RNS Number:2373S
Helesi PLC
14 April 2008
Embargoed until: 0700, 14 April 2008
Helesi PLC
("Helesi" or "the Group")
Final Results for the year to 31 December 2007
Helesi PLC (AIM: HLS), the Greece and UK based waste management products
manufacturer and services supplier announces final results for the year to 31
December 2007
Highlights
• Group revenues increased by 42% to €50.0 million (2006: €35.2
million):
o four year compounded annual growth rate (CAGR) of 42%
• Net income increased in line with revenues to €6.2 million:
o four year CAGR of 43%
• Recommended final dividend of 1.2 Euro cents per share making a total
for the year of 1.8 Euro cents
• First full year's contribution from waste management services business
PYP acquired in November 2006
• Perivallontiki waste management services businesses acquired in
November 2007 for €10.9 million successfully integrated into Vehicles and
Accessories division
• Plant utilisation at production sites in Komotini and Bradford
operated at capacity
• €83 million investment program nearing completion - on budget and over
70% complete:
• Strategic focus: increase manufacturing capacity and geographic reach
in waste management products, expand waste management services in core
territory of south east Europe and prepare the expansion into Asia
Commenting on the results, Sakis Andrianopolous, Chief Executive of Helesi,
said,
"In 2007 we made considerable progress towards achieving our twin objectives of
becoming a global player in waste management products and a fully integrated
provider of waste management services in the fast growing markets of south east
Europe."
For further information please visit www.helesi.com or contact:
Helesi PLC For the week of 14 April
2008:
+44 (0) 207 920 3150
Thereafter:
+30 (0) 210 60 47 971
Sakis Andrianopoulos, Chief Executive
Apostolos Binomakis, Finance Director binomakis@helesi.com
Panmure Gordon (Nomad and broker) +44 (0) 20 7459 3600
Andrew Godber
Katherine Roe
Tavistock Communications + 44 (0) 20 7920 3150
Simon Hudson shudson@tavistock.co.uk
Paul Youens
Gemma Bradley
Chairman's Statement
Introduction
2007 was a successful year for Helesi, the first full year after its shares were
admitted to the AIM market of the London Stock Exchange. The principal themes
were a continuation of our organic growth, a clear focus on our 2006-2009 €83
million investment program and the acquisition in November of key businesses of
the Perivallontiki Group.
Results
Group revenues grew by 42% to €50 million (2006: €35.2 million) and profit
before tax was up 38.5% to €7.0 million (2006: €5.1 million). Net income, after
a 11% tax charge (2006: 15.4%), increased by 45% to €6.2 million (2006: €4.3
million) and basic and fully diluted earnings per share were 19 Euro cents
(2006: 18 Euro cents), reflecting the higher number of shares in issue for 2007
following the capital raising at the time of the Group's IPO at the end of 2006.
Dividends
The Board is recommending a final dividend of 1.2 Euro cents per share. Taken
together with the interim dividend of 0.6 Euro cents per share paid in October,
this makes a total for the year of 1.8 Euro cents (2006: nil). The total cost of
the final dividend will be €0.4 million.
Operations
Plant utilization throughout the year at our current production sites in
Komotini (Northern Greece) and Bradford in the UK was at full stretch and it was
a challenge to keep both units running at over normal capacity. New additions
were made to our list of export countries (notably Iran, Lithuania, Croatia and
the Czech Republic) further expanding and diversifying our revenue base. This
reflects the continuing growth in demand for our principal plastic product
ranges in waste containers. Test marketing in pallet boxes has also proved
encouraging. The increased price of our main raw material HDPE (high density
polyethylene) resulted in some pressure on margins but this was to a large
extent mitigated by a more beneficial sales mix.
Investment Program
Our €83 million investment program is now nearing completion. Since construction
commenced in February 2007, progress on our new plant in Pisticci, Basilicata in
southern Italy has been rapid and it is on schedule to start operations in the
last quarter of this year. The €25 million plant will manufacture pallet boxes
and recycling containers for the European market. In Komotini, the first phase
of the €35 million expansion program was completed in December 2007 increasing
capacity by 12 per cent. The second phase, which will double the existing
capacity in Komotini, is effectively an entirely new plant. Construction
commenced in August 2007 and we are on schedule to complete by the end of 2008.
Waste Management & Perivallontiki
The waste management services division had a slow start to the year, but enjoyed
a strong second half with a number of important contract wins. In November,
Perivallontiki was acquired for a consideration of €10.9 million. This company's
principal business is the supply of specialist vehicles to the waste management
industry in Greece and Cyprus. This is complementary to our existing
Merchandises division and the addition of the vehicles business will
significantly enhance Helesi's product offering in this area.
Outlook
For 2008, we already have good revenue visibility of approximately 50 per cent
across all divisions from orders received and in hand. This year will see a full
year's contribution from the Perivallontiki acquisition. We also expect to
conclude our current investment program to give us the increased capacity that
we badly need.
As we said in January, the principal driver for our business continues to be
growing government regulation worldwide of waste collection, management and
recycling. We do not believe that this trend is likely to be seriously affected
by any downturn in the global economy and we look forward to exploiting the
exciting opportunities that this presents for the Company.
Our successful growth would not be possible without the efforts and dedication
of our staff in Greece, the UK, Italy and around the world. On behalf of the
Board and management team, I thank them for their hard work.
Roger Parsons
Chairman
11 April 2008
Chief Executive's Review of Operations
In 2007, we made considerable progress towards achieving our twin objectives of
becoming a global player in waste management products and a fully integrated
provider of waste management services in the fast growing markets of south east
Europe.
Financial Results
Group revenues increased by 42% in 2007 to €50.0 million. For the fourth year in
a row, we have maintained a compounded annual growth rate (CAGR) of 42% in
revenues from a base of just €12.5 million in 2003. Net income increased in line
with revenues to €6.2 million, producing a four year CAGR of 43% from the €1.5
million recorded in 2003.
These results include a first full year's contribution from the PYP waste
management business acquired in November 2006. The Perivallontiki businesses
which were acquired in November 2007 will be fully consolidated in 2008 for the
first time. To better reflect the importance to the Group of our Services
businesses, we are providing for the first time a segmental analysis by activity
as well as by geography. This shows that in 2007, Services accounted for 12% of
revenues but due to the division's higher margins 32% of pre-tax profits.
The demanding investment program along with the leveraged acquisition of the
Perivallontiki businesses, resulted in an impact on the Group's net debt
position. At 31 December 2007, net borrowings stood at €33 million (2006: €5
million) representing gearing of 78% on increased shareholders' equity of €42
million (2006: 14% on shareholders' equity of €36 million).
As the current investment program approaches its end in 2009, we anticipate that
borrowings will peak during 2008 and have assumed average borrowing levels for
the year of some €45 million. At this level, we will still have ample headroom
on our existing, committed facilities. The blended average rate for our
borrowings (all in Euros) during 2007 was approximately 6% and interest costs of
€1.7 million were covered 6.1 times by EBITDA . An additional interest charge of
€0.2 million relating to the portion of the investment program currently in
progress was capitalised in accordance with IAS23.
We have worked hard during 2007 to contain working capital, which improved
significantly during the year. This was despite the adverse effect of increased
Group revenues in southern and eastern European countries that traditionally
have extended payment cycles. We will continue to monitor closely our working
capital requirements.
Operations
Our Products division had a very good year with plant utilisation at our
production sites in Komotini in northern Greece and in Bradford in the UK
operating at levels close to capacity. These utilisation levels reflect the
continued growth in demand for our principal plastic product ranges in waste
containers and pallet boxes from both existing and new markets. Particularly
strong demand was seen from south east Europe, the Middle East and Asia, all of
which were supplied from Komotini. First orders were secured from new
territories including Iran (the city of Tehran), Lithuania, Croatia and the
Czech Republic further expanding and diversifying our revenue base.
In Services, the PYP waste management business enjoyed an extremely successful
first full year as part of the Group and grew revenues by 41% compared to 2006.
Even at this level of growth, the business has still not yet met our high
expectations to the full and we look forward to an increased contribution in the
upcoming years as the services markets we target allow more private
participation. Our Vehicles and Accessories business saw a boost in sales of €4
million resulting from the Perivallontiki acquisition at the end of the period
and performed in line with projections excluding this contribution. The
Perivallontiki acquisition is expected to be earnings enhancing for the current
financial year despite the debt acquired with the businesses as part of the
acquisition financing. The outlook for this year for the enlarged Vehicles and
Accessories business remains very positive and we plan to take full advantage of
Helesi's dominant position in Greece.
Investment Program
At this time, our €83 million investment program is over 70% complete. The
principal remaining projects are the expansion in Komotini and the new plant in
Italy. These two projects, accounting for the bulk of the investment program,
will only begin to make a significant positive contribution to revenues and
profits from 2009 onwards.
We have made good progress on our new €25 million plant in southern Italy.
Completion is currently at 90% and has been rapid since construction commenced
in February 2007. The plant is on schedule to start operations in the last
quarter of this year and will manufacture pallet boxes and recycling containers
for the European market.
At Komotini, we expect to be approximately three quarters of the way through the
final, second phase of the €35 million expansion program, which will double
existing capacity, by the end of 2008. Completion of the Komotini expansion is
also on schedule.
Research and Development
R & D is vital to our continued successful growth. As stated in the Interim
Report, the Group capitalises R & D costs only at the development phase of a
project, by which time the technical feasibility of completing the work
undertaken (so that it becomes available for use) is evident and the generation
of future economic benefits is highly probable. For the full year in 2007,
approximately €0.36 million of development costs have been capitalised,
principally relating to the development of the pallet box product lines that
Helesi will introduce from the new Italian facilities.
Current Strategy
Our principal focus since the IPO in November 2006 has been on the investment
program to significantly expand our manufacturing capability and our geographic
reach in waste management products. Going forward, we will maintain this focus
but in addition we have now targeted our core territory of south east Europe for
expansion of our waste management and waste treatment services, seeking to take
advantage of the maturing market conditions there for such environmental
services. Secondly, we plan Helesi's expansion into Asian markets as our
business there has now established a presence on which we can build. We will
also be monitoring closely any industry consolidation in our business space both
in products and in services.
Our approach when entering new markets is first to appoint agents to distribute
our products and then, once we have built market share, to open our own assembly
and distribution centres ahead of building production facilities if the size of
the market warrants such investment. This approach has worked successfully for
the Group in the UK and now in Italy and we will follow the same, low risk
pattern as we plan our further development in Asian markets.
Outlook
We have begun the 2008 financial year with a strong pipeline despite the
uncertain overall economic outlook. Our businesses, by contrast, are driven more
by regulation and government directive and we remain optimistic for the year's
outcome. Already, we have revenue visibility of over 50% of the year's expected
total and 2008 will see the first full year's contribution from the
Perivallontiki acquisition. We are confident that the foundations we have built
will enable us to continue to grow revenues and profits in the current year as
the drivers for our business continue to accelerate.
Sakis Andrianopoulos
Chief Executive
11 April 2008
Statement of comprehensive income
The Group
Notes 31 December 31 December
2007 2006
€000 €000
Sales revenue 3 50,033 35,222
Other revenue 4 660 792
------- -------
50,693 36,014
Changes in inventories of finished
goods 228 2,145
Cost of materials used (27,709) (22,195)
Personnel-related costs 5 (4,537) (2,819)
Directors' emoluments (346) (62)
Depreciation charges 6 (1,652) (1,159)
Other operating expenses (7,968) (5,660)
------- -------
Profit, before finance charges 8,709 6,264
Cost of financing, net 7 (1,695) (1,200)
------- -------
Profit from ordinary activities 7,014 5,064
Income taxes (relief) 8 (789) (780)
------- -------
Net profit after taxes 6,225 4,284
------- -------
Basic earnings per share
(in Euro) 24 0.19 0.18
------- -------
Diluted earnings per share
(in Euro) 0.19 0.18
------- -------
Statement of financial position
The Group
Notes 31 December 31 December
2007 2006
€000 €000
Tangible fixed assets 11 56,488 30,648
Intangible fixed assets 12 429 70
Goodwill 12,254 1,545
Other long-term assets 13 51 41
------- -------
Long-term assets 69,222 32,304
------- -------
Inventories 14 11,310 6,171
Receivables 15 29,107 19,669
Cash and cash equivalents 16 10,396 7,674
------- -------
Current assets 50,813 33,514
------- -------
Total assets 120,035 65,818
------- -------
Payables 19 (33,041) (16,075)
Income taxes payable (231) (108)
Short-term borrowings 17 (30,900) (4,762)
------- -------
Current liabilities (64,172) (20,945)
------- -------
Long-term interest bearing loans 17 (12,457) (7,762)
Employee benefits 20 (58) (24)
Deferred tax liabilities 25 (1,364) (797)
------- -------
Long-term liabilities (13,879) (8,583)
------- -------
Net assets 41,984 36,290
======= =======
Share capital 22 3,278 3,278
Share premium 22 29,950 29,950
Capital reserves 23 6,202 -
Currency translation adjustments 23 (307) 27
Retained earnings (losses) 2,861 3,035
------- -------
Shareholders' equity 41,984 36,290
======= =======
Statement of changes in equity
€000
The Group
Currency
Share Share Capital translation Retained
capital premium reserves adjustments earnings Total
Balances, as at 31 December 2005 4,684 2,473 5,264 76 2,099 14,596
Shares issued in 2005, paid 825 1,649 - - - 2,474
Profit for the first
half of 2006, after tax - - - - 1,249 1,249
Dividends paid - - - - (226) (226)
Currency translation adjustments - - - (89) - (89)
------- ------- ------- ------- ------- -------
5,509 4,122 5,264 (13) 3,122 18,004
Effect of Group restructuring (3,258) 11,631 (5,264) 13 (3,122) -
------- ------- ------- ------- ------- -------
2,251 15,753 - - - 18,004
Shares issued on incorporation 30 - - - - 30
Shares on admission to AIM 997 16,093 - - - 17,090
Costs of AIM listing, net of tax - (1,896) - - - (1,896)
Profit for the second
half of 2006, after tax - - - - 3,035 3,035
Currency translation adjustments - - - 27 - 27
------- ------- ------- ------- ------- -------
Balances, as at 31 December 2006 3,278 29,950 - 27 3,035 36,290
Profit for the year
2007, after tax - - - - 6,225 6,225
Transferred to capital reserves - - 6,202 - (6,202) -
Dividends paid - - - - (197) (197)
Currency translation adjustments - - - (334) - (334)
------- ------- ------- ------- ------- -------
Balances, as at 31 December 2007 3,278 29,950 6,202 (307) 2,861 41,984
------- ------- ------- ------- ------- -------
Statement of cash flows
The Group
31 December 31 December
2007 2006
€000 €000
Cash flows related to operating activities
Profit (loss), before taxes 7,014 5,064
Adjustments in respect of non-cash transactions:
Depreciation of fixed assets 1,722 1,159
Interest expense, net 1,956 1,200
Employee retirement benefits 7 (2)
Other adjustments (227) 322
------- -------
10,472 7,743
Decrease (increase) in inventories (2,863) (2,550)
Decrease (increase) in receivables (5,341) (7,681)
Increase (decrease) in payables 4,259 5,963
------- -------
6,527 3,475
Interest received (paid) (1,895) (1,200)
Income taxes paid (257) (220)
------- -------
Net operating cash inflows (outflows) 4,375 2,055
------- -------
Cash flows related to investing activities
Acquisition of tangible fixed assets (28,204) (16,023)
Disposal of tangible fixed assets 409 36
Investment grants received 10,619 4,639
Acquisition of intangible fixed assets (1,215) (90)
Acquisition of shares of subsidiaries - (3,496)
------- -------
Net investment cash inflows (outflows) (18,391) (14,934)
------- -------
Cash flows related to financing activities
Proceeds of issue of new shares, net of costs - 17,296
Dividends paid (197) (226)
Loans contracted (repaid) 17,059 (2,276)
Finance lease payments (121) (122)
Loan repaid by (granted to) Helesi AE - -
------- -------
Net financing cash inflows (outflows) 16,741 14,672
------- -------
Increase (decrease) of cash balances 2,725 1,793
Cash balances, at the beginning of the period 7,674 5,884
Effect of currency translation adjustments (3) (3)
------- -------
Cash balances, at the end of the period 10,396 7,674
------- -------
Notes to the financial statements
1 Basis of preparation
The financial statements have been compiled on the basis of the International
Financial Reporting Standards (IFRS) that have been adopted by the European
Union. The financial statements have been compiled on the basis of historical
cost and the amounts reported therein are stated in Euro thousand.
2 Accounting polices
Impact of New Professional Pronouncements
The impact of the adoption by the Helesi Group of IAS 23 "Borrowing Costs"
(revised) is explained and quantified in these notes to the financial statements
of the Group. Management believes that no other prenouncement of the
International Accounting Statndards Board has any material impact on the
financial statements of the Group nor is it anticipated that it will have such
an impact in the future.
Fixed assets
Fixed assets are reported in the financial information at acquisition cost,
after deduction of (a) the government grants received that partially cover their
acquisition cost, (b) accumulated depreciation and, if applicable, (c) any
permanent impairment. Exceptionally, land was revalued, as at 31 December 2002,
and the value thus assigned to this asset has been treated as its deemed cost
ever since. The net, after current and deferred taxes, gain recognised on
revaluation, amounting to €262 thousand was taken directly to shareholders'
equity.
The costs incurred for the replacement of substantial component parts of fixed
assets are capitalised. The remaining costs that are incurred subsequent to the
installation of fixed assets are capitalised only if they enhance the future
economic benefits that will be derived through the use of the affected assets.
All other costs and expenses that are incurred for the maintenance, repair etc.
of fixed assets are charged to operations at the time they are incurred.
Depreciation is computed and charged to operations on the basis of the
straight-line method, over the estimated useful life of the fixed assets. Land
is not depreciated. The estimated useful life of each category of assets, is as
follows:
Buildings, installations and infrastructural works 20-40 years
Landscaping 5 years
Industrial machinery and equipment 15-20 years
Other installations and equipment 4-8 years
Furniture and other equipment 4-8 years
Vehicles 4-8 years
The intangible fixed assets acquired by the Helesi PLC Group are reported at
their acquisition cost reduced by accumulated amortisation and, if applicable,
by any permanent impairment of their value. The costs associated with internally
generated goodwill are charged to operations in the period in which they are
incurred.
The amortisation of intangible fixed assets, comprising computer software, is
charged to operations on the basis of the straight-line method, over their
estimated useful life. The estimated useful life of computer software is 8
years.
Capitalisation of Interest Costs
In March 2007, IAS 23 "Borrowing Costs" (revised) was issued, requiring the
inclusion of the borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset in the cost of
that asset. Although the implementation of IAS 23 (revised) becomes compulsory
for annual periods beginning on or after 1 January 2009, the Helesi Group has
adopted the provisions of this Standard, as from 1 July 2007, given that, in the
opinion of management, the adoption of IAS 23 (revised) is conducive to "fair
presentation" and the earlier application of the Standard in permitted, under
the provisions of the Standard itself. As required, such borrowing costs are
capitalised as part of the cost of the asset, only when it is probable that they
will result in future economic benefits to the Group and the costs can be
measured reliably. The Group ceases capitalising borrowing costs when
substantially all the activities necessary to prepare the qualifying asset for
its intended use are complete. For the purposes of the application of IAS 23
(revised), management believes that the manufacturing plants that are currently
under construction in Komotini, Greece and Pisticci, Italy do constitute
qualifying assets.
Capitalisation of Development Costs
The Helesi PLC Group invests substantial amounts in research and development
and, in particular, in the development of new moulds and techniques that are
instrumental in the lowering of costs and in attaining higher levels of
operational efficiency. Such development costs are capitalised if, and only if,
the following conditions are satisfied:
(a) the technical feasibility of completing the work undertaken (so that it will
be available for use) is evident;
(b) the commitment and ability to complete such work and use its outcome exists;
(c) the generation of future economic benefits through the use of such
development work is highly probable;
(d) the necessary technical, financial and other resources to complete the
development work and to place it into use are available;
(e) the ability to measure reliably the expenditure attributable to such
development work exists.
Participation in joint ventures
The cost of participating in the operating capital of joint ventures is
accounted for as an investment in associated entities while the Helesi PLC
Group's share of the profits or losses realised by such joint ventures are taken
to operations (reported in the statement of earnings) in the period in which
they are realised.
Inventories
Inventories are reported at the lower of their purchase or production cost and
their corresponding net realisable value. Net realisable value is the estimated
re-sale value of the inventories, reduced by the cost of disposal. The cost of
inventories is quantified on the basis of the weighted average method and is
inclusive of the costs associated with their acquisition or production (in the
case of internally produced goods) and the costs incurred in bringing them to
their present location and condition.
The specialised spare parts of machinery and equipment that are purchased at the
stage of the acquisition of the machinery and equipment they relate to, are
considered to be an integral part of and are depreciated along with the assets
they are destined to support, while the replacements of such spare parts are
expensed at the time of their purchase. In contrast, maintenance materials and
general-use spare parts are included in inventories and are expensed as and when
they are used.
Trade and other receivables
Receivables are reported net of the amounts that are deemed to be doubtful of
collection.
Cash and cash equivalents
Cash is inclusive of cash equivalents, such as current account balances and
short-term deposits. Bank overdrafts repayable on demand that form part of the
cash management system of the Helesi PLC Group, are reported, in the statement
of cash flows, as forming part of cash balances.
Transactions in foreign currencies
The transactions that are denominated in foreign currencies are stated in the
functional currency of each entity forming part of the Helesi PLC Group, on the
basis of the exchange rates ruling on the date of the transaction. On the
balance sheet date, monetary assets and liabilities that are denominated in
foreign currencies are re-stated in the reporting currency on the basis of the
exchange rates ruling on this date. The gains and losses arising on restatement
are taken to operations.
In contrast, the currency translation adjustments that arise in the
consolidation process, on the conversion of the financial statements of
subsidiaries that are compiled in currencies other than the Group's reporting
currency, are reflected directly in shareholders' equity.
Dividends
Dividends payable are reported as a liability at the time that they are declared
as payable by the shareholders in general meeting.
Employee retirement benefits
The obligations of the Helesi PLC Group towards its employees, who are based in
Greece, for the payment of certain benefits at the stage of retirement that are
dependent on the length of service, are quantified and reported by reference to
the accrued, as at the date of the balance sheet, benefit that is anticipated to
be paid to each employee in the future, discounted to its present value, having
regard to the anticipated time of payment. The discount rate used is equal to
the yield, as at the balance sheet date, of Greek Government bonds.
Provisions
Provisions are set up when the Helesi PLC Group has a legal or constructive
obligation, in relation to a past event, and it is deemed likely that the
settlement of the obligation will absorb resources embodying economic benefits.
Financial instruments
The basic financial instruments used by the Helesi PLC Group are cash, bank
deposits, short-term receivables and payables and certain other forms of
financing. Given the short-term nature of these instruments, Helesi PLC Group
management believes that their fair value is essentially identical to the value
at which they are reported in the accounting records of the Helesi PLC Group.
Furthermore, Helesi PLC Group management believes that the interest rates paid
in relation to the contracted loans are equivalent to the current fair market
rates and, consequently, there are no grounds for adjusting the value at which
these obligations are reported. The Helesi PLC Group does not use any financial
derivatives.
Revenues
Sale of goods and services
The revenue derived from the sale of goods is recognised (reported in the
statement of earnings) at the stage when the basic risks and benefits associated
with the ownership of the goods, are transferred to the buyer. The revenue
derived from the rendering of services is recognised (reported in the statement
of earnings) on the basis of the stage of completion of the project, at the date
of the balance sheet. Revenue is not recognised, if there is substantial
uncertainty as to the likelihood of collecting the consideration agreed upon or
the possible return of the goods.
Government grants
Government grants are accounted for when there is reasonable certainty that they
will be collected and the Helesi PLC Group is in a position to conform to the
terms and conditions imposed for their collection. The grants that are intended
to partly finance the acquisition of fixed assets are deducted from the cost of
the acquisition of the related assets. The grants, which aim at compensating the
business for expenses incurred, are reported as income of the period in which
the subsidised expenses are charged.
Expenses
Payroll Costs
Payroll costs are charged to operations as incurred, except for the element of
these costs that is associated with the development of new products or new
components of existing products, which may be capitalised, if appropriate.
Operating leases
The payments effected under operating leases are charged to operations in line
with the usage of the leased asset.
Finance leases
Finance leases are treated as financing arrangements, resulting in the leased
assets being reported as assets of the Helesi PLC Group (and depreciated
accordingly) with a corresponding liability being reported towards the lessor or
the lessors. The cost of financing is taken to operations as an expense, as it
accrues.
Cost of financing
The net cost of financing comprises interest paid or accrued on contracted loans
as well as on finance leases, calculated on the basis of the real interest rate,
less interest income generated by the short-term investment of surplus cash
funds. Exceptionally, the cost of financing the construction of fixed assets is
treated as a component part of the cost of these assets, provided that the
conditions set for such capitalisation are satisfied.
Income taxes
The income tax charge in the period comprises the current tax charge and the
deferred tax element, that is the tax (or the tax relief), which is associated
with revenues (or costs) that are reported, for accounting purposes, in the
current period but will generate a tax burden or relief in future accounting
periods. Income tax charges are shown in the statement of earnings, except for
the tax, which relates to transactions taken directly to equity. In the latter
case, the tax is, likewise, taken directly to equity.
The current tax charge is quantified by reference to the taxable income of the
period of each entity forming part of the Helesi PLC Group, on the basis of the
nominal rates of tax applicable as at the balance sheet date, plus any
additional taxes likely to be imposed on the examination of the tax returns
filed. In the case that different tax rates apply to distributed and retained
earnings, the quantification of the current tax is based on the rates applicable
to each category and by reference to the corresponding amounts. This inevitably
results in the differentiation of the effective tax rate over time, depending on
the policy followed by the Helesi PLC Group with respect to the distribution or
the non-distribution of profits.
The deferred tax charge is quantified by the application of the relevant tax
rates on the differences between the accounting and tax base of assets and
liabilities, to the extent that such differences comprise timing differences
that are anticipated to reverse in the future.
A deferred tax asset is recognised, only to the extent that is likely that
taxable profits will be generated in the future, sufficient to absorb the tax
relief obtained through the recognition of the deferred tax asset. A deferred
tax asset is appropriately reduced to the extent that it becomes uncertain
whether the anticipated future tax relief will, in fact, be secured.
Segmental analysis
A "segment" is defined as a separate and distinct group of business activities
with common characteristics as to the nature of the activities and the business
risk associated with such activities (business segment). A corresponding
distinction is made on the basis of the business environment within which the
activities are undertaken (geographic segment). Up to 31 December 2006, the
Helesi PLC Group had only one substantial business activity segment, namely that
of the production and sale of injection-moulded refuse containers (bins).
However, as a result of the business combinations that were effected in the
course of 2007, management is of the opinion that two distinct business segments
have emerged: the environmental products segment and the environmental services
segment. As a consequence, these two business segments are recognised for
business segmental reporting purposes.
The business activities of the Helesi PLC Group can be distinguished between the
production, marketing and distribution of environment-related products and
environment-related services. At present, the Helesi PLC Group has two
production and trading units - one in Greece and one in the United Kingdom,
under the corporate umbrellas of Helesi AE and Helesi UK Ltd, respectively. The
financial results and the financial position of these two business and
geographic segments are summarised in note 9 to the financial information. The
third-party transactions and balances of Helesi PLC and Helesi Italia srl, which
are not eliminated on consolidation, still comprise relatively immaterial
amounts that are included in the Greek segment.
On the basis of business risks and, in general, the economic environment of each
country in which Helesi PLC Group customers are based, an analysis is provided
in note 9 of (a) the value of sales and (b) the value of the trade receivables
outstanding at each year end.
For the purposes of this analysis, a distinction is made between the following
geographic segments:
Greece
United Kingdom
Other European Union states
Other (non-EU) states
3 Sales revenue
The Group
31 December 31 December
2007 2006
€000 €000
Sales of manufactured goods 34,102 30,515
Sales of traded goods 9,733 3,027
Fees for services rendered 6,198 1,680
------ ------
50,033 35,222
------ ------
4 Other revenue
The Group
31 December 31 December
2007 2006
€000 €000
Government grants 334 429
Recharging of transportation costs 163 84
Environmental study fees - 38
Renting of tools and equipment - 90
Other revenues 163 151
------ ------
660 792
------ ------
5 Persons employed and related costs
The Group
31 December 31 December
2007 2006
Number Number
Number of persons employed (at year end) 233 167
------ ------
31 December 31 December
2007 2006
€000 €000
Salaries and wages (3,672) (2,274)
Social insurance costs (996) (514)
Other personnel costs (84) (23)
Employment termination benefits (20) (8)
Payroll costs capitalised 235 -
------ ------
(4,537) (2,819)
------ ------
Cost per employee (in Euro) 19,472 16,880
------ ------
6 Analysis of depreciation charges
The Group
31 December 31 December
2007 2006
€000 €000
Buildings and building installations (215) (180)
Plant and machinery (1,090) (770)
Vehicles (346) (172)
Furniture and other equipment (59) (27)
Computer software (14) (10)
Depreciation charges recapitalised 72 -
------ ------
(1,652) (1,159)
------ ------
7 Cost of financing
The Group
31 December 31 December
2007 2006
€000 €000
Interest charges on bank loans (1,810) (1,162)
Finance lease charges (12) (23)
Cost of letters of credit, letters
of guarantee and similar instruments (262) (76)
------ ------
(2,023) (1,261)
Interest income 389 61
------ ------
(1,695) (1,200)
------ ------
8 Income taxes
The Group
31 December 31 December
2007 2006
€000 €000
Profit (loss), before taxes,
per the statement of earnings 7,014 5,064
------ ------
Tax rate 24% 29%
------ ------
Income taxes, at the nominal
tax rate (1,670) (1,491)
Taxes on permanent differences
between accounting and taxable
profits (72) (70)
Tax relief associated with profits
the taxation of which is indefinitely
deferred 986 703
Tax relief due to the
reduction of the tax rate - 78
------ ------
Total tax charge (789) (780)
------ ------
Current tax charge (222) (192)
Deferred tax charge (567) (588)
------ ------
Total tax charge (789) (780)
------ ------
The fact that, in certain cases, revenues and expenses are recognised for
accounting purposes in a different period than the period in which these income
items are taxed or expense items provide tax relief, requires the recognition of
deferred tax assets and liabilities.
The nominal tax rate applicable to the Helesi PLC Group varies from period to
period, reflecting changes, over time, in the nominal tax rates in-force in the
countries in which the Helesi PLC Group operates, but also because of
differences in the national nominal tax rates, which render the Helesi PLC Group
weighted average tax rate a function of the geographic dispersion of taxable
profits (or the losses that provide tax relief) within the Helesi PLC Group.
The nominal tax rate applicable to Helesi PLC is 10%. However, the dividends
payable to natural persons, who are tax residents of Cyprus, are subject to a
withholding tax of 15%.
The tax relief that is associated with profits that are not taxed or are taxed
at reduced rates primarily emanates from the profits derived from the Greek
activities of the Helesi PLC Group. In Greece, the taxation of certain forms of
income may be deferred indefinitely, provided that the said income is
transferred to reserves and its distribution is, likewise, deferred. In 2006,
the validity of one of the Greek laws providing such relief was challenged and
the issue has not been finally resolved as yet. However, given that the
provisions of this piece of legislation have not been utilised by Helesi AE, it
is not anticipated that the issue will have any impact on the Helesi Group.
The tax returns of the entities forming part of the Helesi PLC Group, for the
years noted below, have not been examined by the tax authorities as yet. As a
consequence, it is possible that additional taxes may be assessed at the time of
such an examination. These financial statements reflect a provision in respect
of this contingent liability, based on management's best estimate of the amount
that is likely to be assessed.
Entity Tax returns not examined as yet
by the tax authorities
Helesi PLC Up to 2007
Helesi AE 2007
Perivallontiki Environmental Services AE 2006 & 2007
Helesi UK Ltd 2004 to 2007
9 Segmental analysis
As from 2007, the Helesi PLC Group recognises two business segments: the
environmental products segment and the environmental services segment. The
financial results and the financial position of these two business segments are
set out below.
The Group 2007
Environmental Environmental Helesi PLC
products services Group
€000 €000 €000
Third-party sales 43,838 6,195 50,033
Other third-party revenues 608 52 660
------ ------ ------
Total revenues 44,446 6,247 50,693
Cost of materials used (27,481) (-) (27,481)
Personnel-related costs (2,743) (1,794) (4,537)
Directors' emoluments (346) (-) (346)
Depreciation charges (1,443) (209) (1,652)
Other operating expenses (6,713) (1,177) (7,968)
Intersegment expenses 620 (620) -
------ ------ ------
Segmental profit, before
finance charges 6,340 2,447 8,709
Cost of financing (1,466) (168) (1,695)
------ ------ ------
Segmental profit, before taxes 4,709 2,444 7,014
Elimination of intersegmental
profits 124 (124) -
------ ------ ------
Profit, before taxes 4,833 3,230 7,014
Income taxes (544) (261) (789)
------ ------ ------
Net profit, after taxes 4,081 2,267 6,225
------ ------ ------
The Group 2006
Environmental Environmental Helesi PLC
products services Group
€000 €000 €000
Third-party sales 33,542 1,680 35,222
Other third-party revenues 791 1 792
------ ------ ------
Total revenues 34,333 1,681 36,014
Cost of materials used (20,050) (-) (20,050)
Personnel-related costs (2,190) (629) (2,819)
Directors' emoluments (62) (-) (62)
Depreciation charges (1,147) (12) (1,159)
Other operating expenses (5,288) (372) (5,660)
------ ------ ------
Segmental profit, before
finance charges 5,596 668 6,264
Cost of financing (1,102) (98) (1,200)
------ ------ ------
Profit, before taxes 4,494 570 5,064
Income taxes (692) (88) (780)
------ ------ ------
Net profit, after taxes 3,802 482 4,284
------ ------ ------
The Group 31 December 2007
Environmental Environmental Helesi PLC
products services Group
€000 €000 €000
Total assets 115,233 4,863 120,035
Total liabilities to third
parties (77,440) (521) (77,961)
------ ------ ------
Net assets 37,793 4,342 42,135
------ ------ ------
The Group 31 December 2006
Environmental Environmental Helesi PLC
products services Group
€000 €000 €000
Total assets 63,306 2,512 65,818
Total liabilities to third
parties (29,068) (460) (29,528)
------ ------ ------
Net assets 34,238 2,052 36,290
------ ------ ------
The Helesi PLC Group operates two production units - one in Greece and one in
the United Kingdom, under the corporate umbrellas of Helesi AE and Helesi UK
Ltd, respectively. The financial results and the financial position of these two
operations are set out below.
The Group 2007
Greece UK Elimination of Helesi PLC
intersegment Group
transactions
€000 €000 €000 €000
Third-party sales 19,393 5,950 - 25,343
Intersegment sales 2,948 307 (3,255) -
------ ------ ------ ------
Total sales 22,341 6,257 (3,255) 25,343
------ ------ ------ ------
Other third-party
revenues 893 - - 893
Other intersegment
revenues 185 - (185) -
------ ------ ------ ------
Other revenues 1,078 - (185) 893
------ ------ ------ ------
Total revenues 23,419 6,257 (3,440) 26,236
Cost of materials and
accessories used (10,637) (4,632) - (15,269)
Cost of intersegment
use of materials (2,653) (276) 2,929 -
Personnel-related
costs (1,728) (238) - (1,966)
Directors' emoluments (50) - - (50)
Depreciation charges (779) (69) - (848)
Other operating
expenses (3,451) (623) - (4,074)
Intersegment expenses - (185) 185 -
------ ------ ------ ------
Segmental profit,
before finance charges 4,121 234 (326) 4,029
Cost of financing (824) (1) - (825)
------ ------ ------ ------
Segmental profit,
before taxes 3,297 233 (326) 3,204
Elimination of
intersegmental profits (295) (31) 326 -
------ ------ ------ ------
Profit, before taxes 3,002 202 - 3,204
Income taxes (489) (53) - (542)
------ ------ ------ ------
Net profit, after taxes 2,513 149 - 2,662
------ ------ ------ ------
The Group 2006
Greece UK Elimination of Helesi PLC
intersegment Group
transactions
€000 €000 €000 €000
Third-party sales 26,952 8,270 - 35,222
Intersegment sales 5,391 1,039 (6,430) -
------ ------ ------ ------
Total sales 32,343 9,309 (6,430) 35,222
Other third-party
revenues 792 - - 792
------ ------ ------ ------
Total revenues 33,135 9,309 (6,430) 36,014
Cost of materials used (13,790) (6,260) - (20,050)
Cost of intersegment
use of materials (4,852) (935) 5,787 -
Personnel-related costs (2,341) (478) - (2,819)
Directors' emoluments (62) - - (620)
Depreciation charges (1,026) (133) - (1,159)
Other operating expenses (4,283) (1,377) - (5,660)
Intersegment expenses - (15) 15 -
------ ------ ------ ------
Segmental profit,
before finance charges 6,781 111 (628) 6,264
Cost of financing (1,250) 50 - (1,200)
------ ------ ------ ------
Segmental profit,
before taxes 5,531 161 (628) 5,064
Elimination of
intersegmental profits (539) (104) 6436 -
------ ------ ------ ------
Profit, before taxes 4,992 57 15 5,064
Income taxes (766) (14) - (780)
------ ------ ------ ------
Net profit, after taxes 4,226 43 15 4,284
------ ------ ------ ------
The Group 31 December 2007
Greece UK Elimination of Helesi PLC
intersegment Group
transactions
€000 €000 €000 €000
Intersegment investments 46 - (46) -
Intersegment receivables/
payables 3,475 (3,475) - -
Unrealised intersegment
profits - 50 (50) -
Total other assets 36,660 5,037 - 41,697
Total liabilities to
third parties (25,556) (1,557) 12 (27,101)
------ ------ ------ ------
Net assets 14,625 55 (84) 14,596
------ ------ ------ ------
The Group 31 December 2006
Greece UK Elimination of Helesi PLC
intersegment Group
transactions
€000 €000 €000 €000
Intersegment investments 46 - (46) -
Intersegment receivables
payables 5,496 (5,496) - -
Unrealised intersegment
profits - 50 (50) -
Total other assets 58,407 7,411 - 65,818
Total liabilities to
third parties (27,579) (1,961) 12 (29,528)
------ ------ ------ ------
Net assets 36,370 4 (84) 36,290
------ ------ ------ ------
The third-party sales and the value of the related trade receivables outstanding
at each year end, on the basis of the location at which the customers operate
(inclusive of the balances that are doubtful of collection and have been
provided for), is analysed as follows:
European
United Union
The Group Greece Kingdom states EU) states Group
€000 €000 €000 €000 €000
2007
Value of sales 22,430 6,019 17,774 3,810 50,033
------ ------ ------ ------ ------
Trade receivables,
at year end 12,820 1,436 8,820 827 23,903
------ ------ ------ ------ ------
2006
Value of sales 9,860 6,868 12,152 6,342 35,222
------ ------ ------ ------ ------
Trade receivables,
at year end 6,112 2,554 6,416 3,066 18,148
------ ------ ------ ------ ------
10 Interest in joints ventures
In the course of 2004, Helesi AE established a joint venture with Perivallontiki
AE and Urbaser Hellas AE, for the purposes of providing waste management
services to a municipality adjacent to the city of Athens. The aggregate
"capital" contributed by the three participants to the venture amounted to €10
thousand and their respective participation interests are 10%, 40% and 50%.
Furthermore, Helesi AE has, through the absorption of the Vehicles Division of
Perivallontiki AE acquired an interest of 70% and 50%, in two other joint
ventures, namely the Messoghios Joint Venture and the Perivantollogiki AZ Joint
Venture, respectively. These joint ventures have their own assets and
liabilities, which, however, are not material in the context of these financial
statements. The Perivantollogiki AZ Joint Venture has neither assets nor
liabilities. The profits and the losses realised by the joint ventures are
allocated to the participants, on the basis of their participation interest, who
remain, however, jointly and severally liable for the liabilities of the joint
ventures. The aggregate amount of net profits (losses) that were allocated to
Helesi AE, amounted to a loss of €41 thousand in 2007 and a profit of €1
thousand in 2006.
11 Tangible fixed assets
The Group Assets under
Buildings Furniture construction
and building Plant and and other or
Land installations machinery Vehicles equipment installation Total
€000 €000 €000 €000 €000 €000 €000
At cost or valuation
As at 31 December
2005 1,084 3,362 11,728 757 1054 8,145 25,181
Effect of
currency
translation - - (23) - - - (23)
Assets assumed,
at cost 52 - 48 913 2 15 1,030
Additions 2006 1,772 3,229 5,763 931 127 (3,308) 8,514
Disposals 2006 - - - (20) - - (20)
------ ------ ------ ------ ------ ------ ------
As at 31
December 2006 2,908 6,591 17,516 2,581 234 4,852 34,682
Effect of currency
translation - - (31) - - - (31)
Additions 2007 132 2,276 6,342 203 200 18,470 27,623
Capitalised
interest charges - - - - - 153 153
Disposals 2007 (53) - (7) (173) - (13) (246)
------ ------ ------ ------ ------ ------ ------
As at 31
December 2007 2,987 8,867 23,820 2,611 434 23,462 62,181
------ ------ ------ ------ ------ ------ ------
Accumulated depreciation
As at 31
December 2005 - (450) (1,798) (254) (75) - (2,577)
Depreciation - - (9) (303) - - (312)
assumed
Depreciation
charge 2006 - (180) (770) (172) (27) - (1,149)
Depreciation
on disposals - - - 4 - - 4
------ ------ ------ ------ ------ ------ ------
As at 31
December 2006 - (630) (2,577) (725) (102) - (4,034)
Depreciation
charge 2007 - (215) (1,162) (346) (59) - (1,782)
Recapitalised
depreciation - - 72 - - - 72
Disposals 2007 - - - 51 - - 51
------ ------ ------ ------ ------ ------ ------
As at 31
December 2007 - (845) (3,667) (1,020) (161) - (5,693)
------ ------ ------ ------ ------ ------ ------
Net book values
As at 31
December 2007 2,987 8,022 20,153 1,591 273 23,462 56,488
------ ------ ------ ------ ------ ------ ------
As at 31
December 2006 2,908 5,961 14,939 1,856 132 4,852 30,648
------ ------ ------ ------ ------ ------ ------
The assets under construction or installation are inclusive of advance payments
effected in favour of suppliers of fixed assets. These assets, as at 31 December
2007, are analysed, by major project, as follows:
The Group Grants
Partially Advance already Amount Anticipation
constructed payments received * reported completion date
€000 €000 €000 €000
Extension of
Komotini factory 10,806 2,702 (2,358) 11,150 First quarter of 2009
Italian factory 17,822 - (5,663) 12,159 Fourth quarter of 2008
------ ------ ------ ------
28,628 2,702 (8,021) 23,309
------ ------ ------ ------
(*) The grant advances collected relate to investments in fixed assets that may have been partly initiated,
as at 31 December 2007.
The cost of the acquisition of tangible fixed assets is reported net of the
grants received for partly financing their purchase. The full purchase cost of
these assets and the related grants that have been utilised to partially finance
their acquisition is reflected in the following table:
The Group Full Investment Reported
purchase grants acquisition
cost received costs
€000 €000 €000
2006
Land 2,908 - 2,908
Buildings and building
installations 9,363 (2,772) 6,591
Plant and machinery 29,063 (11,547) 17,516
Vehicles 3,397 (816) 2,581
Furniture and other
equipment 308 (74) 234
Assets under construction 5,962 (1,110) 4,852
------ ------ ------
51,001 (16,319) 34,682
------ ------ ------
2007
Land 2,987 - 2,987
Buildings and building
installations 11,641 (2,774) 8,867
Plant and machinery 38,993 (15,173) 23,820
Vehicles 3,672 (1,061) 2,611
Furniture and other
equipment 556 (122) 434
Assets under construction 30,939 (7,477) 23,462
------ -------- ------
88,788 (26,607) 62,181
------ -------- ------
The assets under construction are inclusive of capitalised interest charges,
amounting to €153 thousand while the depreciation charges have been reduced by
the amount of €72 thousand, which has been recapitalised in the development of
new products.
In accordance with the relevant provisions of the International Financial
Reporting Standards, finance leases are reported in the financial information as
a form of borrowing and the related leased assets are included in tangible fixed
assets and accordingly depreciated.
As at 31 December 2007 and 2006, there were mortgages and other charges on the
property of the Helesi PLC Group, as a form of security for the financing
facilities placed at the disposal of the Helesi PLC Group and for guarantees
given in favour of the Helesi PLC Group, which amounted, in aggregate, to €18.5
million and €20 million, respectively. In the course of 2007, mortgages and
charges of €1.5 million were removed.
12 Intangible fixed assets
Other than goodwill, the intangible fixed assets of the Helesi PLC Group
entirely comprise computer software.
13 Other long-term assets
Other long-term assets primarily comprise guarantee deposits given in relation
to operating leases.
14 Inventories
The Group
31 December 31 December
2007 2006
€000 €000
Manufactured goods 3,619 2,910
Raw and packaging materials 6,348 2,484
Consumables 196 254
Traded goods 1,147 523
------ ------
11,310 6,171
------ ------
15 Receivables
The Group
31 December 31 December
2007 2006
€000 €000
Trade receivables 23,903 18,148
Expense-related grants
receivable and prepaid expenses 540 506
Receivables doubtful of
collection (855) (855)
------ ------ ------ ------
23,588 17,799 634 -
Advances to suppliers 443 149 - -
State receivables 3,060 1,534 19 -
(including grants)
Blocked deposit accounts 358 27 - -
Other receivables 1,658 160 100 -
------ ------ ------ ------
29,107 19,669 753 -
------ ------ ------ ------
The trade and other receivables reported by Helesi PLC are due from other Group
entities.
16 Cash and cash equivalents
Cash and cash equivalents comprise notes held by the Helesi PLC Group as well as
bank deposits available on demand.
17 Loans
The loans contracted by the Helesi PLC Group have been advanced by Greek banks
and are denominated in Euros. The amounts that are repayable within one year of
the balance sheet date are reported as short-term obligations while the amounts
that are repayable at a subsequent stage, are reported as long-term obligations.
The loans of the Helesi PLC Group are analysed as follows:
The Group
31 December 31 December
2007 2006
€000 €000
Short-term borrowings
Bank loans (29,575) (3,101)
Short-term portion of
long-term loans (1,229) (1,540)
Finance lease obligations (96) (121)
------ ------
(30,900) (4,762)
------ ------
Long-term borrowings
Debenture loan (8,778) (5,951)
Bank loans (3,679) (1,715)
Finance lease obligations (-) (96)
------ ------
(12,457) (7,762)
------ ------
Depending on the date of expiry, long-term borrowings are analysed as follows:
The Group
31 December 31 December
2007 2006
€000 €000
Long-term borrowing repayable in:
1 to 2 years (7,471) (1,291)
2 to 5 years (4,986) (3,474)
Over 5 years (-) (2,997)
------ ------
(12,457) (7,762)
------ ------
The bank loans and other bank financing facilities (including the debenture loan
referred to below) contracted by the Helesi PLC Group are analysed as follows:
Scheduled
Short-term Long-term repayment Applicable effective
liabilities liabilities (to year) interest rate
€000 €000
Debenture loan (1,229) (8,778) 2012 Euribor+1.6%
Other long term loans (-) (3,679) 2008-2009 Euribor+1.5% - +1.65%
Short term loans (29,575) - 2008 Euribor+1.1% - +1.65%
------ ------
(30,804) (12,457)
------ ------
A debenture loan of €7 million was contracted in December 2005. The first part
of the loan was received and loan debentures of a nominal value of €5.85 million
were issued on 30 December 2005. These funds were partly utilised for
refinancing pre-existing loan facilities and partly for financing the further
development of the Helesi PLC Group sales network and the purchase of production
optimisation equipment. The second part of the loan debentures, having a nominal
value of €1.15 million, was issued in June 2006. The funds thus generated have
been utilised for financing the purchase of land.
The debenture loan agreement entered into imposes restrictions on the sale of
fixed assets and on the subjection of such assets to further mortgages and/or
charges. Restrictions are, likewise, imposed with respect to a possible
corporate restructuring (mergers, acquisitions, disposals of segments etc.).
Under the same agreement, the following financial covenants must be respected:
(a) indebtedness to banks over EBITDA must be less than 4.5, (b) EBITDA over
finance costs must be greater than 4.0 and (c) indebtedness to banks over net
assets must be less than 1.3.
The debenture loan is secured by a mortgage/charge, amounting to €10 million,
over the land, buildings and the machinery of Helesi AE, as well as by personal
guarantees given by two directors and major shareholders of the Company.
The bank loans advanced are secured by mortgages and charges on the property of
the Helesi AE, which are quantified in the note on tangible fixed assets.
The present value of finance lease obligations and the lease charges payable
under the related leasing contracts in force, as at 31 December 2007, and 2006,
were as follows:
The Group
31 December 31 December
2007 2006
€000 €000
Payable in:
Not later than 1 year (100) (135)
1 to 5 years (-) (100)
------ ------
(100) (235)
Future lease charges 4 18
------ ------
Present value of obligations under
finance lease contracts (96) (217)
------ ------
18 Financing instruments
Exchange risks
The consideration for most of the sales effected by the Helesi PLC Group and, by
extension, the receivables of the Helesi PLC Group are denominated in Euros. A
notable exception is the sales and the receivables of Helesi UK Ltd, which are
denominated in Pound Sterling. The cost of raw materials and the operating costs
of the Helesi PLC Group are, likewise, denominated in Euros, except for the
operating costs and the payables of Helesi UK Ltd, which are denominated in
Pound Sterling. The loans contracted by the Helesi PLC Group are also
denominated in Euros. As a consequence, the exchange risk, which the Helesi PLC
Group is exposed to, is not believed to be material.
Credit risks
The Helesi PLC Group has a clearly defined policy, which is followed
consistently. The exposure to credit risks is monitored and assessed on a
regular basis, thus ensuring that the credit given does not exceed the
authorised credit limits of each customer. As at 31 December 2007 and 2006,
receivables, amounting to €0.3 million and €2.31 million, respectively, were
secured by letters of credit, letters of guarantee, state guarantees and
distributor guarantees.
The maximum exposure of the Helesi PLC Group to credit risk, assuming that all
customers will fail to honour their obligations, is the amount reported under
receivables, less the aforementioned amounts of the guarantees secured.
Interest rate risks
Most of the interest-bearing receivables and payables of the Helesi PLC Group
are linked to floating interest rates that are adjusted in line with
interest-rate market fluctuations. The Helesi PLC Group does not use financial
derivatives.
19 Payables
The Group
31 December 31 December
2007 2006
€000 €000
Trade creditors (26,863) (15,413)
Accrued expenses (296) (149)
Social security
contributions payable (239) (194)
Taxes (other than income
tax) payable (205) (181)
Customer advances (-) (2)
Other payables (5,438) (136)
------ ------
(33,041) (16,075)
------ ------
The other payables reported, as at 31 December 2007, primarily represent the
liabilities towards Perivallontiki AE that have arisen as a result of the
acquisition of its Vehicles Division.
20 Employee benefits
The obligation of the Helesi PLC Group towards its employees based in Greece, to
provide them with certain future benefits depending on their length of service
is quantified and reported on the basis of the accrued entitlement, as at the
date of the balance sheet, that is anticipated to be paid, discounted to its
present value by reference to the anticipated time of payment. The discount rate
used is is broadly equal to the yield of Greek Government bonds.
The movement of the account of employee benefits, in the years 2006 and 2007 was
as follows:
The Group
€000
Provision as at 31 December 2005 (18)
Obligations assumed through acquisitions (8)
Charge for the year (8)
Amounts actually disbursed 10
------
Provision as at 31 December 2006 (24)
Charge for the year in respect of
employment termination benefits (20)
Charge for the year in respect of
employee share options (28)
Amounts actually disbursed 14
------
Provision as at 31 December 2007 (58)
------
21 Government grants
Government grants relate to Helesi AE and Helesi Italia srl and have been
granted in relation to investments in fixed tangible assets, effected in the
period from 2000 to 2007 or currently under construction. The reported value of
the acquired fixed tangible assets has been reduced by the grants received for
the purposes of partially financing their acquisition cost. Depending on the
provisions of the law, under which the grants were advanced, certain
restrictions apply as to the transfer of the ownership of the subsidised assets
and to changes of the legal status of the entity to which the grants were
advanced. The inspections carried out by the supervisory authorities, to date,
have not disclosed cases of non-compliance with these restrictions that had not
been approved, in advance.
The amount of government grants received, for the purposes of financing the
purchase of fixed assets, is reported under the note covering fixed tangible
assets. The resultant reduction of the depreciation charges that would have,
otherwise, burdened the operations of the Helesi PLC Group is quantified in the
following table:
The Group €000
Effective reduction of the value of tangible fixed
assets, as at 31 December 2005 (10,000)
New grants secured in 2006 (4,638)
Effective reduction of the depreciation charges, in 2006 632
------
Effective reduction of the value of tangible fixed
assets, as at 31 December 2006 (14,006)
New grants secured in 2007 (10,289)
Effective reduction of the depreciation charges, in 2007 879
------
Effective reduction of the value of tangible fixed
assets, as at 31 December 2007 (23,416)
------
22 Share capital and share premium
In the past, the ultimate holding company of the Helesi Group was Perivallontiki
AE, a company registered in Greece. As part of its admission to trading on the
AIM market operated by the London Stock Exchange, the Helesi Group was
restructured, by the shareholders of Helesi AE exchanging their shares in Helesi
AE for shares in Helesi PLC, a then newly incorporated company in Cyprus, whose
shares were listed on AIM in the latter part of 2006. The ratio on the basis of
which the Helesi AE shares were exchanged was 1 share in Helesi AE for 120.32
shares in Helesi PLC. This exchange of shares was approved and implemented on 23
October 2006. The total number of Helesi PLC shares, which were thus issued, was
22,505,000, which were added to the 300,000 shares of Helesi PLC that had been
issued for cash on the incorporation of the Company, in May 2006. Thus, Helesi
AE became a wholly-owned subsidiary of Helesi PLC.
On the basis of the net assets of Helesi AE, as at 30 June 2006, amounting, in
total, to €18,004 thousand, the 22,505,000 shares thus issued were deemed to
have been issued at a premium of €0.70 per share, yielding a total premium of
€15,753 thousand.
On the admission to AIM, 9,969,505 new shares were issued at a price of 116
pence (€1.71) per share, thus raising approximately €17.1 million, before
expenses, of new capital.
As a result of the above transactions, the total number of issued and
outstanding shares of Helesi PLC, as at 31 December 2006 and 2007, was
32,774,505 of a nominal value of €0.10 each.
The share premium generated on the exchange of the Helesi AE shares for Helesi
PLC shares of €15,753 thousand plus the share premium raised on the admission to
AIM of €16,093 thousand has been reduced by the AIM admission costs of €2,301
thousand less the tax relief generated by these costs of €405 thousand, i.e. by
a net amount of €1,896 thousand.
The corporate restructuring process has, in effect, rendered "non-distributable"
all the pre-restructuring reserves and retained earnings of the Group. A
substantial part of the pre-structuring reserves of Helesi AE were, in any
event, non-distributable either because they had, by law, been taken to capital
reserves or because they had been allocated to untaxed reserves for the purposes
of deferring the payment of the taxes (that would have been, otherwise, payable)
on the profits so transferred.
23 Reserves
As stated in the preceding note, the corporate restructuring process has, in
effect, rendered "non-distributable" all the pre-restructuring reserves and
retained earnings of the Group. A substantial part of the pre-structuring
reserves of Helesi AE were, in any event, non-distributable either because they
had, by law, been taken to capital reserves or because they had been allocated
to untaxed reserves for the purposes of deferring the payment of the taxes (that
would have been, otherwise, payable) on the profits so transferred.
In accordance with the provisions of Greek company law, the creation of a
"statutory reserve", by transferring to such a reserve an amount equal to 5% of
the annual after tax profits realised, is compulsory until the time the reserve
reaches 1/3 of share capital. The "statutory reserve" can be distributed only
upon dissolution but can be utilised to offset accumulated losses.
The capital reserve reported in 2005 was created in relation to a capital
investment grant received by Helesi AE in 2002. Under the terms and conditions
stipulated for the approval of the said investment grant, Helesi AE was under an
obligation to transfer to a capital reserve the amount of €118 thousand, which
is not available for distribution for a period of 10 years, expiring in 2012.
The revaluation gain reserve reported in 2005 was created in 2002, on the
revaluation of the land owned by Helesi AE. The reserve is stated net of the
deferred tax liability that was set up in connection with this transaction.
The untaxed reserves reported in 2005 have been created, in the period from 2001
to 2005, on the basis of provisions of tax legislation, which permit the
indefinite deferral of the incidence of taxation on otherwise taxable profits,
as a form of an investment incentive, on condition that the said profits are
re-invested in the business. The tax thus deferred is precipitated by the
disposal of the assets acquired, within a period of 5 years of their
acquisition, or whenever the untaxed reserves are distributed. The tax liability
that will precipitate on the distribution of these reserves, estimated, as at 31
December 2007, at €1.16 million, shall be recognised as and when a decision to
distribute these reserves, or part thereof, is taken.
The currency translation adjustments that arise in the consolidation process, on
the conversion of the financial statements of Helesi UK Ltd from Pounds Sterling
into Euro, are reflected directly in shareholders' equity and are reported under
the caption "currency translation adjustments".
24 Earnings per share and proposed dividends
Earnings per share are calculated by dividing the profit attributable to the
shareholders of Helesi PLC by the weighted average number of issued and
outstanding shares in the accounting period covered by the financial statements.
Basic EPS Diluted EPS
The Group 31 December 31 December 31 December 31 December
2007 2006 2007 2006
€000 €000 €000 €000
Net profit attributable to
the shareholders (in Euro
thousand) 6,225 4,284 6,225 4,284
Weighted average number of
issued shares (in thousand
pieces) 32,775 23,719 32,775 23,719
------ ------ ------ ------
Earnings per share (in €) 0.19 0.18 0.19 0.18
------ ------ ------ ------
As at 31 December 2003, 2004 and 2005, there were no commitments for the
issuance of new shares in the future and, therefore, the requirement to
calculate and report diluted earnings per share (i.e. the earnings per share
that would have taken into consideration the dilutive effect of such future
issues of shares) did not apply.
For the purposes of computing the earnings per share for 2005, the shares that
were issued and allotted on 21 December 2005 have not been taken into
consideration in calculating the weighted average number of the shares that were
outstanding in 2005, given that the proceeds from the issue of these shares were
not received until the early part of 2006.
In the autumn of 2007, an interim dividend of €0.006 per share was declared and
paid shortly thereafter. The Board of Directors of Helesi PLC has resolved to
propose the distribution of a dividend of €0.012 per share, or a total of
€393,294 to the shareholders of Helesi PLC. The distribution of the dividend is
subject to the approval of the shareholders, at their forthcoming annual general
meeting. The dividend will be recognised as a liability of Helesi AE at the time
of the approval of the proposed distribution. In the event that the proposed
dividend is approved, the total dividend for the year will amount to €0.018 per
share.
25 Deferred tax assets and liabilities
Deferred tax assets and liabilities are quantified at the level of each separate
entity forming part of the Helesi PLC Group and, to the extent that deferred tax
assets and deferred tax liabilities arise, they are off set against each other.
The deferred tax assets and liabilities emanate from the following causes:
The Group
31 December 31 December
2007 2006
€000 €000
Tax impact of the
differentiation of the
accounting and the tax
depreciation rates (1,727) (1,305)
Anticipated tax burden on
the disposal of revalued land (27) (27)
Writing-off of expenses,
which yield tax relief over
five years 138 37
Tax impact of capitalised
interest charges in fixed
assets (38) (-)
Providing for doubtful
receivables, while tax
relief entails a write-off 214 214
Reducing the value of
stocks to eliminate the
effect of tax depreciation 54 37
Deferred tax asset 5 18
associated with a loss
carry forward right
Miscellaneous timing
differences between
accounting profits and
taxable income 17 (6)
------ ------
Income taxes, which will
relieve (burden) future
accounting periods (1,364) (1,032)
Deferred tax asset on share
capital increase costs
(posted directly to
shareholders' equity) - 235
------ ------
Income taxes, which will
burden future accounting
periods (1,364) (797)
------ ------
26 Commitments and contingent liabilities
The two major investment projects that were in progress, as at 31 December 2007,
were the tyre disposal plant and the upgrading of the Komotini production
facilities.
Investment project Total Commitment
Total amount Grants as at
capital Approved Net already already 31 December
expenditure grants investment expensed collected 2007
13,357 (7,331) 6,026 13,357 (3,592) 0
3,846 (2,109) 1,737 1,492 (632) 2,354
20,818 (11,436) 9,382 5,507 (3,431) 15,311
Italian production
facilities 25,365 (16,990) 8,375 20,717 (5,663) 4,648
------ ------ ------ ------ ------ ------
63,386 (37,866) 25,520 41,073 (13,318) 22,313*
------ ------ ------ ------ ------ ------
* of which €19,182 thousand is likely to be expended in 2008 and €3,311
thousand in 2009. The timing of the collection of grants varies depending on
the type of the grant and the terms under which it has been approved. The
collection of the grants may precede or follow the expending of the funds.
In addition, in 2006, Helesi Italia Srl, the newly incorporated 99% subsidiary
of Helesi AE, secured the approval of the Italian authorities to proceed with
its proposed investment in a plastic waste containers and pallet boxes
production plant, which will be located in the industrial zone of Val Basenko
Technoparco, in Pisticci, Italy. The total investment is expected to reach
€25,365,200, less anticipated government grants of € 16,990,000.
As at 31 December 2007, the Helesi PLC Group was planning to acquire the shares
of Perivallontiki AZ Ltd and Helesi Trans Ltd for a total consideration of €952
thousand. This transaction was completed shortly after the year-end.
The Helesi PLC Group is contractually committed under operating leases for the
leasing of office space and warehouses and of certain production facilities in
the UK, as follows:
Within 1 Within 2-5
year years
€000 €000
Office premises 57 22
Production facilities 145 290
------ ------
202 312
------ ------
The Helesi PLC Group has not provided any guarantees in favour of third parties.
27 Business combinations
On 23 November 2007, the shareholders of Helesi AE formally resolved, in general
meeting, to absorb the Vehicles Division of Perivallontiki AE, an entity under
the management and control of the principal shareholders of Helesi PLC, with
effect from 31 August 2007. The objective of this acquisition was to attain a
higher level of transparency in the operations of the Helesi Group but also to
benefit from the anticipated synergistic effects of this combination. The
activity of the absorbed Vehicles Division is focused on the trading of special
purpose vehicles that are used within the waste management industry. The
activities of the absorbed Vehicles Division also include the participation in
two Cyprus-based joint ventures that provide waste management services on the
island. The transaction included the right of use of the readily recognised (in
Greece as well as in Cyprus) brand name of "Perivallontiki", ad infinitum.
The cost of the acquisition, amounting to €10,708 thousand, was covered to the
extent of €9,868 thousand through the assumption of net liabilities of an equal
value and to the extent of €840 thousand through the issuance of new shares of
Helesi AE that were, shortly thereafter, acquired by Helesi PLC. The assets and
the liabilities that were acquired in the context of this acquisition were
valued by PricewaterhouseCoopers, at the values reflected below:
€'000
Inventories 2,276
Receivables 7,562
------
Total assets 9,838
------
Payables (5,811)
Short term interest bearing loans (13,895)
------
Total liabilities (19,706)
------
Total net liabilities (9,868)
=======
The financial result of the Vehicles Division activity, in the period from 1
September to 31 December 2007, amounted to a loss, before taxes, of €177
thousand, which has been incorporated in the reported results for the year ended
31 December 2007.
Had the absorption of the Vehicles Division of Perivallontiki AE been effected
at the beginning of the year, the incremental impact on the revenue of the
Company, in the year 2007, would have been an increase of €7,352 thousand, while
the corresponding incremental impact on the profits, before taxes, reported by
the Company would have been an increase of €843 thousand, after allowing for the
cost of effecting this investment under the same terms and conditions, including
the cost of financing.
28 Post balance sheet events
On 3 January 2008, the shareholders of Helesi PLC formally resolved, in general
meeting, to acquire the shares of Perivallontiki AZ Ltd and Helesi Trans Ltd,
then wholly-owned subsidiaries of Perivallontiki AE. AZ Perivallontiki Ltd is a
Company incorporated in Cyprus, engaged in the distribution of the Helesi
Group's products in Cyprus. Helesi Trans Ltd is also a Company incorporated in
Cyprus, engaged in the provision of international transportation services. The
consideration paid for acquiring the shares of these two entities amounted,
in total, to €952,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFWSMLSASEIL
