Everything impaired

Resilience of a different nature will be needed from the new anchor shareholder of the Consolidated Infrastructure Group (CIG), Fairfax Africa, which has backed a decidedly bold R1.1bn cash injection to recapitalise this loss-making enterprise. Fairfax’s crystal ball must be showing a future that’s an awful lot brighter than the present, with decreased demand across all the company’s business sectors; the cost of restructuring initiatives in Conco, its largest subsidiary; and increased borrowing costs adding up to a sphinctertightening after-tax loss of about R2bn.

The group has impaired everything that moves, including the goodwill of Conco, and the hope is that the recapitalisation will enable it to return to profitability in 2019. Key to any return to form will be the turnaround of Conco, which supplies substations and delivers high-voltage electrification but has been suffering tough trading conditions involving low order intake and slow execution of work that added up to a loss for the year of R1.3bn. Legacy projects will still affect the division, but its restructuring initiatives are largely complete and will generate significant cost savings.

CIG is pinning its hopes on renewable energy and off-grid industrial-scale opportunities. The recapitalisation will allay going concern issues for the time being and leave the balance sheet looking healthier; the longterm goal is to build annuity revenue streams, moving away from engineering, procurement and construction contracting to a sustainable platform supplying power across Africa. Fairfax has placed a substantial bet on CIG’S future, and now it needs to deliver.