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Unaudited condensed consolidated financial results for the 6 months ended 30 June 2017
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 2017
OVERVIEW
Despite subdued business confidence within South Africa, the waste management industry
remains a dynamic place to conduct business. The trading environment is competitive but
Interwaste’s strategy of providing integrated waste management solutions and controlling
the entire value chain continues to afford us a competitive advantage. Our internationally
accredited operating standards and growing service offerings continue to enable Interwaste
to be the supplier of choice for many local and multinational clients.
Demand for services in waste management industry is directly correlated with economic
activity and, despite an environment with minimal growth in GDP, revenue from continuing
operations increased 8% year-on-year on the back of price increases as well as growing
volumes from predominately new operations.
Through improved asset utilisation, consolidations, relocations and disposals of various
non-performing depots and businesses, the Group has improved profitability resulting in
a 17% increase in headline earnings per share on continuing operations. There remains a
strong focus to reduce overhead costs, to improve Logistics efficiencies and grow
organically from our existing client base through added service offerings.
Looking forward, economic indicators predict continued subdued growth in many of the
industry verticals in which we operate over the next few years, which when combined with
increasing levels of competition, indicate challenging trading conditions are expected
to continue. On the positive side, increasing levels of either voluntary or enforced
levels of compliance will create demand for our services establishing a robust sales
pipeline. The Department of Environmental Affairs continues to introduce a host of new
environmental legislation which will create additional opportunities for Interwaste in
the form of added service offerings to our customers. We remain proactive in our
participation by constantly engaging both local and national government to ensure that
we are suitably prepared and adequately resourced to leverage off the legislative changes.
FINANCIAL PERFORMANCE
Revenue from continuing operations grew 8% year-on-year mainly impacted by new operations
and industry price increases. Operational efficiencies resulted in an increase in profit
from continuing operating activities of 20% year-on-year.
Revenue from the Logistics segment increased 10% year-on year in a competitive environment
with profit from operating activities increasing 35%.
The Facilities segment reported negative growth with a decrease of 6% in year-on-year
revenue. While decreasing municipal volumes were experienced on the FG Landfill, there
were increases in volumes to the Klinkerstene Landfill as the facility starts to grow
following commissioning during 2016. The decreased municipal volumes to the FG Landfill
site together with increased one-off compliance costs put pressure on the profitability
of the Facilities segment resulting in a 17% decrease in profit from operating activities
year-on-year. The non-performing Blending Plant assets, which is included in the
Facilities segment, was sold to Lafarge effective 30 June 2017 and losses have ceased
from this date.
CASH FLOWS
The Group was highly cash generative for the six months ending 30 June 2017 with R33.2
million of cash generated before finance activities (30 June 2016: usage of R22.0
million), a substantial improvement. Higher cash was earned from operating activities
together with a meaningful reduction in cash used in investing activities. Cash utilised
in investing activities was offset by R14.3 million inflow resulting from the sale of
non-performing Blending Plant assets to Lafarge.
Cash and cash equivalents held at the end of June 2017 was R75.5 million compared to
R14.7 million in the prior year. The stronger cash flow has resulted in reduced net
gearing year-on-year.
The Group embarked on a strategy in 2013 to replace the four year full maintenance
operating leases with finance leases in order to reduce the costs of fleet ownership.
This strategy has almost entirely been implemented with the final units being replaced
in the second half of 2017. Capital investments within our Logistics division are
financed largely through debt however, investments into the Facility operations are self-
funded utilising cash resources.
During the period under review, R5.4 million of treasury shares were acquired.
SADC INVESTMENTS
The overall activities in our cross border investments continued to perform well with
healthy returns being generated. We have taken proactive steps to right size certain
areas of investment to ensure that we do not have unproductive assets allocated to areas
with subdued economic activity.
The change last year to billing our SADC customers in US Dollar has limited our exposure
to traditional SADC type currency fluctuations. However, with the strengthening Rand
against the US Dollar during the reporting period, we incurred exchange rate losses. We
continue to successfully repatriate foreign revenue generated outside South Africa aligned
to our investment strategy and knowledge of the countries in which we operate.
The SADC region, into which Interwaste invested over 20 years ago, remains a key growth
area and we continue to assess our investments and operating units in the region. We
have gained extensive local knowledge enabling us to understand and navigate the specific
challenges we face.
FG LANDFILL
The FG Landfill is one of only two in Gauteng that complies with current landfill liner
legislation, and remains recognised by independent experts as one of the best managed
landfill facilities in South Africa. It is the only facility in the country that has
received international OHSAS 18001 certification from German based TUV Rheinland.
Interwaste has always embraced the communities within which we conduct business and is
respectful of the potential impacts our operations have on the local environment. As a
result, we continue to pursue best practices with respect to the management of our
operations. Various measures which were designed, managed and commissioned by leading
engineering companies in the sector, have been implemented at the landfill to ensure that
potential environmental impacts associated with the operation of the landfill are
effectively mitigated. During the period, R1.7 million was spent in extending the gas
extraction on FG Landfill which has been connected to the gas flaring system commissioned
in the prior year.
Given the extensive focus on the FG Landfill, the site’s licence and compliance has come
under scrutiny from both the national and provincial regulators. The company remains
confident that the site is compliant with the license conditions. The company is currently
engaged in legal processes involving the applicable regulators retaining leading
environmental law experts.
INITIATIVES
Our Laboratory at our site in Germiston, which analyses waste for various customers and
for Interwaste, was awarded full SANAS accreditation with Interwaste now having the most
advanced and fully certified environmental laboratory in South Africa.
OUTLOOK
Based on forecasts of economic growth, it is reasonable to presume relatively flat growth
in the year that lies ahead. The provision of integrated waste solutions together with
increasing levels of compliance should assist in retaining clients as well as acquiring
new clients. We continue to drive returns by managing costs and improving efficiencies.
Resources will be applied in investments generating the required returns.
References to forward looking statements included anywhere in this announcement have not
been reviewed or reported on by the Group’s external auditors.
DIVIDENDS
Interwaste will not pay a dividend for the period. The executive board remains committed
to the payment of a dividend and future dividend payments will be considered bearing in
mind the balance between capitalising on opportunities and delivering on short, medium
and long term value for 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 the International
Financial Reporting Standards and are consistent with those applied in the previous year’s
annual financial statements.
BASIS OF MEASUREMENT
The condensed consolidated interim financial statements are presented in thousands of
South African Rands (R’000) 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 financial statements was
supervised by the Group Financial Director, RA Lumb CA(SA).
APPRECIATION
We extend our gratitude to all 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
23 August 2017
RA Lumb WAH Willcocks
Financial Director Chief Executive Officer
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2017
June 2017 % June 2016 December 2016
R’000 Change R’000 R’000
6 months 6 months Audited
12 months
Continuing operations
Revenue 480 652 8% 445 432 924 003
Cost of sales (219 983) (202 301) (421 317)
Gross profit 260 669 7% 243 131 502 686
Operating expenses (159 671) (148 659) (297 591)
Earnings before interest, tax,
100 998 7% 94 472 205 095
depreciation and amortisation
Depreciation and amortisation (51 989) (53 617) (106 636)
Results from operating
49 009 20% 40 855 98 459
activities
Net finance costs (16 382) (12 738) (28 720)
Finance costs (17 085) (13 898) (30 882)
Finance income 703 1 160 2 162
Profit before taxation 32 627 16% 28 117 69 739
Taxation expense (9 607) (8 153) (21 999)
Profit for the period from
23 020 15% 19 964 47 740
continuing operations
Discontinued operations
Loss from discontinued
- (5 397) (3 961)
operations, net of tax
Profit for the period 23 020 58% 14 567 43 779
Profit attributable to:
Non-controlling interests 704 (2 113) 14
Owners of the company 22 316 16 680 43 765
Other comprehensive income:
Items that are or may be
reclassified to profit or loss
Foreign currency translation
reserve movement on foreign (1 444) (1 458) (5 434)
operations
Total comprehensive income for
21 576 65% 13 109 38 345
the period
Total comprehensive income
attributable to:
Non-controlling interests 704 (2 113) 14
Owners of the company 20 872 15 222 38 331
Continuing and discontinued
operations
Basic earnings per share (cents) 4.80 35% 3.57 9.36
Diluted earnings per share
(cents) 4.77 35% 3.54 9.29
Continuing operations
Basic earnings per share (cents) 4.80 15% 4.17 9.95
Diluted earnings per share
(cents) 4.77 16% 4.13 9.88
Condensed Consolidated Statement of Financial Position
As at 30 June 2017
June 2016 December
R’000 2016
June 2017 Audited
R’000 R’000
ASSETS
Non-current assets 763 272 763 570 778 914
Property, plant and equipment 697 510 700 214 713 290
Goodwill 64 008 61 082 64 008
Deferred tax assets 1 754 2 274 1 616
Current assets 312 164 262 576 238 283
Inventories 9 162 11 352 8 143
Current tax receivables 4 425 8 952 6 066
Trade and other receivables 223 074 225 220 193 223
Cash and cash equivalents 75 503 17 052 30 851
TOTAL ASSETS 1 075 436 1 026 146 1 017 197
EQUITY AND LIABILITIES
Equity 556 837 518 709 541 343
Equity attributable to owners of the company 553 121 517 139 537 903
Stated share capital 310 164 318 656 315 558
Share-based payment reserve 5 141 4 647 5 401
Foreign currency translation deficit (9 506) (4 085) (8 062)
Retained earnings 247 322 197 921 225 006
Non-controlling interests 3 716 1 570 3 440
LIABILITIES
Non-current liabilities 290 778 271 078 274 046
Interest-bearing borrowings 198 360 185 487 183 579
Provision for site rehabilitation 36 301 34 246 34 347
Deferred tax liabilities 56 117 51 345 56 120
Current liabilities 227 821 236 359 201 808
Current tax payable 574 3 367 4 160
Interest-bearing borrowings 107 058 99 430 105 386
Trade and other payables 120 189 131 255 92 262
Bank overdrafts - 2 307 -
Total liabilities 518 599 507 437 475 854
TOTAL EQUITY AND LIABILITIES 1 075 436 1 026 146 1 017 197
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2017
December
June 2017 June 2016 2016
R’000 R’000 R’000
6 months 6 months Audited
12 months
Profit before taxation on total operations 32 627 21 985 64 907
Adjustments for:
Depreciation and amortisation 51 989 54 022 106 769
Finance costs 17 085 13 858 31 394
Finance income (703) (652) (2 206)
(Profit)/loss on disposal of property, plant
(1 402) (1 859) 1 599
and equipment
Profit on disposal of compost business - - (2 448)
Share-based payment transactions (260) 1 438 1 156
Foreign currency translation (774) 4 939 3 905
Changes in working capital:
Increase in trade and other receivables (29 851) (44 881) (12 885)
Increase/(decrease) in trade and other
payables 27 926 20 003 (18 989)
(Increase)/decrease in inventories (1 018) 314 3 328
Change in estimate – site rehabilitation cost 831 945 998
Cash generated from operations 96 450 70 112 177 528
Finance costs paid (15 964) (12 999) (29 526)
Finance income received 703 652 2 206
Tax paid (11 692) (5 099) (9 471)
Net cash inflow from operating activities 69 497 52 666 140 737
Cash flows from investing activities
Purchases of property, plant and equipment (53 457) (84 062) (157 538)
Proceeds on disposal and scrapping of
property, plant and equipment 17 175 9 425 4 725
Proceeds on disposal of discontinued
operations - - 8 560
Acquisition of subsidiaries - - (2 927)
Net cash outflow on investing activities (36 282) (74 637) (147 180)
Cash flows from financing activities
Proceeds on issue of share capital - - 1 165
Treasury shares acquired (5 394) - (3 226)
Net movement in interest-bearing borrowings 16 454 (11 959) (7 373)
Interest-bearing borrowings raised 76 788 44 170 105 410
Interest-bearing borrowings repaid (60 334) (56 129) (112 783)
Dividends to non-controlling interests (428) - (260)
Net cash inflow/(outflow)from financing
activities 10 632 (11 959) (9 694)
Total cash movement for the period 43 847 (33 930) (16 137)
Effect of exchange rate fluctuations on cash
held 805 (4 479) (6 166)
Cash and cash equivalents at beginning of
period 30 851 53 154 53 154
Total cash and cash equivalents at end of
period 75 503 14 745 30 851
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2017
June 2016 December
R’000 2016
June 2017 6 months R’000
R’000 Audited
6 months 12 months
Profit after tax 23 020 14 567 43 779
Dividends paid to non-controlling interests (428) - (260)
Shares issued - 1 036 821
Treasury shares acquired (5 394) - (3 226)
Foreign currency translation reserve movement (1 444) (1 458) (5 434)
Share-based payment reserve movement (260) 401 1 500
Equity at the beginning of period 541 343 504 163 504 163
Total equity at end of period 556 837 518 709 541 343
NOTES TO THE FINANCIAL RESULTS
1. Condensed Consolidated Segment Report
For the six months ended 30 June 2017
June 2017 June 2016 December
R’000 R’000 2016
6 months 6 months R’000
Audited
12 months
Gross revenue
Logistics 423 131 384 000 803 887
Facilities 57 521 61 432 120 116
480 652 445 432 924 003
Results from operating activities
Logistics 39 160 28 957 64 618
Facilities 9 849 11 898 33 841
49 009 40 855 98 459
Depreciation
Logistics 41 328 43 395 84 442
Facilities 10 661 10 222 22 194
51 989 53 617 106 636
Segment assets
Logistics 900 350 862 120 865 655
Facilities 175 086 164 026 151 542
1 075 436 1 026 146 1 017 197
Segment liabilities
Logistics 460 656 454 921 431 358
Facilities 57 943 52 516 44 496
518 599 507 437 475 854
2. Reconciliation of headline earnings
For the six months ended 30 June 2017
June 2017 % June 2016 December
R’000 Change R’000 2016
6 months 6 months R’000
Audited
12 months
Profit attributable to owners of the
company 22 316 16 680 43 765
Adjusted for:
Gain on sale of discontinued operation - - (2 448)
Tax effect on gain on sale of
discontinued operation - - 685
Loss/(profit) on disposal of property,
plant and equipment (1 402) (1 859) 1 599
Tax effect of loss/(profit) on disposal
of property, plant and equipment 392 520 (447)
(Profit)/loss on disposal of business (202) - -
Tax effect on (profit)/loss on disposal
of business 57 - -
Headline earnings attributable to
ordinary shareholders 21 161 38% 15 341 43 154
Weighted average number of shares in
issue on which earnings per share are 465 308 987 467 668 014 467 818 670
based
Diluted weighted average number of
shares in issue on which diluted 467 366 292 471 347 170 471 135 689
earnings per share are based
Continuing and discontinued operations
Headline earnings per share (cents) 4.55 39% 3.28 9.22
Diluted headline earnings per share
(cents) 4.53 39% 3.25 9.16
Continuing operations
Headline earnings per share (cents) 4.55 17% 3.88 9.94
Diluted headline earnings per share
(cents) 4.53 18% 3.85 9.87
3. RELATED PARTIES
Trusts relating to directors Wilco Family Trust
N2 Property Trust
Directors D Rosevear
BL Willcocks
C Boles
LJ Mahlangu
LC Grobbelaar
PF Mojono
WAH Willcocks
RA Lumb
Significant shareholders The Wilco Family Trust
There were no major transactions with related parties in the six months ended 30 June
2017.
4. SUBSEQUENT EVENTS
The directors are not aware of any material matter or circumstance arising since
the end of 30 June 2017 and up to the date of approval of the condensed
consolidated financial results, relevant to an assessment of the financial results
at 30 June 2017.
5. IMPACT OF IFRS 15, IFRS 9 AND IFRS 16
IFRS 15 Revenue from contracts with customers
The Group has done a preliminary assessment of the potential impact of the adoption
of
IFRS 15. For revenue from the sale of goods, management does not expect a significant
impact on the measurement or timing of revenue recognition as:
1) There is no material right of return; and
2) The date when control passes in terms of IFRS 15 is likely to be materially the
same as the date revenue is currently recognised.
For revenue from the rendering of services, management does not expect a significant
impact on the measurement or timing of revenue recognition due to the nature and
short length of the services rendered.
IFRS 9 Financial Instruments
Management has performed a preliminary assessment of the impact of IFRS 9. Given the
nature of the Group’s financial instruments, the Group does not believe that the new
classification requirements will significantly impact on the measurement of these
instruments.
The impairment model for trade receivables will change from an “incurred loss” model
to an “expected loss” model.
IFRS 16 Leases
The entity has a number of operating leases for equipment and vehicles that may be
recognised on the statement of financial position as a result of the adoption of
IFRS 16. Management has identified specific contracts where an impact is expected
and is in the process of determining:
1) Whether these contracts meet the definition of lease contracts per IFRS 16;
2) Whether any scope exemptions apply; and
3) The quantitative impact of recognising these leases on balance sheet, where
relevant.
No significant impact is expected for the Groups’ finance leases.
Corporate Information
Non-executive directors: PF Mojono(Chairperson), LJ Mahlangu, C Boles, D Rosevear,
BL Willcocks
Executive directors: WAH Willcocks (Chief Executive Officer), RA Lumb (Financial
Director), 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: 23/08/2017 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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