INFRASTRUCTURE

 

CONTRIBUTION TO HEADLINE EARNINGS 30 June 2020
R million
30 June 2019
R million
CIVH (649) (204)
Grindrod (12) 72
Grindrod Shipping (46) (65)
SEACOM (10) (2)
Other 1 25
(716) (174)

PROFILE: CIVH is active in the telecommunications and information technology sectors. The key operating companies of the group are Dark Fibre Africa Proprietary Limited (DFA) and Vumatel Proprietary Limited (Vumatel), which constructs and owns fibre-optic networks.

Corporate information
Equity valuation at 30 June 2020
R19 353 million
Chief Executive Officer of DFA
M W Mulder
Chief Executive Officer of Vumatel
D Mare
Remgro nominated directors
C W Ceasar, P J Uys
Website
www.dfafrica.co.za
www.vumatel.co.za
Financial Highlights
Year ended
31 March 2020
R million %
Revenue 3 704 57.7
Operating profit 608 150.2
Headline loss (1 269) (173.5)
Sustainability measureS
CSI/Training spend
R22 million
Number of employees
1 084
BBBEE status
DFA: Level 2

COMMUNITY INVESTMENT VENTURES HOLDINGS PROPRIETARY LIMITED (CIVH)

CIVH is active in the telecommunications and information technology sectors and is the holding company of a group of companies of which DFA and Vumatel are its largest operating subsidiaries.

DFA is the premier open-access fibre infrastructure and connectivity provider in South Africa. It builds, installs, manages and maintains a fibre network to transmit metro and long haul telecommunications traffic, which is leased to its customers (Telecommunication Companies and Internet Service Providers (ISPs)) using an open access wholesale commercial model. DFA has in excess of 12 000 km of fibre assets in the ground and owns fibre networks in Johannesburg, Cape Town, Durban, Midrand, Centurion and Pretoria, as well as in 25 smaller metros, such as East London, Polokwane, Tlokwe, Emalahleni and George, to name a few.

Vumatel is an open-access fibre provider at the last mile level and provides Fibre-to-the-Home (FTTH) products and services to ISPs. Vumatel installs FTTH in residential suburbs and has in excess of 18 000 km of fibre assets. After the fibre has been installed, Vumatel leases its infrastructure to Internet Service Providers (ISPs), who then provide broadband retail internet services to the end customers.

CIVH has a March year-end and therefore its results for the 12 months ended 31 March 2020 have been included in Remgro’s results for the year under review. CIVH’s contribution to Remgro’s headline earnings for the year under review amounted to a loss of R649 million compared to a headline loss incurred of R204 million in the prior year. The reason for the significant increase in the loss was due to significant transaction and funding costs incurred related to the Vumatel acquisition during the current financial year, as well as consolidating ten months of Vumatel’s accounting losses. The group results were also negatively impacted by prudent credit provisioning due to the uncertainties created by Covid-19.

The group is however highly cash generative and reinvested in excess of R2 billion of operating cash flow during the year into expanding its operations and network footprint.

CIVH has undertaken significant corporate actions during the year under review, which includes amongst others increasing its investment in Vumatel from 34.9% to 100% during May 2019 and restructuring the separate debt packages of DFA and Vumatel during December 2019 into an optimal group-wide debt facility with capacity for further growth capital expenditure.

Vumatel became the FTTH South African market leader in homes passed and active subscribers achieving approximately 40% in both verticals respectively. Infrastructure initiatives allowed the business to successfully commercialise fibre into the Lower LSM areas under the Reach product offering and it successfully launched its Reach pre-paid platform. In addition to driving uptake on the current deployed infrastructure, key focus areas in the year included the extension of its Active Ethernet and Gigabit Passive Optic Network (GPON) in Ekurhuleni and Cape Town while creating expansion capability into new Reach areas such as Mitchells Plain, Vosloorus and Soweto.

Vumatel group revenue for the period increased by 80% to R1.5 billion compared to the prior year, driven by accumulated subscriber uptake growth for the year.

DFA’s current book value of the fibre optic network is in excess of R9.7 billion. The network uptime for the year under review was 99.985%, and mean time to repair was less than 2.5 hours, well above industry standards. The DFA revenue model adapts to the customers’ needs, and DFA offers flexible payment profiles, with a mix of an upfront amount and a monthly annuity, or solely annuity based with multi-year contracts of mostly up to 15 years. The future value of the current annuity contracts (excluding orders) is in excess of R11.6 billion.

DFA group revenue for the financial year ended 31 March 2020 increased by 5% year on year to R2 465 million (2019: R2 349 million), as its annuity income grew to in excess of R179 million per month at 31 March 2020 (31 March 2019: R159 million), with the majority thereof from long-term contracts with customers.

Vumatel initiated the registration of an independent CSI Foundation with the objective of creating sustainable eco-systems in the communities in which the business operates in. The goal is to contribute meaningfully and sustainably to these communities leading to strong ties with communities that talk to the essence of the Vuma brand, a distinction that will set Vuma apart from the competition in a manner not easily replicated. Focus areas include education, safety, environment and healthcare. The business will also continue with the Vuma schools project, where 372 schools have been connected to date in areas where fibre has been deployed – providing every school that Vumatel passes with a free 1Gbps service offering.

DFA achieved a level 2 BBBEE rating for the year. Critical gaps in infrastructure development e.g. rural school connectivity remain DFA’s ongoing key focus of CSI, so that it is able to bridge the digital divide in high poverty areas. The positive impact is on providing student access to e-learning and ultimately, new job creation and access to the economy.

PROFILE: Grindrod is an integrated freight logistics provider and its business involves the movement of cargo by road, rail and air, utilising specialised assets and infrastructure, including vehicles, locomotives, ports, terminals, warehouses and depots. Grindrod Bank is the second business unit in the Grindrod group.

Corporate information
Market cap at 30 June 2020
R2 286 million
Listed on the JSE Limited
Chief Executive Officer
A G Waller
Remgro nominated directors
P J Uys, W O van Wyk (alternate)
Website
www.grindrod.co.za
Financial Highlights
Year ended
31 December 2019
R million %
Revenue 3 873 11.7
Operating profit 527 28.9
Headline earnings 55 (93.0)
Sustainability measureS
CSI/Training spend
R15 million
Number of employees
4 746
BBBEE status
Level 2
Environmental aspect
Scope 1, 2 and 3 emissions of 15 000 tonnes CO2e

GRINDROD LIMITED (GRINDROD)

Grindrod has a December year-end, however its results for the 12 months to 30 June 2020 have been included in Remgro’s results for the year under review. The company’s contribution to Remgro’s headline earnings for the year under review amounted to a loss of R12 million (2019: a loss of R72 million).

Continuing operations generated headline earnings amounting to R23 million for the first half of 2020, compared to R165 million in 2019.

The Maputo Port maintained its earnings level as it benefited from a weaker US dollar against the rand offsetting the impact of a 5% drop in its volume from 9.3 million tonnes in 2019 to 8.8 million tonnes. The Matola Terminal benefited from a resilient iron ore price, assisted by demand from China, resulting in volumes up 13% compared to June 2019. The Seafreight business and its landside container operation achieved earnings growth of 30% on 2019. Clearing and Forwarding showed good earnings growth and Rail Logistics improved after restructuring initiatives. The Road transportation businesses continued to be impacted by a highly competitive and declining volume market, and exposure to reduced economic growth in South Africa.

Grindrod Bank continues to operate cautiously during this time, ensuring it remains compliant on its liquidity cover and capital adequacy ratios. The advances book has been carefully assessed to ensure that adequate provisions are in place to cover loans where security values may have been compromised due to Covid-19.

PROFILE: Grindrod Shipping is a shipping service provider and owns a fleet of freight ships.

Corporate information
Market cap at 30 June 2020
R913 million
Primary Listing
New York Stock Exchange
Secondary Listing
JSE Limited
Chief Executive Officer
M R Wade
Remgro nominated directors
P J Uys, W O van Wyk (alternate)
Website
www.grinshipping.com
Financial Highlights
Year ended
31 December 2019
$ million %
Revenue 331 3.8
Gross profit 21 86.6
Loss attributable to shareholders (21) 0.0
Sustainability measureS
CSI/Training spend
R3 million
Number of employees
699

GRINDROD SHIPPING HOLDINGS LIMITED (GRINDROD SHIPPING)

Grindrod Shipping has a December year-end, however its results for the 12 months to 30 June 2020 have been included in Remgro’s results for the year under review. The company’s contribution to Remgro’s headline earnings for the year under review amounted to a loss of R46 million (2019: R65 million loss).

Grindrod Shipping reported its results for the six months ended 30 June 2020. Revenue was flat with a slight decrease from $167.2 million for the six months ended 30 June 2019 to $167.1 million for the six months ended 30 June 2020. The largest component of revenue is vessel revenue. Vessel revenue decreased by $19.7 million, or approximately 13.3%, from $147.7 million for the six months ended 30 June 2019 to $128.0 million for the six months ended 30 June 2020. Improved charter rates in the tanker market were offset by a decrease in the charter rates in the drybulk market during the first half of 2020. During this period, ships sale revenue increased from $16.5 million to $37.9 million.

Gross profit increased by $3.0 million, or 50.8%, from $5.9 million for the six months ended 30 June 2019 to $8.9 million for the six months ended 30 June 2020. This was mainly due to the lower charter hire costs as drybulk charter rates decreased in the first half of 2020, as well as the decrease in pool distributions to third parties following the purchase and consolidation of the company’s IVS Bulk business.

Grindrod Shipping’s headline loss for the six months ended 30 June 2020 amounted to $6.3 million (2019: $14.4 million).

PROFILE: SEACOM provides high-capacity local and international fibre-optic connectivity, internet and cloud services to the wholesale and enterprise markets in Southern and East Africa.

Corporate information
Equity valuation at 30 June 2020
R3 030 million
Unlisted
Chief Executive Officer
B Clatterbuck
Remgro nominated directors
H J Carse, P J Uys
Website
www.seacom.mu
Financial Highlights
SEACOM is a private company and its detailed financial information is not disclosed due to restrictions on disclosure as agreed among its shareholders.
Sustainability measureS
CSI/Training spend
US$0.3 million
Number of employees
292

SEACOM CAPITAL LIMITED (SEACOM)

Remgro has an effective economic interest of 30% in SEACOM, which operates and markets fibre-optic based telecommunication systems through metropolitan, regional and international route networks in Southern and East Africa.

SEACOM has a December year-end, and therefore the results for the 12 months to 30 June 2020 have been included in Remgro’s results for the year under review. SEACOM’s contribution to Remgro’s headline earnings for the year under review amounted to a R10 million loss (2019: R2 million loss). Higher imputed interest costs due to the impact of the adoption of IFRS 15 impacted the group’s profitability in the prior year.

SEACOM provides high-capacity international and local bandwidth services to customers in the form of International Private Line, IP Transit, Internet access and cloud services. The company continues to expand and grow business in the Enterprise and Service Provider market offering national long haul, metro and last-mile fibre solutions to customers, providing high-capacity Internet, Metro Ethernet and cloud services.

There has been an increased demand in the use of data and cloud services. SEACOM’s ability to adapt to the rapidly evolving data market and invest in its submarine and terrestrial network allow it to respond to an ever-increasing demand for faster and more reliable data services and is critical to maintain its ongoing competitive positioning.

SEACOM maintains a proactive approach to ensuring profitability by expanding its network and products to meet market demand, and introducing a more diversified product range that allows it to capture increased market share by offering a better value proposition. Organic growth and acquisitions in the year under review have contributed to SEACOM’s continued growth.

PRIMCO AND PRIF

PROFILE: Pembani Remgro Infrastructure Managers Proprietary Limited (PRIMCO) is the advisor to Pembani Remgro Infrastructure Fund I (PRIF), a fund focusing on private sector investment in infrastructure across the African continent.

WEBSITE: www.pembani-remgro.com