Tox Free Solutions Limited reports solid result prior to takeover offer

This morning waste disposal business Tox Free Solutions Limited (ASX: TOX) posted a statutory net profit of $7.1 million on revenues of $255.3 million for the six-month period ending December 31 2017.

The adjusted net profit came in at $13.7 million up 14% on the prior corresponding half. The company will pay an interim dividend of 5 cents per share on adjusted (excluding one-off costs) earnings per share of 5.75 cents.

On a trailing basis the company now offers investors a trailing yield of 2.9% plus the tax effective benefits of franking credits.

Underlying or adjusted operating income (EBITDA) came in at $40.56 million which goes to show that this is a group that operates on low profit margins due to the relatively high costs in the waste management industry.

The group’s net debt to equity ratio also worsened to 47% from 41% in the prior corresponding period. Total cash outflows for the half were $11.8 million after investment and interest costs, among others, which left cash on hand on $21.97 million. The group is forecasting second half capex of $6 million to take full year capex to $29 million.

The company splits its operations into four divisions; industrial services, environmental services, waste services, and health services. The industrial services sector that serves the resources and civil infrastructure industries is one of the largest segments and had a successful year growing revenue and EBITDA by 38% and 45%.

In December of this year Tox agreed to a takeover offer from Cleanaway Services at $3.45 per share and as such the share price is likely to hover around this mark until the deal is completed and the company de-listed from the exchange. The deal looks almost certain to go ahead with the institutional part of the offer now completed.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Tox Free Solutions Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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