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CIL 201704240012A
Unaudited consolidated interim results for the six months ended 28 February 2017
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)
Unaudited consolidated interim results for the six months ended
28 February 2017
Salient features
- Revenue up 29% to R2,7 billion (2016: R2,1 billion)
- EBITDA up 20% to R328 million (2016: R274 million)
- HEPS down 18,5% to 111,1 cents per share (2016: 136,3 cents per share)
- Group order book up 25% to R6,6 billion (2016: R5,3 billion)
- 65% of profits derived outside South Africa
“During the period our international penetration continued to progress
and we saw benefits from the synergies between Conco and Conlog post
the full integration of the acquisition. We continue to see
opportunities outside of South Africa and will seek to explore
these going forward.” Raoul Gamsu, CEO.
Overview
CIG is a decentralised infrastructure group operating across Africa.
During the period, revenue increased by 29% to R2,7 billion (2016:
R2,1 billion), operating profit increased by 11% to R215 million
(2016: R193 million) while profit after tax reduced by 3% to
R203 million (2016: R209 million). Earnings per share and headline
earnings per share were 111.0 (2016: 136,3) and 111.1 (2016: 136,4)
cents per share respectively, an 18,6% decrease from the previous period.
CIG remains committed to its strategy of geographic and sector
diversification which is encapsulated in a three-pronged approach:
- Strategic growth of the divisions
- Transformative investments
- Formation of a Pan-African growth engine
The group experienced positive momentum in strengthening its presence
and opportunities across the African continent and Middle East. Angola
Environmental Servicos Limitada (AES) was negatively impacted by the
reduction in oil waste volumes, while profits were affected by an
increase in finance costs and adverse currency movement of an
appreciating ZAR.
The Conlog acquisition was effective from 1 November 2016 and performed
in line with expectations for the four months.
The group’s strategy to operate across a wider geographic footprint
enabled CIG to generate 65% of profits after tax from outside of
South Africa. The flagship Power division contributed 61% of the
group’s profits. Management continues with its objective to diversify
earnings across a wider operational portfolio.
Segmental analysis of profit after tax
2017 2016
Power 61% 50%
Oil & Gas 16% 30%
Building Materials 8% 7%
Rail 5% 4%
Corporate 10% 9%
Liquidity management
The group reported a cash balance of R548 million at 28 February 2017
(2016: R481 million). On a net debt basis, the group reported
an 10,9% debt-to-equity ratio (2016: 9,1%). On a gross basis
excluding the cash on hand the debt-to-equity ratio is 23,9%
(2016: 23,8%), which is below the targeted debt-to-equity ratio
of between 30% and 40% that the group considers an appropriate
gearing level.
The group extended the size of its medium-term note programme to
R1,5 billion (2016: R1 billion). To date the group has issued
R960 million through the programme. The group will consider future
funding requirements and under appropriate market conditions, will
consider issuing further notes under the programme. The programme
has maintained a consistent Moody’s global and national scale
corporate family rating of Ba2/A3.za.
In terms of the current programme CIG has an obligation to redeem
R36 million on 30 June 2017. This redemption will be settled from
current cash reserves.
Management fosters ongoing working relationships with its financiers
to ensure that sufficient guarantee, working capital and trade finance
facilities are available to meet all foreseeable capital requirements.
Interest cover as measured against EBITDA remained at a satisfactory
level of 4,8 times.
Divisional overview
Power
- 61% of group profit (2016: 50%)
- Revenue up 28% to R2,3 billion (2016: R1,8 billion)
- EBITDA up 26% to R275 million (2016: R218 million)
- Order book up 24% to R6,2 billion (2016: R5 billion)
Business activity outside of South Africa remains strong through deeper
market penetration. In addition to the traditional tender business, the
number of negotiated contracts and projects in the renewable energy sector
have increased for turnkey development projects and metering solutions.
The group has five operations in the Power division:
- Conco, a leading supplier of high voltage turnkey electrical substations,
overhead power lines and renewable energy for wind and solar infrastructure
- Conlog, a leading developer, manufacturer and distributor of pre-paid,
smart solutions including electricity meters, applications and support services
- Consolidated Energy Solutions, a provider of customised plant and
technology solutions for industry and utilities
- Consolidated Power Maintenance, a provider of long-term operational
and maintenance services to renewable energy and power infrastructure
- CIGenCo, a developer and investor in small and midsize renewable
energy plants
The division has made progress in line with the strategic objective of
diversifying the work across Africa and the Middle East. Turnover
generated outside of South Africa was 55% in the current period. The
ability to deliver product and projects on time and in line with budgets
is enhancing the brand and reputation of all the operating companies in
this division. The strong reputation and cross-selling of our divisional
offerings is creating further geographic opportunities for the Power
division. CIGenCo has successfully concluded negotiations for its first
independent power supply project in Namibia, which once completed will
deliver sustainable returns. Project execution will be completed before
the financial year-end.
The operations in South Africa continued to face headwinds as uncertainty
remained in the municipal and renewable energy sector. Eskom continued to
invest positively in grid infrastructure and the mining sector started to
show improvements.
Building Materials
- Revenue up 8% to R247 million (2016: R228 million)
- EBITDA up 6% to R38,2 million (2016: R36,2 million)
The Building Materials division which supplies aggregates, clay brick
and concrete roof tiles in the Gauteng region, reported an 8% increase
in revenue mainly as a result of improving market conditions and an
increase in market share.
Oil & Gas Services
- Profit attributable to AES down 47% to R33 million (2016: R62 million)
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.
Activity levels of both production and exploration were down in the period
and consequentially the business is operating below optimum levels. However,
costs have been contained and the business continues to deliver positive
returns.
Conditions surrounding availability and remittance of foreign currency
improved for AES and there is no backlog for any offshore payments.
Rail
- Revenue up 36% to R152 million (2016: R112 million)
- EBITDA up 6% to R18 million (2016: R17 million)
Tension Overhead Electrification Proprietary Limited (Tractionel),
which specialises in the electrification of railways and installation
of overhead traction equipment, performed in line with expectations.
Prospects
Power
Across the continent the opportunities for the Power division are robust
and can be identified in three distinct areas:
- Leverage the established geographic presence or market experience of
group companies to expand other group companies’ products and services
into new markets. For example, the Conco business has an excellent track
record in Ghana yet historically Conlog has not supplied product or
services to this market. Discussions are in progress to assess the
market’s immediate and ongoing requirements
- Growth of renewable energy across the African continent continues on
an upward trajectory. To date proposals of USD740 million have been made
and the first contract wins have been recorded. Conco’s position in the
renewable energy sector is unique in that it has developed a competitive
edge as a preferred provider with the capacity and ability to execute to
world class standards. The plummeting costs of wind and solar technology
have become increasingly independent of government support. The group
is dynamically involved in developing, building and owning clean energy
projects in industrial rooftop solar installations and utility scale solar
projects. These projects are taking place across the continent
- Financing of grid infrastructure through utilisation of credit export
funding lines, as successfully implemented in a current Ethiopian project.
Current proposals under submission amount to USD600 million. The group has
invested dedicated resources to manage the export financing solutions and
address the global appetite from development funding institutions to assist
with financing infrastructure opportunities
Despite a backlog of R39 billion in the South African transmission market
and Eskom’s Build Programme of R165 billion, uncertainty remains relating
to the timing of the roll-out of these projects and the resultant impact
on the division. The division has signed Round 4 Renewable Energy contracts
of R2,3 billion and anticipates work emanating from the programme of between
R3 billion and R4 billion over the next three years. The current delay is
expected to impact the potential South African revenue for the second half
of the financial year. While the roll-out of the commencement dates on the
Round 4 projects is disappointing, the announced commitment to the programme
is encouraging and we expect that it will contribute significantly to the
next three years of work for the South African business.
CIGenCo has built a solid pipeline and will continue focus on closing the
projects in the pipeline while seeking to develop other opportunities
across the continent.
The change in the broad based black economic empowerment (BBBEE)
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 South African
businesses maintain their required BBBEE 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. The
establishment of the international head office in Mauritius has assisted
in attracting new engineering talent whilst retaining existing engineers,
mitigating some of the key skills uncertainty. The emphasis placed on
strategic workforce planning and the drive to enhance the skill of our
project managers and engineers will allow us to have sufficient talent
to manage the expected growth.
It is anticipated that the growth outside of South Africa, as a result
of the opportunities mentioned above, will contribute positively to
the continuous growth of the Power division.
Building Materials
Prior to the change in the economic outlook of South Africa as a result
of the credit ratings downgrade, there was a sense of optimism in the
market that growth of the Building Materials division would continue.
Oil & Gas
Oil exploration remains at historically low levels. This will continue
to negatively impact AES’s volumes during 2017. It is expected that
exploration will expand towards 2018.
Rail
The division continues to provide short-term potential as South Africa
upgrades its rail infrastructure to manage the roll-out of its new
locomotive programme. The business has started to leverage off the
Power division for opportunities to quote for work outside South Africa.
Condensed consolidated statements of comprehensive income
Unaudited Unaudited Audited
six months six months year
ended ended ended
28 February 29 February 31 August
2017 2016 2016
R’000 R’000 R’000
Revenue 2 698 907 2 101 323 4 531 640
Cost of sales (2 059 097) (1 616 534) (3 545 385)
Gross profit 639 810 484 789 986 255
Other income 42 162 34 798 60 268
Operating expenses (347 999) (268 336) (588 174)
Foreign exchange (loss)/gain (5 505) 23 066 17 183
Earnings before interest,
taxation, depreciation and
amortisation (EBITDA) 328 468 274 317 475 532
Depreciation and amortisation (45 421) (34 717) (72 617)
Profit before interest
and taxation 283 047 239 600 402 915
Interest received 14 971 9 896 29 117
Interest paid (83 420) (56 118) (136 963)
Profit before taxation 214 598 193 377 295 069
Taxation (44 805) (47 015) (37 973)
Income from joint arrangement 33 389 62 318 135 789
Profit for the period 203 182 208 680 392 885
Total profit for the period
attributable to:
Equity holders of the parent 203 063 208 499 395 023
Non-controlling interest 119 181 (2 138)
Other comprehensive income:
Recyclable in profit and loss:
Exchange rate differences on
translating foreign operations (116 471) 134 070 62 982
Total comprehensive income 86 711 342 750 455 867
Total comprehensive income
attributable to:
Equity holders of the company 86 592 342 569 458 733
Non-controlling interest 119 181 2 866
Basic earnings per share (cents) 111,0 136,4 255,0
Diluted earnings per share (cents) 108,8 132,7 248,1
Reconciliation of
headline earnings:
Profit attributable to
ordinary shareholders 203 063 208 499 395 023
Adjusted for:
Profit on disposal of property,
plant and equipment (32) (155) (849)
Impairment of fixed assets - - 1 502
Tax effect on adjustments 9 43 (183)
Headline earnings attributable
to ordinary shareholders 203 086 208 387 395 493
Weighted average number of shares
in issue (000’s) 182 873 152 883 154 912
Diluted weighted average number
of shares in issue (000’s) 186 705 157 130 159 194
Headline earnings per
share (cents) 111,1 136,3 255,3
Diluted headline earnings per
share (cents) 108,8 132,6 248,4
Condensed consolidated statements of financial position
Unaudited Unaudited Audited
as at as at as at
28 February 29 February 31 August
2017 2016 2016
R’000 R’000 R’000
Assets
Non-current assets 2 547 606 1 877 821 1 884 309
Property, plant and equipment 482 151 460 751 466 802
Goodwill 1 232 111 534 272 536 343
Intangible assets 64 578 19 634 18 271
Deferred tax 44 127 72 159 66 768
Investment in joint
arrangement 706 146 779 556 782 854
Financial assets 18 493 11 449 13 271
Current assets 5 312 491 4 159 754 4 871 789
Inventories 188 377 121 764 135 252
Financial assets 1 381 - 1 381
Trade and other receivables 536 036 278 742 381 452
Amounts due from
contract customers 3 956 808 3 271 418 3 734 851
Taxation receivable 45 251 7 068 22 702
Cash and cash equivalents 584 638 480 762 596 151
Total assets 7 860 097 6 037 575 6 756 098
Equity and liabilities
Equity 4 207 821 3 271 880 3 393 272
Share capital 2 327 007 1 605 110 1 606 059
Share-based payment reserve 49 765 35 549 42 875
Foreign currency translation
reserve 62 363 249 194 178 834
Non-controlling interest 1 217 4 145 1 098
Accumulated profits 1 767 469 1 377 882 1 564 406
Non-current liabilities 1 085 376 850 061 1 109 866
Financial liabilities –
interest bearing 925 008 632 333 928 321
Financial liabilities –
non-interest bearing 87 885 108 209 98 183
Provisions 24 385 8 566 8 166
Instalment sale liabilities 24 429 16 177 19 401
Deferred tax 23 669 84 776 55 795
Current liabilities 2 566 900 1 915 634 2 252 960
Other financial liabilities 42 398 107 113 48 311
Trade and other payables 2 204 277 1 528 918 1 952 588
Amounts received in advance 112 888 155 826 114 075
Amounts due to contract
customers 145 958 95 741 75 912
Bank overdraft 36 542 - 38 226
Instalment sale liabilities 13 254 24 486 18 747
Taxation payable 11 583 3 550 5 101
Total equity and liabilities 7 860 097 6 037 575 6 756 098
Number of shares in
issue (000’s) 195 826 156 884 156 966
Net asset value per
share (cents) 2 149 2 085 2 162
Net tangible asset value
per share (cents) 1 487 1 732 1 808
Condensed consolidated statements of cashflow
Unaudited Unaudited Audited
six months six months year
ended ended ended
28 February 29 February 31 August
2017 2016 2016
R’000 R’000 R’000
Cash flows generated from/
(utilised in) operating
activities 27 854 (324 887) (418 513)
Cash flows utilised in
investing activities (730 288) (43 437) (72 707)
Cash flows from
financing activities 696 985 357 122 563 925
Net increase in cash and
cash equivalents (5 718) (11 202) (72 705)
Effect on foreign currency
translation reserve movement
on cash balances (4 111) 9 487 2 743
Cash and cash equivalents at the
beginning of the period 557 925 482 477 482 477
Cash and cash equivalents at the
end of the period 548 096 480 762 557 925
Reconciled as follows:
Unaudited
six months
ended
28 February
2017
R’000
Cash flows from operating activities
Cash generated from operations 152 639
Interest income 14 971
Finance costs (83 420)
Tax paid (56 606)
Net cash flows from operating activities 27 584
Cash flows from investing activities
Acquisition of property, plant and equipment (53 131)
Proceeds on sale of property, plant and equipment 1 167
Purchase of other intangible assets -
Business combinations (673 102)
Acquisition of financial assets (5 222)
Net cash flows from investing activities (730 288)
Cash flows from financing activities
Proceeds on share issue 720 948
Repayment of financial liabilities (9 226)
Repayment of instalment sale liabilities (14 737)
Net cash flows from financing activities 696 985
Total cash and cash equivalents movement for the year (5 718)
Cash and cash equivalents at the beginning of the year 557 925
Effect of foreign currency translation on cash balances (4 111)
Total cash and cash equivalents at the end of the period 548 096
Condensed consolidated statements of changes in equity
Unaudited Unaudited Audited
six months six months year
ended ended ended
28 February 29 February 31 August
2017 2016 2016
R’000 R’000 R’000
Balance at the beginning
of the period 3 393 272 2 675 244 2 675 244
Issue of share capital
and share issue expenses 720 948 248 980 249 929
Share-based payment reserve 6 890 4 906 12 232
Total comprehensive income for
the period 86 592 342 569 458 733
Non-controlling interest 119 181 (2 866)
Balance at the end of
the period 4 207 821 3 271 880 3 393 272
Segmental analysis
Unaudited Unaudited Audited
28 February 29 February 31 August
2017 2016 2016
R’000 R’000 R’000
Revenue
Building Materials 247 244 228 222 485 306
Power 2 299 310 1 760 659 3 754 730
Rail 152 353 112 442 291 604
Total 2 698 907 2 101 323 4 531 640
EBITDA
Building Materials 38 188 36 240 96 214
Power 274 855 218 192 364 301
Rail 17 880 16 520 21 930
Corporate (2 455) 3 365 (6 913)
Total 328 468 274 317 475 532
Profit after tax
Building Materials 15 724 13 811 44 950
Power 124 416 104 748 169 063
Oil & Gas 33 389 62 318 135 789
Rail 9 874 9 328 11 179
Corporate 19 779 18 475 31 904
Total 203 182 208 680 392 885
Unaudited Unaudited Audited
28 February 29 February 31 August
2017 2016 2016
% of total % of total % of total
Revenue
Building Materials 9 11 11
Power 85 84 83
Rail 6 5 6
Total 100 100 100
EBITDA
Building Materials 12 13 20
Power 84 80 77
Rail 5 6 4
Corporate (1) 1 (1)
Total 100 100 100
Profit after tax
Building Materials 8 7 11
Power 61 50 43
Oil & Gas 16 30 35
Rail 5 4 3
Corporate 10 9 8
Total 100 100 100
Unaudited Unaudited Audited
28 February 29 February 31 August
2017 2016 2016
R’000 R’000 R’000
Assets
Building Materials 625 950 582 776 625 348
Power 3 521 489 2 762 518 3 042 585
Oil & Gas 706 145 799 556 782 850
Rail 207 475 120 304 171 783
Corporate 3 682 185 2 852 030 3 024 872
Total assets including
group loan accounts 8 743 244 7 117 184 7 647 438
Inter-group elimination (883 147) (1 079 609) (891 340)
Total 7 860 097 6 037 505 6 756 098
Liabilities
Building Materials 432 741 422 797 448 749
Power 2 230 633 1 814 977 2 032 872
Oil & Gas 87 885 108 209 98 183
Rail 119 270 48 024 97 028
Corporate 1 118 669 808 105 1 028 320
Total liabilities including
group loan accounts 3 989 198 3 202 112 3 705 152
Inter-group elimination (336 922) (436 417) (342 326)
Total 3 652 276 2 765 695 3 362 826
Dividend
The group’s policy is for the board to consider a dividend on an annual
basis after reviewing the annual results.
Business combination
On 1 November 2016, CIG acquired 100% of the shares of Conlog
Proprietary Limited (Conlog) for a total purchase consideration of
R850 million. The purchase consideration comprised an initial payment on
the effective date of R700 million with the balance payable in April 2017.
CIG undertook a R750 million rights offer in relation to the transaction.
A summary of the provisional fair values of assets and liabilities is
as follows:
R’000
Property, plant and equipment 7 934
Intangible assets 45 901
Deferred taxation (asset) 4 811
Inventories 51 133
Trade and other receivables 152 455
Cash 26 898
Provisions (20 455)
Trade and other payables (109 326)
Tax payable (5 118)
Total net assets acquired 154 232
Goodwill 695 768
Contingent consideration (150 000)
Cash acquired (26 898)
Net cash paid 673 102
In terms of IFRS 3: Business Combinations, CIG has a maximum of 12 months
from the acquisition date to complete the acquisition accounting of Conlog.
The allocation of the purchase consideration to identifiable assets and
subsequent amendment to the recorded goodwill will therefore be reported
at the year ending 31 August 2017 and retrospectively applied for the
six months ended 28 February 2017.
Basis of preparation
These unaudited consolidated interim results for the six months ended
28 February 2017 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, 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 2016 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 9: Financial Instruments
IFRS 10: Consolidated Financial Statements
IFRS 11: Joint Arrangements
IFRS 12: Disclosure of Interest in Other Entities
IFRS 15: Revenue from Contracts with Customers
IFRS 16: Leases
IAS 12: Income Tax
IAS 16: Property, Plant and Equipment
IAS 27: Consolidated and Separate Financial Statements
IAS 28: Investments in Associates and Joint Ventures
IAS 38: Intangible Assets
IFRIC 22: Foreign Currency Transactions and Advance Consideration
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 2016.
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).
The directors are not aware of any matters or circumstances arising subsequent
to February 2017 that require any additional disclosure or adjustment to
the financial statements.
Appreciation
The directors and management of CIG 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
24 April 2017
Independent non-executive directors:
F Boner (Chairman), K Bucknor*, A Darko*, AD Dixon, R Horton, K Kariuki**,
J Nwokedi, K Ojah***
Executive directors: RD Gamsu, IM Klitzner
K Ojah was appointed to the board effective 1 December 2016.
*Ghanaian
** Kenyan
***USA
Registration number
2007/004935/06
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
Visit our website, www.ciglimited.co.za, to review the investor presentation
relating to the interim results for the six months ended 28 February 2017.
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: 24/04/2017 09:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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