| Mon 18 Feb 2002, 0:00 | | Chemical Services Limited - Audited Group Results |
|
December 2001
Chemical Services Limited
(Registration No. 1967/003338/06)
(Incorporated in the Republic of South Africa)
(Share Code:CHC ISIN Code: ZAE00009908)
("the Company")
Audited Group Results for the year ended 31 December 2001
Revenue +53% Trading profit +39% Headline earnings per share +20% Final
dividend per share +23%
Group Income Statement
2001 2000 Change
Rm Rm %
Revenue 2414,8 1575,7 +53
Trading profit 232,4 167,0 +39
Financing costs 32,4 10,3
Exceptional expenses 93,5 14,6
Associated companies' earnings 1,4 1,3
Profit before taxation 107,9 143,4
Taxation 47,6 46,0 +3
Profit after taxation 60,3 97,4
Attributable to outside shareholders (0,2) (0,7)
Attributable profit 60,1 96,7
Earnings per share (cents):
Headline 180,7 150,7 +20
Attributable 73,7 131,9 -44
Final dividend per share (cents) -
declared 27,0 22,0 +23
Interim dividend per share (cents) -
paid 17,5 15,0 +17
Dividend cover (times) 4,1 4,1
Depreciation/amortisation (excluding
goodwill) (Rm) 46,0 29,5
Trading margin (%) 9,6 10,6
EBITDA margin (%) 11,5 12,4
Summarised Group Balance Sheet
2001 2000 1999
Rm Rm Rm
Shareholders' equity 592,5 452,7 Q
Outside shareholders' interest 25,5 12,9 1,5
Interest-bearing debt 221,7 7,3 73,8
Capital employed 839,7 472,9 401,0
Fixed assets and intellectual property 307,1 202,8 183,2
Goodwill 166,2 43,8 499,8
Deferred taxation 24,6 8,9 8,7
Current assets 960,5 562,9
Interest-free liabilities (618,7) (345,5) (290,7)
Net assets 839,7 472,9 401,0
Total shares in issue (millions) 81,5 73,5
Weighted average shares in issue (millions) 81,5 73,3
Capital expenditure (Rm) 97,4 26,6 28,8
Net asset value per share (cents) 727 616 466
Gearing ratio (%) 37 2 23
Summarised Group Cash Flow Statement
2001 2000
Rm Rm
Trading profit 232,4 167,0
Add: non-cash items 53,6 28,6
Less: cash exceptional expenses (50,1) -
235,9 195,6
(Increase)/decrease in working capital (14,9) 36,3
Cash generated from operations 221,0 231,9
Financing costs 32,4 10,3
Taxation paid 44,8 51,2
Cash available from operations 143,8 170,4
Dividends paid 32,2 27,7
Cash retained from operations 111,6 142,7
Utilised in investing activities 313,8 82,1
Fixed assets - additions 97,4 26,6
- proceeds from disposals (2,8) (1,2)
Acquisitions and disposals of businesses 219,2 56,7
Total acquisitions 322,1 96,7
Less: settled by issue of shares (102,9) (40,0)
(Deficit)/surplus (202,2) 60,6
Financed by:
Increase/(decrease) in net borrowings 201,4 (62,5)
Shares issued for cash 0,8 1,9
Changes in Shareholders' Equity
2001 2000
Rm Rm
Attributable profit 60,1 96,7
Dividends (32,2) (25,2)
Shares issued 103,7 41,9
Non-distributable reserve adjustment - (1,0)
Unrealised profits on hedging activities 8,2 (0,5)
Net increase in equity 139,8 111,9
Equity at beginning of year 452,7 325,7
Effect of change in accounting policy 15,1
Equity at end of year 592,5 452,7
Made up as follows:
Share capital and premium 225,4 121,7
Non-distributable reserves 14,8 6,6
Distributable reserves 352,3 324,4
592,5 452,7
2001 2000
Rm Rm
Reconciliation of Headline Earnings
Attributable profit 60,1 96,7
Goodwill amortisation 40,9 9,9
After tax effect of charges on closure
and sale of operations 46,2 3,9
Headline earnings 147,2 110,5
Changes in Group Portfolio
The 2001 figures reflect the incorporation during the year of the 80,1%
shareholding in AECI Coatings, the businesses of Kynochem, Industrial
Urethanes, Plaaskem and three minor but strategic acquisitions in the food
additive, personal care and water treatment sectors. These acquisitions, to
a total value of R322 million, constituted the largest portfolio growth
phase in Chemserve's history.
Comment
The group increased headline earnings per share by 20% to 180,7 cents. This
was a continuation of the record earnings pattern achieved for the last 9
consecutive years, resulting in compound growth in headline earnings per
share of 21% per annum over this period. This clearly demonstrates the
success of the group's acquisition and diversification strategy in recent
years.
These excellent results were achieved during a period when most global
specialty chemical businesses disappointed in the wake of the global
economic slowdown, exacerbated by the events in the USA during September.
Furthermore, the manufacturing sector of the local economy failed to show
any meaningful growth. Despite being largely dependent on imported raw
materials, the sharp deterioration of the Rand towards the end of 2001 had
no material impact on the results as these imports were covered by forward
exchange contracts.
The bulk of the group's operations performed very well. Revenue grew by 53%
to R2,4 billion and has more than doubled over the last 5 years. The
acquisitions made during the year contributed 42% of the increase in
revenue. The 39% increase in trading profit was, however, not commensurate
with the increase in revenue, mainly as a result of the under-performance of
AECI Coatings. The non-core divisions of this operation were discontinued in
the second half of the year. This, together with substantial fixed cost
reductions and the ongoing implementation of advanced technology sourced
from the joint venture partner, has since improved performance materially.
Finance costs increased due to higher borrowings following the acquisitions.
Interest cover remained at a healthy level in excess of 7 times and the year-
end gearing ratio of 37% was well within the group's target range. As part
payment for the acquisitions made from AECI, 7 920 000 new shares were
issued.
Exceptional items consisted of R41 million amortisation of goodwill and
charges of R52 million mainly relating to the closure and sale of
operations. The effective tax rate on headline earnings was slightly lower
than the previous year following the utilisation of certain taxation losses.
Increased capital expenditure included R30 million for the purchase of
properties already used by the group, the commissioning of a state-of-the-
art scrubbing system at the sulphuric acid plant at Umbogintwini, the
expansion of the group's manufacturing base and the installation of
equipment at customers' sites.
Outlook
The restructuring and refocusing of operations in recent years are expected
to contribute to continued growth in earnings in 2002 and beyond. A major
objective will be to maintain satisfactory returns on the group's
investments in assets and technology in the wake of input cost increases
following the sharp fall in the value of the Rand. Further acquisition
opportunities are being investigated. Management is aiming for a headline
earnings target of 210 cents per share in 2002.
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 dividends declared and AC116(revised) in respect of employee
benefits. These changes had no material impact on current year earnings.
Strate
Dematerialisation of the company's issued shares commenced on
2 July 2001. Shares still in paper form are no longer good for delivery and
will require to be dematerialised before participation in any transaction.
Dividend
The directors have declared a final dividend of 27 cents per share, the
formal announcement of which has been published.
Annual Report
The company's annual report will be posted to shareholders on or about 11
March 2002, and may also be viewed on our website, www.chemserve.co.za. For
a copy of the report please contact the Group Secretary, Private Bag X137,
Bryanston, 2021.
Lex van Vught Schalk Engelbrecht
Directors 18 February 2002
Declaration of dividend
The directors have declared a final dividend (No.70) of 27,0 cents per share
in respect of the year ended 31 December 2001. The last date to trade in the
company's shares for purposes of entitlement to the dividend will be
Wednesday, 20 March 2002. The shares will commence trading ex-dividend on
Friday 22 March 2002 and the record date will be Thursday, 28 March 2002.
The dividend will be paid on Tuesday, 2 April 2002.
Share certificates may not be dematarialised or rematerialised from
Wednesday 13 March 2002 to Friday 28 March 2002, both days inclusive.
By order of the Board Sponsor
S J Hughes PricewaterhouseCoopers
18 February 2002 Corporate Finance (Pty) Limited
