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CIL - Consolidated Infrastructure Group Limited - Unaudited condensed

Release Date: 13/04/2011 08:50
Code(s): CIL
Wrap Text

CIL - Consolidated Infrastructure Group Limited - Unaudited condensed consolidated interim results for six months ended 28 February 2011 and changes to the board of directors Consolidated Infrastructure Group Limited (Formerly Buildworks Group Limited) (Incorporated in the Republic of South Africa) (Registration number 2007/004935/06) Share code: CIL ISIN: ZAE000148201 ("Consolidated Infrastructure" or "CIG" or "the group") UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR SIX MONTHS ENDED 28 FEBRUARY 2011 AND CHANGES TO THE BOARD OF DIRECTORS - Revenue increased by 8% - Fully diluted headline earnings per share increased by 13% - Order book R1,5 billion up 40% from a year ago - First 400kv overhead contract line awarded for R190 million Condensed consolidated statements of comprehensive income Unaudited Unaudited Audited Six Six Year months months ended
ended ended 28 28 31 August February February 2010 2011 2010
R`000 R`000 R`000 Revenue 680,034 629,107 1,229,748 Cost of sales (507,504) (463,764) (886,241) Gross profit 172,530 165,343 343,507 Other income 0 133 1,209 Operating expenses (92,011) (82,176) (180,087) Foreign exchange loss (4,025) (4,214) (12,611) Earnings before interest, taxation, 76,494 79,086 152,018 depreciation and amortisation ("EBITDA") Fair value adjustment 21,786 Depreciation and amortisation (12,680) (15,492) (32,452) Impairment of goodwill (24,578) Profit before interest and taxation 63,814 63,594 116,774 Interest received 1,762 2,243 7,299 Interest paid (1,095) (8,802) (14,529) Profit before taxation 64,481 57,035 109,544 Taxation (17,942) (15,897) (32,889) Profit for the period attributable to 46,539 41,138 76,655 the ordinary shareholders Other comprehensive income: Exchange rate differences on (3,115) (3,379) translating foreign operations Total comprehensive income for the 43,424 41,138 73,276 period attributable to the ordinary shareholders Basic earnings per share (cents) 4.10 4.39 7.99 Fully diluted earnings per share 4.10 3.62 6.75 (cents) Reconciliation of headline earnings:
Profit attributable to ordinary 46,539 41,138 76,655 shareholders Adjusted for: Profit on disposal of property, plant (120) (133) (205) and equipment Impairment of goodwill 24,578 Headline earnings attributable to 46,419 41,005 101,028 ordinary shareholders Weighted average number of shares in 1,136,409 936,409 959,971 issue (000`s)
Fully diluted weighted average number 1,136,409 1,136,409 1,136,409 of shares in issue (000`s) Headline earnings per share (cents) 4.08 4.38 10.52 Fully diluted headline earnings per 4.08 3.61 8.89 share (cents)

Condensed consolidated statements of financial position Unaudited Unaudited Audited
As at As at As at 28 28 31 August February February 2010 2011 2010
R ` 000 R ` 000 R ` 000 ASSETS Non-current assets 784,414 811,520 788,083 Property, plant and equipment 276,247 278,519 277,971 Goodwill 462,220 482,595 462,220 Intangible assets 37,050 44,923 38,792 Deferred tax 7,040 4,476 7,522 Financial assets 1,857 1,007 1,578 Current assets 572,683 695,202 672,786 Inventories 40,665 36,247 34,388 Trade and other receivables 25,682 65,747 59,952 Amounts due from contract customers 381,429 342,511 328,683 Current taxation 5,524 0 6,568 Cash and cash equivalents 119,383 250,697 243,195 Total assets 1,357,097 1,506,722 1,460,869 EQUITY AND LIABILITIES Equity 879,341 804,011 835,917 Issued capital 11 9 11 Share premium 676,153 536,387 676,153 Shares to be issued - 140,000 - Foreign currency translation reserve (6,494) - (3,379) Accumulated profits 209,671 127,615 163,132
Non-current liabilities 82,342 140,353 84,556 Other financial liabilities 32,567 25,367 37,734 Provisions 8,346 8,183 8,283 Instalment sale liabilities 10,273 80,949 7,047 Deferred tax 31,156 25,854 31,492 Current liabilities 395,414 562,358 540,396 Other financial liabilities 7,615 59,637 53,698 Trade and other payables 180,177 145,319 170,137 Amounts received in advance 1,385 20,657 45,954 Amounts due to contract customers 155,374 277,883 241,719 Bank overdraft 14,766 9,149 9,335 Instalment sale liabilities 5,288 23,921 5,160 Current tax payable 30,809 25,792 14,393
Total equity and liabilities 1,357,097 1,506,722 1,460,869 Number of shares in issue (000`s) 1,136,409 936,409 1,136,409
Net asset value per share (cents) 77.38 85.86 73.56 Net tangible asset value per share 33.44 29.53 29.47 (cents) Condensed consolidated statements of cashflow
Unaudited Unaudited Audited Six Six Year months months ended ended ended
28 28 31 August February February 2010 2011 2010 R`000 R`000 R`000
Cash generated by operations before 79,927 57,209 151,931 changes in working capital Changes in working capital (145,906) 16,067 43,493 Net interest received/(interest paid) 667 (6,559) (7,230) Taxation paid (6,577) (21,982) (75,724) Cash flows from operating activities (71,889) 44,735 112,470 Cash flows from investing activities (9,214) (9,913) (20,475) Cash flows from financing activities (47,896) 13,244 (77,921) Net (decrease)/increase in cash and cash (128,999) 21,578 14,074 equivalents Effect on foreign currency translation (244) (184) reserve movement on cash balances Cash and cash equivalents at beginning 233,860 219,970 219,970 of period
Cash and cash equivalents at end of 104,617 241,548 233,860 period
Condensed consolidated statements of changes in equity Unaudited Unaudited Audited
Six Six Year months months ended ended ended 28 28 31 August
February February 2010 2011 2010 R`000 R`000 R`000 Balance at beginning of period 835,917 762,873 762,873 Issue of share capital and share issue 0 0 (232) expenses Total comprehensive income for period 43,424 41,138 73,276 Balance at end of period 879,341 804,011 835,917 SEGMENTAL ANALYSIS Unaudited Unaudited Audited Unaudited Unaudited Audited 28 28 31 August 28 28 31 February February 2010 February February August 2011 2010 2011 2010 2010
R`000 R`000 R`000 % of % of % of total total total External Revenue Heavy building 96,729 100,443 202,312 14% 16% 16% materials West End 48,787 43,059 86,881 7% 7% 7% Claybrick Drift Supersand 47,942 57,384 115,431 7% 9% 9% Power 583,305 528,665 1,027,436 86% 84% 84% Corporate - - - 0% 0% 0% Total 680,034 629,107 1,229,748 100% 100% 100% Unaudited Unaudited Audited Unaudited Unaudited Audited
28 28 31 August 28 28 31 February February 2010 February February August 2011 2010 2011 2010 2010 R`000 R`000 R`000 R`000 R`000 R`000
EBITDA % of % of % of total total total Heavy building 17,541 16,766 28,840 23% 21% 19% materials West End 6,160 1,038 (1,966) 8% 1% (1%) Claybrick Drift Supersand 11,381 15,728 30,806 15% 20% 20%
Power 62,609 66,626 129,716 82% 84% 85% Corporate (3,656) (4,306) (6,538) (5%) (5%) (4%) Total 76,494 79,086 152,018 100% 100% 100% Reconciliation of profit before tax EBITDA per segment analysis 76,494 Depreciation (12,680) Net interest received 667 Profit before tax 64,481 Unaudited Unaudited Audited 28 28 31 August February February 2010 2011 2010
R`000 R`000 R`000 Assets Heavy building materials 394,913 428,556 400,768 West End Claybrick 252,496 279,665 250,198 Drift Supersand 142,417 148,891 150,570 Power 624,788 664,503 673,635 Corporate 1,127,436 1,132,683 1,178,202 Total assets including group loan accounts 2,147,137 2,225,742 2,252,605 Inter-group elimination (790,040) (719,020) (791,736) Total 1,357,097 1,506,722 1,460,869
Unaudited Unaudited Audited 28 28 31 August February February 2010 2011 2010
R`000 R`000 R`000 Liabilities Heavy building materials 308,329 320,452 318,276 West End Claybrick 210,403 205,442 207,391 Drift Supersand 97,926 115,010 110,885 Power 361,279 452,888 448,986 Corporate 43,178 93,382 94,417 Total liabilities including group loan 712,786 866,722 861,679 accounts Inter-group elimination (235,030) (164,011) (236,727) Total 477,756 702,711 624,952 Commentary Introduction Consolidated Infrastructure is the largest turnkey developer of high-voltage electrical substations in Sub-Saharan Africa, and is a substantial provider of high-voltage overhead cables and protection and automation systems. The group delivered a highly satisfactory set of results for the half year ended 28 February 2011. Fully diluted headline earnings increased by 13% to 4.08 cents per share. Headline earnings per share are 4.08 cents and basic earnings per share are 4.10 cents, both of which are marginal decreases over the previous comparative period. The current order book has grown to a record R1,5 billion from R1,05 billion a year ago, representing a 42% increase. The order book has increased by R200 million since 31 August 2010, representing an increase of 15% over the 6 months. Included in this increase is the award of CIG`s first 400kv overhead- lines tender, for R190 million. 400 kv overhead lines is a segment of the market in which the group had targeted strategically but had not previously participated. 86% of all CIG`s revenue and 82% of CIG`s earnings before interest, taxation, depreciation and amortisation ("EBITDA") are directly attributable to the power and electrification sector. CIG built significant new operating capacity in this business in the last six months: establishing the Renewable Energy Division, expanding 400kv line capacity, opening a Middle East office, and hiring in additional project-execution skills. Nevertheless, trading profits reflected a good contribution from Consolidated Power Projects (Pty) Ltd ("Conco").The Building Materials Division recorded slightly higher profits due to an improved performance at West End Claybrick ("West End"). Financial Overview Revenue for the period grew 8% to R680 million (Feb 2010: R629 million). The trading margin was 25.4% which was marginally lower than the previous comparative period (Feb 2010: 26.3%), due to upfront tender margins at Conco coming under slight pressure and a change in the sales mix in the projects executed during the period. Our financial position remains strong and the group is appropriately capitalised. Total debt, decreased by R48 million to R55 million (Aug 2010: R103 million). Overall the group`s debt-to-equity ratio declined to 6% which is a significant improvement on the 12% as at 31 August 2010. CIG therefore has significant borrowing capacity. The cash position at 28 February 2010 was R105 million (Aug 2010: R234 million). Excess cash was used in the period to reduce debt, and to enhance margins by taking advantage of prompt-payment discounts offered by our suppliers. There was therefore an overall increase in the investment in the working capital. It is the view of CIG`s board of directors that headline earnings and fully diluted headline earnings per share provide the most meaningful understanding of the results for the period. The number of shares in issue increased by 21% when all the Conco warranties were achieved. Headline earnings for the six months ended 28 February 2011 was R46,4 million which is an increase of 13% over the previous six months ended 28 February 2010. Divisional Overview Conco The business had a good six months. Conco achieved revenue of R583 million (Feb 2010: R528 million) and EBITDA of R62.6 million (Feb 2010: R66,6 million). This was achieved after sustained investment in capacity as Conco recruited highly skilled personnel to assist with project execution. The key metric of substantial progress in this regard has been the growth of the order book. The order book currently stands at R1,5 billion (Feb 2010: R1.05bn). The business has enjoyed a substantial uplift in tender activity with higher than expected levels emerging from across the African Continent. It has also been a busy period in South Africa. We are of the view that despite recent substantial gains in our order book we still have additional capacity within the business and we are aggressively targeting prospective projects. The period was characterised by capacity building of highly skilled project execution personnel and services that support project execution. Since August 2010, Conco has increased the head count of those key employees involved in revenue and profit generation by 11%. We have improved our business development, health, safety and human capital management. Information Technology has been upgraded to handle the multi-country and project risks that we need to manage. This change process is still underway. Building Materials West End delivered an operating profit for the six months ended 28 February 2011 as opposed to an operating loss in the prior comparative period. Turnover increased by 13% to R48 million as a result of an increase in roof-tile sales compared to the prior year. EBITDA improved to R6 million (Feb 2010: R1 million). The decline in activity in the residential construction industry appears to have leveled, and there are early signs of a recovery in demand. West End has secured sufficient facilities to sustain itself through the current downturn, and to handle an uptick in activity levels. Drift had a satisfactory six months despite a 16% reduction in turnover to R48 million. The continued decline in the residential and commercial sectors coupled with a decrease in volumes supplied to the roads sector resulted in turnover decreasing. Volumes were 28% lower than the previous comparative period. The business continued to maintain tight cost controls and productivity improvements. Despite these actions at Drift the reduction in turnover resulted in EBITDA decreasing to R11 million from (Feb 2010: R16 million). Prospects The group`s strategic positioning in the provision of infrastructure to the African Power Market, with the majority of the clients being South African or African utilities, provides a fairly robust buffer against the volatility of the market place. The imbalance of substantially higher demand levels for power generation and transmission against the current supply shortage will remain for decades but the constraints to growth remain a funding capacity for projects and shortage of skills to execute the projects. The Renewable Energy Division has submitted an increasing number of proposals to execute the Balance of Plant ("BoP") for major wind-farm projects in South Africa. We are optimistic that the Renewable Energy business will make a material contribution to the future results of the group, and will justify our decision to establish a dedicated division to handle Renewable Energy projects. Our ability to execute successful projects with South African expertise and a successful track record in the sector leaves Conco well positioned for a significant increase in these Renewable Energy Projects. We all wait for successful contractual conclusion between NERSA and the developers to be concluded. Conco continues to add capacity to execute work and expand on its business development network across Africa. We are focused on improving our success rate in Africa with tighter performance measures and a more aggressive strategic approach to closing work in those targeted African countries. The regulatory approvals for our investment in Saudi Arabia have been received and our office in Al-Khobar on the East Coast of the Arabian Gulf has been opened. We remain highly confident that we will find the appropriate offering in this high growth market. The Building Materials Division is expected to remain under pressure for the remainder of the financial year. The division is currently operating a tightly controlled expense base, and we are hopeful that expansion in sales and distribution capacity will increase our market share. The group is confident that we are structurally well positioned for higher-than-normal organic growth over the medium to longer term. Sustained demand for our services and goods, combined with a balance sheet that has some latitude for growth, re- inforces the strategic intent that we will, at the appropriate time, acquire additional operating companies. These prospective acquisitions would fulfil our strategic intent to provide infrastructure and infrastructure services across the African Continent. CHANGES TO THE BOARD OF DIRECTORS Peter Baird, who has been acting as chairman since November 2010, has been appointed chairman of the group. Peter is a Senior Advisor to Vantage Capital. He also serves on the boards of EastPharma, listed on the London Stock Exchange, and Catalent Pharma Solutions, a portfolio company of the Blackstone Group. He was previously the president of DJO, Inc., a medical-devices company also owned by the Blackstone Group, and was also a partner at McKinsey & Company. Robert Horton, a partner of Kingdom Zephyr Africa Management has been appointed to the board as a non- executive director. Rob has 11 years of private- equity investment experience, and has served as non- executive director of unlisted companies operating in the building supplies, consumer goods, distribution and light manufacturing sectors. Robert worked in the oil and gas sector at Masefield in London. In 1998 he moved back to South Africa and worked in corporate finance before joining a leading private equity firm providing development and buyout capital to small and medium sized enterprises. Robert has a BCom in Accounting and in Information Systems from UCT and is a Chartered Accountant. Nathan Mintah, previously a non-executive director of the group, is now an independent non-executive director. Andrea Geisser has resigned from the board. The board wishes to thank Andrea for his contribution to the group during his term as a director. DIVIDEND POLICY The dividend policy will be reviewed periodically taking into account prevailing circumstances and future cash requirements. At present, all earnings generated by the group will be utilised to fund future growth. Accordingly, no dividend has been recommended for the six months ended 28 February 2011. BASIS OF PREPARATION These condensed consolidated interim financial results have been prepared in accordance with International Financial Reporting Standards ("IFRS"), Interim Financial Reporting (IAS34), AC500 series of interpretations, the JSE Listing Requirements and comply with the South African Companies Act (1973), as amended. The accounting policies applied are consistent with those applied in the annual financial statements for the year ended 31 August 2010. These results have not been audited or reviewed by the group`s auditors. SUBSEQUENT EVENTS It is highly pleasing to report that subsequent to the period under review, Conco secured an order on one of its key initiatives - its first 400kv overhead line project with Eskom for R190 million. This contract is included in our reported order book, but no financial implications have yet been recorded. This award is an important milestone for Conco, as we have now entered a significant segment of the high-voltage power industry to which we had no previous exposure. No other material events have occurred subsequent to the interim period and the date of this announcement. APPRECIATION The directors and management of Consolidated Infrastructure wish to thank all staff for their focused efforts and loyalty over the period. We also thank our customers, business partners, advisors, suppliers and our shareholders for their ongoing support and faith in the group. By order of the board Peter Baird Raoul Gamsu Chairman CEO 13 April 2011 Non-executive directors: F Boner, P Voutyritsas*, R Horton Independent non-executive directors: P Baird (Chairman)**, AD Dixon, A Darko***,N Mintah** Executive directors: RD Gamsu, IM Klitzner, B Berelowitz *Greek, **American, ***Ghanaian Registration number: 2007/004935/06 Business address: 6A Sandown Valley Crescent, Sandown, Sandton Business postal address: PO Box 651455, Benmore, Johannesburg 2010 Company secretary: Sandra Saunders BA LLB (WITS) DIP CORP GOV (RAU) Telephone: 011 722 7430 Facsimile: 011 722 7431 Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited Sponsor: Java Capital Auditors: PKF(Jhb) Inc. Visit our website: www.ciglimited.co.za Date: 13/04/2011 08:50:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). 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