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CONSOLIDATED INFRASTRUCTURE GRP LTD - Unaudited results for the six months ended 28 February 2014

Release Date: 09/04/2014 07:30
Code(s): CIL     PDF:  
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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