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IWE - Interwaste Holdings Limited - Unaudited condensed consolidated

Release Date: 26/09/2011 11:24
Code(s): IWE
Wrap Text

IWE - Interwaste Holdings Limited - Unaudited condensed consolidated financial results for the six months ended 30 June 2011 Interwaste Holdings Limited (Incorporated in the Republic of South Africa) (Registration number: 2006/037223/06) (JSE code: IWE ISIN: ZAE000097903) ("Interwaste" or "the Company" or "the Group") UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011 Condensed Consolidated Statement of Comprehensive Income Unaudited Unaudited Unaudited Audited Revised
6 months 6 months 6 months 12 months June 2011 June 2010 June 2010 Dec 2010 R`000 R`000 R`000 R`000 Revenue 220 990 211 690 211 690 442 674 Cost of sales (129 382) (138 368) (132 012) (290 033) Gross profit 91 608 73 322 79 678 152 641 Other income - 4 651 2 990 2 082 Operating expenses (66 828) (55 643) (50 759) (123 401) Earnings before interest, tax, 24 780 31 909 depreciation and amortisation 22 330 31 322 Depreciation and amortisation (19 640) (23 544) (16 147) (38 814) Profit/(loss) before interest 5 140 (1 214) 15 762 (7 492) and taxation Investment income - 464 464 5 298 Share of equity accounted 589 148 148 55 earnings of joint venture Net interest paid (4 143) (5 070) (5 070) (13 236) Profit/(loss) before taxation 1 586 (5 672) 11 304 (15 375) Taxation (expense)/credit (429) 1 366 (3 055) 3 419 Total comprehensive 1 157 (4 306) 8 249 (11 956) income/(loss) for the period Comprehensive income for the period attributable to: Non-controlling interest (264) (372) (372) (111) Comprehensive income/(loss) 893 7 877 attributable to equity holders (4 678) (12 067) Reconciliation of headline earnings/(loss) Earnings/(loss) attributable to 893 (4 678) 7 877 (12 067) ordinary shareholders Adjusted for: Profit on disposal of subsidiary - (4 254) (2 593) (4 254) Loss on disposal of property, 289 827 plant and equipment 827 2 398 Impairment of investment in - 1 416 - 1 416 joint venture Impairment of goodwill 1 432 1 432 Headline earnings/(loss) 1 182 6 111 attributable to ordinary (5 257) (11 075) shareholders Weighted average number of 329 311 329 311 329 311 329 311 shares in issue on which 210 210 210 210 earnings per share are based Basic earnings/(loss) per share 0.27 (1.42) 2.39 (3.66) (cents) Loss on disposal of property, 0.09 0.25 0.25 0.73 plant and equipment Impairment of goodwill - 0.43 - 0.43 Impairment of investment in - 0.43 - 0.43 joint venture Profit on disposal of subsidiary - (1.29) (0.79) (1.29) Headline earnings/(loss) per 0.36 (1.60) 1.85 (3.36) share (cents)
Condensed Consolidated Statement of Changes in Equity Unaudited Unaudited
Unaudited Audited 6 months Revised 6 months June 2011 6 months June 2010 12 months R`000 June 2010 R`000 Dec 2010
R`000 R`000 Total comprehensive income 1 157 (4 306) 8 249 (11 956) for the period Disposal of subsidiary (non- - (1 594) (1 594) (1 575) controlling interest) Dividends paid to minorities (105) (244) (244) (243) Share option expense - - - 142 Equity at beginning of 236 781 266 085 266 085 250 413 period Equity at end of period 237 833 259 941 272 496 236 781 Made up as follows: Share capital issued 33 33 33 33 Share premium 175 458 175 458 175 458 175 458 Share based reserves 113 1 553 1 553 1 715 Retained income 60 287 80 861 93 416 57 801 Non controlling interest 1 942 2 036 2 036 1 774 Equity at end of period 237 833 259 941 272 496 236 781 Condensed Consolidated Statement of Financial Position Unaudited Unaudited
Unaudited Audited June 2011 Revised June 2010 12 months R`000 June 2010 R`000 Dec 2010 R`000 R`000
ASSETS Non-current assets 302 376 315 804 318 780 296 552 Property, plant and 253 866 257 319 264 716 248 540 equipment Goodwill 47 001 50 381 50 381 47 001 Intangible assets 179 179 179 179 Investment in joint venture 700 1 619 1 619 110 Deferred tax asset 630 6 306 1 885 722 Current assets 117 308 140 418 145 113 119 902 Inventories 18 051 28 012 34 368 15 717 Other financial assets - 973 973 - Loans to related companies 7 413 - - 7 347 Current tax receivable 2 254 4 202 4 202 6 947 Trade and other receivables 81 239 99 397 97 736 80 581 Cash and equivalents 8 351 7 834 7 834 9 310 Total assets 419 684 456 222 463 893 416 454
EQUITY AND LIABILITIES Equity 237 833 259 941 272 496 236 781 Share capital 175 491 175 491 175 491 175 491 Share based payment 113 1 553 1 553 1 715 reserves Retained earnings 60 287 80 861 93 416 57 801 Non-controlling interest 1 942 2 036 2 036 1 774 Non-current liabilities 58 942 76 578 76 578 66 710 Interest-bearing borrowings 40 172 47 782 47 782 47 739 Deferred tax liability 18 770 28 796 28 796 18 971 Current liabilities 122 909 119 703 114 819 112 963 Current tax payable 176 1 778 1 778 - Interest-bearing borrowings 51 075 49 534 49 534 51 547 Trade and other payables 50 475 38 901 34 017 37 949 Bank overdrafts 21 183 29 490 29 490 23 467 Total liabilities 181 851 196 281 191 397 179 673 TOTAL EQUITY & LIABILITIES 419 684 456 222 463 893 416 454 Number of shares in issue 329 311 329 311 329 311 329 311 at period end 208 208 208 208 Net asset value per share 71.6 78.3 82.1 71.4 (cents) Net tangible asset value 57.4 63.0 66.8 57.1 per share (cents) Condensed Consolidated Statement of Cash Flow Unaudited Unaudited Unaudited Audited Revised 6 months 6 months 6 months 12 months
June 2011 June 2010 June 2010 Dec 2010 R`000 R`000 R`000 R`000 Cash inflow from operating 34 398 15 317 15 317 38 424 activities Cash outflow on investing (25 033) (17 369) (17 369) (34 948) activities Cash (outflow)/ inflow from (8 040) (55) (55) 1 916 financing activities Total cash movement for the 1 325 (2 107) (2 107) 5 392 period Cash at beginning of period (14 157) (19 549) (19 549) (19 549) Cash at end of period (12 832) (21 656) (21 656) (14 157) Condensed Consolidated Segment Report Unaudited Unaudited Unaudited Audited Revised Original
6 months 6 months 6 months 12 months June 2011 June 2010 June 2010 Dec 2010 R`000 R`000 R`000 R`000 Gross revenue Waste management 155 888 130 340 130 340 270 566 Metals recovery 10 771 21 979 21 979 37 469 Organics 14 115 19 510 19 510 56 755 Landfill 40 216 39 861 39 861 77 884 220 990 211 690 211 690 442 674 Profit/ (Loss) before interest and taxation Waste management 3 625 4 331 13 793 14 307 Metals recovery (2 006) (7 630) (2 713) (13 126) Organics (1 648) (2 879) (2 338) (5 588) Landfill 5 169 4 964 7 020 (3 085) 5 140 (1 214) 15 762 (7 492) Depreciation Waste management 12 440 14 732 10 103 23 377 Metals recovery 1 954 548 376 1 786 Organics 1 658 1 722 1 181 1 825 Landfill 3 588 6 542 4 487 11 826 19 640 23 544 16 147 38 814
Geographical segments are not reported as the company operates mainly in South Africa and its international operations do not meet the IAS 14 thresholds for reportable segments. OVERVIEW The six month period continued to be challenging for the Group. We reported that the 2010 financial year had been difficult and conditions during the current period again reflected a lack of growth in the parts of the economy we operate in. Interwaste produced a small profit for the period. Encouragingly, the Group produced strong cash flows from operations which were reinvested into the business. The annual report for the year ended 31 December 2010 included a note that a number of impairments had been made in that financial year. Certain of the impairments related to the six month period to 30 June 2010 and the comparative figures have been restated to reflect those impairments. Details of the adjustments are set out in the "Financial" section below. The waste management division grew revenue by 19,6% over the comparative period but saw a 16,3% decrease in earnings before interest and taxation. The decline in profits was a function of higher landfill costs, some of which could not be passed on to customers, an increase in salary costs, including the cost of new depots/businesses which will yield commensurate returns as they develop, and higher fuel and vehicle operating costs. Substantial increases in landfill disposal costs have characterised the industry over the last few years and are likely to continue. In an increasing number of cases we have been successful in developing alternate disposal options for our customers which limited their cost increases and protected our margins; this will become an increasingly important part of our business. The development of a cell in our landfill which will be able to accept waste from many of our clients will significantly contribute to the Group`s future profitability. MRC`s revenue decreased as operations in the division were scaled back. This, together with substantially lower inventory write offs, resulted in a reduction in the loss generated by the division. Revenue in the organics division declined by 27,7% and the loss before interest and tax reduced by 42,3%. We have appointed a new chief executive to the division and we are confident that he should have a positive impact on the second half of the year, which is the primary season for this business. Turnover in the landfill division was flat as were earnings. The division is the largest landfill manager in the country and we need to make better use of our scale to drive growth and reduce costs. FINANCIAL As set out in the annual report for the year ended 31 December 2010, a number of large impairments were expensed in the 2010 financial year. Certain of those related to the six month period to 30 June 2010 and the comparative figures were restated to reflect that. The following adjustments were processed: Cost of sales (R 6,356 million) - inventory was impaired by R6,4 million, the majority of which comprised inventory held by MRC; Operating expenses (R 4,884 million) - goodwill was impaired by R1,4 million and an investment in a joint venture by R1,4 million; - an additional expense accrual of R2,0 million was required; Depreciation (R 7,397 million) - additional depreciation of property, plant and equipment of R5,8 million was processed; - property, plant and equipment of R1,8 million was impaired; Other income (R 1,661 million) - profit on the sale of the Namibian subsidiary of R1,7 million was brought to account; Tax relief of the R4,4 million arose on the adjustments; The net decrease in the previously reported profit after tax for the six months ended 30 June was R12,6 million. Group revenue for the six months increased by 4% to R221 million (2010 : R212 million). Gross profit increased by 25% to R92 million (2010 restated: R73 million). EBITDA increased by 11% to R25 million (2010 restated: R22 million). The limited increase in Group revenue is reflective of the difficult markets we faced. Price increases have been limited, customers are delaying and limiting clean ups where possible, and certain of our competitors are tendering for landfill management contracts at prices that are proving to be unsustainable. The improvement in gross profit was a function of large stock impairments in the comparative period and the positive contribution from the Group`s own landfill in the current period. Operating expenses increased as a result of inflation, additional operating units, including a branch outside South Africa, the establishment of a water treatment facility and the company owned landfill, the costs of a strike plan and the expensing of costs on the development of a second landfill, that do not yet qualify for capitalisation. The Group produced strong cash flows from operations, primarily as a result of improved working capital management. The cash was reinvested into operating assets, the development of the cell in the Group`s landfill, and applied to reduce borrowings. PROSPECTS The markets in which the Group operates are likely to remain difficult. The nationwide strikes in July meant that many of our customers lost production which negatively impacted our revenue and results for the month. August has been substantially better and we should have a reasonable second half should current operating levels continue and should we succeed in cutting some of the costs we have targeted. Interwaste will continue to offer clients innovative and cost effective solutions for their waste disposal and will generate growth accordingly. As part of this the Group expects to complete the development of the landfill cell referred to above prior to the year end. This which will facilitate our ability to offer clients a complete waste solution and should be an important source of future revenue. We have curtailed the metals recovery business and will continue to evaluate its viability. Significantly more marketing effort has been applied to the organics business and we anticipate an improvement in turnover during the second half of the year. Our challenges in the landfill management business will be to continue winning contracts in an environment which can be politically difficult and to ensure that we manage our costs effectively so that contracts meet our profitability requirements. During the second half of the year we will be consolidating the majority of our Gauteng operations into a single site the Group owns in Germiston. This should lead to cost savings and provide the opportunity for improved synergies across the different businesses. DIVIDEND The Group will not pay a dividend for the six month period. Platinum Waste Resources (Pty) Ltd, a partly owned subsidiary, paid dividends of R105 000 to non-controlling shareholders. ACCOUNTING POLICIES BASIS OF PREPARATION These condensed consolidated interim financial statements have been prepared in accordance with the recognition and measurement principles of IFRS, the presentation and disclosure requirements of IAS 34 Interim Financial Reporting, the AC 500 Standards as issued by the Accounting Practices Board, the requirements of the South African Companies Act of 2008 and the JSE Listing Requirements. The accounting policies and methods of computation applied in the preparation of these interim financial statements are in accordance with IFRS and are consistent with those applied in the preparation of the Group`s annual financial statements for the year ended 31 December 2010. The condensed consolidated interim financial statements are presented in South African Rands. STATEMENT ON GOING CONCERN The interim financial statements have been prepared on the going concern basis as the directors believe that the group has adequate resources to continue in operation for the foreseeable future. APPRECIATION The board extends its gratitude to our employees, our customers and our investors for the effort and support during the period. On behalf of the Board 26 September 2011 AH Willcocks A Broodryk Chief Executive Financial Director COROPORATE INFORMATION Non-executive directors: A Kawa (Chairperson) PF Mojono, GR Tipper, BL Willcocks Executive directors: WAH Willcocks (MD), A Broodryk (FD), LC Grobbelaar Registration number: 2006/037223/06 Registered address: P O Box 73503, Fairlands, 2030 Company secretary: Allen de Villiers Telephone: (011) 792 9330 Facsimile: (011) 792 8998 Transfer secretaries: Computershare Investor Services (Pty) Limited Designated Adviser: Vunani Corporate Finance Date: 26/09/2011 11:24:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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