| Mon 23 Jul 2001, 0:00 | | Chemical Services Limited - Interim Report |
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CHEMICAL SERVICES LIMITED
INTERIM REPORT FOR THE SIX MONTHS TO 30 JUNE 2001
Revenue + 48%
Trading profit + 33%
Headline earnings per share + 20%
Dividend per share + 17%
GROUP INCOME STATEMENT
Six months Year
to 30 June ended
31 Dec
2001 2000 Change 2000
(unaudited) % (audited)
Rm Rm Rm
Revenue 1121,3 756,0 +48 1575,7
Trading profit 100,6 75,4 +33 167,0
Financing costs 14,1 6,5 10,3
86,5 68,9 +26 156,7
Exceptional items (46,3) (4,8) (14,6)
Profit before
taxation 40,2 64,1 142,1
Taxation 16,8 23,2 46,0
Profit after
taxation 23,4 40,9 96,1
Attributable to
outside shareholders (0,4) (0,4) (0,7)
Associated companies'
earnings 0,4 0,6 1,3
Attributable profit 23,4 41,1 96,7
Earnings per share
(cents):
Headline 75,1 62,6 +20 150,8
Attributable 28,8 56,1 -51 131,9
Dividend per share
(cents) 17,5 15,0 +17 37,0
Dividend cover
(times) 4,3 4,2 4,1
Depreciation/
amortisation
(excluding goodwill)
(Rm) 22,0 14,6 29,5
Trading margin (%) 9,0 10,0 10,6
EBITDA margin (%) 10,9 11,9 12,4
Reconciliation of
headline earnings
Attributable profit 23,4 96,7
Goodwill amortisation 16,3 9,9
After tax effect of
losses on sale or
closure of businesses 21,4 3,9
Headline earnings 61,1 110,5
Summarised Group Balance Sheet
30 June 31 Dec
2001 2000
(unaudited) (audited)
Shareholders' equity 562,3 452,7
Outside shareholders' interest 3,4 2,3
Interest bearing debt 241,4 17,9
Capital employed 807,1 472,9
Property, plant, equipment and
intellectual property 297,6 202,8
Goodwill 148,8 43,8
Current assets 866,4 562,9
Total assets 1312,8 809,5
Defferred taxation 34,3 8,9
Interest-free liabilities (540,0) (345,5)
Net operating assets 807,1 472,9
Total shares in issue (millions) 81,5 73,5
Weighted average shares in issue
(millions) 81,4 73,3
Capital expenditure (Rm) 34,8 26,6
Net asset value per share
(cents) 690 616
Gearing ratio (%) 43 4
Summarised Group Cash Flow Statement
Six months to Year ended
30 June 31 Dec
2001 2000
(unaudited) (audited)
Rm Rm
Trading profit 100,6 167,0
Dividends received - 1,4
Non-cash items 21,6 32,3
Exceptional items (3,9) (5,1)
(Increase)/decrease
in working capital (46,4) 36,3
Cash generated from
operations 71,9 231,9
Financing costs - net 14,1 10,3
Taxation paid 26,0 51,2
Cash available from
operations 31,8 170,4
Dividends paid 17,9 27,7
Cash retained from
operations 13,9 142,7
Utilised in investments 222,6 82,1
Fixed assets - additions 34,8 26,6
- proceeds from disposals (1,4) (1,2)
Acquisitions of businesses189,2 56,7
Total acquisitions 292,2 96,7
Less: settled by issue of
shares (103,0) (40,0)
(Shortfall)/surplus (208,7) 60,6
Financed by:
Increase/(decrease) in net
borrowings 208,5 (62,5)
Increase in share capital
And premium 0,2 1,9
Changes in Shareholder's Equity
Six months Year
To 30 June ended
2001 Dec 2000
(unaudited) (audited)
Rm Rm
Attributable profit 23,4 96,7
Dividend (17,9) (25,2)
Shares issued 103,2 41,9
Non-distributable reserve adjustment - (1,0)
Foreign currency translation
differences 0,9 (0,5)
Net increase in equity 109,6 111,9
Equity at beginning of period 452,7 325,7
Change in accounting policy - 15,1
Equity at end of period 562,3 452,7
Made up as follows :
Share capital and premium 224,9 121,7
Non-distributable reserves 7,5 6,6
Distributable reserves 329,9 324,4
562,3 452,7
CHANGES IN GROUP PORTFOLIO
The 2001 interim results reflect the incorporation of the 80,1% shareholding
in AECI Coatings as well as the businesses of Kynochem, Industrial
Urethanes, Plaaskem and two minor but strategic acquisitions in the food
additive and water treatment sectors respectively.
COMMENT
The group's results are most pleasing in the context of the generally poor
performance of the global chemical industry, which is still reeling under
high energy-based raw material costs and a contraction in demand triggered
by the economic slowdown in the United States.
Headline earnings per share increased by 20% due to the continuing solid
performance of the group's traditional portfolio in a weak domestic economy,
as well as a satisfactory contribution from the acquisitions referred to
above. In addition, disciplined control over fixed costs was exercised.
The increase in trading profit was however not commensurate with the
increase in sales revenue, mainly as the result of the under performance of
AECI Coatings where restructuring is continuing following the introduction
of new technology in the prior year. Certain portions of the business are
being sold or closed to allow for greater focus on the core aspects of
automotive finishes.
Ongoing attention to cash management limited the impact of the acquisitions
on borrowings, resulting in a gearing ration of 43% at midyear. Interest
cover remains at an acceptable level of 7 times.
Capital expenditure was higher than in previous years due to the
installation of increased production capacity and maintenance of an enlarged
manufacturing base. Furthermore, it is planned to install a world class
scrubber at the sulphur dioxide plant at Umbogintwini in order to achieve
fully acceptable emission specifications.
The exceptional item consists of R16,3 million amortisation of goodwill and
charges of R30,0 million relating to the sale or closure of operations.
OUTLOOK
Notwithstanding a sombre economic outlook, the group is again expected to
achieve a significant improvement in earnings in the second half of the
year. The business of Plaaskem and Applied Chemicals have been merged,
which will strengthen the group's thrust into the specialised agrochemical
sector. In addition, Akulu-Marchon has assumed the management of the
sulphur-based business of Kynochem with the aim of maximising the
synergistic benefits between these operations. A number of further
acquisitions are also being contemplated. The directors therefore remain
committed to achieving target headline earnings of 167 cents a share for the
full year.
ACCOUNTING POLICIES
The accounting policies are consistent with those applied in the previous
financial year except for the introduction of AC107 (revised) in regard to
accounting for dividend declared.
STRATE
The conversion of the Company's shares to the STRATE system commenced on 2
July 2001 with the dematerialisation of such shares. Electronic trading
commenced on 23 July with the first electronic settlement date being 30 July
2001.
DIVIDEND
The directors have declared an interim dividend of 17,5 cents a share in
respect of the six months ended 30 June 2001. The last date to trade will be
10 August 2001. The shares will trade ex-dividend from 13 August 2001.
Record date will be 17 August 2001 and pay date 21 August 2001.
Lex van Vught
Schalk Engelbrecht
Directors
23 July 2001 www.chemserve.co.za
