better
use of our scale to drive growth and reduce costs.
FINANCIAL
As set out in the annual report for the year ended 31 December 2010, a
number of large impairments were expensed in the 2010 financial year.
Certain of those related to the six month period to 30 June 2010 and the
comparative figures were restated to reflect that. The following
adjustments were processed:
Cost of sales (R 6,356 million)
- inventory was impaired by R6,4 million, the majority of which
comprised inventory held by MRC;
Operating expenses (R 4,884 million)
- goodwill was impaired by R1,4 million and an investment in a joint
venture by R1,4 million;
- an additional expense accrual of R2,0 million was required;
Depreciation (R 7,397 million)
- additional depreciation of property, plant and equipment of R5,8
million was processed;
- property, plant and equipment of R1,8 million was impaired;
Other income (R 1,661 million)
- profit on the sale of the Namibian subsidiary of R1,7 million was
brought to account;
Tax relief of the R4,4 million arose on the adjustments;
The net decrease in the previously reported profit after tax for the six
months ended 30 June was R12,6 million.
Group revenue for the six months increased by 4% to R221 million (2010 :
R212 million).
Gross profit increased by 25% to R92 million (2010 restated: R73 million).
EBITDA increased by 11% to R25 million (2010 restated: R22 million).
The limited increase in Group revenue is reflective of the difficult
markets we faced. Price increases have been limited, customers are
delaying and limiting clean ups where possible, and certain of our
competitors are tendering for landfill management contracts at prices that
are proving to be unsustainable.
The improvement in gross profit was a function of large stock impairments
in the comparative period and the positive contribution from the Group`s
own landfill in the current period.
Operating expenses increased as a result of inflation, additional operating
units, including a branch outside South Africa, the establishment of a
water treatment facility and the company owned landfill, the costs of a
strike plan and the expensing of costs on the development of a second
landfill, that do not yet qualify for capitalisation.
The Group produced strong cash flows from operations, primarily as a result
of improved working capital management. The cash was reinvested into
operating assets, the development of the cell in the Group`s landfill, and
applied to reduce borrowings.
PROSPECTS
The markets in which the Group operates are likely to remain difficult.
The nationwide strikes in July meant that many of our customers lost
production which negatively impacted our revenue and results for the month.
August has been substantially better and we should have a reasonable second
half should current operating levels continue and should we succeed in
cutting some of the costs we have targeted.
Interwaste will continue to offer clients innovative and cost effective
solutions for their waste disposal and will generate growth accordingly.
As part of this the Group expects to complete the development of the
landfill cell referred to above prior to the year end. This which will
facilitate our ability to offer clients a complete waste solution and
should be an important source of future revenue.
We have curtailed the metals recovery business and will continue to
evaluate its viability.
Significantly more marketing effort has been applied to the organics
business and we anticipate an improvement in turnover during the second
half of the year.
Our challenges in the landfill management business will be to continue
winning contracts in an environment which can be politically difficult and
to ensure that we manage our costs effectively so that contracts meet our
profitability requirements.
During the second half of the year we will be consolidating the majority of
our Gauteng operations into a single site the Group owns in Germiston.
This should lead to cost savings and provide the opportunity for improved
synergies across the different businesses.
DIVIDEND
The Group will not pay a dividend for the six month period.
Platinum Waste Resources (Pty) Ltd, a partly owned subsidiary, paid
dividends of R105 000 to non-controlling shareholders.
ACCOUNTING POLICIES
BASIS OF PREPARATION
These condensed consolidated interim financial statements have been
prepared in accordance with the recognition and measurement principles of
IFRS, the presentation and disclosure requirements of IAS 34 Interim
Financial Reporting, the AC 500 Standards as issued by the Accounting
Practices Board, the requirements of the South African Companies Act of
2008 and the JSE Listing Requirements. The accounting policies and methods
of computation applied in the preparation of these interim financial
statements are in accordance with IFRS and are consistent with those
applied in the preparation of the Group`s annual financial statements for
the year ended 31 December 2010.
The condensed consolidated interim financial statements are presented in
South African Rands.
STATEMENT ON GOING CONCERN
The interim 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.
APPRECIATION
The board extends its gratitude to our employees, our customers and our
investors for the effort and support during the period.
On behalf of the Board
26 September 2011
AH Willcocks A Broodryk
Chief Executive Financial Director
COROPORATE INFORMATION
Non-executive directors: A Kawa (Chairperson)
PF Mojono, GR Tipper, BL Willcocks
Executive directors: WAH Willcocks (MD), A Broodryk (FD), LC Grobbelaar
Registration number: 2006/037223/06
Registered address: P O 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: 26/09/2011 11:24:02 Produced by the JSE SENS Department.
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