Wrap Text
Year-ed results and dividend declaration
GAIA Infrastructure Capital Limited
(Incorporated in the Republic of South Africa)
(Registration number 2015/115237/06)
ISIN: ZAE000210555 Share code: GAI
("GAIA" or "the Company")
Reviewed Provisional Financial Results
for the year ended 28 February 2019 and cash dividend declaration
SALIENT FEATURES
- Tangible NAV* per share at R10.42 pre-final dividend distribution
- Gross assets under management at R737 million
- Total revenue at R49 million, down 21% due to the short-term effect of the asset
diversification strategy
- Headline earnings per share at 56.09 cents per share, down 28%
- Net cash of R8 million
- Final gross cash dividend declaration of 14.8 cents per share
- Asset diversification strategy successfully implemented with the exercise of an option to reduce
exposure to the Dorper Wind Farm for economic interest in three solar PV farms
- A diversified asset portfolio by geography, technology and energy resource, with long-term
benefits over the life of the assets
* Net asset value.
DIRECTORS' REPORT
FINANCIAL COMMENTARY
Effective 12 December 2018, GAIA restructured the Company's asset portfolio to include indirect
minority interests in three solar PV renewable energy projects in return for a lower exposure to the
Dorper wind project ("Asset Diversification"). The Company now has a diversified investment portfolio
of five renewable energy assets with exposure to two (2) wind and three (3) solar energy resources.
The Asset Diversification strategy with long-term benefits over the life of the assets resulted in
lower revenue for the year under review.
Revenue decreased to R48.7 million (2018: R62.0 million) for the year under review, comprised of
dividend and interest income generated from the assets under management. GAIA received dividend
income of R32.6 million (2018: R60.0 million) from GAIA Financial Services (RF) Proprietary Limited
("GAIA Financial Services"), a wholly owned subsidiary of the Company which in turn received income
from the Company's underlying investments. The 2019 financial year enjoyed the benefits of a full
year of dividend income from the Noblesfontein investment and will enjoy the full benefits of
dividend income from the solar PV farms in the 2020 financial year. The Company earned interest
income of R2.1 million over the reporting period (2018: R4.3 million) mainly from the Coronation
Money Market Fund. The reduction from the prior year was as a result of the funds being deployed on
operating expenses as the Company now operates as a fully fledged investment holding company.
The expense to assets under management ratio has remained relatively flat with operating expenses
at R17.6 million (2018: R18.5 million) whilst the Company continues to engage shareholders for
equity capital support required to grow the Company through executing the identified
investment opportunities.
Expenses by function
FY2019 FY2018
Opex* Opex*
Function (Rm) % AUM** (Rm) % AUM**
Corporate governance 5.7 0.8 6.1 0.8
Investment management 4.8 0.7 4.8 0.6
Capital raising 4.1 0.6 2.4 0.3
Deal pipeline sourcing 0.2 0.0 3.1 0.4
Other 2.8 0.4 2.1 0.3
17.6 2.5 18.5 2.4
* Operating expenditure.
** Assets under management.
Assets under management (Rm) 2019 2018
Noblesfontein - SARGE 76.4 88.7
Noblesfontein - GAIA SPV 136.4 169.2
Noblesfontein - Education Trust 4.9 4.7
Dorper and Intikon Solar - GAIA RE1 519.6 505.8
737.3 768.4
ASSETS UNDER MANAGEMENT COMMENTARY
GAIA's diversified investment portfolio is made up of operational, Round 1 Renewable Energy
Independent Power Producer Procurement Programme ("REIPPPP") projects in South Africa.
GAIA's current portfolio of operational assets continues to perform to expectation. Some variability
around the predicted average resources was experienced, but the expected distribution to shareholders
was in line with long-term forecasts.
DIVIDEND DISTRIBUTION
GAIA (tax reference number: 9473/844/17/4) paid its interim cash dividend of R13.7 million
(24.84 cents per share) for the six months ended 31 August 2018, in November 2018.
Notice is hereby given that the board of directors ("the Board") have declared a final gross cash
dividend of 14.8 cents (11.84 cents net of dividend withholding tax) per ordinary share for the
period ended 28 February 2019. The dividend has been declared from income reserves. A dividend
withholding tax of 20% will be applicable to all shareholders who are not exempt from or do not
qualify for a reduced rate of dividend withholding tax.
This brings the total dividend for the 2019 financial year to 39.64 cents per share, which is lower
than the comparable dividend for the 2018 financial year due to reduced dividend income from the
underlying investment portfolio as a result of the short-term effect of the Asset Diversification
strategy and a change in the discount rate applied in determining fair values of financial assets
and liabilities of the Company.
The issued share capital at the declaration date is 55 151 000 ordinary shares. The salient dates
for the dividend will be as follows:
2019
Last day of trade to receive a dividend Tuesday, 18 June
Shares commence trading "ex" dividend Wednesday, 19 June
Record date Friday, 21 June
Payment date Monday, 24 June
Share certificates may not be dematerialised or rematerialised between Wednesday, 19 June 2019 and
Friday, 21 June 2019, both days inclusive.
This final cash dividend amounting to R8.2 million has not been recognised as a liability in these
reviewed provisional financial results.
OUTLOOK
GAIA continues to engage with the equity capital markets to raise funding to enable execution of
identified value-accretive diversified investments in accordance with the Company's Investment
Policy for the benefit of its stakeholders.
GAIA's primary focus, the secondary market in infrastructure equity, continues to present
significant opportunities which are not dependent on whether new infrastructure projects are
continually developed. The Company's investment case was buoyed by Government's renewed commitment
to facilitate private sector investment into the selected infrastructure sectors in which GAIA
invests, being energy, water and sanitation, and transportation infrastructure.
GAIA focuses on core infrastructure assets for which the cash flows can be forecast with a low
margin of error. These are assets that are mature beyond their demand ramp-up phase, functioning
in established and transparent regulatory environments, serving demographically and economically
sound service areas and have minimal obsolescence or technology risks.
CONDENSED STATEMENT OF FINANCIAL POSITION
as at 28 February 2019
Reviewed Audited
2019 2018
R'000 R'000
Total assets 576 447 586 718
Non-current assets 520 492 506 286
Current assets 55 955 80 432
Cash and cash equivalents 8 160 26 729
Trade and other receivables 47 795 53 703
Total equity and liabilities 576 447 586 718
Share capital 545 852 545 852
Retained income 28 801 34 728
Total liabilities 1 794 6138
Net asset value per share (Rand) 10.42 10.53
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 28 February 2019
Reviewed Audited
2019 2018
R'000 R'000
Total revenue 48 739 62 019
Interest income 2 063 4 284
Dividend income 32 600 60 023
Other income 25 307
Net fair value gain/(loss) 14 051 (2 595)
Total operating expenses (17 586) (18 456)
Finance costs - (2)
Taxation (217) (346)
Net profit for the year 30 935 43 215
Basic earnings per share (cents) 56.09 78.36
Headline earnings per share (cents) 56.09 78.36
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February 2019
Share Retained Total
capital income equity
R'000 R'000 R'000
Balance at 1 March 2017 - Audited 545 852 40 234 586 086
Net profit for the year - 43 215 43 215
Dividends paid - (48 720) (48 720)
Balance at 1 March 2018 - Audited 545 852 34 729 580 581
Net profit for the year - 30 935 30 935
Dividends paid - (36 863) (36 863)
Balance at 28 February 2019 - Reviewed 545 852 28 801 574 653
CONDENSED STATEMENT OF CASH FLOWS
for the year ended 28 February 2019
Reviewed Audited
2019 2018
R'000 R'000
Cash flows from operating activities
Cash generated from/(used in) operations 18 950 (3 079)
Finance costs - (2)
Dividends paid (36 863) (48 720)
Tax paid (396) (1 067)
Net cash used in operating activities (18 309) (52 869)
Cash flows from investing activities
Purchase of property, plant and equipment (29) (454)
Investment in financial asset (230) (4 705)
Net cash used in investing activities (259) (5 159)
Total cash movement for the year (18 569) (58 027)
Cash at beginning of year 26 729 84 756
Total cash at end of year 8 160 26 729
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
for the year ended 28 February 2019
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed provisional financial results have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting
Standards ("IFRS") and interpretations of IFRS, as issued by the International Accounting
Standard Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, the Financial Pronouncements as issued by Financial Reporting Standards Council, the
JSE Limited Listings Requirements, and the requirements of the South African Companies Act, 71
of 2008, and the presentation and disclosure requirements of IAS 34 Interim Financial Reporting.
The provisional financial results have been prepared on the historic cost basis except that
financial assets and liabilities at fair value through profit and loss are stated at their fair
value. The results are presented in Rand, which is the Company's functional and
presentation currency.
Accounting policies
The accounting policies applied in the preparation of the annual financial statements from which
the provisional financial statements were derived are in terms of IFRS and are consistent with
the previous annual financial statements, except as noted below.
2. PREPARATION
The condensed provisional financial results have been prepared internally under the supervision
of the Chief Executive Officer, P Lebina CA(SA), and approved by the Board.
The Directors take full responsibility for the preparation of the provisional financial
statements and for correctly extracting the financial information, from the reviewed condensed
financial statements for inclusion in the announcement.
The reviewed condensed provisional financial results were reviewed by the Company's external
auditor, Deloitte & Touche. A copy of their unmodified review conclusion is available from the
Company's registered office. Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the external auditor. The auditor's report
does not necessarily report on all the information contained in this announcement. Shareholders
are therefore advised that in order to get a full understanding of the nature of the auditor's
engagement, they should obtain a copy of the auditor's report together with the accompanying
financial information from the Company's registered office.
3. NEW STANDARDS AND INTERPRETATION
In the current year, the Company has adopted the following standards and interpretations that
are effective for the current financial year and that are relevant to its operations:
- Standard: IFRS 15 Revenue from Contracts with Customers.
- Effective date: years beginning on or after 1 January 2018.
- Expected impact: The adoption of this standard has not had a material impact on the results of
the Company, but has resulted in more disclosure than would have previously been provided in
the financial statements.
4. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
GAIA has adopted an accounting policy of measuring its investments at fair value through profit
or loss with fair value movements on its assets under management recognised in the statement of
profit or loss.
Reviewed Audited
2019 2018
R'000 R'000
At fair value through profit or loss - designated
GAIA Financial Services (RF) (Pty) Limited 515 135 501 085
The Company funded the acquisition of its effective see-through economic interest of 25.2% of
Dorper, through a R501 million loan to GAIA Financial Services. The loan is interest-free,
unsecured and has no fixed terms of repayment.
The acquisition entailed the subscription for the ordinary shares in GAIA RE1 equal to 34.9%
(R265 036 179) economic and voting interest of the issued share capital and the advancing of a
convertible loan (R235 963 821) to GAIA RE 1 which will effectively give the Company an economic
interest of 84.2% in GAIA RE1. The convertible loan could be settled in one of two ways, which
could trigger the acquisition of minority interest in three (3) additional renewal energy
projects ("IK Option") by GAIA or the conversion of the convertible loan into additional ordinary
shares in GAIA RE 1 ("DK Option").
Effective 12 December 2018, the Company acquired indirect effective minority interests in
three (3) solar assets, being Jasper (4.0%), Lesedi (5.3%) and Letsatsi (5.3%) Solar PV Farms
("Intikon Solar Assets") through the exercise of the IK Option. On conversion, the fair value
movement was recognised to the statement of profit or loss.
Post implementation of the IK Option, GAIA RE 1 nows holds 30% of the issued share capital in
Dorper and 100% in Intikon Solar which holds indirect economic interests in the Intikon
Solar Assets.
GAIA Financial Services interest in Noblesfontein Wind Farm
On 19 September 2017 GAIA Financial Services acquired C Preference Shares GAIA SPV (RF) (Pty)
Limited ("GAIA SPV") for an aggregate subscription price of R130 million and, as a result,
acquired an effective economic interest of 13.001% in the combined distributions linked to the
ordinary shares and shareholder loan claims against Noblesfontein Wind Farm.
In addition, GAIA Financial Services entered into funding agreements with SARGE whereby GAIA
Financial Services subscribed for A Preference Shares and B Preference Shares in SARGE for an
aggregate subscription price of R57 493 127. As a result of the SARGE Transaction, GAIA
Financial Services acquired a further effective economic interest of 7.03% of the distributions
linked to the ordinary shares in the Noblesfontein Wind Farm.
GAIA Financial Services obtained funding to facilitate, inter alia, its subscription for the
by it, of A Preference Shares and B Preference Shares to RMBIA for an aggregate subscription
price of approximately R188 million in terms of the GAIA Financial Services Preference Share
Subscription Agreement. The Company extended a loan to the Noblesfontein Educational Trust,
having taken it over from the previous shareholder at an interest rate, and with repayment terms
more beneficial than market rates and terms, in order to benefit the beneficiaries of the trust,
being members of the local Noblesfontein community.
Reviewed Audited
2019 2018
R'000 R'000
Loans and receivables
Noblesfontein Educational Trust 4 935 4 705
The loan shall accrue interest at a rate equal to the aggregate of CPI plus 7% net of taxes
applied as a nominal annual compounded monthly in arrears rate, and calculated on the loan
outstanding principal for that interest period. The loan is secured by a cession of any shares
held by Noblesfontein Educational Trust in Noblesfontein Wind Farm.
Reviewed Audited
2019 2018
R'000 R'000
Total other financial assets 520 071 505 790
Non-current assets
Designated as at fair value through profit or loss 515 135 501 085
Loans and receivables at amortised cost 4 935 4 705
520 071 505 790
Valuation of underlying renewable assets
The value of the investment in the ordinary shares of Dorper and intikon Solar was determined
using the discounted cash flow valuation model.
Assumptions and inputs used in valuation techniques include long-term CPI forecast and
determination of an investor premium used in estimating discount rates.
The value of the investments in the preference shares in SARGE and GAIA SPV are also calculated
using the discounted cash flow valuation model. The assumptions and inputs used include CPI rate,
prime rate and JIBAR.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the
prices that would be received to sell the investments in underlying renewable assets in an
orderly transaction between market participants at the measurement date.
The Company uses valuation models that were developed by experienced independent third parties
during the bidding process for the rights of the project. These models have been developed from
recognised valuation models and developers' experience regarding the valuation of renewable
energy projects.
Some of the significant inputs into the discounted cash flow model may not be observable in the
market and are derived from market prices or rates or are based on assumptions. This valuation
model therefore requires additional management judgement and estimation in determination of
fair value.
In the valuation for the investment in Dorper, Intikon Solar and the preference shares related to
Noblesfontein, management's judgement and estimation is required for:
- selection of the appropriate valuation model to be used, in this case the discounted cash
flow model;
- assessment and determination of the expected cash flows from the investments; and
- selection of the appropriate discount rate.
The fair value estimate obtained from the discounted cash flow model will only be adjusted
forfactors such as liquidity risk and model uncertainty to the extent that the Company believes
that a third-party market participant would take them into account in pricing a transaction.
No such adjustments were deemed necessary in the valuation of the investments in underlying
renewable assets. The Company has an established control framework with respect to the
measurement of fair values.
Specific controls include:
- verification of observable pricing inputs;
- a review and approval process for new models and changes to such models;
- analysis and investigation of significant valuation movements; and
- review of unobservable inputs and valuation adjustments.
Fair value hierarchy of financial assets at fair value through profit or loss
For financial assets recognised at fair value, disclosure is required of a fair value
hierarchy which reflects the significance of the inputs used to make the measurements.
- Level 1 represents those assets which are measured using unadjusted quoted prices in active
markets for identical assets.
- Level 2 applies inputs other than quoted prices that are observable for the assets either
directly (as prices) or indirectly (derived from prices).
- Level 3 applies inputs which are not based on observable market data. This category includes
all instruments for which the valuation technique includes inputs not based on observable
data and the unobservable inputs have a significant effect on the instrument's valuation.
This category includes instruments that are valued based on quoted prices for similar
instruments but for which significant unobservable adjustments or assumptions are required
to reflect differences between the instruments.
The table below analyses financial instruments measured at fair value at the reporting date
by the level in the fair value hierarchy into which the fair value measurement is categorised.
The amounts are based on the values recognised in the statement of financial position.
All fair value measurements below are recurring.
Reviewed Audited
2019 2018
R'000 R'000
Level 3
GAIA Financial Services (Pty) Limited 515 135 501 085
As at 28 February 2019, the fair value measurement of shares held by the Company in GAIA
Financial Services is categorised into Level 3. The fair value of investments in its 100%
subsidiary is determined using unadjusted net asset value of GAIA Financial Services at the
reporting date.
Reconciliation of financial assets at fair value through profit or loss measured at Level 3
Opening Gains in profit
balance profit or loss Total
GAIA Financial Services (Pty) Limited 501 085 14 051 515 135
The change in unrealised gains or losses (net gain) for the period is included in profit or
loss for financial assets held at the reporting date. These gains and losses are recognised in
profit or loss as a net gain from financial instruments at fair value through profit or loss.
Significant unobservable inputs used in measuring fair value
Significant unobservable inputs are developed as follows:
- Discount rate
Represents the rate used to discount projected levered or unlevered forecast cash flows
for an asset to determine their present values. Their discounted present value cash flows
are determined as their fair value at reporting date. GAIA RE1 uses a discount rate that
appropriately captures Dorper's and Intikon Solar Assets stage-of-life, using South African
data, substantiated by international findings. GAIA FS used a discount rate that
appropriately reflects the Noblesfontein risk and return profile using South African data,
substantiated by international findings.
- CPI/JIBAR and prime rate
Rates are obtained from publicly available consensus views.
5. SHARE CAPITAL
Authorised
6 000 000 000 ordinary no par value shares.
2019 2018
R'000 R'000
Issued and fully paid
55 151 000 no par value shares, net of share issue cost 545 852 545 852
6. EARNINGS PER SHARE
In the year under review, earnings per share decreased by 28% to 56.09 cents per share compared
to 78.36 cents per share in 2018. There were no potential dilutive shares in issue, or headline
adjustments required, therefore diluted earnings per share and headline earnings per share were
in line with basic earnings per share.
Basic earnings per share
Basic earnings per share is determined by dividing profit or loss attributable to the ordinary
equity holders by the weighted average number of ordinary shares outstanding during the period.
Profit or loss attributable to the ordinary equity holders is determined as profit or loss after
adjusting for the tax effect.
Reviewed Audited
2019 2018
R'000 R'000
Basic earnings per share
Basic earnings per share
From continuing operations (cents) 56.09 78.36
From continuing operations (cents) 56.09 78.36
Basic earnings per share was based on earnings of R30 935 474 (2018: R43 214 601) and weighted
average number of ordinary shares of 55 151 000 (2018: 55 151 000).
Reviewed Audited
2019 2018
R'000 R'000
Reconciliation of profit for the period to basic earnings
Profit for the period attributable to equity holders of GAIA
Infrastructure Capital Limited 30 935 43 215
Diluted earnings per share
In the determination of diluted earnings per share, profit or loss attributable to the equity
holders and the weighted average number of ordinary shares are adjusted for the effects of all
dilutive potential ordinary shares.
Reviewed Audited
2019 2018
R'000 R'000
From continuing operations (cents) 56.09 78.36
Diluted earnings per share is equal to earnings per share because there are no dilutive
potential ordinary shares in issue.
Headline earnings and diluted headline earnings per share
Headline earnings per share is calculated using Circular 4/2018. The calculation of headline
earnings per ordinary share is based on the weighted average of 55 151 000 (2018: 55 151 000)
ordinary shares in issue during the year, and headline earnings calculated as follows:
Headline earnings per share and diluted headline earnings per share are determined by dividing
headline earnings and diluted headline earnings by the weighted average number of ordinary
shares outstanding during a period.
Headline earnings and diluted headline earnings are determined by adjusting basic earnings and
diluted earnings by excluding separately identifiable remeasurement items. Headline earnings
and diluted headline earnings are presented after tax and non-controlling interest.
Reviewed Audited
2019 2018
R'000 R'000
Headline earnings per share (cents) 56.09 78.36
Diluted headline earnings per share (cents) 56.09 78.36
Reconciliation between earnings and headline earnings
Basic earnings 30 935 43 215
Reconciliation between earnings and headline earnings
Diluted earnings 30 935 43 215
7. RELATED PARTIES
Relationships
Common directors GAIA Fund Managers (Pty) Limited
GAIA Infrastructure Partners (Pty) Limited
Subsidiary GAIA Financial Services (RF) (Pty) Limited
GAIA SPV (RF) Limited
Investments GAIA RE1 (Pty) Limited
GAIA Infrastructure Partners (Pty) Limited has been appointed as the Management Company ("ManCo")
of the Company and therefore has significant influence.
GAIA Infrastructure Partners (Pty) Limited holds 1 000 shares in the Company.
A management fee calculated as 0.8% of the enterprise value is paid to GAIA Infrastructure
Partners (Pty) Limited in quarterly instalments.
2019 2018
R'000 R'000
Financial assets at fair value through profit or loss
GAIA Financial Services (RF) (Pty) Limited 15 135 501 085
Amounts included in trade receivable/(trade payable)
regarding related parties
GAIA Infrastructure Partners (Pty) Limited (3 951)
GAIA Financial Services (Pty) Limited 1 611 7 708
GAIA SPV (RF) (Pty) Limited 226 -
Management fees paid to related parties
GAIA Infrastructure Partners (Pty) Limited 4 845 4 790
Dividend income
GAIA Financial Services (RF) (Pty) Limited 32 600 60 023
8. GOING CONCERN
The provisional financial statements have been prepared on the basis of accounting policies
applicable to a going concern. This basis presumes that funds will be available to finance
future operations and that the realisation of assets and settlement of liabilities, contingent
obligations and commitments will occur in the ordinary course of business.
On behalf of the Board
KP Lebina
Chief Executive Officer
31 May 2019
Johannesburg
GENERAL INFORMATION
Country of incorporation and domicile Transfer secretaries
South Africa Computershare Investor
Services (Pty) Limited
Rosebank Towers
Directors 15 Biermann Avenue, Rosebank
KP Lebina (Chief Executive Officer Johannesburg, 2196
and Interim Financial Director)
MMN Nieuwoudt (Chief Investment Officer) Company secretary
KE Mbalo* (Chairman) Fusion Corporate Secretarial
S Tuku* Services (Pty) Limited
L Mondi* Unit 7, Block C
N Kimber* Southdowns Office Park
T Bukula* Karee Street, Irene
L de Wit Pretoria, 0169
C Ferreira
B Schabort Company registration number
2015/115237/06
* Independent Non-Executive
Tax reference number
Registered office 9473/844/17/4
3rd Floor, Penthouse 5
4 The High Street Preparer
Melrose Arch, 2196 The financial statementsnwhere
compiled under Prudence Lebina's
Sponsor supervision.
Sasfin Capital
29 Scott Street, Waverley
Johannesburg, 2090
Bankers
FirstRand Bank Limited
Auditors
Deloitte & Touche
www.gaia-ic.com
Date: 31/05/2019 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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