IT’S APPROPRIATE THAT EnviroServ uses a green underlay to its results announcement to stress its environmental credentials. Green also stands for go, and EnviroServ (formerly Wastetech), which listed on the JSE in 1966, has certainly been going great guns.
Headline earnings per share for the first half of the financial year – the six months to December 2006 – have increased from 10c in 1999 to 35c in 2006. For the full financial years to June, between 1999 and 2006 HEPS rose from 20c to 67c and distribution from 5c to 21c.
Disposing of hazardous industrial waste is its main business. Increased waste volumes have accompanied strong growth in key market sectors: chemicals & oils, industrial metals and mining. EnviroServ managed to offset inflationlinked costs by efficiency gains on a higher turnover, maintaining its margins.
Expansion has been largely organic and domestic, but an Angolan operation set up a couple of years ago is now self-supporting. A business has also been opened in Mozambique and a base set up in Qatar to explore opportunities in the Gulf, while last October a 51% stake was bought in Burma Plant Hire, which has supplied EnviroServ in the Cape for some years.
EnviroServ has a BBB (black influenced) rating from Empowerdex and is investigating ways of lifting its empowerment ownership to 25%.
EnviroServ says the latest figures are a solid foundation for growth for the rest of its financial year. Two major areas for future growth are international expansion in countries that are politically stable, have hard currencies and can use the group’s skills and the development of waste beneficiation processes. A number of possible conversions of waste materials into saleable products have been identified.
It’s the only listed company that specialises in waste disposal, an expanding business as heavy industries, in particular, face increasingly strident calls to clean up their acts. It has an enviable record, with every reason to expect that to continue.
At 1 060c/share, the price has more than doubled since mid-2006. That’s taken market cap above R1bn, the traditional graduation from small cap to medium cap, and it’s now R1,3bn. If first-half growth can be sustained, 12-month HEPS could be between 90c and 95c, with an annual dividend of around 29c. That’s equivalent to a forward price: earnings of about 11,5 and a yield of 2,7%, which looks like good value.