Increased spending on electrical infrastructure across Africa and progress on the South African Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) have driven solid growth and strong profits for JSE-listed Consolidated Infrastructure Group (CIG) for the six months ended February 28, 2013.

Through its subsidiary Consolidated Power Projects (Conco), CIG is the largest turnkey developer and installer of high-voltage electrical substations and overhead cables, as well as renewable-energy balance of plant electrical work in sub-Saharan Africa.

Conco had performed well over the six-month period, securing a healthy 17% increase in its order book to R2.1-billion.

The division won work worth some R800-million for renewable-energy projects as part of the first round of the Department of Energy’s REIPPPP. 

Conco was also awarded tenders to build and upgrade electrical substations across the African subcontinent, including in Angola, Mozambique, Tanzania, Botswana, Ghana and Zambia.

“However, the South African municipality market, a key market for Conco, continued to remain disappointing and the levels of activity in this sector continued to decline,” the company said.

CIG believed that Conco’s current order book, together with higher-than-expected levels of tenders awaiting adjudication, placed the group on a solid foundation to continue delivering growth.  

“The group is strategically positioned to provide infrastructure to the African power market, with the majority of clients being South African or African utilities. The geographic mix provides a fairly robust buffer against the volatility of the market place,” CIG said, adding that the drivers of growth in these markets remained the boom in commodity markets and urbanisation.

The group was confident that sustainable long-term opportunities were available in South Africa as a result of the substantial backlog identified in the National Development Plan, together with increased renewable-energy and conventional independent power providers.

However, the group expected that, over the medium and long term, the greatest constraint to growth remained the availability of suitably qualified engineers to execute the expected increase in work.

Financial Results
CIG reported a 27% improvement in profit and headline earnings for the six months ended February to R70-million, compared with R55-million in the first half of the previous financial year.

Earnings and headline earnings a share of 59c represented an increase of 23% over that of the first half of 2012.

Revenue grew by 27% to R970-million from R764-million in the prior comparable period, driven chiefly by a strong performance by the company’s core power and electrification sector, which accounted for 85% of CIG’s revenue and earnings and 80% of earnings before interest, taxation, depreciation and amortisation (Ebitda).

Trading margins remained unchanged at 26.6%, as management continued their focus on maintaining efficiencies, supply chain initiatives, geographic and project mix at Conco, and margin focus in CIG’s building materials division. 

Conco’s revenue increased by 29% to R825-million and its Ebitda improved by 25% to R99-million for the six months.

Revenue from the building materials division increased by 17% to R144-million, but Ebitda remained fairly static at R26.3-million as the division was unable to sufficiently increase selling prices relative to the cost increases incurred in production.

“The second half of the financial year has historically produced a stronger earnings performance owing to the December shutdown period that takes place during the interim reporting period. The group expects this trend to continue in the current financial year,” the company said.