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Unaudited condensed consolidated financial results for the six months ended 30 June 2015
Interwaste Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/037223/06)
JSE code: IWE
ISIN: ZAE000097903
(“Interwaste” or “the company”)
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE
2015
Overview
Interwaste produced a solid performance for the period under review.
Revenue grew by 19%, operating profit grew by 12%, profit attributable to
shareholders by 6% and headline earnings by 6%. Headline earnings per share
declined by 10% as a result of the increased number of shares in issue following
the capital raising late last year.
While the Group continued to generate strong revenue growth, the combination of
lethargic economic growth domestically, declining commodity prices and the
weakening of the Rand resulted in relatively lower profit growth.
Cash flows from operating activities were substantially higher than in the prior
period. Net investment once again exceeded operating cash flow however the excess
was significantly lower than in the prior period. This was a function of stronger
operating cash flows as investments made in previous financial periods mature and
growth in the core business continues, as a well as a decision to moderate the
previously rapid pace of expansion, in line with the operating environment.
Segmental review
The waste management business grew turnover strongly but a currency loss of R 6
million due to the weaker Rand, slowing growth in Mozambique as a result of lower
oil prices and a higher proportion of lower margin business during the period,
offset the profit growth generated by the core operations. In addition the Wynberg
transfer station was brought up to breakeven capacity during the period and made a
negative contribution during the first few months; the asset is however
strategically important and we expect considerable operating efficiencies from it
going forward. We are reviewing the capital structure which gave rise to the
currency loss and have reduced the overhead structure in Mozambique in line with
the current reduction in demand.
The compost manufacturing and sales business grew turnover pleasingly and produced
a small profit. The division is an important component of our overall offering and
its performance has been the subject of considerable management focus. The retail
side of the business has scaled up to a level where it should make consistent
positive contributions in future.
The landfill management business increased turnover by 12% relative to the
comparative period but succeeded in growing profit by 116%. This was primarily a
function of a poor result in the comparative period but also included the benefits
of an extended focus on eliminating loss making contracts, improving the
reliability of equipment and reducing unplanned maintenance costs, and the
leveraged returns from sustained volume growth at the FG landfill. In addition to
managing landfills the division continues to source and develop new landfill space,
or alternatives to landfills, and the Group invested heavily behind those
initiatives. (In the early phases of landfill or technology identification and
procurement, the costs relate primarily to environmental impact authorisations and
other required approvals, and are expensed as incurred).
Initiatives
Despite the decision to slow the pace of new investment, the Group progressed a
number of initiatives during the period.
The Envirowaste business is performing well and services a niche in which it is
competitively well placed. We acquired another small Johannesburg based waste
business during the period and its performance to date has exceeded what is
required in terms of the purchase warranties. There may be an opportunity to
combine these businesses in the medium term.
In order to facilitate an entry into the Port Elizabeth market, we purchased a
business in Port Elizabeth. The results of the business have met our expectations
to date and we are confident of being able to leverage off the base that we now
have in the area.
We are constructing the first RDF (refuse derived fuel) plant in South Africa and
expect to produce RDF during the next six months. The plant will enable us to
convert certain waste streams into fuel which can be sold, and for which there is
ready demand. A further benefit of the plant is that it enhances our ability to
offer a “zero waste to landfill” solution to customers, something that is
increasingly in demand.
The Wynberg transfer station accepted its first loads late in 2014 and its volumes
reached breakeven level during the period under review. We expect the efficiencies
from the asset to generate meaningful value over the next few years.
The replacement of the core fleet was completed during the period. We elected to
purchase rather than lease the vehicles and based on our experience over the term
of the previous leases, expect savings from the move.
As part of the repositioning of the landfill management business we have attempted
to eliminate small and loss making contracts and have focussed on large contracts
where we can bring the whole range of the division’s skills to bear over multi-year
periods. It is gratifying to report that during the period under review the
division won the largest contract in its history.
Prospects
In the commentary on the December 2014 results we predicted that the 2015 financial
year would be difficult. Unfortunately that prediction was accurate, although we
have seen some level of recovery during the latter part of the financial period. We
are however currently in the annual wage negotiation process with the possibility
of labour unrest.
The material reductions in H:H (high hazard) landfill disposal costs that occurred
in 2014 have been sustained. While these cost reductions have affected the
profitability of waste disposal mechanisms which provide alternatives to landfills,
they have created the opportunity for significant customer savings and have largely
maintained the volumes of waste going to H:H landfills.
We continue to enjoy the benefit of low fuel prices, although in terms of our
business model a substantial proportion of the benefit is passed back to our
customers.
Despite earlier assurances to the contrary by government, load shedding is a
regular phenomenon and is likely to continue. While the detrimental impact of load
shedding is obvious on a daily basis, the less obvious but very negative
implications of multiple policy and leadership failures are equally concerning. We
work with our customers to mitigate the effects of load shedding on the waste
generation and disposal aspects of their businesses, and we have installed back up
power in most of our facilities.
Although we face a difficult environment with no obvious catalysts for change, we
are cautiously optimistic as to the next 12 months. We have a number of strategic
assets which are performing well, the business is sufficiently diversified that it
is able to weather tough times in particular sectors or geographies, and we have a
strong management team.
Any reference to future financial performance included in this announcement has not
been reviewed or reported on by the company’s auditors.
Dividends
Interwaste will not pay a dividend for the period. Interwaste Cleaning (Pty) Ltd, a
partly owned subsidiary, paid dividends of R 538 560 to non-controlling
shareholders.
Statement of compliance
The condensed consolidated interim financial statements are prepared in accordance
with International Financial Reporting Standard, (IAS) 34 Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by Financial Reporting
Standards Council and the requirements of the Companies Act of South Africa. The
accounting policies applied in the preparation of these interim financial
statements are in terms of International Financial Reporting Standards and are
consistent with those applied in the previous annual financial statements.
Basis of measurement
The condensed interim financial statements are presented in thousand of South African
Rands (R’000s) on the historical cost basis, except for share based payments which
are measured at fair value.
Going Concern
The condensed consolidated 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.
Preparation of interim results
The preparation of the Group’s condensed consolidated interim statements was
supervised by the group financial director, AP Broodryk, CA(SA).
Appreciation
We extend our gratitude to all our staff who contributed to this result and to our
shareholders and other stakeholders for your valued support.
On behalf of the Board
6 August 2015
WAH Willcocks AP Broodryk
Chief Executive Officer Financial Director
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 2015
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months % 6 months 12 months
June 2015 Change June 2014 Dec 2014
R’000 R’000 R’000
Revenue 460 422 19% 386 014 834 474
Cost of sales (224 638) (201 140) (421 169)
Gross profit 235 784 28% 184 874 413 305
Operating expenses (155 680) (125 380) (264 419)
Earnings before interest, tax, depreciation
and amortisation 80 104 35% 59 494 148 886
Depreciation and amortisation (45 210) (28 401) (64 870)
Results from operating activities 34 894 12% 31 093 84 016
Net finance cost (11 614) (8 296) (19 579)
Finance cost (12 731) (8 678) (20 367)
Finance income 1 117 382 788
Profit before taxation 23 280 2% 22 797 64 437
Taxation expense (6 540) (6 576) (18 890)
Profit for the period 16 740 3% 16 221 45 547
Profit attributable to:
Non-controlling interests 367 825 1 224
Owners of the company 16 373 6% 15 396 44 323
Other comprehensive income:
Items that are or may be reclassified to
profit or loss
Foreign currency translation reserve movement
on foreign operations (177) (211) (39)
Total comprehensive income for the period 16 563 3% 16 010 45 508
Total comprehensive income attributable to:
Non-controlling interests 367 825 1 224
Owners of the company 16 196 15 185 44 284
Reconciliation of headline earnings
Profit attributable to owners of the company 16 373 15 396 44 323
Adjusted for:
Loss/(profit) on disposal of property, plant
and equipment 332 340 2 317
Taxation charge on headline earnings
adjusting items (93) (95) (649)
Total non-controlling interest effects of
adjustments - - 9
Headline earnings attributable to ordinary
shareholders 16 612 6% 15 641 46 000
Weighted average number of shares in issue on
which earnings per share are based 465 026 429 395 977 877 409 464 398
Diluted weighted average number of shares in
issue on which diluted earnings per share are 472 451 924 403 156 437 417 189 252
based
Basic earnings per share (cents) 3.52 (9%) 3.89 10.82
Diluted earnings per share (cents) 3.47 (9%) 3.82 10.62
Headline earnings per share (cents) 3.57 (10%) 3.95 11.23
Diluted headline earnings per share (cents) 3.52 (9%) 3.88 11.03
Condensed Consolidated Statement of Financial Position
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2015 June 2014 Dec 2014
R’000 R’000 R’000
ASSETS
Non-current assets 698 596 565 264 658 412
Property, plant and equipment 637 409 505 176 598 590
Goodwill 60 732 59 382 59 382
Deferred tax assets 455 706 440
Current assets 267 535 156 198 241 765
Inventories 17 093 15 014 14 747
Current tax receivables 4 874 242 120
Trade and other receivables 193 749 131 675 164 992
Cash and cash equivalents 51 819 9 267 61 906
Total assets 966 131 721 462 900 177
EQUITY AND LIABILITIES
Equity 480 640 341 848 453 083
Equity attributable to owners of the company 477 920 339 356 450 192
Stated share capital and premium 317 645 225 491 306 498
Share-based payment reserve 3 680 2 564 3 295
Foreign currency translation (deficit)/reserve (117) (112) 60
Retained earnings 156 712 111 413 140 339
Non-controlling interests 2 720 2 492 2 891
LIABILITIES
Non-current liabilities 261 662 216 964 252 208
Interest-bearing borrowings 192 338 162 038 191 378
Provision for site rehabilitation 25 689 20 819 23 964
Deferred tax liabilities 43 635 34 107 36 866
Current liabilities 223 829 162 650 194 886
Current tax payable 3 111 2 247 3 036
Interest-bearing borrowings 94 854 79 250 89 005
Trade and other payables 125 864 75 395 102 845
Bank overdrafts - 5 758 -
Total liabilities 485 491 379 614 447 094
TOTAL EQUITY & LIABILITIES 966 131 721 462 900 177
Number of shares in issue at year end 467 627 877 395 977 210 458 342 877
Net asset value per share (cents) 102.2 85.7 98.2
Net tangible asset value per share (cents) 89.2 70.7 85.3
Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2015 June 2014 Dec 2014
R’000 R’000 R’000
Net cash inflow from operating activities 62 039 37 140 103 099
Net cash outflow on investing activities (88 947) (138 228) (265 659)
Net cash inflow from financing activities 17 609 75 540 195 184
Total cash movement for the period (9 299) (25 548) 32 624
Effect of exchange rate fluctuations on
cash held (788) (225) -
Cash and cash equivalents at beginning of
period 61 906 29 282 29 282
Cash and cash equivalents at end of period 51 819 3 509 61 906
Condensed Consolidated Statement of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2015 June 2014 Dec 2014
R’000 R’000 R’000
Profit after tax 16 740 16 221 45 547
Dividends paid to non-controlling interests (539) (459) (459)
Shares issued 11 147 - 81 006
Foreign currency translation reserve movement (177) (211) (39)
Share-based payment expense 386 501 1 232
Equity at the beginning of period 453 083 325 796 325 796
Total equity at end of period 480 640 341 848 453 083
Made up as follows:
Stated share capital 317 645 225 491 306 498
Share based payment reserve 3 680 2 564 3 295
Foreign currency translation (deficit)/reserve (117) (112) 60
Retained earnings 156 712 111 413 140 339
Non-controlling interests 2 720 2 492 2 891
Total equity at end of period 480 640 341 848 453 083
Condensed Consolidated Segment Report
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2015 June 2014 Dec 2014
R’000 R’000 R’000
Gross revenue 460 422 386 014 834 474
Waste management 377 799 312 950 676 330
Compost manufacturing and sales 16 341 13 993 40 989
Landfill management 66 282 59 071 117 155
Results from operating activities 34 894 31 093 84 016
Waste management 10 091 22 264 46 024
Compost manufacturing and sales 1 524 (1 971) (1 215)
Landfill management 23 279 10 800 39 207
Depreciation 45 210 28 401 64 870
Waste management 36 303 21 686 54 183
Compost manufacturing and sales 865 1 099 2 475
Landfill management 8 042 5 616 8 212
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
Registration number: 2006/037223/06
Registered Address: P O Box 382, Germiston, 1400
Company Secretary: Allen de Villiers
Telephone: (011) 323 7300
Facsimile: 086 576 8152
Transfer secretaries: Computershare Investor Services (Pty) Limited
Sponsor: Grindrod Bank Limited
Germiston
6 August2015
Sponsor
Grindrod Bank Limited
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