Revenue for the interim period increased to R2.101 billion (2014: R1.663 billion). Gross profit rose to R484.8 million (2014: R385.1 million), earnings before interest, taxation, depreciation and amortisation (“EBITDA”) climbed to R274.3 million (2014: R206.5 million), while total profit for the period attributable to equity holders of the parent was higher at R208.5 million (2014: R163.5 million). Furthermore, headline earnings per share grew to 136.3 cents per share (2014: 110.1 cents per share).
The group’s policy is for the board to consider a dividend on an annual basis after reviewing the annual results.
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.
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.
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.
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.