1
Results for the year ended 31 August 2017
Group
ResultsPROPRIETARY. Any use of this material without specific permission
of Consolidated Infrastructure Group Limited is strictly prohibited
2
Copyright of information contained in this document is owned by Consolidated Infrastructure Group Limited (“CIG”). You may use this
information and reproduce it in hard copy for your own personal reference use only. The information may not otherwise be reproduced,
distributed or transmitted to any other person or incorporated in any way into another document or other material without the prior written
permission of CIG.
Information in this document is given by us in good faith and has been taken from sources believed to be reliable. We make no
representations that the information contained in this document inaccurate, complete or fair and no reliance should be placed on it for any
purpose whatsoever.
The information contained herein is not intended to serve as financial or other advice. CIG shall not be liable for any loss or damage suffered
by any person or company using or relying on any information and/or opinions contained herein.
CIG does not make any representation regarding any other sources, which may be referenced in this document and accordingly accepts no
responsibility for the content or use of such sources or information contained therein. CIG shall not be liable to any party for any form of loss
or damage incurred as a result of any use or reliance on any information contained in such sources or any sources which can be accessed
through this document.
Disclaimer
3
21%
79%
45%
55%
Group revenue1
South Africa
Rest of Africa
Group PAT
South Africa
Rest of Africa
Group OverviewThe group realised a loss for the year, driven by significant losses incurred in the Conco business. The remaining group
businesses were profitable, including AES
-4%R 4 369m
-138%R -150m
Group Pipeline:R 38bn
Group Order Book: R 6.8bn
+26%
HEPS: -77.9 cents(2016: 255.3c)
-130%
EBITDA1: R 5m(2016: 476m)
-99%
Note 1: Group revenue and EBITDA exclude any contribution from AES as it is equity accounted and is included below the revenue line
PAT Breakdown
-441
291
Conco
Rest of
Group
4
HighMajor project delays devastated marginPoor commercial management
Serious intervention in progress
HighRealised efficiencies have maintained profitability, despite the market contraction
Short term outlook is negative but recovery expected mid 2018
MediumRecord year for revenues and realised strong operational efficiencies
Continue to improve operational efficiencies in light of uncertain demand
MediumDespite tough macroeconomic conditions, achieved a record year for revenue and PAT
Challenging outlook with potential to expand into rest of Africa
MediumA positive year diversifying regionally into new markets
Markets opening up and there is more potential for growth
MediumBusiness brought into the Group, successfully meeting expectations
Leverage group opportunities and grow revenue streams
Low A year of strong revenue growth Need to pivot, long road to build annuity book
LowSuccessful delivery of our first entire power value chain project
Strong outlook, long road to build annuity book
Framing the Problem
Review Outlook
The poor performance this year was caused primarily by challenges experienced in Conco and AES,
which are the most significant businesses in the Group.
Significance
5
5
Funding PositionFY2017 results have put CIG in breach of covenants and a waiver has been secured from funders in support of CIG
Going concern
consideration
Breach of covenants
Loss reflected in Conco lead to a
breach of the EBITDA interest cover
ratio
Funders’ committee
Initial waiver granted subject to
agreed upon course of action
• The group entered into negotiations
with banks and other debt providers
to request a covenant waiver
effective 31 August 2017
• As part of submissions to the forum,
a data room was prepared by
management which included group
budgets, twelve-month cash flows,
forward looking covenant
calculations and group debt
exposures
• The majority of forum members have
subsequently granted the group a
covenant waiver and provided
assurance that current facilities will
remain in place until 15 February
2018.
Conco waiver conditions
To procure an extension of the waiver
beyond 15 February 2018, the
funders’ committee has prescribed
the following conditions within Conco:
• Evaluation of economic returns of all
business units,
• Amended risk procedures
specifically around new contract
acceptance
• Independent detailed review of all
material contracts to evaluate
internal rate of return, project cash
flows and funding requirements
• Contagion mitigation strategy
• Debtors and work in progress
analysis
• Detailed 24 month cash flow, liquidity
and income forecast
Cash flow forecasts indicate
the Group meets liquidity
obligations for ensuing 12
month period
Anticipated return to
profitability in FY2018
Required
Level
Level at 31
August 2017
EBITDA Interest
Cover> 4 times 0.54 times
Net Debt to
Equity< 50% 40.1%
Residual Asset
Value> 1.85 times 2.97 times
Note: Net current assets = R1.35bn, Net asset value = R3.84bn, Net tangible asset value = R2.52bn
No loss of key management
No loss of material market,
customer, or supplier
Support from Funders with the
grant of initial waiver, to be
reviewed February
6
Having isolated the causes of poor performance, CIG has stabilised and is
implementing key initiatives to restore performance
Short Term Outlook
▪ Causes of poor performance in Conco have been isolated and major initiatives
have been put in place to cut costs and inefficiencies, review contract acceptance
procedures and drive economic performance
▪ While we anticipate it will take several months for these measures to gain traction,
Conco is expected to return to profitability as a leaner, more efficient business by
the end of FY2018
▪ Going concern: we have received support from our funders, have sufficient
headroom, and anticipate returning to profitability in FY2018
▪ The group’s focus is on cash generation and efficient use of cash
▪ We look to continue our reputation for reliable execution and excellent customer
service, with no guarantees breached, claims or penalties in the past 20 years
▪ AES likely to decline further short term. Management anticipates the market to
recover towards the second half of 2018
▪ Other businesses in our portfolio are performing well and continue to grow
profitably
7
10 Year JourneyWe have had a remarkable 10 year journey since listing in 2007 and have recently bolstered the team to enable our next
phase of growth
Tamara ParkerB.Soc.sci (psych),
HDE, MBA Joined | 2016
CIG Human
Capital
Wouter du
Preez BCom (Hons), CFA Joined | 2017
CIG Head:
Structured Finance
Raoul
Gamsu
BAcc, CA
(SA)Founder | 2007
CIG CEO
Ivor KlitznerBCom, CA (SA) Founder | 2007
CIG FD
D.C. MooreBSc Electrical
Engineering,
MBA in Finance
(Wharton) Joined | 2011
CIG CIO
R 4369R4 532m
R3 604m
R2 636m
R2 037m
R1 554mR1 446mR1 230m
R745m
R201m
2009 2011 2012 2013 2014 2015 2016 201720102008
CIG acquired
Conco
Achieved >R1bn
revenue
AES included
in results
Tractionel
included
in results
CIGenCo
established
Acquired
100% of
Conlog
10
ye
ar
reve
nu
e g
row
th
FY
Jeremy
FriedmanBCom Acc (Hons),
CA (SA) Joined | 2016
CIG Financial
Analyst
Revenue
CAGR 31%
HEPS
CAGR1%
Profit
CAGR-13%10 year analysis: 1 2 3
8
fin
an
cia
Financial
review
9
364
96
220
-7
-128
99
42
0
-8
EBITDA (R’m)
3 755
485 292
- -
3 441
533 394
- -
Revenue (R’m)
Consolidated Financial PerformanceModerate revenue decline and the reduction of Conco’s margin resulted in a loss in FY2017
-8% -135%
Revenue EBITDA Revenue EBITDA
+10% +3% +35% +91%
Revenue EBITDA
N/A -63%
Revenue Income from equity-
accounted investment
N/A -16%
Revenue EBITDA
Note: O&G profit margin maintained, liquidity strong.
Note 1: “Corporate” segment serves the group in providing management assistance for which fees are allocated intra-group.
Note 2: “Oil and Gas” segment is comprised of the investment in AES which is an equity accounted joint venture. Income is recognised separately from the operations of the rest of CIG.
Note 1 Note 2
CIG
2017: 4 369
2016: 4 531-4% -99%
CIG
2017: 5
2016: 476
136
51
2016 2017
Income from equity-
accounted investment
(R’m)
2016
2017
10
169
45
11
136
32
-305
47 24
51 33
Consolidated EarningsLosses in the Power segment lead to a HEPS loss of 77.9 cents per share
Note 1: Weighted average number of shares for HEPS increased due to rights issue during the year to acquire Conlog.
Note 2: Impact of HEPS adjustments to PAT per HEPS disclosure requirements.
PATHEPS
2017
-138%
2017
-130%
Major difference between EBITDA and PAT: interest
cost on working capital funding
.
Decreased Angolan oil production; still profitable
with strong cash flow
Rights
Issue
Increased number of shares from rights
issue diluted HEPS. Conlog achieved strong
results, contributing positively to HEPS
despite dilution
2016 2017HEPS
ADJ
HEPS (cents)Profit After Tax (R’m)
Rights
Issue
Note 1 Note 2
Comparable FX
impact on HEPS
2016
2017
0.11
(0.20)
2017: - R150m2016: R393m
CIG
2017: -150
2016: 393 -138%
2016
2017
11
Financing activities2017: 6572016: 564
FX movement2017: 72016: 3
Group Cash FlowsMajor group cash flows in FY17 stemmed from the investment in Conlog, majority funded via a successful rights offer
CIG Cash Flows (R’m)
Operating cash flow
Investment in NWC
Net finance cost and
tax paid
Operating activities2017: -2842016: -419
Opening C&CE Closing C&CEInvesting activities2017: - 9482016: - 614
Proceeds on rights offer: R 721m
Investment in Conlog: R 856mBalance funded using on-balance sheet cash
Major financing inflow and investing outflow:
investment in Conlog
Note 1: C&CE: Cash and cash equivalents
12
Group Working Capital ManagementManagement was not effective in reducing the investment in working capital in FY2017; this is a primary focus area for FY2018
Focus
Areas2 3 4
305332
299
228235
2214
14
1422
-156-221-216
-153-152
171
125 97 88
105
20172016201520142013
Debtors days Inventory days Creditors days Net days receivable
Shorten Conco debtors days
through more effective collections,
collection of large outstanding
payments causing distortion, and
lower expected growth rate
1Reduce use of overdraft
facility used to finance
equipment overheads gap
Sourcing deal-
specific trade
finance
Matching creditor payments
to debtors receipts and
negotiating favourable
receipt and payment terms
162209
98
83 45
43
20172016
Breakdown of debtors days
Trade andotherrecievables
Accountsrecievable +retentions
Costs incurred+ recognisedprofit
Note: Current debtors days is distorted
due to slow City Power payment, in the
process of being resolved
13
Working Towards Efficient Use Of DebtDebt is strategically used to raise the liquidity required to support the extensive working capital investment that is key to CIG’s
growth
596
2016
Sources of liquidity for headroom1 (R’m)
Cash on hand Undrawn facilities
360
2017
Revolving GSTBF
2017: R371m
2016: R38m
Structured note program
Value of notes in issue
2017: R924m
2016: R960m.
New notes issued in FY2017: 0
Notes repaid in FY2017: R36m
.
Total long and
short term facilities
2017: R1.737bn
2016: R1.426bn
Foreign sources of debt
Source cheaper USD or EUR
denominated debt, lowering group cost
of capital for ROIC hurdle rate used to
evaluate projects and investments
Note 1: Headroom = difference between available cash facilities and utilised cash facilities
Note 2: R150m 5-year loan raised off the Conlog balance sheet to replenish cash on hand at a group level. Raised post year-end but pre-reporting date
204 239
302
179
FY18 FY19 FY20 FY21
Note maturity buckets.
Future liquidity requirements
Lo
ng
te
rm d
eb
t
Risk management
EBITDA interest cover
2017: 0.5 times
2016: 4.4 times
Net debt-to-equity
2017: 37.8%
2016: 26.1%
Hea
dro
om
Ris
k m
an
ag
em
ent
Strategic
Focus
Areas
Increased use of trade finance
Match debt maturity and currency with
underlying cash flow requirements
Raise debt leveraging cash
generative businesses within CIG.
Use cash-generative group businesses as
security to raise debt for group use
Working capital facilities: R200m
Performance bonds and
guarantees:
In issue: R1 628m
Headroom: R1 800m
Cash balance and facilities on hand are sufficient to meet the short-
term operational requirements.
Note: The full value of notes outstanding has been reclassified to
current liabilities in accordance with IAS 1.74
For purposes of the covenant calculation, EBITDA includes income from joint arrangement and excludes unrealised forex gain or losses
Trade finance
2017: R442m
2016: R428m
Sh
ort
te
rm fa
cili
tie
s
14
op
era
tio
Operationalreview
15
Power
16
Contribution to
group profit2016: 43%
0%
FY2017 Revenue
growth 5 year CAGR: 11%
-8% 10%
2016
EBITDA Margin
-4%
2017
Power Sector
Performance
Revenue significantly impacted by uncertainty
▪ Missed revenue caused by significant delays in project
commencement
▪ Uncertain ability to recover revenue from scope overruns on
three material projects
Team retained at the expense of margin
▪ Continued investment in international operations in anticipation
of growth
▪ Projects taken on at reduced margins following delayed order
book unwind and pipeline conversion
▪ Retained our skilled team
Diversification strategy into new regions
▪ Entry into new markets has contributed towards slow
conversion of our pipeline
▪ Progress in new markets is still below expectations
Growing revenue streams
▪ Latest acquisition provides reliable cash flow
▪ Start-up businesses have made good progress
Significant project overruns, a brutal South African operating
environment, and moderate international growth lead to a
disappointing year for the power sector
3 755
3 441
2016 2017
Revenue (R'm)
364
-128
2016 2017
EBITDA (R'm)
-305
169
20172016
PAT (R'm)
17
Conco is the largest Africa-based turnkey EPC provider in sub-Saharan
Africa, offering high voltage turnkey electrical substations, overhead
power lines and renewable energy solutions
Review: A tough year in a challenging macroeconomic environment
▪ Scope overruns: $26m in scope overruns with uncertain ability to recover costs
▪ Further delays in renewable energy projects: IPP Round 4 impacting order book by an
estimate of R2.4bn and revenue by R800m
▪ Delays in order book conversion: Only realised R530m of an expected R2.3bn in South Africa
▪ Wrong mix of work: Sub-optimal work with minimal economies of scale
▪ Regionalisation strategy: Dedicated management has been appointed in the countries serviced
Outlook: Business is consolidating and taking steps to fix operational
challenges
▪ War room initiative: to fast track adoption of key initiatives
▪ Improving project margins: Current project underway to save R100m in operational cost
▪ Cashflow management: Improve working capital cycle, borrowing costs and payment terms
▪ Focused international footprint: Strategic review in process to entrench analytical approach to
entering market niches
▪ Stable order book: Uptick since August with an improved orderbook mix
▪ IPP Round 4: Execution expected to begin from February 2018
Proven ability to execute
Product agnostic turn-key offering
/ /Strategic Advantage
Registered
offices
57%
43%
Revenue split by geography
RevenueR 2.9bn
-21%
98%
2%
Revenue split by product
Local expertise and partners
/ Highly skilled team
Conco
Project footprint
South Africa
Rest of Africa
Renewables
Traditional
David van
ZylCEO
David has over 20
years’ experience
in the power and
electrical industry
Slu GeshaMD Conco South
Africa
Slu has over 24
years’ experience in
the power and
electrical industry
Retief de VilliersMD Conco
International
Retief has over 27
years’ experience in
the power and
electrical industry
18
Conco Performance ReviewContributing factors have been identified and isolated, and remedial action is being taken What went wrong How we are fixing it
The poor performance this year arose primarily in Conco, while
management’s ability to react timeously was insufficient
Having identified and isolated the contributing factors as to what went wrong,
remedial action is being taken
▪ Lower than expected revenues, specifically due to delay in Round
4 IPP
▪ Nature of engineering and construction projects requires a high
degree of management estimation and judgement. Changes in
assessment may well result in material variances
▪ Delayed recognition of contractual issues requiring urgent
management intervention, caused as a result of high regional
growth and increased complexity of operations
▪ Margin erosion, caused by downward pressure from clients in
contract negotiations, and tendering at lower prices in an effort to
gain market share regionally and maintain market share in SA in
a contracting market
▪ Rising compliance and regulatory costs in SA resulting in cost
creep
▪ Investment in retention of highly-skilled key personnel, causing
low labour utilisation and overallocation of resources to projects
▪ Failed recovery of additional costs incurred on industry standard
operational issues such as disruptions, delays and scope of work
adjustments
▪ A “war room” has been established, under the supervision of CIG, to drive accountability
internally and the rapid adoption of key organisational changes, detailed below
▪ Tighter control in the contract approval process:
▪ Advance approval of all new bids in excess of R50 million
▪ Approval of all major scope and cost changes
▪ Approval of all cost saving initiatives
▪ Assessment of the economic benefits of all current projects
▪ An independent business review to assess the economic performance of each business
unit to ensure a refocus within Conco on economic profit
▪ Independent specialist advising on the upgrade and refinement of accounting processes
to improve accuracy and speed of reporting
▪ Targeting R100m in annualised cost savings through a combination of bonus sacrifice,
salary increase sacrifice, correction of band creep and overhead cost reduction
▪ Commencement of Round 4 IPP’s is expected no later than March 2018
▪ The pipeline of confirmed orders is satisfactory with positive medium-term prospects
▪ The group is actively increasing its mix of private sector work
▪ Diversification of Conco's client base and regional footprint to reduce project
concentration risk
The board believes the remedial action put in place is in the best interest
of the group and all its stakeholders and will result in solutions which
materially contribute to the remedying of the problems identified and to
restore the confidence of stakeholders
In spite of poor financial performance, Conco
has maintained excellent working relationships
with its clients and has not been exposed to
liability for damages or penalties
19
2.10.6
6.4
8.213.2
10.21.7
1.2
2.2
0.4
0.4
9.9
12.3
15.3
28.6
FY15 FY16 FY17
1.72.1
1.35
1.2
2.5
2.32
1.1
0.05
2.40
1.0
0.35
0.02
3.0
1.8
0.3
4.0
5.0
6.10
FY15 FY16 FY17 FY18 FY19 FY20
Order book unwind2
R’bn
Current order book1
Pipeline
R’bnR’bn
25%
21%
Order bookPipeline breakdown3 Pipeline weighting4
R’bn
Conco Order BookThe order book and pipeline remain stable, but conversion rates on pipeline projects have decreased as we have spread into
new regions
We have cultivated a healthy pipeline, with
R19bn carrying a probability weighting
greater than 50%
Due to project delays from the prior year, a
significant amount of the order book is due for
execution in FY2018
Note 1: Order book represents guaranteed work with signed contracts in place
Note 2: Showing the period over which the FY2017 order book revenues are
expected to be realised
Note 3: Pipeline represents tenders awaiting adjudication and excludes tenders won
Note 4: Pipeline weighting represents managements' probability weighting of tenders awaiting
adjudication
Rest of Africa Renewables
SA Renewables
Rest Africa Traditional
SA Traditional
Order book unwind
3.1
15.9
9.7
Pipeline weighting
<50%
50% - 89%
>90%
28.6
Note: only 25% of FY2018
orderbook is expected in
the first 6 months
20
/ /
ConcoESConcoES is the largest secondary plant supplier in South
Africa, offering customised secondary plant solutions to
protect and automate EHV, HV and MV electrical
infrastructure, and small scale PV generation
Outlook: Strong growth outlook for micro grid and secondary plant
solutions
▪ Diversification of partners: Increasing engagement with private sector clients and other EPCs
▪ Focus on emerging trends: Smart grids, rooftop PV & DC storage
▪ International footprint: Establishment of regional offices and further project partnerships
▪ Growing annuity revenue: Automation contracts for utilities
Andreas
RichelmanMD
Andreas has over 19
years’ experience in
the power and
electrical industry
In-house product development
Tailored turn key solutions
Low working capital requirements
Strategic Advantage
Review: A positive year diversifying regionally into new markets
▪ Commencement of micro grid project: First in Tanzania
▪ Reduced reliance on Conco: 50% of revenue is now generated externally
▪ Regional diversification: Increased footprint across Africa
▪ Power project completion: 2 x 5MW Gobabis project completed in Namibia
▪ BEE: Achieved level 2 BEE Rating
Registered offices
59%
41%
Revenue split by client
RevenueR 481m
(R 296m eliminated on
consolidation)
+62%
54%37%
9%
Revenue split by product
Order bookR 216m
(Including R110m of
Conco order book)
-10%
Project footprint
Renewables (PV)
Traditional
Conco
Non-Conco
Automation contracts
21
/
CPMCPM is the only large scale South Africa based company offering long
term operational and maintenance services to wind farms and solar
parks for municipalities and utilities throughout sub-Saharan Africa
Review: A year of strong revenue growth
▪ Restored business to profitability: Following a loss making year in FY2016
▪ Successful management of 20 renewable energy contracts: Contributed to 60% of
turnover
▪ Diversification from renewable energy projects: Won more transmission and distribution
maintenance work
Outlook: Markets opening up and there is more potential for growth
▪ OEM maintenance contract restrictions lifted: Allows CPM to tender for longer term projects
▪ Opportunities to leverage off Group synergies: Opportunity to complement work done by Conco
▪ Customer retention: Existing renewable energy projects for FY2018 continue and have started an
annuity project outside of South Africa
▪ Growing annuity revenue: Pursuing operational and maintenance contracts
Pius N. GumbiCEO
Pius has over 20 years’
experience in the power
industry in the UK and
African utilities
Strategic Advantage
Localised presence with BEE Level 2 rating
Ability to service multiple OEMs
/
Registered offices
12%
88%
Revenue split by geography
RevenueR 48m
+67%
Order bookR 62m
148%
16%
60%
24%
Revenue split by product
World class experienced team
Project footprint
Renewables
Powerform
Transmission and distribution
South Africa
Rest of Africa
(Including projects and
annuity contracts)
22
/
CIGenCoCIGenCo takes minority stakes in power generation
infrastructure projects and specialises in financing, developing,
constructing and operating generation plants in Sub-Saharan
Africa
Review: Successful delivery of our first entire power value chain
project
▪ Delivery of Ejuva Solar Energy Projects in Namibia: A first of its kind in Namibia,
executing as a late stage developer, turning the failing project into a reality
▪ First year revenue composed only from project management fees: Now annuity
revenues from operations have started to flow
Outlook: Strong growth prospects going forward
▪ Strong pipeline: 10 projects totaling 524MW but might not generate revenue in FY2018
▪ Capital raising: Ring-fenced financing arrangements available from extensive sources
▪ Capital constraints: CIG is currently unable to make large equity investments
▪ International footprint: Pursuing strong leads in over 5 countries
▪ Growth in annuity revenue: Strong pipeline will result in growing annuity revenue flows
Wilfred
Bassaragh CEO
Wilfred has over 25
years’ experience in
the electric power
industry
Strategic Advantage
Late stage project development niche
Local expertise and partners
Access to multiple revenue streams
/
Registered offices
RevenueR 23.7m
(First year of
revenue)
100%
Project footprint
Generation
assets under
operation
10MW
524MW
Potential
generation
projects in the
pipeline
Pipeline footprint
23
CIGenCo was able to harness the holistic CIG offering across the power value chain
and deliver a successful project to unlock annuity revenue for the Group
Gobabis Success
Activation▪ CIGenCo leveraged group networks to activate the project
▪ CIGenCo provided equity funding through a 49% minority stake
▪ Financing package is ringfenced from the CIG Group
▪ Capital was raised from institutional investorsRevenue Stream: Financing income
Development▪ Successful partnerships with local expertise to develop local skills and jobs
▪ Partnered with Conco to provide the turnkey EPC work
▪ ConcoES provided the secondary plant solutionsRevenue Streams: Development and project management fees
Maintenance▪ CPM will provide ongoing maintenance of the project
▪ CIGenCo will support the operations of the projectRevenue Stream: Maintenance fee and dividend yield
Won and successfully executed on 2 renewable solar PV power plants
▪ Sponsor – CIGenCo
▪ Receiver – Namibia Power Corporation Limited
▪ Focus – Renewable energy
▪ Income – 25 year annuity revenue
24
/
ConlogConlog is an electronics design company, offering the world’s largest
base of smart meters and prepaid solutions. The business provides the
complete end-to-end solution covering management systems, vending
architecture, prepaid meters and systems management
Review: Business brought into the Group, successfully meeting
expectations
▪ Acquisition of Conlog: Concluded successfully and seamlessly
▪ Successful execution of export strategy: Generated 75% of revenue outside of SA
▪ Leveraged Group synergies: Benefits from relationships opened up by CIG
▪ First PLC prototype piloted: Developed and designed to market specifications, enabling us to
penetrate new markets
▪ Delay in microchip supply: Still lagging and expecting to catch-up in December. We have more
demand that we are able to fulfil
Outlook: Leverage Group opportunities and grow revenue streams
▪ Cross-selling opportunities: Between CIG and subsidiaries
▪ Returning customers: Emerging trend in cost conscious customers returning due to quality
product and service offering
▪ Grow services offering and annuity income: Opportunity to grow annuity income from a base of
2%
▪ International opportunities: Large growth potential in regions where CIG has extensive
experience
Logan MoodleyCEO
Logan has over 15 years
of experience at Conlog
Strategic Advantage
Market leaders in Africa
Niche electric ecosystem
Leverage strong brand, skills and pipeline
/
24%
76%
Revenue split by geography
4%
96%
Revenue split by product
RevenueR 465m
(10 months
consolidated, since
acquisition)
Products
Services
Registered offices
Sales footprint
Rest of the world
South Africa
Note: sales in South America and Asia
not reflected above
25eBay may be a shark
in the ocean, but we
are a crocodile in the
Yangtze. If we fight in
the sea we lose, but
if we fight in the
river, we win.
Jack Ma, Alibaba
“
”
26
Building Materials
27
CBMCBM is a building materials business made up of West End Clay Brick
& Roofing, Drift SuperSand and Drift Laezonia, offering top quality
bricks, rooftiles and aggregates for the building and construction
industry
Review: Record year for revenues and realised strong operational
efficiencies
▪ Rewarding investments: Laezonia quarry output increased by 50%
▪ Operational efficiencies: 1:1 production to sales ratio with zero wastage and reduced
logistics costs
▪ Automation and quality control: Increase in production at West End Clay Brick plant
Outlook: Continue to improve operational efficiencies in light of
uncertain demand
▪ Large construction developments: Expanding out towards Lanseria
▪ Robust demand: Public infrastructure service delivery in houses and hospitals
▪ Maintenance of current production: Monthly production of 120 000 tons from quarries
Jannie HoomanCEO
Jannie has over 23 years’
experience in the
aggregates industries/ /Strategic Advantage
Highly skilled management and operational teams
Ability to execute efficiently
Strong customer base
Registered officesContribution to
group profit2016: 11%
+22%
32%
26%
42%
Revenue split by product
Revenue R 533m
+10%
Drift Laezonia
West End Clay Brick & Roofing
Drift Supersand
28
Rail
29
TractionelTractionel is the leading railway electrification company in
South Africa, offering turnkey solutions for the installation and
maintenance of transmission lines, substations, and other
railway services mainly to Guatrain, Transnet and PRASA
Review: Despite tough macroeconomic conditions, achieved a record
year for revenue and PAT
▪ Awarded significant projects: Secured Majuba, the largest project in the companies history
▪ Downward trend with PRASA and Transnet: Cancellation of the Braamfontein depot
Outlook: Challenging outlook with potential to expand into rest of Africa
▪ Order book: Order book reduced due to fast rate of execution, however the uptick in new orders
has not been commensurate
▪ International footprint: Expand maintenance offering through established MOUs
▪ Expansion of service offering: Diversify into signalling and maintenance of rail infrastructure
▪ BEE rating change: Obtain level 2 BEE rating
▪ Diversify into new rail services: Maintenance of rail infrastructure
Danie LubbeCEO
Danie has over 11
years experience at
Tractionel
Exclusive affiliations with international providers
/Strategic Advantage
Niche railroad product offering /
Proven
ability to
execute
Registered offices
Contribution to
group profit2016: 3%
11%
96%
4%
Revenue split by product
Revenue R 394m
+35%
Order bookR257m
- 49%
Maintenance work
Project work
30
Oil and Gas
31
AESAES offers fully integrated waste management services to the oil and
gas industry, encompassing the collection, recycling and disposal of oil-
based waste created during the drilling process
Review: Business has remained profitable through realising efficiencies,
despite the decrease in number of active rigs
▪ Operational and cost efficiencies: Significant steps were taken to reduce and manage cost
▪ Outsourcing strategy: Outsourcing of the thermal desorption process has enabled the business to
scale according to demand
▪ New contracts awarded: Surface rights for landfill in Luanda and integrated waste management
contract in Soyo
▪ Minimised liabilities: No in-country debt and healthy cash balance
Outlook: Short term outlook for Angola oil and gas market is negative
however recovery expected in mid 2018
▪ Stabilising market: We expect the number of active oil rigs to decrease through December 2017
and pick up from April 2018
▪ Servicing of current production: 1.6million barrels produced per day; expected to decrease in
the short-term
Morten Eriksen
Manager
Morten has 15 years
experience in oil and gas
Unique service offering in Angola / /
Strategic Advantage
Efficient scalable operations
Licenced
international
technology
Registered officesContribution to
group profit2016: 35%
+24%
Income from
equity-accounted
investment
R 51m2016: R 136m
-63%
70%
30%
Income split by product
Exploration
Production
32
Angolan
Oil and GasThe need for waste management services will remain
due to the requirement for continued production
Oil’s contribution to Angola’s economy
30%GDP
▪ Government is incentivised to maintain production
levels due to the sheer contribution of oil to Angola’s
economy
▪ President of Angola has recently convened a
meeting between Sonangol and oil operators to
discuss the development of the industry
▪ Discharge law came into effect in January 2016
requiring all oil companies to dispose of waste
responsibly onshore
▪ AES is the dominant company operating in the waste
management service in Angola
▪ All stages of the oil extraction lifecycle require waste
management
▪ Exploration drilling must continue in order to maintain
productivity of the oil producing block
“The medium-term outlook for oil demand is
for a significant increase to 2022 with a
healthy average annual increase.”
Mohammad BarkindoSecretary General, Organization
of Petroleum Exporting CountriesWells drilled Multi wells drilled Drilling
production &
injection wells
Drilling more
production and
injection wells
Infield drilling
Exploration Appraisal Development Production
50%Public
revenues
95%Exports
SOURCE: www.africaneconomicoutlook.org | http://www.scmdaleel.com/category/offshore-rigs/88
https://www.bloomberg.com/news/articles/2017-10-15/opec-sees-healthy-oil-demand-growth-to-2022-as-renewables-gain
33
Str
ate
gy
Longer term strategy
34
Conveying Our IdentityOur identity statement highlights the Group’s core purpose for existence, differentiating factors and offering to clients
We enable basic services
and unlock Africa’s economic
potential
We execute efficiently, we
have deep local expertise,
and we prudently manage
risks
We develop, implement and
support specialised
infrastructure products and
services
Addressing Africa’s basic societal needs
Enabling economic development across Africa
Proven track record of delivery of turnkey projects through
agile project management processes
Focusing on recruitment and retention of a highly skilled
team and investing in local expertise and partnerships
Diversification across industries and geography
Services spanning the entire value chain
Focusing on niche offerings across the power, oil and gas,
rail and building materials sectors
WHY
HOW
WHAT
35
The Operating EnvironmentThrough our unrelenting Africa growth strategy, we have developed a deep understanding of the unpredictable and
challenging nature of the operating environment1
Note 1: The countries listed are the regions the Group perceives have the highest probability of delivering sustainable growth
Nigeria▪ Naira depreciated by 44% from January 2016
▪ Political stagnation and policy uncertainty
▪ Underperforming O&G sector
▪ Annual real GDP growth of 4.8%
Ethiopia▪ During the 2016 drought the government spent $400 million to fight off
famine, negatively affecting government’s budget
▪ Has the highest annual real GDP growth rate in Africa of 9.7%
Kenya▪ Kenya’s October 2017 elections creating policy uncertainty
▪ Kenya IPP delayed till mid 2018
▪ Annual real GDP growth of 5.3%
Angola▪ Oil rigs decreased from 10 to 5 in FY2017
▪ Elections in August 2017 creating policy uncertainty
▪ Sonangol restructured its Board of Directors
▪ Annual real GDP growth of 4.3%
South Africa▪ Rand appreciation by ~21% since January 2016 affecting margins
▪ Three different energy ministers appointed this year
▪ Delays in IPP programs
36
The OpportunityAmidst the challenges, the positive outlook for Africa continues to support an aggressive growth strategy as governments look to
close a rapidly growing infrastructure gap
2018 20192017
3.4%
Normalising the macro-economic shocks of the past year, Africa is
still projected to be the 2nd fastest growing continental economy
in the world and is estimated to grow by 4.7% in 2019
4.3% 4.7%
Infrastructure spend in Sub Saharan Africa is driven by a
large deficit between supply and demand and is expected
to reach $180bn p.a. by 2025
Emerging energy trends in Africa
▪ Renewable energy prices are anticipated to
fall even further, and it is expected to make up
15% of Africa’s energy generation by 2040 (up
from 1% in 2012)
▪ Micro grids can be quickly deployed, linking
power generation much closer to source where
it is too expensive for traditional power
infrastructure to reach
▪ Smart metering allows utilities to reduce
operating costs, improve grid reliability,
increase energy efficiency and improve
revenue collection
$45bn p.a.
2017
$180bn p.a.
2025
30% of which
will be made
up of energy
SOURCE: African Development Bank | PWC | RMB
2.2%
2016
37
Our rationale for business is directed by our strategic drivers and determines how
we extract value from our operating environment
Strategic Drivers
▪ Risk management practice
▪ Enhancing stability in revenue and earnings
▪ Backing strong management teams
▪ Building sustainable partnerships
▪ Higher margins and long term relationships
▪ Stronger-than-market quality guarantees
▪ Synergies throughout the Group
▪ Develop management and strategic skills
We address basic societal
needs
We unlock potential in our
businesses
We offer specialised
products and services
We diversify by region and
industry
We remain agile through a
decentralised business model
▪ Growth in the demand for infrastructure
▪ Invest ahead of the curve
38
Sector DiversificationWe manage the volatility in our operating environment by diversifying our operations across multiple sectors and multiple
product offerings
Power
Project activation• Developers of renewable
energy power generation
Infrastructure development• High voltage electrical
substations
• Overhead power lines
• Renewable energy (wind and
solar)
• Customised secondary plant
solutions
Operations & maintenance• Long-term operational and
maintenance services
Downstream• Prepaid meters and support
software
Building Materials
Aggregates • Crushed stone and rock
for application in roads,
readymix and concrete
Roof tiles• Manufacture of concrete
roof tiles
Bricks• Manufacturing of face,
semi-faced and plaster
clay bricks
Rail
Railway electrification• Overhead transmission
lines
• Substations up to 132kV
Maintenance• Installation and
maintenance of railway
electrics
• Railway maintenance
services to Gautrain,
Transnet, PRASA and
private siding owners
Oil and Gas
Waste management• Full integrated waste
management services
• Collection, recycling
and disposal of oil-
based waste
39
55%56%
83%
78%
79%
2.04
2.64
3.60
4.53 4.37
Geographical DiversificationFurther diversification across regions has yielded consistent smooth revenue growth
▪ We have historically experienced consistent upward revenue
growth and have been protected from macroeconomic swings in any
one region due to our geographical diversification strategy, with
operations in 24 countries across Africa and the Middle East
▪ We have a specific focus on diversifying away from South Africa which has been very disruptive to the business
▪ This year has however been disrupted by scope overruns in several
large projects internationally as well as a brutal South African operating
environment
Rest of AfricaSouth Africa
2013 2014 2015 2016 2017
Rest of Africa
South Africa
Group Revenue (R’bn)
40
Diversified Business ModelsWe have diversified our business models, building a cash generative base and establishing annuity
revenue streams to balance our project-based businesses
▪ Our project-based businesses
are driving revenue growth.
These businesses must be
measured on a 2-3 year cycle
Rec
urr
ing
reve
nu
e
Vo
lum
e-b
as
ed
reve
nu
e
Pro
jec
t-b
as
ed
reve
nu
e
PowerBuilding
MaterialsRail Oil and Gas
▪ Our volume-based businesses
provide a firm cash generative
base for the Group
▪ Our recurring revenue businesses
are in their nascent state, but have
considerable ability to scale and will
generate stable income for the
Group in the long term
41
Activate
Feasibility,
finance and
structuring
Design and planning
Manufacturing and material
supply
Construction and
Implementation
Integration
and
commission
Operation and
maintenanceDownstream
Project Project Project Project
Project Project
ProductProject Project
Annuity
Development
funding interest
Project
management fee
Return on equity;
Asset management
Product Time-basedLicencing;
Time based
Product
Project Project Project Project Annuity
Annuity;
Transactional
Conco
ConcoES
CPM
CIGenCo
Conlog
CBM
Tractionel
AES
Primary activity Secondary activity
Value Chain ExposureWe operate across the full power value chain and pursue niche opportunities in other industry pillars
Develop Implement Support
42
Managing Operational RisksWe are focused on the risks inherent in our environment and have developed mechanisms to manage these risks
Risk Relative Exposure Mitigation
Currency risk ▪ Match exposures between suppliers and customers where possible
▪ Structured FX contracts to manage exposureMinimal currency risk at
operational level
Payment risk ▪ No defaults incurred by CIG debtors
▪ Payment tolerance factored into working capital management strategyDelayed payments, not
defaults
Repatriation risk ▪ Risk is predominantly in Angolan operations
▪ Track record of successful repatriation with full legislative complianceLimited exposure and
efficiently managed
Client
concentration risk
▪ Active focus on regional diversification
▪ Client exposures managed individually relative to credit riskLow individual client
concentration
Africa risk ▪ 10 years history of successfully doing business in Africa
▪ Local African presence with teams on the groundLow due to track record
and experience
Project
concentration risk
Diversifying revenue
streams
▪ Matching payment profiles, efficient working capital management, and
diverse pipeline reducing key project risk
▪ Have not yet reached a scale where we are sufficiently diversified to
withstand major project delays
43
Mid-term Focus Areas
Objective Result
Pip
elin
e
Focus on synergies
• Through facilitating introductions into
new regions, particularly in but not
limited to Conlog
Focus on diversification
• Specifically business model and client
diversification
Shorter sales cycles
and better
conversion rates
Team
Focus on management
• Human capital executive to focus on
management development
Focus on local team and partners
• Build further trust through becoming an
advisor, not just a provider
More negotiated
work and longer
term clients
Ca
pit
al
Focus on annuity income
• Growth of CIGenco and CPM off the
back of successes
Focus on capital allocation
• Particular focus on Conco to embed
cultural adoption of a focus on capital
efficiency, however legacy projects must
still be executed
More efficiencies
and better use of
capital
Our focus in the medium term is weighted towards growing capabilities within our team and continuing growth of our pipeline
1
Pipeline
2
Team3
Capital
Triangular
paradox
44
The fundamentals of our business remain, and we are excited to deliver increasing
shareholder value as we grow
Investment Case
Delivering infrastructure growth
in Africa
▪ Africa’s infrastructure gap is large and growing
▪ Requiring extensive infrastructure spend
▪ Consumers driving demand for basic services
▪ Positioned to capitalise on macro trends
Through a specialised offering▪ Services spanning the entire power value chain
▪ Targeting niche offerings
▪ Providing sustainable margins
Protected by diversified risk▪ Diversified across geographies
▪ Diversified across industries
▪ Diversified across business models
With talented and experienced
management teams
▪ Experience in operating in Africa
▪ Local expertise with strong networks
▪ Ability to attract, deploy and retain talent
With a recognised ability to
execute
▪ Deliver turnkey projects through agile project
management processes
▪ Product agnostic offering
And a proven track record▪ Market leaders in our fields
▪ Evidenced by our strong 10-year growth story
▪ Track record of innovation and quality
45
co
nta
ct
Contact
46
L O C A T I O N
First Floor, 30 Melrose Boulevard,
Melrose Arch 2196
T E L E P H O N E
+27 11 280 4040
E M A I L
W E B S I T E
www.ciglimited.co.za
47
ap
pen
di
Appendix
48
SA Operating EnvironmentDisruptions at utilities and municipalities has hampered progress to infrastructure development
11% Group
exposure to
Group companies exposed
to Eskom
CEO: Sean Maritz
▪ Four different CEO’s since November 2016
▪ Eskom's credit ratings downgraded to Ba2 in June 2017
▪ Of the R350bn government guarantees available to Eskom R210bn has been drawn down already1 and 2
▪ Possible options are government underwriting, IMF bailout or a restructuring
▪ Two cabinet reshuffles, three different ministers since March 2017
Department of energy Energy minister: David Mahlobo
▪ CIG is diversifying away from Eskom and RSA
▪ Increasing trend in mix of private customers
Source: www.businesslive.co.za/bd/economy/2017-05-10-state-guarantees-of-r466bn-unlikely-to-explode; Eskom AFS;
http://www.saaea.org/news/category/reipppp; New Power Generators RSA,CSIR,14 Oct 2016
REIPPP timeline
Municipalities▪ Lack of decision making in municipalities have reduced the number of tenders awarded this year
2014 2015 2016 2017
Mar- R3.5 Bid
submissions
Aug- R4 Bid
submissions
Apr- R4 Bid
announcement; 27
projects representing
~R60bn
Dec- R3.5 Bid
announcement
Oct - SAWEA
lodges formal
complaint
with Nersa
Feb- President Jacob Zuma’s instructs Eskom to sign the
outstanding PPAs in State of the Nation address
Feb- Outa submission to Competition Commission
Mar- Mmamoloko Kubayi appointed as DOE minister
Apr- Tina Joemat-Pettersson deadline to sign the PPAs
Sep- Eskom acknowledge legal obligation to conclude PPAs
following high court ruling
Oct- Kubayi’s deadline to sign the PPAs, price cap set to
R0.77/kWh
David Mahlobo appointed as DOE minister
49
Clean Energy TrendsRenewable energy generation in Africa is expected to see growth in the foreseeable future driven by large capital inflows and
high demand
African energy generation by source
3%4% 3%2%
3%
26%
3%4%
25%
27%
1%
22%
3%
9%
9%
56%Coal
Hydro
Other renewables
Nuclear
Gas
Oil
2012
Nuclear
Biomass
Concentrated solar
Wind
GeothermalSolar PV
Hydro
Coal
2040
Oil
Other
renewables
15%
Gas
2012 Total generation:
440 TWh
2014 Total generation:
1 540 TWh
$62B
2004
$349B
2015
Global investment in renewables: for
the first time, in 2015, developing
countries attracted the majority of
renewable energy investments.
61% - Growth in renewable generating capacity since
2012. New generating capacity fuelled by renewables
has exceeded that fuelled by non-renewables by a
widening margin.
60 - The number of countries globally where solar is the
cheapest form of energy to produce, Solar PV costs are
now half of what they were in 2010 and could fall by
another 60% over the next decade.
Benefits - renewables are well suited for Africa as they
can be built quickly to match countries needs and are
adaptable in there application.
Example - New Scaling Solar mandate in Zambia will
begin with an initial procurement round of up to 200 MW
of utility-scale energy, with subsequent rounds to follow
with a goal of developing 500 MW of renewable power.
SOURCE: www.bp.com/en/global/corporate/technology/technology-outlook/energy-resources.html; http://www.iea.org/publications/freepublications/publication/keyworld2014.pdf;
www.irena.org/DocumentDownloads/Publications/IRENA_REthinking_Energy_2017.pdf
50
Conco Working Capital ManagementManagement was not effective in reducing the investment in working capital in FY2017; this is a primary focus area for FY2018
▪ Negotiating more favourable trade terms with
suppliers
▪ Closer matching of creditor payments to
debtor receipts
Potential risks:
▪ Lean WC management introduces a level of
operational risk, requiring careful planning and
execution. In the short term, heightened
oversight is required
▪ Theoretical reduction in financing cost may
improve margin, however, suppliers may look
to increase pricing due to less favourable
terms
50%
3% 3%8%
20%10%
5% 2% 2%
2 4 6 8 10 12 14 16 18
Civil works andoverheads
Construction andassembly
Commisioning andintegration
2 4 6 8 10 12 14 16 18
Civil works andoverheads
Construction andassembly
Commisioning andintegration
2% 3% 5%15%
40%
20%9%
3% 3%
2 4 6 8 10 12 14 16 18
Civil works andoverheads
Construction andassembly
Commisioning andintegration
▪ Larger projects with longer timelines greater
complexity have lead to the build up of
working capital
▪ Historically equipment was procured early, in
order to reduce operational risks and
complexity
▪ Through our growth in the experience curve
we are able to manage this working capital
investment more closely going forward
▪ Have to pay trade creditors earlier using bank
funding
▪ WIP has a slower, more gradual unwind.
Current WIP is distorted due to current phase
of the Ethiopia project
▪ Debtors shouldn’t have come down yet, but it
will towards the end of the cycle. Current
debtors is distorted due to slow City Power
payment, soon to be resolved
Reduction in gross working capital
for the same project cost Cumulative costs incurred
Costs incurred
Historic approach Targeted approach Working capital saving
WC build over time Focus on cash flow management Challenges
Month