GAIA INFRASTRUCTURE CAPITAL LIMITED - Reviewed Provisional Financial Results for the year ended 28 February 2018 and cash dividend declaration

Release Date: 15/06/2018 11:00
Code(s): GAI
 
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Reviewed Provisional Financial Results for the year ended 28 February 2018 and cash dividend declaration

GAIA Infrastructure Capital Limited
(previously GAIA Capital Proprietary Limited)
Incorporated in the Republic of South Africa
(Registration number 2015/115237/06)
Share Code: GAI, ISIN ZAE000210555
("GAIA") or "the Company")

Reviewed Provisional Financial Results
for the year ended 28 February 2018 and cash dividend declaration

- Tangible NAV* per share at R10.53 pre-final dividend distribution
- Gross assets under management growth from R503.9 million to R763.7 million
- Maintenance of an inflationary increase in dividends to shareholders with a final cash dividend 
  declaration of 42.0 cents per share
- Headline earnings per share up 19.5% to 78.4 cents per share
- Total revenue up 15.5% to R62.0 million
- Net cash of R26.7 million
- Successful transition from SPAC** to a fully fledged investment holding company
- Second investment concluded in the year under review
- Strong pipeline of investment opportunities yielding above target investment return

*   Net asset value.
**  Special purpose acquisition company.

FINANCIAL COMMENTARY
Effective December 2016, GAIA transitioned to a fully fledged investment holding company compared 
to the 12 months to 28 February 2017 of the Company trading largely as a SPAC. The Dorper Wind Farm 
which was acquired on 20 December 2016 performed to the satisfaction of the Company with the 
highlight for the year under review being the acquisition of an effective see-through economic 
interest of 20% in the Noblesfontein Wind Farm on 19 September 2017 for R188 million ("the 
Noblesfontein Transaction").

Revenue increased to R62.0 million (2017: R53.6 million) for the year under review, comprised of 
dividend and interest income generated from the investments in Dorper and Noblesfontein, as well as 
favourable fair value gains from the Noblesfontein Transaction. GAIA received dividend income of 
R60.0 million (2017: R15.6 million) from GAIA Financial Services (RF) Proprietary Limited 
("GAIA Financial Services") which in turn received income from the Company's underlying investments 
in Dorper and Noblesfontein. Income received from Noblesfontein was included for only five months 
of the year. The 2019 financial year will enjoy the benefits of a full year of dividend income from 
the Noblesfontein Transaction. The Company earned interest income of R4.3 million over the reporting 
period (2017: R33.0 million) mainly from the Coronation Money Market Fund. The reduction from the 
prior year was as a result of the funds being deployed on operating expenses including transaction 
costs on the Noblesfontein Transaction.

The expense to revenue ratio increased as GAIA increased its capacity to enable it to absorb the 
growth expected from operating as an investment holding company with operating expenses increasing 
to R18.5 million (2017: R8.8 million). Operating expenses included acquisition costs incurred for 
the Noblesfontein Transaction and other transactional costs related to the sourcing of investment  
opportunities in accordance with the shareholder-approved Investment Policy.

Expenses by function

                                                             FY2018                    FY2017
Function                                              Opex*(Rm)     % AUM**     Opex*(Rm)     % AUM**
Corporate governance                                       6.1        0.8            3.3        0.7
Investment management                                      4.8        0.6            3.4        0.7
Capital raising                                            2.4        0.3            1.5        0.3
Deal pipeline sourcing                                     3.1        0.4            0.1        0.0
Other                                                      2.1        0.3            0.5        0.1
                                                          18.5        2.4            8.8        1.8
*   Operating expenditure.                             
**  Assets under management.                       
                                                   
Assets under management (Rm)                                                        2018       2017
Noblesfontein - SARGE                                                               88.7          -
Noblesfontein - GAIA SPV                                                           169.2          -
Dorper - GAIA RE 1                                                                 505.8      503.9
                                                                                   763.7      503.9


ASSETS UNDER MANAGEMENT COMMENTARY
On 19 September 2017, GAIA notified shareholders of the successful conclusion of the Noblesfontein 
Transaction through GAIA Financial Services acquiring C Preference Shares in GAIA SPV (RF) 
Proprietary Limited ("GAIA SPV") for an aggregate subscription price of R130 million and, as a 
result, acquiring 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) 
Limited ("Noblesfontein Wind Farm"). In addition, GAIA Financial Services acquired a further 
effective economic interest of 7.03% of the distributions linked to the ordinary shares in the 
Noblesfontein Wind Farm through a subscription of A Preference Shares and B Preference Shares in
South African Renewable Green Energy (Pty) Limited ("SARGE") for an aggregate subscription price 
of R57 million.

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 Rand Merchant Bank Investments and Advisory 
Proprietary Limited 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.73.8 MW 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.

Dorper's asset performance has been consistent with the forecast figures on total electricity 
production for the period under review. The average actual capacity factor was also consistent with 
average forecast capacity factor at 33%.

GAIA has adopted an accounting policy of measuring its investments at fair value through profit or 
loss with fair value movements on its assets under management recognised in the Statement of 
Profit or Loss. However, the R501 million investment in the Dorper Wind Farm was through an 
acquisition of a 34.9% equity stake in GAIA RE 1 Proprietary Limited for R265 million and a 
convertible loan of R235 million. The convertible loan may be settled either through the acquisition 
of (i) minority interest in three (3) additional renewable solar energy assets and fulfilment of all 
applicable conditions precedents, or (ii) additional equity exposure to the Dorper Wind Farm. The 
Company has recognised the R235 million convertible loan at amortised cost with the fair value 
movement on the investment to be recognised on conversion of the convertible loan into equity 
interest(s).

DIVIDEND DISTRIBUTION
The cash flows of GAIA's underlying assets are typically of a predictable nature, resulting in an 
inflation-linked dividend growth investment case. GAIA (Tax reference number: 9473/844/17/4) paid 
its interim cash dividend of R13.7 million (24.84 cents per share) for the six months ended 
31 August 2017, paid in November 2017.

Notice is hereby given that the board of directors ("the Board") have declared a final gross cash 
dividend of 42.0 cents (33.6 cents net of dividend withholding tax) per ordinary share for the 
period ended 28 February 2018. 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.

This brings the total dividend for the 2018 financial year to 66.84 cents per share, which is 
5.3% more than the comparable dividend for the 2017 financial year. The Board previously announced 
its intention to increase the dividend annually by the rate of inflation.

The issued share capital at the declaration date is 55 151 000 ordinary shares.

The salient dates for the dividend will be as follows:

2018
Last day of trade to receive a dividend                                             Tuesday, 3 July
Shares commence trading "ex" dividend                                             Wednesday, 4 July
Record date                                                                          Friday, 6 July
Payment date                                                                         Monday, 9 July

Share certificates may not be dematerialised or rematerialised between Wednesday, 4 July 2018 and 
Friday, 6 July 2018, both days inclusive.

This final cash dividend amounting to R23.2 million has not been recognised as a liability in 
these reviewed condensed financial statements.

OUTLOOK
GAIA's primary focus, the secondary market in infrastructure equity, continues to present 
significant opportunities which are not dependent on whether new infrastructure projects are 
continually developed. The Company's investment case was buoyed by Government's renewed commitment 
to facilitate private sector investment into the selected infrastructure sectors in which GAIA 
invests, being energy, water and sanitation, and transportation infrastructure.

GAIA focuses on core infrastructure assets for which the cash flows can be forecast with a low 
margin of error. These are assets that are mature beyond their demand ramp-up phase, functioning 
in established and transparent regulatory environments, serving demographically and economically 
sound service areas and have minimal obsolescence or technology risks.

GAIA has a diversified pipeline of approximately R1.7 billion of exclusive investment opportunities 
for which it requires equity funding to execute. The Company continues to engage with the equity 
capital markets to raise funding to enable execution of these value-accretive investments in 
accordance with the Company's Investment Policy for the benefit of its stakeholders. The investment 
pipeline yields are above target investment return of CPI +6% (gross of fees) on a blended basis.

CHANGES TO THE BOARD
In accordance with paragraph 3.59(a) of the JSE Limited Listings Requirements, shareholders are 
advised that Ms Tamee Soudien-Witten resigned as Finance Director and as an Executive Director of 
the Board, with effect from 9 February 2018. The Chief Executive Officer, Ms Prudence Lebina, 
fulfils the duties and responsibilities of Finance Director whilst the Board is in the process of 
identifying a suitable successor to fill the position of Finance Director.

Condensed Statement of Financial Position
as at 28 February 2018

                                                                               Reviewed     Audited
                                                                                   2018        2017
                                                                                  R'000       R'000
Total assets                                                                    586 718     588 436
Non-current assets                                                              506 286     503 680
Current assets                                                                   80 432      84 756
Cash and cash equivalents                                                        26 729      84 756
Trade and other receivables                                                      53 703           -
Total equity and liabilities                                                    586 718     588 436
Share capital                                                                   545 852     545 852
Retained income                                                                  34 728      40 234
Total liabilities                                                                 6 138       2 351
Shares in issue                                                                  55 151      55 151
Net asset value per share (Rand)                                                  10.53       10.63
                                                                           
Condensed Statement of Comprehensive Income                                
for the year ended 28 February 2018                                        
                                                                           
                                                                               Reviewed     Audited
                                                                                   2018        2017
                                                                                  R'000       R'000
Total revenue                                                                    62 019      53 685
Interest income                                                                   4 284      33 040
Dividend income                                                                  60 330      15 563
Net fair value gain/(loss)                                                       (2 596)      5 083
Total operating expenses                                                        (18 456)     (8 799)
Finance costs                                                                        (2)         (5)
Taxation                                                                           (346)     (8 706)
Net profit for the year                                                          43 215      36 175
Basic earnings per share (cents)                                                  78.36       65.59
Headline earnings per share (cents)                                               78.36       65.59

Condensed Statement of Changes in Equity
for the year ended 28 February 2018

                                                                     Share     Retained       Total
                                                                   capital       income      equity
                                                                     R'000        R'000       R'000
Balance at 1 March 2016 - Audited                                  545 852        4 059     549 910
Net profit for the year                                                  -       36 175      36 175
Balance at 1 March 2017 - Audited                                  545 852       40 234     586 086
Net profit for the year                                                  -       43 215      43 215
Dividends paid                                                           -      (48 720)    (48 720)
Balance at 28 February 2018 - Reviewed                             545 852       34 728     580 580




Condensed Statement of Cash Flows
for the year ended 28 February 2018
                                                                               Reviewed     Audited
                                                                                   2018        2017
                                                                                  R'000       R'000
Cash flows from operating activities                                          
Cash (used in)/generated from operations                                         (3 079)     39 625
Finance costs                                                                        (2)         (5)
Dividends paid                                                                  (48 720)          -
Tax paid                                                                         (1 067)     (7 069)
Net cash (used in)/generated from operating activities                          (52 869)     32 551
Cash flows from investing activities                                             
Purchase of property, plant and equipment                                          (454)          -
Investment in financial asset                                                    (4 705)   (501 000)
Net cash (used in) investing activities                                          (5 159)   (501 000)
Cash flows from financing activities                                             
Repayment of related-party loan                                                       -        (587)
Net cash from financing activities                                                    -        (587)
Total cash movement for the year                                                (58 027)   (469 036)
Cash at the beginning of the year                                                84 756     553 792
Total cash at end of the year                                                    26 729      84 756

Notes to the Condensed Financial Statements
for the year ended 28 February 2018

1.  BASIS OF PREPARATION AND ACCOUNTING POLICIES
    The reviewed provisional financial results have been prepared in accordance with the framework 
    concepts and the measurement and recognition requirements of International Financial Reporting 
    Standards ("IFRS") and interpretations of IFRS, as issued by the International Accounting 
    Standard Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices 
    Committee, the Financial Pronouncements as issued by Financial Reporting Standards Council, the 
    JSE Limited Listings Requirements, and the requirements of the South African Companies Act, 71 
    of 2008, and the presentation and disclosure requirements of IAS 34 Interim Financial Reporting.

    The provisional financial results have been prepared on the historic cost basis except that 
    financial assets and liabilities at fair value through profit and loss are stated at their fair 
    value. The results are presented in Rand, which is the Company's functional and presentation 
    currency.

    Accounting policies
    The accounting policies applied in the preparation of the annual financial statements from which 
    the provisional financial statements were derived are in terms of IFRS and are consistent with 
    the previous annual financial statements.

2.  PREPARATION
    The condensed provisional financial results have been prepared internally under the supervision 
    of the Chief Executive Officer, P Lebina CA(SA), and approved by the Board.

    The condensed provisional financial results were reviewed by the Company's external auditor, 
    Deloitte and Touche. A copy of their unmodified review conclusion is available from the Company's 
    registered office. Any reference to future financial performance included in this announcement, 
    has not been reviewed or reported on by the external auditor. The auditor's report does not 
    necessarily report on all the information contained in this announcement. Shareholders are 
    therefore advised that in order to get a full understanding of the nature of the auditor's 
    engagement, they should obtain a copy of the auditor's report together with the accompanying 
    financial information from the Company's registered office.

3.  SHARE CAPITAL
    Authorised
    6 000 000 000 ordinary no par value shares.

                                                                                   2018        2017
                                                                                  R'000       R'000
    Issued and fully paid                                                                  
    55 151 000 no par value shares, net of share issue cost                     545 852     545 852

4.  EARNINGS PER SHARE
    In the year under review, earnings per share increased 19.5% to 78.4 cents per share compared 
    to 65.6 cents per share in  2017. There were no potential dilutive shares in issue, or headline 
    adjustments required, therefore diluted earnings per share and headline earnings per share were 
    in line with basic earnings per share.

On behalf of the Board

KP Lebina
Chief Executive Officer

15 June 2018
Johannesburg

General information
Country of incorporation and domicile South Africa
                                     
Directors                            
KP Lebina (Chief Executive Officer and Interim Financial Director)
MMN Nieuwoudt (Chief Investment Officer)                 
KE Mbalo* (Chairman)                
S Tuku*                             
L Mondi*                            
N Kimber*                           
T Bukula*                           
L de Wit
C Ferreira                           
B Schabort
                           
* Independent Non-Executive
                                     
Registered office                    
37 Vineyard Road
Claremont
Western Cape, 7708
                                     
Sponsor                              
Rand Merchant Bank (A division of FirstRand Bank Limited)

Bankers
FirstRand Bank Limited

Auditors
Deloitte & Touche

Transfer secretaries
Computershare Investor Services (Pty) Limited
Rosebank Towers
15 Biermann Avenue, Rosebank
Johannesburg, 2196

Company secretary
Fusion Corporate Secretarial Services (Pty) Limited
Unit 7, Block C
Southdowns Office Park
Karee Street, Irene
Pretoria, 0169

Company registration number
2015/115237/06

Tax reference number
9473/844/17/4
 
Preparer
The financial statements where compiled under Prudence Lebina's supervision. 

Website
www.gaia-ic.com
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