unaudited consolidated interim results - · pdf fileunaudited consolidated interim results for...

Supporting Pan-African growth through infrastructure

UNAUDITED CONSOLIDATED INTERIM RESULTSfor the six months ended 29 February 2016

CIG A5 booklet April 2016.indd 1 2016/04/20 3:00 PM

CIG UNAUDITED CONSOLIDATED INTERIM RESULTS

DISCLAIMERThe 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.

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”)

Executive directorsRD Gamsu, IM Klitzner

Independent non-executive directorsF 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 addressCommerce Square, Building 2, 39 Rivonia Road, Sandhurst

Business postal addressPO Box 651455, Benmore, Johannesburg 2010Telephone: 011 280 4040 Facsimile: 086 748 9169

Company secretaryCIS Company Secretaries Proprietary Limited

Transfer secretariesComputershare Investor Services Proprietary Limited

SponsorJava Capital

AuditorsGrant Thornton

Visit our websitewww.ciglimited.co.za, to review the investor presentation relating to the interim results for the six months ended 29 February 2016.

CORPORATE INFORMATION


FOR THE SIX MONTHS ENDED 29 FEBRUARY 2016 1

OVERVIEW Consolidated Infrastructure improved revenue by 26% to R2,1 billion from R1,7 billion in 2015 and grew profit after tax by 28% to R209 million compared to R164 million for the previous period. Earnings per share and headline earnings per share were 136 cents per share, a 24% increase from 110 cents per share for the previous period.

The group’s strategy to operate across a wider geographic footprint enabled CIG to generate 55% of profits after tax from outside of South Africa. The group’s flagship Power division contributed half of the group’s profits, while management continues with its objective to diversify earnings across a wider operational portfolio.

The group’s segmental analysis of profit after tax is:

2016%

2015%

Power 50 53Oil and Gas 30 31Building Materials 7 8Rail 4 3Corporate 9 5

Strong demand for the group’s energy services and products across the geographies has continued over the past six months. The group’s major sectors have consequently experienced high growth, while management continues to manage the associated risks. Sufficient capital was raised to fund the organic expansion in the power sector and the intensive working capital requirements of the projects cycle. The delivery risk associated with projects is mitigated by conservative procurement practices and policies.

The group reported a cash balance of R481 million as at 29 February 2016 (2015: R460 million). The debt-to-equity ratio of 23,8% (2015: 39,2%) is below the targeted debt-to-equity ratio of between 30% and 40% that the group considers an appropriate gearing level. On a net debt basis, the group reported a 9,1% debt-to-equity ratio (2015: 20,1%).

The group maintains a R1 billion medium-term note programme, which to date has issued R625 million in debt. There is still R375 million available under the current programme which, given appropriate market conditions, can be tapped to fund the group’s growth profile. The programme has maintained a consistent Moody’s credit rating of Baa2.za.

26%Revenue

to R2,1 billion(2015: R1,7 billion)

24%

Headline earnings per share

to 136,3 cents per share(2015: 110,1 cents per share)

33%EBITDA

TO R274 million(2015: R206 million)

conco order Book

35%to R5 billion

(2015: R3,7 billion)


CIG UNAUDITED CONSOLIDATED INTERIM RESULTS2

Management fosters ongoing working relationships with relevant banks to ensure that sufficient guarantees and working capital facilities are available to meet all foreseeable capital requirements. Interest cover as measured against EBITDA remained at a satisfactory level of 5,9 times. The group recently closed additional bank guarantee facilities of R500 million and working capital lines of R300 million.

DIVISIONAL OVERVIEW POWER

• Revenue up 28% to R1,8 billion (2015: R1,4 billion)

• EBITDA up 31% to R218 million (2015: R166 million)

• Conco order book up 35% to R5 billion (2015: R3,7 billion)

Consolidated Power Projects Group Proprietary Limited (“Conco”), the group’s turnkey developer of high voltage electrical infrastructure across Africa and the Middle East, produced strong growth across Namibia, Botswana, Zambia, Tanzania, Mozambique, Ghana and Rwanda. Recently, Conco expanded its operations into Ethiopia, where ageing electrical infrastructure has created a demand for Conco’s flexible electrical solutions.

The demand for Conco products and services amongst African utilities remains strong and the international order book grew to USD116 million, representing a three-fold increase over the last three years. Order book growth in South Africa was flat during the six month period although growth in the demand from Eskom compensated for some of the weakness in spending by the municipalities on substations. Renewable energy has sustained its momentum, although undergoing some delay.

Consolidated Power Maintenance (“O&M”), which operates and maintains renewable energy, transmission and distribution assets on behalf of asset owners in South Africa, reported disappointing results due to delays in the renewable energy project rollouts and a slowdown in South African municipality spend. Consequently, this business was unable to increase its market share in the period under review.

Energy Solutions, which designs, engineers, manufactures and commissions protection and control equipment for substations, containerised substations, batteries, chargers and smart grid solutions, performed in line with expectations. The division is making great strides to increase its presence and market share in the solar market, by providing innovative solar solutions for clients. This includes its recent foray into offering small-scale solar photo voltaic (“PV”’) solutions in response to the high demand across South Africa and the rest of the continent. The division has also entered the low voltage market sector to supply motor control centres and distribution boards to industry.

BUILDING MATERIALS • Revenue down 1% to R228 million (2015: R231 million)

• EBITDA up 11% to R36,2 million (2015: R32,7 million)

The Building Materials division, which supplies aggregates, clay brick and concrete roof tiles in the Gauteng region, reported a 1% decrease in revenue as a result of the subdued demand from the civils and construction sectors. Profitability was however increased due to an improved mix of product sales and cost control.



OIL AND GAS SERVICES • Profit attributable to AES up 24% to R62 million (2015: R50 million)

Angola Environmental Servicos Limitida (“AES”) collects, recycles and disposes of waste generated in the oil production and drilling process from oil and gas rigs located off the coast of Angola. In December 2015, the zero discharge regulation was implemented in Angola and as oil and gas rig operators adopted the new environmental law, volumes for AES increased. AES results were resilient considering the volatility of the sector and the resulting impact on the country. While there is still risk associated with remittance of foreign currency in Angola, the situation improved during the period.

RAIL • Revenue on a comparative basis up 35% to R112 million (2015 for four months: R60 million)

• EBITDA on a comparative basis up 17% to R17 million (2015 for four months: R9 million)

• Order book up 200% to R400 million (2015: R132 million)

Tension Overhead Electrification Proprietary Limited (“Tractionel”), which specialises in the electrification of railways and installation of Overhead Traction Equipment, performed in line with expectation. The group made progress to integrate the Tractionel management team into the CIG culture and structures. Danie Lubbe was promoted to CEO from CFO after Johan Boschoff, the founder and former CEO of the business, retired.

PROSPECTS

general Notwithstanding the exceptional volatility experienced in emerging markets over the past six months, CIG has not had any cancellations in projects nor experienced any untoward delays in project awards or issue of tenders. Management has identified an under investment by South African corporates and increased levels of disinvestment by internationals out of South Africa.

The group continues to seek acquisition opportunities among those companies that operate across the continent and supply services and products into sectors where management expects higher levels of infrastructure investment. Solid progress has been made on the acquisition front.

POWER

The prospects of the Power division are robust and the order book has grown substantially in absolute terms. The average size of projects has also lengthened the execution timelines. The improved focus of Conco on its regional markets, and its diversified geographic base, enable the business to manage the potential risk of a downturn in any one of its individual markets.

Geographic diversification will remain a priority and significant business development initiatives are underway in a number of markets to entrench the Conco brand and services. These initiatives are gaining momentum and should lead to a successful outcome over the next twelve months.

Conco’s position in the renewable energy sector is unique in that the operation has developed a competitive edge as a preferred provider with the capacity and ability to execute to world class standards. Management is of the view that momentum in the renewable energy sector will continue to grow within South Africa and across the continent.



The change in the broad based black economic empowerment (“BEE”) legislation and the weakness in local manufacturing poses a short-term challenge to the Power division’s traction in South Africa. Management is following the required actions to ensure that the Conco South African business maintains its required BEE rating.

It is expected that over the medium to longer term the biggest constraint to growth will remain the availability of suitably qualified engineers to execute on the expected increase in technically complex work.

CIGenCo, a developer of and investor in generation projects, is making excellent progress on power generation opportunities across the African continent that offer internal rates of return of 18% or higher depending on the commercial nature of the project and its risks. The group’s broad footprint, ability to partner with local developers and technical expertise have made CIGenCo an attractive partner for other stakeholders on the African continent.

BUILDING MATERIALS There are signs of a slowdown in the demand for building materials across all of the division’s markets. Despite these factors, there is a reasonable probability that existing levels of performance can be sustained.

OIL AND GAS SERVICES

AES should sustain current activity levels with the processing of high volumes of waste. Growth in processing volumes will offset any decline in rental revenue, which may have a negative impact on net margins. The current level of oil production is expected to be sustained although it is difficult to predict the future with any certainty until greenfield exploration levels pick up.

RAIL

The Tractionel rail business continues to provide enormous short- and medium-term potential as South Africa upgrades its rail infrastructure to manage the rollout of its new locomotive programme. Management expects project awards over the next 12 months to have a material impact on the future of the rail business.

DIVIDENDSThe group’s policy is for the board to consider a dividend on an annual basis after reviewing the annual results.

BASIS OF PREPARATION These unaudited consolidated interim results for the six months ended 29 February 2016 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), Interim Financial Reporting (IAS 34), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the JSE Listings Requirements, and comply with the South African Companies Act (2008), as amended.



All amendments to standards applicable to CIG’s financial period beginning on 1 September 2015 have been considered. Based on management’s assessment, the following new amendments do not have a material impact on the group’s interim financial statements:

IFRS 2 – Share-based Payments

IFRS 3 – Business Combinations

IFRS 8 – Operating Segments

IFRS 10 – Consolidated Financial Statements

IFRS 12 – Disclosure of Interest in Other Entities

IFRS 13 – Fair Value Measurement

IAS 19 – Employee Benefits

IAS 24 – Related Party Disclosure

IAS 27 – Consolidated and Separate Financial Statements

IAS 36 – Impairment of Assets

IAS 40 – Investment Property

Other than the amendments, all accounting policies applied in the preparation of these interim financial statements are consistent with those applied by CIG in its consolidated financial statements for the year ended 31 August 2015.

These results have not been audited or reviewed by the group’s auditors.

These unaudited interim results have been prepared under the supervision of the group financial director, I Klitzner CA(SA).

APPRECIATIONThe directors and management of Consolidated Infrastructure wish to thank all staff for their focused efforts and loyalty. We also thank our customers, business partners, advisors, suppliers and our shareholders for their ongoing support.

By order of the board

Frank Boner Raoul Gamsu Chairman CEO

19 April 2016



CONDENSED CONSOLIDATED Statements OF comprehensive income

Unaudited Six months

ended29 February

2016R’000


ended28 February

2015R’000

Audited Year ended

31 August 2015

R’000

Revenue 2 101 323 1 662 864 3 603 953

Cost of sales (1 616 534) (1 277 753) (2 818 381) Gross profit 484 789 385 111 785 572Other income 34 798 21 516 62 088Operating expenses (268 336) (204 261) (439 098) Foreign exchange gain 23 066 4 116 5 899 Earnings before interest, taxation, depreciation and amortisation (“EBITDA”) 274 317 206 482 414 461Depreciation and amortisation (34 717) (29 294) (56 249) Profit before interest and taxation 239 600 177 188 358 212Interest received 9 896 12 999 33 268Interest paid (56 118) (36 261) (90 250) Profit before taxation 193 377 153 296 301 230Taxation (47 015) (40 701) (79 341)

Income from joint arrangement 62 318 50 420 109 517

Profit for the period 208 680 163 645 331 406Total profit for the period attributable to:Equity holders of the parent 208 499 163 482 330 266Non-controlling interest 181 163 1 180

Other comprehensive income:

Recyclable in profit and loss:Exchange rate differences on translating foreign operations 134 070 19 480 112 502Total comprehensive income 342 750 183 125 443 908Total comprehensive income attributable to:Equity holders of company 342 569 182 962 436 945Non-controlling interest 181 163 2 133Basic earnings per share (cents) 136,4 110,3 222,5Diluted earnings per share (cents) 132,7 107,6 216,3Reconciliation of headline earnings:Profit attributable to ordinary shareholders 208 499 163 482 330 226Adjusted for:Profit on disposal of property, plant and equipment (155) (399) (3 770)Tax effect on adjustments 43 112 1 055Headline earnings attributable to ordinary shareholders 208 387 163 195 327 511

Weighted average number of shares in issue (000s) 152 883 148 272 148 407

Diluted weighted average number of shares in issue (000s) 157 130 151 936 152 654Headline earnings per share (cents) 136,3 110,1 220,7Diluted headline earnings per share (cents) 132,6 107,4 214,5



CONDENSED CONSOLIDATED Statements OF financial position

Unaudited as at

29 February 2016R’000

Unaudited as at

28 February 2015

R’000

Audited Year ended

31 August 2015

R’000

AssetsNon-current assets 1 877 821 1 523 307 1 676 514Property, plant and equipment 460 751 432 692 450 076Goodwill 534 272 537 514 534 272 Intangible assets 19 634 23 118 21 419Deferred tax 72 159 63 238 75 070Investment in joint arrangement 779 556 457 797 584 170Financial assets 11 449 8 948 11 507Current assets 4 159 754 3 022 291 3 550 357Inventories 121 764 94 810 109 050Trade and other receivables 278 742 274 829 245 101Amounts due from contract customers 3 271 418 2 192 323 2 707 486Taxation receivable 7 068 326 6 243Cash and cash equivalents 480 762 460 003 482 477

Total assets 6 037 575 4 545 598 5 226 871

Equity and liabilitiesEquity 3 271 880 2 406 494 2 675 244Share capital 1 605 110 1 351 712 1 356 130Share-based payment reserve 35 549 27 094 30 643Foreign currency translation reserve 249 194 23 055 115 124Non-controlling interest 4 145 1 994 3 964Accumulated profits 1 377 882 1 002 639 1 169 383Non-current liabilities 850 061 747 629 846 901Other financial liabilities – interest bearing 632 333 544 691 635 514Other financial liabilities – non-interest bearing 108 209 78 149 89 677Provisions 8 566 8 373 8 166Instalment sale liabilities 16 177 34 967 22 729Deferred tax 84 776 81 449 90 815Current liabilities 1 915 634 1 391 475 1 704 726Other financial liabilities 107 113 339 780 8 892Trade and other payables 1 528 918 813 554 1 427 761Amounts received in advance 155 826 52 144 172 645Amounts due to contract customers 95 741 134 304 66 611Instalment sale liabilities 24 486 24 110 23 364Taxation payable 3 550 27 583 5 443

Total equity and liabilities 6 037 575 4 545 598 5 226 871

Number of shares in issue (000s) 156 884 148 594 148 884Net asset value per share (cents) 2 085 1 620 1 797Net tangible asset value per share (cents) 1 732 1 242 1 423




ended29 February

2016R’000


ended28 February

2015R’000

Audited Year ended

31 August 2015

R’000

Balance at beginning of period 2 675 244 2 178 496 2 178 496Issue of share capital and share issue expenses 248 980 41 573 45 991Share-based payment reserve 4 906 3 300 6 849Total comprehensive income for the period 342 569 182 962 441 775Non-controlling interest 181 163 2 133Balance at end of period 3 271 880 2 406 494 2 675 244


ended29 February

2016R’000


ended28 February

2015R’000

Audited Year ended

31 August 2015

R’000

Cash flows utilised in operating activities (324 887) (562 432) (260 203) Cash flows utilised in investing activities (43 437) (102 358) (122 152) Cash flows from financing activities 357 122 166 747 (89 167) Net decrease in cash and cash equivalents (11 202) (498 043) (471 522) Effect on foreign currency translation reserve movement on cash balances 9 487 9 062 5 015Cash and cash equivalents at beginning of period 482 477 948 984 948 984Cash and cash equivalents at end of period 480 762 460 003 482 477

CONDENSED CONSOLIDATED Statements OF CASH FLOW

CONDENSED CONSOLIDATED Statements OF CHANGES IN EQUITY



Unaudited 29 February

2016R’000


2015R’000

Audited 31 August

2015R’000


2016% of total


2015% of total

Audited 31 August

2015% of total

RevenueBuilding Materials 228 222 230 777 499 807 11 14 14Power 1 760 659 1 371 774 2 951 149 84 82 82Rail 112 442 60 313 152 996 5 4 4Total 2 101 323 1 662 864 3 603 953 100 100 100

EBITDA Building Materials 36 240 32 763 86 017 13 16 19Power 218 192 166 301 300 698 80 81 73Rail 16 520 9 418 20 048 6 4 5Corporate 3 365 (2 000) 7 698 1 (1) 3Total 274 317 206 482 414 461 100 100 100

Profit after taxBuilding Materials 13 811 12 689 39 346 7 8 12Power 104 748 86 428 146 879 50 53 44Oil and Gas 62 318 50 410 109 517 30 31 33Rail 9 328 6 108 11 253 4 3 3Corporate 18 475 8 000 24 410 9 5 7Total 208 680 163 645 331 406 100 100 100


2015R’000


2015R’000

Audited 31 August

2015R’000

AssetsBuilding Materials 582 776 593 890 599 983Power 2 762 518 1 934 526 2 394 459Oil and Gas 799 556 457 797 584 170Rail 120 304 88 209 96 600Corporate 2 852 030 2 258 212 2 447 727Total assets including group loan accounts 7 117 184 5 332 634 6 122 939Inter-group elimination (1 079 609) (787 036) (896 070) Total 6 037 505 4 545 598 5 226 871

liabilitiesBuilding Materials 422 797 463 326 460 653Power 1 814 977 1 171 657 1 581 365Oil and Gas 108 209 177 117 89 677Rail 48 024 33 937 33 764Corporate 808 105 590 749 694 573Total liabilities including group loan accounts 3 202 112 2 436 786 2 860 032Inter-group elimination (436 417) (297 682) (308 405) Total 2 765 695 2 139 104 2 551 627

SEGMENTAL ANALYSIS


Commerce Square, Building 2, 39 Rivonia Road, Sandhurst 2196PO Box 651455, Benmore, Johannesburg 2010Telephone: 011 280 4040 Facsimile: 086 748 9169

www.ciglimited.co.za


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