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Reviewed provisional condensed consolidated financial statements
For the year ended 31 December 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” or “the Group”)
Reviewed provisional condensed consolidated financial statements
For the year ended 31 December 2015
OVERVIEW
Interwaste produced a disappointing result for the year with solid performances by our
core operations being dragged down by the impact of low commodity and oil prices on
our effluent treatment division, commodities trading division and our Mozambican
division.
Revenue grew 14.7% to R957 million, below our target for the year of R1 billion. The
ratio of operating expenses to total revenue declined from 31.7% to 30.5%, partly as
a result of the decision to purchase rather than lease vehicles as they come up for
renewal. The depreciation charge increased substantially, a consequence of aggressive
capital expansion over a number of years. Finance costs increased as a result of higher
interest rates and a limited increase in debt levels.
Interwaste’s business is highly correlated with the general state of the economy and
it is encouraging that our core businesses performed well despite tepid economic
growth. As certain of our assets have matured their returns have improved and this,
together with the measures taken to control costs in the businesses that are directly
exposed to the oil and commodity cycles, will enable the group to continue growing if
current economic conditions persist, as seems likely.
SEGMENTAL REVIEW
The waste management business grew revenue by 12.4% however operating profit declined
by 23.8%. The result included a currency loss of R1.5 million, the impact of a higher
proportion of lower margin business and the consequence of lower oil and commodity
prices. The Mozambican economy was severely affected by the sustained drop in oil
prices and our revenue declined accordingly. We repatriated excess capital and
restructured the remaining investment, reduced our cost base, acquired revenue streams
that are less dependent on oil/gas exploration spend and anticipate improved results
going forward. The effluent treatment and commodities trading businesses were adversely
affected by customers in the local oil and commodities industries deferring clean ups
and reducing discretionary spend. Margins on commodities declined and our access to
tradeable commodities was limited by fewer clean ups. Both of these businesses have
relatively low overhead structures, are positive contributors to the group and will
provide significant optionality when the volume of clean ups increases.
The compost manufacturing and sales business grew turnover by 12.5% and produced a
profit of R5.3 million (2014: loss of R1.2 million). The business is an important part
of our overall offering and we have been able to diversify our sources of raw material,
thus enabling us to maintain operations at a level which is profitable. As reported
previously, the retail side of the business has achieved critical mass and has been a
major contributor to the improvement in the overall result.
The landfill management business grew revenue by 28.4% and operating profit by 13.5%.
The growth in revenue was a function of the sustained volume growth at FG landfill and
new landfill management contracts. The division changed its business model over the
last two years, eliminating unprofitable management contracts and focussing on larger
contracts where our offering attracts a premium, and developing new landfill space. In
this regard the Klinkerstene landfill is expected to accept its first waste in April
2016. The landfill will be developed on a cellular basis at a very low cost per cubic
metre of airspace and should be strongly cash positive. If fully developed, based on
current estimates for the area, Klinkerstene should provide approximately 100 years of
airspace.
INITIATIVES
A number of initiatives on which we reported previously have been progressed.
The Envirowaste business continues to meet expectations and another small Johannesburg
based business we acquired, has exceeded the warranties contained in the purchase
agreement. These operations service an important niche and will continue to trade under
separate brands. They are both growing users of the Wynberg transfer station, and are
benefitting from the consequent logistical efficiencies. A key factor in the Wynberg
transfer station’s success will be the extent to which it is used by third parties and
we are beginning to see some traction in this area.
The coastal businesses, including the new business in Port Elizabeth, have shown a
significant improvement in profitability. The Port Elizabeth operation has won a number
of contracts, giving it critical mass, and we are pursuing further opportunities in
the area.
Our RDF (refuse derived fuel) plant has been brought into operation and its initial
production has been sold. The plant enables us to convert certain waste streams into
saleable fuel and enhances our ability to offer a “zero waste to landfill” solution to
customers.
We have brought two baling machines into operation at our Germiston site, enabling us
to increase the yields we generate from the recyclables we process, and to better
control the recycled products prior to sale.
We continue to work on permitting a number of the landfill sites we have identified.
While progress is often slow and the related costs are expensed, not capitalised, we
are confident that some of the airspace that will be created through this process will
be an invaluable resource in due course.
PROSPECTS
Absent any catalysts for change, which are currently difficult to conceive of, South
Africa is likely to remain a challenging place in which to do business. Our economic
growth rate is unacceptably low, our infrastructure is creaking in many areas and
failing in others, and laws and regulations are applied inconsistently. As the impact
of the current rand weakness becomes more pronounced and the resultant decline in
living standards more apparent, we are likely to see higher levels of social unrest
and more aggressive wage demands.
Interwaste has grown revenue by 71.3% and operating profit by 163.3% over the last
three years. While we will continue to target meaningful real revenue growth, our
primary objectives for the next year will be to complete a number of the projects
currently in progress, to extract value from the investments we have made in recent
years and to control costs and manage the margins in our core businesses given the
competitive pressures in the market. As a result, barring any unforeseen large
opportunities, our level of investment spend should continue to decline.
The overall result for 2015 is below our expectations. There was however an improvement
in the quality of underlying earnings and we are encouraged by how solidly the core
businesses are performing. The higher margin operations will continue to be managed as
an important and relatively low cost source of optionality.
The benefit of lower oil prices has been partly offset by the substantially weaker
rand. Given the low growth outlook and the possibility of further rand weakness, the
next year is likely to be challenging. Nonetheless, our fundamentals are solid, we
have cut costs in the more volatile areas and we should be cash generative.
Any reference to future financial performance included in this announcement has not
been reviewed or reported on by the company’s auditors.
DIVIDEND
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 provisional condensed consolidated financial statements have been prepared in
accordance with the requirements of the JSE Listings Requirements for provisional
reports, and the requirements of the Companies Act of South Africa applicable to
summary financial statements. The Listings Requirements require provisional reports to
be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (“IFRS”) and
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Pronouncements as issued by the Financial Reporting Standards Council
and to also, as a minimum, contain the information required by IAS 34 – Interim
Financial Reporting.
BASIS OF PREPARATION
The provisional condensed consolidated financial statements are prepared in thousands
of South African Rands on the historical cost basis.
The accounting policies applied in the preparation of the provisional condensed
consolidated financial statements are in terms of IFRS and are consistent with those
applied in the previous consolidated annual financial statements.
The standards, amendments and interpretations, which became effective in the year ended
31 December 2015 were assessed for applicability to the Group and management concluded
that they were not applicable to the business of the Group and consequently will have
no impact.
SUBSEQUENT EVENTS
No events that meet the requirements of IAS 10 have occurred since the reporting date.
REPORT OF THE INDEPENDENT AUDITORS
These provisional condensed consolidated financial statements for the year ended 31
December 2015 have been reviewed by KPMG Inc., who expressed an unmodified review
conclusion. A copy of the auditor’s review report is available for inspection at the
company’s registered office together with the financial statements identified in the
auditor’s report.
PREPARER OF FINANCIAL STATEMENTS
These provisional condensed consolidated financial statements have been prepared under
the supervision of the Group financial director, André Broodryk CA(SA).
APPRECIATION
We extend our gratitude to all our staff who contributed to the result, and to our
shareholders and other stakeholders for your valued support.
On behalf of the Board
17 March 2016
WAH Willcocks AP Broodryk
Chief Executive Financial Director
Provisional Condensed Consolidated Statement of Comprehensive Income for the year ended 31
December 2015
Dec 2015 % Dec 2014
Reviewed Change Audited
R’000 R’000
Revenue 956 916 14.7% 834 474
Cost of sales (484 094) (421 169)
Gross profit 472 822 14.4% 413 305
Operating expenses (292 083) (264 419)
Earnings before interest, tax, depreciation and 180 739 21.4% 148 886
amortisation
Depreciation and amortisation (95 836) (64 870)
Result from operating activities 84 903 1.1% 84 016
Net finance costs (24 505) (19 579)
Finance costs (26 080) (20 367)
Finance income 1 575 788
Profit before taxation 60 398 (6.3%) 64 437
Taxation expense (18 165) (18 890)
Profit for the year 42 233 (7.3%) 45 547
Profit attributable to:
Non-controlling interests 1 331 1 224
Owners of the company 40 902 (7.7%) 44 323
Other comprehensive income
Items that are or may be reclassified to profit or
loss:
Foreign currency translation reserve movement on (2 687) (39)
foreign operations
Total comprehensive income for the year 39 546 (13.1%) 45 508
Total comprehensive income attributable to:
Non-controlling interests 1 331 1 224
Owners of the company 38 215 44 284
Reconciliation of headline earnings
Profit attributable to owners of the company 40 902 44 323
Adjusted for:
(Profit)/loss on disposal of property, plant and (52) 2 317
equipment
Taxation charge on headline earnings adjusting 15 (649)
items
Total non-controlling interest effects of (28) 9
adjustments
Headline earnings attributable to ordinary 40 837 (11.2%) 46 000
shareholders
Weighted average number of shares in issue on which 466 374 466 409 464 398
earnings per share are based
Diluted weighted average number of shares in issue 472 937 529 417 189 252
on which diluted earnings per share are based
Basic earnings per share (cents) 8.77 (18.9%) 10.82
Diluted earnings per share (cents) 8.65 (18.5%) 10.62
Headline earnings per share (cents) 8.76 (22.0%) 11.23
Diluted headline earnings per share (cents) 8.63 (21.8%) 11.03
Provisional Condensed Consolidated Statement of Financial Position as at 31 December 2015
Dec 2015 Dec 2014
Reviewed Audited
R’000 R’000
ASSETS
Non-current assets 737 099 658 412
Property, plant and equipment 674 804 598 590
Goodwill 61 082 59 382
Deferred tax assets 1 213 440
Current assets 249 709 241 765
Inventories 11 472 14 747
Current tax receivables 4 745 120
Trade and other receivables 180 338 164 992
Cash and cash equivalents 53 154 61 906
TOTAL ASSETS 986 808 900 177
EQUITY AND LIABILITIES
Equity 504 163 453 083
Equity attributable to the owners of the Company 500 480 450 192
Stated share capital 317 620 306 498
Share based payment reserves 4 246 3 295
Foreign currency translation reserve (2 627) 60
Retained earnings 181 241 140 339
Non controlling interests 3 683 2 891
Non-current liabilities 279 640 252 208
Interest-bearing borrowings 204 876 191 378
Provision for site rehabilitation 27 931 23 964
Deferred tax liabilities 46 833 36 866
Current liabilities 203 005 194 886
Current tax payable 291 3 036
Interest-bearing borrowings 91 461 89 005
Trade and other payables 111 253 102 845
Total liabilities 482 645 447 094
TOTAL EQUITY & LIABILITIES 986 808 900 177
Number of shares in issue at year end 467 627 877 458 342 877
Provisional Condensed Consolidated Statement of Cash Flows for the year ended 31 December
2015
Dec 2015 Dec 2014
Reviewed Audited
R’000 R’000
Net cash inflow from operating activities 142 114 103 099
Net cash outflow on investing activities (175 986) (265 659)
Net cash inflow from financing activities 26 538 195 184
Total cash movement for the year (7 334) 32 624
Effect of exchange rate fluctuations on cash held (1 418) -
Cash and cash equivalents at beginning of year 61 906 29 282
Total cash and cash equivalents at end of year 53 154 61 906
Provisional Condensed Consolidated Statement of Changes in Equity for the year ended 31
December 2015
Dec 2015 Dec 2014
Reviewed Audited
R’000 R’000
Profit after tax 42 233 45 547
Dividends paid to non-controlling interest (539) (459)
Shares issued 11 122 81 006
Foreign currency translation reserve movement (2 687) (39)
Share-based payment transactions 951 1 232
Equity at beginning of year 453 083 325 796
Total Equity at end of year 504 163 453 083
Made up as follows :
Stated share capital 317 620 306 498
Share-based payment reserve 4 246 3 295
Foreign currency translation reserve (2 627) 60
Retained earnings 181 241 140 339
Non-controlling interests 3 683 2 891
Total Equity at end of year 504 163 453 083
Provisional Condensed Consolidated Segment Report for the year ended 31 December 2015
Dec 2015 Dec 2014
Reviewed Audited
R’000 R’000
Gross revenue
Waste management 760 384 676 330
Compost manufacturing and sales 46 096 40 989
Landfill management 150 436 117 155
956 916 834 474
Results from operating activities
Waste management 35 085 46 024
Compost manufacturing and sales 5 324 (1 215)
Landfill management 44 494 39 207
84 903 84 016
Depreciation and amortisation
Waste management 75 945 54 183
Compost manufacturing and sales 1 655 2 475
Landfill management 18 236 8 212
95 836 64 870
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
www.interwaste.co.za
Date: 17/03/2016 01:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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