| Fri 18 Aug 2006, 16:00 | | EnviroServ - Audited Results for the year ended 30 |
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ENV
ENV
EnviroServ - Audited Results for the year ended 30 June 2006
Enviroserv Holdings Limited
(Registration number 1994/000280/06)
("EnviroServ")
JSE code: ENV & ISIN: ZAE000010989
Audited Results for the year ended 30 June 2006
- Diluted headline earnings per share up 40% to 63,1 cents
- Operating profit up 65% to R93,1 million
- Cash distribution to shareholders up 40% to 21 cents
- Cash generated by operations up 50% to R186,6 million
Abridged group income statement
for the year ended 30 June 2006
Audited
Audited Restated
2006 % 2005
R000 change R000
Revenue 741 744 28 578 745
Operating profit before impairment 98 903 50 66 088
of assets
Impairment of assets (5 845) (9 809)
Operating profit 93 058 65 56 279
Finance income 831 1 868
Finance costs (10 472) (12 631)
Share of profit of associate 1 357 2 269
company
Profit before taxation 84 774 77 47 785
Taxation (18 319) (7 180)
Net profit attributable to 66 455 64 40 605
ordinary shareholders
Diluted headline earnings per 63,1 40 45,1
share (cents)
Headline earnings per share 66,9 37 48,8
(cents)
Diluted earnings per share (cents) 59,4 60 37,1
Earnings per share (cents) 62,9 57 40,1
Operating margin (%) 13% 10%
Weighted average number of shares
in issue during
The year - diluted 111 876 327 109 460 978
Weighted average number of shares
in issue during
the year - net of treasury shares 105 571 756 101 226 978
Shares in issue at end of the year
- net of
treasury shares 106 306 288 103 606 626
Reconciliation of headline
earnings
Net profit attributable to 66 455 40 605
ordinary shareholders
Adjusted by:
Impairment of goodwill 4 281 2 501
Impairment of property - 6 115
Impairment of plant and equipment 1 564 1 193
Profit on disposal of property, (1 719) (930)
plant and equipment
70 581 49 484
Taxation on aforementioned 45 (76)
adjustments
Headline earnings 70 626 43 49 408
Abridged group cash flow statement
for the year ended 30 June 2006
Audited
Audited Restated
2006 2005
R000 R000
Cash generated by operations 186 578 124 619
Movement in working capital (24 941) (25 877)
Cash flow from operations 161 637 98 742
Spent from environmental (14 724) (23 239)
remediation provisions
Net finance costs (7 262) (9 010)
Taxation paid (12 016) (4 759)
Cash retained from operating 127 635 61 734
activities
Cash distribution paid to (16 775) (13 834)
shareholders
110 860 47 900
Additions to property, plant and (97 003) (49 353)
equipment
Proceeds on disposal of property, 1 807 5 632
plant and equipment
Contractor claim received - 8 500
Dividend received from associate 444 2 345
Acquisition of subsidiaries and (8 000) (16 097)
operations
8 108 (1 073)
Proceeds from issue of share 625 19 000
capital
Net financing effects of employee (8 479) 1 815
share incentive trust
Movement in interest-bearing 40 089 15 279
borrowings
Movement in current portion of (6 672) (5 743)
interest-bearing borrowings
Movement in cash and cash 33 671 29 278
equivalents
Net foreign exchange difference 5 573 1 755
Balance at the beginning of the 35 280 4 247
year
Balance at the end of the year 74 524 35 280
Abridged group statement of changes in equity
for the year ended 30 June 2006
Audited
Audited Restated
2006 2005
R000 R000
Share capital
Ordinary share capital 1 063 1 036
At beginning of the year 1 236 1 181
Issued during the year 1 55
Treasury shares (174) (200)
Share premium 22 336 33 115
At beginning of the year including 44 211 39 099
treasury shares
Issued during the year 624 18 946
Cash distribution (16 775) (13 834)
28 060 44 211
Treasury shares (5 211) (13 109)
Share-based payment reserve 4 026 2 013
Options acquired on own equity (4 539) -
23 399 34 151
Foreign currency translation
reserve
At beginning of the year (132) (1 887)
Currency translation differences 5 573 1 755
during the year
5 441 (132)
Distributable reserves
At beginning of the year 187 315 146 710
Net profit attributable to 66 455 40 605
ordinary shareholders
253 770 187 315
Abridged group balance sheet
as at 30 June 2006
Audited
Audited Restated
2006 2005
R000 R000
ASSETS
Non-current assets 366 904 323 611
Property, plant and equipment 327 542 288 833
Intangibles 27 001 23 330
Investment in preference shares 12 361 11 448
and associate
Current assets 307 274 223 544
Inventories 13 705 10 638
Trade and other receivables 203 544 176 002
Share incentive trust loans 15 501 1 624
Cash and cash equivalents 74 524 35 280
Total assets 674 178 547 155
EQUITY AND LIABILITIES
Capital and reserves 282 610 221 334
Ordinary share capital and share 23 399 34 151
premium
Foreign currency translation 5 441 (132)
reserve
Distributable reserves 253 770 187 315
Non-current liabilities 228 624 172 391
Deferred taxation 18 051 21 670
Environmental remediation 122 748 102 364
provisions
Interest-bearing borrowings 85 244 45 155
Deferred income 2 581 3 202
Current liabilities 162 944 153 430
Trade and other payables 132 794 126 530
Current portion of interest- 23 621 30 293
bearing borrowings
Taxation 6 529 (3 393)
Total equity and liabilities 674 178 547 155
Net asset value per share (cents) 266 214
Debt/equity ratio 12% 18%
Net interest bearing debt 34 341 40 168
Contingencies
Suretyship for bank overdrafts 34 760 20 254
Capital commitments
Approved and contracted for 9 566 39 675
Approved, not yet contracted for 187 809 169 584
Reconciliations of the transition from SA GAAP to IFRS
2005
R"000
Profits attributable to
shareholders as
previously
reported under SA GAAP 42 957
IFRS adjustments (2 352)
Property, plant and (339)
equipment (net of tax)
Share-based payments (2 013)
As reported under IFRS 40 605
Property, Distribu-
plant and Deferred table Share
equipment tax reserves 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 (683) (198) (485) -
equipment
As reported under IFRS 291 138 13 021 146 710 39 099
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 (1 161) (336) (824) -
equipment
As reported under IFRS 288 833 21 670 187 315 46 224
Commentary
Overview
EnviroServ has d a record performance for the year, achieving solid growth in a
number of areas across the group. The steady Rand, for most of the year,
together with buoyant commodity prices and strong demand in the local economy
has led to increased production from the mining and manufacturing sector. Waste
volumes and revenues increased in line with improved market conditions.
Performance was further enhanced by the success of our strategy to gain market
share with some of our larger industrial customers. Ongoing efforts to reduce
costs and improve productivity, quality and customer service also contributed to
better performance. On the downside, the continuing stagnation in municipal
waste contract markets has weighed heavily on the performance of our BEE joint
venture, Millennium Waste Management (Pty) Ltd. However, these negative effects
were largely offset by sound operational management and significant advances
made by the Sanumed division in a very tough health care risk waste market.
During the year revenue increased by 28% to R741,7 million from R578,7 million,
and operating profit rose by an effective 65% to R93,1 million from R56,3
million.
Diluted headline earnings per share grew 40% to 63,1 cents (2005: 45,1 cents).
Cash generated by operations rose by 50% from R124,6 million to R186,6 million
which enabled the group to reduce net interest bearing debt by R5,8 million even
after spending R49,5 million on replacement capex and a further R47,5 million on
plant and equipment for expansion.
Review of operations
EnviroServ Waste Management (Pty) Ltd
The year to 30 June 2006 was the most successful ever for EnviroServ Waste
Management with record growth being achieved in revenue, profits and margins.
Most of this growth was achieved from EnviroServ"s core industrial operations
within South Africa. The focus on partnering with key customers in developing
innovative waste solutions tailored to customers" specific needs has proven very
successful in expanding the service offering and in providing beneficial
solutions to previously problematic waste issues.
The volumes of waste handled during the year increased substantially over
previous years as a consequence of increased waste generation from major
customers, an increase in market share and a number of waste stockpile
remediations. The overall increase in activity for EnviroServ translated into
very strong revenue growth in transport, treatment and disposal. Margins in the
business also strengthened due to improvements in operational efficiencies and
the gearing effect of controlled increases in fixed costs. The improved margin
achieved despite the very high increases in fuel prices and the annual increase
in unionised wages, which was well in excess of inflation.
EnviroServ Waste Management has continued to explore new markets in waste
management and new environmentally and economically sound solutions for waste
problems. The business development arms of the company, Strategic Growth
Projects and Technology Solutions, have expanded the business footprint to areas
within South Africa in which the group did not previously operate, and have
expanded the group"s suite of services offered to customers.
EnviroServ Waste Management"s wholly owned subsidiary, Chargold, which
beneficiates carbon waste products delivered a good result this year with strong
growth in revenue and profits. Chargold has benefited from EnviroServ"s close
relationships with some of the largest generators and users of carbon products,
and in turn, Chargold has added another dimension to the EnviroServ solution.
Specialist compaction hire business Conquip managed to turn its performance
around from the previous year to post a healthy profit. Although Conquip is
still experiencing a lack of growth in revenue, renewed focus on efficiencies
and the implementation of a plant renewal programme has strengthened operating
margins steadily over the past twelve months.
An international division has been established to take advantage of the many
opportunities that exist abroad for EnviroServ. This division has submitted a
number of international tenders that are currently in various stages of the
adjudication process. Should these prove successful, they will have a positive
impact on the group going forward.
The contract in Angola for the collection of domestic waste in Luanda was
increased during the year with Envirobac, a joint venture with a local Angolan
company, being awarded a much larger area of the city. Operations in Mozambique
are also expanding and now include the management and transportation of
hazardous waste as well as the contract to manage the country"s only hazardous
waste landfill site.
In September 2005 EnviroServ Waste Management signed an agreement with Japan
Carbon Finance Limited, a conglomerate of blue chip companies in Japan, 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 once
operations begin as planned in the next financial year. The authorities issued a
"letter of no objection" which enabled the piloting phase to proceed. This pilot
proved successful, and the environmental impact assessment has been submitted
for a record of decision.
Millennium Waste Management (Pty) Ltd
Conditions have not improved in the domestic waste market despite numerous, well
publicised, service delivery shortcomings by the local authorities.
Last year Millennium underwent a restructuring exercise to address the
increasing losses experienced under these constricting market conditions which
has lead to an improved performance this year. The most impressive improvement
came from SanuMed, the healthcare risk waste business. Revenue continued to
increase significantly as the division consolidated its position in the private
health care sector. Renegotiated rates in some of the loss making contracts
together with an improvement in operational efficiencies have improved SanuMed"s
margins which are now approaching acceptable levels.
Domestic waste collection business, Wade Refuse, and water and sewage management
business, Sediba, were the most severely impacted by the reduction of work
outsourced by local authorities. Initiatives that began last year to reduce the
losses in Wade Refuse are starting to take effect and losses have diminished in
the second half of the year. Sediba has focused on the value added services of
training and asset management within the waste water sector. The Landfill
Management division also experienced a drop in revenue, but improved operational
efficiencies and a reduction in overheads following the restructure resulted in
an improvement in margins and an increase in profits.
The improvements shown in Millennium in the latter part of the financial year
are very promising. Millennium has steadily improved performance and although it
has still recorded a loss for the twelve-month period, it has managed to break
even for the last months of this financial year. Management expects Millennium
to achieve an operating profit in the forthcoming financial year.
Prospects
The group"s prospects for 2007 remain positive given the solid platform from
which to grow. EnviroServ Waste Management will continue to focus on developing
long-term mutually beneficial waste solutions in partnership with its key
clients. The group"s substantial investment into research for viable alternative
waste treatment options has started to result in some very promising options
that will enable us to improve and expand our basket of services, while
assisting clients to improve their sustainability profile. These prospects
assume that there will be no substantial slowdown in the South African economy,
particularly in the manufacturing and mining sectors.
Further growth is expected through the expansion of the activities outside of
South Africa. EnviroServ will continue to seek opportunities for our existing
skill and competencies in areas that make sound business sense for our group.
In terms of the domestic waste market, management is satisfied that the changes
and interventions implemented last year, are achieving the objective of
maintaining the scale of operations in line with the amount of work available.
Going forward we will focus on tailoring solutions which provide better
opportunities to grow in this very difficult, but potentially massive market.
The group remains focused on driving operational efficiencies and improving its
cost base. Increased environmental awareness and higher level selling
initiatives are helping to drive growth. This is particularly relevant in cases
where clients are looking more to outsourcing and strategic supplier
relationships, resulting in the development of key partnerships with EnviroServ.
Changes in directorate
On 22 November 2005 Patrick Francis Crowley was appointed to the board as an
independent non-executive director. Pierre Fourie resigned from the board as an
executive director on 31 October 2005. His valuable contribution has been
greatly appreciated.
Appreciation
Special thanks to the board of EnviroServ for their valuable contributions and,
on behalf of the board, extend appreciation to dedicated staff and managers who
have worked hard to achieve this great result. Management also values the
continuing goodwill and support of customers, suppliers and business associates.
Financial statements
The 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 statement for the year
ended 30 June 2005 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.
These results have been audited by Ernst & Young, Chartered Accountants (SA),
Registered Accountants and Auditors. Their unqualified audit opinion is
available for inspection at the company"s registered office.
Declaration of distribution
The directors have resolved to pay a dividend of 10 cents per ordinary share and
a payment of 11 cents per ordinary share out of share premium, ("the
distribution"), for the year ended 30 June 2006. The last day to trade "CUM" the
distribution in order to participate in the distribution will be Friday, 6
October 2006. The shares of the company will commence trading "EX" the
distribution from the commencement of business on Monday 9 October 2006 and the
record date will be Friday 13 October 2006. Share certificates may not be
dematerialised or rematerialised from Monday, 9 October 2006 to Friday,
13 October 2006 both days inclusive. Payment will be made to shareholders on
Monday, 16 October 2006.
A McLean DK Gordon
Chairman Group Chief
Executive
18 August 2006
Directors: A McLean (Chairman), DK Gordon (Group Chief Executive), PF Crowley*,
MBN Dube*, 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: Brickfield Road, Meadowdale, Germiston 1401
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: 18/08/2006 04:00:27 PM Produced by the JSE SENS Department
