GRINDROD LIMITED (GRINDROD)
Grindrod has a December year-end, but its results for the 12 months to 30 June 2017 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 R48 million (2016: loss of R45 million). This loss is mainly attributable to the results of the rail assembly business.
Grindrod experienced improved trading conditions during the period and reported a headline profit of R126 million (excluding the headline loss of R255 million from the rail assembly business held for sale) during the first half of 2017. The Maputo Port and agricultural logistics business experienced higher volumes, which was also supported by higher commodity prices. The warehousing and transportation businesses, while not profitable, continue their turnaround and reduced their losses markedly. The dry-bulk fleet is operating above the daily ship running cost, but the rates in the tanker market remain depressed.
Capital expenditure for the six months to 30 June 2017 amounted to R355 million, of which 81% was expansionary and the remainder for maintenance and replacement projects.
COMMUNITY INVESTMENT VENTURES HOLDINGS PROPRIETARY LIMITED (CIV GROUP)
Remgro has an effective interest of 51.0% 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 2017 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 R110 million (2016: R64 million).
DFA’s revenue for the financial year ended 31 March 2017 increased by 37% year on year to R1 630 million (2016: R1 188 million) mainly as a result of solid growth of 29% in annuity revenue. DFA’s EBITDA for the period under review increased by 24% to R1 071 million. The current book value of the fibre-optic network is in excess of R6.6 billion. DFA has thus far secured an annuity income in excess of R115 million per month, with the majority thereof being on long-term contracts with customers.
DFA owns fibre network rings in Johannesburg, Cape Town, Durban, Midrand, Centurion and Pretoria, as well as rings in smaller metros, such as East London, Polokwane, Tlokwe, Emalahleni and George, to name a few. The company also installs Fibre-to-the-Business (FTTB) and Fibre-to-the-Home (FTTH) networks. At 31 March 2017, a total distance of 9 854 km (31 March 2016: 9 144 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 99.9884%.
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 is in excess of R11.5 billion.
SEACOM CAPITAL LIMITED (SEACOM)
Remgro has an effective economic 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 the results for the 12 months to 30 June 2017 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 (2016: R33 million). The loss is mainly due to costs associated with the repair of subsea cable faults, conservative provisioning for doubtful debts in specific regions, the introduction of a long-term management incentive scheme and higher financing costs associated with a term loan.
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, as well as 10 to 15-year indefeasible right of use (IRU) contracts, which generally include annual maintenance charges over the term. Revenue from IRUs is accounted for over the full term of each respective contract.
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.
The company continues to expand and grow business in the Enterprise market where metro and last-mile fibre solutions are offered to business customers, providing internet, metroethernet and cloud services.
Increasing use of data and cloud services is ensuring that demand continues to grow. SEACOM’s ability to adapt to the rapidly evolving data market, and to respond to ever-increasing demand for faster and more reliable data services, is critical to maintain its ongoing competitive positioning.
OTHER INFRASTRUCTURE INTERESTS