Wrap Text
Unaudited results for the six months ended 28 February 2014
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
Unaudited results for the six months ended 28 February 2014
Highlights
– Revenue up 36% to R1,3 billion
– EBITDA up 36% to R169 million
– HEPS up 50% to 88,5 cents per share
– Order book up 36% to R2,85 billion
Consolidated Infrastructure delivered strong profit growth over the
six months ended 28 February 2014.
The improvement in profits was driven by the impressive performance
and first time inclusion in our results from Angola Environmental
Servicos Limitada (“AES”). During the period under review all the
divisions enjoyed strong growth in top line revenues and managed to
maintain their profit margins.
Business Overview
Consolidated Infrastructure, through its subsidiary Consolidated
Power Projects Proprietary Limited (“Conco”), is a leading turnkey
developer and installer of high-voltage electrical substations,
overhead cables and renewable energy balance of plant electrical work
in sub-Sahara Africa. The Building Materials division locally
produces a range of aggregates and building products for the
construction industry. Consolidated Infrastructure’s joint venture,
AES, is a leading services provider to the oil and gas sector in
Angola.
Financial overview
Revenue grew by 36% to R1,3 billion (2013: R970 million). Earnings
before interest, taxation, depreciation and amortisation (“EBITDA”)
grew by R45 million to R169 million, a 36% increase over the prior
year. EBITDA margins remained steady at 12,8%.
The power and electrification sector contributes 63% of the
group’s profit after tax, oil and gas contributes 22% and building
materials 9%.
Profit for the six month period increased by 70% to R120 million from
the prior year’s R70 million.
Earnings and headline earnings per share of 88,6 cents and 88,5 cents
respectively represent an increase of 50% over the corresponding six
months.
The debt-to-equity ratio increased to 40,8% (2013: 29,6%) as R130
million was raised during the second half of the prior year through
the medium-term note programme and in order to facilitate the
on-shore payment to the shareholders of AES, an additional loan of
R182 million was raised in Angola.
Interest cover as measured against EBITDA remained at a satisfactory
level of 8,9 times. The group still has R100 million of unissued debt
available as part of the medium-term note programme and a cash balance
on hand of R542 million. R182 million has been collateralised to settle
the Angolan obligation. After allowing for the settlement of the Angolan
debt, the debt-to- equity ratio would reduce to 30,2%. It is anticipated
that over the next 12 months the cash will be invested into Angola to repay
the Angolan debt. The group has maintained a consistent Moody’s Baa2.za
credit rating.
The second half of the financial year has historically produced
stronger earnings performance due to the December shut down period
that occurs during the interim reporting period. The group expects
this trend to continue in the current financial year.
Divisional overview
Power
– Revenue up 39% to R1,1 billion
– EBITDA up 39% to R137 million
– Order book up 36% to R2,85 billion
The rapid growth in turnover within Conco of R318 million,
representing a year on year increase of 39%, was well managed during
the period with efficient and effective project management. The
strategic approach to the renewable sector projects to trade
off extended payment milestones for lower levels of penalty and
damages risk was successfully implemented. Contractual and
operational challenges were surmounted in Round 1 of the Renewable
Energy Independent Power Producer Programme (“REIPPP”) and, although
specific facilities were established to meet the expected working
capital requirements, Conco could have better anticipated some of the
project timing issues encountered to reach some of the project
milestones. The contractual and operational experience gained through
Round 1 will be used to improve contract terms within the risk
framework of the upcoming Round 3 negotiations. Management will
continue to minimise the penalty risk while improving the working
capital absorption during the execution of these upcoming contracts.
Conco continued to successfully execute work in the Renewable
Energy sector and has R400 million of orders still to execute. To
date they have continued to deliver on time and without penalty. The
risks associated with the execution of renewable projects continue to
remain at the high end of the spectrum. The focus of the Renewable
Energy Feed-In Tariff Programme (“REFIT”) on local procurement has
increased the risk of local suppliers being unable to deliver on time
and to the required standards. This risk is requiring greater focus
by the Conco team in managing supply chain issues and to ensure that
there is no financial or reputational damage to the Conco brand.
The division won substantial work from South African municipalities
who continue to award projects to alleviate the estimated R39,6
billion electrical infrastructure backlog. Conco recently secured the
largest municipal contract in its history worth R800 million, which
is to be executed over a three year period.
In sub-Sahara Africa, excluding SA, Conco won tenders to build and
upgrade electrical substations and the order book remained
constant in US Dollar terms. Conco completed benchmark projects in
Kenya and Zambia and won its first project in Rwanda. This brings the
countries we have successfully operated in to a total of 21. The
African market demand for electrification remains robust and
significant tenders were submitted to African utilities. The demand
from global mining houses, traditionally a strong market segment for
Conco, was however weak and projects for these companies were either
shelved or delayed. This impacted the growth in Ghana and Democratic
Republic of Congo. On balance there has not been a slowdown in the
demand for Conco’s services across the rest of the African continent.
The Operations & Maintenance company, rebranded as Consolidated Power
Maintenance (“O&M”), was initially established to operate and
maintain renewable energy projects for either the owner or original
equipment manufacturer. The company did not contribute to trading profit
for the period. Six short-term contracts were awarded in the period. O&M
are confident that when they prove the quality of their offering they will
convert these projects into long-term annuity based contracts. It is not
anticipated that O&M will contribute to the group profitability this year.
Structurally, O&M has been separated from Conco and established as a
standalone CIG subsidiary.
The Protection & Automation division performed in line with
expectations and the building blocks required for its expansion have
been put in place, including the recruitment of key personnel and
rental of a new facility required to handle the increase in volumes.
Building Materials
– Revenue up 19% to R171 million
– EBITDA up 7% to R28 million
The Building Materials division experienced a pickup in demand from
the residential building sector. Additional operating costs were
incurred at Laezonia to reconfigure the quarry, which will increase
the availability and mix of product over time.
Oil & Gas Services
– Profit attributable to joint venture of R26 million
AES is a service provider to the oil and gas rigs located off the
coast of Angola. The primary service is to collect and recycle and
dispose of waste generated in the oil drilling process.
Shareholders have previously been advised that the transaction to
acquire an effective 30,5% became unconditional in all respects, as a
consequence of which CIG became the effective holder of a 30,5%
shareholding in AES. The shareholding in AES is currently held by an
Angolan incorporated company controlled by CIG. As soon as the
requisite approval of the transaction has been granted by the Angolan
authorities in terms of the Angola Private Investment Law, Law 20/11,
CIG will transfer its entire shareholding in AES to a CIG wholly owned
subsidiary incorporated in Mauritius.
As planned the business experienced strong growth as a function of
increased drilling, stricter environmental laws and growth in market
share.
The profit attributable to the joint venture was for a five month
period commencing 1 October 2013.
Prospects
The Power division is well positioned, with a strong order book and
sufficient tender awards across its core markets, to continue to
deliver steady growth. Its prospects in South Africa within the
municipalities and REFIT programme are expected to yield above
average prospects. African utilities will however continue to
offer above average growth prospects.
A key priority of CIG remains the focus on geographic
diversification. Consequently significant business development
initiatives are underway in Nigeria, Angola, Mozambique and Oman.
These initiatives are gaining momentum and will hopefully lead to a
positive conclusion over the next twelve months. Conco has
strategically diversified its risk base and will continue to manage
downturns through successfully operating across multiple geographies
while providing a variety of relevant product ranges. It is expected
that over the medium to longer term the biggest constraint to growth
will remain the availability of suitably qualified engineers to
execute on the expected increase in the technically complex work.
The AES business will continue to grow organically due to the
increased oil drilling in Angola and legislated environmental
requirements in the drill cutting law. The business is in the
process of building a second site at Soyo, in the north of Angola,
which will allow AES to relocate all volumes originating from the
north to Soyo and free up approximately 30% of additional capacity in
Luanda. In the short term there is a cost implication, as
additional capital and operating expenditure (“capex”) is incurred,
but this capex spend will enable future operating capacity. The
business has built a sound track record in providing specialised
services of waste management to oil companies in Angola and is
well positioned to be the supplier of choice given its performance
history.
Despite financial headwinds to consumers’ demands for housing, there
have been no signs of a slowdown and it is expected that the Building
Materials division should sustain its current growth trajectory.
Condensed consolidated statements of comprehensive income
Unaudited Unaudited
six six audited
months months year
ended ended ended
28 Feb 28 Feb 31 Aug
2014 2013 2013
R’000 R’000 R’000
Revenue 1 314 580 969 671 2 037 402
Cost of sales (1 000 008) (711 406) (1 528 347)
Gross profit 314 572 258 265 509 055
Other income 14 129 7 000 22 589
Operating expenses (181 328) (145 516) (290 359)
Foreign exchange gain 21 129 4 115 37 211
Earnings before interest,
taxation, depreciation and
amortisation ("EBITDA") 168 502 123 864 278 496
Depreciation (25 118) (20 630) (44 646)
Profit before interest and
taxation 143 384 103 234 233 850
Interest received 9 514 7 958 17 631
Interest paid (28 500) (14 211) (33 758)
Profit before taxation 124 398 96 981 217 723
Taxation (30 932) (26 497) (46 097)
Income from joint venture 26 493
Profit for the period 119 959 70 484 171 626
Total profit for the period
attributable to:
Equity holders of the
parent 118 800 70 135 170 832
Non-controlling interest 1 159 349 794
Other comprehensive income:
Recyclable in profit and
loss:
Exchange rate differences on
translating foreign
operations 12 343 (1 328) 1 394
Total comprehensive income 132 302 69 156 173 020
Total comprehensive income
attributable to:
Equity holders of company 131 568 68 807 171 946
Non-controlling interest 734 349 1 074
Basic earnings per share
(cents) 88,6 59,0 138,3
Diluted earnings per share 87,8 58,1 136,9
Fully diluted earnings per
share (cents) 87,7 58,1 126,3
Reconciliation of headline
earnings:
Profit attributable to
ordinary shareholders 118 800 70 135 170 832
Adjusted for:
Profit on disposal of property,
plant and
equipment (213) (26) (760)
Tax effect on adjustments 38 7 213
Headline earnings attributable
to ordinary shareholders 118 625 70 116 170 285
Weighted average number of
shares in issue (000's) 134 040 118 841 123 533
Diluted weighted average number
of shares in issue (000's) 135 322 120 748 124 815
Fully diluted weighted average
number of shares in
issue (000's) 135 402 120 748 135 281
Headline earnings per share
(cents) 88,5 59,0 137,8
Diluted headline earnings
per share (cents) 87,7 58,1 136,4
Fully diluted headline
earnings per share (cents) 87,6 58,1 125,9
Condensed consolidated statements of financial position
Audited
As at As at year ended
28 Feb 28 Feb 31 Aug
2014 2013 2013
R’000 R’000 R’000
Assets
Non-current assets 1 188 439 818 357 867 718
Property, plant and
equipment 375 354 316 096 364 368
Goodwill 462 220 462 220 462 220
Intangible assets 26 600 30 084 28 342
Deferred tax 4 559 6 805 6 316
Investment in joint venture 312 588
Financial assets 7 118 3 152 6 472
Current assets 2 342 379 1 477 028 1 910 571
Inventories 94 142 71 931 93 156
Trade and other receivables 118 428 55 701 94 786
Amounts due from contract
customers 1 587 446 1 048 962 1 216 896
Taxation receivable 292 292 1 402
Cash and cash equivalents 542 071 300 142 504 331
Total assets 3 530 818 2 295 385 2 778 289
Equity and liabilities
Equity 1 715 562 1 217 757 1 579 991
Issued capital 13 11 13
Share premium 983 401 726 892 982 572
Share based payment reserve 18 776 13 643 16 336
Foreign currency
translation reserve 10 808 (4 401) (1 960)
Non-controlling interest 1 820 361 1 086
Accumulated profits 700 744 481 251 581 944
Non-current liabilities 551 419 371 802 496 658
Other financial liabilities
– interest bearing 424 780 308 711 428 774
Other financial liabilities
– non-interest bearing 60 694
Provisions 8 331 8 165 8 232
Instalment sale liabilities 28 253 10 114 27 552
Deferred tax 29 361 44 812 32 100
Current liabilities 1 263 837 705 826 701 640
Other financial liabilities 231 456 30 962 10 256
Trade and other payables 567 633 375 632 499 467
Amounts received in advance 65 666 78 302 22 755
Amounts due to contract
customers 125 098 187 470 113 369
Bank overdraft 228 420 – –
Instalment sale liabilities 15 689 10 490 16 985
Taxation payable 29 875 22 970 38 808
Total equity and
liabilities 3 530 818 2 295 385 2 778 289
Number of shares in issue
(000’s) 134 120 118 841 133 999
Net asset value per share
(cents) 1 279 1 025 1 179
Net tangible asset value
per share (cents) 915 610 813
Condensed consolidated statements of cashflow
Unaudited Unaudited
six six Audited
months months year
ended ended ended
28 Feb 28 Feb 31 Aug
2014 2013 2013
R’000 R’000 R’000
Cash flows from operating
activities (115 961) (72 686) (182 377)
Cash flows from investing
activities (348 692) (21 280) (60 928)
Cash flows from financing
activities 277 305 (9 995) 343 257
Net (decrease)/increase in
cash and cash equivalents (187 348) (103 961) 99 952
Effect on foreign currency
translation reserve
movement on cash balances (3 332) (286) (10)
Cash and cash equivalents
at beginning of period 504 331 404 389 404 389
Cash and cash equivalents
at end of period 313 651 300 142 504 331
Condensed consolidated statements of changes in equity
Unaudited Unaudited
six six Audited
months months year
ended ended ended
28 Feb 28 Feb 31 Aug
2014 2013 2013
R’000 R’000 R’000
Balance at beginning of the
period 1 579 991 1 146 503 1 146 503
Issue of share capital and
share issue expenses 829 – 255 677
Share based payment reserve 2 440 2 098 4 791
Total comprehensive income
for the period 131 568 68 807 171 946
Non-controlling interest 734 349 1 074
Balance at end of period 1 715 562 1 217 757 1 579 991
Segmental analysis
Unaudited Unaudited
six six Audited
months months year
ended ended ended
28 Feb 28 Feb 31 Aug
2014 2013 2013
R’000 R’000 R’000
Revenue
Building materials 171 072 144 279 309 923
Power 1 143 508 825 392 1 727 479
Total 1 314 580 969 671 2 037 402
EBITDA
Building materials 28 130 26 344 61 865
Power 137 123 98 957 213 765
Corporate 3 249 (1 437) 2 866
Total 168 502 123 864 278 496
Profit after tax
Building materials 10 990 8 402 29 162
Power 75 006 63 191 137 858
Oil & gas 26 493 – –
Corporate 7 470 (1 109) 4 606
Total 119 959 70 484 171 626
Unaudited Unaudited
six six Audited
months months year
ended ended ended
28 Feb 28 Feb 31 Aug
2014 2013 2013
% % %
Revenue
Building materials 13 15 15
Power 87 85 85
Total 100 100 100
EBITDA
Building materials 16 21 22
Power 81 80 77
Corporate 3 (1) 1
Total 100 100 100
Profit after tax
Building materials 9 12 17
Power 63 90 –
Oil & gas 22 – 80
Corporate 6 (2) 3
Total 100 100 100
Unaudited Unaudited
six six Audited
months months year
ended ended ended
28 Feb 28 Feb 31 Aug
2014 2013 2013
R’000 R’000 R’000
Assets
Building materials 473 400 446 227 486 636
Power 1 679 440 1 206 823 1 259 482
Oil & Gas 312 588
Corporate 1 848 711 1 421 175 1 814 808
Total assets including
group loan accounts 4 314 139 3 074 225 3 560 926
Inter-group elimination (783 321) (778 840) (782 637)
Total 3 530 818 2 295 385 2 778 289
Liabilities
Building materials 360 235 354 146 385 357
Power 1 031 697 699 110 676 214
Oil & Gas 272 303
Corporate 430 533 280 564 422 400
Total liabilities including
group loan accounts 2 094 768 1 333 820 1 483 971
Inter-group elimination (279 512) (256 192) (285 673)
Total 1 815 256 1 077 628 1 198 298
Dividend
The group’s policy is for the board to consider a dividend on an
annual basis after reviewing the annual results.
Basis of preparation
These unaudited consolidated interim results for the six months ended
28 February 2014 have been prepared in accordance with International
Financial Reporting Standards (“IFRS”), Interim Financial Reporting
(IAS34), the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the JSE Listings Requirements and
comply with the South African Companies Act (2008), as amended. The
accounting policies applied are consistent with those applied in the
annual financial statements for the year ended 31 August 2013. These
results have not been audited or reviewed by the group’s auditors.
These unaudited interim results have been prepared under the
supervision of the group financial director I Klitzner CA(SA).
Changes to composition of the Audit Committee
Subsequent to the AGM held on 2 April 2014, Frank Boner has stepped
down from the audit committee and was replaced by independent
non-executive director Rob Horton. Frank will continue to attend
meetings of the audit committee as an invitee.
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.
By order of the board
Frank Boner Raoul Gamsu
Chairman CEO
9 April 2014
Independent non-executive directors
F Boner (Chairman), K Bucknor*, A Darko*, AD Dixon, R Horton,
J Nwokedi
* Ghanaian
Executive directors
RD Gamsu, IM Klitzner, B Berelowitz
There were no changes to the board of directors during the period.
Business address - Commerce Square, Building 2, 39 Rivonia Road, Sandhurst
Business postal address - PO Box 651455, Benmore, Johannesburg 2010
Telephone: 011 280 4040 Facsimile: 086 748 9169
Company secretary - Probity Business Services Proprietary Limited
Transfer secretaries - Computershare Investor Services Proprietary Limited
Sponsor - Java Capital
Auditors - Grant Thornton (Jhb) Inc.
Disclaimer
The group has in good faith made reasonable effort to ensure the
accuracy and completeness of the information contained in this
document, including all information that may be regarded as
“forward-looking statements”.
Forward-looking statements may be identified by words such as
“believe”, “anticipate”, “expect”, “plan”, “estimate”, “intend”,
“project”, “target”.
Forward-looking statements are not statements of fact, but statements
by the management of the group based on its current estimates,
projections, expectations, beliefs and assumptions regarding the
group’s future performance and no assurance can be given to this
effect.
The risks and uncertainties inherent in the forward-looking
statements contained in this document include but are not limited to
changes to IFRS and the interpretations, applications and practices
subject thereto as they apply to past, present and future periods;
domestic and international business and market conditions such as
exchange rate and interest rate movements; changes in the domestic
and international regulatory and legislative environments; changes to
domestic and international operational, social, economic and political
risks; and the effects of both current and future litigation.
The group does not undertake to update any forward-looking statements
contained in this document and does not assume responsibility for any
loss or damage and howsoever arising as a result of the reliance by
any party thereon, including, but not limited to, loss of earnings,
profits or consequential loss or damage.
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