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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')
21 April 2015
Unaudited consolidated interim results for the six months ended
28 February 2015
Highlights
' Revenue up 26% to R1,7 billion
' EBITDA up 23% to R206 million
' HEPS up 24% to 110,1 cents per share
' Conco order book up 30% to R3,7 billion
Consolidated Infrastructure Group delivered strong profit growth for
the six months ended 28 February 2015
Overview
Consolidated Infrastructure increased revenue 26% to R1,7 billion from
R1,3 billion in 2014 and grew profit after tax by 36% to R164 million
in the six months ended 28 February 2015. Earnings per share and headline
earnings per share were 24% higher at 110 cents per share from 88.5 cents
per share for the previous period. The group continues to pursue its
diversification strategy across a wider geographic footprint and as a
consequence 50% of profits after tax were derived from outside South Africa.
Management's initiatives to diversify the group's operational portfolio across
a wider range of business sectors continued to gain momentum and the contribution
to group results from the power sector has reduced over the last two years from
80% to 53% in the six months ended February 2015. The group's segmented analysis
of profit after tax is:
2015 2014
% %
Power 53 63
Oil and Gas 31 22
Building Materials 8 9
Rail 3 '
Corporate 5 6
The group continues to experience high growth across its major
sectors and remains focused on managing the associated risks.
Extensive effort was placed on ensuring sufficient capital is
available for expansion and delivery risk was mitigated by
conservative procurement practices and policies.
The group reported a cash balance of R460 million as at 28 February 2015
of which R99 million has been collateralised to settle an Angolan obligation.
After settlement of the Angolan debt, the debt-to-equity ratio will reduce
to 35,1% from the current 39,2% (2014: 40,8%). On a net debt basis, the group
had a 20,1% debt to equity ratio (2014: 9,2%). The group is satisfied that a
debt-to-equity ratio of between 30% and 40% is an appropriate
tolerance level of gearing to maintain going forward.
The group will continue to participate in the medium-term note
programme which is in place to assist with the longer-term funding
requirements which will arise as the order book grows. To date
R530 million of medium-term notes have been issued as part of the
R1 billion medium-term note programme. Management maintains ongoing
working relationships with their bankers to ensure that sufficient
guarantee and working capital facilities are in place to meet all
foreseeable requirements. Interest cover as measured against EBITDA
remained at a conservative level of 8,9 times.
The group has maintained a consistent Moody's credit rating of Baa2.za.
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 20% to R1,4 billion
' EBITDA up 21% to R166 million
' Order book up 44% to R4,1 billion
Consolidated Power Projects Proprietary Limited ('Conco'), the
group's turnkey developer of high voltage electrical infrastructure
across Africa and the Middle East, produced growth across South Africa,
Namibia, Botswana, Zambia, Kenya, Tanzania, Mozambique, Ghana, Rwanda and
Saudi Arabia. The demand for Conco products and services amongst African
utilities, the larger South African municipalities and independent power
producers, both international and South African, was equally strong.
Conco managed to grow revenue, profits and order books across all of these sectors.
Conco has demonstrated is capability as a preferred supplier in the
renewable energy space and the operation was very successful in
securing work from 70% of the successful round three bidders and is
still negotiating on the remaining contracts.
Consolidated Power Maintenance ('O&M'), a South African entity
focused on operating and maintaining power infrastructure, continued
to build on the base established in the prior year and delivered a
maiden profit to the group. The entity increased the number of
contracts under management by 33%, the vast majority of its success
stemming from the Solar Photovoltaic market.
Energy Solutions designs, engineers, manufactures and commissions
protection and control equipment for substations, containerised
substations, batteries, chargers and smart grid solutions. The
division entered the low voltage market sector to supply motor
control centres and distribution boards. The business performed in
line with expectations.
Building Materials
' Revenue up 35% to R231 million
' EBITDA up 16% to R33 million
The Building Materials division which supplies aggregates, clay brick
and concrete roof tiles in the Gauteng region experienced a pickup in
demand from the residential building sector and inroads into the
turn-around of the Laezonia operation contributed significantly to
its overall growth. The division has successfully grown market share
and has achieved the objective, albeit with some margin sacrifice.
Oil and Gas Services
' Profit attributable to AES up 90% to R50 million
Angola Environmental Servicos Limitida ('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 production and drilling process. The attributable results
were boosted by 66% as a result of increased rentals and waste
volumes processed in the period. The acquisition only became effective
on 1 October 2013 and five months of attributable results were included
in the prior interim period. The inclusion of an additional month's profit
and the depreciation of the rand-dollar exchange rate during the six months,
boosted profit for the period by 24%.
Rail
' Revenue for 4 months of R60 million
' EBITDA for 4 months of R9 million
' Order book of R132 million
Tension Overhead Electrification Proprietary Limited ('Tractionel')
specialises in the electrification of railways and installation of
Overhead Traction Equipment. Although the business revenue and order
acquisition was slightly below expectations for the four months since
its acquisition in November 2014, the division currently has R1 billion
of tenders awaiting adjudication.
The group has commenced the integration of the Tractionel management team
into the CIG culture and structures.
Prospects
Power
Conco has gained a reputation of providing innovative technical
solutions on time and within our client's budgets. The prospects of
the Power division are robust and the order book has continued to
grow substantially in both absolute terms and in the increased
average size of projects. The execution horizon of the larger
projects has expanded. The improved focus of Conco on its regional
markets, and its diversified geographic base, continue to allow
the business to manage the potential risk of a downturn in any one
of its individual markets.
CIG remains focused on geographic diversification and consequently,
significant business development initiatives are underway in a
number of markets to entrench the Conco brand and its services.
These initiatives are gaining momentum and should lead to a positive
outcome over the next twelve months.
Power division prospects in South Africa within the larger
municipalities and REFIT programme are expected to yield above
average growth. Conco's position in the renewable energy sector is
unique in that the operation has developed a competitive edge as a
preferred local provider with the capacity and ability to execute to
world class standards. It is management's view that momentum in the
renewable energy sector will continue to grow within South Africa and
across the continent.
The change in the broad based black economic empowerment ('BEE')
legislation and the weakness in local manufacturing have posed a new
short-term challenge to the Power division's traction in South
Africa. Management is following the required actions to ensure
that the Conco South African business maintains its required BEE
rating to maintain its ability to transact within South Africa.
Initiatives have been also been implemented by Conco management to
assist the local manufacturers with orders for additional volumes and
contracts.
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
technically complex work.
The African continent continues to remain undersupplied and
underserviced with power and electricity. As a result of this
mismatch, CIG have established CIGenCo. The objective of CIGenCo
is to identify niche power generation opportunities. We have hired a
CEO with an outstanding track record in developing these
opportunities in emerging markets.
Building Materials
Despite an economy constrained by power shortages and slow growth,
there has currently been no sign of a slowdown in the demand for
Building Materials across all of its markets and it is expected that
the Building Materials division should sustain its current growth
trajectory.
Oil and Gas
The AES business is set to grow organically due to the legislated
environmental requirements of Angola's zero-waste drill cutting law.
Increased production from the oil majors is assisting the business
and management are unaware of any significant curtailment in oil
field development nor exploration in Angola.
It is anticipated that there will be a minor contraction in
margins as international oil companies strive to save costs across
their supply chains. The impact of this margin contraction should be
mitigated from 3 areas. Firstly, volumes should expand to
comply with the legislated requirements. Secondly, AES derives 50%
of all revenues from long-term rentals, which assist in providing a
steady annuity stream of income. Thirdly, the relocation of waste
processing from rigs located in the North of Angola to the new
facility in Soyo enables the international oil companies to
materially save on their logistical costs.
Management continues to build capacity in the AES business and
evaluate technology partnerships which will aid to grow a sustainable
business. The long-term growth in demand for oil should also aid the
sustained growth in oil services.
Rail
The Tractionel rail business provides enormous short- and medium-
term potential as South Africa upgrades its rail infrastructure to
manage the roll out of its new locomotive program. Management expect
projects awards over the next 12 months to have a material impact on
the business together with the R1 billion of tenders awaiting
adjudication.
Dividend
The group's policy is for the board to consider a dividend on an
annual basis after reviewing the annual results.
Business combination
On 1 November 2014,CIG acquired 100% of the shares of Tension
Overhead Electrification Proprietary Limited and Tractionel
Maintenance Services Proprietary Limited ('Tractionel'). The purchase
price of R121 228 488 was partly settled by a cash payment of R73 424 344
and the issue of shares to the value of R36 804 144.The balance owing of
R11 000 000 is payable over the next two years, subject to certain performance
conditions being met.
A summary of the provisional fair values of assets and liabilities is as follows:
R'000
Property, plant and equipment 33 306
Financial assets 701
Deferred taxation (asset) 215
Inventories 5 655
Trade and other receivables 32 129
Cash 19 551
Interest bearing liabilities (11 514)
Trade and other payables (30 650)
Tax payable (1 300)
Total net assets acquired 48 093
Purchase consideration discharged as follows: 121 228
Cash payments made on effective date 73 424
Shares issued on effective date 36 804
Deferred cash payment due in future 11 000
Goodwill 73 135
In terms of IFRS3: Business Combinations, CIG has a maximum of 12 months from
the acquisition date to complete the acquisition accounting of Tractionel.
The allocation of the purchase consideration to identifiable assets and subsequent
amendment to the record of goodwill will therefore be reported at the year ending
31 August 2015 and retrospectively applied for the six months ended 28 February 2015.
Basis of preparation
These unaudited consolidated interim results for the six months ended
28 February 2015 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.
All amendments to standards applicable to CIG's financial period
beginning on 1 September 2014 have been considered. Based on
management's assessment, the following new amendments do not have a
material impact on the group's interim financial statements:
IFRS 2 ' Share-based Payments
IFRS 3 ' Business Combinations
IFRS 8 ' Operating segments
IFRS10 ' Consolidated Financial Statements
IFRS 12 ' Disclosure of Interest in Other Entities
IFRS 13 ' Fair Value Measurement
IAS 19 ' Employee Benefits
IAS 24 ' Related Party Disclosure
IAS 27 ' Consolidated and Separate Financial Statements
IAS 36 ' Impairment of assets
IAS 40 ' Investment Property
Other than the amendments, all accounting policies applied in the
preparation of these interim financial statements are consistent with
those applied by CIG in its consolidated financial statements for the
year ended 31 August 2014.
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).
Condemnation of current acts of xenophobia
CIG is a group working across the continent with decades of experience,
where we enjoy incredible support and friendship. We join the vast majority
of South Africans in strongly condemning the xenophobic acts currently being
perpetrated in South Africa.
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
21 April 2015
Condensed consolidated statements of comprehensive income
Unaudited Unaudited
Six months Six months Audited
ended ended year ended
28 February 28 February 31 August
2015 2014 2014
R'000 R'000 R'000
Revenue 1 662 864 1 314 580 2 635 713
Cost of sales (1 277 753) (1 000 008) (2 046 565)
Gross profit 385 111 314 572 589 148
Other income 21 516 14 129 48 286
Operating expenses (204 261) (181 328) (319 873)
Foreign exchange gain 4 116 21 129 (405)
Earnings before interest,
taxation, depreciation and
amortisation ('EBITDA') 206 482 168 502 317 156
Depreciation and
amortisation (29 294) (25 118) (51 428)
Profit before interest and
taxation 177 188 143 384 265 728
Interest received 12 999 9 514 28 233
Interest paid (36 261) (28 500) (66 187)
Profit before taxation 153 296 124 398 227 774
Taxation (40 701) (30 932) (52 310)
Income from joint
arrangement 50 420 26 493 82 644
Profit for the period 163 645 119 959 258 108
Total profit for the
period attributable to:
Equity holders of the
parent 163 482 118 800 257 213
Non-controlling interest 163 1 159 895
Other comprehensive income:
Recyclable in profit and loss:
Exchange rate differences on
translating foreign
operations 19 480 12 343 5 385
Total comprehensive income 183 125 132 302 263 493
Total comprehensive income
attributable to:
Equity holders of company 182 962 131 568 262 748
Non-controlling interest 163 734 745
Basic earnings per share
(cents) 110,3 88,6 188,8
Diluted earnings per share
(cents) 107,6 87,8 183,4
Reconciliation of headline
earnings:
Profit attributable to
ordinary shareholders 163 482 118 800 257 213
Adjusted for:
Profit on disposal of property,
plant and
equipment (399) (213) (1 833)
Tax
effect on adjustments 112 38 513
Headline earnings 163 195 118 625 255 893
attributable to ordinary
shareholders
Weighted average number of
shares in issue (000s) 148 272 134 040 136 249
Diluted weighted average number
of shares in issue
(000s) 151 936 135 322 140 223
Headline earnings per
share (cents) 110,1 88,5 187,8
Diluted headline earnings
per share (cents) 107,4 87,7 182,5
Condensed consolidated statements of financial position
Unaudited Unaudited Audited
as at as at year ended
28 February 28 February 31 August
2015 2014 2014
R'000 R'000 R'000
Assets
Non-current assets 1 523 307 1 188 439 1 320 147
Property, plant and
equipment 432 692 375 354 387 517
Goodwill 537 514 462 220 462 220
Intangible assets 23 118 26 600 24 880
Deferred tax 63 238 4 559 64 739
Investment in joint
arrangement 457 797 312 588 372 638
Financial assets 8 948 7 118 8 153
Current assets 3 022 291 2 342 379 2 671 496
Inventories 94 810 94 142 76 311
Trade and other
receivables 274 829 118 428 196 471
Amounts due from contract
customers 2 192 323 1 587 446 1 446 405
Taxation receivable 326 292 3 325
Cash and cash equivalents 460 003 542 071 948 984
Total assets 4 545 598 3 530 818 3 991 643
Equity and liabilities
Equity 2 406 494 1 715 562 2 178 496
Share capital 1 351 712 983 414 1 310 139
Share-based payment
reserve 27 094 18 776 23 794
Foreign currency
translation reserve 23 055 10 808 3 575
Non-controlling interest 1 994 1 820 1 831
Accumulated profits 1 002 639 700 744 839 157
Non-current liabilities 747 629 551 419 735 948
Other financial liabilities
' interestbearing 544 691 424 780 549 121
Other financial
liabilities ' non-interest
bearing 78 149 60 694 71 878
Provisions 8 373 8 331 8 073
Instalment sale
liabilities 34 967 28 253 23 761
Deferred tax 81 449 29 361 83 115
Current liabilities 1 391 475 1 263 837 1 077 199
Other financial
liabilities 339 780 231 456 173 371
Trade and other payables 813 554 567 633 711 728
Amounts received in
advance 52 144 65 666 66 145
Amounts due to contract
customers 134 304 125 098 80 463
Bank overdraft ' 228 420 '
Instalment sale
liabilities 24 110 15 689 18 392
Taxation payable 27 583 29 875 27 100
Total equity and
liabilities 4 545 598 3 530 818 3 991 643
Number of shares in issue
(000s) 148 594 134 120 146 851
Net asset value per share
(cents) 1 620 1 279 1 483
Net tangible asset value
per share (cents) 1 242 915 1 152
Condensed consolidated statements of cash flow
Unaudited Unaudited
Six months Six months Audited
ended ended year ended
28 February 28 February 31 August
2015 2014 2014
R'000 R'000 R'000
Cash flows utilised in
operating activities (562 432) (115 961) (103 345)
Cash flows utilised in
investing activities (102 358) (348 692) (313 977)
Cash flows from financing
activities 166 747 277 305 655 355
Net (decrease)/increase in
cash and cash equivalents (498 043) (187 348) 44 723
Effect on foreign currency
translation reserve
movement on cash balances 9 062 (3 332) (70)
Cash and cash equivalents
at beginning of period 948 984 504 331 504 331
Cash and cash equivalents
at end of period 460 003 313 651 948 984
Condensed consolidated statements of changes in equity
Unaudited Unaudited
Six months Six months Audited
ended ended year ended
28 February 28 February 31 August
2015 2014 2014
R'000 R'000 R'000
Balance at beginning of
the period 2 178 496 1 579 991 1 579 991
Issue of share capital and
share issue expenses 41 573 829 327 554
Share-based payment
reserve 3 300 2 440 7 458
Total comprehensive income
for the period 182 962 131 568 262 748
Non-controlling interest 163 734 745
Balance at end of period 2 406 494 1 715 562 2 178 496
Segmental analysis
Unaudited Unaudited Audited
28 February 28 February 31 August
2015 2014 2014
R'000 R'000 R'000
Revenue
Building Materials 230 777 171 072 399 452
Power 1 371 774 1 143 508 2 236 261
Rail 60 313 ' '
Total 1 662 864 1 314 580 2 635 713
EBITDA
Building Materials 32 763 28 130 75 848
Power 166 301 137 123 225 395
Rail 9 418 ' '
Corporate (2 000) 3 249 15 913
Total 206 482 168 502 317 156
Profit after tax
Building Materials 12 689 10 990 35 052
Power 86 428 75 006 118 321
Oil and Gas 50 410 26 493 82 644
Rail 6 108 ' '
Corporate 8 000 7 470 22 092
Total 163 645 119 959 258 108
Unaudited Unaudited Audited
28 February 28 February 31 August
2015 2014 2014
% of total of total % of total
Revenue
Building Materials 14 13 15
Power 82 87 85
Rail 4 ' '
Total 100 100 100
EBITDA
Building Materials 16 16 24
Power 81 81 71
Rail 4 ' '
Corporate (1) 3 5
Total 100 100 100
Profit after tax
Building Materials 8 9 14
Power 53 63 46
Oil and Gas 31 22 32
Rail 3 ' '
Corporate 5 6 8
Total 100 100 100
Unaudited Unaudited Audited
28 February 28 February 31 August
2015 2014 2014
R'000 R'000 R'000
Assets
Building Materials 593 890 473 400 601 072
Power 1 934 526 1 679 440 1 503 096
Oil and Gas 457 797 312 588 372 638
Rail 88 209 - -
Corporate 2 258 212 1 848 711 2 298 842
Total assets including
group loan accounts 5 332 634 4 314 139 4 775 648
Inter-group elimination (787 036) (783 321) (784 005)
Total 4 545 598 3 530 818 3 991 643
Liabilities
Building Materials 463 326 360 235 480 264
Power 1 171 657 1 031 697 819 268
Oil and Gas 177 117 272 303 266 341
Rail 33 937 - -
Corporate 590 749 430 533 552 430
Total liabilities including
group loan accounts 2 436 786 2 094 768 2 118 303
Inter-group elimination (297 682) (279 512) (305 556)
Total 2 139 104 1 815 256 1 813 147
Executive directors
RD Gamsu, IM Klitzner
Independent non-executive directors
F Boner (Chairman), K Bucknor*, A Darko*, AD Dixon, R Horton, J
Nwokedi
* Ghanaian
Business address
Commerce Square, Building 2, 39 Rivonia Road, Sandhurst
Telephone: 011 280 4040
Facsimile: 086 748 9169
Business postal address
PO Box 651455, Benmore, Johannesburg 2010
Company secretary
CIS Company Secretaries Proprietary Limited
Transfer secretaries
Computershare Investor Services Proprietary Limited
Sponsor
Java Capital
Auditors
Grant Thornton www.ciglimited.co.za
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 notundertake 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.
Date: 21/04/2015 08:00:00 Supplied by www.sharenet.co.za
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