CIL – trading statement

Shareholders are advised that for the year ended 31 August 2019 (“F2019”), the Group expects to report:
– Loss per share (“LPS”) of between 370 cents per share and 440 cents per share, being an improvement of between 57.3% and 64.1% compared to the year ended 31 August 2018 (“the prior comparable reporting period” of “F2018”) of 1030.40 cents loss per share and;
– Headline loss per share (“HLPS”) of between 340 cents per share and 400 cents per share, being an improvement of between 44.5% and 52.9% compared to the prior comparable reporting period of 721.20 cents loss per share.

During the year the Group successfully concluded a rights issue, raising net proceeds of R765 million by issuing 200 million shares. This resulted in an increase in the weighted average number of issued shares from 196 million to 335 million on which the current LPS is based. The total number of shares in issue and outstanding, net of treasury shares, at 31 August 2019 is 396 million.

The LPS and HLPS for the year, had it been based on the prior weighted number of shares in issue of 196 million, would have been:
– LPS of between 630 cents per share and 750 cents per share compared to the prior comparable reporting period of 1030 cents loss per share; and
– HLPS of between 580 cents per share and 680 cents per share compared to the prior comparable reporting period of 721 cents loss per share.

The expected results should be considered in the context of the adoption of IFRS 15 “Revenue from contracts with customers” which, along with revenue recognition error adjustments, impacted opening retained earnings. While assessing the impact of IFRS 15, the revenue recognition practices were reassessed and resulted in a restatement of the prior year results. The restatement has the impact of reducing the losses recorded in F2019 and F2018 with a reduction in retained earnings in the F2017 and prior financial years. During the first half of F2019, the Group adopted the modified retrospective approach to account for IFRS 15 which did not adjust comparative numbers, however due to the eventual magnitude of the adjustment at R670 million, management decided to perform a fully retrospective adoption to account for IFRS 15 as it would provide the user with more meaningful information. Further details regarding the prior period error restatement will be provided in the financial results announcement. The results expected in the current reporting period have been impacted by a tough macro-economic environment with pressure on most of the Group’s businesses, especially in the engineering, procurement and construction (“EPC”) businesses. Despite this, the Group has seen improved operating results in the second half of the financial year from its building materials businesses and its Conlog Proprietary Limited (“Conlog”) pre-paid power business.

The Group’s EPC businesses continue to experience some losses as a result of low level of contract awards in the period and the resultant under recovery of overheads costs. In the second half of F2019 significant focus was applied by both CIG management and the Consolidated Power Projects Proprietary Limited (“Conco”) management team, supported by experienced independent construction experts, to several areas within the Conco business, including the review of contract execution, commercial management, forecasting and liquidity management. These initiatives identified certain adjustments that were made to various contract’s total estimated profit recognition which reflected a charge against earnings in the period. Although a material portion of these charges are not expected to convert into cash outflow, they have been included into the Group’s liquidity models to ensure a more conservative approach to liquidity management. Arising from the review, key remedial action plans have been implemented, to mitigate any negative cashflow impact and any further earnings impact. These actions are monitored regularly by CIG management and the Conco CEO.

The Group thus expects to report a net loss for F2019 similar in magnitude to that reported for the first half of F2019.

Update on debt restructure
The company is pleased to announce that it and Conco are in the process of finalising binding legal agreements, which agreements will be subject to normal conditions precedent. It is anticipated that the legal agreements will be concluded by 29 November 2019, or such later date as agreed between the relevant parties. The Group expects to release its audited consolidated results to the market on or before 29 November 2019. The information on which this trading statement has been based has not been reviewed or reported on by the Company’s external auditors.

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