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Reviewed condensed consolidated preliminary financial results for the year ended 31 December 2012
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”)
REVIEWED CONDENSED CONSOLIDATED PRELIMINARY FINANCIAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2012
Condensed Consolidated Statement of Comprehensive Income
for the year ended 31 December 2012
Reviewed Audited
12 months 12 months
Dec 2012 Dec 2011
R’000 R’000
Revenue 558 591 455 991
Cost of sales (315 522) (276 323)
Gross profit 243 069 179 668
Operating expenses (168 305) (139 625)
Earnings before interest, tax, depreciation and
amortisation 74 764 40 043
Depreciation and amortisation (42 521) (37 785)
Results from operating activities 32 243 2 258
Share of (loss)/profit in equity accounted joint
venture (168) 563
Net finance cost (10 923) (9 471)
Finance cost (11 432) (10 709)
Finance income 509 1 238
Profit/(loss) before taxation 21 152 (6 650)
Taxation(expense)/credit (5 642) 1 548
Profit/(loss) after tax 15 510 (5 102)
Profit/(loss) attributable to:
Non-controlling interests 721 749
Owners of the company 14 789 (5 851)
Other comprehensive income
Foreign currency translation reserve movement on (12) 53
foreign operations
Total comprehensive income/(loss) 15 498 (5 049)
Total comprehensive income/(loss) attributable to:
Non-controlling interests 721 749
Owners of the company 14 777 (5 798)
Reconciliation of headline earnings/(loss)
Profit/(loss) attributable to owners of the company 14 789 (5 851)
Adjusted for:
(Profit)/loss on disposal of property, plant and
equipment (2 421) 1 371
Share of profit on disposal of property, plant &
equipment in equity accounted joint venture (18) -
Taxation on headline earnings adjusting entries 462 (384)
Headline earnings/(loss) 12 812 (4 864)
Weighted average number of shares in issue on which
earnings per share are based 329 311 210 329 311 210
Diluted weighted average number of shares in issue
on which diluted earnings per share are based 329 377 872 329 311 210
Basic and diluted earnings/(loss) per share (cents) 4.49 (1.78)
Headline and diluted headline earnings/(loss) per
share (cents) 3.89 (1.48)
Condensed Consolidated Statement of Changes in Equity
for the year ended 31 December 2012
Reviewed Audited
12 months 12 months
Dec 2012 Dec 2011
R’000 R’000
Profit/(loss) after tax 15 510 (5 102)
Dividends paid to non-controlling interest (367) (105)
Foreign currency translation reserve movement (12) 53
Share-based payment expense 709 96
Equity at beginning of the year 231 723 236 781
Total Equity at end of year 247 563 231 723
Made up as follows :
Share Capital issued 33 33
Share Premium 175 458 175 458
Share-based payment reserve 832 123
Foreign currency translation reserve 41 53
Retained earnings 68 427 53 638
Non-controlling interests 2 772 2 418
Total Equity at end of year 247 563 231 723
Condensed Consolidated Statement of Financial Position
as at 31 December 2012
Reviewed Audited
Dec 2012 Dec 2011
R’000 R’000
ASSETS
Non-current assets 338 649 325 914
Property, plant and equipment 290 177 277 719
Goodwill 47 001 47 001
Investment in joint venture 505 673
Deferred tax asset 966 521
Current assets 127 687 115301
Inventories 15 815 17106
Loans to related companies 7 939 7 369
Current tax receivable - 2 999
Trade and other receivables 95 074 82 957
Cash and cash equivalents 8 859 4 870
Total assets 466 336 441 215
EQUITY AND LIABILITIES
Equity 247 563 231 723
Equity attributable to owners of the company 244 791 229 305
Share capital and premium 175 491 175 491
Share based payment reserves 832 123
Foreign currency translation reserve 41 53
Retained earnings 68 427 53 638
Non controlling interests 2 772 2 418
Non-current liabilities 82 382 67 174
Interest-bearing borrowings 52 847 46 191
Provision for site rehabilitation 8 844 5 394
Deferred tax liabilities 20 691 15 589
Current liabilities 136 391 142 318
Current tax payable 1 112 815
Loans from related parties 5 691 3 567
Interest-bearing borrowings 35 010 50 088
Trade and other payables 64 294 55 358
Bank overdraft 30 284 32 490
Total liabilities 218 773 209 492
TOTAL EQUITY & LIABILITIES 466 336 441 215
Number of shares in issue at period end 329 311 210 329 311 210
Net asset value per share (cents) 74.3 69.6
Net tangible asset value per share (cents) 60.1 55.4
Condensed Consolidated Statement of Cash Flow
for the year ended 31 December 2012
Reviewed Audited
12 months 12 months
Dec 2012 Dec 2011
R’000 R’000
Net Cash inflow from operating activities 65 937 50 228
Net Cash outflow on investing activities (53 442) (64 146)
Net Cash (outflow)/inflow from financing
activities (6 300) 455
Total cash movement for the year 6 195 (13 463)
Cash and cash equivalents at beginning of year (27 620) (14 157)
Total cash and cash equivalents at end of year (21 425) (27 620)
Condensed Consolidated Segment Report
for the year ended 31 December 2012
Reviewed Audited
12 months 12 months
Dec 2012 Dec 2011
R’000 R’000
Gross revenue
Waste management 385 893 310 223
Metals recovery 24 840 21 809
Compost manufacturing and sales 44 193 40 415
Landfill management 103 665 83 544
558 591 455 991
Results from operating activities
Waste management 23 288 2 686
Metals recovery (1 839) (3 414)
Compost manufacturing and sales (10 203) (2 718)
Landfill management 20 997 5 704
32 243 2 258
Depreciation
Waste management 23 700 23 149
Metals recovery 3 032 3 682
Compost manufacturing and sales 2 679 3 073
Landfill management 13 110 7 881
42 521 37 785
The preparation of the group’s condensed consolidated preliminary financial results
was supervised by the group financial director, AP Broodryk, CA(SA).
Overview
We are pleased to report a substantial improvement in performance over the prior
year. While there is still progress to be made, the turnaround has taken hold and
we are seeing more satisfactory returns from the business.
Revenue grew by 22% and translated into profit before taxation of R21.1 mln, an
improvement over the loss before taxation of R6.7 mln in the prior year. The main
improvements took place in the waste management and landfill management businesses,
the metals recovery business again lost money, although the loss was limited, and
the compost business had a bad year with substantial losses.
Cash flow from operating activities was 31.2% higher than in the previous year and
cash applied to investing activities declined from R64.2 mln in 2011 to R53.5 mln,
mainly due to the major capital expenditure on the development of FG landfill in
2011 not being repeated in the current year. After applying R6.3mln to reduce debt,
the Group produced a cash surplus of R6.2 mln for the year (2011: deficit of R13.5
mln).
The strike action during the second half of the year once again disrupted both our
operations and those of many of our clients. While we were able to compensate for
certain of the strike consequences, our operations were negatively affected with a
consequent impact on results. We recognise the importance of collective bargaining
and the right to strike action but question the irresponsible exercise of those
rights in an economy where growth is constrained.
The Group completed a number of projects during the year and achieved meaningful
progress on others. The move to the central hub in Germiston was completed and has
resulted in cost savings and synergies. The new cell at FG landfill was
commissioned as a B-lined site in terms of the new Waste Act and accepted its first
load of waste in February. Volumes have increased steadily since then and the
landfill now receives a satisfactory monthly base volume of waste.
Various options are being considered for additional landfill sites, with pleasing
progress on one of the sites, and the Group’s business outside South Africa is
growing well, albeit off a small base. We are confident that there is great
potential in the non-South African business and that returns on investment, on a
risk adjusted basis, will be exciting.
Subsequent to year end the Group acquired Enviro-Waste which will add solidly to
the revenue and profit lines. There are opportunities for the elimination of costs
from the business and for synergies between Enviro-Waste and Interwaste. In
addition, the waste streams from the acquisition will be largely redirected to FG
landfill with consequent benefits to the Group.
The waste management business grew revenue by 24.4% and profit from operating
activities improved from R2.7 mln to R23.3 mln. Landfill costs for the division
increased by 20%, less than the growth in revenue despite significant inflation in
this area, reflecting a portion of the benefit of FG landfill. The majority of the
value arising from the landfill is accounted for in the landfill division. The
increase in fixed vehicle costs was limited to 14% as we achieved better asset
utilisation levels, and related maintenance costs reduced by 32% as a result of the
full maintenance lease programme. Fuel cost increased by 16%, a combination of a
14% increase in the average fuel price for the period and the growth in operations.
The increase in this cost was limited by the improvement in the levels of vehicle
utilisation during the period. The increase in operating costs was limited to 8.6%
as certain of the benefits of the consolidation process implemented in the prior
year became evident.
As with the first six months of the year, the growth in revenue exceeded the
increase in costs resulting in positive leverage and the significant improvement in
the result for the division. We will continue to focus on leveraging our asset base
to create growth and will ensure that investments made to expand operations are not
earnings dilutive.
The metals recovery business grew its revenue by 13.9% and its loss decreased from
R3.4 mln to R1.8 mln. As reported previously we have scaled the business down, and
we will continue to restrict the capital allocated to it. The business is an
important component of our service offering to many clients, thus precluding a
disposal of it, and we will continue to work to turn it around.
The compost business was a disappointment. It grew its revenue by 9.4% over the
previous period but generated a loss from operations of R10.2 mln, versus the loss
of R2.7 mln in the previous period. We reported in the interim results for this
year that the business is seasonal and that we expected a recovery in the second
half of the year. While we saw some growth in revenue, trading conditions remained
difficult with very low margins and the level of costs in the business resulted in
the loss. In order to address the cost base, the Kwazulu Natal depot has been
scaled down and now only sells bulk product. An impairment loss of R3 mln has been
raised against the inventory balance of R5 mln at this depot. The Mpumalanga depot
will continue to make bulk sales but will only bag to order and will limit its
offering to orders above a viable size.
The landfill business grew its revenue by 24.1% and operating profit rose from R5.7
mln to R21 mln. Although the division was boosted by the FG landfill which it
manages, it won a number of new sites and remains the leading third party landfill
manager in the country. This is significant as the capital requirements associated
with landfill management are such that scale is important and the growing
regulatory burden on landfill managers requires an increasing degree of
specialisation. Progress has been made on the equipment maintenance issues that
have long been a problem for the business and we expect further benefits in the
area as management and cost controls become more effective.
An article appeared in the press during the period under review stating that
Interwaste is the subject of an investigation by the Green Scorpions. The nature of
the waste business is such that we are subject to regular regulatory audits and
inspections by government agencies. We co-operate fully with all of these and
respond comprehensively to any concerns or issues raised. Our sites are subject to
regular external compliance audits and consistently achieve exemplary ratings.
Prospects
While stock markets reach new highs, business conditions on the ground remain
difficult. The consumer is under pressure and this will affect many of our clients
and ultimately impact our business. We have spent much of the last two years
transforming our business and eliminating costs and this should stand us in good
stead going forward.
The recent investments we have made should continue to yield strong returns and if
we are able to successfully implement some of the projects we are currently working
on, they will generate good profits.
We will continue to focus on innovation as a strong source of growth, both with
existing and new clients. The new Waste Act and ongoing changes to the Waste
regulations mean that ethical disposal is becoming increasingly critical to many
South African companies; we have gained business as a result of this and we believe
that ethical disposal will provide Interwaste with a significant continuing
advantage in the market.
We will look for acquisitions where they can be made at prices which offer fair
returns.
Our challenges for the next year will be to control costs, to leverage our asset
base, to develop new sources of revenue in a highly competitive market and to
support our non-South African initiatives.
Dividend
The Group will not pay a dividend for the period.
Platinum Waste Resources (Pty) Ltd, a partly owned subsidiary, paid dividends of
R315 000 to non-controlling shareholders. Interwaste Cleaning (Pty) Ltd, a partly
owned subsidiary, paid dividends of R51 000 to non-controlling shareholders.
Supplementary Notes
Interwaste is a South African registered company. The condensed consolidated
preliminary financial statements of the Company comprise the Company and its
subsidiaries and the Group’s interest in jointly controlled entities.
Statement of Compliance
The condensed consolidated preliminary financial statements have been prepared in
accordance with the recognition and measurement criteria of International Financial
Reporting Standards, “IFRS”, the presentation and disclosure requirements of IAS 34
– Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and the requirements of the Companies Act of
South Africa, 2008.
Basis of Measurement
The condensed consolidated preliminary financial statements are presented in
thousands of South African Rands (R’000s) on the historical cost basis.
The accounting policies presented in the annual financial statements for the year
ended 31 December 2012 have been applied consistently to the periods presented in
these condensed consolidated financial statements by all Group entities.
Going Concern
The condensed consolidated preliminary 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.
Report of the Independent Auditors
These condensed consolidated preliminary financial statements have been reviewed by
the auditors, KPMG Inc. In their report dated 25 March 2013 they have expressed an
unmodified conclusion. A copy of the auditors report is available for inspection at
the Company’s registered office.
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
25 March 2013
WAH Willcocks AP Broodryk
Chief Executive Financial Director
Corporate Information
Non-executive directors: A Kawa (Chairperson), LJ Mahlangu, PF Mojono, GR Tipper,
BL Willcocks
Executive directors: WAH Willcocks (MD), AP Broodryk (FD), LC Grobbelaar
Registration number: 2006/037223/06
Registered address: P O Box 641, Northriding, 2162
Company secretary: Allen de Villiers
Telephone: (011) 323 7300
Facsimile: 086 576 8152
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated Adviser: Grindrod Bank Limited
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