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CHEMICAL SERVICES LIMITED - UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 30
JUNE 2002
Chemical Services Limited
(Registration No. 1967/003338/06)
(Incorporated in the Republic of South Africa)
(Share Code:CHE ISIN Code: ZAE000009908)
("the Company")
Revenue +31%
Trading profit +48%
Headline earnings per share +37%
Dividend per share +26%
Group Income Statement
Six months to Year ended
30 June 31 Dec
2002 2001 2001
(Unaudited) Change (Audited)
Rm Rm % Rm
Revenue 1469,7 1121,3 +31 2414,8
Trading profit 148,8 100,6 +48 232,4
Net financing costs 19,7 14,1 +40 32,4
Post-employment medical
aid costs 3,0 - -
Amortisation of goodwill 21,4 16,3 40,9
Exceptional expenses - 30,0 52,6
Associated companies`
earnings 0,3 0,4 1,4
Profit before taxation 105,0 40,6 107,9
Taxation 41,0 16,8 47,6
Profit after taxation 64,0 23,8 60,3
Attributable to outside
shareholders (1,5) (0,4) (0,2)
Attributable profit 62,5 23,4 +167 60,1
Earnings per share
(cents):
Headline 102,8 75,1 +37 180,7
Attributable 76,6 28,8 +166 73,7
Interim dividend per share
(cents) - declared 22,0 17,5 +26 17,5
Final dividend per share
(cents)- paid - - 27,0
Dividend cover (times) 4,7 4,3 4,1
Depreciation/amortisation
(excluding goodwill) (Rm) 25,1 22,0 46,0
Trading margin (%) 10,1 9,0 9,6
EBITDA margin (%) 11,6 10,9 11,5
Summarised Group Balance Sheet 30 June 31 Dec
2002 2001
(Unaudited) (Audited)
Rm Rm
Shareholders` equity 629,4 592,5
Minority interest 27,0 25,5
Interest-bearing debt - net 212,8 221,7
Capital employed 869,2 839,7
Property, plant, equipment and
intellectual property 309,5 307,1
Goodwill 144,7 166,2
Deferred taxation 21,4 24,6
Long term provisions (47,0) (44,0)
Trade working capital 538,0 449,2
Other current liabilities (97,4) (63,4)
Net assets 869,2 839,7
Total shares in issue (millions) 81,7 81,5
Weighted average shares in issue
(millions) 81,6 81,5
Capital expenditure (Rm) 26,1 97,4
Net asset value per share (cents) 770 727
Gearing ratio (%) 34 37
Summarised Group Cash Flow Statement
Six months to 30 June
2002 2001
(Unaudited)
Rm Rm
Trading profit 148,8 100,6
Add: non-cash items 25,1 21,6
Less: cash exceptional expenses - (3,9)
173,9 118,3
Increase in working capital 53,0 46,4
Cash generated from operations 120,9 71,9
Net financing costs 19,7 14,1
Taxation paid 44,5 26,0
Cash available from operations 56,7 31,8
Dividends paid 22,0 17,9
Cash retained from operations 34,7 13,9
Utilised in investing activities 26,9 222,6
Fixed assets - additions 26,1 34,8
- proceeds from disposals (0,4) (1,4)
Acquisitions and disposals of businesses 1,2 189,2
Total acquisitions 1,2 292,2
Less: settled by issue of shares - (103,0)
Surplus/(deficit) 7,8 (208,7)
Financed by:
(Decrease)/increase in net borrowings (8,9) 208,5
Shares issued for cash 1,1 0,2
Changes in Shareholders` Equity
Six months to 30 June
2002 2001
(Unaudited)
Rm Rm
Attributable profit 62,5 23,4
Dividends (22,0) (17,9)
Shares issued 1,1 103,2
Unrealised (loss)/gain on hedging
activities (4,7) 0,9
Net increase in equity 36,9 109,6
Equity at beginning of year 592,5 452,7
Equity at end of year 629,4 562,3
Made up as follows:
Share capital and premium 226,5 224,9
Non-distributable reserves 10,1 7,5
Distributable reserves 392,8 329,9
629,4 562,3
Reconciliation of Headline Earnings
Attributable profit 62,5 23,4
Goodwill amortisation 21,4 16,3
After tax effect of charges on closure
and sale of operations - 21,4
Headline earnings 83,9 61,1
Comment
It is pleasing indeed to report a 37 per cent increase in headline earnings to
103 cents per share, which extends the company`s 20 per cent per annum compound
earnings growth record to ten successive years. An interim dividend of 22 cents
per share has been declared.
The 31 per cent increase in revenue reflected not only currency effects but also
continuing strong demand from a broad spectrum of manufacturing sectors and
growth in market share by a number of operations. Volumes increased materially
for the first time in a number of years, driven mainly by export based domestic
industries.
The group successfully managed the effect of sharp increases in costs following
the weakening of the Rand towards the end of last year. This, together with the
benefits gained from restructuring during 2001 and on-going cost control,
resulted in the trading margin returning to the historical level of 10 per cent
after falling to 9 per cent in the first half of 2001. There were significant
improvements in the few operations that had been underperforming, most notably
in respect of AECI Coatings. All these factors contributed to the 48 per cent
growth in trading profit.
The 40 per cent increase in finance costs arose as a result of higher average
borrowings following the acquisitions made during 2001, higher working capital
requirements and increases in interest rates. Although higher in total Rand
terms, the ratio of average trade working capital to sales improved to 16,4 per
cent from 18,7 per cent in 2001.
No major capital expenditure or investments were undertaken during the period
under review and the gearing ratio continues to reduce. Commitments are in
line with the amounts disclosed in the 2001 annual report.
Outlook
We expect the current demand pattern in the domestic manufacturing sector to
continue for the rest of the year. Assuming no undue fluctuations in interest
rates and currencies, management is aiming for a headline earnings target for
the full year of 215 cents per share. The rate of improvement in earnings for
the full year is expected to be lower than for the first half as many of the
restructuring benefits were already reflected in results for the second half of
last year.
As recently announced, Chemical Services Limited has reached agreement in
principle with Sentrachem Limited to acquire its mining and alkylates chemical
businesses for a total cash consideration of approximately R140 million. The
transaction, which is subject to various conditions precedent, will broaden
Chemserve`s range of mining chemicals and detergent raw materials. Completion
of the transaction is only anticipated towards the end of the year.
Segmental reporting
No segmental reporting is provided as all the group operations are in the
specialty chemicals industry and the group operates predominantly in southern
Africa.
Accounting policies
The accounting policies used are in accordance with South African GAAP and are
consistent with those applied in the previous financial year.
Lex van Vught Schalk Engelbrecht
Directors 23 July 2002
Declaration of dividend
The directors have declared an interim dividend (No.71) of 22 cents per share in
respect of the six months ended 30 June 2002. The last date to trade in the
company`s shares for purposes of entitlement to the dividend will be Thursday, 8
August 2002. The shares will commence trading ex-dividend on Monday, 12 August
2002 and the record date will be Friday, 16 August 2002. The dividend will be
paid on Monday, 19 August 2002.
Share certificates may not be dematerialised or rematerialised from Monday 12
August 2002 to Friday 16 August 2002 both days inclusive.
By order of the Board Sponsor
S J Hughes PricewaterhouseCoopers
Group Secretary Corporate Finance (Pty) Limited
23 July 2002
Date: 23/07/2002 08:30:00 AM Produced by the JSE SENS Department
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