Revenue for the interim period soared to R1.7 billion (2014: R1.3 million). Gross profit rose to R385.1 million (2014: R314.6 million). Earnings before interest, taxation, depreciation and amortisation (“EBITDA”) increased to R206.5 million (2014: R168.5 million), and total profit for the period attributable to equity holders of the parent jumped to R163.5 million (2014: R118.8 million), while headline earnings per share grew to 110.1cps (2014: 88.5cps).
Dividend
The group’s policy is for the board to consider a dividend on an annual basis after reviewing the annual results.
Prospects
Power
Conco has gained a reputation of providing innovative technical solutions on time and within our client’s budgets. The prospects of the Power division are robust and the order book has continued to grow substantially in both absolute terms and in the increased average size of projects. The execution horizon of the larger projects has expanded. The improved focus of Conco on its regional markets, 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. CIG remains focused on geographic diversification and consequently, significant business development initiatives are underway in a number of markets to entrench the Conco brand and its services. These initiatives are gaining momentum and should lead to a positive outcome over the next twelve months.
Power division prospects in South Africa within the larger municipalities and REFIT programme are expected to yield above average growth. Conco’s position in the renewable energy sector is unique in that the operation has developed a competitive edge as a preferred local provider with the capacity and ability to execute to world class standards. It is management’s 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 have posed a new 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 to maintain its ability to transact within South Africa. Initiatives have been also been implemented by Conco management to assist the local manufacturers with orders for additional volumes and contracts.
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. The African continent continues to remain undersupplied and under serviced with power and electricity. As a result of this mismatch, CIG have established CIGenCo. The objective of CIGenCo is to identify niche power generation opportunities. We have hired a CEO with an outstanding track record in developing these opportunities in emerging markets.
Building Materials
Despite an economy constrained by power shortages and slow growth, there has currently been no sign of a slowdown in the demand for Building Materials across all of its markets and it is expected that the Building Materials division should sustain its current growth trajectory.
Oil and Gas
The AES business is set to grow organically due to the legislated environmental requirements of Angola’s zero-waste drill cutting law. Increased production from the oil majors is assisting the business and management are unaware of any significant curtailment in oil field development nor exploration in Angola. It is anticipated that there will be a minor contraction in margins as international oil companies strive to save costs across their supply chains. The impact of this margin contraction should be mitigated from 3 areas. Firstly, volumes should expand to comply with the legislated requirements. Secondly, AES derives 50% of all revenues from long-term rentals, which assist in providing a steady annuity stream of income. Thirdly, the relocation of waste processing from rigs located in the North of Angola to the new facility in Soyo enables the international oil companies to materially save on their logistical costs. Management continues to build capacity in the AES business and evaluate technology partnerships which will aid to grow a sustainable business. The long-term growth in demand for oil should also aid the sustained growth in oil services.
Rail
The Tractionel rail business provides enormous short- and medium- term potential as South Africa upgrades its rail infrastructure to manage the roll out of its new locomotive program. Management expect projects awards over the next 12 months to have a material impact on the business together with the R1 billion of tenders awaiting adjudication.