Wrap Text
Unaudited Condensed consolidated financial results for the six months ended 30 June 2018
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 2018
SAILENT FEATURES
• Strong growth in revenue up 24% to R595.0 million (2017: R480.7 million)
• Robust growth in operating profit up 22% to R59.8 million (2017: R49.0 million)
• Headline Earnings per share (HEPS) of 6.43 cents per share, up 41% (2017: 4.55 cents per
share)
• Strong sustainable cash generation with cash generated before financing of R78.2 million
(2017: R76.0 million)
• Continued reduction of debt with net debt to equity of 19.2% (2017: 41.3%) and a
reduction in net debt to R112.1 million (2017: R229.9 million)
FINANCIAL PERFORMANCE
Revenue grew 24% year-on-year on the back of industry price increases and growth from
diversifying our customer base, offset by lower recyclable prices and lower total volumes
to own landfill facilities which were down 7% compared to the same period last year.
Gross profit percentages remained under pressure due to lower domestic recyclable prices,
higher input costs and lower disposal volumes to the FG Landfill with increasing year-on-
year environmental compliance costs in respect of this site.
Operating profit for the six months ended 30 June 2018 was R59.8 million (2017: R49.0
million), up 22% year-on-year.
Net finance costs for the six months ended 30 June 2018 fell 27% from R16.4 million down to
R12.0 million due to the continued reduction in debt with growing cash and cash equivalents.
Net debt to equity as at 30 June 2018 was 19.2% compared to 41.3% in the prior year.
Profit before tax (PBT) for the six months ended 30 June 2018 was R47.8 million (2017:
R 32.6 million), up 47% compared to the same period last year.
Headline earnings per share (HEPS) for the six months ended 30 June 2018 was 6.43 cents per
share (2017: 4.55 cents per share) up 41% year-on-year. While there has been a notable
year-on-year growth in HEPS, the rate of growth was impacted by an increased share of
profits earned by minorities.
Net operating assets (excluding cash and cash equivalents) as at 30 June 2018 were R700.9
million (2017: R772.1 million) down 9% compared to the prior year. The reduction in net
operating assets coupled with an increase in operating profit positively impacted the annual
rolling return on net operating assets which averaged 16.0% (2017: 13.5%). The rolling
annual return on equity averaged 9.4% (2017: 8.9%).
The Group generated cash flow before financing for the six months ended 30 June 2018 of
R78.2 million (2017: R76.0 million). Cash and cash equivalents held at 30 June 2018 were
R116.1 million compared to R75.5 million in the prior year and a similar amount as at 31
December 2017.
During the first half of 2018, Interwaste Holding’s share price traded below the net asset
value and the Company continued to use the opportunity to buy back its own shares. 11.6
million shares at an average price of 84.4c per share were acquired during the six months
ended 30 June 2018. A total of 41.1 million shares were held at 30 June 2018.
TRADING ENVIRONMENT
Lower than expected growth in the South African Gross Domestic Product (GDP) was recorded
during the first quarter of 2018 and demand for services in the waste management industry
directly correlates with economic activity aligned with global macro-economic, industry and
geographic trends. Our performance is very pleasing in a very mixed economic and political
environment. The Logistics segment delivered pleasing results with growing volumes mainly
from diversifying services across industry sectors, but this was offset by underperformance
of the Facilities segment with lower total volumes to own landfill sites.
China’s ban on importing certain waste and slag type material as part of its National Sword
campaign has negatively impacted and disrupted the global and local recycling industry.
Another list of 16 items will be banned by the end of 2019. These import bans are leading
to products being stock-piled thus driving down the value of previously related export
material, whilst alternative markets and solutions are found for their re-use. During the
financial year, decreases in recyclable waste prices have substantially impacted the local
recyclable prices and the profitability of these associated business units.
We remain focussed on strengthening our financial position with prudent capital allocation
and this has resulted in improved cash generation, reduced debt with improving returns.
Management continues to build a diversified, sustainable and profitable business to create
value for all stakeholders.
The trading environment remains competitive but Interwaste’s strategy of providing
integrated waste management solutions and controlling the entire value chain affords us a
competitive advantage. Our internationally accredited operating standards and innovative
service offerings continue to enable Interwaste to be the supplier of choice for many local
and multinational clients.
The regulatory framework governing the Waste Management Industry in our domestic and
global markets is constantly evolving and the supervisory capacity of regulators is
increasing significantly. We remain abreast of these changes and actively contribute to
the development of national policy and legislation through formal submissions and advisory
input addressed to policy makers and regulatory authorities. 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 clients.
LOGISTICS
Revenue from the Logistics segment increased 29% compared to the same period last year
with profit from operating activities increasing by 38%. Logistics operating margins
improved from 9.3% in 2017 to 9.9% in 2018, positively impacted by growing volumes and
continued strong focus on asset utilisation and efficiencies.
FACILITIES
The Facilities segment underperformed with revenue decreasing 11% compared to last year
impacted by lower net volumes to company owned landfill sites. While volumes to FG
decreased, volumes to Klinkerstene continued to grow. The lower volumes to FG, high site
fixed costs and additional environmental compliance costs resulted in a 42% decrease in
Facilities’ operating profit compared to the same period last year.
Given the extensive focus on the FG Landfill, the site’s license and compliance has come
under scrutiny from both the National and Provincial Regulators. The Company was engaged
in legal proceedings with regards to the license for the site. The matter was heard in
December 2017 and on 13 February 2018, the Court ruled in Interwaste’s favour, setting aside
the compliance notice and the MEC’s decision to uphold the compliance notice, on the premise
that the site’s licence remains valid. GDARD and DEA together with the Greater Midstream
Forum applied for Leave to Appeal, which was granted by the Court on 11 April 2018.
The Klinkerstene Landfill which was commissioned in July 2016 continues to provide
flexibility through an additional company owned disposal facility. Cell two at the landfill
was completed in the last quarter of 2017 which provides additional airspace to meet the
Group’s short to medium-term demands.
SADC INVESTMENTS
On the back of higher petro-chemical prices, the overall activities in our cross-border
investments continue to perform well with healthy returns being generated. As some volumes
reduce in regions where approved projects are coming to an end and awaiting new approvals,
other regions grow with new volumes. We continue to take proactive steps to right size
certain areas of investment and transfer assets to ensure effective utilisation.
We continue to bill our SADC customers in US Dollars and therefore have limited exposure to
the traditional SADC type currency fluctuations. The net fair value gain relating to
financial instruments was R1.4 million (2017: R3.1 million charge) mainly due to the
translation gains and losses on US Dollar denominated monetary assets and liabilities in
the region. We continue to successfully repatriate foreign cash flows 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 will continue to assess opportunities and investments in the region. We have
gained extensive local knowledge enabling us to understand and navigate the regionally
specific challenges.
OUTLOOK
Despite low GDP growth in the first quarter of 2018, the outlook for the South African
economy continues to improve characterised by rising confidence levels. The South African
GDP is now forecast to grow at around 1.2% for 2018. Growing GDP coupled with population
growth and urbanisation bodes well for the industry. Globally, some commodity prices
continued to improve into 2018 which augurs well for industrial businesses especially within
the manufacturing and mining and resource sectors.
China’s ban on importing certain waste and slag type material along with the resultant
impact on local recyclable prices will continue to negatively impact the margins of these
associated business units, but the overall effect remains marginal as we continue to grow
a diversified business within the industry. 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.
References to forward looking statements included anywhere in this announcement have not
been reviewed or reported on by the Group’s external auditors.
DIVIDENDS
The maiden dividend declared on the 19 March 2018 in respect of the results for the year
ended 31 December 2017 was paid on 16 April 2018. Interwaste will not pay a dividend for
the interim period. The Board remains committed to future dividends by applying a policy
of between 4.5 to 5.0 times cover of income attributable to Interwaste shareholders, 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 the 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.
During the period new and revised standards were adopted, the details of which are
recorded in note 7.
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.
RESTATEMENT OF JUNE 2017 STATEMENT OF CASH FLOWS
As advised in the condensed consolidated financial statements for the year ended 31 December
2017 and the consolidated financial statements for 2017, the 30 June 2017 Condensed
Consolidated Statement of Cash flows was restated to more accurately reflect additions of
property, plant and equipment through instalment sales agreements as a non-cash flow item
as required by IAS7: Cash flow statements. This is set out in note 3 to the Unaudited
condensed financial Results for the six months ended 30 June 2018.
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 Chief Financial Officer, RA Lumb CA(SA).
APPRECIATION
We extend our gratitude to all staff who contributed to the results for the period and to
our shareholders and other stakeholders for your valued support.
On behalf of the Board
6 August 2018
WAH Willcocks RA Lumb
Chief Executive Officer Chief Financial Officer
Condensed Consolidated Statement of profit/loss and other comprehensive income
For the six months ended 30 June 2018
June 2018 % June 2017 December 2017
R’000 Change R’000 R’000
Unaudited Unaudited Audited
6 months 6 months 12 months
Revenue 595 030 24% 480 652 1 033 085
Cost of sales (304 823) (219 983) (495 449)
Gross profit 290 207 11% 260 669 537 636
Operating expenses (180 252) (159 671) (325 541)
Administrative expenses (167 218) (146 432) (296 717)
Selling and distribution expenses (10 108) (9 833) (22 336)
Research and development expenses (2 926) (3 406) (6 488)
Earnings before interest, tax and
109 955 9% 100 998 212 095
depreciation
Depreciation (50 143) (51 989) (102 783)
Results from operating activities 59 812 22% 49 009 109 312
Net finance costs (11 991) (16 382) (30 506)
Finance costs (14 101) (17 085) (33 480)
Finance income 2 110 703 2 974
Profit before taxation 47 821 47% 32 627 78 806
Taxation expense (13 798) (9 607) (24 985)
Profit for the period 34 023 48% 23 020 53 821
Profit attributable to:
Non-controlling interests 6 152 704 6 165
Owners of the company 27 871 22 316 47 656
Other comprehensive income, net of tax
items that may be reclassified subsequently
to profit or loss
Foreign currency translation reserve
movement on foreign operations 4 291 (1 444) (3 632)
Total comprehensive income for the period 38 314 78% 21 576 50 189
Total comprehensive income attributable to:
Non-controlling interests 6 152 704 6 165
Owners of the company 32 162 20 872 44 024
Basic earnings per share (cents) 6.36 33% 4.80 10.40
Diluted earnings per share (cents) 6.36 33% 4.77 10.35
Condensed Consolidated Statement of Financial Position
As at 30 June 2018
June 2018 June 2017 December 2017
Unaudited Unaudited Audited
R’000 R’000 R’000
ASSETS
Non-current assets 738 616 763 272 753 241
Property, plant and equipment 673 060 697 510 687 919
Goodwill 64 008 64 008 64 008
Deferred taxation assets 1 548 1 754 1 314
Current assets 392 987 312 164 328 843
Inventories 10 980 9 162 9 213
Current taxation receivables 9 318 4 425 7 597
Trade and other receivables 256 559 223 074 195 938
Cash and cash equivalents 116 130 75 503 116 095
TOTAL ASSETS 1 131 603 1 075 436 1 082 084
EQUITY AND LIABILITIES
EQUITY 582 811 556 837 566 582
Equity attributable to owners of the company 571 603 553 121 559 310
Stated capital 283 141 310 164 292 974
Share-based payment reserve 3 295 5 141 4 564
Foreign currency translation reserve (7 403) (9 506) (11 694)
Retained earnings 292 570 247 322 273 466
Non-controlling interests 11 208 3 716 7 272
LIABILITIES
Non-current liabilities 234 175 290 778 264 265
Interest-bearing borrowings 125 109 198 360 162 079
Provision for site rehabilitation 43 758 36 301 37 808
Deferred taxation liabilities 65 308 56 117 64 378
Current liabilities 314 617 227 821 251 237
Current taxation payable 11 073 574 666
Interest-bearing borrowings 103 079 107 058 110 546
Trade and other payables 200 465 120 189 140 025
Total liabilities 548 792 518 599 515 502
TOTAL EQUITY AND LIABILITIES 1 131 603 1 075 436 1 082 084
Condensed consolidated statement of cash flows
For the six months ended 30 June 2018
June 2018 June 2017 December 2017
R’000 R’000 R’000
Unaudited Unaudited Audited
6 months Restated* 12 months
6 months
Profit before taxation 47 821 32 627 78 806
Adjustments for:
Depreciation 50 143 51 989 102 783
Finance costs 14 101 17 085 33 480
Finance income (2 110) (703) (2 974)
Loss/(profit) on disposal of property, plant and
426 (1 402) 2 084
equipment
Profit on disposal of business - - (202)
Share-based payment credit (1 267) (260) (838)
Foreign currency translation differences 1 680 (774) (1 138)
Movement in provision for site rehabilitation 979 831 1 218
Changes in working capital:
Increase in inventories (1 767) (1 018) (1 070)
Increase in trade and other receivables (60 621) (29 851) (3 752)
Increase in trade and other payables 60 440 27 926 50 185
Cash generated from operations 109 825 96 450 258 582
Finance costs paid (12 869) (15 964) (31 237)
Finance income received 2 110 703 2 974
Taxation paid (4 414) (11 692) (21 256)
Net cash inflow from operating activities 94 652 69 497 209 063
Cash flows from investing activities
Purchases of property, plant and equipment (21 555) (10 657) (33 286)
Proceeds on disposal and scrapping of property,
18 073
plant and equipment 5 102 17 175
Disposal of subsidiary, net of cash disposed of - - (1 209)
Net cash (outflow on)/inflow from investing
(16 422)
activities (16 453) 6 518
Cash flows from financing activities
Treasury shares acquired (9 834) (5 395) (22 584)
Net movement in interest-bearing borrowings (57 114) (26 346) (83 868)
Interest-bearing borrowings raised - 33 988 33 988
Interest-bearing borrowings repaid (57 114) (60 334) (117 856)
Acquisition of non-controlling interest - - (1 100)
Dividends to owners of the Company (8 768) - -
Dividends to non-controlling interests (2 216) (427) (427)
Net cash outflow from financing activities (77 932) (32 168) (107 979)
Total cash movement for the period 267 43 847 84 662
Effect of exchange rate fluctuations on cash held (232) 805 582
Cash and cash equivalents at beginning of period 116 095 30 851 30 851
Total cash and cash equivalents at end of period 116 130 75 503 116 095
*See note 3 for details of the restatement of the June 2017 condensed consolidated statement
of cash flows.
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2018
June 2018 June 2017 December 2017
R’000 R’000 R’000
Unaudited Unaudited Audited
6 months 6 months 12 months
Equity at the beginning of period (audited) 566 582 541 343 541 343
Profit after tax 34 023 23 020 53 821
Dividends paid to non-controlling interests ( 2 216) (427) (427)
Dividends paid to owners of the Company ( 8 768) - -
Acquisition of non-controlling interest without a
change in control - - (1 100)
Treasury shares acquired ( 9 834) (5 395) (22 584)
Foreign currency translation reserve movement 4 291 (1 444) (3 633)
Share-based payment reserve movement ( 1 267) (260) (838)
Total equity at end of period 582 811 556 837 566 582
NOTES TO THE FINANCIAL RESULTS
1. Condensed consolidated segment report
For the six months ended 30 June 2018
June 2018 June 2017 December 2017
R’000 R’000 R’000
Unaudited Unaudited Audited
6 months 6 months 12 months
Gross revenue from external customers
Logistics 544 005 423 131 924 539
Facilities 51 025 57 521 108 546
595 030 480 652 1 033 085
Results from operating activities
Logistics 54 087 39 160 93 751
Facilities 5 725 9 849 15 561
59 812 49 009 109 312
Depreciation
Logistics 41 864 41 328 82 224
Facilities 8 279 10 661 20 559
50 143 51 989 102 783
Segment assets
Logistics 952 850 900 350 914 418
Facilities 178 753 175 086 167 666
1 131 603 1 075 436 1 082 084
Segment liabilities
Logistics 494 702 460 656 471 854
Facilities 54 090 57 943 43 648
548 792 518 599 515 502
2. Reconciliation of headline earnings
For the six months ended 30 June 2018
June 2018 % June 2017 December
R’000 Change R’000 2017
Unaudited Unaudited R’000
6 months 6 months Audited
12 months
Profit attributable to owners of the Company 27 871 25% 22 316 47 656
Adjusted for:
Loss/(profit) on disposal of property, plant
426 (1 402) 2 084
and equipment
Tax effect of loss/(profit) on disposal of
(119) 392 (583)
property, plant and equipment
Profit on disposal of business - (202) 202
Tax effect of profit on disposal of business - 57 57
Headline earnings attributable to ordinary
28 178 33% 21 161 49 012
shareholders
Weighted average number of shares in issue
438 153 409 465 308 987 458 111 275
on which earnings per share are based
Diluted weighted average number of shares in
issue on which diluted earnings per share 438 342 741 467 366 292 460 251 501
are based
Headline earnings per share (cents) 6.43 41% 4.55 10.70
Diluted headline earnings per share (cents) 6.43 42% 4.53 10.65
3. Restatement of June 2017 cash flows
The 2017 Condensed Statement of Cash Flows was restated in order to correct a
classification error reflecting additions of property, plant and equipment through
instalment sales agreements amounting to R42.8 million as non-cash flow items as required
by IAS 7: Cash flow statements.
The impact of the changes are reflected below:
Figures in R’000s June 2017
June 2017
unaudited
unaudited
condensed
condensed
consolidated Impact of
consolidated
statement of restatement
statement of
cash flows as
cash flows as
previously
revised
reported
Net cash outflow on investing activities (36 282) 6 518 42 800
Net cash outflow on financing activities 10 632 (32 168) (42 800)
This restatement had no impact on Earnings per share, nor Headline Earnings per share for
June 2017.
4. NET ASSET VALUE PER SHARE
The net asset value per share of 135.55 cents (2017: 120.58 cents) is based on equity
attributable to owners of the Company of R571.6 million (2017: R553.1 million) divided
by the number of shares in issue, excluding treasury shares, of 427 994 267 (2016: 458
699 213).
5. RELATED PARTIES
Trusts relating to directors The Wilco Family Trust
N2 Property Trust
Directors PF Mojono
WAH Willcocks
RA Lumb
LC Grobbelaar
BL Willcocks
C Boles
D Rosevear
LJ Mahlangu
Key Management JJ Mcneil
R Pillay
DL Nkomo
K Stubbs
Significant shareholders The Wilco Family Trust
There were no major transactions with related parties for the period ended 30 June 2018.
6. SUBSEQUENT EVENTS
The directors are not aware of any material matter or circumstance arising since the end of
30 June 2018 and up to the date of approval of the condensed consolidated financial results,
relevant to an assessment of the financial results at 30 June 2018.
7. IMPACT OF IFRS 15, IFRS 9 AND IFRS 16
The following new and revised standards have been issued and is effective at the date of
this report;
IFRS 15: Revenue from contracts with customers
The Group implemented the revised statement, for both the sale of goods and rendering of
services revenue streams, and had no material impact on the results.
IFRS 9: Financial instruments
The Group implemented the revised statement, the impairment model for trade receivables has
changed from an “incurred loss” model to an “expected loss” model, and had no material
impact on the results.
The following new and revised standard has been issued, but is not yet effective at the
date of this report and thus has not been adopted;
IFRS 16: Leases
The Group 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:
- Whether these contracts meet the definition of lease contracts per IFRS 16;
- Whether any scope exemptions apply; and
- The quantitative impact of recognising these leases on the statement of financial
position, where relevant.
At the end of the period the Group had lease commitments of R 5.2 million (2017: R6.6
million) for premises and R0.05 million (2017: R1.7 million) for vehicles and equipment.
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 (Chief Financial
Officer), LC Grobbelaar
Registration number: 2006/037223/06
Registered Address: P O Box 382, Germiston, 1400
Company Secretary: Amanda Fairley
Telephone: (011) 323 7300
Facsimile: 086 576 8152
Transfer secretaries: Computershare Investor Services (Pty) Limited
Sponsor: Grindrod Bank Limited
Date: 06/08/2018 09:18:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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