Revenue for the period lowered to R2.7 billion (R4.4 billion) whilst LBITDA came to R946.1 million (earnings of R5.4 million). Loss before interest and taxation widened to R1.7 billion (loss of R92.3 million). Loss attributable to equity holders worsened to R2.0 billion (loss of R146.8 million). Furthermore, headline loss per share came to 721.2cps (loss of 77.9cps).
No dividend has been recommended for the year.
Across the continent, the opportunities for CIG’s power businesses continue to be driven by:
- Growth in renewable energy and off-grid industrial-scale opportunities in Africa;
- Leveraging the established regional presence/market experience of group companies to geographically expand other group companies’ products and
- Financing of grid infrastructure utilising export credit funding lines.
The key objective for Conco is to return to profitability. A three-year target focusing on cash generated from operations has been set to help drive this goal, and underpins the long-term incentive framework for the executive team. The order book for the year was secured in accordance with the revised guidelines for contract acceptance, taking into account baseline working capital assumptions and margin and is adequate to stabilise performance. However, the tail of legacy projects will continue to act as a drag on divisional margins for the next twelve to eighteen months.
Conlog has exciting prospects both geographically and through innovative new offerings. Progress has been made in supplying product into new markets. An increased focus by utilities and municipalities on revenue collection is spurring demand for prepaid meters and other growth opportunities, which may include a rental offering. The business continues to innovate and in May 2018, launched its new power line communication product, the BECX, which strengthened and advanced its product range for improved competitiveness.
CPM’s market is expanding as early stage REIPPPP original equipment manufacturer (“OEM”) maintenance contracts reach expiry. The global shift to renewable energy will drive the growth trajectory for the business.
CIGenCo has a strong pipeline of development projects with a number of opportunities identified across the continent. The group is examining alternative funding structures for CIGenCo to alleviate the pressure on capital availability and to allow the business to build on its recent accomplishments.
The Tractionel short-term order book remains sub-optimal and, unless market conditions improve, will result in continued losses in 2019. In the longer term, there are a number of opportunities which, if successful, should see the business return to previous levels of profitability.
The Building Materials division anticipates moderate growth in the year ahead as infrastructure and related spending improves in the run-up to the national elections in mid-2019. Operational plans have been developed to mitigate any effects of a further deterioration in market conditions, should they materialise.
The market for Oil & Gas services in Angola is expected to begin to gradually pick up in 2019. AES is debt free and well-positioned to capitalise on market growth and to improve profitability.
CIG has emerged from the year with a cornerstone shareholder in Fairfax Africa, who is committed to the long-term prospects of CIG’s offering and opportunities across the African energy space. Conco has been restructured to be leaner and more efficient. The group-wide initiatives to build annuity returns are gaining in both momentum and credibility. The group is optimistic of its ability to return to sustainable profitability in 2019.
Management has implemented processes to provide greater assurance on the quality of the subsidiaries’ results, and stricter focus on cash returns and returns on capital employed to ensure that the businesses operate in line with their strategic plans and budgets and that operating risks are promptly identified and addressed.
Within Conlog and CIGenCo, given the exciting prospects for the African power sector over the next decade, we anticipate scope for growth beyond existing business. In addition to product sales, Conlog will target meter leasing and platform opportunities to grow annuity income and introduce new services. Through developing power-producing plants, CIGenCo also intends to grow annuity income, with six of the fourteen Africa-wide renewable energy projects in the pipeline at an advanced stage.
The long-term strategy to transition the group away from the vagaries of Engineering, Procurement and Construction (“EPC”) contracting into a sustainable platform supplying power needs across Africa can be achieved through the integration of CIG’s distinct offerings across the value chain and is expected, over the medium to long term, to restore stakeholder confidence in CIG.