Johannesburg - Enviroserv, the waste management group, had embarked on a massive capital expenditure drive to improve its services and focus on cost reduction for a healthy year ahead, Des Gordon, the chief executive, said yesterday.
During the six months to December, the company lost two contracts and is still entangled in a legal dispute over Aloes, the hazardous waste disposal facility, which has been closed since August. This caused a reduction of more than R2 million in operating profit.
"We have made a satisfactory improvement in the period under review. We experienced a slow pace in revenue and though 5 percent is not much, it is significant in our business," Gordan said. Operating profit was down 3 percent to R16,2 million from R16,6 million. Revenue stood at R171 million from R163 million, while earnings a share increased by 9 percent to 10,9c.
The company had invested R72 million in a fleet replacement programme hoping to "improve efficiencies and decrease fleet operating costs". A further R5 million was pumped into information technology systems. Gordon said: "Our operating margins have decreased to 9,5 percent even though our own target was between 10 percent and 12 percent."
The company's five divisions have had a tough period, with the domestic waste division experiencing payment problems from the Randfontein town council. Over the past three years just under 1 000 people were laid off and Gordon said the company might lay off more staff in the maintenance division, which might also be outsourced.
Enviroserv stayed debtfree. The company acquired a 26 percent minority stake in Chargold, the carbon and waste beneficiating company. "It only added R330 000 of profit before tax, but everything else had been organic growth," he said.
He said the group did not expect fireworks for the next six months. Benefits, he added, would start to be seen in the next financial year. In October Bidvest, the industrial services group, bought a 25 percent stake in the company. Enviroserv shares closed unchanged at R1 yesterday.