LONDON, August 11 /PRNewswire/ --
- Revenue from continuing operations up 12% to $43.0 million
- EBITDA from continuing operations up 4.6% to $16.7 million
- Net profit from continuing operations up 223% to $5.5 million
Cascal N.V. (NYSE: HOO) (the "Company"), a leading provider of water and wastewater services in seven countries, today announced unaudited financial results for first quarter ended June 30, 2008. Cascal N.V. results are presented in U.S. dollars.
Results for First Quarter to June 30, 2008
For the three months ended June 30, 2008, revenue from continuing operations increased by 12% to $43.0 million, compared to $38.3 million for the same period last year. Approximately $1.4 million was contributed by new projects with the remaining $3.3 million achieved by the Company's historical portfolio through a combination of rate increases, addition of new customers and higher volumes supplied.
-- Revenue in the UK increased by $0.8 million or 3.2%, compared to the same period last year, primarily as a result of the Company's scheduled rate increase of 3.68%.
-- Revenue in South Africa increased by $0.7 million or 16%, compared to the same period last year, as a result of the inclusion of revenue from Siza Water for the full three months compared to two months in the same period last year, together with a 7.5% rate increase implemented by the Nelspruit business in July 2007 and continued growth in the customer base. These results were offset in part by $0.4 million due to exchange rate movements.
-- Revenue in Indonesia increased by $0.7 million or 27%, compared to the same period last year, primarily as a result of the 20% rate increase implemented in December 2007, together with increased water demand caused by continued population growth.
-- Revenue in China increased by $1.1 million or 45%, compared to the same period last year, principally as a result of the inclusion of two months of revenue from the Company's acquisition of the Yancheng joint venture, together with continuing growth in demand, as well as $0.2 million due to exchange rate movements.
-- Revenue in Panama increased by $0.8 million or 38%, compared to the same period last year, as a result of the recognition of $0.5 million of revenue following the client's recent approval of a rate increase effective from May 2007, along with the impact of a further rate increase effective from April 2008.
EBITDA from continuing operations for the quarter ended June 30, 2008 increased by 4.6% to $16.7 million, compared to $16.0 million for the same period last year. Of the $0.7 million increase, approximately $0.5 million was contributed by new projects and $0.4 million coming from organic growth of the historical portfolio, offset by $0.1 million of additional corporate overhead. The increase in EBITDA was mainly the result of positive advancements in South Africa, China, Indonesia and Panama, partially offset by a reduction in the U.K. due notably to higher electricity prices. Please read "Use of non-GAAP Financial Measures" for a description of EBITDA.
Overall, net financial income and expense from continuing operations decreased by $3.9 million for the quarter ended June 30, 2008, compared to the same period last year. This result was comprised of a $1.6 million decrease in interest expense due mainly to a repayment of borrowings in February 2008 out of the proceeds of the initial public offering, together with a $2.3 million decrease in foreign exchange losses, largely related to those borrowings.
For the quarter ended June 30, 2008, net profit from continuing operations was $5.5 million, or $0.18 per share, compared to net profit of $1.7 million, or $0.08 per share for the same period last year.
The effective tax rate incurred by continuing operations was 34.7% compared to 50.4% in the same period last year. The parent company incurred taxable losses of approximately $0.7 million in the three months ended June 30, 2008 that it was not able to utilize due to insufficient taxable income in The Netherlands. The corresponding amount was higher at $4.5 million for the same period last year due to higher interest costs and foreign exchange losses. The effective tax rate for the same period last year was reduced by the recognition of a deferred tax credit of $0.6 million arising from a change to the standard rate of income tax in the United Kingdom from 30% to 28%.
As referenced above, the revenue and EBITDA for the quarter ended June 30, 2008 included approximately $0.5 million relating to earlier periods as a result of the recognition of a rate increase with effect from May 2007 that was recently approved by the client in Panama. All the invoices corresponding to the rate increases have been approved and accepted by the client but have not been paid. The client is currently sourcing the additional funds in accordance with the relevant policies and procedures of the state of Panama.
Commenting on the Company's first quarter results, Stephane Richer, Cascal Chief Executive Officer, stated, "I am very pleased with our results for the quarter. Our strategy has been to develop a blended portfolio, whereby we balance our revenue between more stable, developed economies and rapidly growing markets that provide Cascal with tremendous growth opportunities. During the quarter, we achieved solid revenue growth of 12%, a majority of which was the result of organic growth, and maintained strong EBITDA margins within our target range around 40 percent."
As of June 30, 2008, the Company had cash and cash equivalents of $71.3 million.
Recent Business Highlights
-- Today, Cascal's UK subsidiary submitted its Draft Business Plan to the industry regulator OFWAT for the period 2010-2015. The plan includes capital expenditures of approximately $120 million and average annual rate increases of 3% above inflation.
-- On August 7, 2008, Cascal announced that a cash dividend of $0.18 per share, recommended by Cascal's board of directors, was approved at its Annual General Meeting of shareholders held in Amsterdam, The Netherlands. The dividend is payable to shareholders of record on September 24, 2008, and will be payable on September 30, 2008. The shares become ex-dividend on September 22, 2008. Dutch withholding tax will be deducted from the dividend at a rate of 15%, which may be reduced in certain circumstances.
-- On July 23, 2008, Cascal announced that its China Water subsidiary completed the acquisition of a 51 percent stake in a new water company in Zhumadian City, China. Over the initial three years, Cascal expects this new subsidiary to achieve revenues rising from approximately $6 million to approximately $13 million and EBITDA margins improving from slightly below 50 percent to approximately 60 percent.
-- On June 27, 2008, Cascal announced that it had acquired 100 percent of the Servicomunal and Servilampa companies located immediately to the north of Santiago, Chile. These two new businesses operate perpetually held, regulated water and wastewater concessions and will be progressively combined with Cascal's existing operations to provide greater efficiencies. Over the initial three years, Cascal expects these acquisitions to achieve revenues rising from approximately $6 million to approximately $8 million and EBITDA margins improving from approximately 40 percent to approximately 50 percent.
Taxation
-- On July 21, 2008 the U.K. Government's 2008 Finance Bill received royal assent. This legislation includes changes that progressively phase out the availability of tax deductions for the cost of assets that qualify under the definition of industrial buildings. As a consequence of this new legislation, the Group will recognize a one-time deferred tax liability of approximately $5 million for the year ending March 31, 2009. Recording the deferred tax liability is a non-cash transaction and the cash impact of the new legislation will be spread over the remaining useful economic lives of the assets in question, typically between 40 and 60 years.
-- In the next few months, Cascal expects to introduce changes to the tax attributes of certain group companies to address the underlying inefficiencies within the current tax structure. These changes would enable the effective rate of tax for the group to realign with the statutory rates of 25.5% and 28% in The Netherlands and United Kingdom, respectively.
Conference Call
The Company will host a conference call at 9 a.m. Eastern Time/ 2 p.m. BST on August 12, 2008. On the call, Stephane Richer, CEO of Cascal, and Steve Hollinshead, CFO, will discuss the Company's results, and review operational highlights and other business developments. The Company invites you to participate on the call at the following telephone numbers: +1-877-375-4189 (local), +1-404-665-9923 (international), (0800)-032-3836 (UK Freephone). The access code for all callers is 57930879. The call will also be available via webcast at www.cascal.co.uk. Please allow extra time prior to the call to visit the site and to download any necessary software to listen to the Internet broadcast. An online archive of the webcast will be available on the Company's website for 30 days following the call. A replay of the call will be available from August 12, 2008 at 9.45 a.m., ET/2.45 p.m. BST through September 12, 2008 at 11.59 p.m. ET/ September 13, 2008 at 4.59 a.m. BST. To access the replay, please call +1-800-642-1687 (local) or +1-706-645-9291 (international) and enter the following code: 57930879.
About Cascal N.V.
Cascal provides water and wastewater services to its customers in seven countries: the United Kingdom, South Africa, Indonesia, China, Chile, Panama and The Philippines. Cascal's customers are predominantly homes and businesses representing a total population of approximately 4 million.
Forward-looking statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. There are important factors, many of which are outside of our control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements including: general economic business conditions, unfavorable weather conditions, housing and population growth trends, changes in energy prices and taxes, fluctuations with currency exchange rates, changes in regulations or regulatory treatment, changes in environmental compliance and water quality requirements, availability and the cost of capital, the success of growth initiatives, acquisitions and our ability to successfully integrate acquired companies and other factors discussed in our filings with the Securities and Exchange Commission, including under Risk Factors in our Form 20-F for the fiscal year ended March 31, 2008, filed with the SEC on June 25, 2008. We do not undertake and have no obligation to publicly update or revise any forward-looking statement.
Use of Non-GAAP Financial Measures
In evaluating its business, the Company uses EBITDA as a supplemental measure of its operating performance. The Company defines EBITDA as earnings before interest, taxes, depreciation and amortization. The term EBITDA is not defined under generally accepted accounting principles, or GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. EBITDA has limitations as an analytical tool, and when assessing the Company's operating performance, investors should not consider EBITDA in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with GAAP.
Investor Contacts: KCSA Strategic Communications Jeffrey Goldberger / Yemi Rose +1-212-896-1249 / +1-212-896-1233 jgoldberger@kcsa.com / yrose@kcsa.com Tables follow Consolidated Statements of Income Three months ended June 30, 2008 Amounts, except Continuing Discontinued shares and per share operations operations Total amounts, expressed in Unaudited Unaudited Unaudited thousands of USD Revenue 42,956 - 42,956 Operating Expenses Raw and auxiliary materials and other external costs 10,011 - 10,011 Staff costs 9,054 - 9,054 Depreciation and amortization of intangible and tangible fixed assets and negative goodwill 5,928 - 5,928 Profit on disposal of intangible and tangible fixed assets (808) - (808) Other operating charges 7,177 (3) 7,174 31,362 (3) 31,359 Operating Profit 11,594 3 11,597 Net Financial Income and Expense Exchange rate results (173) - (173) Interest income 591 8 599 Interest expense (3,182) (1) (3,183) (2,764) 7 (2,757) Profit before Taxation 8,830 10 8,840 Taxation (3,067) - (3,067) Profit after taxation 5,763 10 5,773 Minority Interest (271) - (271) Net Profit 5,492 10 5,502 Earnings per share - Basic and Diluted 0.18 0.00 0.18 Weighted average number of shares - Basic and Diluted 30,566,007 30,566,007 30,566,007 Three months ended June 30, 2007 Amounts, except Continuing Discontinued shares and per share operations operations Total amounts, expressed in Unaudited Unaudited Unaudited thousands of USD Revenue 38,315 861 39,176 Operating Expenses Raw and auxiliary materials and other external costs 8,437 190 8,627 Staff costs 7,818 173 7,991 Depreciation and amortization of intangible and tangible fixed assets and negative goodwill 5,492 13 5,505 Profit on disposal of intangible and tangible fixed assets (6) - (6) Other operating charges 6,082 428 6,510 27,823 804 28,627 Operating Profit 10,492 57 10,549 Net Financial Income and Expense Exchange rate results (2,480) (2) (2,482) Interest income 539 11 550 Interest expense (4,740) (5) (4,745) (6,681) 4 (6,677) Profit before Taxation 3,811 61 3,872 Taxation (1,921) - (1,921) Profit after taxation 1,890 61 1,951 Minority Interest (189) - (189) Net Profit 1,701 61 1,762 Earnings per share - Basic and Diluted 0.08 0.00 0.08 Weighted average number of shares - Basic and Diluted 21,849,343 21,849,343 21,849,343 Revenue by segment Three Three months months ended ended June 30, June 30, 2008 2007 Amounts expressed in thousands of USD Unaudited Unaudited United Kingdom 24,198 23,447 South Africa 5,377 4,647 Indonesia 3,411 2,681 China 3,425 2,364 Chile 2,596 2,054 Panama 3,011 2,183 The Philippines 761 711 Holding Companies 1,043 768 Less: Inter-segment sales (866) (540) Continuing operations 42,956 38,315 Discontinued operations - Mexico (note 1) - 861 42,956 39,176 (1) On January 8, 2008, the Company agreed to an early termination of its operation and maintenance contract in Mexico. As a result of this agreement the operations of Mexico have been shown as discontinued in the three months ended June 30, 2008 and 2007. The Company received a termination fee of MXP 10.5 million (USD 1.0 million) and after the costs of termination and receipts for sale of assets made a profit on termination of MXP 1.1 million (USD 0.1 million).
Use of Non-GAAP Financial Measures - EBITDA
EBITDA from continuing operations represents net profit from continuing operations before interest expense/(income) and exchange rate results, taxation, depreciation and amortization of intangible and tangible fixed assets and negative goodwill, loss/(profit) on disposal of intangible and tangible fixed assets and minority interest. EBITDA is a non-GAAP measure and does not represent and should not be considered as an alternative to net profit or cash flow as determined under generally accepted accounting principles. We believe EBITDA facilitates operating performance comparisons from period to period. We believe EBITDA may facilitate company to company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense), taxation and the age and book depreciation of facilities and equipment (affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance and other non-recurring one-time items. We further believe that EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an EBITDA measure when reporting their results.
EBITDA has limitations as an analytical tool, and you should not consider it either in isolation or as a substitute for analyzing our results as reported under Dutch GAAP. Some of these limitations are:
-- EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
-- EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
-- EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
-- EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;
-- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements of those replacements; and
-- other companies in our industry may calculate EBITDA differently, limiting its usefulness as a comparative measure.
Because of these limitations, EBITDA from continuing operations should not be considered as the primary measure of our operating performance or as a measure of discretionary cash available to us to invest in the growth of our business. The following is a reconciliation of net profit from continuing operations, the most directly comparable Dutch GAAP performance measure, to EBITDA from continuing operations.
Three months ended Three months ended (Dollars in thousands) June 30, 2008 June 30, 2007 Net profit from continuing operations $5,492 $1,701 Add: Interest expense/(income) and exchange rate results 2,764 6,681 Taxation 3,067 1,921 Depreciation and amortization of intangible and tangible fixed assets and negative goodwill 5,928 5,492 (Profit) on disposal of intangible and tangible fixed assets (808) (6) Minority interest 271 189 EBITDA from continuing operations $16,714 $15,978 Revenue from continuing operations $42,956 $38,315 EBITDA as a percentage of revenue from continuing operations 38.9 % 41.7 % Cascal Consolidated Balance Sheets June 30, 2008 March 31, Amounts expressed in thousands of USD Unaudited 2008 Assets Fixed Assets Intangible fixed assets 43,362 18,424 Tangible fixed assets 395,263 366,357 Financial fixed assets 26,602 26,685 465,227 411,466 Current Assets Stocks and work in progress 5,053 2,083 Debtors 72,735 54,474 Cash at bank and in hand 71,309 54,380 149,097 110,937 Total Assets 614,324 522,403 Shareholders' Equity & Liabilities Shareholders' equity 138,758 136,726 Minority shareholders' interest 18,141 16,101 Group Equity 156,899 152,827 Negative goodwill 1,246 1,232 Provisions & deferred revenue 124,885 126,341 Long term liabilities 240,916 190,190 Current liabilities 90,378 51,813 Total Liabilities 457,425 369,576 Total Shareholders' Equity and Liabilities 614,324 522,403
Web site: http://www.cascal.co.uk
Investor Contacts, Jeffrey Goldberger, +1-212-896-1249, jgoldberger@kcsa.com, or Yemi Rose, +1-212-896-1233, yrose@kcsa.com, both of KCSA Strategic Communications for Cascal N.V.
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