Wrap Text
Reviewed interim results for the six-month period ended 31 August 2017; cash dividend and change in auditors
GAIA Infrastructure Capital Limited
(Incorporated in the Republic of South Africa)
(Registration number 2015/115237/06)
ISIN: ZAE000210555
Share code: GAI
("GAIA" or "the Company")
Reviewed condensed interim financial statements
for the six-month period ended 31 August 2017;
cash dividend declaration and change in auditors
www.gaia-ic.com
Salient features
Tangible NAV* per share at R10.24
First interim cash dividend declaration of 24.84 cents per share
Headline earnings per share up 8% to 24.84 cents per share
Robust financial position with net cash of R56.7 million
Total revenue up 11% to R23.3 million
Dividend income received from investments up 100% to R13.3 million
Strong pipeline of investment opportunities in line with the investment policy
* Net asset value pre-interim dividend payment.
Financial commentary
On 20 December 2016, GAIA acquired through GAIA Financial Services Proprietary Limited
("GAIA Financial Services"), a wholly-owned subsidiary of the Company, an effective see-through
economic interest of 25.2% in Dorper Wind Farm (RF) Proprietary Limited ("Dorper") for
R501 million. The first flow of income from Dorper was received in January 2017.
GAIA's sources of revenue changed from earning only interest on cash to revenue generated
from interest income, dividend income and capital appreciation. The Company's revenue for the
six (6) months under review increased by 11% to R23.3 million compared to the prior period
with dividend income of R13.3 million from GAIA Financial Services which in turn received
income from the Company's underlying investment in Dorper. The Company earned interest
income of R2.6 million over the reporting period (2016: R18.7 million) mainly from the Coronation
Money Market Fund.
GAIA now operates as a fully-fledged investment holding company and is in the process of
optimising its internal capacity to facilitate further growth. This led to the operating expenses
increasing to R7.5 million (2016: R3.6 million). The Board of directors ("the Board") is satisfied
that the increase in expenses is justified given the growth opportunities available to the Company.
The cash flows of GAIA's underlying assets are typically of a predictable nature, resulting in a
dividend growth (CPI-linked) investment case. The Board has adopted a policy of aiming to
declare dividends that increase consistently on an annual basis. In addition, the Board resolved
to pay dividends on a semi-annual basis given the predictable flow of cash income throughout
the year. Shareholders can therefore expect the Company's Tangible NAV to remain fairly stable.
Asset performance commentary
Dorper produced more electricity than expected for the reporting period due to a consistent
wind resource and better than expected plant availability. The asset performance has been
consistent with forecast figures on total electricity production for the period 1 January 2017 to
31 August 2017 and the average actual capacity factor was also consistent with the average
forecast capacity factor at 33%.
Dividend distribution
As at 28 February 2017, GAIA's Tangible NAV was R10.63 per share, following which a maiden
dividend of 63.5 cents per share was declared and paid in May 2017. This reduced the Tangible
NAV to R10.00 per share at the time. For this reporting six (6) months, the Company's earnings
per share was 24.84 cents per share, thereby increasing the Tangible NAV to R10.24.
Notice is hereby given that the Board have declared an interim dividend of 24.84 cents
(19.872 cents net of dividend withholding tax) per ordinary share for the period ended
31 August 2017. The dividend has been declared from income reserves. A dividend withholding
tax of 20% will be applicable to all shareholders who are not exempt from or do not qualify
for a reduced rate of dividend withholding tax.
The issued share capital at the declaration date is 55 151 000 ordinary shares.
The salient dates for the dividend will be as follows:
2017
Last day of trade to receive a dividend Tuesday, 31 October
Shares commence trading "ex" dividend Wednesday, 1 November
Record date Friday, 3 November
Payment date Monday, 6 November
Share certificates may not be dematerialised or rematerialised between Wednesday,
1 November 2017 and Friday, 3 November 2017, both days inclusive.
This interim dividend amounting to R13.7 million has not been recognised as a liability in these
reviewed condensed interim financial statements. It will be recognised in shareholders' equity
for the year ending 28 February 2018.
Change in external auditor
Shareholders are advised that in terms of paragraph 3.78 of the JSE Listings Requirements, the
Board has resolved to terminate the services of KPMG Incorporated ("KPMG") as external
auditor to the Company with effect from 31 October 2017. New external auditors will be
appointed and announced in due course.
Following the recent reputational concerns regarding KPMG and after discussions with the
external audit team on GAIA, the Board deemed it best to part ways with KPMG.
Changes to the Board
In accordance with paragraph 3.59(a) of the Listings Requirements of the JSE Limited,
shareholders are advised that Mr Lumkile Mondi and Mr Thembani Bukula were appointed as
independent non-executive directors to the Board of GAIA with effect from 1 June 2017.
Outlook
GAIA has a diversified pipeline of near-term investment opportunities for which it requires
funding to execute. The Company will continue to engage with the capital markets to raise
funding to enable execution of these value-accretive investments in accordance with the
Company's investment mandate for the benefit of its shareholders. The strong investment
pipeline yields above target investment return on a blended basis.
Events after the reporting period
On 19 September 2017 the Company issued a Securities Exchange News Service ("SENS")
announcement notifying shareholders that GAIA Financial Services had acquired C Preference
Shares in Business Venture Investments No. 3010 (Pty) Ltd ("GAIA SPV") for an aggregate
subscription price of R130 million and, as a result, acquired an effective economic interest of
13.0% in the combined distributions linked to the ordinary shares and shareholder loan claims
against Coria (PKF) Investments 28 (RF) (Pty) Ltd ("Noblesfontein Wind Farm"). In addition,
GAIA Financial Services has entered into funding agreements with South African Renewable
Green Energy (Pty) Ltd ("SARGE") whereby GAIA Financial Services will subscribe for A Preference
Shares and B Preference Shares in SARGE for an aggregate subscription price of R57 493 127,
(the "SARGE Transaction"). As a result of the SARGE Transaction, GAIA Financial Services will
acquire a further effective economic interest of 7.03% of the distributions linked to the ordinary
shares in the Noblesfontein Wind Farm.
GAIA Financial Services obtained funding to facilitate, inter alia, its subscription for the GAIA
SPV C Preference Shares; and subscription for the SARGE Preference Shares by way of the
issue, by it, of A Preference Shares and B Preference Shares to RMB Investments and Advisory
Proprietary Limited ("RMBIA") for an aggregate subscription price of approximately R188 million
in terms of the GAIA Financial Services Preference Share Subscription Agreement.
Noblesfontein Wind Farm is a Round 1 Renewable Energy Independent Power Producer
Procurement Programme ("REIPPPP") wind project comprising c.73.8MW of electricity generation
capacity and located between the towns of Three Sisters and Victoria West in the Northern Cape
of South Africa. The wind farm achieved commercial operation date on 12 July 2014.
Interim statement of financial position
as at 31 August 2017
Reviewed Reviewed Audited
31 August 31 August 28 February
2017 2016 2017
Note(s) R R R
Assets
Non-current assets
Financial assets at fair value
through profit or loss 2 511 123 029 - 503 680 415
Current assets
Trade and other receivables 1 715 466 - -
Cash and cash equivalents 56 682 360 566 395 140 84 755 945
Loans to related parties - 1 026 -
58 397 826 566 396 166 84 755 945
Total assets 569 520 855 566 396 166 588 436 360
Equity and liabilities
Equity
Share capital 545 851 762 545 851 762 545 851 762
Retained income 18 912 920 16 726 993 40 233 870
564 764 682 562 578 755 586 085 632
Liabilities
Non-current liabilities
Deferred tax 2 267 558 - 567 854
Current liabilities
Trade and other payables 2 281 797 1 169 492 1 539 601
Loans from related parties - 58 648 -
Current tax payable 206 818 2 589 271 243 273
2 488 615 3 817 411 1 782 874
Total liabilities 4 756 173 3 817 411 2 350 728
Total equity and liabilities 569 520 855 566 396 166 588 436 360
Net asset value per share (Rand) 10.24 10.20 10.63
Interim statement of profit or loss and other comprehensive income
for the period ended 31 August 2017
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2017 2016 2017
Note(s) R R R
Interest income 2 569 975 18 646 925 33 039 564
Dividend income 13 282 512 - 15 562 635
Net gain from financial assets at
fair value through profit or loss 7 442 614 2 402 562 5 082 978
Total revenue 23 295 101 21 049 487 53 685 177
Total operating expenses (7 549 963) (3 595 982) (8 798 612)
Operating profit before finance costs 15 745 138 17 453 505 44 886 565
Finance costs (1 236) (4 473) (5 088)
Increase in net assets attributable to
ordinary shareholders before taxation 15 743 902 17 449 032 44 881 477
Taxation (2 043 967) (4 780 567) (8 706 137)
Increase in net assets attributable
to ordinary shareholders 13 699 935 12 668 465 36 175 340
Earnings per share
Per share information
Basic earnings per share (cents) 3 24.84 22.97 65.59
Diluted earnings per share (cents) 3 24.84 22.97 65.59
Interim statement of changes in equity
for the year period 31 August 2017
Share Retained Total
capital income equity
R R R
Balance at 1 March 2016 - audited 545 851 762 4 058 528 549 910 290
Increase in net assets attributable to
ordinary shareholders - 12 668 465 12 668 465
Balance at 1 September 2016 - reviewed 545 851 762 16 726 993 562 578 755
Increase in net assets attributable to
ordinary shareholders - 23 506 877 23 506 877
Balance at 1 March 2017 - audited 545 851 762 40 233 870 586 085 632
Increase in net assets attributable to
ordinary shareholders - 13 699 935 13 699 935
Dividends - (35 020 885) (35 020 885)
Balance at 31 August 2017 - reviewed 545 851 762 18 912 920 564 764 682
Interim statement of cash flows
for the period ended 31 August 2017
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2017 2016 2017
R R R
Cash flows from operating activities
Cash generated by operations 9 044 720 14 502 551 39 625 306
Finance costs (1 236) (4 473) (5 088)
Tax paid (380 718) (1 365 739) (7 069 452)
Net cash generated by operating activities 8 662 766 13 132 339 32 550 766
Cash flows from investing activities
Investment in financial asset at fair
value through profit or loss - - (501 000 000)
Proceeds from disposal of financial assets - 551 445 066 551 445 066
Net cash generated by investing activities - 551 445 066 50 445 066
Cash flows from financing activities
Dividends paid (35 020 885) - -
Repayment of related-party loans - (529 444) (587 066)
Prepayment of share issue expenses (1 715 466) - -
Net cash used in financing activities (36 736 351) (529 444) (587 066)
Total cash movement for the period (28 073 585) 564 047 961 82 408 766
Cash at the beginning of the period 84 755 945 2 347 179 2 347 179
Total cash at the end of the period 56 682 360 566 395 140 84 755 945
Accounting Policies
Corporate information
The Company was incorporated on 16 April 2015 and successfully listed as a Special Purpose
Acquisition Company ("SPAC") on the Main Board of the JSE Limited ("JSE") on 12 November
2015. The Company is focused on acquiring equity stakes in emerging Southern African
infrastructure assets, specifically in the energy, transport and water and sanitation sectors. The
Company aims to be a leading investment holding company of infrastructure assets in South
Africa. The Company's investment philosophy is to invest in infrastructure assets that are
operational or near operational, offer low risk and yield inflationary linked returns.
On listing, the Company issued 55 151 000 shares at R10 per share, thereby raising
R551.5 million. A SPAC is a special purpose vehicle established for facilitating the primary
capital raising process to enable the acquisition of viable assets in pursuit of a listing on the JSE.
The Company invests substantially all its assets through its wholly owned subsidiary GAIA
Financial Services. The two companies have the same investment objectives.
1. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these interim financial statements
are set out below.
1.1 Basis of preparation
The interim financial statements are prepared in accordance with International Financial
Reporting Standard ("IAS") 34 Interim Financial Reporting, the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council and the requirements of the Companies
Act of South Africa. The accounting policies applied in the preparation of these interim financial
statements are in terms of International Financial Reporting Standards and are consistent with
those applied in the previous annual financial statements.
The interim financial statements have been prepared on the basis of accounting policies
applicable to a going concern.
The basis presumes that funds will be available to finance future operations and that the
realisation of assets and settlement of liabilities, contingent obligations and commitments will
occur in the ordinary course of business.
The financial statements have been prepared on the fair value basis, except for other assets.
Liabilities and equity are stated at historic cost. The functional and presentation currency is the
South African Rand.
The preparation of the interim financial statements for the six months ended 31 August 2017
was supervised by the financial director Tamee Soudien-Witten.
The interim financial statements have been reviewed by KPMG Inc., which issued an unmodified
report which is available for inspection at the registered address of GAIA Infrastructure Limited.
The directors take full responsibility for the preparation of the interim financial statements.
Notes to the interim financial statements
for the period ended 31 August 2017
Reviewed Audited
six months 12 months
ended ended
31 August 28 February
2017 2017
R R
2. Financial assets at fair value through profit or loss
At fair value through profit or loss - designated
GAIA Financial Services (Pty) Ltd 511 123 029 503 680 415
The Company funded the acquisition of its effective see-through economic interest of 25.2% of
Dorper, through a R501 million loan to GAIA Financial Services. The loan was financed using the
proceeds from the partial disposal of the Company's unit trust investment. This loan is
interest-free, unsecured and has no fixed terms of repayment.
The Dorper Acquisition was concluded on 20 December 2016. The residual capital is held in a
money market fund.
The acquisition entailed the subscription for the ordinary shares in GAIA RE 1 equal to 34.9%
(R265 036 179) economic and voting interest of the issued share capital and the advancing of a
convertible loan (R235 963 821) to GAIA RE 1 which will effectively give the Company an
economic interest of 84.2% in GAIA RE 1.
The convertible loan may be settled in one of two ways, which could potentially trigger the
acquisition of minority interest in three (3) additional renewal energy projects by the Group or the
conversion of the convertible loan into additional ordinary shares in GAIA RE 1. The option may
be exercised no later than 31 March 2018 unless all parties agree otherwise.
GAIA RE 1 holds 30% of the issued share capital in Dorper, the 84.2% economic interest in
GAIA RE 1 equates to a 25.2% effective see-through economic interest in Dorper.
Reviewed Audited
six months 12 months
ended ended
31 August 28 February
2017 2017
R R
Non-current assets
Designated as at fair value through profit or loss 511 123 029 503 680 415
Fair value estimation
For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which
reflects the significance of the inputs used to make the measurements.
Level 1 represents those assets which are measured using unadjusted quoted prices in active
markets for identical assets.
Level 2 applies inputs other than quoted prices that are observable for the assets either directly
(as prices) or indirectly (derived from prices).
Level 3 applies inputs which are not based on observable market data. This category includes
all instruments for which the valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for similar instruments but for
which significant unobservable adjustments or assumptions are required to reflect differences
between the instruments.
Valuation of underlying renewable assets
The value of the investment in the ordinary shares of Dorper was determined using the
discounted cash flow valuation model. Assumptions and inputs used in valuation techniques
include long-term CPI forecast and determination of an investor premium used in estimating
discount rates.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the
prices that would be received to sell the investment in Dorper in an orderly transaction between
market participants at the measurement date.
The Company uses a valuation model that was developed by an experienced independent third
party during the bidding process for the rights of the project. This model has been developed
from recognised valuation models and the developer's experience regarding the valuation of
renewable energy projects.
Some of the significant inputs into the discounted cash flow model may not be observable in
the market and are derived from market prices or rates or are based on assumptions. This
valuation model therefore requires more management judgement and estimation in
determination of fair value.
In the valuation for the investment in Dorper management's judgement and estimation is
required for:
- selection of the appropriate valuation model to be used, in this case the discounted cash
flow model;
- assessment and determination of the expected cash flows from the investment in Dorper; and
- selection of the appropriate discount rate.
The fair value estimate obtained from the discounted cash flow model will only be adjusted for
factors such as liquidity risk and model uncertainty to the extent that the Company believes that
a third-party market participant would take them into account in pricing a transaction. No such
adjustments were deemed necessary in the valuation of the investment in Dorper.
The Company has an established control framework with respect to the measurement of fair
values. Specific controls include:
- verification of observable pricing inputs;
- a review and approval process for new models and changes to such models;
- analysis and investigation of significant valuation movements; and
- review of unobservable inputs and valuation adjustments.
The table below analyses financial instruments measured at fair value at the reporting date by
the level in the fair value hierarchy into which the fair value measurement is categorised. The
amounts are based on the values recognised in the statement of financial position. All fair value
measurements below are recurring.
Reviewed Audited
six months 12 months
ended ended
31 August 28 February
2017 2017
R R
Level 3
GAIA Financial Services (Pty) Ltd 511 123 029 503 680 415
As at 31 August 2017, the fair value measurement of shares held by the Company in GAIA
Financial Services is categorised into Level 3. The fair value of investments in its 100% subsidiary
is determined using unadjusted net asset value of GAIA Financial Services at the reporting date.
Reconciliation of financial assets at fair value through profit or loss measured at Level 3
Gains
Opening in profit
balance or loss Total
GAIA Financial Services (Pty) Ltd 503 680 415 7 442 614 511 123 029
The change in unrealised gains or losses (net gain) for the period is included in profit or loss for
financial assets held at the reporting date. These gains and losses are recognised in profit or
loss as a net gain from financial instruments at fair value through profit or loss.
Sensitivity of fair value measurement to changes in unobservable inputs
Although management believes that its estimates of fair value are appropriate, the use of
different methodologies or assumptions could lead to different measurements of fair value. For
fair value measurements in Level 3, changing one or more of the assumptions used to reasonably
possible alternative assumptions would have the following effects on net assets.
Significant Range of estimates Sensitivity to changes 1% decrease 1% increase
Valuation unobservable for unobservable in significant in unobser- in unobser-
technique inputs inputs unobservable inputs vable input vable input
Discounted Discount 12.92% (28 February The estimated fair
cash flow rate 2017: 12.92%) value would increase
if the discount rate
decreased 17 080 881 (15 323 711)
Significant unobservable inputs used in measuring fair value
Significant unobservable inputs are developed as follows:
Discount rate
Represents the rate used to discount projected levered or unlevered forecast cash flows for an
asset to determine their present values. Their discounted present value cash flows are
determined as their fair value at reporting date. GAIA RE 1 uses a discount rate that appropriately
captures Dorper's stage-of-life, using South African data, substantiated by international findings.
3. Earnings per share
Basic earnings per share
Basic earnings per share is determined by dividing profit or loss attributable to the ordinary
equity holders by the weighted average number of ordinary shares outstanding during the period.
Profit or loss attributable to the ordinary equity holders is determined as profit or loss after
adjusting for the tax effect.
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2017 2016 2017
R R R
Basic earnings per share
From continuing operations (cents per share) 24.84 22.97 65.59
Basic earnings per share was based on earnings of R13 699 935 (2017: R36 175 340) and
weighted average number of ordinary shares of 55 151 000 (2017: 55 151 000).
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2017 2016 2017
R R R
Reconciliation of profit for the period to
basic earnings
Profit for the period attributable to equity
holders of GAIA Infrastructure Capital Ltd 13 699 935 12 668 465 36 175 340
Diluted earnings per share
In the determination of diluted earnings per
share, profit or loss attributable to the equity
holders and the weighted average number
of ordinary shares are adjusted for the effects
of all dilutive potential ordinary shares.
From continuing operations (cents per share) 24.84 22.97 65.59
Diluted earnings per share is equal to earnings per share because there are no dilutive potential
ordinary shares in issue.
Headline earnings and diluted headline earnings per share
Headline earnings per share is calculated using Circular 2/2015. The calculation of headline
earnings per ordinary share is based on the weighted average of 55 151 000 (2017: 55 151 000)
ordinary shares in issue during the year, and headline earnings calculated as follows:
Headline earnings per share and diluted headline earnings per share are determined by dividing
headline earnings and diluted headline earnings by the weighted average number of ordinary
shares outstanding during a period.
Headline earnings and diluted headline earnings are determined by adjusting basic earnings
and diluted earnings by excluding separately identifiable remeasurement items. Headline earnings
and diluted headline earnings are presented after tax and non-controlling interest.
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2017 2016 2017
R R R
Headline earnings per share (cents) 24.84 22.97 65.59
Diluted headline earnings per share (cents) 24.84 22.97 65.59
Reconciliation between earnings and
headline earnings
Basic earnings 13 699 935 12 668 465 36 175 340
Reconciliation between earnings and
headline earnings
Diluted earnings 13 699 935 12 668 465 36 175 340
4. Prior period restatements and reclassifications
In the comparative period, cash and cash equivalents excluded the Coronation Money Market
Fund previously disclosed as part of investments in the statement of financial position and not
included in the statement of cash flows. This has been disclosed in the 2017 interim results and
the 2016 interim comparative reclassified accordingly.
These reclassifications had no impact on the previously reported profit, retained income and
financial position of the Company.
The reclassifications are set out below:
Balance Restated
previously Reclassifi- comparative
stated cation balance
Statement of financial position
Financial assets 565 607 644 (565 607 644) -
Cash and cash equivalents 787 496 565 607 644 566 395 140
Statement of cash flows
Cash used in operations (4 144 374) 18 646 925 14 502 551
Investment income 18 646 925 (18 646 925) -
Net cash from operating activities 14 502 551 - 14 502 551
Proceeds from disposal of financial assets 4 470 000 546 975 066 551 445 066
Investment income reinvested (18 632 578) 18 632 578 -
Net cash from investing activities (14 162 578) 565 607 644 551 445 066
16 October 2017
Johannesburg
Financial Advisor and Sponsor to GAIA
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Company contact details
Prudence Lebina
+27 11 684 1230
prudence@gaia.group
General information
Country of incorporation and domicile
South Africa
Directors
Eddie Mbalo
Leon de Wit
Nathiera Kimber
Prudence Lebina
Lumkile Mondi
Clive Ferreira
Botha Schabort
Tamee Soudien-Witten
Mich Nieuwoudt
Thembani Bukula
Sisanda Tuku
Registered office
37 Vineyard Road
Claremont, 7708
Business address
37 Vineyard Road
Claremont, 7708
Bankers
FirstRand Bank Ltd
Auditors
KPMG Inc
Chartered Accountants (SA)
Registered Auditors
Secretary
Fusion Corporate Secretarial Services
Company registration number
2015/115237/06
Tax reference number
9473/844/17/4
Level of assurance
These interim financial statements have been voluntarily reviewed as there are no regulatory
requirements imposing an interim review on the entity.
Preparer
The interim financial statements were compiled under the supervision of: Tamee Soudien-Witten
Chartered Accountant (SA).
Date: 16/10/2017 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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