cig: building the world around us...consolidated infrastructure group limited diversified...
TRANSCRIPT
Consolidated
Infrastructure Group Limited Diversified capabilities, strength to deliver
CIG: Building the World
Around Us 2012 Annual results
August 2012
Overview
• African Growth. We are at an interesting juncture in the “African Growth Story”. On balance, trends are working in favor of African-based infrastructure, companies who can provide first-class operations, customer-centric service, local procurement and local skills development. As Africa invests in its infrastructure backbone, CIG will continue to help shape Africa’s future
• Unleashing the potential. Our core businesses of CONCO and Building Materials have performed well while navigating a few tail winds in Power and Construction, respectively. Their performance has led to 7% turnover growth and 20% EBITDA growth. Additionally the group has made significant progress against our 4 strategic goals for 2012
• More growth ahead. CIG is poised for more growth ahead. Our progress against our 4 strategic goals has made for a robust platform for growth. Looking forward, we look to leverage our forward momentum to invest in a more ambitious growth strategy and trajectory
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CIG is leveraging “tailwinds” while
navigating “headwinds”
▪ Africa growth story: Drive for commodities, urbanization and flat returns in developing world spurring growth along with investments in infrastructure
▪ Focus on sectors we service: Power, Mining and Oil & Gas leading current and future growth in Africa benefitting our core businesses, along with push for sustainability
▪ Africa heterogeneity: Diversity across Africa favors companies with scalable core platforms, proven ability to partner with local stakeholders and ability to find synergies between verticals
▪ Rise of African companies: As countries continue to grow, so do local companies, providing CIG additional partners well suited to management strengths and ways of working
Positive trends working in our favor…
…while navigating negatives
▪ Shortage of skills: Lack of skills necessary to support our core businesses has led to the planning/launch of a Skills Academy and enhanced focus on retention
▪ Dependence on commodity cycle: While unavoidable given Africa countries’ dependence on commodities, presence across sectors and geographies lessens the risk
▪ Foreign invasion: Presence of Asian and European competitors has increased pressure but years of African commercial and operational experience and a robust network has served CIG well
▪ Sovereign risk and localization: Risk addressed by CIG business model built on Pan-African subsidiaries, local hiring and hedging of currency risks
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Our Core Business: Services to African
infrastructure sector has tailwinds
Power Transmission
Renewable Energy
Fossil Generation
Roads Telecom Rail
Water & Waste Pipelines
Development of Africa’s commodities requires
infrastructure
Infrastructure provides platform for more
exploration, industry and individual productivity
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Source: Fin24
In SA, despite market troubles
we see signs of upside Lack of quality spend on low-income housing
Government looking to spend (R50B) on rectifying sub-standard housing
Blackouts and maintenance backlogs
Lack of capacity leading to new build and well-structured RE procurement programme
Long term contracts reduce order book
Longer term contracts give CIG more annuity-based income and lower cost
Delays in the RE program
DoE ensuring program is well structured, increasing certainty around execution and payments
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Overview
• African Growth. We are at an interesting juncture in the “African Growth Story”. On balance, trends are working in favor of African-based infrastructure, companies who can provide first-class operations, customer-centric service, local procurement and local skills development. As Africa invests in its infrastructure backbone, CIG will continue to help shape Africa’s future
• Unleashing the potential. Our core businesses of CONCO and Building Materials have performed well while navigating a few tail winds in Power and Construction, respectively. Their performance has led to 7% revenue growth with 20% EBITDA growth . Additionally the group has made significant progress against our 4 strategic goals for 2012
• More growth ahead. CIG is poised for more growth ahead. Our progress against our 4 strategic goals has made for a robust platform for growth. Looking forward, we look to leverage our forward momentum to invest in a more ambitious growth strategy and trajectory
6
CIG navigated market hurdles and
gained efficiencies 2010 - 2012 CIG annual results
+7% 1,446 1,230
1,553
225 +20% 187
152
11510089 +15%
2012 2011 2010
Revenue ZAR MM
EBITDA ZAR MM
Fully diluted HEPS ZAR cps
While revenue gains were 7%, CIG subsidiaries implemented efficiency gains leading to EBITDA and HEPS increases of 20% and 16%, respectively
CONCO delivered the bulk of Group’s results at 82% and 80% of revenue and EBITDA, respectively
D/E ratio increased from 10% to 32% due to successful note program
Current ratio improved from 1.48 to 2.64 7
CONCO’s growth is driven by
Africa’s need for power 2010 - 2012 CONCO annual results
1,027 1,280 1,242
179166130
2.0
1.5
1.0
2010 2012 2011
Revenue ZAR MM
EBITDA ZAR MM
Order book ZAR B
While revenue remained flat, due to delays in our active markets, EBITDA improved by 8%
Although South African municipality spending was weak, business increased 5-fold from the South African transportation sector, with sizeable tenders from Transnet
Management seeing signs of investments in the business paying off in the short-term, for example: South Africa Renewable Energy Business Development initiatives (e.g.,
new staff, new offerings) Skills Academy (13 learnerships)
Beginning execution on pipeline of new
initiatives 8
2012 YTD Order book ZAR Billion
0.7
0.61.5
1.3
+23%
2012 YTD
2.0
0.7
2011 2010
CONCO order book is growing and increasingly diverse
Order book has grown significantly over the past two years (23%)
Non-South African business accounts for ~50% of the non-Renewable Energy portion of the order book
Renewable Energy is projected to comprise a significant share (~30%) of the order book for the foreseeable future
Not included in the order book are contracts awarded, but not signed 9
*SA does not include Renewable Energy
ex-SA RE SA*
CONCO’s 2 year rolling win rate
is a stellar ~36%
61% 67% 64%
36%
2012
116
33%
2011
223
39%
Total
339 100%
Won
Lost
2011 – 2012 Project won/lost ratio Percent
CONCO won/lost ratio declined slightly in 2012 as we continue to compete against new market entrants
Slow downs in spending in some regions and globally increased competitiveness
There are over 80 projects from 2011 and 2012 yet to be adjudicated 10
Tenders submitted*
232 189 421
*Difference in submitted and won/lost totals is projects not yet adjudicated
1.52.2
1.8
0.4
+43%
2012
6.1
3.9
2011
4.5
2.3
2010
3.0
1.5
Potential Ex-SA and SA Renewables projects offer tremendous upside
2012 YTD tenders awaiting adjudication ZAR Billion 49% order book growth
is a promising sign of rising demand across Africa
Growth outside of SA has been remarkably strong
Despite delays, management optimistic SA Renewables will contribute significantly to turnover in FY 2013. SA government recently increased allocation of future build to RE projects
SA Ex-SA SA RE
*Window 1 only 11
Home office Overview of CIG experience across Africa and the Middle East
It remains essential to increase coverage across Africa
CIG office or presence
Split of business: SA vs ex-SA ZAR MM, Percent
64% 65%58%
2010
1,028
36% 35%
100%
SA
Ex-SA
2012
1,280
42%
2011
1,242
12
Supply authority and Transport spend has compensated for Municipalities and Mining
2012 CONCO turnover by division Percentage
2012 CONCO turnover by client type Percentage
Substations Overhead
Lines
Protection
&
Automation
Renewable
energy
Overview of turnover split by division
3
1
3
Mining & General
30
35
21
Supply Authorities
42
26
34
Municipalities
Transport
25
38
42
2012
2011
2010
Example
13
67 64 28 31
57
00
FY 2008 – 2012 CONCO growth in personnel
•Finding quality personnel continues to be our biggest constraint
•Significant progress made towards CONCO certification as a trainer
•CONCO Skills Academy, to be formally launched, led to 13 learnerships for previously disadvantaged candidates
CONCO continues to invest in our key asset – our people
111
134
178
180+32%
2010
1,056
646
2011
876
615
824
2012
481
2009
454
343
Key positions
Rest of workforce
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Building materials has improved its
operational platform
2010 - 2012 BM annual results ZAR MM 273
203202
58
2829
2012 2011 2010
Revenue
EBITDA
Focused on strengthening operations platform and implementing cost savings initiatives
Outperforming others in the sector, while waiting for a recovery
Actively pursuing acquisition opportunities
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Priority
•Strategic focus on “Big 5”
•Renewables
• Investment in Infrastructure and Energy
•Deliver more solutions
Progress Details
•Maintained edge in SA •Multiple projects in Ghana and Kenya •Small project wins in Angola, Nigeria •Starting to see opportunity in KSA
•Despite delays, positively positioned
for Window 1 • Increased staff to execute additional
projects efficiently for customers • Invested in Operations & Maintenance
•Added capacity to invest •Advancing on a pipeline of M&A and
project opportunities
•Business Development at CONCO fully staffed and performing well
•Kicking off procurement initiative •Budding partnerships with financiers
Group has made significant progress
against 2012 strategic priorities
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Overview
• African Growth. We are at an interesting juncture in the “African Growth Story”. On balance, trends are working in favor of African-based infrastructure, companies who can provide first-class operations, customer-centric service, local procurement and local skills development. As Africa invests in its infrastructure backbone, CIG will continue to help shape Africa’s future
• Unleashing the potential. Our core businesses of CONCO and Building Materials have performed well while navigating a few tail winds in Power and Construction, respectively. Their performance has led to 7% turnover growth and 20% EBITDA growth. Additionally the group has made significant progress against our 4 strategic goals for 2012
• More growth ahead. CIG is poised for more growth ahead. Our progress against our 4 strategic goals has made for a robust platform for growth. Looking forward, we look to leverage our forward momentum to invest in a more ambitious growth strategy and trajectory
17
Strategic growth of subsidiaries
Transformative investments
Formation of Pan-African growth engine
•Accelerate growth by applying strategic, operational and financial levers to navigate market conditions and outperform competition
•Priorities: Market share gain in Big 5, successful execution of Renewable Energy EPC projects, product expansion in Building Materials
•Seek and acquire infrastructure companies and projects which can significantly enhance the value of the group, strategically and financially
•Priorities: Make multiple investments during FY2013, dedicate additional resources to sourcing attractive deals
•Build a group support structure which extends reach, adds management capacity to subsidiaries and properly “corporatizes” new investments; making the whole greater than the sum of its parts
•Priorities: Add Business Intelligence function at group level, optimize Group corporate and capital structure
On the back of strategic success,
management built a growth platform
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•Sectors: Power, Oil & Gas, Mining, Logistics, Telecom and Water and other infrastructure services
•Investment types: Services companies into each sector, infrastructure projects, advantaged manufacturing assets
•Investment profile: Earnings enhancing, good management, scalable services, high growth potential, customer-centric, nice fit with Group ethos (entrepreneurial, technically sound, moderate technical complexity)
•Progress: Management has identified opportunities to invest in, diligence progressing, potential partners engaged to identify additional opportunities
CIG Board has approved an investment
mandate for Management to execute
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Public sector (e.g., NERSA, DTI, Eskom, Munis) Experienced local skill development (26 yrs) Supplier localization Long term investment by SA company Easy access to performance across multiple
assets
Owners and Developers Maximize value for entire asset Reliable balance sheet to support
performance guarantees Transparent performance reporting Meet localization, development goals
Financiers Certainty around cash flows due to
uninterrupted operations Increased security with higher
value assets Transparency into asset
performance Subcontractor with a meaningful
balance sheet
EPCs and OEMs Maintenance of asset and
equipment to specification Avoids hassle of importing O&M
personnel or hiring personnel of substandard quality
Greater warranty assurance
CONCO O&M can align stakeholder
interests in SA Renewable Energy
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Appendix: Detailed Financials
21 21
Financial performance and ratios
12 months 31st Aug 2012
12 months 31st Aug 2011
ROIC – Conco 24% 21%
ROCE 13.3% 12.8%
EPS (cps) 116 98
HEPS (cps) 116 100
Operating margin (EBITDA on revenue)
14.5% 12.9%
Current ratio
2.64 1.48
Debt to equity
32% 10%
Net asset value per share (cents) 964 832
Net tangible asset per share (cents) 549 395
Note: HEPS figures adjusted to allow for 10:1 share consolidation
22 22
31 Aug 2012 Rand ‘000
Percent change
31 Aug 2011 Rand ‘000
Revenue 1,553,522 8% 1,445,556
EBITDA 225,059 21%
186,794
Trading profit 185,379 16%
159,325
Net interest earned / (expensed) 2,671
(4,919)
Taxation 51,146 18%
(43,314)
Profit for period 136,892 23%
111,092
Headline earnings 136,485 20%
114,223
Consolidated income statement
Trading margin steady at 28%
Note: Current ZAR exchange rate = R7/$ 23 23
31 Aug 2012
Rand ‘000 31 Aug 2011
Rand ‘000
Non-current assets
819,151
817,423 Current assets 1,163,227 807,528 Total assets 1,982,378 1,624,951
Equity 1,146,503 946,311 Non-current liabilities 396,053 132,570 Current liabilities 439,822 546,070 Total equity and liabilities 1,982,378 1,624,951
Consolidated balance sheet
24 24
Consolidated cash flow statements
25
Reviewed 31 Aug 2012
Rand ‘000
Audited 31 Aug 2011
Rand ‘000
Cash generated by operations before changes in working capital 226,523 190,736
Changes in working capital (225,068) (179,735)
Net interest received/(interest paid) 2,671 (4,919)
Taxation paid (13,845) (39,986)
Cash flows from operating activities (9,719) (33,904)
Cash flows from investing activities (42,789) (58,567)
Cash flows from financing activities (268,362) (5,261)
Net increase/ (decrease) in cash and cash equivalents 268,362 (97,732)
Effect on foreign currency translation reserve movement on cash balances (9) (92)
Cash and cash equivalents at beginning of year 136,036 233,860
Cash and cash equivalents at end of year 404,389 136,036
25
CONCO Debtor Analysis
26
56
124
348
39
147
335
Contract debtors Debtors over 60 days Retention debtors
2011
2012
2011 and 2012 Debtors positions ZAR MM
Increase in retention debtors CONCO has put additional effort into collecting on late debts
26
• Procurement shift to East (5 to 7 months of additional investment)
• Higher value projects – longer construction periods
• Milestone shifts - from delivery to installation
• “Lumpiness” in turnover
• Mix of contracts has resulted in a substantial reduction in advance payments (R100m)
• Investment in new markets and capabilities
Working Capital constraints
27
CIG Shareholders > 5% represents
70% of the shareholder base
28
11%
30%
6%
10%Yonbor Nominees (Global Capital)
PGR2 investments
14% Consolidated Power Holding (Management) 6%
Nala Empowerment
Pan African Investment Partners II
23% Other*
Peregrine Equities
CIG Shareholders with greater than 5% stake Percent
28
*Includes shares held by institutions and other smaller shareholders
Contact Us
Thank you for your interest!!
Raoul Gamsu – CEO [email protected]
Ivor Klitzner – CFO [email protected]
D.C. Moore – CIO [email protected]
Main telephone: +27 10 591 0593
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