Ev­ery­thing im­paired

Financial Mail - - DIAMONDS & DOGS -

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.

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