Wrap Text
Unaudited condensed consolidated financial results
for the six months ended 30 June 2016
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 2016
OVERVIEW
Interwaste’s core operations produced a solid result for the first six months of
2016, which was partly offset by a loss in an investment with a joint venture which
has subsequently been placed into liquidation.
Revenue from continuing operations grew 6%, profit from operating activities grew
28% and profit from continuing operations grew 34%. An after-tax loss from
discontinued operations of R5.4 million was incurred; this comprised a profit of
R3,9 million on sale of the Earth 2 Earth business, and a loss of R9,3 million on
the Enbitec investment.
The results for the six months to June 2015 and the year to 31 December 2015 have
been restated to reflect Earth 2 Earth and Enbitec separately as discontinued
operations.
Interwaste’s business is directly affected by the level of economic activity in the
country, and the core result, in an environment of virtually no growth, is
pleasing.
SEGMENTAL REVIEW
WASTE MANAGEMENT
Revenue from the waste management business grew 8%, while the result from operating
activities was 233% higher. The improvement in the operating result was a function
of:
- Improved performance by a number of the regional businesses which have gained
critical mass;
- Clean-ups at certain of our larger customers;
- A pleasing performance from the effluent treatment business, which saw an
improvement in volumes during the period;
- A stronger result from the cleaning business arising from a focus on the
weaker areas, and the benefit of the newly constructed processing facility;
- A significant improvement in the performance of the Gauteng logistics
operation.
The business operates in a highly competitive low margin market, and
efficiencies have been driven in order to improve margins;
- A positive result from the Mozambican business (the 2015 result included a
significant currency loss);
- Well controlled overheads;
- A substantial loss from the blending platform due to significantly lower than
budgeted volumes;
- Lower commodity trading results with less opportunities to access tradeable
commodities at viable prices; and
- Lower customer volumes in certain areas, which impacted profitability despite
early measures to reduce costs.
COMPOST MANUFACTURING AND SALES
The compost manufacturing and sales business had been returned to profitability.
However, concerns as to the future supply of raw material prompted its sale,
effective 1 June 2016, with the proceeds on sale received after the period end. The
business produced a profit of R3.9 million with a gain on sale of the assets
included in the profit on disposal of property, plant and equipment.
LANDFILL MANAGEMENT
Revenue from the landfill management division decreased by 7.3% and the result from
operating activities declined from R23.3 million to R11.9 million. This was
primarily a function of:
- Lower profits from the landfill management business due to the loss of a
large contract and current year losses on a landfill construction contract
due to unforeseen delays;
- Reduced volumes through the FG landfill, in line with the reduction in market
volumes; and
- The increased costs of the gas and leachate abatement measures applied at the
landfill.
INVESTMENT
The Company invested R84.1 million in maintaining and expanding operations during
the period (2015: R89 million). R9.5 million was generated from the sale of
property, plant and equipment, primarily on disposal of the Earth 2 Earth business.
R44.2 million was applied to fleet and operating asset replacements, with the
balance being spent on bringing the Klinkerstene landfill into operation (first
waste accepted 1 July 2016), expanding our recycling capacity, and improving the
waste management facilities at the Germiston Hub. Given the difficult operating
environment, investments to expand operations will be limited to those areas of the
business where growth at rates sufficient to justify the investment is available.
There have been substantial levels of investment in recent years, including the
multi-year development of the Klinkerstene landfill, and the current asset base
should support strong returns in the medium term.
FG LANDFILL
There were a number of press articles regarding the FG landfill during the period
and, where appropriate, the Company released Sens announcements updating
shareholders on developments relating to the site.
During the period Interwaste received a notice from the Gauteng Department of
Agriculture and Rural Development (“GDARD”) requiring it to cease operations at the
site, on the basis that its licence to operate the landfill should have been
renewed and had not been. The Company disagreed with the interpretation of the
licence conditions by GDARD and obtained an interdict suspending the operation of
the compliance notice until the matter is heard by a court.
The Company was informed by the Department of Environmental Affairs (DEA) that
residents in the area of the landfill had lodged numerous complaints with DEA
regarding alleged unpleasant odours produced by the landfill. Although third party
research has shown that there are a number of businesses and operations in the
Olifantsfontein area which produce odours, including a sewerage treatment plant,
Interwaste has gone to considerable lengths to reduce, and where possible
eliminate, odours produced by the landfill site to ensure that it is not the basis
of any complaints. The level of complaints regarding alleged odours from the
landfill has subsequently reduced substantially and Interwaste will continue to
work closely with the authorities in this regard. The FG landfill has been subject
to repeated audits by the regulator and certain of our customers, and we have not
been notified of any breaches of environmental legislation or regulations at the
landfill. FG is the only landfill in the country with a TUV ISO 18001
accreditation.
ENBITEC
Interwaste invested in a joint venture agreement with Enbitec in the prior
financial year. The joint venture entity provided various liquid treatment
services, including the construction of water and sewerage treatment facilities.
In July 2016 Interwaste determined that certain of the financial information
reported to it on a monthly basis by Enbitec had been false and the joint venture
entity was no longer viable. An application was made to place the venture into
liquidation and a provision was raised for the expected loss on the Company’s
exposure to the entity at 30 June 2016. Should our investigations reveal any foul
play, Interwaste will institute criminal charges.
MOZAMBIQUE
With effect from 1 January 2016 the majority of the Company’s Mozambican contracts
are either US dollar denominated or US dollar indexed. The functional currency of
that operation has accordingly changed to the US dollar, significantly reducing
Interwaste’s exposure to the ongoing depreciation of the Metical.
INITIATIVES
The coastal businesses continue to gain traction with the new regions producing
solid turnover growth and encouraging levels of profitability.
Volumes through our new transfer station network are growing and these assets are
generating the expected efficiencies. As volumes to our own landfills increase, we
will consider the need for additional transfer stations, in high waste generation
areas.
Interwaste’s FG and Klinkerstene landfills are fully compliant with the latest
Waste legislation and regulations, which should constitute a significant
competitive advantage going forward. Furthermore, the landfills have significant
available capacity whereas a number of the other Gauteng landfills have relatively
little remaining airspace. We will continue to work on permitting the sites we have
identified for development of new landfill space.
The purchase of Redbins, a waste company specialising in the northern areas of
Johannesburg, was successfully concluded during the period. Although the business
will not add significantly to Group turnover, it provides important access to a
niche market that was underserviced by Interwaste.
The Mozambican operation received the hazardous landfill license it had applied
for. The landfill will be developed once the economics in the local economy justify
the investment.
Interwaste received an integrated waste management license for the Germiston Hub.
This allows for recycling, resource recovery, anaerobic digestion, waste to energy
and various other activities.
PROSPECTS
The results of the recent municipal elections do not appear to have catalysed any
meaningful change from central government and, in the absence of that, it is
difficult to see how the pedestrian level of economic growth we are currently
subject to will improve, and how the country will avoid a ratings downgrade in the
next year. Accordingly, we will continue to drive returns by managing costs and
efficiencies, and targeting growth from those markets where it can be achieved
without unduly sacrificing margin. Resources will be directed to the core
operations which performed well during the period, and we will limit the capital
and people allocated to non-core or new areas.
Investment in the next six months will be limited to existing commitments and
maintaining operations; any other investment will require a strong strategic
rationale or anticipated returns significantly in excess of the Company’s cost of
capital.
We have taken steps to address the major factors which impacted the results for the
current period and, given the performance of our core business, are quietly
optimistic looking forward.
DIVIDENDS
Interwaste will not pay a dividend for the period.
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 consolidated interim financial statements are presented in thousands
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 the result for the
period and to our shareholders and other stakeholders for your valued support.
On behalf of the Board
30 August 2016
AP Broodryk WAH Willcocks
Financial Director Chief Executive Officer
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months % 6 months 12 months
June 2016 Change June 2015 Dec 2015
R’000 R’000 R’000
Restated Restated
Continuing operations
Revenue 445 432 6% 420 730 851 300
Cost of sales (202 301) (198 755) (410 442)
Gross profit 243 131 10% 221 975 440 858
Operating expenses (148 659) (145 567) (270 576)
Earnings before interest, tax, depreciation
94 472 24% 76 408 170 282
and amortisation
Depreciation and amortisation (53 617) (44 430) (94 349)
Results from operating activities 40 855 28% 31 978 75 933
Net finance cost (12 738) (11 265) (23 734)
Finance cost (13 898) (12 731) (26 080)
Finance income 1 160 1 466 2 346
Profit before taxation 28 117 36% 20 713 52 199
Taxation expense (8 153) (5 821) (15 856)
Profit for the period from continuing
19 964 34% 14 892 36 343
operations
Discontinued operations
(Loss)/profit from discontinued operations,
(5 397) 1 848 5 890
net of tax
Profit for the period 14 567 (13%) 16 740 42 233
Profit attributable to:
Non-controlling interests (2 113) 367 1 331
Owners of the company 16 680 2% 16 373 40 902
Other comprehensive income:
Items that are or may be reclassified to
profit or loss
Foreign currency translation reserve movement
on foreign operations (1 458) (177) (2 687)
Total comprehensive income for the period 13 109 (21%) 16 563 39 546
Total comprehensive income attributable to:
Non-controlling interests (2 113) 367 1 331
Owners of the company 15 222 16 196 38 215
Reconciliation of headline earnings
Profit attributable to owners of the company
16 680 2% 16 373 40 902
Adjusted for:
(Profit)/loss on disposal of property, plant
(1 859) 332 (52)
and equipment
Taxation charge on headline earnings
520 (93) 15
adjusting items
Total non-controlling interest effects of
adjustments – – (28)
Headline earnings attributable to ordinary
15 341 (8%) 16 612 40 837
shareholders
Weighted average number of shares in issue on
which earnings per share are based 467 668 014 465 026 429 466 374 466
Diluted weighted average number of shares in
issue on which diluted earnings per share are 471 347 170 472 451 924 472 937 529
based
Basic earnings per share (cents) 3.57 1% 3.52 8.77
Diluted earnings per share (cents) 3.54 2% 3.47 8.65
Headline earnings per share (cents) 3.28 (8%) 3.57 8.76
Diluted headline earnings per share (cents) 3.25 (7%) 3.52 8.63
Condensed Consolidated Statement of Financial Position
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2016 June 2015 Dec 2015
R’000 R’000 R’000
ASSETS
Non-current assets 763 570 698 596 737 099
Property, plant and equipment 700 214 637 409 674 804
Goodwill 61 082 60 732 61 082
Deferred tax assets 2 274 455 1 213
Current assets 262 576 267 535 249 709
Inventories 11 352 17 093 11 472
Current tax receivables 8 952 4 874 4 745
Trade and other receivables 225 220 193 749 180 338
Cash and cash equivalents 17 052 51 819 53 154
Total assets 1 026 146 966 131 986 808
EQUITY AND LIABILITIES
Equity 518 709 480 640 504 163
Equity attributable to owners of the company 517 139 477 920 500 480
Stated share capital 318 656 317 645 317 620
Share-based payment reserve 4 647 3 680 4 246
Foreign currency translation deficit (4 085) (117) (2 627)
Retained earnings 197 921 156 712 181 241
Non-controlling interests 1 570 2 720 3 683
LIABILITIES
Non-current liabilities 271 078 261 662 279 640
Interest-bearing borrowings 185 487 192 338 204 876
Provision for site rehabilitation 34 246 25 689 27 931
Deferred tax liabilities 51 345 43 635 46 833
Current liabilities 236 359 223 829 203 005
Current tax payable 3 367 3 111 291
Interest-bearing borrowings 99 430 94 854 91 461
Trade and other payables 131 255 125 864 111 253
Bank overdrafts 2 307 – –
Total liabilities 507 437 485 491 482 645
TOTAL EQUITY & LIABILITIES 1 026 146 966 131 986 808
Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2016 June 2015 Dec 2015
R’000 R’000 R’000
Net cash inflow from operating activities 52 666 62 039 142 114
Net cash outflow on investing activities (74 637) (88 947) (175 986)
Net cash inflow from financing activities (11 959) 17 609 26 538
Total cash movement for the period (33 930) (9 299) (7 334)
Effect of exchange rate fluctuations on cash held (4 479) (788) (1 418)
Cash and cash equivalents at beginning of period 53 154 61 906 61 906
Cash and cash equivalents at end of period 14 745 51 819 53 154
Condensed Consolidated Statement of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2016 June 2015 Dec 2015
R’000 R’000 R’000
Profit after tax 14 567 16 740 42 233
Dividends paid to non-controlling interests – (539) (539)
Shares issued 1 036 11 147 11 122
Foreign currency translation reserve movement (1 458) (177) (2 687)
Share-based payment expense 401 386 951
Equity at the beginning of period 504 163 453 083 453 083
Total equity at end of period 518 709 480 640 504 163
Made up as follows:
Stated share capital 318 656 317 645 317 620
Share based payment reserve 4 647 3 680 4 246
Foreign currency translation deficit (4 085) (117) (2 627)
Retained earnings 197 921 156 712 181 241
Non-controlling interests 1 570 2 720 3 683
Total equity at end of period 518 709 480 640 504 163
Condensed Consolidated Segment Report
Unaudited Unaudited Audited
Restated Restated
6 months 6 months 12 months
June 2016 June 2015 Dec 2015
R’000 R’000 R’000
Gross revenue
Waste management 384 000 354 448 700 865
Landfill management 61 432 66 282 150 435
445 432 420 730 851 300
Results from operating activities
Waste management 28 957 8 699 31 440
Landfill management 11 898 23 279 44 493
40 855 31 978 75 933
Depreciation
Waste management 43 395 36 387 76 114
Landfill management 10 222 8 043 18 235
53 617 44 430 94 349
Discontinued operations
COMPOST MANUFACTURING AND SALES
Effective 1 June 2016 the group sold the assets and inventory of the Compost manufacturing
and sales segment. While the segment had been restored to profitability there were
concerns as to the sustainability of raw material and it was not regarded as part of the
group’s key competencies. The Compost manufacturing and sales segment had not previously
been classified as held-for-sale or as a discontinued operation as there was no intention
to dispose of it at the last reporting date. The comparative condensed consolidated
statement of profit or loss and other comprehensive income has been restated to show the
discontinued operation separately from continuing operations.
Results of discontinued operation
Unaudited Unaudited Audited
6 months 6 months 12 months
June 2016 June 2015 Dec 2015
R’000 R’000 R’000
Revenue 17 624 16 341 46 096
Cost of sales (14 249) (9 676) (30 326)
Gross Profit 3 375 6 665 15 770
Operating expenses (4 439) (4 653) (9 826)
Earnings before interest, tax, depreciation and
(1 064) 2 012 5 944
amortization
Depreciation and amortisation (132) (517) (1 022)
Results from operating activities (1196) 1 495 4 922
Finance income 4 – –
Earnings before taxation (1 192) 1 495 4 922
Taxation credit/(expense) 334 (419) (1 378)
Results from operating activities, net of tax (858) 1 076 3 544
Gain on sale of discontinued operation 6 736 – –
Income tax on gain of sale (1 886) – –
Profit for the period 3 991 1 076 3 544
Profit attributable to:
Non-controlling interests – – –
Owners of the company 3 991 1 076 3 544
Basic earnings per share 0.85 0.23 0.76
Diluted earnings per share 0.85 0.23 0.75
CASH FLOWS FROM/(USED IN) DISCONTINUED OPERATION
6 months 6 months 12 months
June 2016 June 2015 Dec 2015
R’000 R’000 R’000
Net cash (outflow)/inflow from operating activities (8 455) 6 321 11 465
Net cash inflow from investing activities 8 560 – –
Net cash flow for the period 105 6 321 11 465
June 2016
R’000
Effect of disposal on the financial position of the Group
Property, plant and equipment (6 112)
Trade and other receivables 22 978
Inventories (3 457)
Trade and other payables (6 673)
Net assets and liabilities 6 736
Total sales consideration 16 305
Sales consideration included in trade and other receivables (16 305)
Net cash inflow –
ENBITEC ENVIRONMENTAL SOLUTIONS (PTY) LTD
In July Enbitec Environmental Solutions (Pty) Ltd, a 50% subsidiary of the group was
placed in voluntary liquidation. At 30 June 2016 the liabilities of this legal entity
exceeded its assets and the entity was determined to as no longer being viable. The
comparative condensed consolidated statement of profit or loss and other comprehensive
income has been restated to show the discontinued operation separately from continuing
operations.
Results of discontinued operation
6 months 6 months 12 months
June 2016 June 2015 Dec 2015
R’000 R’000 R’000
14 904 23 351 59 519
Revenue (18 508) (16 207) (43 326)
Cost of sales (3 604) 7 144 16 193
Gross Profit
Operating expenses (7 327) (5 460) (11 681)
Earnings before interest, tax, depreciation and
(10 931) 1 684 4 512
amortization
Depreciation and amortisation (273) (264) (464)
Results from operating activities (11 204) 1 420 4 048
Net finance costs (472) (349) (771)
Finance costs (512) (349) (771)
Finance income 40 – –
Profit before taxation (11 676) 1 071 3 277
Taxation expense 2 288 (299) (931)
Profit for the period (9 388) 772 2 346
Profit attributable to:
Non-controlling interests (2 596) 386 1 173
Owners of the company (6 792) 386 1 173
Basic earnings per share (1.45) 0.17 0.25
Diluted earnings per share (1.44) 0.16 0.25
CASH FLOWS FROM/(USED IN) DISCONTINUED OPERATION
6 months 6 months 12 months
June 2016 June 2015 Dec 2015
R’000 R’000 R’000
Net cash outflow from operating activities (377) (4 025) (8 226)
Net cash outflow from investing activities (24) (980) (829)
Net cash (outflow)/inflow from financing activities (590) 6 700 10 152
Net cash flow for the period (991) 1 695 1 097
June 2016
R’000
Effect of liquidation on the financial position of the Group
Trade and other receivables (9 782)
Receiver of revenue 2 739
Non-controlling interests 1 424
Net assets and liabilities (5 619)
Consideration received in cash –
Cash and cash equivalents disposed of –
Net cash inflow –
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
Date: 30/08/2016 03:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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