| Fri 18 Feb 2005, 10:07 | | Enviroserv Holdings Limited - Interim Announcement |
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Enviroserv Holdings Limited - Interim Announcement For The Six-Month Period
Ended 31 December 2004
ENVIROSERV HOLDINGS LIMITED
(Registration number 1994/000280/06)
(`EnviroServ`) Share code: ENV ISIN: ZAE 000010989
Interim announcement for the six-month period ended
31 December 2004
Headline EPS up 15% Revenue from ongoing operations up 22%
Abridged Group Income Statement
Six-month Six-month
period period Year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
(unaudited) Percentage (unaudited) (audited)
R`000 change R`000 R`000
Revenue 267 434 16 229 882 475 403
Ongoing operations 267 434 22 219 431 464 952
Discontinued operation - 10 451 10 451
Operating profit before
depreciation
and amortisation 48 454 45 236 103 143
Ongoing operations 48 454 49 806 107 713
Discontinued operation - (4 570) (4 570)
Depreciation and
Amortisation (20 900) (19 878) (42 842)
Operating profit 27 554 9 25 358 60 301
Net finance costs (5 821) (4 083) (8 574)
Share of profit of
associate company 1 584 435 2 107
Amortisation of goodwill (1 065) (845) (1 697)
Profit before taxation 22 252 7 20 865 52 137
Taxation (1 990) (2 960) (11 592)
Net profit attributable
to ordinary shareholders 20 262 13 17 905 40 545
Headline earnings
per share (cents) 21,8 15 19,0 45,0
Diluted headline
earnings per share (cents) 19,9 17,5 40,7
Earnings per share (cents) 20,8 13 18,4 42,7
Diluted earnings
per share (cents) 18,9 17,0 38,7
Operating margin (%) 10% 11% 13%
Operating margin -
ongoing operations (%) 10% 14% 14%
Weighted average
number of shares in issue
during the period 97 491 953 97 526 196 94 897 248
Shares in issue at
end of the period 111 840 626 105 548 829 106 412 055
Reconciliation of
headline earnings
Net profit attributable to
ordinary shareholders 20 262 17 905 40 545
Adjusted by:
Amortisation of goodwill 1 065 845 1 697
Impairment of property,
plant and equipment - - 2 005
Profit on disposal of
property plant
and equipment (97) (245) (1 541)
Net profit on
Discontinuance - (117) (117)
21 230 18 388 42 589
Taxation on
aforementioned adjustments 29 109 80
Headline earnings 21 259 15 18 497 42 669
Abridged Group Statement of Changes in Equity
31 December 31 December 30 June
2004 2003 2004
(unaudited) (unaudited) (audited)
R`000 R`000 R`000
Share capital
Ordinary shares 1 117 1 055 1 063
At beginning of period 1 063 1 055 1 055
Issued during the period 54 - 8
Share premium 43 389 35 986 38 277
At beginning of
the period 38 277 48 652 48 785
Issued during the period 18 946 - 2 158
Cash distribution (13 834) (12 666) (12 666)
Treasury shares (8 927) (7 811) (10 649)
Prior year (10 649) (4 371) (4 371)
Current year 1 722 (3 440) (6 278)
35 579 29 230 28 691
Foreign currency
translation reserve
At beginning of period (1 887) - -
Currency translation
differences during
the period (2 066) - (1 887)
(3 953) - (1 887)
Distributable Reserves
At beginning of
the period 148 017 107 472 107 472
Profit attributable to
ordinary shareholders 20 262 17 905 40 545
168 279 125 377 148 017
Abridged Group Balance Sheet
31 December 31 December 30 June
2004 2003 2004
(unaudited) Percentage (unaudited) (audited)
R`000 change R`000 R`000
Assets
Non-current assets 333 372 298 035 318 376
Property, plant
and equipment 298 764 271 790 291 821
Goodwill 23 844 7 876 6 804
Investment in preference
shares and associate 10 764 18 369 19 751
Current assets 162 645 115 732 142 810
Inventory 9 436 6 969 4 006
Accounts receivable 150 091 105 107 130 591
Employee benefits 3 118 3 656 3 966
Cash and cash equivalents - - 4 247
Total assets 496 017 413 767 461 186
Equity and liabilities
Capital and reserves 199 905 154 607 174 821
Ordinary share capital
and share premium 35 579 29 230 28 691
Foreign currency
translation reserve (3 953) - (1 887)
Distributable reserves 168 279 125 377 148 017
Non-current liabilities 162 694 147 037 146 740
Deferred taxation 14 533 10 405 13 219
Environmental
remediation provisions 94 557 99 664 102 317
Interest-bearing
Borrowings 50 152 33 104 27 532
Deferred income 3 452 3 864 3 672
Current liabilities 133 418 112 123 139 625
Accounts payable
and provisions 93 650 75 598 102 083
Current portion of
interest-bearing
borrowings 36 010 26 232 36 036
Bank overdraft 3 607 8 173 -
Taxation 151 2 120 1 506
496 017 413 767 461 186
Net asset value per
share (cents) 179 22 146 164
Debt/equity ratio 45% 35% 34%
Net interest bearing debt 89 769 33 67 509 59 321
Abridged Group Cash Flow Statement
Six-month Six-month
period ended period ended Year ended
31 December 31 December 30 June
2004 2003 2004
(unaudited) (unaudited) (audited)
R`000 R`000 R`000
Cash generated
by operations 60 067 57 871 125 456
Movement in
working capital (27 432) (12 526) (7 632)
Cash flow
from operations 32 635 45 345 117 824
Spent from environmental
remediation provisions (17 615) (2 364) (7 077)
Finance costs (5 821) (4 083) (8 574)
Taxation paid (3 359) (9 040) (15 472)
Distribution paid
to shareholders (13 834) (12 666) (12 666)
Cash (utilised)/retained
from operating
activities (7 994) 17 192 74 035
Additions to property,
plant and equipment (23 243) (29 208) (84 786)
Proceeds on disposal of
property, plant
and equipment 421 3 514 13 219
Dividend received
from associate - - 744
Disposal of operations - 2 349 2 349
Acquisition of subsidiaries
and associates (15 944) - (967)
(46 760) (6 153) 4 594
Proceeds from issue
of share capital 19 000 - 2 166
Net financing effects
of employee share
incentive trust 1 722 (3 440) (6 278)
Movement in interest-
bearing borrowings 20 276 4 479 (1 093)
Movement in current
portion of
interest-bearing borrowings (26) (6 753) 3 051
Movement in cash and
cash equivalents (5 788) (11 867) 2 440
Net foreign
exchange difference (2 066) - (1 887)
Balance at the beginning
of the period 4 247 3 694 3 694
Balance at the end of
the period (3 607) (8 173) 4 247
Introduction to the Group
EnviroServ is a total waste management solutions company with an operational
focus to be the leader in environmentally responsible waste management. Wholly
owned subsidiary company, EnviroServ Waste Management (Pty) Ltd currently offers
a comprehensive range of waste solutions to industrial clients predominantly in
the manufacturing, mining and petro-chemical industries. Black economic
empowerment (BEE) joint venture company, Millennium Waste Management (Pty) Ltd,
offers solutions to the domestic, landfill management, water & sewage, and
health care risk waste markets predominantly in the government and local
authority sectors.
Financial Results
Headline earnings for the six month period to December 2004 amounted to R21,3
million, an increase of 15% on the comparative six month period to December 2003
(R18,5 million). Headline earnings per share increased by 15% to 21,8 cents
(2003: 19,0 cents).
This result was achieved in a very challenging environment with the strength of
the rand impacting many customers. Increased competition resulted in aggressive
pricing with vigilant cost management.
Revenue from ongoing operations increased 22% to R267,4 million (2003: R219,4
million). The operating margin however decreased to 10% (2003: 14%) mainly as a
result of aggressive pricing.
The Group generated cash of R60,1 million during the six months, up 4% from
2003. R27,4 million was invested to increase working capital as creditors
reduced substantially from the relative high levels reached in June 2004 and
debtors extended their terms in response to prevailing economic factors, in
particular in our cross border operations. A once-off amount of R11,6 million
was also incurred in commissioning a leachate treatment plant at Holfontein H:H
landfill site, while a further R23,2 million was invested in new plant and
vehicles.
As a result, net interest bearing debt increased to R89,8 million (2003: R67,5
million) raising gearing to 45%. No significant further expenditure on the
leachate plant is planned for the future, which will help to reduce debt levels
going forward.
During the period, the Group acquired the remaining 65% of the shareholding in
associate company Chargold, for R19 million by means of an issue of 5 428 571
EnviroServ Holdings Limited shares at a price of R3,50 each.
EnviroServ Waste Management (Pty) Limited
Following a very slow start to the financial year, industrial waste specialists
Waste-tech and Dispose-tech have produced results below management`s
expectations for the six month period. The effect of the strong rand impacted
their major customers in the mining, manufacturing and petro-chemical industries
resulting in decreased expenditure from these clients on larger projects and
major clean-ups. However, activity levels have improved significantly towards
the end of the year and appear to be gaining momentum.
Specialist compaction plant hire business Conquip also experienced a lower
revenue period as demand for construction equipment weakened. Satisfactory hire
activity within the waste industry partly helped to counter the downturn.
Our Process division, which provides alternative `greener/cleaner` waste
management solutions in reducing, re-using and recycling waste products,
continues to expand and broaden the Group`s range of products and services. The
acquisition of Chargold, together with good progress on some of the division`s
larger waste re-use and minimisation projects helped to enhance revenue and
earnings. Plans to develop this division into one of the major future revenue
and earnings generators are progressing well.
The Group`s non-South African operations have produced good results, and the
opportunities to expand and grow these areas are promising. During 2004 the
Group invested significantly in establishing some of these start-up operations
which are now delivering a consistent performance. The very long payment terms
that appear to be inherent in doing business in these new territories have
contributed substantially to the Group`s increased working capital. This
situation is currently being addressed.
Millennium Waste Management (Pty) Limited
The domestic waste market continued to be overtraded during the period, as the
trend of in-sourcing by local authorities continued. Millennium still lacks the
critical mass required to achieve acceptable margins. However, the company has
shown steady improvement on a number of fronts during the period and management
remains confident that this improvement will continue.
Wade Refuse the domestic waste collection business, Landfill Management the
landfill site management business and Sediba the water & sewage management
business were all adversely affected by the scarcity of new work. However the
SanuMed division, which manages health care risk waste, secured major new
contracts with the larger private health care groups towards the end of the
period. This will benefit the division`s performance going forward.
These businesses continue with efforts to repackage their range of solutions to
initiate growth and development in their relatively stagnant markets, while
costs are being continually rationalised.
Investment
With effect from 1 October 2004 EnviroServ acquired the remaining 65% of
Chargold. Chargold has been an associate of EnviroServ since 2001 and
specialises in the beneficiation of carbon waste products. During this time we
have been able to identify a number of synergies in packaging and selling
holistic waste management solutions.
Prospects
The next six months look promising as the market appears to have strengthened
during the second quarter of the financial year. The Group continues to bolster
the Process division which offers alternatives to disposing of waste,
particularly industrial waste. The Group has also begun leveraging off this
increased technical capacity to advance the selling of holistic solutions to
larger clients. Prospects for this type of approach to the market appear
positive. Planned abnormal capital and development expenditure during the first
six months is largely completed and the Group expects debt levels to reduce
going forward.
An improved performance is expected from all divisions during the next six
months and the Group expects to report growth for the full year in line with
previous years.
Appreciation
Thank you to my fellow board members for their valued input and to the
management team and staff for your continuing ability to meet the Group`s
objectives.
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 2004 except for the restatement of the treasury shares, which now
includes the value of unvested shares allocated to employees in terms of the
share incentive scheme.
Where necessary comparative figures have been adjusted to conform with changes
in presentation in the current year
31 December 31 December
2003 2003
restated previously
stated
(unaudited) (unaudited)
R`000 R`000
Abridged Group Balance Sheet
Employee benefits 3 656 -
Ordinary share capital and share premium 29 230 37 041
Accounts payable and provisions 75 598 75 012
Current portion of interest-bearing borrowings 26 232 15 351
Abridged Group Statement of Changes in Equity
Share premium 28 175 35 986
Abridged Group Cash Flow Statement
Movement in working capital (12 526) (13 998)
Net financing effects of employee
share incentive trust (3 440) -
Movement in current portion of
interest-bearing borrowings (6 753) (7 797)
30 June 2004 30 June 2004
restated previously
stated
(audited) (audited)
R`000 R`000
Abridged Group Balance Sheet
Employee benefits 3 966 16 608
Ordinary share capital and share premium 28 691 41 333
Abridged Group Statement of Changes in Equity
Share premium 27 628 40 270
Abridged Group Cash Flow Statement
Movement in working capital (7 632) (22 980)
Net financing effects of employee
share incentive trust (6 278) 1 993
Dividend
In line with the Group`s dividend policy to declare an annual dividend after
publication of its final audited results no interim dividend has been declared.
Presentation to investors
A full copy of the presentation to investors and analysts can be viewed on the
company`s website. www.enviroserv.co.za
A McLean DK Gordon
Chairman Group Chief Executive
18 February 2005
EnviroServ Waste Management (Pty) Ltd
Waste-tech Industrial Waste Management
Dispose-tech Responsible Waste Disposal
Process Management Waste Reduction, Re-Use and Recovery
Conquip Hire Equipment & Plant Hire
Abzorbit Hazmat Services
Chargold
Millennium Waste Management (Pty) Ltd
Wade Refuse Domestic Waste Management
Sanumed Healthcare Waste
Landfill Management Waste Facility Management
Sediba Water and Sewage
Directors
A McLean (Chairman), DK Gordon (Group Chief Executive), 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 Bank Limited
100 Grayston Drive, Sandton 2196
PO Box 785700, Sandton 2146
Transfer secretaries
Computershare Investor Services 2004 (Pty) Ltd,
70 Marshall Street, Johannesburg 2001
