Revenue increased to R3.6 billion (2014: R2.6 billion), gross profit rose to R786 million (2014: R589 million) and EBITDA grew to R414 million (2014: R317 million). In addition, profit attributable to equity holders of the parent rose to R330 million (2014: R257 million). Headline earnings per share were recorded at 220.7cps (2014: 187.8cps).
Dividend
The dividend policy was reviewed by the board. After taking into account prevailing circumstances and future cash requirements, all earnings generated by the group will be utilised to fund the anticipated growth in the coming year. Accordingly, no dividend has been recommended for the period.
Prospects
Power and Electricity
The prospects of the power division across South Africa and into Sub-Saharan Africa remain robust. The order book has continued to grow substantially in absolute terms as well as in the increased average size of projects, demonstrating Conco’s earned reputation for providing innovative, large scale, technical solutions on time and within planned budgets. The execution horizon of the larger projects has expanded. The improved focus of Conco across multiple sectors and its diversified geographic base, continue to allow the business to manage the potential risk of a downturn in any one of its individual markets. In South Africa, the group’s prospects within the municipalities and Renewable Energy Feed-In Tariff programme are expected to yield solid growth. Substantial contracts and proposals have been signed and submitted as part of the government’s round 4 REIPPP. These have not been included in the order book and a short delay in closure is expected as Eskom deliberates on a proposal by the Department of Energy to resolve the issue of Transmission Budget Quotes. The group, which has an outstanding reputation and significant competence in the provision of electrical Balance of Plant in the wind sector, is working extensively to expand its offerings and has been building capacity to enhance its solutions to the solar PV market.
African utilities are expected to continue to provide above average growth prospects and, while awards in the oil exporting countries are slowing, the majority of the countries on the continent are oil importers and remain committed to the expansion of infrastructure. As a result, Conco International is seeing a greater number of quality opportunities particularly in East Africa and Ethiopia. As mentioned often by management, the biggest constraint to growth over the medium to long term is the availability of suitably qualified engineers to execute on the expected increase of the technically complex work. The current opportunity available to CIGenco is substantial and if successful will require significant capital to support the development and ownership of power projects. To ensure the group maximises the potential growth of CIGenco, various optimal capital structures are being considered. Feedback on the process will be made at the appropriate time.
Building Materials
Despite financial headwinds to consumers, there have been no signs of a slowdown within the buildings materials division and it is expected that the division should sustain its current activity levels.
Oil and Gas Services
Should there be no further delays in the implementation of legislated environmental requirements in the drill cutting law, currently scheduled for implementation by 31 December 2015, AES will continue to grow as expected. However, any delays to the implementation of this legislation may slow revenue and profit growth. A consortium agreement with Fundo de Investimento Privado Angola (“FIPA”), which owns 16% in AES, gives FIPA a put option to sell its shareholding to CIG on 1 May 2016 and this option expires after four years. At present should FIPA exercise the put option, it is the intention of CIG to acquire the shares currently estimated to cost between USD40 million and USD50 million. At these valuations, earnings per share are expected to be enhanced by approximately 10%. In the event of a material adverse condition existing at the time the put option is triggered by FIPA, CIG has the right to delay the process. In these circumstances the put option holder has the right to jointly market both CIG’s and their own shares. The decision on this further investment can only be made with certainty when FIPA triggers the option.
Rail
The railway business provides enormous short and medium-term potential as the South African government seeks to upgrade rail infrastructure to manage the roll out of the new locomotive programme. There are a number of opportunities in the sector which can only be pursued once there is further momentum and clarity amongst all stakeholders in this sector.