| Thu 27 Oct 2011, 9:48 | | CIL - Consolidated Infrastructure Group Limited - Consolidated |
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CIL
CIL
CIL - Consolidated Infrastructure Group Limited - Consolidated
Infrastructure releases reviewed results for the year ended 31 August
2011
Consolidated Infrastructure Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2007/004935/06)
Share code: ISIN: ZAE000148201
("Consolidated Infrastructure" or "CIG" or "the group")
CONSOLIDATED INFRASTRUCTURE RELEASES REVIEWED RESULTS FOR THE YEAR ENDED
31 AUGUST 2011
Salient features
- Revenue up 17.5% to R1,4 billion
- Ebitda up 23% to R187 million
- Fully diluted HEPS 100.51 cps (2010: 88.90 cps)
CIG CEO, Raoul Gamsu, commented: "These solid results demonstrate
another year of sustainable growth for CIG, in the power and
electrification sector. The growth outlook for our core business, Conco,
remains strong given that we are ideally placed to benefit from the
increased infrastructure spend in power generation and transmission in
South Africa, rest of Africa and the Middle East as well as from the
maintenance and refurbishment of South Africa`s ageing electricity
distribution infrastructure.
CIG is well placed to build on a track record which has produced
compound annual growth in EBITDA of 23% over the past three years and we
look forward to another year of growth and successful delivery in
FY2012."
Overview
CIG is the largest turnkey developer and installer of high-voltage
electrical substations in Sub-Saharan Africa and an installer of high
voltage overhead cables focusing on the African power high voltage
transmission market. The group supplies electrical protection and
automation systems and established a South African renewable energy
business aimed at designing, developing and installing electrical
solutions and grid connections for the regional renewable energy
industry.
CIG also produces and supplies a range of construction materials
including aggregates and a wide variety of brick and roof tiles within
its building materials division.
Financial Overview
Revenue grew by 17.5% to R1.4 billion (2010: R1.2 billion). Trading
margins are slightly up at 28.3% (2010: 27.9%). Conco were able to
maintain margins through improved efficiencies, supply chain initiatives
and spreading the geographic and project mix at the division.
The power and electrification sector remains a core area for revenue and
earnings generation with 86% of CIG`s revenue and an increased 89% of
earnings before interest, taxation, depreciation and amortisation
("EBITDA") directly attributed to this sector.
Profit for the period of R111 million represents a 45% increase over the
prior year (2010: R77 million). Headline earnings of R114 million was a
13% increase on the prior year (2010: R101 million). In the prior year
headline earnings were impacted favourably by a once off fair value
adjustment of R22 million.
Fully diluted headline earnings per share of 100.51 cents and fully
diluted earnings per share of 97.76 cents represent an increase of 13%
and 45% respectively over the previous year.
Due to the timing fluctuations of turnkey development and the growth of
the business there was a significant increase in amounts due from
contract customers towards year-end. An investment in additional fixed
assets of R58m was made to support growth and improve efficiencies. As a
result, the year-end net cash position decreased to R136 million
(2010:R234 million). We are however satisfied to report that at our year-
end there was no year-on-year increase in overdue accounts and we are
not anticipating any delays in the collection of receivables.
The debt-to-equity ratio declined to 10% (2010: 12%) as debt declined by
R5m to R98 million (2010: R103 million) interest cover as measured
against EBITDA was 38 times (2010: 21 times), while the net debt to
EBITDA ratio declined to 0.53 times (2010:0.68 times). Net finance
charges decreased 32% to R4.9 million (2010: R7.2 million) due to the
effect of lower average borrowings over the course of the year.
CIG`s financial position remains strong due to strict contract
management, where advance and progress payments are negotiated upfront.
Working capital management remained an area of critical focus.
During the financial year CIG encountered an increasing trend by
customers to only accept performance bonds and guarantees for upfront
payments from major banks. Previously Insurance related products were
widely accepted. Accordingly guarantee facilities have been
substantially increased by our bankers. We anticipate that this trend
will continue and we will continue to work with our bankers to increase
our facilities.
The attractive growth trajectory expected in Africa and in the Renewable
Energy Projects in South Africa in the coming years will place a strain
on the group`s working capital. The group`s financial position however,
allows for additional borrowing capacity and the group has taken the
precaution of increasing its banking facilities to allow for additional
funding lines. CIG is evaluating various medium term funding options and
has already agreed in principle with the Industrial Development
Corporation to obtain R100m additional revolving credit facility which
will alleviate some of the constraints to meet the expected organic
growth in turnover.
Conco`s short-term order book of R1.45 billion is up 11% over the prior
year (2010: R1.3 billion). 50% of the order book consists of African-
based projects and currently excludes any potential projects emanating
from renewable energy.
The building materials division has operated at satisfactory capacity,
which is pleasing given the weaker market conditions and has also
managed to increase its market share. The division recorded an operating
profit for the year.
Divisional overview
Conco
Conco, a market leader in its field, had another impressive year and
completed projects across 12 Sub Saharan countries. The division
tendered on 209 deals during the year and a satisfactory win rate was
achieved on those tenders adjudicated. To date there are 88 tenders
still awaiting adjudication. Revenue increased 20.9% to R1.242 billion
(2010: R1.027 billion) and EBITDA improved 28% to R166 million (2010:
R130 million). A supplier of choice, the division differentiates itself
through distinctive design, a superior skills base and an excellent
delivery record.
Conco responded to Africa`s and the Middle East`s long term power
demands and maintained a robust development programme for new operating
capacity and has the ability to supply different technologies across
18 geographies. Conco expanded its 400kv line capacity to contribute to
an estimated 8000 km in domestic demand. The regulatory approvals for
the investment in Saudi Arabia were received and the office in Al-Khobar
on the East Coast of the Arabian Gulf was opened in December 2010. This
office is well positioned to respond to an 8% per annum estimated
electricity growth rate in Saudi Arabia. The group currently dominates
the turnkey provision of substations to South African Municipalities and
utilities, with an estimated 50% established market share. Management
believes that capacity building precedes demand and has increased its
skills capacity by 33% in key positions over the prior year.
Notwithstanding CIG`s capital outlay to strengthen Conco`s delivery
potential, trading profits from Conco improved. The division has seen an
increase in potential work within its target markets with an increase of
60% in tenders awaiting adjudication, 52% of this outside South Africa.
A dedicated Renewable Energy Division has been staffed with an initial
focus on providing designs, budgets and costings for wind farm
developers and international turbine manufacturers. The business has
submitted 45 tenders and budgets.
Building materials
Despite the economic downturn in the building sector, the building
materials division successfully grew its market-share resulting in a
slight increase in trading profits.
Revenue of R202 million and EBITDA of R28 million was consistent with
the prior year. Management reviewed the merits of having two separate
management teams and reporting lines for West End and Drift operations.
It was decided that a single management team would be both effective and
efficient and the operations have been consolidated into a single
business unit with cost savings expected in the 2012 financial year.
Building Materials is now managed and reported on as one division.
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.
Geographically between 35% to 45% of the company`s business is currently
sourced from Sub Saharan Africa excluding South Africa, while 52% of the
value of tenders awaiting adjudication relates to other African markets.
This trend is set to continue with the company seeking to increase its
percentage turnover earned from this region. In South Africa, Eskom is
expected to spend R26 billion on transmission upgrades over the next 6
years. Conco estimates that the Gauteng province alone requires between
20 to 25 new substations per annum to keep up with demand. The
municipality sector is required to spend between R25 billion to R30
billion on refurbishing its current distribution and transmission
infrastructure. Conco is well positioned to benefit from these three
areas of demand.
The South African Department of Energy has produced a clear cut
programme, worth approximately R60 billion for the imminent roll out of
3750 mw of renewable energy over the next 4 years. The first window is
to be installed by mid-2014 and Conco has to date submitted 45 tenders
or budget proposals to obtain significant work. These first of 4 tender
windows are due for submission on the 4 November 2011.
Conco is well positioned to take advantage of the South African
Government`s commitment to source 15% of new electricity generation from
renewable energy sources within the next 20 years. We are especially
excited that we have built a South African Renewable energy business.
This division has a highly competent team and proven track record and
successful tenders in this division will have a material impact on
growth. Constraints to growth do however remain in funding capacity for
projects and particularly the size and scope of the individual projects.
The company has not seen indicative metrics to demonstrate a substantial
improvement in the domestic construction industry and the current demand
for the building material products is expected to remain weak over the
medium term. At present the building material division is trading at
higher than expected levels.
REVIEWED CONSOLIDATED RESULTS FOR FINANCIAL YEAR ENDED 31 AUGUST 2011
Condensed consolidated statements of comprehensive income
Reviewed Audited
Year ended Year ended
31 August 31 August
2011 2010
R`000 R`000
Revenue 1,445,556 1,229,748
Cost of sales (1,036,075) (886,241)
Gross profit 409,481 343,507
Other income 1,273 1,209
Operating expenses (216,864) (180,087)
Foreign exchange loss (7,096) (12,611)
Earnings before interest, taxation, 186,794 152,018
depreciation and amortisation ("EBITDA")
Fair value adjustment 0 21,786
Depreciation (27,469) (32,452)
Impairment of goodwill 0 (24,578)
Profit before interest and taxation 159,325 116,774
Interest received 3,628 7,299
Interest paid (8,547) (14,529)
Profit before taxation 154,406 109,544
Taxation (43,314) (32,889)
Profit for the year 111,092 76,655
Other comprehensive income:
Exchange rate differences on translating (545) (3,379)
foreign operations
Total comprehensive income 110,547 73,276
Basic earnings per share (cents) 97.76 79.85
Fully diluted earnings per share (cents) 97.76 67.45
Reconciliation of headline earnings:
Profit attributable to ordinary 111,092 76,655
shareholders
Adjusted for:
Loss/(profit) on disposal of property, 3,131 (205)
plant and equipment
Impairment of goodwill 0 24,578
Headline earnings attributable to ordinary 114,223 101,028
shareholders
Weighted average number of shares in issue 113,641 95,971
(000`s)
Fully diluted weighted average number of 113,641 113,641
shares in issue (000`s)
Headline earnings per share (cents) 100.51 105.24
Fully diluted headline earnings per share 100.51 88.90
(cents)
Condensed consolidated statements of financial position
Reviewed Audited
As at As at
31 August 31 August
2011 2010
R ` 000 R ` 000
ASSETS
Non-current assets 817,423 788,083
Property, plant and equipment 307,529 277,971
Goodwill 462,220 462,220
Intangible assets 35,309 38,792
Deferred tax 10,115 7,522
Financial assets 2,250 1,578
Current assets 807,528 672,786
Inventories 40,228 34,388
Trade and other receivables 51,102 59,952
Amounts due from contract customers 569,624 328,683
Taxation receivable 7,811 6,568
Cash and cash equivalents 138,763 243,195
Total assets 1,624,951 1,460,869
EQUITY AND LIABILITIES
Equity 946,311 835,917
Issued capital 11 11
Share premium 676,000 676,153
Foreign currency translation reserve (3,924) (3,379)
Accumulated profits 274,224 163,132
Non-current liabilities 132,570 84,556
Other financial liabilities 70,469 37,734
Provisions 7,881 8,283
Instalment sale liabilities 11,182 7,047
Deferred tax 43,038 31,492
Current liabilities 546,070 540,396
Other financial liabilities 10,029 53,698
Trade and other payables 299,816 170,137
Amounts received in advance 45,883 45,954
Amounts due to contract customers 170,850 241,719
Bank overdraft 2,727 9,335
Instalment sale liabilities 6,852 5,160
Taxation payable 9,913 14,393
Total equity and liabilities 1,624,951 1,460,869
Number of shares in issue (000`s) 113,641 113,641
Net asset value per share (cents) 832.72 735.58
Net tangible asset value per share (cents) 394.91 294.70
Condensed consolidated statements of cashflow
Reviewed Audited
Year ended Year
ended
31 August 31
2011 August
2010
R`000 R`000
Cash generated by operations before changes 190,736 151,931
in working capital
Changes in working capital (179,735) 43,493
Net interest received/(interest paid) (4,919) (7,230)
Taxation paid (39,986) (75,724)
Cash flows from operating activities (33,904) 112,470
Cash flows from investing activities (58,567) (20,475)
Cash flows from financing activities (5,261) (77,921)
Net (decrease)/increase in cash and cash (97,732) 14,074
equivalents
Effect on foreign currency translation (92) (184)
reserve movement on cash balances
Cash and cash equivalents at beginning of 233,860 219,970
year
Cash and cash equivalents at end of year 136,036 233,860
Condensed consolidated statements of
changes in equity
Reviewed Audited
Year ended Year
ended
31 August 31
2011 August
2010
R`000 R`000
Balance at beginning of year 835,917 762,873
Issue of share capital and share issue (153) (232)
expenses
Total comprehensive income for the year 110,547 73,276
Balance at end of year 946,311 835,917
SEGMENTAL ANALYSIS
Reviewed Audited Reviewed Audited
31 August 31 August 31 31
2011 2010 August August
2011 2010
R`000 R`000 R`000 R`000
Revenue % of % of
total total
Heavy building 202,890 202,312 14% 16%
materials
Power 1,242,666 1,027,436 86% 84%
Corporate - - 0% 0%
Total 1,445,556 1,229,748 100% 100%
Reviewed Audited Reviewed Audited
31 August 31 August 31 31
2011 2010 August August
2011 2010
R`000 R`000 R`000 R`000
EBITDA % of % of
total total
Heavy building 28,299 28,840 15% 19%
materials
Power 165,866 129,716 89% 85%
Corporate (7,371) (6,538) (4%) (4%)
Total 186,794 152,018 100% 100%
Reviewed Audited
31 August 2011 31 August
2010
Reconciliation of profit before tax
EBITDA per segment analysis 186,794 152,018
Fair value adjustment 0 21,786
Depreciation (27,469) (32,452)
Impairment of goodwill 0 (24,578)
Net interest paid (4,919) (7,230)
Profit before tax 154,406 109,544
Reviewed Audited
31 August 31 August
2011 2010
R`000 R`000
Assets
Heavy building materials 422,954 400,768
Power 848,016 673,635
Corporate 1,137,134 1,178,202
Total assets including group loan accounts 2,408,104 2,252,605
Inter-group elimination (783,153) (791,736)
Total 1,624,951 1,460,869
Reviewed Audited
31 August 31 August
2011 2010
R`000 R`000
Liabilities
Heavy building materials 336,101 318,276
Power 515,704 448,986
Corporate 60,630 94,417
Total liabilities including group loan 912,435 861,679
accounts
Inter-group elimination (233,795) (236,727)
Total 678,640 624,952
REVIEW OPINION
These consolidated annual financial results have been
reviewed by Sone Kock of PKF (JHB) Inc. Their
unqualified review opinion is available for inspection
at Consolidated Infrastructure`s registered address.
SHARE CONSOLIDATION
CIG consolidated the share capital on a 10 for 1 basis
with effect from 20 June 2011. Earnings per share,
headline earnings per share and net asset value per
share for the prior year have been adjusted
accordingly.
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
year.
BASIS OF PREPARATION
These consolidated annual 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 (2008), as amended. The accounting
policies applied are consistent with those applied in
the prior year.
Due to a change in management structures within the
Building Materials Division and given the size of each
operation relative to the overall profitability and
asset base of the group, Building Materials is reported
as one segment in the current year and the prior year`s
segmental reporting has been adjusted accordingly.
These reviewed results have been prepared under the
supervision of the group financial director I Klitzner
CA(SA).
Appreciation
The directors and management of Consolidated
Infrastructure wish to thank all staff for their
focused efforts and loyalty over these challenging
times. We also thank our customers, business partners,
advisors, suppliers and our shareholders for their
ongoing support and faith in the group. We would also
like to extend a special word of thanks to the IDC for
sharing in our vision of sustainable, renewable energy.
By order of the board
Peter Baird Raoul Gamsu
Chairman CEO
27 October 2011
Non-executive directors:
P Voutyritsas*, R Horton
Independent non-executive directors:
P Baird (Chairman)**, AD Dixon, A Darko***, N Mintah**,
F Boner
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
Telephone: 011 722 7430
Facsimile: 011 722 7431
Company secretary: Probity Business Services (Pty) Ltd
Transfer secretaries: Computershare Investor Services
(Pty) Limited
Contacts
CIG CEO Raoul Gamsu, 011 722 7430
Sponsor
Java Capital
Auditors
PKF (Jhb) Inc.
Visit our website: www.ciglimited.co.za
Date: 27/10/2011 09:48:01 Produced by the JSE SENS Department.
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