Grindrod is an integrated freight logistics and shipping service provider and its business involves the movement of cargo by road, rail, sea and air, utilising specialised assets and infrastructure, including vehicles, locomotives, ships, ports, terminals, warehouses and depots.
GRINDROD LIMITED (GRINDROD)
Grindrod has a December year-end, but its results for the 12 months to 30 June 2016 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 R45 million (2015: headline earnings of R135 million). This loss is mainly attributable to a decline in shipping volumes and rates.
Due to the continued depressed state of the market, it has been necessary to raise an impairment of R675 million in the rail businesses. Including this impairment, Grindrod’s reported net loss for the six months to 30 June 2016 amounted to R1 120 million (2015: R303 million profit).
Headline earnings which, inter alia, exclude the impact of the aforementioned impairment, however, decreased by 216% to a loss of R381 million (2015: R328 million headline earnings), due to the continued weak dry-bulk shipping market and weak commodity prices.
Capital expenditure for the six months to 30 June 2016 amounted to R812 million, of which 90% was expansionary and the remainder for maintenance and replacement projects.
CIV Holdings is an investment holding company with its major asset (100%) being Dark Fibre Africa (DFA) that builds, owns, maintains and monitors infrastructure suitable to carry services such as fibre-optic networks.
COMMUNITY INVESTMENT VENTURES HOLDINGS PROPRIETARY Limited (CIV group)
Remgro has an effective interest of 50.9% in the CIV group, which is active in the telecommunications and information technology sectors. The key operating company of the group is DFA, which constructs and owns fibre-optic networks.
The CIV group has a March year-end and therefore its results for the 12 months ended 31 March 2016 have been included in Remgro’s results for the year under review. The CIV group’s contribution to Remgro’s headline earnings for the year under review amounted to R64 million (2015: R51 million).
DFA’s revenue for the financial year ended 31 March 2016 increased by 14% year on year to R1 188 million (2015: R1 047 million) mainly as a result of solid growth of 21% in annuity revenue. DFA’s earnings before interest, tax, depreciation and amortisation for the period under review increased by 13% to R861 million. The current book value of the fibre-optic network is in excess of R6 billion. DFA has thus far secured a healthy annuity income in excess of R87.5 million per month, with the majority thereof being on long-term contracts with customers.
DFA owns fibre network rings in Johannesburg, Cape Town, Durban (expanding to Pietermaritzburg), Midrand, Centurion and Pretoria. The network has been expanded to a further 21 smaller metros, including East London, Polokwane, Tlokwe, Emalahleni and George, to name a few. At 31 March 2016, a total distance of 9 144 km (March 2015: 8 353 km) of fibre network had been completed in the major metropolitan areas and on long-haul routes. The network uptime for the year under review was an excellent 99.994%.
The DFA revenue model is flexible to adapt to the customers’ needs, and DFA either sells an indefeasible right of use agreement, which is a lump sum in advance, or on an annuity basis with multi-year contracts of mostly up to 15 years. The future value of the current annuity contract base is in excess of R10 billion.
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.
SEACOM capital Limited (SEACOM)
Remgro has an effective interest of 30% in SEACOM which operates an international and local fibre-optic network to connect Southern and Eastern Africa with Europe and Asia.
SEACOM has a December year-end, but its results for the 12 months to 30 June 2016 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 loss of R33 million (2015: headline earnings of R24 million). The decrease in earnings is mainly due to a change in estimate in determining depreciation, as well as a weaker rand when compared to the previous period.
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. These services are sold under 12 to 36-month lease contracts and as 15 to 20 year indefeasible right of use (IRU) contracts, which generally include annual maintenance charges over the term. Upfront revenue from IRUs is accounted for over the full term of 15 to 20 years.
SEACOM maintains a proactive approach to ensuring profitability by expanding its network and products to meet market demand, introducing a more diversified product range that allows it to capture increased market share by offering a better value proposition.
The company has also entered the Enterprise market where metro and last-mile fibre solutions are offered to enterprise customers to provide internet, metro-ethernet and cloud services.
Increasing demand for data and cloud services is ensuring that demand grows above expectations. SEACOM’s ability to adapt to the rapidly evolving data market, and to respond to ever increasing demand for faster reliable data services, is critical to maintain its ongoing competitive positioning.
other infrastructure interests