CIVH sharply reduces losses ahead of Vodacom deal

CIVH, the Remgro-controlled parent company of fibre infrastructure operators Dark Fibre Africa (DFA) and Vumatel, has reported a sharp reduction in losses in its most recent reporting period.

Remgro, which holds a controlling 57% stake in CIVH – or Community Investment Ventures Holdings – said the company’s contribution to its headline earnings reduced to a loss of R23-million from a loss of R209-million in the 2020 financial year. That means CIVH reported a full-year headline loss of R40.3-million, compared to a loss of R366.6-million in 2020.

CIVH has a March year-end and its results for the six months ended 30 September 2021 are included in Remgro’s results for year ended 31 December 2021.

The performance of the underlying businesses improved due to a 21% increase in revenue…

“The decrease in losses is mainly due to the settlement of head office debt, resulting from two rights issues, and improved performances by the underlying businesses,” Remgro said in a statement to shareholders.

“The performance of the underlying businesses improved due to a 21% increase in revenue, coupled with cost reductions in the period under review, which resulted in improved operating earnings for the six months of R696-million (2020: R451-million). DFA’s revenue increased by 18.2% to R1.4-billion (2020: R1.2-billion) mainly due to annuity income increasing to R192-million/month at 30 September 2021 (30 September 2020: R187-million/month).

Read: Retrenchments hit Dark Fibre Africa

Vumatel’s revenue increased by 31.7% to R1.4-billion, driven by its fibre infrastructure expansion programme and subscriber growth.

Cash generative

“Vumatel is operationally cash generative and continues to reinvest any excess operating cash flow and capital into expanding its operations and network footprint with a continued principle of limiting overbuild in key markets,” Remgro said. “Its underlying operating earnings increased by 63% to R484-million for the six months to 30 September 2021 (30 September 2020: R297-million).”

In July 2021, CIVH conducted a rights issue to reduce debt and facilitate growth. Remgro subscribed for 67 364 shares for R2.1-billion. In the process, Remgro’s stake in CIVH climbed from 55.2% to 57%.

Read: Richard Came’s Platform Investment Partners exits CIVH

However, talks are at an advanced stage to introduce Vodacom a shareholder into the venture. Last November, Remgro announced that Vodacom would acquire up to 40% of a new created wholly owned subsidiary of CIVH called Infraco, which would hold CIVH’s interests in DFA and Vumatel. Vodacom is bringing a combination of assets of R4.2-billion to the table as well as at least R6-billion in cash.

Vodacom is buying into Vumatel and DFA

“As a result of the proposed transaction, Remgro’s indirect interest in DFA and Vumatel will dilute with the entrance of Vodacom as a shareholder, but Remgro will also obtain an indirect interest in the assets contributed by Vodacom.”

The Vodacom deal and consequent restructuring remain subject to regulatory and other approvals.

As at 31 December 2021, Remgro attached a book value to its stake in CIVH of R6.9-billion and an intrinsic value of R15.1-billion. That compares to R5-billion and R12.1-billion, respectively, a year earlier. — (c) 2022 NewsCentral Media