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ENV
ENV
Enviroserv - Interim results for the six-month period ended 31 December 2005
Enviroserv Holdings Limited
Reg no. 1994/000280/06
ISIN: ZAE000010989
Share code: ENV
INTERIM ANNOUNCEMENT FOR THE SIX-MONTH PERIOD ENDED 31 DECEMBER 2005
Financial statements
Financial Highlights
- Revenue up 29%
- Operating profit up 53%
- Diluted headline earnings per share up 31%
Abridged Group Income Statement
Six-month Six-month Year
period ended period ended ended
31 December 31 December 30 June
2005 2004 2005
(Unaudited) Percentage (Restated) (Restated)
R"000 change R"000 R"000
Revenue 343 950 29 267 434 578 745
Operating profit before
depreciation,
amortisation
and environmental
remediation provisions 86 136 53 56 237 113 818
Depreciation,
amortisation and
environmental
remediation provisions (47 553) 53 (30 993) (59 292)
Operating profit 38 583 53 25 244 54 526
Finance income 49 - 1 868
Finance costs (5 634) (5 821) (10 878)
Share of profit of
associate company 780 1 584 2 269
Profit before taxation 33 778 61 21 007 47 785
Taxation (7 917) (1 921) (7 180)
Net profit attributable
to ordinary
shareholders 25 861 35 19 086 40 605
Diluted headline
earnings per
share (cents) 24,5 31 18,8 45,1
Diluted earnings
per share (cents) 23,1 30 17,8 37,1
Headline earnings
per share (cents) 26,1 27 20,6 48,8
Earnings per
share (cents) 24,7 26 19,6 40,1
Operating margin 11% 9% 9%
Weighted average
number of shares
in issue
during the
period - diluted 111 840 626 107 061 663 109 460 978
Weighted average
number of shares
in issue
during the period
- net of treasury
shares 104 876 369 97 491 953 101 226 978
Shares in issue
at end of the
period -net of
treasury shares 105 334 139 101 947 280 103 606 626
Reconciliation of
headline earnings
Net profit
attributable to
ordinary shareholders 25 861 19 086 40 605
Adjusted by:
Impairment of goodwill - 1 065 2 501
Impairment of property - - 6 115
Impairment of plant
and equipment 1 102 - 1 193
Loss/(Profit) on
disposal of
property plant
and equipment 1 075 (97) (930)
28 038 20 054 49 484
Taxation on
aforementioned
adjustments (631) 29 (76)
Headline earnings 27 407 36 20 083 49 408
Abridged Group Balance Sheet
31 December 31 December 30 June
2005 Percentage 2004 2005
(Unaudited) change (Restated) (Restated)
R"000 R"000 R"000
Assets
Non-current assets 356 034 332 450 323 611
Property, plant
and equipment 312 997 297 842 288 833
Intangible assets 31 253 23 844 23 330
Investment in
preference shares
and associate 11 784 10 764 11 448
Current assets 247 487 162 645 223 544
Inventories 14 063 9 436 10 638
Accounts
receivable 186 189 150 091 176 002
Employee benefits 2 755 3 118 1 624
Cash and cash
equivalents 44 480 - 35 280
Total assets 603 521 495 095 547 155
Equity and
liabilities
Capital and
reserves 230 486 199 250 221 334
Ordinary share
capital and
share premium 17 494 37 407 34 151
Foreign currency
translation
reserve (184) (3 953) (132)
Distributable
reserves 213 176 165 796 187 315
Non current
liabilities 216 360 162 427 172 391
Deferred taxation 21 104 14 266 21 670
Environmental
remediation
provisions 112 435 94 557 102 364
Interest-bearing
borrowings 79 820 50 152 45 155
Deferred income 3 001 3 452 3 202
Current
liabilities 156 675 133 418 153 430
Accounts payable
and provisions 115 565 93 650 126 530
Current portion of
interest-bearing
borrowings 34 961 36 010 30 293
Bank overdraft 4 783 3 607 -
Taxation 1 366 151 (3 393)
Total equity and
liabilities 603 521 495 095 547 155
Net asset value
per share (cents) 219 12 195 214
Debt/equity ratio 33% 45% 18%
Net interest
bearing debt 75 084 (16) 89 769 40 168
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
31 December 31 December 30 June
2005 2004 2005
(Unaudited) (Restated) (Restated)
R"000 R"000 R"000
Share capital
Ordinary shares 1 236 1 236 1 236
At beginning of period 1 236 1 181 1 181
Issued during period - 55 55
Share premium 28 436 45 217 46 224
At beginning of period 46 224 39 099 39 099
Issued during period - 18 946 18 946
Share-based payments 1 006 1 006 2 013
Share options (2 019) - -
Cash distribution (16 775) (13 834) (13 834)
Treasury shares (12 178) (9 046) (13 309)
Prior period (13 309) (10 649) (10 649)
Current period 1 131 1 603 (2 660)
17 494 37 407 34 151
Foreign currency translation
reserve
At beginning of period (132) (1 887) (1 887)
Currency translation
differences during period (52) (2 066) 1 755
(184) (3 953) (132)
Distributable Reserves
At beginning of period 187 315 146 710 146 710
Profit attributable to
ordinary shareholders 25 861 19 086 40 605
213 176 165 796 187 315
Abridged Group Cash Flow Statement
31 December 31 December 30 June
2005 2004 2005
(Restated)
R"000 R"000 R"000
Cash generated by operations 89 118 60 067 126 632
Movement in working capital (24 572) (27 432) (23 535)
Cash flow from operations 64 546 32 635 103 097
Spent from environmental
remediation provisions (7 501) (17 615) (23 239)
Net finance costs (5 585) (5 821) (9 010)
Taxation paid (3 724) (3 359) (4 759)
Distribution paid to shareholders (16 775) (13 834) (13 834)
Cash retained from
operating activities 30 961 (7 994) 52 255
Additions to property,
plant and equipment (59 070) (23 243) (49 353)
Proceeds on disposal of
property, plant and equipment 2 820 421 5 632
Dividend received from associate 444 - 2 345
Contractor claim received - - 8 500
Acquisition of subsidiaries,
associates and operations (8 000) (15 944) (16 097)
(32 845) (46 760) 3 282
Proceeds from issue of share
capital - 19 000 19 000
Net financing effects of
employee share incentive trust - 1 722 (2 540)
Options on own equity (2 019) - -
Movement in
interest-bearing borrowings 34 665 20 276 15 279
Movement in
current portion of
interest-bearing
borrowings 4 668 (26) (5 743)
Movement in cash and
cash equivalents 4 469 (5 788) 29 278
Net foreign exchange difference (52) (2 066) 1 755
Balance at beginning of period 35 280 4 247 4 247
Balance at end of period 39 697 (3 607) 35 280
RECONCILIATIONS OF THE TRANSITION FROM SA GAAP TO IFRS
Six-month Year
period ended ended
31 December 30 June
2004 2005
R"000 R"000
Profit attributable to shareholders
as previously reported under SA GAAP 20 262 42 957
IFRS adjustments (1 176) (2 352)
Property, plant and equipment (net of tax) (170) (339)
Share-based payments (1 006) (2 013)
As reported under IFRS 19 086 40 605
Property, plant Deferred Retained Share
and equipment tax earnings premium
R"000 R"000 R"000 R"000
1 July 2004
As previously
reported 291 821 (13 219) (148 017) (38 277)
IFRS adjustments (683) 198 1 307 (822)
Share-based payments - - 822 (822)
Property, plant
and equipment (683) 198 485 -
As reported under
IFRS 291 138 (13 021) (146 710) (39 099)
31 December 2004
As previously
reported 298 764 (14 533) (168 279) (43 389)
IFRS adjustments (922) 267 2 483 (1 828)
Share-based payments - - 1 828 (1 828)
Property, plant
and equipment (922) 267 655 -
As reported under
IFRS 297 842 (14 266) (165 796) (45 217)
30 June 2005
As previously
reported 289 994 (22 006) (190 974) (43 389)
IFRS adjustments (1 161) 336 3 659 (2 835)
Share-based payments - - 2 835 (2 835)
Property, plant
and equipment (1 161) 336 824 -
As reported under
IFRS 288 833 (21 670) (187 315) (46 224)
COMMENTARY ON THE DECEMBER 2005 INTERIM RESULT
EnviroServ delivered strong results for the six months to December 2005.
Headline earnings increased 36% to R27,4 million (2004: R20,1 million),
diluted headline earnings per share increased 31% to 24,5 cents (2004: 18,8
cents) and headline earnings per share increased 27% to 26,1 cents (2004: 20,6
cents).
During the six-month period EnviroServ experienced improved market conditions,
which together with a concerted sales drive, underpinned revenue growth of
29%. The improvement in revenue enabled the operating margin to increase to
11% (2004: 9%) and operating profit to increase by 53% to R38,6 million (2004:
R25,2 million).
Cash generated by operations was R89.1 million, an improvement of 48% on the
comparative period (R60,1 million). R24,6 million of cash was invested in
working capital to fund increased activity, R47,9 million was
invested in replacing vehicles, plant, equipment and landfill cells and a
further R11,2 million was expended on assets for new projects and to
accommodate the group"s growth.
The group"s effective tax rate has increased to 23% as much of the growth in
earnings was attributable to South African operations that are subject to a
higher rate of tax than the group"s international companies.
On 1 October 2005 EnviroServ acquired an environmental absorbent product
distribution business from Zorbit Environmental CC. This operation fits well
with the hazardous response business and is already showing good synergies.
Its profits in the three months to December have been in line with
management"s expectations.
REVIEW OF OPERATIONS
EnviroServ Waste Management (Pty) Limited
EnviroServ Waste Management continued the strong performance shown in the six
months to June 2005 to deliver an excellent result in the six months to
December 2005. The company achieved strong revenue growth across all regions
largely due to an increase in waste management requirements from major
customers and additional resources employed in sales and marketing that have
driven volumes and market share. Towards the end of the six-month period the
company embarked on a major contract to remove and landfill a large hazardous
waste stockpile in Cape Town, which had a positive effect on revenue and
profits. This contract will be completed early in the next six months.
EnviroServ Waste Management continued to focus on partnering with its key
customers to provide total waste solutions tailored to customers specific
needs. This was achieved through close co-operation between the different
service divisions co-ordinated by the recently formed regional Commercial
teams.
Conquip, the specialist compaction hire business, delivered a good operational
performance despite a lack of revenue growth. This was achieved through
operational efficiencies and replacing ageing plant.
Operations outside of South Africa have continued to perform well. The
domestic waste contract in Luanda is growing. The contract to manage
Mozambique"s only hazardous landfill facility is progressing satisfactorily
and the business has now expanded to provide waste transport services in the
region. EnviroServ Waste Management continues to invest in exploring and
developing foreign opportunities.
In September 2005 EnviroServ Waste Management signed an agreement with Japan
Carbon Finance Limited to sell carbon emission credits emanating from a gas
extraction project at the Chloorkop landfill site. This project will reduce
carbon emissions from the site as well as contributing to the group"s earnings
once operations begin as planned in the next financial year.
Millennium Waste Management (Pty) Limited ("Millenium")
Millennium reported an operating loss for the six-month period as it suffered
a further decline in revenue and a fall in tender opportunities from local
authorities and increased competition from small operators. Sediba, the water
and sanitation division was particularly effected as local authorities are
choosing to rather in-source despite a serious lack of capacity.
PROSPECTS
EnviroServ is well-positioned to achieve sustainable growth in revenue and
profits due to the positive impact of initiatives established over the past
years. EnviroServ"s higher growth, experienced over the past six months should
continue into the second six-month period, and then more moderately into the
medium term. Management will continue to focus on reducing the losses from
Millennium Waste Management, controlling costs and improving efficiencies in
all aspects across the Group.
EnviroServ is focused on developing partnerships with larger customers and
expanding the basket of waste treatment options. Opportunities outside of
South Africa"s borders for the skills and services offered by EnviroServ are
promising and plans are in place to seek out and develop these opportunities
to the benefit of the group. During this past period, as part of this
initiative, a number of international tenders have been submitted on behalf of
the group. Due to the nature of tenders, there is no certainty as to what
extent EnviroServ will be successful, however winning these tenders could add
significantly to the group"s results going forward.
CHANGES IN DIRECTORATE
Pierre Fourie resigned from the board as an executive director on 31 October
2005. We would like to express our appreciation for his valuable contribution.
On 22 November 2005 Patrick Francis Crowley was appointed to the board as an
independent non-executive director.
APPRECIATION
We would like to thank the members of the board for their enthusiasm and input
over this period and on behalf of the board we extend our appreciation to our
dedicated staff and managers who have worked hard to achieve this good result.
FINANCIAL STATEMENTS
The interim financial statements were prepared in accordance with
International Financial Reporting Standards (IFRS) with effect from 1 July
2005. The opening balance sheet of 1 July 2004 and the comparative income
statements for the year ended 30 June 2005 and the period ended 31 December
2004 were restated, where appropriate, having considered the transitional
arrangements provided by IFRS1 - First Time Adoption of International
Financial Reporting Standards.
The reconciliations as required in terms of IFRS1 indicating the effect of the
transition from SA GAAP to IFRS have been provided.
DIVIDEND
In line with the group"s dividend policy to declare an annual distribution or
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 D K Gordon
Chairman Chief Executive
21 February 2006
Directors
A McLean (Chairman), D K Gordon (Chief Executive)
P F Crowley*, M B N Dube*, E Gombault, B Joffe* D Lavarinhas, E K Motebang,
J L Pamensky* L P Ralphs*, R P Rocher, A C Salomon*
* Non-executive
Secretary: O Deftereos (ACIS, CA(SA))
Registered Office
18 Dusseldorf Street, Apex, Benoni 1500
Reg no. 1994/000280/06
ISIN: ZAE000010989
Share code: Env
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: 22/02/2006 08:01:32 AM Produced by the JSE SENS Department
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