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CHEMICAL SERVICES LIMITED -
Chemical Services Limited
(Registration No. 1967/003338/06)
(Incorporated in the Republic of South Africa)
(Share Code:CHE ISIN Code: ZAE000009908)
("the Company")
Revenue +5% Trading profit +12% Headline earnings per share +15% Dividend per
share +18%
Group Income Statement
Six months to Year ended
30 June 31 Dec
2003 2002 2002
(Unaudited) Change (Audited)
Rm Rm % Rm
Revenue 1536,8 1469,7 +5 3036,5
Trading profit 163,4 145,8 +12 317,8
Net financing costs 18,0 19,7 -9 37,4
Amortisation of goodwill 25,4 21,4 42,9
Exceptional expenses - - 0,4
Income from associates 0,3 0,3 0,9
Profit before taxation 120,3 105,0 +15 238,0
Taxation 47,6 41,0 86,6
Profit after taxation 72,7 64,0 151,4
Minority interest (0,1) (1,5) (2,5)
Attributable profit 72,6 62,5 +16 148,9
Earnings per share
(cents):
Headline 118,1 102,8 +15 235,2
Attributable 88,3 76,6 +15 182,2
Interim dividend per share
(cents) - declared 26,0 22,0 +18 22,0
Final dividend per share
(cents)- paid - - 36,0
Dividend cover (times) 4,5 4,7 4,1
Depreciation/amortisation
(excluding goodwill) (Rm) 25,7 25,1 46,0
Trading margin (%) 10,6 9,9 10,5
EBITDA margin (%) 12,3 11,6 12,0
Group Balance Sheet 30 June 31 Dec
2003 2002
(Unaudited) (Audited)
Rm Rm
Non-current assets 536,7 466,2
Property, plant, equipment and
intellectual property 341,3 320,9
Goodwill 173,4 123,3
Deferred taxation 22,0 22,0
Current assets 1322,6 1176,3
Inventory 554,8 528,5
Trade receivables 572,1 460,2
Cash and cash equivalents 195,7 187,6
Total Assets 1859,3 1642,5
Capital and reserves 739,3 692,8
Minority interest 14,7 14,8
Long term borrowings 59,4 58,1
Long term provisions 57,0 53,7
Current liabilities 988,9 823,1
Trade payables 502,4 456,8
Other current liabilities 54,8 103,2
Short term borrowings 415,9 232,2
Taxation 15,8 30,9
Total equity and liabilities 1859,3 1642,5
Total shares in issue (millions) 82,3 82,1
Weighted average shares in issue
(millions) 82,2 81,7
Capital expenditure (Rm) 38,8 66,5
Net asset value per share (cents) 898 844
Gearing ratio (%) 38 15
Abridged Group Cash Flow Statement
Six months to 30 June
2003 2002
(Unaudited) (Unaudited)
Rm Rm
Trading profit 163,4 145,8
Add: non-cash items 28,0 28,1
191,4 173,9
Increase in working capital and
provisions (63,1) (53,0)
Cash generated from operations 128,3 120,9
Financing costs 18,0 19,7
Taxation paid 62,8 44,5
Cash available from operations 47,5 56,7
Dividends paid 29,6 22,0
Cash retained from operations 17,9 34,7
Utilised in investing activities (196,2) (26,9)
Fixed assets - additions (38,8) (26,1)
- proceeds from disposals 3,1 0,4
Acquisitions of businesses (160,5) (1,2)
(Deficit)/ surplus (178,3) 7,8
Financed by:
Increase /(decrease) in net borrowings 176,9 (8,9)
Shares issued for cash 1,4 1,1
Changes in Shareholders" Equity
Six months to 30 June
2003 2002
(Unaudited) (Unaudited)
Rm Rm
Attributable profit 72,6 62,5
Dividends (29,6) (22,0)
Shares issued 1,4 1,1
Unrealised gain /(loss) on hedging
activities 2,1 (4,7)
Net increase in equity 46,5 36,9
Equity at beginning of period 692,8 592,5
Equity at end of period 739,3 629,4
Made up as follows:
Share capital and premium 231,6 226,5
Non-distributable reserves 4,4 10,1
Distributable reserves 503,3 392,8
739,3 629,4
Reconciliation of Headline Earnings
Attributable profit 72,6 62,5
Goodwill amortisation 25,4 21,4
Profit on sale of fixed assets (0,9)
Headline earnings 97,1 83,9
Comment
Chemical Services Limited is pleased to report a 15 per cent increase in
headline earnings per share for the first half of 2003. This was achieved
during a difficult period for the manufacturing sector, with export oriented
sectors affected by the strengthening Rand and subdued local demand from a
slowing economy. Turnover increased by 5 per cent, including Senmin from May
2003 and accounting for only 50 per cent of Crest Chemicals in 2003 following
its changed shareholding to a 50:50 joint venture. The increase is 6,1 per cent
adjusting for these changes. Gross margins were maintained. Tight cost control
enabled an increase in trading and EBITDA margins. Despite the slowdown in the
manufacturing sector, there has been a small increase in volumes.
Most of the operations produced results in line with expectations under the
prevailing conditions. The results to date from Senmin have been satisfying and
the acquisition will allow Chemical Services to benefit further from the
expansion of mining operations in Africa. Although AECI Coatings showed
continued improvements at the operating level, returns will not adequately
reward the investment in fixed and working capital until the implementation of
appropriate new technologies being developed by the joint venture partner.
Good working capital management and limited capital expenditure allowed for
reduced financing costs prior to the purchase of the Senmin business. Capital
commitments are in line with the amounts disclosed in the 2002 Annual Report.
Outlook
The demand from the manufacturing sector during the second half of the year will
be driven mainly by the level of the Rand and anticipated lower interest rates.
Referring to management"s target for 2003 headline earnings of 265 cents per
share, as indicated in the results published on 17 February 2003, such headline
earnings remain dependent on the Rand not strengthening further and interest
rates declining as expected.
The previously announced acquisition of the remaining 50 per cent of Ondeo-Nalco
South Africa for $14 million is progressing, and is subject only to Competition
Tribunal approval. The expected effective date is 1 September 2003.
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, except for the
adoption of AC133 Financial Instruments - Recognition and Measurement. This has
no impact on the current or prior period results as the group had complied with
the accounting requirements of AC133 since 2002.
Dividend
The directors have declared an interim dividend of 26 cents per share, the
formal announcement of which has been published elsewhere.
Schalk Engelbrecht Frank Baker
Directors 21 July 2003
Date: 21/07/2003 12:48:25 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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