Wrap Text
Reviewed provisional consolidated results for the year ended 31 August 2013
Consolidated Infrastructure Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2007/004935/06)
JSE share code: CIL ISIN: ZAE000153888
(Consolidated Infrastructure or CIG or the Group)
www.ciglimited.co.za
Reviewed provisional consolidated results for the year ended 31 August 2013
Highlights
Revenue up 31% - R2 037 million (2012: R1 553 million)
HEPS up 19% - 137,8 cents per share (2012: 116,1 cents per share)
EBITDA up 24% - R278 million (2012: R225 million)
Order book up 10% - R2,2 billion
Statements of financial position
Reviewed Audited
Year ended Year ended
31 August 31 August
R000 2013 2012
ASSETS
Non-current assets 867 718 819 151
Property, plant and equipment 364 368 313 704
Goodwill 462 220 462 220
Intangible assets 28 342 31 825
Deferred tax 6 316 8 250
Financial assets 6 472 3 152
Current assets 1 910 571 1 163 277
Inventories 93 156 65 972
Trade and other receivables 94 786 57 086
Amounts due from contract customers 1 216 896 635 412
Taxation receivable 1 402 368
Cash and cash equivalents 504 331 404 389
Total assets 2 778 289 1 982 378
EQUITY AND LIABILITIES
Equity 1 579 991 1 146 503
Issued capital 13 11
Share premium 982 572 726 897
Share-based payment reserve 16 336 11 545
Foreign currency translation reserve (1 960) (3 074)
Non-controlling interest 1 086 12
Accumulated income 581 944 411 112
Non-current liabilities 496 658 396 053
Other financial liabilities 428 774 328 787
Provisions 8 232 8 065
Instalment sale liabilities 27 552 13 799
Deferred tax 32 100 45 402
Current liabilities 701 640 439 822
Other financial liabilities 10 256 17 711
Trade and other payables 499 467 232 569
Amounts received in advance 22 755 34 589
Amounts due to contract customers 113 369 108 930
Instalment sale liabilities 16 985 9 975
Taxation payable 38 808 36 048
Total equity and liabilities 2 778 289 1 982 378
Number of shares in issue (000s) 133 999 118 841
Net asset value per share (cents) 1 179 964
Net tangible asset value per share (cents) 813 549
Statements of comprehensive income
Reviewed Audited
Year ended Year ended
31 August 31 August
R000 2013 2012
Revenue 2 037 402 1 553 522
Cost of sales (1 528 347)(1 116 409)
Gross profit 509 055 437 113
Other income 22 589 1 690
Operating expenses (290 359) (241 734)
Foreign exchange gain 37 211 27 990
Earnings before interest taxation
depreciation and amortisation (EBITDA) 278 496 225 059
Depreciation and amortisation (44 646) (39 680)
Profit before interest and taxation 233 850 185 379
Interest received 17 631 18 457
Interest paid (33 758) (15 786)
Profit before taxation 217 723 188 050
Taxation (46 097) (51 146)
Profit for the year 171 626 136 904
Total profit for the year attributable to:
Equity holders of the parent 170 832 136 892
Non-controlling interest 794 12
Other comprehensive income:
Recyclable in profit and loss:
Exchange rate differences on translating
foreign operations 1 394 851
Total comprehensive income 173 020 137 755
Total comprehensive income attributable
to:
Equity holders of the parent 171 946 137 743
Non-controlling interest 1 074 12
Basic earnings per share (cents) 138,3 116,5
Diluted earnings per share (cents) 136,9 116,2
Fully diluted earnings per share (cents) 126,3 115,0
Reconciliation of headline earnings:
Profit attributable to ordinary
shareholders 170 832 136 892
Adjusted for:
Profit on disposal of property, plant and
equipment (760) (565)
Tax effect on adjustments 213 158
Headline earnings attributable to ordinary
shareholders 170 285 136 485
Weighted average number of shares in issue
(000's) 123 533 117 548
Diluted weighted average number of shares 124 815 117 800
in issue (000's)
Headline earnings per share (cents) 137,8 116,1
Diluted headline earnings per share
(cents) 136,4 115,9
Fully diluted headline earnings per share
(cents) 125,9 114,6
Statements of cash flow
Reviewed Audited
Year ended Year ended
31 August 31 August
R000 2013 2012
Cash generated by operations before
changes in working capital 273 341 226 523
Changes in working capital (383 827) (225 068)
Net (interest paid)/received (16 127) 2 671
Taxation paid (55 764) (13 845)
Cash flows from operating activities (182 377) (9 719)
Cash flows from investing activities (60 928) (42 789)
Cash flows from financing activities 343 257 320 870
Net increase in cash and cash equivalents 99 952 268 362
Effect on foreign currency translation
reserve movement on cash balances (10) (9)
Cash and cash equivalents at beginning of
year 404 389 136 036
Cash and cash equivalents at end of year 504 331 404 389
Statements of changes in equity
Reviewed Audited
Year ended Year ended
31 August 31 August
R000 2013 2012
Balance at beginning of the year 1 146 503 946 310
Issue of share capital and share issue
expenses 255 677 50 893
Share-based payment reserve 4 791 11 545
Total comprehensive income for the year 171 946 137 743
Non-controlling interest 1 074 12
Balance at end of year 1 579 991 1 146 503
Segmental analysis
Reviewed Audited Reviewed Audited
Year ended Year ended Year ended Year ended
31 August 31 August 31 August 31 August
2013 2012 2013 2012
R000 R000 % %
Revenue
Heavy building materials 309 923 272 898 15 18
Power 1 727 479 1 280 624 85 82
Corporate
Total 2 037 402 1 553 522 100 100
EBITDA
Heavy building materials 61 865 57 840 22 26
Power 213 765 179 264 77 80
Corporate 2 866 (12 045) 1 (6)
Total 278 496 225 059 100 100
Segmental analysis Reviewed Audited
Year ended Year ended
31 August 31 August
R000 2013 2012
ASSETS
Heavy building materials 486 636 448 705
Power 1 259 482 868 846
Corporate 1 814 808 1 442 983
Total assets including Group loan accounts 3 560 926 2 758 925
Inter-group elimination (782 637) (778 156)
Total 2 778 289 1 982 378
LIABILITIES
Heavy building materials 385 357 363 029
Power 676 214 419 397
Corporate 422 400 316 426
Total liabilities including Group loan
accounts 1 483 971 1 097 243
Inter-group elimination (285 673) (262 977)
Total 1 198 298 835 875
CEO of CIG, Raoul Gamsu commented
We are pleased to deliver another robust set of results.
In South Africa, our power subsidiary Consolidated Power Projects
(Pty) Ltd (Conco), successfully executed R600 million worth of
highly complex electrical work on seven Round 1 projects of the
Department of Energys Renewable Energy Independent Power Producer
Programme (REIPPP). Conco met all key milestones to date and with
renewed focus and restructuring, is proving itself to be a competent
supplier and contender in the REIPPP.
The continued demand for and development of new electrical
infrastructure in West and East Africa, specifically Ghana and Kenya,
contributed substantially to our earnings.
The Group expanded its Protection and Automation offerings and is
positioned to service major utilities and municipalities on the
African continent.
We also made further inroads in our Operations and Maintenance
division to service the highly technical maintenance requirements of
wind farm developers and original equipment manufacturers.
The Building Materials division expanded in line with a moderate pick
up in the sector and two small strategic bolt-on acquisitions were
completed during the year.
Our acquisition in specialist oil and gas waste management group,
Angolan Environmental Serviços Limitada (AES), was announced on
SENS on 3 December 2012. The quota (shareholding) is expected to be
transferred next month. We have been involved with the running of
this business since December 2012 and are pleased with its
performance, which is in line with our expectations.
COMMENTARY
Financial overview
Revenue grew by R483 million to R2 037 million, a 31% increase over
the prior year. Earnings before interest, taxation, depreciation and
amortisation (EBITDA) grew by R53 million to R278 million, a 24%
increase over the prior year. The decline in EBITDA margin to 13,7%
from 14,5% in the prior year is partly attributable to the lower
margin South African renewable energy work. While the renewable energy
work required specific intensive focus, it also resulted in an inability
to fully exploit other operational efficiencies across other areas of
the business.
The power and electrification sector continues to be the core
business for CIG with 85% of CIGs revenue and earnings and 77% of
EBITDA directly attributed to this sector.
Profit for the year improved by 25% to R172 million
(2012: R137 million).
Earnings per share of 138,3 cents (2012: 116,5 cents) and headline
earnings per share of 137,8 (2012: 116,1 cents) cents represents
an increase of 19% over the previous year.
The debt-to-equity ratio remained constant at 30% (2012: 32%) despite
an additional R130 million of funds raised through the medium-term
note programme in August 2013. A portion of the first R270 million
raised to finance expenditure from the alternative energy sector was
deployed during the year into Renewable Energy Projects. The Group
maintained a Moodys credit rating of Baa2.za as part of the
programme.
As anticipated, the Group utilised working capital to fund the R500
million of turnover growth. The Round 1 renewable energy projects of
the REIPP are in the final rounds of completion and consequently
should unlock additional cash flow over the next six months.
The investment in amounts due from contract customers increased
during the year due to the increase in revenue and an unfavourable
shift in payment milestones negotiated within our existing contracts,
specifically those relating to the Renewable Energy Projects. The
Group has identified the negotiation of payment milestones as a
critical area to reduce the required working capital to fund the
growth of the business. Subsequent to year-end, management have begun
to introduce controls to improve assessment of tenders prior to
submission, which should ensure that projects deliver enhanced cash
generation during execution.
To deliver on the current order book and growth prospects the Group
is satisfied that for the foreseeable future, sufficient facilities
and guarantee lines have been secured through its bankers and other
providers of capital.
Divisional overview
Substations and high voltage electrification work Conco, a market leader
in its field, continued with its excellent track record and delivered solid
results for the year. Revenue from the division increased 35% to
R1 727 million (2012: R1 280 million) while EBITDA improved 19% to
R214 million (2012: R179 million).
Conco secured a 10% increase in its order book to R2,2 billion
(2012: R2,0 billion).
Over the past four years Conco has increased its revenue by a
compounded 19% and sustainably positioned itself to successfully
operate across the African continent. To underpin Concos sustainable
growth, management have sharpened its focus regionally to improve
operational efficiency and flexibility. The Protection and Automation
division which generated R136 million of revenue was deemed material enough
to become a standalone business, with its own strategy, key customers and
growth prospects.
Work stemming from the South African municipalities, historically
a key market for Conco, was disappointing as the number of tenders
issued during the year declined. In addition the issuing of the
certificates required to proceed on large strategic projects was
delayed as a result of external technical and bidding issues.
Continued progress was made on the rest of the continent and
significant contract wins were achieved in Tanzania, Kenya, Uganda
and Zambia in East Africa whilst Ghana and Angola continue to
develop.
The Saudi Arabia business successfully executed its first small
project and the business has been selected for an additional
R70 million project. Currently negotiations are ongoing and the Group
anticipates closure within the next 30 days.
Protection and Automation
Protection and Automation is the control of power delivery systems to
reduce the occurrence of, and shorten the duration of outages. The
Conco Protection and Automation business was originally set up as an
internal service provider in 2002. It has subsequently established a
reliable name as a supplier of protection and automation schemes to
major utilities and municipalities on the African continent.
The independent Protection and Automation division will extend its
services to other market segments as the Group anticipates that
the market for protection schemes will grow over the medium term. The
individual focus will allow the independent division to focus on
business development, assembly systems and processes that are more
appropriate for a business of this nature. In addition, management
will seek to augment the breadth of offering from this division.
Renewable Energy
In the first round of the REIPPP programme, Conco won R870 million of
renewable energy business and after the certificates to proceed on
the projects were issued in November and December 2012, has executed
R600 million worth of business. The remaining R270 million is due for
delivery in the next financial year. The projects were internally
classified as having higher risks, particularly due to penalties for
late delivery and grid compliance in terms of Eskom codes. To
successfully complete these projects Conco re-assigned highly
experienced internal personnel to meet the demanding deadlines and
comply with the required stringent legal and risk criteria.
Although at the planning stage the Group underestimated some of the
unforeseen challenges the Group expected to encounter during execution,
a huge effort was expended at every level of the organisation and the
team to date, has successfully delivered on all these projects in
compliance with set standards, on time and without any penalties.
Operations and Maintenance
Incubated within Conco, the new division was formed to supply the
prescribed operational and maintenance services to wind farms, solar
parks, municipalities and utilities on a long-term basis. The
division won a maintenance balance of plant and a turbine maintenance
contract during the year. The necessary foundations for its success
have been established and it has developed management capacity and
undertaken training of its South African technicians by the Danish
Wind Academy. The divisions management actively engaged with both
the wind farm developers and the original equipment manufacturers
to secure and meet their highly technical maintenance requirements,
which is imperative to sustain the assets on a long-term basis.
Developing skills
The recruitment drive to increase the Groups skills base continues
at the Conco Skills Academy and over the past year an additional
eight interns were enrolled in the Groups programme. The Academy has
recruited 16 candidates for 2014 and introduced a bursary scheme for
engineering graduates. The Academy seeks to develop and educate
engineers according to Concos high standards with the intention of
retaining these graduates to contribute to Concos robust growth
plans.
Building Materials
The Building Materials division had another successful year and
continued to gain market share particularly in the roof tile market.
Market conditions improved from the lows of 2009/2010 but remain
volatile. The market continued to respond negatively to price
increases and the division was unable to pass on the full extent of
cost increases.
Revenue increased 14% to R310 million (2012: R273 million) and
EBITDA increased 7% to R62 million (2012: R58 million).
During the year the division increased its capacity and range with
the acquisition of a small roof tile operation and purchase of the
Laezonia quarry which is situated close to a high growth node in
Northern Johannesburg. These acquisitions did not contribute to
the current years results and we expect them to deliver a positive
contribution in 2014.
Oil and Gas Services
AES collects, recycles and disposes of the oil-based waste created
during the process of drilling for oil.
AES has an exciting growth trajectory as the level of oil drilling
increases and the industry in Angola prepares for the more stringent
environmental standards scheduled to be implemented in 2014. To fund
the growth of the business, AES concluded a USD30 million financing
agreement with Standard Bank Angola. This will allow AES to meet the
demand for their specialist services with minimal additional shareholder
assistance.
AES performed in line with expectations and substantial new contracts
were won with the international oil companies. Two major clients
requested extensions on the implementation of the environmental
standards which will allow them additional time to comply.
Consequently these two clients have not yet contracted for the
additional services.
It is anticipated that CIGs acquisition of quota holding (shares) in
AES will be discharged and transferred to an Angolan incorporated
company controlled by CIG International in November 2013.
Had CIG equity accounted the results of AES for the eight months
ended August 2013 it would have contributed 18 cents of additional
earnings per share.
Prospects
The current order book of Conco together with higher than expected
levels of bidding and tenders awaiting adjudication will contribute
to the Groups sustainable growth path. Business development through
our Mauritian-based subsidiary, Consolidated Power Projects International
(Pty) Ltd, has made progress with significant non-South African clients
in developing turnkey solutions. The potential size and scope of those
projects managed and controlled through our Mauritian subsidiary is
greater than we have historically executed. There is however some downward
pricing pressure from Iberian and Asian competitors in order to
potentially secure these high value contracts.
The Group expects that the Protection and Automation division will
receive significant enquiries for protection schemes from utilities over
the next 12 months. If successful they will have a material impact on the
division in 2015.
The Renewable Energy division still has one-third of Round 1 of
the REIPP programme to complete. While there are currently ongoing
negotiations on the award of Round 2 projects the Group has
secured orders of R290 million out of a potential R500 million. Our
strategy to offer large full turnkey projects didnt prove to
be as successful as in Round 1, as developers divided the projects
between multiple contractors and we secured a smaller amount of work
than expected. We believe we remain well positioned for Round
3 as the market observes our high-quality output and ability to
mitigate risks as a turnkey EPC (in full) once the Round 1 projects
are commissioned on-time.
The Groups recent investment into operating and maintenance is
showing positive signs. The division has noted an increasing trend
from municipalities to outsource maintenance on a longer-term
contractual basis, which should benefit the division.
The Group continues to mitigate market volatility risk by
operating in multiple geographies across the African continent. The
continent continues to experience higher than average growth rates,
which are expected to accelerate with the demand for minerals, oil,
gas and food security. Favourable demographics and increasing
population growth rates together with increasing urbanisation and
purchasing power will increase the opportunities for Conco and the
Group.
The Group is actively pursuing acquisitions in South Africa and on
the African continent, which are synergistic to the current business
operations or transformative in nature across the infrastructure
services sector.
Review Opinion
These reviewed provisional consolidated annual financial results have
been reviewed by Grant Thornton (Jhb) Inc. Their unqualified review
opinion is available for inspection at Consolidated Infrastructures
registered address. Any reference to future financial performance
included in this announcement has not been reviewed or reported on by
the Groups external auditors.
Shares Issued for Cash
On 9 May 2013, the Group placed 15 million shares (12,6% of shares in
issue) for cash at R17,20 per share to selected institutions. The
proceeds raised will be used to fund the settlement of the AES
acquisition and to bolster expected working capital requirements
to facilitate further growth.
The increased number of shares has been used in calculating the
earnings per share, diluted and fully diluted earnings per share for
the year.
Dividend Policy
The dividend policy was reviewed by the board. After taking into
account prevailing circumstances and future cash requirements, all
earnings generated by the Group will be utilised to fund the
anticipated growth in the coming year. Accordingly, no dividend
has been recommended for the period. Basis of preparation
These reviewed provisional consolidated annual financial results
have been prepared in accordance with International Financial
Reporting Standards (IFRS), Interim Financial Reporting (IAS 34), the
SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued
by Financial Reporting Standards Council, the JSE Listings
Requirements and comply with the requirements of the South African
Companies Act 2008, as amended. The accounting policies are
consistent with those applied in the prior year other than the
adoption of the revised IAS 1 whereby Other Comprehensive Income
needs to be split between those items that can be reclassified to
profit and loss and those that cant.
These reviewed results have been prepared under the supervision of
the Group financial director I Klitzner CA(SA).
Appreciation
The directors and management of Consolidated Infrastructure wish to
thank all staff for their focused efforts and loyalty. 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
Frank Boner Raoul Gamsu
Chairman CEO
29 October 2013
Executive directors: RD Gamsu, IM Klitzner, B Berelowitz
Non-executive directors: K Bucknor*
Independent non-executive directors: R Horton, AD Dixon, A Darko*,
J Nwokedi, F Boner (Chairman) * Ghanaian
There was no change to the board of directors during the year
Company secretary: Probity Business Services (Pty) Ltd
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Sponsor: Java Capital
Auditors: Grant Thornton (Jhb) Inc.
Date: 29/10/2013 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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