| Tue 19 Aug 2003, 9:40 | | Results For The Year Ended 30 June 2003 |
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Enviroserv Holdings Limited -
Enviroserv Holdings Limited
(Registration number 1994/000280/06) ("EnviroServ")
Share code: ENV ISIN: ZAE 000010989
RESULTS FOR THE YEAR ENDED 30 JUNE 2003
Comments
Introduction
EnviroServ"s established position in the South African waste market has
enabled the Group to deliver a strong result for the year ended 30 June
2003. Headline earnings per share increased by 17% to 35,7 cents per
share (2002: 30,6 cents per share). Revenue increased by 13% to R426,1
million(2002: R377,9 million), and an improved margin resulted in a 24%
increase in operating profit before amortisation of goodwill to R53,4
million (2002: R43,0 million). A combination of improved cost control and
a shift away from high-volume, low-margin work resulted in the operating
margin to increasing to 12,2% for the year (2002: 11,1%).
Net interest bearing debt remained constant at R48 million (2002: 48
million), after investing R63 million in new businesses and expanding our
asset base. Gearing is
31% (2002: 36,5%), and is well within the levels management believes
appropriate for the Group.
Acquisitions
Millennium Waste Management (Pty) Ltd acquired the Water Operations
Division of Bateman Project Holdings Limited with effect from 1 July
2002. Bateman Water Operations is a leader in the water and sewage
industry in South Africa, and was incorporated into our Sediba division.
Sediba now has the appropriate critical mass, operational expertise and
empowerment credentials to grow effectively in the South African market.
With effect from 1 January 2003 the Group acquired the Spills Response
Division of Abzorbit CC. Abzorbit is the leading spills response business
in KwaZulu-Natal, where EnviroServ previously had a limited presence in
this kind of business.
Both of these acquisitions are performing in line with expectations.
Operational review
Enviroserv Waste Management (Pty) Ltd
Waste-tech
The industrial collection business had a year of moderate growth as the
performance of the manufacturing industry worsened in the second half of
the financial year. Mining clients also saw conditions deteriorate as
highly volatile exchange rate fluctuations negatively impacted their
operations. In spite of these negative market forces this division has
been able to record growth in earnings through various operational
initiatives. Improved utilisation and cost efficiency were achieved with
our fleet through the implementation of several new technologies
Our KwaZulu-Natal region successfully achieved ISO 14001 accreditation,
as we began our planned rollout of this programme throughout the Company.
The effective way in which Waste-tech have adopted the onerous new
National Road Transport Act has provided a competitive advantage in our
offering to clients. The requisite Operational Agreements place stringent
requirements on waste generators to control the transportation of their
waste.
Waste-tech"s hazardous materials response business, Hazmat Support
Services, has strengthened its position as the leader in its field with
the purchase of Abzorbit, which increased the skills base as well as the
geographical coverage of Hazmat. During the year, Hazmat was involved in
a number of successful high profile projects including the clean up of
the stricken cargo vessel Jolly Rubino which ran aground off the coast of
KwaZulu-Natal.
Dispose-tech
The Dispose-tech division, which operates the Group"s permitted waste
treatment, destruction and disposal facilities, has been centralised to a
national management structure. This has enabled greater focus on the
highly specialised technical aspects inherent in this business. Dispose-
tech experienced a modest increase in revenue, but a strong improvement
in margins as some high-volume, low-margin waste streams were replaced
with more profitable volumes. Our hazardous waste landfill site at
Shongweni in KwaZulu-Natal achieved ISO 14001 accreditation in July. This
programme is being rolled out to all sites nationally.
The Group"s incineration facilities remain strategic to the disposal of
healthcare risk waste in South Africa and are systematically being
upgraded as EnviroServ strives to attain international standards and
practices. All of these facilities are about to be fitted with
environmental gas cleaning systems to ensure new legislative requirements
are met.
Process Management
This division focuses on waste reduction, re-use and recovery. During the
year the team has been further strengthened through the appointment of
people with experience in chemical process engineering and project
management. Process Management projects are long-term due to the need for
conducting in-depth evaluations, followed by an infrastructural roll out
programme to ensure the appropriate beneficiation of the waste stream.
The Process Management division currently has a number of projects in
different stages of progress and is therefore expected to contribute
significantly towards the Group"s growth in the medium term.
EnviroDrum
This division, specialising in responsible container management through
drum reconditioning, has reported very poor results for the year and has
negatively impacted EnviroServ"s group result. During the year the
operation re-engineered many of its systems and processes to improve
effectiveness. In particular, systems were changed to improve levels of
quality, production throughput and a higher level of used drum
procurement. The short-term impact of these improvements was however
impacted by a high level of management changes. Various alternatives
regarding the future of this business are currently under investigation.
Conquip Hire
Conquip, which hires compaction equipment to the waste, mining and
construction industries, reported strong results for the period as the
synergistic benefits resulting from incorporation into the Group were
realised. Additionally, the benefits of having Conquip"s skills and
resources within the Group have improved the efficiencies of other
divisions that have outsourced their plant requirements to Conquip.
Millennium Waste Management (Pty) Ltd
Sediba
The Group"s water and sewage division has made significant progress with
its growth strategy through the purchase of Bateman Water Operations.
This acquisition has added a highly experienced and competent team to
Sediba"s existing operations. Revenue and profits have increased
substantially as the critical mass and national footprint required to
make Sediba an important player in this industry was achieved.
Significant progress has been made towards accrediting its laboratory
with ISO 17025, which is expected early in the next financial year
Sediba is now considered to be one of the top three private operators in
this sector in South Africa, providing services to more than two million
South Africans and managing more than two million litres of water and
waste-water per day.
Landfill Management
Landfill Management, which manages disposal sites on behalf of third
parties, performed well in 2003. Increased efficiencies and growth in
revenue have improved profitability. Access to newly developed technology
through the Group"s plant hire company, Conquip, and cross-selling
opportunities from the entire Millennium Group"s services should lead to
continued growth in the forthcoming year.
Wade Refuse
The domestic collection business has not performed well during the year.
A number of substantial contracts with local councils have not been
renewed as councils continue to in-source waste collection services.
Although it is very difficult to operate efficiently in this environment,
the Group is consistently improving its service offering through the use
of new technology and sustainable business practices. EnviroServ believes
that this investment will enable Wade Refuse to show improvements in the
future.
The domestic waste operations continue to suffer from the slow pace of
privatisation of these services. However, a new sense of urgency with
regard to service delivery does appear to be manifesting within various
local authorities. Problems created through a critical lack of skills and
resources together with an ever aging and deteriorating asset base are
encouraging local authorities to consider sustainable service delivery
from private companies. The Group is confident that great opportunities
for the Millennium business will arise in the medium term.
SanuMed
The healthcare waste collection division, Sanumed delivered good growth
in revenue this year. It did not however achieve satisfactory returns due
largely to a lack of critical mass in some of the regions in which it
operates. To profitably grow this division going forward, SanuMed is
investing in new equipment, such as re-usable plastic containers, and new
technology such as automated bin tracking.
Prospects
It is expected that South Africa"s manufacturing sector will emerge from
its recessionary period, which could result in a strong rebound on the
back of lower interest rates and a recovery in global demand. If these
markets improve, the increased waste generation will positively impact on
the Group"s results going forward. EnviroServ"s ongoing technological
improvements and refinements will ensure it continues to buffer tough
markets.
The Group"s operations are currently undergoing intense change to move
from a traditional product focus to becoming more customer centred. This
will be achieved through focusing on tailor-made solutions and by using
recently implemented IT systems to improve customer delivery. The
combination of expected market growth and ever increasing service
delivery levels should result in good growth for the industrial waste
related operations.
Going forward, we expect a growing demand for expertise in the waste
industry as legislation becomes increasingly stricter and more
prescriptive. This will increase the barriers to entry and drive waste
generators to outsource their waste programmes.
The Group"s track record shows that it is well positioned to deliver
services to the evolving waste market.
Changes in Directorate
Mrs Esme Gombault was appointed to the Board on 18 August 2003.
Financial Statements
The Financial statements have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice. The
Accounting Policies used are consistent with those used in the annual
financial statements for the year ended 30 June 2002, except for the
adoption of AC 133 - Financial instruments: recognition and measurement,
which had no material impact on the financial statements.
Ernst and Young"s unqualified audit reports on the annual financial
statements as at 30 June 2003 and the summarized financial statements
contained herein are available for inspection at the Company"s registered
office.
Cash Distribution
The directors have resolved to pay a cash distribution of 12 cents per
ordinary share, payable out of share premium, in lieu of a final dividend
("the distribution"), for the year ended 30 June 2003". This dividend is
subject to approval by the shareholders at the Annual General Meeting to
be held on 10 October 2003. The last day to trade "CUM" the distribution
in order to participate in the distribution will be Friday,
17 October 2003. The shares of EnviroServ will commence trading "EX" the
distribution from the commencement of business on Monday, 20 October
2003, and the record date will be Friday, 24 October 2003. Share
certificates may not be dematerialised or rematerialised from Monday, 20
October 2003 to Friday, 24 October 2003, both days inclusive. Payment
will be made to shareholders on Monday, 27 October 2003.
For and on behalf of the Board
A McLean DK Gordon
Chairman Chief Executive Officer
18 August 2003
Abridged Group Income Statement
Year ended Year ended
30 June 2003 Percentage 30 June 2002
R"000 change R"000
Revenue 426,086 13 377,946
Operating profit 53,376 24 42,959
Net finance costs (8,601) (6,939)
Share of profit of associate company 907 1,399
Amortisation of goodwill (1,509) (1,008)
Profit before taxation 44,173 21 36,411
Taxation (7,262) (4,695)
Net profit attributable to ordinary
shareholders 36,911 16 31,716
Headline earnings per share (cents) 35.7 17 30.6
Earnings per share (cents) 35.0 16 30.1
Operating margin (%) 12.5% 11.4%
Weighted average number of shares
in issue during the year 105,548,848 105,548,848
Number of shares in issue
at end of year 105,548,848 105,548,848
Reconciliation of Headline earnings
Net profit attributable to
ordinary shareholders 36,911 31,716
Adjusted by :
Amortisation of goodwill 1,509 1,008
Impairment of property, plant
and equipment -net of tax - 2,640
Profit on disposal of property,
plant and equipment - net of tax (766) (3,075)
37,654 17 32,289
Abridged Group Balance Sheet
Year ended Year ended
30 June 2003 Percentage 30 June 2002
R"000 change R"000
Assets
Non-current assets 292 090 263 504
Property, plant and equipment 264,868 242,830
Goodwill 8,859 2,140
Investments in preference shares
and associate 18,363 18,534
Current assets 112,908 107,664
Inventory 6,596 4,474
Accounts receivable 102,618 92,480
Cash and cash equivalents 3,694 10,710
Total assets 404,998 371,168
Equity and liabilities
Capital and reserves 157,179 130,823
Ordinary share capital and
share premium 49,707 60,262
Distributable reserves 107,472 70,561
Non current liabilities 133,817 136,632
Deferred taxation 13,688 10,643
Environmental remediation provisions 87,428 79,220
Long-term borrowings 28,625 42,238
Deferred income 4,076 4,531
Current liabilities 114,002 103,713
Accounts payable and provisions 85,937 86,401
Current portion of long-term
borrowings 23,148 16,229
Taxation 4,917 1,083
Total equity and liabilities 404,998 371,168
Net asset value per share (cents) 149 20 124
Abridged Group Statement of Changes in Equity
30 June 2003 30 June 2002
R"000 R"000
Ordinary share capital and
share premium
Ordinary shares 1,055 1,055
Share premium 48,652 59,207
At beginning of year 59,207 59,207
Cash distribution (10,555) -
49,707 60,262
Distributable Reserves
At beginning of year 70,561 38,845
Net profit attributable to ordinary
Shareholders 36,911 31,716
At the end of the year 107,472 70,561
Abridged Group Cash Flow Statement
Year ended Year ended
30 June 2003 30 June 2002
R"000 R"000
Cash generated by operations 103,362 89,858
Movement in working capital (10,184) (16,399)
Movement in deferred income (455) (410)
Cash flow from operations 92,723 73,049
Finance costs (8,601) (6,939)
Taxation paid (383) (13,824)
Cash distribution / Dividends paid (10,555) (8,444)
Cash retained from operating activities 73,184 43,842
Additions to property, plant and equipment (53,126) (98,272)
Proceeds on disposal of property,
plant and equipment 1,614 7,154
Disposal of operations - 15,901
Dividends received 307 -
Acquisition of investments and subsidiary (10,380) (23,944)
11,600 (55,319)
Movement in long-term liabilities (13,613) 37,691
Utilised from enviromental remediation
provisions (11,921) (3,173)
Increase in short term borrowings 6,919 15,416
Movement in cash and cash equivalents (7,016) 5,385)
Balance at the beginning of the year 10,710 16,095
Balance at the end of the year 3 694 10 710
Date: 19/08/2003 08:07:23 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
