Wrap Text
Unaudited consolidated interim results for the six months ended 29 February 2016
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 consolidated interim results for the six months ended 29 February 2016
Salient features
– Revenue up 26% to R2,1 billion (2015: R1,7 billion)
– EBITDA up 33% to R274 million (2015: R206 million)
– HEPS up 24% to 136,3 cents per share (2015: 110,1 cents per share)
– Conco order book up 35% to R5 billion (2015: R3,7 billion)
Overview
Consolidated Infrastructure improved revenue by 26% to
R2,1 billion from R1,7 billion in 2015 and grew profit after tax by
28% to R209 million compared to R164 million for the previous period.
Earnings per share and headline earnings per share were 136 cents
per share, a 24% increase from 110 cents per share for the
previous period.
The group’s strategy to operate across a wider geographic footprint
enabled CIG to generate 55% of profits after tax from outside of
South Africa. The group’s flagship Power division contributed half of
the group’s profits, while management continues with its objective to
diversify earnings across a wider operational portfolio.
The group’s segmental analysis of profit after tax is:
2016 2015
% %
Power 50 53
Oil and Gas 30 31
Building Materials 7 8
Rail 4 3
Corporate 9 5
Strong demand for the group’s energy services and products across the
geographies has continued over the past six months. The group’s major
sectors have consequently experienced high growth, while management
continues to manage the associated risks. Sufficient capital was
raised to fund the organic expansion in the power sector and the
intensive working capital requirements of the projects cycle. The
delivery risk associated with projects is mitigated by conservative
procurement practices and policies.
The group reported a cash balance of R481 million as at 29 February 2016
(2015: R460 million). The debt-to-equity ratio of 23,8% (2015: 39,2%)
is below the targeted debt-to-equity ratio of between 30% and 40% that
the group considers an appropriate gearing level. On a net debt basis,
the group reported a 9,1% debt-to-equity ratio (2015: 20,1%).
The group maintains a R1 billion medium-term note programme, which to
date has issued R625 million in debt. There is still R375 million
available under the current programme which, given appropriate market
conditions, can be tapped to fund the group’s growth profile. The
programme has maintained a consistent Moody’s credit rating of
Baa2.za.
Management fosters ongoing working relationships with relevant banks
to ensure that sufficient guarantees and working capital facilities
are available to meet all foreseeable capital requirements. Interest
cover as measured against EBITDA remained at a satisfactory level of
5,9 times. The group recently closed additional bank guarantee
facilities of R500 million and working capital lines of R300 million.
Divisional overview
Power
– Revenue up 28% to R1,8 billion (2015: R1,4 billion)
– EBITDA up 31% to R218 million (2015: R166 million)
– Conco order book up 35% to R5 billion (2015: R3,7 billion)
Consolidated Power Projects Group Proprietary Limited (“Conco”), the
group’s turnkey developer of high voltage electrical infrastructure
across Africa and the Middle East, produced strong growth across
Namibia, Botswana, Zambia, Tanzania, Mozambique, Ghana and Rwanda.
Recently, Conco expanded its operations into Ethiopia, where ageing
electrical infrastructure has created a demand for Conco’s flexible
electrical solutions.
The demand for Conco products and services amongst African utilities
remains strong and the international order book grew to USD116
million, representing a three-fold increase over the last three
years. Order book growth in South Africa was flat during the six
month period although growth in the demand from Eskom compensated for
some of the weakness in spending by the municipalities on
substations. Renewable energy has sustained its momentum, although
undergoing some delay.
Consolidated Power Maintenance (“O&M”), which operates and maintains
renewable energy, transmission and distribution assets on behalf of
asset owners in South Africa, reported disappointing results due to
delays in the renewable energy project rollouts and a slowdown in
South African municipality spend. Consequently, this business was
unable to increase its market share in the period under review.
Energy Solutions, which designs, engineers, manufactures and
commissions protection and control equipment for substations,
containerised substations, batteries, chargers and smart grid
solutions, performed in line with expectations. The division is
making great strides to increase its presence and market share in the
solar market, by providing innovative solar solutions for clients.
This includes its recent foray into offering small-scale solar photo
voltaic (“PV”’) solutions in response to the high demand across South
Africa and the rest of the continent. The division has also entered
the low voltage market sector to supply motor control centres and
distribution boards to industry.
Building Materials
– Revenue down 1% to R228 million (2015: R231 million)
– EBITDA up 11% to R36,2 million (2015: R32,7 million)
The Building Materials division, which supplies aggregates, clay
brick and concrete roof tiles in the Gauteng region, reported a 1%
decrease in revenue as a result of the subdued demand from the civils
and construction sectors. Profitability was however increased due
to an improved mix of product sales and cost control.
Oil and Gas Services
– Profit attributable to AES up 24% to R62 million
(2015: R50 million)
Angola Environmental Servicos Limitida (“AES”) collects, recycles and
disposes of waste generated in the oil production and drilling
process from oil and gas rigs located off the coast of Angola. In
December 2015, the zero discharge regulation was implemented in
Angola and as oil and gas rig operators adopted the new environmental
law, volumes for AES increased. AES results were resilient
considering the volatility of the sector and the resulting impact on
the country. While there is still risk associated with remittance of
foreign currency in Angola, the situation improved during the period.
Rail
– Revenue on a comparative basis up 35% to R112 million
(2015 for four months: R60 million)
– EBITDA on a comparative basis up 17% to R17 million
(2015 for four months: R9 million)
– Order book up 200% to R400 million (2015: R132 million)
Tension Overhead Electrification Proprietary Limited (“Tractionel”),
which specialises in the electrification of railways and installation
of Overhead Traction Equipment, performed in line with expectation.
The group made progress to integrate the Tractionel management team
into the CIG culture andstructures. Danie Lubbe was promoted to CEO
from CFO after Johan Boschoff, the founder and former CEO of the
business, retired.
Prospects
General
Notwithstanding the exceptional volatility experienced in emerging
markets over the past six months, CIG has not had any cancellations
in projects nor experienced any untoward delays in project awards or
issue of tenders. Management has identified an under investment by
South African corporates and increased levels of disinvestment by
internationals out of South Africa.
The group continues to seek acquisition opportunities among those
companies that operate across the continent and supply services and
products into sectors where management expects higher levels of
infrastructure investment. Solid progress has been made on the
acquisition front.
Power
The prospects of the Power division are robust and the order book
has grown substantially in absolute terms. The average size of
projects has also lengthened the execution timelines. The improved
focus of Conco on its regional markets, and its diversified
geographic base, enable the business to manage the potential risk of
a downturn in any one of its individual markets.
Geographic diversification will remain a priority and significant
business development initiatives are underway in a number of markets
to entrench the Conco brand and services. These initiatives are
gaining momentum and should lead to a successful outcome over the
next twelve months.
Conco’s position in the renewable energy sector is unique in that the
operation has developed a competitive edge as a preferred provider
with the capacity and ability to execute to world class standards.
Management is of the 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 poses a 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.
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.
CIGenCo, a developer of and investor in generation projects, is
making excellent progress on power generation opportunities across
the African continent that offer internal rates of return of 18%
or higher depending on the commercial nature of the project and its
risks. The group’s broad footprint, ability to partner with local
developers and technical expertise have made CIGenCo an attractive
partner for other stakeholders on the African continent.
Building Materials
There are signs of a slowdown in the demand for building materials
across all of the division’s markets. Despite these factors, there is
a reasonable probability that existing levels of performance
can be sustained.
Oil and Gas Services
AES should sustain current activity levels with the processing of
high volumes of waste. Growth in processing volumes will offset
any decline in rental revenue, which may have a negative impact on
net margins. The current level of oil production is expected to be
sustained although it is difficult to predict the future with any
certainty until greenfield exploration levels pick up.
Rail
The Tractionel rail business continues to provide enormous short- and
medium-term potential as South Africa upgrades its rail infrastructure
to manage the rollout of its new locomotive programme. Management
expects project awards over the next 12 months to have a material
impact on the future of the rail business.
Dividends
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
29 February 2016 have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”), Interim Financial Reporting
(IAS 34), the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and 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 2015 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
IFRS 10 – 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 2015.
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).
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
19 April 2016
Condensed consolidated statements of comprehensive income
Unaudited Unaudited Audited
Six months Six month Year
ended ended ended
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Revenue 2 101 323 1 662 864 3 603 953
Cost of sales (1 616 534) (1 277 753) (2 818 381)
Gross profit 484 789 385 111 785 572
Other income 34 798 21 516 62 088
Operating expenses (274 317) (204 261) (439 098)
Foreign exchange gain 23 066 4 116 5 899
Earnings before interest,
taxation, depreciation and
amortisation (“EBITDA”) 274 317 206 482 414 461
Depreciation and
amortisation (34 717) (29 294) (56 249)
Profit before interest and
taxation 239 600 177 188 358 212
Interest received 9 896 12 999 33 268
Interest paid (56 118) (36 261) (90 250)
Profit before taxation 193 377 153 296 301 230
Taxation (47 015) (40 701) (79 341)
Income from joint
arrangement 62 318 50 420 109 517
Profit for the period 208 680 163 645 331 406
Total profit for the period
attributable to:
Equity holders of the
parent 208 499 163 482 330 266
Non-controlling interest 181 163 1 180
Other comprehensive income:
Recyclable in profit and loss:
Exchange rate differences on
translating foreign
operations 134 070 19 480 112 502
Total comprehensive income 342 750 183 125 443 908
Total comprehensive income
attributable to:
Equity holders of company 342 569 182 962 436 945
Non-controlling interest 181 163 2 133
Basic earnings per share
(cents) 136,4 110,3 222,5
Diluted earnings per share
(cents) 132,7 107,6 216,3
Reconciliation of headline
earnings:
Profit attributable to
ordinary shareholders 208 499 163 482 330 226
Adjusted for:
Profit on disposal of property,
plant and equipment (155) (399) (3 770)
Tax effect on adjustments 43 112 1 055
Headline earnings
attributable to ordinary
shareholders 208 387 163 195 327 511
Weighted average number of
shares in issue (000s) 152 883 148 272 148 407
Diluted weighted average
number of shares in issue
(000s) 157 130 151 936 152 654
Headline earnings per
share (cents) 136,3 110,1 220,7
Diluted headline earnings
per share (cents) 132,6 107,4 214,5
Condensed consolidated statements of financial position
Unaudited Unaudited Audited
as at as at Year ended
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Assets
Non-current assets 1 877 821 1 523 307 1 676 514
Property, plant and
equipment 460 751 432 692 450 076
Goodwill 534 272 537 514 534 272
Intangible assets 19 634 23 118 21 419
Deferred tax 72 159 63 238 75 070
Investment in joint
arrangement 779 556 457 797 584 170
Financial assets 11 449 8 948 11 507
Current assets 4 159 754 3 022 291 3 550 357
Inventories 121 764 94 810 109 050
Trade and other
receivables 278 742 274 829 245 101
Amounts due from contract
customers 3 271 418 2 192 323 2 707 486
Taxation receivable 7 068 326 6 243
Cash and cash equivalents 480 762 460 003 482 477
Total assets 6 037 575 4 545 598 5 226 871
Equity and liabilities
Equity 3 271 880 2 406 494 2 675 244
Share capital 1 605 110 1 351 712 1 356 130
Share-based payment
reserve 35 549 27 094 30 643
Foreign currency
translation reserve 249 194 23 055 115 124
Non-controlling interest 4 145 1 994 3 964
Accumulated profits 1 377 882 1 002 639 1 169 383
Non-current liabilities 850 061 747 629 846 901
Other financial liabilities
– interest bearing 632 333 544 691 635 514
Other financial
liabilities – non-interest
bearing 108 209 78 149 89 677
Provisions 8 566 8 373 8 166
Instalment sale
liabilities 16 177 34 967 22 729
Deferred tax 84 776 81 449 90 815
Current liabilities 1 915 634 1 391 475 1 704 726
Other financial
liabilities 107 113 339 780 8 892
Trade and other payables 1 528 918 813 554 1 427 761
Amounts received in
advance 155 826 52 144 172 645
Amounts due to contract
customers 95 741 134 304 66 611
Instalment sale
liabilities 24 486 24 110 23 364
Taxation payable 3 550 27 583 5 443
Total equity and
liabilities 6 037 575 4 545 598 5 226 871
Number of shares in issue
(000s) 156 884 148 594 148 884
Net asset value per share
(cents) 2 085 1 620 1 797
Net tangible asset value
per share (cents) 1 732 1 242 1 423
Condensed consolidated statements of cash
Unaudited Unaudited Audited
Six months Six month Year
ended ended ended
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Cash flows utilised in
operating activities (324 887) (562 432) (260 203)
Cash flows utilised in
investing activities (43 437) (102 358) (122 152)
Cash flows from financing
activities 357 122 166 747 (89 167)
Net decrease in cash and
cash equivalents (11 202) (498 043) (471 522)
Effect on foreign currency
translation reserve
movement on cash balances 9 487 9 062 5 015
Cash and cash equivalents
at beginning of period 482 477 948 984 948 984
Cash and cash equivalents
at end of period 480 762 460 003 482 477
Condensed consolidated statements of changes in equity
Unaudited Unaudited Audited
Six months Six month Year
ended ended ended
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Balance at beginning of
period 2 675 244 2 178 496 2 178 496
Issue of share capital and
share issue expenses 248 980 41 573 45 991
Share-based payment
reserve 4 906 3 300 6 849
Total comprehensive income
for the period 342 569 182 962 441 775
Non-controlling interest 181 163 2 133
Balance at end of period 3 271 880 2 406 494 2 675 244
Segmental analysis
Unaudited Unaudited Audited
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Revenue
Building Materials 228 222 230 777 499 807
Power 1 760 659 1 371 774 2 951 149
Rail 112 442 60 313 152 996
Total 2 101 323 1 662 864 3 603 953
EBITDA
Building Materials 36 240 32 763 86 017
Power 218 192 166 301 300 698
Rail 16 520 9 418 20 048
Corporate 3 365 (2 000) 7 698
Total 274 317 206 482 414 461
Profit after tax
Building Materials 13 811 12 689 39 346
Power 104 748 86 428 146 879
Oil and Gas 62 318 50 410 109 517
Rail 9 328 6 108 11 253
Corporate 18 475 8 000 24 410
Total 208 680 163 645 331 406
Unaudited Unaudited Audited
29 February 28 February 31 August
2016 2015 2015
% of total % of total % of total
Revenue
Building Materials 11 14 14
Power 84 82 82
Rail 5 4 4
Total 100 100 100
EBITDA
Building Materials 13 16 19
Power 80 81 73
Rail 6 4 5
Corporate 1 (1) 3
Total 100 100 100
Profit after tax
Building Materials 7 8 12
Power 50 53 44
Oil and Gas 30 31 33
Rail 4 3 3
Corporate 9 5 7
Total 100 100 100
Unaudited Unaudited Audited
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Assets
Building Materials 582 776 593 890 599 983
Power 2 762 518 1 934 526 2 394 459
Oil and Gas 799 556 457 797 584 170
Rail 120 304 88 209 96 600
Corporate 2 852 030 2 258 212 2 447 727
Total assets including
group loan accounts 7 117 184 5 332 634 6 122 939
Inter-group elimination (1 079 609) (787 036) (896 070)
Total 6 037 505 4 545 598 5 226 871
liabilities
Building Materials 422 797 463 326 460 653
Power 1 814 977 1 171 657 1 581 365
Oil and Gas 108 209 177 117 89 677
Rail 48 024 33 937 33 764
Corporate 808 105 590 749 694 573
Total liabilities including
group loan accounts 3 202 112 2 436 786 2 860 032
Inter-group elimination (436 417) (297 682) (308 405)
Total 2 765 695 2 139 104 2 551 627
Corporate information
Executive directors
RD Gamsu, IM Klitzner
Independent non-executive directors
F Boner (Chairman), K Bucknor*, A Darko*, AD Dixon, R Horton,
J Nwokedi
* Ghanaian
There were no changes to the board of directors during this 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
CIS Company Secretaries Proprietary Limited
Transfer secretaries
Computershare Investor Services Proprietary Limited
Sponsor
Java Capital
Auditors
Grant Thornton
19 April 2016
Visit our website
www.ciglimited.co.za, to review the investor presentation relating
to the interim results for the six months ended 29 February 2016.
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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