HOW WE DRIVE PERFORMANCE

INSIGHTS FROM OUR
GROUP FINANCE DIRECTOR

L. J. Jérôme De Chasteauneuf

The financial year ended 30 June 2022 resulted in a remarkable financial performance across all our sectors of activities. The much-awaited rebound of our group activities post the pandemic led to a record year, both in terms of profit after tax and profit attributable reaching MUR 2.2 bn and MUR 1.3 bn, respectively. Earnings per share reached MUR 0.77 which implies a current price to earnings ratio of 8.7 at 30 June 2022.

The Finance Strategy

The strategy aims at optimising the allocation of our financial resources across our sectors of activities to ensure capital growth of our portfolio and sustained dividend growth for our shareholders. With proper allocation we aim at beating our cost of capital target, maximising profits and improving the value of the CIEL portfolio over the long-term.

We have positioned EBITDA and Return on Capital Employed (ROCE) as indicators to measure achievement. With EBITDA, we are measuring our ability to generate cash and we measure our capital efficiency through quantifying ROCE.

We need to invest for future growth and to do this diligently, we need financial discipline. Free cash flow for the year reached MUR 1.6 bn (2021: MUR 986M) and we have a solid capital base with net interest-bearing debt reducing by MUR 1.0 bn to stand at MUR 13.1 bn. The resulting gearing ratio of 33.2% was down from 39.0% and net debt to EBITDA of 2.6, was well below the prior year’s 5.9.

In order to execute our business strategy to meet market expectations, we will continue to balance growth in investments and profitability with increasing shareholder returns and maintaining a sound financial structure.

At the Group level, we ensure sound business practices in our clusters, manage investments aimed at future growth, understand financial indicators - not just the numbers but also the conditions surrounding them - and provide timely decision-making and operational support.

Moreover, if we are to win in today’s world, we cannot just retain funds needed for investment — we must also reinforce the non-financial measurement methodologies that will ensure the sustainable growth of both CIEL and society.

The effects of reinforcing non-financial measurement methodologies may not become immediately apparent in numerical form, but I believe that fulfilling this responsibility will lead to greater corporate value for CIEL in the long run. You can see more on our journey in this regard in the Focussing on a Sustainable Future section of this report.

Income Statement Analysis

Where We Generate Our Revenue

Group Revenue MUR ‘M
Cluster Revenue MUR ‘M

Group revenue increased by MUR 10.6 bn to reach MUR 28.5 bn at year end, a 60% increase on the prior year. This was driven by the sustained growth achieved in the Textile, Finance and Healthcare clusters, 48%, 20% and 19% respectively. The remarkable turnaround in the Hotels & Resorts cluster, since its gradual reopening in October 2021, was commendable as they achieved revenue of MUR 4.8 bn up from MUR 528M in the prior year.

EBITDA

Earnings before interest, taxation, depreciation, amortisation and impairment (“EBITDA”) increased over 100% year on year, a MUR 2.7 bn increase to MUR 5.0 bn. This led to high double-digit margins across clusters leading to a Group EBITDA margin of 17.8%, up from 13.5% in the year ended 30 June 2021.

Profit

The Group’s profit after tax rose by MUR 1.7 bn to MUR 2.2 bn, up from MUR 446M in the prior year as all clusters exceeded expectations with strong earnings rallies.

Profit attributable to owners of the parent increased more than 100% to MUR 1.3 bn compared to MUR 617M Win the same period in 2021.

Cluster PAT MUR ‘M

Financial Review

table

	MUR ‘M	2022	2021	% Change
	Revenue	28,525	17,869	60%
A	EBITDA1	5,084	2,408	>100%
	Depreciation and amortisation	(1,390)	(1,301)	7%
	Earnings Before Interests and Taxation (EBIT)	3,694	1,107	>100%
B	Expected credit losses	(474)	(286)	66%
C	Fair value gain on investment properties	185	960	(81%)
	Net finance costs	(851)	(1,275)	(33%)
D	Share of results of associates & joint ventures net of tax	432	267	62%
	Profit before tax	2,985	773	>100%
E	Taxation	(545)	(80)	>100%
	Profit from continued operation	2,441	693	>10%
F	Loss from discontinued operation	(287)	(247)	16%
	Profit for the period Attributable to:	2,154	446	>100%
	Owners of the Parent	1,300	617	>100%
	Non controlling interests	854	(171)	>100%
		2,154	446	>100%
	Basic and diluted earnings per share (MUR)	0.77	0.37	>100%
	EBITDA Margin	17.8%	13.5%
	Equity	26,383	22,185	19%
	Net Asset Value per Share (Group)	10.50	8.85	19%
	Net Asset Value per Share (Company)	12.49	9.28	35%
	Net Interest Bearing Debt	13,134	14,157	(7%)
	Gearing = Debt/(Debt+Equity)	33.2%	39.0%
	DEBT to EBITDA2	2.6	5.9
	Capital Employed	39,517	36,342	9%
	ROCE	9.7%	5.6%
	Dividend per share (MUR)	0.21	-
	Market Capitalisation (MUR 'bn)	11,305	8,603	31%

A

EBITDA increased over 100% year on year, a MUR 2.7 bn increase to MUR 5.0 bn. This led to high double-digit margins across clusters leading to a Group EBITDA margin of 17.8%, up from 13.5% in the year ended 30 June 2021.
B

Expected credit losses increased by MUR 474M for the year under review, as a result of the growth in the loan book at BNI Madagascar of MUR 4.8 bn due to the worsening of the probability default rates year on year in Madagascar, together with specific provisions on BNI’s corporate book.
C

Fair value gain in investment properties stood at MUR 185M for the 2022 year end, mainly related to the properties transferred to our newly incorporated property vehicle, Evolis Properties Limited, compared to the prior year’s MUR 960M that benefitted from the fair value gain of Ferney land.
D

The share of results of associates and joint ventures increased by MUR 165M to MUR 432M, largely owing to increased profitability at Bank One, CIEL’s 50% share of profit reaching MUR 188M compared to MUR 67M in the prior year. Our share of Alteo profit of MUR 212M was slightly lower than 2021 owing to one-off items boosting the prior year profit. In addition, Anahita Golf & Villa Resort (ARVL) contributed positively to our share of profit with MUR 10M from a loss of MUR 68M in the prior year.
E

Income tax charge was MUR 465M higher for the year on account of increased profitability across all clusters. Major increases came from the Textile cluster’s Indian operations where the tax rate averages 21% and a tax charge of MUR 51M from SUN, which had deferred tax credits of MUR 225M on account of losses in the prior year. In addition, Healthcare has fully utilised its prior year’s tax assets against taxable profit and now has a tax charge of MUR 91M (2021: MUR 7M).
F

Loss from discontinued operation for the year ended 30 June 2022 was at MUR 287M on account of closure costs associated with Consolidated Fabrics Limited operations in Mauritius as part of the partnership signed with SOCOTA (2021: MUR 247M).

Financial Structure

Group Free Cash Flow MUR ‘M

Group Free Cash Flow (“FCF”) stood at MUR 1.6 bn for the year ended 30 June 2022 versus MUR 986M in the prior year, attributable to improved cash flow from operating activities from most clusters, including a good turnaround from Hotels & Resorts. The Textile cluster incurred higher working capital requirements during the phase of increased production.

Group net interest-bearing debt decreased by MUR 1 bn to MUR 13.1 bn at the year ended 30 June 2022, reflecting the bond repayment in December 2021 of MUR 1.7 bn as well as the additional disbursement in the form of quasi equity of MUR 548M from the Mauritius Investment Corporation at SUN Group level (Hotels & Resorts cluster). This reduction was further enhanced by the positive free cash flow generated from the Group’s operations of MUR 1.6bn. Group gearing reached a healthy 33.2% compared to 39.0% as at 30 June 2021.

Group Net Interest-Bearing Debt

Share Price

CIEL’s Share Price At The Year Ended 30 June 2022 Reached MUR 6.70, A 31% Increase On 30 June 2021: MUR 5.10.

Dividend Analysis

Investment Portfolio

At Company level, the total portfolio value has increased by 29%. The total portfolio value was positively impacted by the increase in value of all of the underlying clusters of the Group namely:

C-Care: the volume-weighted average price of C-Care increased by 82% to MUR 18.82 (2021: MUR 10.35).

Hotels & Resorts: SUN’s share price increased by 39% to MUR 25.75 (2021: MUR 18.50).

Agro: Alteo’s market price increased by 23% to MUR 31.80 (2021: MUR 25.80).

Properties: valuation increased by 32% resulting from the MUR 783M assets transferred from the Textile cluster into the new property vehicle, Evolis Properties Limited and the subsequent revaluation of MUR 277M as at 30 June 2022.

Textile: revalued once a year in June using the discounted cash flow model and has increased its valuation by 12% founded on projections based on its healthy order books at strong margin levels.

Company Net Asset Value grew by 35% to MUR 12.49 per share for the year ended 30 June 2022 versus MUR 9.28 at year end 2021.