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CIL
CIL
CIL - Consolidated Infrastructure Group Limited - Unaudited condensed
consolidated interim results for six months ended 28 February 2011 and
changes to the board of directors
Consolidated Infrastructure Group Limited
(Formerly Buildworks Group Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2007/004935/06)
Share code: CIL ISIN: ZAE000148201
("Consolidated Infrastructure" or "CIG" or "the group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR SIX MONTHS ENDED 28
FEBRUARY 2011 AND CHANGES TO THE BOARD OF DIRECTORS
- Revenue increased by 8%
- Fully diluted headline earnings per share increased by 13%
- Order book R1,5 billion up 40% from a year ago
- First 400kv overhead contract line awarded for R190 million
Condensed consolidated statements of comprehensive income
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended
28 28 31 August
February February 2010
2011 2010
R`000 R`000 R`000
Revenue 680,034 629,107 1,229,748
Cost of sales (507,504) (463,764) (886,241)
Gross profit 172,530 165,343 343,507
Other income 0 133 1,209
Operating expenses (92,011) (82,176) (180,087)
Foreign exchange loss (4,025) (4,214) (12,611)
Earnings before interest, taxation, 76,494 79,086 152,018
depreciation and amortisation
("EBITDA")
Fair value adjustment 21,786
Depreciation and amortisation (12,680) (15,492) (32,452)
Impairment of goodwill (24,578)
Profit before interest and taxation 63,814 63,594 116,774
Interest received 1,762 2,243 7,299
Interest paid (1,095) (8,802) (14,529)
Profit before taxation 64,481 57,035 109,544
Taxation (17,942) (15,897) (32,889)
Profit for the period attributable to 46,539 41,138 76,655
the ordinary shareholders
Other comprehensive income:
Exchange rate differences on (3,115) (3,379)
translating foreign operations
Total comprehensive income for the 43,424 41,138 73,276
period attributable to the ordinary
shareholders
Basic earnings per share (cents) 4.10 4.39 7.99
Fully diluted earnings per share 4.10 3.62 6.75
(cents)
Reconciliation of headline earnings:
Profit attributable to ordinary 46,539 41,138 76,655
shareholders
Adjusted for:
Profit on disposal of property, plant (120) (133) (205)
and equipment
Impairment of goodwill 24,578
Headline earnings attributable to 46,419 41,005 101,028
ordinary shareholders
Weighted average number of shares in 1,136,409 936,409 959,971
issue (000`s)
Fully diluted weighted average number 1,136,409 1,136,409 1,136,409
of shares in issue (000`s)
Headline earnings per share (cents) 4.08 4.38 10.52
Fully diluted headline earnings per 4.08 3.61 8.89
share (cents)
Condensed consolidated statements of financial
position
Unaudited Unaudited Audited
As at As at As at
28 28 31 August
February February 2010
2011 2010
R ` 000 R ` 000 R ` 000
ASSETS
Non-current assets 784,414 811,520 788,083
Property, plant and equipment 276,247 278,519 277,971
Goodwill 462,220 482,595 462,220
Intangible assets 37,050 44,923 38,792
Deferred tax 7,040 4,476 7,522
Financial assets 1,857 1,007 1,578
Current assets 572,683 695,202 672,786
Inventories 40,665 36,247 34,388
Trade and other receivables 25,682 65,747 59,952
Amounts due from contract customers 381,429 342,511 328,683
Current taxation 5,524 0 6,568
Cash and cash equivalents 119,383 250,697 243,195
Total assets 1,357,097 1,506,722 1,460,869
EQUITY AND LIABILITIES
Equity 879,341 804,011 835,917
Issued capital 11 9 11
Share premium 676,153 536,387 676,153
Shares to be issued - 140,000 -
Foreign currency translation reserve (6,494) - (3,379)
Accumulated profits 209,671 127,615 163,132
Non-current liabilities 82,342 140,353 84,556
Other financial liabilities 32,567 25,367 37,734
Provisions 8,346 8,183 8,283
Instalment sale liabilities 10,273 80,949 7,047
Deferred tax 31,156 25,854 31,492
Current liabilities 395,414 562,358 540,396
Other financial liabilities 7,615 59,637 53,698
Trade and other payables 180,177 145,319 170,137
Amounts received in advance 1,385 20,657 45,954
Amounts due to contract customers 155,374 277,883 241,719
Bank overdraft 14,766 9,149 9,335
Instalment sale liabilities 5,288 23,921 5,160
Current tax payable 30,809 25,792 14,393
Total equity and liabilities 1,357,097 1,506,722 1,460,869
Number of shares in issue (000`s) 1,136,409 936,409 1,136,409
Net asset value per share (cents) 77.38 85.86 73.56
Net tangible asset value per share 33.44 29.53 29.47
(cents)
Condensed consolidated statements of cashflow
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended
28 28 31 August
February February 2010
2011 2010
R`000 R`000 R`000
Cash generated by operations before 79,927 57,209 151,931
changes in working capital
Changes in working capital (145,906) 16,067 43,493
Net interest received/(interest paid) 667 (6,559) (7,230)
Taxation paid (6,577) (21,982) (75,724)
Cash flows from operating activities (71,889) 44,735 112,470
Cash flows from investing activities (9,214) (9,913) (20,475)
Cash flows from financing activities (47,896) 13,244 (77,921)
Net (decrease)/increase in cash and cash (128,999) 21,578 14,074
equivalents
Effect on foreign currency translation (244) (184)
reserve movement on cash balances
Cash and cash equivalents at beginning 233,860 219,970 219,970
of period
Cash and cash equivalents at end of 104,617 241,548 233,860
period
Condensed consolidated statements of
changes in equity
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended
28 28 31 August
February February 2010
2011 2010
R`000 R`000 R`000
Balance at beginning of period 835,917 762,873 762,873
Issue of share capital and share issue 0 0 (232)
expenses
Total comprehensive income for period 43,424 41,138 73,276
Balance at end of period 879,341 804,011 835,917
SEGMENTAL ANALYSIS
Unaudited Unaudited Audited Unaudited Unaudited Audited
28 28 31 August 28 28 31
February February 2010 February February August
2011 2010 2011 2010 2010
R`000 R`000 R`000 % of % of % of
total total total
External
Revenue
Heavy building 96,729 100,443 202,312 14% 16% 16%
materials
West End 48,787 43,059 86,881 7% 7% 7%
Claybrick
Drift Supersand 47,942 57,384 115,431 7% 9% 9%
Power 583,305 528,665 1,027,436 86% 84% 84%
Corporate - - - 0% 0% 0%
Total 680,034 629,107 1,229,748 100% 100% 100%
Unaudited Unaudited Audited Unaudited Unaudited
Audited
28 28 31 August 28 28 31
February February 2010 February February August
2011 2010 2011 2010 2010
R`000 R`000 R`000 R`000 R`000 R`000
EBITDA % of % of % of
total total total
Heavy building 17,541 16,766 28,840 23% 21% 19%
materials
West End 6,160 1,038 (1,966) 8% 1% (1%)
Claybrick
Drift Supersand 11,381 15,728 30,806 15% 20% 20%
Power 62,609 66,626 129,716 82% 84% 85%
Corporate (3,656) (4,306) (6,538) (5%) (5%) (4%)
Total 76,494 79,086 152,018 100% 100% 100%
Reconciliation of profit before tax
EBITDA per segment analysis 76,494
Depreciation (12,680)
Net interest received 667
Profit before tax 64,481
Unaudited Unaudited Audited
28 28 31 August
February February 2010
2011 2010
R`000 R`000 R`000
Assets
Heavy building materials 394,913 428,556 400,768
West End Claybrick 252,496 279,665 250,198
Drift Supersand 142,417 148,891 150,570
Power 624,788 664,503 673,635
Corporate 1,127,436 1,132,683 1,178,202
Total assets including group loan accounts 2,147,137 2,225,742 2,252,605
Inter-group elimination (790,040) (719,020) (791,736)
Total 1,357,097 1,506,722 1,460,869
Unaudited Unaudited Audited
28 28 31 August
February February 2010
2011 2010
R`000 R`000 R`000
Liabilities
Heavy building materials 308,329 320,452 318,276
West End Claybrick 210,403 205,442 207,391
Drift Supersand 97,926 115,010 110,885
Power 361,279 452,888 448,986
Corporate 43,178 93,382 94,417
Total liabilities including group loan 712,786 866,722 861,679
accounts
Inter-group elimination (235,030) (164,011) (236,727)
Total 477,756 702,711 624,952
Commentary
Introduction
Consolidated Infrastructure is the largest turnkey
developer of high-voltage electrical substations in
Sub-Saharan Africa, and is a substantial provider
of high-voltage overhead cables and protection and
automation systems. The group delivered a highly
satisfactory set of results for the half year ended
28 February 2011. Fully diluted headline earnings
increased by 13% to 4.08 cents per share. Headline
earnings per share are 4.08 cents and basic
earnings per share are 4.10 cents, both of which
are marginal decreases over the previous
comparative period.
The current order book has grown to a record R1,5
billion from R1,05 billion a year ago, representing
a 42% increase. The order book has increased by
R200 million since 31 August 2010, representing an
increase of 15% over the 6 months. Included in this
increase is the award of CIG`s first 400kv overhead-
lines tender, for R190 million. 400 kv overhead
lines is a segment of the market in which the group
had targeted strategically but had not previously
participated.
86% of all CIG`s revenue and 82% of CIG`s earnings
before interest, taxation, depreciation and
amortisation ("EBITDA") are directly attributable
to the power and electrification sector. CIG built
significant new operating capacity in this business
in the last six months: establishing the Renewable
Energy Division, expanding 400kv line capacity,
opening a Middle East office, and hiring in
additional project-execution skills. Nevertheless,
trading profits reflected a good contribution from
Consolidated Power Projects (Pty) Ltd ("Conco").The
Building Materials Division recorded slightly
higher profits due to an improved performance at
West End Claybrick ("West End").
Financial Overview
Revenue for the period grew 8% to R680 million (Feb
2010: R629 million). The trading margin was 25.4%
which was marginally lower than the previous
comparative period (Feb 2010: 26.3%), due to
upfront tender margins at Conco coming under slight
pressure and a change in the sales mix in the
projects executed during the period.
Our financial position remains strong and the group
is appropriately capitalised. Total debt, decreased
by R48 million to R55 million (Aug 2010: R103
million). Overall the group`s debt-to-equity ratio
declined to 6% which is a significant improvement
on the 12% as at 31 August 2010. CIG therefore has
significant borrowing capacity.
The cash position at 28 February 2010 was R105
million (Aug 2010: R234 million). Excess cash was
used in the period to reduce debt, and to enhance
margins by taking advantage of prompt-payment
discounts offered by our suppliers. There was
therefore an overall increase in the investment in
the working capital.
It is the view of CIG`s board of directors that
headline earnings and fully diluted headline
earnings per share provide the most meaningful
understanding of the results for the period. The
number of shares in issue increased by 21% when all
the Conco warranties were achieved. Headline
earnings for the six months ended 28 February 2011
was R46,4 million which is an increase of 13% over
the previous six months ended 28 February 2010.
Divisional Overview
Conco
The business had a good six months. Conco achieved
revenue of R583 million (Feb 2010: R528 million)
and EBITDA of R62.6 million (Feb 2010: R66,6
million). This was achieved after sustained
investment in capacity as Conco recruited highly
skilled personnel to assist with project execution.
The key metric of substantial progress in this
regard has been the growth of the order book. The
order book currently stands at R1,5 billion (Feb
2010: R1.05bn).
The business has enjoyed a substantial uplift in
tender activity with higher than expected levels
emerging from across the African Continent. It has
also been a busy period in South Africa. We are of
the view that despite recent substantial gains in
our order book we still have additional capacity
within the business and we are aggressively
targeting prospective projects.
The period was characterised by capacity building
of highly skilled project execution personnel and
services that support project execution. Since
August 2010, Conco has increased the head count of
those key employees involved in revenue and profit
generation by 11%. We have improved our business
development, health, safety and human capital
management. Information Technology has been
upgraded to handle the multi-country and project
risks that we need to manage. This change process
is still underway.
Building Materials
West End delivered an operating profit for the six
months ended 28 February 2011 as opposed to an
operating loss in the prior comparative period.
Turnover increased by 13% to R48 million as a
result of an increase in roof-tile sales compared
to the prior year. EBITDA improved to R6 million
(Feb 2010: R1 million). The decline in activity in
the residential construction industry appears to
have leveled, and there are early signs of a
recovery in demand. West End has secured sufficient
facilities to sustain itself through the current
downturn, and to handle an uptick in activity
levels.
Drift had a satisfactory six months despite a 16%
reduction in turnover to R48 million. The continued
decline in the residential and commercial sectors
coupled with a decrease in volumes supplied to the
roads sector resulted in turnover decreasing.
Volumes were 28% lower than the previous
comparative period. The business continued to
maintain tight cost controls and productivity
improvements. Despite these actions at Drift the
reduction in turnover resulted in EBITDA decreasing
to R11 million from (Feb 2010: R16 million).
Prospects
The group`s strategic positioning in the provision
of infrastructure to the African Power Market, with
the majority of the clients being South African or
African utilities, provides a fairly robust buffer
against the volatility of the market place. The
imbalance of substantially higher demand levels for
power generation and transmission against the
current supply shortage will remain for decades but
the constraints to growth remain a funding capacity
for projects and shortage of skills to execute the
projects.
The Renewable Energy Division has submitted an
increasing number of proposals to execute the
Balance of Plant ("BoP") for major wind-farm
projects in South Africa. We are optimistic that
the Renewable Energy business will make a material
contribution to the future results of the group,
and will justify our decision to establish a
dedicated division to handle Renewable Energy
projects. Our ability to execute successful
projects with South African expertise and a
successful track record in the sector leaves Conco
well positioned for a significant increase in these
Renewable Energy Projects. We all wait for
successful contractual conclusion between NERSA and
the developers to be concluded.
Conco continues to add capacity to execute work and
expand on its business development network across
Africa. We are focused on improving our success
rate in Africa with tighter performance measures
and a more aggressive strategic approach to closing
work in those targeted African countries.
The regulatory approvals for our investment in
Saudi Arabia have been received and our office in
Al-Khobar on the East Coast of the Arabian Gulf has
been opened. We remain highly confident that we
will find the appropriate offering in this high
growth market.
The Building Materials Division is expected to
remain under pressure for the remainder of the
financial year. The division is currently operating
a tightly controlled expense base, and we are
hopeful that expansion in sales and distribution
capacity will increase our market share.
The group is confident that we are structurally
well positioned for higher-than-normal organic
growth over the medium to longer term. Sustained
demand for our services and goods, combined with a
balance sheet that has some latitude for growth, re-
inforces the strategic intent that we will, at the
appropriate time, acquire additional operating
companies. These prospective acquisitions would
fulfil our strategic intent to provide
infrastructure and infrastructure services across
the African Continent.
CHANGES TO THE BOARD OF DIRECTORS
Peter Baird, who has been acting as chairman since
November 2010, has been appointed chairman of the
group.
Peter is a Senior Advisor to Vantage Capital. He
also serves on the boards of EastPharma, listed on
the London Stock Exchange, and Catalent Pharma
Solutions, a portfolio company of the Blackstone
Group. He was previously the president of DJO,
Inc., a medical-devices company also owned by the
Blackstone Group, and was also a partner at
McKinsey & Company.
Robert Horton, a partner of Kingdom Zephyr Africa
Management has been appointed to the board as a non-
executive director. Rob has 11 years of private-
equity investment experience, and has served as non-
executive director of unlisted companies operating
in the building supplies, consumer goods,
distribution and light manufacturing sectors.
Robert worked in the oil and gas sector at
Masefield in London. In 1998 he moved back to South
Africa and worked in corporate finance before
joining a leading private equity firm providing
development and buyout capital to small and medium
sized enterprises.
Robert has a BCom in Accounting and in Information
Systems from UCT and is a Chartered Accountant.
Nathan Mintah, previously a non-executive director
of the group, is now an independent non-executive
director.
Andrea Geisser has resigned from the board. The
board wishes to thank Andrea for his contribution
to the group during his term as a director.
DIVIDEND POLICY
The dividend policy will be reviewed periodically
taking into account prevailing circumstances and
future cash requirements. At present, all earnings
generated by the group will be utilised to fund
future growth.
Accordingly, no dividend has been recommended for
the six months ended 28 February 2011.
BASIS OF PREPARATION
These condensed consolidated interim financial
results have been prepared in accordance with
International Financial Reporting Standards
("IFRS"), Interim Financial Reporting (IAS34),
AC500 series of interpretations, the JSE Listing
Requirements and comply with the South African
Companies Act (1973), as amended. The accounting
policies applied are consistent with those applied
in the annual financial statements for the year
ended 31 August 2010. These results have not been
audited or reviewed by the group`s auditors.
SUBSEQUENT EVENTS
It is highly pleasing to report that subsequent to
the period under review, Conco secured an order on
one of its key initiatives - its first 400kv
overhead line project with Eskom for R190 million.
This contract is included in our reported order
book, but no financial implications have yet been
recorded. This award is an important milestone for
Conco, as we have now entered a significant segment
of the high-voltage power industry to which we had
no previous exposure.
No other material events have occurred subsequent
to the interim period and the date of this
announcement.
APPRECIATION
The directors and management of Consolidated
Infrastructure wish to thank all staff for their
focused efforts and loyalty over the period. We
also thank our customers, business partners,
advisors, suppliers and our shareholders for their
ongoing support and faith in the group.
By order of the board
Peter Baird Raoul Gamsu
Chairman CEO
13 April 2011
Non-executive directors:
F Boner, P Voutyritsas*, R Horton
Independent non-executive directors:
P Baird (Chairman)**, AD Dixon, A Darko***,N
Mintah**
Executive directors:
RD Gamsu, IM Klitzner, B Berelowitz
*Greek, **American, ***Ghanaian
Registration number: 2007/004935/06
Business address: 6A Sandown Valley Crescent,
Sandown, Sandton
Business postal address: PO Box 651455, Benmore,
Johannesburg 2010
Company secretary: Sandra Saunders BA LLB (WITS)
DIP CORP GOV (RAU)
Telephone: 011 722 7430
Facsimile: 011 722 7431
Transfer secretaries: Computershare Investor
Services 2004 (Pty) Limited
Sponsor:
Java Capital
Auditors:
PKF(Jhb) Inc.
Visit our website: www.ciglimited.co.za
Date: 13/04/2011 08:50:01 Produced by the JSE SENS Department.
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