Tox Free holds dividend, H1 profit dips

Nedlands-based Tox Free Solutions says it will not pay an interim dividend as it reports a 9 per cent fall in its interim net profit.

For the six months to the end of December, the company's net profit fell from the prior corresponding period's $3 million to $2.8 million.

Tox Free said the result included share based payments expense of $156,000 relating to share options issued, and an income tax expense of $1.2 million.

Revenue for the period was up 162 per cent to $41.5 million, resulting in earnings before interest, tax, depreciation and amortisation of $10.1 million, up 63 per cent from the previous corresponding period.

At the end of the reporting period, the company had cash and cash equivalents of $12.7 million, up from $1.3 million.

Shares in Tox were up one cent to $1.33 at 13:38 AEDT.

The announcement is below:

Tox Free Solutions Limited ("Tox Free") is pleased to present the Appendix 4D and Interim Financial Report for the 6 months ended 31 December 2008.

Tox Free achieved record half yearly revenue of $41,505,000 and earnings before interest, taxes, depreciation and amortisation of $10,276,0001 (EBITDA) which represents an increase of 61% from the comparable prior period.

Profit for the period (before depreciation) was $6,847,000 which represents an increase of 62% based on the previous half year result. Net profit for the period was $2,813,000 which includes share based payments of $156,000.

Commentary

The half year to 31 December 2008 has been a very exciting period in the development of Tox Free. Not only has the Company achieved its budget financials to date, we have strengthened our management team and systems as we build a platform to sustain and continue our growth strategy.

Tox Free has made considerable investment in financial, heath, safety, environment and IT management systems during the period which are essential for our continued growth. Additional management overheads and Barry Bros. integration costs have been expensed within the half year in advance of the recognition of revenues that will be obtained through the expected development of the business.

This investment has already been rewarded through the recent award of a total waste management and industrial services contract to Woodside Energy Ltd in Karratha. This is a significant milestone in the development of Tox Free. There are a number of additional waste management and industrial service contracts the Company is presently tendering for and Tox Free is confident of more contracts being awarded throughout Australia.

The integration of Barry Bros. with Tox Free has also been very exciting. The Executive General Manager of Barry Bros, Mr. Steve Pewtress, and the senior management team have successfully invigorated the Barry Bros. business and I am pleased to advise Barry Bros. is on track to achieve its business plan for the 2009 financial year. The prospects for Barry Bros. are very promising as the Federal and State Governments announce considerable infrastructure spending to stimulate the Australian economy.

The Tox Free group of Companies offers a diverse range of services across a number of market sectors. Tox Free has a competitive advantage through its unique licenses, treatment facilities and specialist industrial services. Whilst it is unknown how the global economy will affect the Australian economy, Tox Free has a sound balance sheet, cash on hand at 31 December 2009 of ~ $12,000,000 and a sound business plan to continue to grow through any downturn in the economy. Growth will continue through strategic acquisition and organic growth of our existing divisions.

Industrial Services

The acquisition of Barry Bros. in July 2008 has seen the company expand its revenue and earnings from industrial services nationally. The Barry Bros. business is performing exceptionally well and is on track to meet its financial targets for the full financial year. Barry Bros. has also provided the opportunity for Tox Free to expand its industrial services into Western Australia. The secondment of a senior industrial services manager from Barry Bros. into Western Australia will see this division continue to perform strongly as Tox Free expands its services throughout Australia.

Since January 2008, the expansion of industrial services in the North West has also continued. Tox Free and Barry Bros. is fast becoming the contractor of choice in the region.

Solid Waste Management

Solid waste services are provided in the Kimberley and Karratha regions. Kimberley Waste has exceeded its budget to date as a result of additional assets that were added to the region in FY08. Earnings are secured against municipal contracts with local council.

Solid waste earnings have also grown through the contribution from our Karratha facility. The Karratha facility is now fully operational. This is very strategic asset for Tox Free. It is the only waste management facility servicing the region able to offer a full range of waste management and recycling solutions. As demonstrated by the award of the Woodside contract the facility will continue to target waste and industrial service contracts with major oil / gas and mining companies in the region.

Liquid and Hazardous Waste Management

Revenues from liquid and hazardous waste were consistent with the previous 6 months. Tox Free Queensland and Port Hedland performed to budget expectations.

The new St Marys facility in NSW is still in a start up phase and results from this are yet to achieve full expectations. This is largely due to longer than expected commissioning of site infrastructure. Tox Free is confident once the site is fully operational the NSW facility will be provide a significant contribution to group earnings.

There has been some margin erosion at our Kwinana facility due to higher than expected operating costs including labour, fuel and consumables. The Kwinana site has a new Manager in place with a firm direction to improve operational efficiencies. The site has also been awarded two new contracts to provide Household Hazardous Waste Collection through Western Australia and remediate contaminated soil via thermal desorption. This will assist the site in achieving its full year targets.

Dividend

In October 2008 Tox Free placed 9.3 M shares at $1.40 per share to raise $13,020,000. The funds raised are to be used to partly retire debt and be available to fund new opportunities including the capital requirements to service a number of waste management contracts the company is tendering for.

At this time there is some uncertainty in regards to the economic climate in Australia, and although Tox Free is well placed to weather any downturn in the economy, the board have taken the view that it would be prudent to maintain a healthy balance sheet and have cash available to fund additional opportunities.

The board carefully considered the payment of an interim dividend and has decided to delay the payment of a dividend until completion of the financial year. Based on the Company achieving its results, it is intended to pay a fully franked dividend at the completion of financial year 2009.

The outlook for Tox Free is extremely positive. There are a number of new developments that will contribute to further earnings in the second half of FY09. These include:

 Expansion of Barry Bros. industrial services in WA

 Operation of the Karratha industrial waste treatment plant (commenced February 2009)

 Stronger performance from the St Marys facility

 Oil and gas activity in the North West of WA

 Further development of the Barry Bros. industrial service on the east coast

 Soil remediation campaign started in January 2009

 Woodside contract award (starting 15 March 2009)

 3 months contribution from Greenchip Recycling (completion expected early March 2009)

 New Emergency Response legislation in WA

 Further award of contracts presently being tendered for

The second half is historically stronger than the first with the split in earnings running at about 40:60 with a second half bias. At this point in time Tox Free is confident on achieving its financial forecasts and will keep the market updated on all developments.