| Mon 12 Feb 2007, 17:10 | | ENV - EnviroServ - Interim results: six-month peri |
|
ENV
ENV
ENV - EnviroServ - Interim results: six-month period ended 31 December 2006
Enviroserv Holdings Limited
(Registration number 1994/000280/06)
("EnviroServ")
Share code: ENV & ISIN: ZAE000010989
Interim announcement
for the six-month period ended 31 December 2006
Highlights:
Revenue up 23%
Operating profit up 47%
Diluted headline earnings per share up 41%
Abridged Group Income Statement
Six-month Six-month
period period Year
ended ended ended
31 Dec 31 Dec 30 June
2006 2005 2006
(Unaudited) % (Unaudited) (Audited)
R`000 Change R`000 R`000
Revenue 422 540 23 343 950 741 744
Operating profit before depreciation,
amortisation and environmental
remediation provisions 114 707 33 86 136 182 452
Depreciation, amortisation and
environmental remediation provisions (56 412) 22 (46 364) (89 394)
Operating profit 58 295 47 39 772 93 058
Finance income 739 49 831
Finance costs (7 652) (6 823) (10 472)
Share of profit of associate company 974 780 1 357
Profit before taxation 52 356 55 33 778 84 774
Taxation (13 449) (7 917) (18 319)
Profit attributable to ordinary 38 907 50 25 861 66 455
shareholders
Diluted headline earnings per share 34,5 41 24,5 63,1
(cents)
Diluted earnings per share (cents) 34,8 50 23,1 59,4
Headline earnings per share (cents) 36,1 38 26,1 66,9
Earnings per share (cents) 36,4 47 24,7 62,9
Operating margin 14% 12% 13%
Weighted average number of shares
in issue during the period - diluted 111 961 283 111 840 626 111 876
327
Weighted average number of shares
in issue during the period - net of
treasury shares 107 002 968 104 876 369 105 571
756
Shares in issue at end of the period
-
net of treasury shares 107 491 413 105 334 139 106 306
288
Reconciliation of headline earnings
Net profit attributable to ordinary
shareholders 38 907 25 861 66 455
Adjusted by:
Impairment of goodwill - - 4 281
Impairment of plant and equipment 59 1 102 1 564
Loss/(Profit) on disposal of
property, plant
and equipment (522) 1 075 (1 719)
38 444 28 038 70 581
Taxation on aforementioned 134 (631) 45
adjustments
Headline earnings 38 578 41 27 407 70 626
Abridged Group Statement of Changes in Equity
31 Dec 31 Dec 30 June
2006 2005 2006
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Share capital
Ordinary shares 1 063 1 054 1 063
At beginning of the period 1 237 1 236 1 236
Treasury shares (174) (182) (174)
Issued during the period - - 1
Share premium 14 922 27 436 27 238
At beginning of the period 27 238 44 211 43 389
Issued during the period - - 624
Cash distribution (12 316) (16 775) (16 775)
Treasury shares (5 211) (11 996) (5 211)
Share-based payment reserve 4 904 3 019 4 848
Options acquired in own equity (4 539) (2 019) (4 539)
11 139 17 494 23 399
Foreign currency translation reserve
At beginning of the period 5 441 (132) (132)
Currency translation differences
during the period 1 935 (52) 5 573
7 376 (184) 5 441
Distributable reserves
At beginning of the period 253 770 187 315 187 315
Dividend paid (11 196) - -
Profit attributable to ordinary 38 907 25 861 66 455
shareholders
281 481 213 176 253 770
Abridged Group Balance Sheet
31 Dec 31 Dec 30 June
2006 2005 2006
(Unaudited) % (Unaudited) (Audited)
R`000 Change R`000 R`000
Assets
Non-current assets 391 224 356 034 366 904
Property, plant and equipment 349 282 312 997 327 542
Intangible assets 29 526 31 253 27 001
Investment in preference shares
and associate 12 416 11 784 12 361
Current assets 325 756 247 487 331 423
Inventories 15 676 14 063 13 705
Accounts receivable 236 998 186 189 203 544
Employee benefits 16 140 2 755 15 501
Cash and cash equivalents 56 942 44 480 98 673
Total assets 716 980 603 521 698 327
Equity and liabilities
Capital and reserves 299 996 230 486 282 610
Ordinary share capital and share 11 139 17 494 23 399
premium
Foreign currency translation reserve 7 376 (184) 5 441
Distributable reserves 281 481 213 176 253 770
Non-current liabilities 244 401 216 360 228 624
Deferred taxation 16 036 21 104 18 051
Environmental remediation provisions 140 468 112 435 122 748
Interest-bearing borrowings 85 628 79 820 85 244
Deferred income 2 269 3 001 2 581
Current liabilities 172 583 156 675 187 093
Accounts payable and short-term
provisions 136 165 115 565 132 794
Current portion of interest-bearing
borrowings 28 009 34 961 23 621
Bank overdraft 5 369 4 783 24 149
Taxation 3 040 1 366 6 529
Total equity and liabilities 716 980 603 521 698 327
Net asset value per share (cents) 279 28 219 266
Debt/equity ratio 21% 33% 12%
Net interest-bearing debt 62 064 (17) 75 084 34 341
Contingent liabilities
Group sureties on banking facilities 37 363 33 645 30 913
Abridged Group Cash Flow Statement
Six-month Six-month
period period Year
ended ended ended
31 Dec 31 Dec 30 June
2006 2005 2006
(Unaudited) % (Unaudited) (Audited)
R`000 Change R`000 R`000
Cash generated by operations 113 988 28 89 118 186 578
Movement in working capital (30 273) (24 572) (24 941)
Cash flow from operations 83 715 30 64 546 161 637
Spent from environmental
remediation provisions (4 026) (7 501) (14 724)
Net finance costs (5 724) (5 585) (7 262)
Taxation paid (18 953) (3 724) (12 016)
Distribution paid to shareholders (23 512) (16 775) (16 775)
Cash retained from operating 31 500 30 961 110 860
activities
Additions to property, plant and (50 660) (59 070) (97 003)
equipment
Proceeds on disposal of property,
plant and
equipment 2 268 2 820 1 807
Dividend received from associate 919 444 444
Acquisition of subsidiaries,
associates and
operations (4 820) (8 000) (8 000)
(20 793) (32 845) 8 108
Proceeds from issue of share capital - - 625
Net financing effects of employee
share
incentive trust (639) - (3 940)
Options on own equity - (2 019) (4 539)
Movement in interest-bearing (7 842) 34 665 40 089
borrowings
Movement in current portion of
interest-
bearing borrowings 4 388 4 668 (6 672)
Movement in cash and cash equivalents (24 886) 4 469 33 671
Net foreign exchange difference 1 935 (52) 5 573
Balance at the beginning of the 74 524 35 280 35 280
period
Balance at the end of the period 51 573 39 697 74 524
Commentary
Overview
EnviroServ has continued its growth trend from last year and has delivered
another outstanding performance for the six-month period. Strong growth in the
areas of the economy that make up EnviroServ`s key markets, being the chemicals
and oils, industrial metals, and mining sectors has lead to an increase in waste
volumes, and this has been further impacted by the increasing importance of
responsible waste management in industry as a whole. EnviroServ`s blue-chip
client base is constantly demanding additional value add waste management
services in order to reach their sustainability goals.
During the period, revenue increased by 23% to R422,5 million from R344,0
million, and operating profit rose by 47% to R58,3 million from R39,8 million in
the comparative period. Diluted headline earnings per share grew 41% to 34,5
cents (2005: 24,5 cents). Cash generated by operations rose by 28% to R114,0
million, (2005: R89,1 million).
Review of operations
EnviroServ Waste Management (Pty) Ltd
The local hazardous industrial waste business has been the key contributor to
the Group`s growth for the third consecutive semester.
Revenue growth was driven from an increase in the volume of hazardous waste
managed and from price adjustments closer to current inflation levels. The
increase in waste volumes is indicative of increased activity in the mining and
manufacturing industries, and of the increased importance of responsible waste
management by South Africa`s leading companies. A much higher fuel price than in
the comparative six months and a higher inflationary environment had an upward
impact on costs but this was offset by the increase in efficiencies which could
be leveraged off the higher revenue base. This enabled margins to remain at
approximately the same levels achieved over the previous financial year.
Capital expenditure is expected to increase in the next six months as a large
portion of the fleet of vehicles is due for replacement and additional assets
are purchased to accommodate the increased business. Improved cash flows from
operations should, however, result in gearing remaining relatively unchanged.
EnviroServ`s compaction plant hire division has been expanded with the
acquisition of a 51% share in the Cape-based Burma Plant Hire (Pty) Ltd in
October 2006. Burma Plant Hire has been a supplier to EnviroServ in the Cape for
a number of years. This acquisition will secure a base from which to expand the
plant hire division in the Cape region where it was not previously operative. In
addition to the synergies that will be achieved, the plant hire division will
also gain the benefit of the expertise residing in Burma Plant Hire.
Envirobac (Lda), EnviroServ`s joint venture company in Angola, has again
achieved good growth in revenues and profits as it continues to expand its
operations. The company consistently generates strong cash flows and this period
has seen the repatriation of the Group`s first dividend out of Angola.
Operations in Mozambique have also performed well over the past six months. The
international division has won its first tenders in the Gulf which, although
relatively small, provide a good base from which to establish a presence in this
region where there are a number of potentially viable projects.
The landfill gas extraction Clean Development Mechanism (CDM) project ("carbon
credits") at Chloorkop landfill site is progressing to schedule. We received a
positive Record of Decision on the environmental impact assessment in November
2006 and we have received a Letter of Approval from the Designated National
Authority, which will enable the project to be submitted for registration to the
CDM Executive Board of the Kyoto Protocol. Provided there are no delays by the
CDM Board in granting registration, we expect the project infrastructure to be
substantially complete by June 2007, and operations to begin in the next
financial year.
Millennium Waste Management (Pty) Ltd
The performance of Millennium has improved substantially. Revenue has increased
by nineteen percent, albeit off a very low base, and two out of the four
divisions, Sanumed and Sediba, achieved operating profits for the period, whilst
Wade Refuse substantially reduced its previous losses. Only Landfill Management
suffered a decline during the period. Overall, Millennium Waste Management broke
even at operating level for the period and it is expected to make a modest
operating profit for the full year.
Prospects
The platform from which this six-month result has been achieved, will provide a
very solid foundation to grow for the remainder of the year, subject to the
continued buoyancy of those sectors of the economy in which our major customers
operate. The Group will continue to work together with its key customers to
develop environmentally responsible and sustainable waste solutions that are
aligned to the needs of the customers.
Two major focus areas for future growth are the expansion of operations outside
of South Africa and the development of waste beneficiation processes. The
Group`s international strategy is to explore opportunities in countries that are
politically stable, generate hard currency and have a requirement for the skills
the Group has to offer. Moving up the waste value chain is an ongoing pursuit
within EnviroServ and a number of initiatives have been identified in which
waste products can be converted into saleable products.
Changes in directorate
On 30 October 2006, Dr Makaziwe Mandela was appointed to the board as an
independent non-executive director. Lindsay Ralphs resigned from the board as a
non-executive director on 30 October 2006. The members of the board would like
to express their appreciation to Lindsay for his valuable contribution.
Appreciation
Thank you to all the members of the board, and a special thank you to the
management and staff of the EnviroServ Group without whose tireless effort this
result would not have been possible. The board would also like to acknowledge
the continued support of all of EnviroServ`s customers, suppliers and
associates.
Financial statements
The interim financial statements were prepared in accordance with International
Financial Reporting Standards (IFRS), which is consistent with the prior year.
Dividend
In line with the Group`s dividend policy to declare an annual distribution 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 Chief Executive
12 February 2007
Directors: A McLean (Chairman), DK Gordon (Chief Executive), PF Crowley*, MBN
Dube*, E Gombault, B Joffe*, D Lavarinhas, Dr MP Mandela*, EK Motebang, JL
Pamensky*, 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: 12/02/2007 17:10:02 Produced by the JSE SENS Department.
