Cascal N.V. Announces First Quarter 2009 Results
Monday August 11, 5:13 pm ET
- 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
LONDON, August 11 /PRNewswire/ -- Cascal N.V. (NYSE: HOO - News; 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.
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