A rep­u­ta­tion trashed… an op­por­tu­nity stashed

Finweek English Edition - - Companies & Markets -

IF THE IN­CREAS­INGLY au­di­ble whis­pers from my lit­tle band of as­so­ci­ates is any­thing to go b(u)y then small waste man­age­ment com­pany In­terwaste is prob­a­bly worth a closer look. It’s al­ways dif­fi­cult punt­ing com­pa­nies where a cor­po­rate rep­u­ta­tion has largely been rub­bished. In that re­gard, In­terwaste hasn’t en­joyed the stead­i­est show­ing on the AltX, hav­ing fallen short of ini­tial fore­casts and then not quite sus­tain­ing its come­back strat­egy.

The year to end-De­cem­ber 2009 wasn’t ex­actly a bed of ma­nure ei­ther, with clients cut­ting back pro­duc­tion (which means less waste) and the on­set of some vi­cious com­pe­ti­tion (which prompted In­terwaste to leave some mar­gin squash­ing op­por­tu­ni­ties on the ta­ble). The num­bers don’t make for pretty read­ing: turnover was down 14% at R407m, taxed prof­its down more than a third to R26m and short-term debt (over- draft and bor­row­ings) top­ping R75m.

But there were some pos­i­tives. Op­er­a­tional cash flow was a re­as­sur­ing R40m and the gross trad­ing mar­gin was held above 40%. While there was a sig­nif­i­cant cash out­flow, a hefty amount was spent on bol­ster­ing the un­der­ly­ing busi­nesses (which en­com­pass waste man­age­ment, com­post man­u­fac­tur­ing and land­fills).

So it’s en­cour­ag­ing to see In­terwaste geared for growth, es­pe­cially since the profit mo­men­tum picked up sig­nif­i­cantly in the sec­ond half of its 2009 fi­nan­cial year.

While it’s clear clients stretched their pay­ment terms in 2009, In­terwaste has re­ported net cash out­flow has been sta­bilised and that cash was gen­er­ated in the first months of its 2010 fi­nan­cial year. In ad­di­tion, it started to see growth in rev­enues from ex­ist­ing clients, which hope­fully also means there will be some suc­cess in at­tract­ing new clients and

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