| Tue 16 Aug 2005, 17:54 | | Results For The Year Ended 30 June 2005 |
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Enviroserv Holdings Limited - Audited Results For The Year Ended 30 June 2005
EnviroServ Holdings Limited
(Registration number 1994/000280/06)
(`EnviroServ`)
Share code: ENV ISIN: ZAE 000010989
AUDITED RESULTS for the year ended 30 June 2005
# Revenue from ongoing operations up 24%
# Diluted headline earnings per share up 16%
ABRIDGED GROUP INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2005
30 June
30 June 2004
2005 Percentage restated
R000 change R000
Revenue 578 745 22 475 403
Ongoing operations 578 745 24 464 952
Discontinued operation - 10 451
Cost of Operations (356 415) 28 (278 345)
Ongoing operations (356 415) 34 (266 425)
Discontinued operation - (11 920)
Gross profit 222 330 13 197 058
Depreciation, overheads and
other expenses/income (155 504) 14 (136 566)
Operating profit before
impairment of assets 66 826 10 60 492
Impairment of assets (9 809) 389 (2 005)
Operating profit 57 017 (3) 58 487
Net profit on discontinuance - 117
Finance income 1 868 159
Finance costs (10 878) (8 733)
Share of profit of associate
company 2 269 8 2 107
Profit before taxation 50 276 (4) 52 137
Taxation (7 319) (37) (11 592)
Net profit attributable
to ordinary shareholders 42 957 6 40 545
Headline earnings per share
(cents) 51,1 14 45,0
Diluted headline
earnings per share (cents) 47,3 16 40,7
Earnings per share (cents) 42,4 (1) 42,7
Diluted earnings per share (cents) 39,2 1 38,7
Gross profit margin 38% 41%
Operating margin
- before impairments 12% 13%
Weighted average number
of shares in issue
during the year 101 226 978 94 897 248
Shares in issue at
end of the year 103 606 626 96 518 709
Reconciliation of headline
earnings
Net profit attributable
to ordinary shareholders 42 957 40 545
Adjusted by:
Amortisation of goodwill - 1 697
Impairment of goodwill 2 501 -
Impairment of property 6 115 -
Impairment of plant and equipment 1 193 2 005
Profit on disposal of property,
plant and equipment (930) (1 541)
Net profit on discontinuance - (117)
51 836 42 589
Taxation on aforementioned
adjustments (76) 80
Headline earnings 51 760 21 42 669
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2005
30 June
30 June 2004
2005 restated
R000 R000
Share capital
Ordinary shares 1 036 973
At beginning of year
including treasury shares 1 181 1 173
Issued during the year 55 8
Treasury shares 1 236 1 181
(200) (208)
Share premium 30 280 27 718
At beginning of the year
including treasury shares 38 277 48 785
Issued during the year 18 946 2 158
Cash distribution (13 834) (12 666)
43 389 38 277
Treasury shares (13 109) (10 559)
31 316 28 691
Foreign currency translation reserve
At beginning of period (1 887) -
Currency translation
differences during the period 1 755 (1 887)
(132) (1 887)
Distributable Reserves
At beginning of the year 148 017 107 472
Profit attributable to
ordinary shareholders 42 957 40 545
190 974 148 017
ABRIDGED GROUP BALANCE SHEET AS AT 30 JUNE 2005
30 June
30 June 2004
2005 Percentage restated
R000 change R000
Assets
Non-current assets 324 772 318 376
Property, plant and equipment 289 994 291 821
Goodwill 23 330 6 804
Investment in preference
shares and associate 11 448 19 751
Current assets 223 544 142 810
Inventories 10 638 4 006
Accounts receivable 176 002 130 591
Employee benefits 1 624 3 966
Cash and cash equivalents 35 280 4 247
Total assets 548 316 461 186
EQUITY AND LIABILITIES
Capital and reserves 222 158 174 821
Ordinary share capital
and share premium 31 316 28 691
Foreign currency
translation reserve (132) (1 887)
Distributable reserves 190 974 148 017
Non-current liabilities 172 727 146 740
Deferred taxation 22 006 13 219
Environmental
remediation provisions 102 364 102 317
Interest-bearing borrowings 45 155 27 532
Deferred income 3 202 3 672
Current liabilities 153 431 139 625
Accounts payable and
short-term provisions 126 531 102 083
Current portion of
interest-bearing borrowings 30 293 36 036
Taxation (3 393) 1 506
Total equity and liabilities 548 316 461 186
Net asset value per share (cents) 214 18 181
Debt/equity ratio 18% 34%
Net interest bearing debt 40 168 (32) 59 321
Capital commitments approved for next financial year: R209.3 million
ABRIDGED GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2005
30 June
30 June 2004
2005 restated
R000 R000
Cash generated by operations 126 632 125 456
Movement in working capital (23 535) (7 632)
Cash flow from operations 103 097 117 824
Spent from environmental
remediation provisions (23 239) (7 077)
Net finance costs (9 010) (8 574)
Taxation paid (4 759) (15 472)
Distribution paid to shareholders (13 834) (12 666)
Cash retained from operating activities 52 255 74 035
Additions to property, plant and equipment (49 353) (84 786)
Proceeds on disposal of
property, plant and equipment 5 632 13 219
Contractor claim received 8 500 -
Dividend received from associate 2 345 744
Disposal of operations - 2 349
Acquisition of subsidiary and associate (16 097) (967)
3 282 4 594
Proceeds from issue of share capital 19 000 2 166
Net financing effects of
employee share incentive trust (2 540) (6 278)
Movement in interest-bearing borrowings 15 279 (1 093)
Movement in current portion of
interest-bearing borrowings (5 743) 3 051
Movement in cash and cash equivalents 29 278 2 440
Net foreign exchange difference 1 755 (1 887)
Balance at the beginning of the year 4 247 3 694
Balance at the end of the year 35 280 4 247
RESTATEMENT OF COMPARATIVE FIGURES FOR THE YEAR ENDED 30 JUNE 2005
Previously
Restated reported
30 June 30 June
2004 2004
R000 R000
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
Ordinary share capital 973 1 063
Share premium 27 718 40 270
Abridged Group Cash Flow Statement
Movement in working capital (7 632) (22 980)
Net financing effect on employee
share incentive trust (6 278) 1 993
COMMENTARY
OVERVIEW
EnviroServ has continued to demonstrate its ability to achieve growth and
improve performance, and is again able to report growth in earnings for the
seventh consecutive year. Headline earnings increased 21% to R51,8 million
(2004 : R42,7 million) and diluted headline earnings per share increased 16%
to 47,3 cents (2004 : 40,7 cents). A focused management team has produced
strong organic growth, despite a competitive environment and a strong
currency, which has resulted in revenue from ongoing operations increasing 24%
to R578,7 million (2004: R465,0 million).
Improved cash generation in the second half of the year enabled net interest
bearing debt to be reduced by R19,2 million and gearing to fall to 18% (2004 :
34%) after peaking at 45% at half year. The group invested R23,5 million in
working capital as it established it`s non-South African operations. These
operations tend to have very long payment terms which had to be funded during
the start-up phase. Amounts spent against the environmental remediation
provisions were exceptionally high as in the beginning of the year a leachate
treatment plant was commissioned at Holfontein H:H landfill facility, but
capex on replacement plant and equipment for the year was below expenditure
in recent years as few of the vehicles reached their replacement hours and
few of the cells in the landfill sites reached capacity during the year. An
independent valuation of the property at the group`s Shongweni landfill
facility was undertaken and resulted in a R6,1 million adjustment to state
the asset at recoverable value.
On 1 October 2004 EnviroServ acquired the remaining shares in Chargold,
previously a 35% owned associate, for R19 million by means of an issue of 5
428 571 EnviroServ Holdings Limited shares at a price of R3,50 each. Chargold
has added R45,9 million to revenue and delivered an operating profit in line
with management expectations.
GROUP STRUCTURE
Market research during the year revealed the need for a number of structural
changes in order to achieve an improved client focus. Effecting these changes
has lead to the creation of a commercial division that will incorporate the
traditional sales and support functions and will be totally focused on
providing solutions for our clients, with operations separated into dedicated
service functions. A focused and dedicated research and development team in a
Technology Solutions division, incorporating the former Process Management
operations, will provide a research capability across the group, and will
be dedicated to exploring, finding and implementing alternative `greener,
cleaner`, waste treatment solutions for our clients.
Together with the restructuring, we have simplified the group`s branding by
eliminating all the divisional brands in order to concentrate on the parent
brand, EnviroServ.
REVIEW OF OPERATIONS
EnviroServ Waste Management (Pty) Limited
EnviroServ Waste Management`s performance improved steadily over the year
after a very slow start impacted by the effect of the strong rand on
EnviroServ`s major customers in the mining, manufacturing and petrochemical
industries. Good organic growth in revenue was achieved through increased
market share. This increase, however, came at the expense of its margins as
transport and disposal rates came under pressure in a very competitive
environment. The abnormally high increases in the price of fuel and labour
over the year drove up the cost of operations significantly, causing a further
fall in gross margin.
This past year has seen Technology Solutions` first major project pass through
the construction and development phases very successfully into operation. More
projects are expected to become operational in the next year. The division
contributed R16.9 million towards revenue this year.
Specialist compaction plant hire business Conquip experienced a downturn in
activity as demand for heavy compaction equipment fell. Conquip`s major
customers are in the private domestic waste, coal mining and road construction
industries.
EnviroServ Waste Management is continuing to explore opportunities outside of
South Africa`s borders. Operations in Angola for the collection of domestic
waste in the city of Luanda, and the management of a hazardous landfill
facility in Mozambique have both progressed satisfactorily and have
contributed to operating profits. Most of the difficulties associated with
such start up operations have been resolved and the company plans to use these
contracts as a base from which to leverage its service offerings in these and
other countries. The Group has benefited from a tax exemption granted to the
Angolan company for a period of eight years.
Millennium Waste Management (Pty) Limited
Millennium experienced another challenging year as a number of government
tenders were either not awarded after adjudication or were subject to legal
disputes regarding the award process. In spite of local authorities facing
increasing pressure to deliver the type of services offered by Millenium,
there was a lack of new work coming out of Millennium`s traditional customer
base. This has led to a decline in the company`s profitability, and Millennium
made an operating loss for the first time in recent years. Towards the end of
the year a restructuring exercise took place to reduce overhead costs in line
with the reduced revenue, and to focus on those areas requiring the most
attention.
The health care risk waste collection business, SanuMed, increased revenue
significantly through increased market share in the private hospital groups
but Sediba, the water and sewage management business saw revenue fall during
the year as some of its larger contracts with local authorities came to an end
and were insourced by the relevant local authorities.
Domestic waste collection division, Wade Refuse, grew revenue this year but
increased costs prevented this from translating into improved profitability.
The Landfill Management division saw margins deteriorated slightly without any
growth in revenue during the year, although it remains a profitable business.
Despite Millenium`s unsatisfactory performance over the year opportunities
remain to take the business forward on a profitability growth path and lift
margins in each business.
PROSPECTS
Prospects for 2006 are positive as the group grows off the platform
established in 2005. This year EnviroServ Waste Management focused its
attention on partnering with its key customers to develop long-term, mutually
beneficial waste solutions, incorporating all of the various services offered
by the company. Some of these initiatives are already operational, with more
beginning during the next financial year. With a view towards improving the
total service offering to customers and to deal with the expected future
expansion, extra resources have been employed in the areas of sales and
marketing, operations, and most significantly in the developmental side of
the business of Strategic Growth Projects and Technology Solutions divisions.
Further growth is expected through expansion of the group`s activities outside
of SA. Through diligently implementing our strategies, which have sought to
improve our value proposition by increasing our ability to provide customers
with a broader range of options in waste treatment solutions, EnviroServ is
well placed to adapt to the changing market trends and grow the business. This
growth will however require a fairly significant capital expenditure which will
impact gearing and finance costs.
Furthermore the Group remains focussed on driving operational efficiencies and
improving its cost base. Increased environmental awareness and higher level
selling initiatives where clients are looking more to outsourcing, strategic
supplier relationships and partnerships with EnviroServ, are helping to drive
growth.
CHANGES IN DIRECTORATE
Allan Charles Salomon was appointed to the board as a non-executive director
on 16 May 2005.
APPRECIATION
We would like to thank the members of our board, our management team and all
our dedicated and committed staff for all their hard work and support this
year.
FINANCIAL STATEMENTS
Financial statements of the group have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice consistent with
those used at June 2004 except for the restatement of treasury shares, which
now include the value of the unvested shares allocated to employees in terms
of the share incentive scheme.
Ernst & 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 15 cents (2004: 13
cents) per ordinary share payable out of share premium, in lieu of a final
dividend (`the distribution`), for the year ended 30 June 2005, in terms of
the resolution approved by the shareholders at the annual general meeting
held on Friday 8 October 2004. The last date to trade `CUM` the distribution
in order to participate in the distribution will be Friday 7 October 2005.
The shares of EnviroServ will commence trading `EX` the distribution from the
commencement of business on Monday 10 October 2005, and the record date will
be Friday 14 October 2005. Shareholders are advised that there will be no
dematerialisation or rematerialisation of shares from Monday 10 October 2005
to Friday 14 October 2005 both days inclusive. Payment will be made to
shareholders on Monday 17 October 2005.
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 D K Gordon
Chairman Group Chief Executive 16 August 2005
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, AC Salomon*
*Non-executive
Secretary: O Deftereos (ACIS, CA(SA))
Registered Office
18 Dusseldorf Street, Apex, Benoni 1500
Sponsor
Investec Bank Limited
100 Grayston Drive, Sandton 2196
PO Box 785700, Sandton 2146
Transfer Secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg 2001.
Date: 16/08/2005 05:51:48 PM
Produced by the JSE SENS Department
