Cig Broadens African Footprint in Strong Year

Capitalising on the robust energy markets in Africa, pan-African infrastructure group – Consolidated Infrastructure Group (CIG) – today posted double digit revenue growth for the six months to February 2017, during which the group markedly advanced its strategic objective to expand across Africa.  The decentralised group leveraged its broader geographical footprint to amass 65% of total profit after tax from outside South Africa. The period also saw CIG bed down it acquisition of Conlog – a prepaid electricity metering and services provider – and start to reap the benefits of synergies.

CIG’s order book at February 2017 grew year-on-year 25% at R6.6 billion.

Revenue grew 29% to R2.7 billion from R2.1 billion, while EBITDA was up 20% to R330 million from R274 million at the same time last year. Earnings were however negatively impacted by a reduction in profitability in CIG’s Angolan associate, AES, due to a slowdown in oil exploration, a stronger South African Rand and higher interest costs. Earnings per share (EPS) and headline earnings per share (HEPS) were down 18,5% to 111 cents apiece. The group ended the period with cash of R548 million compared to R481 million at February 2016.

CEO Raoul Gamsu says he remains confident in the group’s focus on Africa and the Middle East, and is “pleased at the continued momentum in CIG’s international penetration in the period.  The MEA region presents a wealth of opportunity given the upward trend in renewable energy projects and continued demand for and funding of electricity grid infrastructure.”

The Power division remained the key driver of results and performed well.  General business activity was strong off the back of Power’s progress in diversifying its footprint and opportunities.  Group newcomer Conlog performed as expected and was included in results for four months, while recent renewables start-up, CIGenco, concluded its first contract for an independent power project in Namibia.  In South Africa the division faced a mixed bag of conditions, with uncertainty in the municipal and renewable energy sectors balanced by continued infrastructure investment on the part of Eskom and the mining sector.

The Building Materials and Rail divisions both recorded stronger and positive growth mainly due to improved market conditions and expanded market share.  AES, the Oil & Gas division’s waste service business in Angola, fared less well and was impacted by reduced oil exploration activity and the appreciation of the South African Rand.  Gamsu points out that “CIG acted quickly together with local management to contain costs in the slower period and AES continues to deliver positive returns on investment for the group.”  He adds that conditions for foreign currency have improved in Angola and currently AES has no backlog on its offshore creditor payments.

Looking ahead he says CIG will leverage the group’s cross-selling opportunities by piggybacking the established presence and local market experience of group companies to introduce their CIG peers’ products and services.  “A tangible example is Ghana where Conco has an excellent track record but where Conlog has never operated.”

In South Africa he remains optimistic despite the delays in starting Round 4 renewable energy projects.  CIG is a major participant in Round 4 having secured R2,3 billion of work. “We have to bear-out the delay in commencing Round 4, as we are confident that the programme will happen and will contribute significantly to our South African Power business over the next three years once active.”  He points out that addressing new BEE legislation in South Africa and the sectors’ skills shortage will continue to pose challenges to growth.

He concludes: “The change in economic outlook in South Africa as a result of our recent credit ratings downgrade has somewhat obscured visibility into the future and curbed the slowly building sense of optimism.  However, positive conditions in the power and rail markets continue to prevail and CIG will capitalise on group strengths in a broad spread of regions to continue expansion and growth.”

CIG’s share closed on Friday at R19,00.