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Unaudited condensed consolidated financial results for the six months ended 30 June 2013
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 2013
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2013 June 2012 Dec 2012
R’000 R’000 R’000
Revenue 315 711 257 509 558 591
Cost of sales (176 580) (144 382) (315 522)
Gross profit 139 131 113 127 243 069
Other income 643 - -
Operating expenses (98 742) (78 313) (168 305)
Earnings before interest, tax, depreciation and
amortisation 41 032 34 814 74 764
Depreciation and amortisation (20 515) (20 486) (42 521)
Results from operating activities 20 517 14 328 32 243
Share of loss in equity accounted joint venture - (168) (168)
Net finance cost (5 937) (3 772) (10 923)
Finance cost (6 193) (4 054) (11 432)
Finance income 256 282 509
Profit before taxation 14 580 10 388 21 152
Taxation expense (3 850) (2 779) (5 642)
Profit after tax 10 730 7 609 15 510
Less: Non-controlling interests (748) 317 721
Income attributable to owners of the company 9 982 7 292 14 789
Other comprehensive income:
Foreign currency translation reserve movement on foreign
operations (53) 16 (12)
Total comprehensive income 9 929 7 308 14 777
Reconciliation of headline earnings
Profit attributable to owners of the company 9 982 7 292 14 789
Adjusted for:
Profit on disposal of property, plant and equipment (79) (2 750) (2 421)
Share of profit on disposal of property, plant and
equipment of equity accounted joint venture - - (18)
Gain from bargain purchase (138) - -
Taxation charge on headline earnings adjusting items 22 550 462
Headline earning attributable to ordinary shareholders 9 787 5 092 12 812
Weighted average number of shares in issue on which
earnings per share are based 330 000 880 329 311 210 329 311 210
Weighted average number of shares in issue on which
331 310 697 329 311 210 329 377 872
diluted earnings per share are based
Basic earnings per share (cents) 3.02 2.21 4.49
Diluted earnings per share (cents) 3.01 2.21 4.49
Headline earnings per share (cents) 2.97 1.54 3.89
Diluted headline earnings per share (cents) 2.95 1.54 3.89
Increase in earnings per share 36.7%
Increase in diluted earnings per share 36.2%
Increase in headline earnings per share 92.9%
Increase in diluted headline earnings per share 91.6%
Condensed Consolidated Statement of Financial Position
Unaudited Unaudited Audited
June 2013 June 2012 Dec 2012
R’000 R’000 R’000
ASSETS
Non-current assets 388 163 331 332 338 649
Property, plant and equipment 326 474 283 305 290 177
Goodwill 60 114 47 001 47 001
Investments in joint ventures - 505 505
Deferred tax asset 1 575 521 966
Current assets 141 102 125 341 127 137
Inventories 17 569 18 008 15 815
Loans to related companies - 7 707 7 389
Current tax receivable 206 3 040 -
Trade and other receivables 117 665 95 734 95 074
Cash and equivalents 5 662 852 8 859
Total assets 529 265 456 673 465 786
EQUITY AND LIABILITIES
Equity 288 234 239 124 247 563
Share capital 206 526 175 491 175 491
Share based payment reserve 1 363 264 832
Foreign currency translation reserve (12) 69 41
Retained earnings 78 659 60 930 68 427
Non controlling interests 1 698 2 370 2 772
LIABILITIES
Non-current liabilities 98 691 74 681 82 382
Interest-bearing borrowings 64 117 50 545 52 847
Landfill rehabilitation provision 11 495 6 665 8 844
Deferred tax liability 23 079 17 471 20 691
Current liabilities 142 340 142 868 135 841
Current tax payable 3 429 1 180 1 112
Loans from related parties - 5 356 5 141
Interest-bearing borrowings 37 975 37 307 35 010
Trade and other payables 80 033 67 615 64 294
Bank overdrafts 20 903 31 410 30 284
Total liabilities 241 031 217 549 218 223
TOTAL EQUITY & LIABILITIES 529 265 456 673 465 786
Number of shares in issue at period end 370 691 411 329 311 210 329 311 210
Net asset value per share (cents) 77.3 71.9 74.3
Net tangible asset value per share (cents) 61.1 57.6 60.1
Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2013 June 2012 Dec 2012
R’000 R’000 R’000
Net cash inflow from operating activities 26 839 25 723 66 303
Net cash outflow from investing activities (56 079) (23 659) (52 893)
Net cash inflow/(outflow) from financing
activities 35 424 (5 002) (7 215)
Total cash movement for the period 6 184 (2 938) 6 195
Cash and cash equivalents at beginning of
period (21 425) (27 620) (27 620)
Cash and cash equivalents at end of period (15 241) (30 558) (21 425)
Condensed Consolidated Statement of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2013 June 2012 Dec 2012
R’000 R’000 R’000
Total comprehensive income for the period 10 730 7 609 15 510
Dividends paid to non-controlling interests (1 170) (366) (367)
Foreign currency translation reserve movement (53) 16 (12)
Share based payment expense 531 141 709
General share issue 31 035 - -
Purchase of additional share in subsidiary from
non-controlling interest (402) - -
Equity at beginning of year 247 563 231 723 231 723
Total equity at end of period 288 234 239 124 247 563
Made up as follows:
Share capital issued 37 33 33
Share premium 206 489 175 458 175 458
Share based reserve 1 363 264 832
Foreign currency translation reserve (12) 69 41
Retained earnings 78 659 60 930 68 427
Non-controlling interests 1 698 2 370 2 772
Total equity at end of period 288 234 239 124 247 563
Condensed Consolidated Segment Report
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2013 June 2012 Dec 2012
R’000 R’000 R’000
Gross revenue
Waste management 245 370 181 881 385 893
Metals recovery - 12 817 24 840
Compost manufacturing and sales 13 625 16 131 44 193
Landfill management 56 716 46 680 103 665
315 711 257 509 558 591
Results from operating activities
Waste management 10 381 14 712 23 288
Metals recovery - (1 701) (1 839)
Compost manufacturing and sales (1 572) (5 778) (10 203)
Landfill management 11 708 7 095 20 997
20 517 14 328 32 243
Depreciation
Waste management 13 883 11 046 23 700
Metals recovery - 1 603 3 032
Compost manufacturing and sales 1 183 1 369 2 679
Landfill management 5 449 6 468 13 110
20 515 20 486 42 521
Metals recovery is no longer material and has been absorbed into the waste management
segment.
The preparation of the group’s condensed consolidated financial results was
supervised by the group financial director, AP Broodryk, CA (SA).
Overview
Performance for the six month period reflects a substantial improvement over the
same period in the previous year. Several projects were successfully completed and
targeted operational efficiencies are being achieved in a number of areas, driving
the returns for the period.
Revenue grew by 22.7%, operating profit grew by 43% and headline earnings grew by
92.2%, over the comparable period. While these are pleasing results, they should be
read in the context of a relatively low comparable base as the impact of the
turnaround was muted in the first part of 2012.
We saw strong revenue growth in the waste management and landfill businesses driven
by organic growth, and gains from certain of the projects we have been working on.
Operating profit in the waste management business declined as we invested in more
senior resources, expensed cash flows on certain projects and directed funding to
the development of the non South African business. The steps taken to restructure
the compost business resulted in a significant decline in the loss in that area and
the landfill management division delivered a strong increase in operating profit as
volumes to the FG landfill increased.
Cash from operating activities was in line with the comparative period largely as a
result of an increase in working capital driven by the growth in revenue. Cash
applied to investment activities increased substantially due to the acquisition of
Envirowaste, expansion into Africa, the acquisition of property to support further
landfill development and investment to support the group’s growth.
The period involved a strong focus on existing operations and on consolidating some
of what had been gained in the last two years.
Additional contracts for disposal at the FG landfill were secured and we saw a
pleasing growth in monthly volumes over the period. The compost business had a
deleterious impact on the group’s results in the 2012 financial year but the
corrective measures are gaining traction and the loss in the current period is
significantly lower. Current forecasts indicate that the business will generate a
positive return in the second half of the year, however should that not happen a
more fundamental restructuring will be applied to the division. The restructuring
of the metals recovery business has continued and the division is significantly
smaller than in the prior year, with the consequence that it no longer requires
separate segmental disclosure. We will retain the division as a necessary part of
our service offering to customers but will not allocate further capital to it.
While the overall performance of the waste and landfill management businesses was
positive, there are still a number of areas of relative under performance and
consequent opportunities for improvement.
A number of projects were progressed; the Envirowaste acquisition was completed and
to date is producing the results we anticipated at acquisition. The environmental
impact assessment for the proposed Klinkerstene landfill has been completed, we
have received the license for the landfill and we are in the process of acquiring
all of the properties. Further landfill sites have been identified and will be
acquired should the viability assessments be positive and the estimated returns
justify the investments. Our expansion beyond South Africa is on track; the current
returns justify the development expenditure and we are confident that this will be
an important area of future growth.
Segmental review
The waste management business grew revenue by 34.9% but operating profit declined
by 27.7%. This was disappointing and was largely a function of a small loss in the
metals recovery area which has been absorbed into waste management, significant
investment in senior staff, costs associated with certain of the projects which
were expensed, higher travel costs associated with the development of the Africa
business, and higher vehicle and landfill costs as a result of the increased
volumes.
The senior staff we employed bring important depth to the team and in time will
produce contributions which well exceed their cost. The core portion of our non
South African business is generating solid returns, we incurred costs in the period
expanding into new geographies and product offerings. Landfill costs continue to
escalate at rates well in excess of published inflation, and while a part of this
was mitigated through use of our own landfill, the benefit of that is reflected in
the results for the landfill management division. The weaker rand contributed
materially to higher vehicle costs; the increase in the expense was however
restricted to 25% as a result of improved utilisation of the fleet.
Revenue from the compost business declined in line with a focus on targeted,
profitable sales and the loss made by the division was substantially lower than
that in the comparable period.
The landfill business grew revenue by 21.5% and operating profit increased by 65%.
This was the result of a relatively weak performance in the first six months of
2012 and a low consequent base, higher income from the FG landfill as volumes
increased and more effective management of equipment maintenance costs. The
landfill division remains the leading third party landfill manager in the country
and will leverage that position, however a significant part of its portfolio is
municipal business which, on occasion, is tendered for and awarded at rates which
are not commercially viable. Given the capital costs of, and maintenance risks
related to, landfill equipment we will not pursue marginal business.
Prospects
We reported previously that despite stock market strength, conditions on the ground
remain difficult. This has not changed. Our customers are under pressure and
innovation and cost control are key to ensuring that we retain customers and that
the business relationships remain profitable.
In June 2013 the company announced that it would raise R50 million through a
placement of shares. This occurred through a general issue in June 2013 in terms of
the company’s existing authority, and a specific issue to non-public shareholders
including directors, in terms of authority to be provided by shareholders in August
2013. The capital raising has substantially improved, and will further improve, the
group balance sheet, and will provide the funding required for a number of the
projects referred to in this announcement.
For a number of years we have provided full onsite services, where we move onto a
customer’s site and manage their entire waste chain, to a limited number of our
customers. We have rolled this service out more aggressively in the last year in
response to market demand for cost savings and more efficient waste management. The
reaction from existing and new customers has been positive, the contracts work well
for Interwaste as we control all aspects of the customer’s waste solution, and this
should be an area of strong future growth.
We continue to target new landfill sites and opportunities which provide for
efficient and green disposal. We have invested in, and are currently bringing into
operation, an alternative disposal mechanism which is environmentally friendly, is
in line with future waste regulations, and which will provide significant
opportunities and benefits to our clients.
In the course of the next 12 months we will further expand the non South African
operations. This will entail a level of expenditure but there are exciting
opportunities as companies exploiting the available resources are forced to comply
with their own groupwide environmental requirements or with the increasingly
sophisticated waste regulations of the countries they operate in.
We continue to look for acquisitions which are a good fit for the company and which
can be made at fair prices.
We remain focussed on controlling costs, on leveraging our asset base, on
addressing the parts of the business that are under performers and on developing
new sources of revenue.
Dividend
The Group will not pay a dividend for the period.
Platinum Waste Resources (Pty) Ltd, a partly owned subsidiary, paid dividends of
R1.17 million to non-controlling shareholders.
Supplementary Notes
Interwaste is a South African registered company. The condensed consolidated
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 interim financial statements have been prepared in
accordance with the recognition and measurement requirements 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 Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council, the Listing
Requirements of the JSE Limited and the Companies Act of South Africa.
Basis of Measurement
The condensed consolidated interim financial statements are presented in thousands
of South African Rands (R’000s) on the historical cost basis, except for derivative
financial instruments which are measured at fair value.
The accounting policies presented in the annual financial statements for the year
ended 31 December 2012 have been applied consistently to all of the periods
presented in these condensed consolidated interim financial statements by all Group
entities.
Going Concern
The condensed consolidated 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
WAH Willcocks AP Broodryk
Chief Executive Financial Director
21 August 2013
Corporate Information
Non-executive directors: A Kawa (Chairperson), LJ Mahlangu, PF Mojono, GR Tipper,
BL Willcocks
Executive directors: WAH Willcocks(CEO), AP Broodryk(FD), LC Grobbelaar(Landfill)
Registration number: 2006/037223/06
Registered address: 2 Brammer street, Germiston South, 1401
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
Date: 21/08/2013 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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