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CIL 201511110005A
Reviewed provisional condensed consolidated results for the year ended 31 August 2015
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
Reviewed provisional condensed consolidated results
for the year ended 31 August 2015
Salient features
– Revenue up 37% to R3,6 billion (2014: R2,6 billion)
– Profit for the year up 28% to R331 million (2014: R258 million)
– HEPS up 18% to 220,7 cents per share (2014: 187,8 cents per share)
– Power order book up 36% to R4,1 billion (2014: R3,0 billion)
Consolidated Infrastructure delivered solid profit growth for the
financial year ended 31 August 2015. The group successfully focused
on key objectives to strategically grow the various divisions and
develop Pan Africa into a growth engine for the group. The group’s
recently established transformative investment division, CIGenco,
made substantial progress with its stated objective to identify
niche power generation opportunities across the African continent.
The strategy to diversify the group’s geographic footprint and
earnings beyond South Africa as well as to diversify its portfolio of
operations across different sectors remains on track. In the current
year, profits after tax reported from outside South Africa were
marginally down at 54% compared to 56% of the group’s profits after
tax reported in 2014.
Business overview
CIG has a diversified portfolio of operations, ranging from services,
infrastructure and materials, covering a large geographic footprint
across South Africa and Sub-Saharan Africa. The operations are
involved in power and electrical, oil and gas, building materials and
more recently, the railway sector.
Financial overview
Revenue grew by 37% to R3,6 billion from R2,6 billion reported in
2014.
Profit for the year increased by 28% to R331 million from the
prior year’s R258 million. Solid growth was achieved across all of
CIG’s divisions, both within South Africa and throughout Sub-Saharan
Africa.
Earnings per share of 222,5 cents (2014: 188,8 cents) and headline
earnings per share of 220,7 cents (2014: 187,8 cents) represent an
18% increase compared to the prior year.
Earnings before interest, taxation, depreciation and amortisation
(“EBITDA”) grew by R97 million to R414 million, a 31% increase over
the prior year of R317 million. EBITDA margins remain within our
targeted range of 11,5% (2014: 11,9%).
The group’s segmented analysis of profit after tax contribution is:
2015 2014
% %
Power and Electricity 45 46
Oil and Gas 33 32
Building Materials 12 14
Rail 3 –
Corporate 7 8
The group continues to deliver high growth across its major sectors
and remains focused to manage the associated risks. These risks are
mitigated by conservative procurement practices and policies.
Extensive effort is made to ensure that sufficient capital is
available for expansion and delivery, particularly for the South
African renewable energy projects.
In order to provide for the group’s anticipated growth, ongoing
banking relationships are fostered, to ensure that sufficient
head-room in respect of working capital, trade finance and
guarantee facilities remains available. A new term sheet has been
signed with Standard Bank to obtain additional working capital, trade
finance and bank guarantee facilities which will supplement existing
facilities with Standard Chartered Bank. In addition, management
continues to work closely with the insurance industry to ensure that
sufficient facilities are available to issue performance and other
related bonds.
The group concluded an underwriting agreement to raise an additional
R250 million of equity. The pricing of the shares for cash placement
will be a price not less than 3 200 cents per share. The proceeds of
the issue will be to support the growth of substation and line work
demand outside South Africa as well as extensive growth in demand
from the renewable energy sector in South Africa.
The group reported a net cash balance of R482 million compared
to R948 million reported for 31 August 2014. During the year
R180 million was used to redeem the debts relating the Angola
Environmental Servicos Limitada (“AES”) acquisition and R90 million
was utilised for other acquisitions including Tractionel. On a net
debt basis, the group reported a 7,8% debt to equity ratio against a
negative ratio of -8,4% reported in 2014. The group is satisfied
that an ongoing debt-to-equity ratio of between 30% and 40% is an
appropriate tolerance level.
The group will continue to participate in the medium-term note
programme, which is in place to assist with the longer-term funding
requirements that arise as the order book grows. On 28 August 2015
the group redeemed note CIG02 for R130 million, which was scheduled
to mature on 30 August 2016. This will ensure that the group has no
debt maturing in the 2016 financial year. CIG issued two further
notes for R225 million, R70 million of which is due to mature on
28 August 2018 and R155 million due to mature on 28 August 2020.
To date R625 million of medium-term notes have been issued as part
of the R1 billion medium-term note programme. Interest cover as
measured against EBITDA remained at a conservative level of
7,3 times.
The group has maintained a consistent Moody’s credit rating of
Baa2.za.
Divisional overview
Power and Electricity
– Revenue up 32% to R2,9 billion.
– EBITDA up 34% to R301 million
– Order book up 36% to R4,1 billion
Consolidated Power Projects Proprietary Limited (“Conco”), a market
leader in the supply of substations and high voltage electrification
work, expanded its footprint across the African continent and R490
million of revenue was generated from outside of South Africa. The
strategy of an expanded local presence is improving the ability to
source new projects. The division is making progress on being a
favoured supplier in each of the markets in which it operates. These
enhancements resulted in the growth of the international order book
to USD100 million.
The execution of this strategy favourably impacted the South African
business. In the South African sector, the Renewable Energy division
executed R981 million of renewable work and currently has an order
book of R1,1 billion, which excludes R1 billion of signed awards as
part of Round 4 of Department of Energy’s Renewable Energy
Independent Power Producer Procurement Programme (“REIPP programme”).
The South African substation and lines business executed R1,4 billion
during the year and secured an additional R1,7 billion of awards.
Demand for electrification remains high across the African markets.
The statutory reorganisation of Conco which was completed by year
end has simplified the South African entity’s statutory structure and
improved its compliance with the rules governing the new broad based
black economic empowerment (“BBBEE”) legislation. The next step is
the acquisition of a significant interest in the Conco South Africa
business by our highly experienced, long serving team of black
engineers and managers led by Mr Slu Gesha, the Managing Director of
Conco South Africa.
Consolidated Energy Solutions performed well, with reported growth in
revenue and EBITDA. The investment to build capacity within Energy
Solutions is bearing fruit and the division is developing smart grid,
battery storage and rooftop solar solutions, which management
anticipates will provide access to new high growth opportunities.
The Consolidated Power Maintenance division established traction in
the renewable energy sector and successfully secured multiple long
and short-term contracts, most notably in the Solar Photovoltaic
market.
CIGenco
Over the past financial year, the group established CIGenco, a
transformative investment division to invest in and oversee the
development, construction and operations of power and electrical
infrastructure. Substantial progress has been made and under the
guidance of the group CIO and the CEO of CIGenco a strong pipeline of
power projects across South Africa and Africa has been identified.
Building Materials
– Revenue up 25% to R500 million
– EBITDA up 13% to R86 million
The Building Materials division continued to benefit from
heightened demand out of the residential sector and successfully grew
market share. The margin was impacted as a result of moving a high
volume of low grade material at the Laezonia quarry in order to
access higher grade product. This process is expected to
continue during 2016 but will moderate as the product mix improves.
Oil and Gas Services
Profit attributable to joint venture up 33% to R109 million
AES is a service provider to the oil and gas rigs located off the
coast of Angola. The primary service is to collect, recycle and
dispose of waste generated in the oil drilling process.
Profits from AES were enhanced due to increased rentals and volumes
processed.
A second facility in Soyo, Angola was opened in July in order to free
up some 30% of additional capacity in Luanda. Management is confident
that it will handle the new drill cuttings from current and new
customers planning to use the facility, in the north of Angola, with
significant cost saving benefits to them.
The volatility in emerging market currencies resulted in AES
incurring currency losses due to the Angolan Kwanza depreciating
against the US Dollar in the financial year. The effect of these
currency losses was not fully offset against translation gains
made due to the depreciation of the South African Rand against the
US Dollar in the corresponding period.
The currency volatility and shortage of foreign currency in Angola
resulted in substantial delays of up to 60 days in paying for
international services. CIG has no significant amounts owing from the
AES operation and the division contractually agreed as part of its
inbound investment into Angola that it would not repatriate
any dividends before October 2016.
Rail
– Revenue of R153 million
– EBITDA of R20 million
– Order book of R240 million
Acquired on 1 November 2014, Tension Overhead Electrification
Proprietary Limited and Tractionel Maintenance Services Proprietary
Limited (“Tractionel”) specialises in the electrification of railways
and the installation of overhead traction equipment. Substantial new
order expectations over the short term were delayed due to internal
disruptions at the Passenger Rail Agency of South Africa and slower
spending patterns at Transnet. The division consequently performed
slightly below expectations.
Prospects
Power and Electricity
The prospects of the Power division across South Africa and into
Sub-Saharan Africa remain robust. The order book has continued to
grow substantially in absolute terms as well as in the increased
average size of projects, demonstrating Conco’s earned reputation for
providing innovative, large scale, technical solutions on time and
within planned budgets. The execution horizon of the larger projects
has expanded. The improved focus of Conco across multiple sectors 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.
In South Africa, the group’s prospects within the municipalities and
Renewable Energy Feed-In Tariff programme are expected to yield solid
growth. Substantial contracts and proposals have been signed and
submitted as part of the government’s Round 4 REIPPP. These have not
been included in the order book and a short delay in closure is
expected as Eskom deliberates on a proposal by the Department of
Energy to resolve the issue of Transmission Budget Quotes. The group,
which has an outstanding reputation and significant competence in the
provision of electrical Balance of Plant in the wind sector, is
working extensively to expand its offerings and has been building
capacity to enhance its solutions to the solar PV market.
African utilities are expected to continue to provide above average
growth prospects and, while awards in the oil exporting countries are
slowing, the majority of the countries on the continent are oil
importers and remain committed to the expansion of infrastructure. As
a result, Conco International is seeing a greater number of quality
opportunities particularly in East Africa and Ethiopia.
As mentioned often by management, the biggest constraint to growth
over the medium to long term is the availability of suitably
qualified engineers to execute on the expected increase of the
technically complex work.
The current opportunity available to CIGenco is substantial and if
successful will require significant capital to support the
development and ownership of power projects. To ensure the group
maximises the potential growth of CIGenco, various optimal capital
structures are being considered. Feedback on the process will be made
at the appropriate time.
Building Materials
Despite financial headwinds to consumers, there have been no signs of
a slowdown within the Buildings Materials division and it is expected
that the division should sustain its current activity levels.
Oil and Gas Services
Should there be no further delays in the implementation of legislated
environmental requirements in the drill cutting law, currently
scheduled for implementation by 31 December 2015, AES will continue
to grow as expected. However, any delays to the implementation of
this legislation may slow revenue and profit growth.
A consortium agreement with Fundo de Investimento Privado Angola
(“FIPA”), which owns 16% in AES, gives FIPA a put option to sell its
shareholding to CIG on 1 May 2016 and this option expires after four
years. At present should FIPA exercise the put option, it is the
intention of CIG to acquire the shares currently estimated to cost
between USD40 million and USD50 million. At these valuations,
earnings per share are expected to be enhanced by approximately 10%.
In the event of a material adverse condition existing at the time
the put option is triggered by FIPA, CIG has the right to delay the
process. In these circumstances the put option holder has the right
to jointly market both CIG’s and their own shares. The decision on
this further investment can only be made with certainty when FIPA
triggers the option.
Rail
The railway business provides enormous short and medium-term
potential as the South African government seeks to upgrade rail
infrastructure to manage the roll out of the new locomotive
programme. There are a number of opportunities in the sector which
can only be pursued once there is further momentum and clarity
amongst all stakeholders in this sector.
General
While our businesses are exposed to strong growth drivers, it is
difficult to fully anticipate the effects of possible austerity
measures in South Africa.
We approach the new financial year with optimism that our geographic
and sector strategies are yielding results and that we have
sufficient capital at our disposal to take advantage of the
opportunities.
Dividend
The dividend policy was reviewed by the board. After taking into
account prevailing circumstances and future cash requirements, all
earnings generated by the group will be utilised to fund the
anticipated growth in the coming year. Accordingly, no dividend
has been recommended for the period.
Business combination
On 1 November 2014, CIG acquired 100% of the shares of Tractionel.
The purchase price of R121 228 488 was settled by a cash payment of
R79 424 344 and the issue of shares to the value of R36 804 144.
The balance of R5 000 000 is payable over the next year, 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) 1 299
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 49 177
Purchase consideration discharged as follows: 121 228
Cash payments made on effective date 73 424
Cash payment made in respect of warranted profit for
Tractionel Maintenance Services 6 000
Shares issued on effective date 36 804
Deferred cash payment due in future 5 000
Goodwill 72 051
Basis of preparation
The reviewed provisional condensed consolidated financial statements
for the year ended 31 August 2015 are prepared in accordance with the
requirements of the JSE Listings Requirements for provisional reports
and the requirements of the Companies Act of South Africa. The JSE
Listings Requirements require provisional reports to be prepared in
accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards
(“IFRS”) and the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued
by Financial Reporting Standards Council and to also, as a minimum,
contain the information required by IAS 34: Interim Financial Reporting.
The accounting policies applied in the preparation of the provisional
condensed consolidated financial statements are in terms of IFRS and
are consistent with those applied in the previous consolidated annual
financial statements, except for the adoption of new standards and
interpretations which became effective in the current year.
The group will adopt the following new standards with effect from
1 September 2015:
i) IFRS 5: Non-current Assets Held for Sale
ii) IFRS 7: Financial Instruments Disclosure
iii) IFRS 10: Consolidated Financial Statements
iv) IFRS 11: Joint Arrangements
The directors have not yet determined what the impact of these new
standards on the group will be.
These reviewed provisional results have been prepared under the
supervision of the group financial director, I Klitzner CA(SA). These
provisional condensed consolidated financial statements for the year
ended 31 August 2015 have been reviewed by the external auditor,
Grant Thornton Johannesburg Partnership, who expressed an unmodified
review conclusion thereon. A copy of the auditor’s review report is
available for inspection at the company’s registered office together
with the financial information identified in the auditor’s report.
The auditor’s review report does not necessarily report on all the
information contained in these financial results. Shareholders are
therefore advised that in order to obtain a full understanding of the
nature of the auditor’s engagement they should obtain a copy of the
auditor’s review report together with the accompanying financial
information from the company’s registered office.
The directors take full responsibility for the preparation of
these financial results and confirm that the financial information
has been correctly extracted from the underlying financial
statements.
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
11 November 2015
Condensed consolidated statements of comprehensive income
Reviewed Audited
Year ended Year ended
31 August 31 August
2015 2014
R’000 R’000
Revenue 3 603 953 2 635 713
Cost of sales (2 818 381) (2 046 565)
Gross profit 785 572 589 148
Other income 62 088 48 286
Operating expenses (439 098) (319 873)
Foreign exchange gain/(loss) 5 899 (405)
Earnings before interest, taxation,
depreciation and amortisation
("EBITDA") 414 461 317 156
Depreciation (56 249) (51 428)
Profit before interest and
taxation 358 212 265 728
Interest received 33 268 28 233
Interest paid (90 250) (66 187)
Profit before taxation 301 230 227 774
Taxation (79 341) (52 310)
Equity accounted income from
joint arrangement 109 517 82 644
Profit for the year 331 406 258 108
Total profit for the period
attributable to:
Equity holders of the parent 330 226 257 213
Non-controlling interest 1 180 895
Other comprehensive income:
Recyclable in profit and loss:
Exchange rate differences on
translating foreign operations 112 502 5 385
Total comprehensive income 443 908 263 493
Total comprehensive income
attributable to:
Equity holders of company 436 945 262 748
Non-controlling interest 2 133 745
Basic earnings per share (cents) 222,5 188,8
Diluted earnings per share (cents) 216,3 183,4
Reconciliation of headline earnings:
Profit attributable to ordinary
shareholders 330 226 257 213
Adjusted for:
Profit on disposal of property,
plant and equipment (3 770) (1 833)
Tax effect on adjustments 1 055 513
Headline earnings attributable to
ordinary shareholders 327 511 255 893
Weighted average number of shares
in issue (000s) 148 407 136 249
Diluted weighted average number of
shares in issue (000s) 152 654 140 223
Headline earnings per share (cents) 220,7 187,8
Diluted headline earnings per
share (cents) 214,5 182,5
Condensed consolidated statements of financial position
Reviewed Audited
As at As at
31 August 31 August
2015 2014
R’000 R’000
Assets
Non-current assets 1 676 514 1 320 147
Property, plant and equipment 450 076 387 517
Goodwill 534 272 462 220
Intangible assets 21 419 24 880
Deferred tax 75 070 64 739
Investment in joint arrangement 584 170 372 638
Financial assets 11 507 8 153
Current assets 3 550 357 2 671 496
Inventories 109 050 76 311
Trade and other receivables 245 101 196 471
Amounts due from contract
customers 2 707 486 1 446 405
Taxation receivable 6 243 3 325
Cash and cash equivalents 482 477 948 984
Total assets 5 226 871 3 991 643
Equity and liabilities
Equity 2 675 244 2 178 496
Stated capital 1 356 130 1 310 139
Share based payment reserve 30 643 23 794
Foreign currency translation
reserve 115 124 3 575
Accumulated profits 1 169 383 839 157
Non-controlling interest 3 964 1 831
Non-current liabilities 846 901 735 948
Other financial liabilities –
interest bearing 635 514 549 121
Other financial liabilities –
non-interest bearing 89 677 71 878
Provisions 8 166 8 073
Instalment sale liabilities 22 729 23 761
Deferred tax 90 815 83 115
Current liabilities 1 704 726 1 077 199
Other financial liabilities 8 892 173 371
Trade and other payables 1 427 761 711 728
Amounts received in advance 172 645 66 145
Amounts due to contract customers 66 611 80 463
Instalment sale liabilities 23 364 18 392
Taxation payable 5 443 27 100
Total equity and liabilities 5 226 871 3 991 643
Number of shares in issue (000’s) 148 884 146 851
Net asset value per share (cents) 1 797 1 483
Net tangible asset value per
share (cents) 1 423 1 152
Condensed consolidated statements of cash flow
Reviewed Audited
Year ended Year ended
31 August 31 August
2015 2014
R’000 R’000
Cash flows from operating activities (260 203) 103 345
Cash flows from investing activities (122 152) (313 977)
Cash flows from financing activities (89 167) 655 355
Net (decrease)/increase in cash
and cash equivalents (471 522) 444 723
Effect on foreign currency translation
reserve movement on cash balances 5 015 (70)
Cash and cash equivalents at
beginning of year 948 984 504 331
Cash and cash equivalents at end 482 477 948 984
of the year
Condensed consolidated statements of changes in equity
Reviewed Audited
Year ended Year ended
31 August 31 August
2015 2014
R’000 R’000
Balance at beginning of the year 2 178 496 1 579 991
Issue of share capital and share
issue expenses 45 991 327 554
Share based payment reserve 6 849 7 458
Total comprehensive income for the year 441 775 262 748
Non-controlling interest 2 133 745
Balance at end of the year 2 675 244 2 178 496
Segmental analysis
Reviewed Audited Reviewed Audited
31 August 31 August 31 August 31 August
2015 2014 2015 2014
R’000 R’000 % of total % of total
Revenue
Building Materials 499 807 399 452 14 15
Power 2 951 149 2 236 261 82 85
Rail 152 996 – 4 –
Total 3 603 953 2 635 713 100 100
EBITDA
Building Materials 86 017 75 848 19 24
Power 300 698 225 395 73 71
Rail 20 048 – 5 –
Corporate 7 698 15 913 3 5
Total 414 461 317 156 100 100
Profit after tax
Building Materials 39 346 35 052 12 14
Power 146 879 118 321 44 46
Oil and Gas 109 517 82 644 33 32
Rail 11 253 – 3 –
Corporate 24 410 22 092 7 8
Total 331 406 258 108 100 100
Reviewed Audited
31 August 31 August
2015 2014
R’000 R’000
Assets
Building Materials 599 983 601 072
Power 2 394 459 1 503 096
Oil and Gas 584 170 372 638
Rail 96 600 –
Corporate 2 447 727 2 298 842
Total assets including group
loan accounts 6 122 939 4 775 648
Inter-group elimination (896 070) (784 005)
Total 5 226 871 3 991 643
Liabilities
Building Materials 460 653 480 264
Power 1 581 365 819 268
Oil and Gas 89 677 266 341
Rail 33 764 –
Corporate 694 573 552 430
Total liabilities including group
loan accounts 2 860 032 2 118 303
Inter-group elimination (308 405) (305 556)
Total 2 551 627 1 813 147
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
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.
Date: 11/11/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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