| Tue 17 Aug 2004, 8:15 | | Enviroserv Holdings Limited - Audited results for |
|
Enviroserv Holdings Limited - Audited results for the year ended 30 June 2004
ENVIROSERV HOLDINGS LIMITED
(Registration number 1994/000280/06)
(`EnviroServ`)
Share code: ENV ISIN: ZAE 000010989
Audited results for the year ended 30 June 2004
- Headline EPS up 13%
- Revenue from ongoing operations up 15%
- Cash generated by operations up 21%
Group Income Statement
Year ended Year ended
30 June 30 June
2004 Percentage 2003
R`000 change R`000
Revenue 475 403 12 426 086
Continuing operations 464 952 15 403 677
Discontinued operation 10 451 22 409
Cost of operations (278 345) 11 (250 868)
Continuing operations (266 425) 17 (228 266)
Discontinued operation (11 920) (22 602)
Gross profit 197 058 12 175 218
Depreciation, overheads and
other expenses/income (138 571) 12 (123 351)
Operating profit 58 487 13 51 867
Net profit on discontinuance 117 -
Net finance costs (8 574) - (8 601)
Share of profit of
associate companies 2 107 132 907
Profit before taxation 52 137 18 44 173
Taxation (11 592) 60 (7 262)
Net profit attributable to
ordinary shareholders 40 545 10 36 911
Earnings per share (cents) 38,69 10 35,20
Headline earnings per share (cents) 40,72 13 35,90
Distribution per share (cents) 13,00 12,00
Operating margin (%) 12,7 12,5
Weighted average number of shares
in issue during the year 104 790 594 104 872 033
Number of shares in issue
at end of year 106 412 074 105 548 829
Reconciliation of Headline earnings
Net profit attributable to
ordinary shareholders 40 545 36 911
Adjusted by:
Profit on discontinuance (117) -
Amortisation of goodwill 1 697 1 509
Impairment of property,
plant and equipment 2 005 -
Profit on disposal of property,
plant and equipment (1 541) (1 094)
42 589 37 326
Taxation on above adjustments 80 328
42 669 13 37 654
Group Statement of Changes in Equity
Year ended Year ended
30 June 30 June
2004 2003
R`000 R`000
Ordinary share capital and share premium
Ordinary shares 1 063 1 055
Share premium 40 270 48 785
At beginning of year 48 785 59 207
Issued during the year 2 158 -
Treasury shares 1 993 133
Cash distribution (12 666) (10 555)
41 333 49 840
Foreign currency translation reserve
At beginning of year - -
Currency translation difference during the year (1 887) -
At end of year (1 887) -
Distributable Reserves
At beginning of year 107 472 70 561
Net profit attributable to ordinary shareholders 40 545 36 911
At the end of the year 148 017 107 472
Group Balance Sheet
30 June 30 June
2004 Percentage 2003
R`000 change R`000
Assets
Non-current assets 318 376 292 090
Property, plant and equipment 291 821 264 868
Goodwill 6 804 8 859
Investments in preference shares
and associates 19 751 18 363
Current assets 155 452 122 878
Inventory 4 006 6 596
Accounts receivable 130 591 102 618
Employee benefits 16 608 9 970
Cash and cash equivalents 4 247 3 694
Total assets 473 828 414 968
Equity and liabilities
Capital and reserves 187 463 157 312
Ordinary share capital and
share premium 41 333 49 840
Foreign currency
translation reserve (1 887) -
Distributable reserves 148 017 107 472
Non-current liabilities 146 740 133 817
Deferred taxation 13 219 13 688
Environmental remediation
provisions 102 317 87 428
Interest bearing borrowings 27 532 28 625
Deferred income 3 672 4 076
Current liabilities 139 625 123 839
Accounts payable and provisions 102 083 85 937
Current portion of interest
bearing borrowings 36 036 32 985
Taxation 1 506 4 917
Total equity and liabilities 473 828 414 968
Net asset value per share (cents) 176 18 149
Group Cash Flow Statement
Year ended Year ended
30 June 30 June
2004 Percentage 2003
R`000 change R`000
CASH RETAINED FROM
OPERATING ACTIVITIES 72 844 - 73 091
Cash generated by operations 125 456 21 103 362
Movement in working capital (15 900) (10 732)
Cash generated from operations 109 556 18 92 630
Finance costs (8 574) (8 601)
Taxation paid (15 472) (383)
Net cash flows from
operating activities 85 510 2 83 646
Cash distribution paid (12 666) (10 555)
CASH UTILISED IN
INVESTING ACTIVITIES (69 443) 13 (61 585)
Additions to property,
plant and equipment (19 154) (18 099)
Replacement of property,
plant and equipment (65 632) (35 027)
Proceeds on disposal of property,
plant and equipment 13 217 1 614
Disposal of operations 2 349 -
Dividends received 744 307
Acquisition of investments
and subsidiary (967) (10 380)
CASH EFFECTS OF FINANCING ACTIVITIES (961) (18 522)
Proceeds from issue of share capital 2 166 -
Net financing effects of employee
share incentive trust 1 992 (1 505)
Movement in long-term liabilities (1 093) (13 613)
Spent from enviromental
remediation provisions (7 077) (11 921)
Increase in short term borrowings 3 051 8 517
Net decrease in cash and
cash equivalents 2 440 (7 016)
Net foreign exchange difference (1 887) -
Balance at the beginning of the year 3 694 10 710
Balance at the end of the year 4 247 15 3 694
NATURE OF BUSINESS
EnviroServ is a group of companies focused on delivering environmentally
responsible waste management services. EnviroServ Waste Management (Pty) Ltd,
provides professional, integrated waste management solutions to industry.
Millennium Waste Management (Pty) Ltd, an empowerment joint venture in which the
group holds a 47% stake, focuses on services for the domestic waste market.
RESULTS OVERVIEW
EnviroServ`s continued focus on improving operating efficiencies and building
relationships with customers has again enabled the Group to report an improved
performance for the year ended 30 June 2004. Headline earnings per share
increased by 13% to 40,72 cents per share (2003: 35,90 cents per share).
Revenue from ongoing operations increased by 15% to R465,0 million (2003: R403,7
million), and operating profit increased by 13% to R58,5 million (2003: R51,9
million). The continuous drive to improve efficiencies enabled the Group to
offset the effect of limited price increases on margins, whilst the closure of
the loss-making steel drum reconditioning division in December 2003 helped
improve the Group`s operating margin to 12,7% (2003: 12,5%).
Cash generated by operations grew by 21% to R125,5 million (2003: R103,4
million). This strong cash generation enabled debt to be contained at the same
levels as last year despite relatively high capital expenditure in 2004.
Additions and replacement to fixed assets amounted to R84,8 million, as a result
of spending R47 million on plant and vehicles as part of our ongoing asset
renewal programme and to resource new ventures and R19 million in replenishing
the airspace consumed from the Group`s landfill sites due to the higher disposal
activity experienced this year compared to recent years.
CORPORATE ACTIVITY
In line with EnviroServ`s strategy to modestly grow its business beyond South
African borders, the Group has secured two new cross-border contracts and is
negotiating a number of others. EnviroServ also acquired a stake in a small
composting plant in the Cape for the handling of sewage sludge, which represents
a move to enhance the Group`s ability to offer alternative waste management
solutions to its customers.
EnviroDrum, which specialised in responsible container management and drum
reconditioning, disposed of its loss-making steel drum reconditioning division
during the year under review. EnviroDrum will continue the profitable portion of
the business that manages cleaning of plastic containers.
OPERATIONAL REVIEW
Industrial Waste Division
The Industrial Waste Division comprises Waste-tech, the industrial collection
business, Conquip Hire, which hires compaction equipment to the waste, mining
and construction industries and Hazmat, a 24 hour support service for emergency
clean-ups, hazardous material spillage containment and on-site remediation.
During the year, the majority of operations across the regions showed a solid
improvement in financial performance enabling the initial roll-out of new depots
in areas where a critical mass in clients has been achieved. The drive for
continuous improvement in our service delivery, particularly in ensuring
environmentally responsible waste solutions, saw the KwaZulu-Natal operation
winning the award for Excellence in Construction Environmental Management at the
Hillside Expansion project in Richards Bay. There was also significant progress
with the implementation of ISO 14001 with the majority of operations now being
certified. During the year a number of remedial cleanups, mainly in the Petro-
Chemical Industry were successfully undertaken.
Disposal Division
The division comprises Dispose-tech, which operates the Group`s permitted waste
treatment, destruction and disposal facilities.
The financial performance across the majority of regions improved moderately
during the year as a result of increased revenues and continued cost control.
The technical integrity and sustainability of our landfill sites was enhanced
through the construction and commissioning of the Aloes leachate treatment plant
which enables the effective management of the liquid effluent generated from the
landfill site. The Holfontein leachate treatment plant is also being
commissioned to achieve similar objectives.Furthermore, the facilities in
Gauteng, KwaZulu-Natal and the Eastern Cape all received ISO 14001
certification.
Domestic Waste Division
Millennium Waste Management (Pty) Ltd Joint Venture Millennium Waste Management,
in which EnviroServ holds a 47% stake, comprises Landfill Management, which
manages disposal sites on behalf of third parties; Sediba, the water and sewage
division, Wade Refuse, the domestic collection division; and SanuMed, the health
care risk waste management division.
This joint venture continued to under-perform and has not delivered the expected
improvement in results. During the year, a number of tendered contracts in our
SanuMed business had a disappointing outcome and the remaining businesses have
not seen the expected growth in new tenders or a positive change in attitude
towards privatisation from Local Authorities. To address this and other
challenges including increased competition from the Local Authorities` in-house
waste service providers and overcapacity in the health care risk waste sector,
management and sales force structures were reorganised during the year.
The Group remains committed to maintaining its presence in this sector as an
essential element of balancing risk through maintaining activities across a
broad spectrum of waste activities and driving economic benefits from critical
mass.
Strategic Growth Projects Division
The division comprises SGP, which develops growth opportunities outside of
traditional markets, and Process Management, which develops growth opportunities
higher up the waste hierarchy through focusing on waste reduction, re-use and
recycling.
The division delivered a positive contribution to Group revenue and earnings as
a result of securing and executing a number of new contracts which include a
contract to build and operate, for a period of 10 years from March 2005, an
effluent treatment plant in Zwelitsha, East London. and the establishment of
start-up operations in Angola and Mozambique where contracts for domestic
collections and the management of a hazardous landfill site in each region
respectively have been secured.Significant progress has also been made towards
establishing a joint venture entity, with a leading player in the cement
industry, which will collect and blend waste for use as alternative fuels and
resources in the cement industry.
PROSPECTS
The Group will continue with its strategy to drive down costs, improve
efficiencies and forge stronger relationships with clients. This, together with
the increasing awareness of environmental issues and responsibility amongst
clients should ensure continued growth in our traditional markets. The pace of
this growth will be largely affected by the performance of the economy and
prevailing economic factors. Additionally, some of the current initiatives to
exploit growth opportunities for the Group are gaining momentum and will enhance
overall performance going forward.
Many of our operations face the challenge of strong competition from non-
compliant waste operators and alternative technologies. We are, however, focused
on seeking innovative ways of providing sustainable and integrated waste
solutions that are appropriate and add value to our clients.
The Group will remain focused on modestly growing the business beyond South
African borders through offering the same traditional services that are offered
in South Africa, and is negotiating a number of cross-border contracts.
Additionally, we are striving to broaden the spectrum of services currently
offered in South Africa.
Going forward, an intense operational focus and commitment from our people
places EnviroServ in a strong position to continue delivering sustainable and
profitable growth.
CHANGES IN DIRECTORATE
Makgabo Rufus Maruma resigned from the Board as Non-Executive Director in March
2004 after seven years of service, and we would like to express our appreciation
for his valuable contribution.
FINANCIAL STATEMENTS
Financial statements of the Group have been prepared in accordance with
Statements of Generally Accepted Accounting Practice consistent with those used
at 30 June 2003 except for the treatment of the Group`s share incentive trust.
In terms of the requirements of the JSE Securities Exchange the Group now
consolidates the share incentive trust and the shares owned by the trust are
accounted for as treasury shares.
EPS and HEPS for the prior year have been restated accordingly.
Ernst and Young have audited the Group financial statements. The unqualified
audit report is available for inspection at the company`s registered office.
DECLARATION OF DISTRIBUTION IN LIEU OF DIVIDEND
The directors have resolved to pay a cash distribution of
13 cents per ordinary share payable out of share premium, in lieu of a final
dividend (`the distribution`), for the year ended 30 June 2004, in terms of the
resolution approved by shareholders at the annual general meeting held on
Friday, 10 October 2003. The last day to trade `CUM` the distribution in order
to participate in the distribution will be Friday,
8 October 2004. The shares of EnviroServ will commence trading `EX` the
distribution from the commencement of business on Monday, 11 October 2004, and
the record date will be Friday, 15 October 2004. Shareholders are advised that
there will be no dematerialisation or rematerialisation of shares from Monday,
11 October 2004 to Friday, 15 October 2004, both days inclusive. Payment will be
made to shareholders on Monday, 18 October 2004.
A McLean DK Gordon
Chairman Group Chief Executive Officer
17 August 2004
Logos
Waste-tech Industrial Waste Management
Dispose-tech
Responsible Waste Disposal
Hazmat
Support Services
Process Management
Waste Reduction, Re-use and Recovery
Conquip Hire
Equipment & Plant Hire
Millennium Waste Management
Wade Refuse
Domestic Waste Management
Sanumed
Healthcare Waste
Landfill Management
Waste Facility Management
Sediba
Water and Sewage
Directors
A McLean (British) (Chairman), DK Gordon (Group Chief Executive Officer), MBN
Dube*, P Fourie, E Gombault, B Joffe*, D Lavarinhas, EK Motebang, JL Pamensky*,
LP Ralphs*, RP Rocher
*Non-Executive
Secretary: O Deftereos (ACIS, CA(SA))
Registered office
18 Dusseldorf Street
Apex, Benoni
PO Box 2207, Benoni 1500
www.enviroserv.co.za
SPONSOR
Investec
Transfer secretaries
Computershare Investor Services 2004 (Pty) Ltd,
70 Marshall Street, Johannesburg 2001
