2.21 generating businesses and 3.18 FINANCIALS ... - ENL Group · This year’s results did not...

2ENL Land Ltd | Annual Report 2016

KEYFINANCIALS

This year, we took several initiatives to keep driving our sustainable performance, we:

• Amalgamated with sister company ENL Investment, resulting in an expanded asset base and breath of activities which should generate significant revenues and operational cash flows

• Strengthened our holding into New Mauritius Hotels to 29.87%

• Spurred the development of property

• Spanned further our financial services

• Pursued regional expansion of logistics

ENL Land now weighs more than Rs 54bn in assets and comprises a diversified set of businesses, capable of generating significant operational profits and cash flows. Our free cash flow levels reached record highs at Rs 995m.

We leverage on our land bank to develop sustainable cash generating businesses and operations. We continue to consolidate and diversify our activities into existing and new industries.

Our debt levels went up from 2.9bn to Rs 12.6bn during the year, following the consolidation of existing debts of the new subsidiaries and the investments made during the year. We have kept our gearing ratio at an acceptable 26%.

Our group’s net asset value remained constant at Rs 86.44 per share while dividend pay-out was kept as Rs 1.32 per share, representing a yield of 3.28% based on a share price of Rs 40.25 at year end.

This year’s results did not reflect ENL Land’s true performance following the merger with ENL Investment, as ex-ENL Investment has been consolidated for only five months. The coming years should see the full potential of the new, broad-based ENL Land unfold.

EARNINGS PER SHARE

Ordinary share performance (RS)

NET ASSET VALUE PER SHARE

MARKET PRICE PER SHARE

DIVIDEND PER SHARE

2012

2014

2013

2016

2015

1.31

2.21

3.18

6.67

5.35

2012

2014

2013

2016

2015

86.44

86.68

86.75

69.65

63.38

2012

2014

2013

2016

2015

40.25

45.50

49.00

46.00

39.40

2012

2014

2013

2016

2015

1.32

1.32

1.25

1.22

0.88

Gearing

26%2015: 12%

Total assets

Rs 55 bn2015: Rs 25 bn

Equity holders’ interests

Rs 26 bn2015: Rs 20 bn

Free Cash Flows

Rs 995 m2015: Rs 26 m

54ENL Land Ltd | Annual Report 2016ENL Land Ltd | Annual Report 2016

AGRO-INDUSTRY LAND & INVESTMENTS

FINANCIALSERVICES

PROPERTYCOMMERCE & INDUSTRY

LOGISTICSHOSPITALITY

• AGRIBUSINESS • AGRO-INDUSTRY

• CONSTRUCTION

ENL Land Ltd

• FINANCIAL SERVICES• TECHNOLOGY

• HOTELS • TRAVEL • LEISURE

• LAND OWNER • VENTURE CAPITAL • BUSINESS INCUBATOR

• LOGISTIC SOLUTIONS

• DEVELOPMENT • INVESTMENTS • SERVICES

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Pantone 295c

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Regional expansion in the logistics sector.Velogic acquired stakes in two Kenyan companies which specialise in customs clearance and transport respectively.

Spurring development of the property cluster. We initiated two developments outside our group’s land bank, So’flo Boutique Mall in Floreal and Saint Antoine Private Residence on the north coast.

Amalgamation of ENL Land and ENL Investment.The new ENL Land weighs more than Rs 54bn in assets and comprises a diversified set of businesses, capable of generating significant operational profits and cash flows.

Strengthening of position into New Mauritius Hotels to a 29.87% holding. This additional investment confirms our faith in the Mauritian hospitality industry and our confidence in the company’s new management team to improve performance.

Acquisition of a controlling stake in Bagaprop, owner of Bagatelle Mall of Mauritius. The Group now holds 85% of Bagaprop which became a subsidiary. Bagatelle Home and Leisure opened this year adding 9,368 m2 to ENL’s retail park.

Smart City developments in Moka.The developments in the region of Moka are

ongoing and the Smart City status should open up a new era of growth for ENL.

Development of the financial services cluster. In line with the strategy to rapidly develop the financial services, Rogers Capital acquired management company River Court Administrators.

recent

D E V E L O P M E N T S

for the thingsthat make everyday

smoother

BU

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BUSINESS REVIEWBUSINESS REVIEW

reviewDear Shareholder,

This year has been momentous for our company. The amalgamation with sister company ENL Investment as well as the increase of our shareholding in New Mauritius Hotels (NMH) and in Bagaprop pave the way to a much bigger and brighter future. It is with this sense of perspective that I report on this year which, no doubt, goes down as a milestone in the history of our company.

The amalgamation with ENL Investment brings in solid, cash-generating businesses: the Rogers group is now a subsidiary while the NMH and the Eclosia (formerly Food and Allied) groups are associates. Bagaprop, the owner of Bagatelle Mall, also became a subsidiary when Ascencia increased its shareholding therein to 85% this year. We invested further to hold 100% of Gardens of Bagatelle and to become the most influential stakeholder in NMH with a shareholding of 29.87%.

The subsidiaries and associates of ENL Investment have been consolidated for only five months and thus the results are not representative of a normal year. We have included pro-forma results for the year ended 30 June 2015, as if the amalgamation occurred on 1st February 2015, to provide a level of comparison and our comments will relate to these results.

The above mentioned transactions impacted positively our results for the year. Turnover grew by 8% and operating profits increased more than five-fold, notwithstanding a relatively slack economic environment (Fig 2). Our free cash flow levels reached record highs at Rs 995m (Fig 1). The results tell us that we have the right strategy, that of leveraging our significant land assets to rapidly bring in cash-generating businesses. And that it works.

Our Profit after tax was however reduced by 31% mainly as a result of profits on sales of land and investments realised last year which did not recur in 2016.

CEO’s “This year goes down as a milestone in the history of our company for it paves the way for a much bigger and brighter future.”

HECTOR ESPITALIER-NOËLCEO of ENL

FREE CASH FLOWS (RS’M)

2015 20162014

65 26

995

A broader activity base has led to a significant increase in free cash flows (Figure 1)



Turnover increased from Rs 5.9bn to Rs 6.3bn primarily as a result of the consolidation of our new subsidiary, Bagaprop, which brought in Rs 330m. The improved performance translated into a significant increase in operating profits which reached Rs 522m compared to Rs 98m last year. However, profit after tax fell from Rs 920m to Rs 636m.

Our results were impacted by the following (Fig3):

• losses amounting to Rs 66m incurred on the disposal of land and investments when last year’s results included exceptional profits of Rs 218m,

• an increase in finance costs of Rs 196m as a result of the amalgamation and of additional debts contracted to finance the acquisitions and investments made during the year,

• fair value gains of Rs 627m on investment properties following the revaluation of our retails assets and the obtention of new land conversion permits.

Advantage of sizeThe new ENL Land weighs more than Rs 54bn in assets and comprises a diversified set of businesses, capable of generating significant operational profits and cash flows. It now has the advantage of size to raise capital from the market, to contract winning partnerships to spur growth and to take on more substantial challenges both locally and internationally.

The amalgamation also resulted in a substantial increase in the group’s indebtedness which went up from 2.9bn to Rs 12.6bn. Notwithstanding this increase, we have kept our gearing ratio at an acceptable level of 26% (Fig 4). Most of the additional indebtedness relates to the financing of an array of businesses that are able to support their own debt through the generation of high levels of operating cash flows.

2015proforma

20162014

5,86

4

1,64

5

104 98

920

522

636

832

6,33

0

EVOLUTION IN TURNOVER AND PROFITS (RS’M)

Operating profits

Profit after tax

Turnover

In addition to the consolidation of existing debts of the new subsidiaries, the following contributed to total indebtedness:

• HospitalityWe invested Rs 1.7bn in NMH to participate in the July 2015 preference share issue and to increase our ordinary shareholding to 29.87% in February 2016. These investments bear testimony to our faith in the Mauritian hospitality industry and our confidence in the company’s new management team to improve performance. Decisive steps have already been taken to modernise the image of NMH through a rebranding initiative and to reduce its indebtedness.

• PropertyRs 1.1bn was invested by Ascencia to acquire an additional 34.9% in Bagaprop and a 100% stake in Gardens of Bagatelle. These transactions were funded by equity and debentures raised on the market. Ascencia also invested Rs 600m during the year to improve and increase its retail floor space. Bagatelle Mall has a new wing as from December 2015, Phoenix Commercial Centre is undergoing a major uplifting due to be completed in November 2016 and construction works have started for So’flo, with completion scheduled for September 2017.

• Financial servicesIn line with our strategy to rapidly expand the financial services segment of our activities, we invested Rs 55m to acquire global business company River Court Administrators.

• LogisticsWe supported our strategy for regional expansion in the logistics sector by partnering with The Kibo Fund to acquire stakes in two Kenyan companies for Rs169m which specialise in customs clearance and transport respectively.

• Agro-industryWe disposed of part of our stake in the Eclosia group for the substantial sum of Rs 550m enabling us to maintain a reasonable level of indebtedness whilst remaining a 39% shareholder in this group.

Figure 2

Figure 4

2.9

2.2

9.89%

12.27%

26.29% 12.6

2015 20162014

Gearing (%)Net indebtedness (Rs’bn)

GEARING IS ON A CONTROLLED UPTREND

MAIN FACTORS IMPACTING PERFORMANCE DURING THE YEAR (RS’M)

FY 15 pro�tProforma

920

Pro�t on sale of land and investments

(360)

Fair value gains on investment

properties250

Others22

FY16 pro�t636

Finance costs(196)

Figure 3



Our group’s net asset value per share remained constant at Rs 86.44 while dividend pay-out was kept as Rs 1.32 per share, representing a yield of 3.28% based on a share price of Rs 40.25 at year end (Fig 5).

Drive for performance The high-impact transactions that highlighted this year have not been a distraction for the senior leadership team. We have maintained the momentum towards greater efficiency and improved performance at operational levels. We continue to focus on generating cash and improving profitability through,

Customer centricity in the design and delivery of products and services

Innovation and efficiency gains at operational levels

Contained indebtedness

We also maintained focus on cost control and efficiency gains in our property and agribusiness segments. This year saw our teams invested significant time and resources in enhancing their marketing planning process and they were supported in this endeavour by the newly created marketing department at ENL Corporate Services. Going forward, we expect our subsidiaries to further refine their commercial strategies, to better plan their overall brand experience, to build engaging relationships with customers and, in the process, to uncover untapped business opportunities.

45.5

0

49.0

0

3.28%

2.55%2.90%

40.2

5

2015 20162014

Our business strategy is supported by steady investments in building our human capital. This objective is pursued by deploying well-thought out plans to attract and retain the best talents, capable of working in global environments, as well as to maintain high levels of engagement among them. We invested an average of 2.3% of our basic salary bill in continuous training to improve soft and technical skills of our teams – on average, 44% of our team members followed a training course during the year (Read more on pages 58 to 61).

Sustainability and innovationWe are committed to the sustainable development of our shareholders’ interests and that of our country at large, not only through our business initiatives but also through our environmental and social stewardship.

As far as business development is concerned, we are actively looking for the next generation of growth drivers for our company. Through the ENL Corporate Venture fund, we have proactively sourced and analysed more than 40 innovative start-ups and projects in sectors with strong growth potential. We should conclude our first investments in the next financial year.

We also operate a business incubator and start-up accelerator, the Turbine. Positioned as a training and coaching school for entrepreneurs, the Turbine was launched in December 2015 with the aim to support and enhance the entrepreneurial eco-system in Mauritius. It also serves as a platform for us to identify promising and innovative lines of business for investment at a later stage. The incubator is run by a team of young and dynamic professionals and it operates from a co-working space we have created in Vivea Business Park. We are looking at finding financial support for funding the Turbine through the National Incubation Fund and corporate partnerships.

As regards community development and social stewardship, our investment this year amounted to Rs 15m in total. Through the Rogers Foundation, we are mainly invested in the protection of coastal and marine ecosystems, especially in the Bel Ombre area. Our support to ENL Foundation takes us closer to the grassroots, with interventions aiming at improving the day-to-day of local communities neighbouring ENL businesses. This year, we initiated a joint community development project at Cité Sainte Catherine together with our associate, the Eclosia (formerly Food and Allied) group.

The ENL group to which we belong, pledges funds beyond the mandatory 2% CSR spend to support its corporate responsibility initiatives. We target national causes while staying close to vulnerable communities, working together with NGOs to make lasting changes in mindsets as well as in physical conditions of living. We are concerned by the latest changes announced to the CSR framework as they can potentially stall progress on the ground. We have joined forces with the business and NGO communities to work out a strategy to mitigate risks. Read further on our Social capital on pages 62 to 65. Share price (Rs)

Dividend yield (%)

ORDINARY SHARE PERFORMANCE

Figure 5



Promising years aheadWe see the year under review as a transitional period, one where our results did not reflect ENL Land’s true performance following the merger with ENL Investment. The coming years should see the full potential of the new, broad-based ENL Land unfold. Our operations are organised in clusters - namely, Property, Hospitality, Financial Services, Logistics, Agro-industry, Commerce & industry and Land & investments – and are all set to forge ahead with focus and ambition.

The coming year should see the start of our Moka smart city project. The Smart City Scheme (SCS) introduced by the government in the 2015 National Budget, comforts us in the knowledge that our strategy and guiding philosophy for property development during the past decade has been the right one. The package of incentives proposed by the SCS makes it possible for us to go much further in our endeavours to build modern, connected and sustainable habitats for the Mauritian and international markets. We are in the starting blocks, ready to give a new dimension to our integrated development plans for Moka.

The prospect is also good for our retail assets. We expect rental income to stay on an upward trend as a result of improved occupancy,

contractual rental escalation and the reopening of Centre Commercial Phoenix. Initiatives such as a second building at the Gardens of Bagatelle Office Park and a new retail development in the South are also in the plans.

We expect continued growth in the hospitality segment as tourist arrivals pick up by an expected 8% in 2016. In the Financial services sector, the integration of complementary business activities under Rogers Capital shall open up avenues for development and unlock considerable value for the group. The effects should be visible as from the next financial year.

Our strategic plan for the period 2014-2017 comes to an end in the coming financial year. Our key drivers of growth, namely Perform, Serve, Explore and Innovate, will continue to guide us during the coming months. We rely on the seeds we have sown in each of these fields and the energies that we have unlocked to carry us over the strategic planning for the coming three years which will start in the coming months. We expect to build further on the foundations we have laid these past three years in order to lead ENL Land to new heights.

We rely on your continued trust and support, dear shareholder, to continue delivering sustainable performances.

Property

“our new home : Les Allées d’Helvetiaau cœur de l’île !”



Leadership despite difficult market conditionsProperty development as well as property and asset management remain key instruments to deliver our strategy to increase the financial yield of our land assets. We build, market and manage a portfolio of strategically situated homes, offices and commercial facilities. Our developments are modern and fully integrated following the live-work-play concept, catering for both Mauritian and international markets.

This year again, most segments of the local property market remained oversupplied. We nonetheless maintained our leadership in the field, realising an overall profit of Rs 423m compared to Rs 309m in 2015. Our performance was driven by the consolidation of Bagaprop as a subsidiary, increases in revenue reflecting the success of our commercial centres, and cost containment measures.

The highlights of the year were as follows:

• We strengthened our control on the Bagatelle development precinct by:

- increasing our stakes in Bagaprop, owner of Bagatelle Mall of Mauritius, to 85%,

- increasing our shareholding in Gardens of Bagatelle, owner of the office park in the area, to 100%, and

- acquiring an additional 50% stake in Mall of Mauritius, owner of the land yet to be developed in the Bagatelle precinct (Circa 100 arpents).

• We initiated two developments outside our group’s land bank, namely So’flo Boutique Mall in Floreal and Saint Antoine Private Residence on the north coast.

ASSETS UNDER MANAGEMENT (RS’M)

2015

9,14

8

2016

10,

082

996

2014 2015

1,05

8

2016

1,12

7

2014

8,23

3

OfficesRetail

INCOME FROM ASSETS UNDER MANAGEMENT (RS’M)

2014

62

2015

76

2016

94

2015

952

2016

1,04

4

2014

808

OfficesRetail

• We completed the Home and Leisure wing of Bagatelle Mall of Mauritius which opened in December 2015 and started renovation works at Centre Commercial Phoenix with completion targeted for November 2016.

• We shelved our plans to build a mall in Kenya owing to difficulties met in achieving targeted investment metrics, though we continue to look for opportunities to invest in Africa.

85%holding in Bagapropowner of Bagatelle Mall

Residential PropertiesThe local residential property market continues to be dominated by a strong demand for land in the Moka region while demand for built products, especially in the high-end segment, is relatively low.

During the year, we completed infrastructure works for Telfair Views, a project made up of 38 plots of land. The offer met with an immediate commercial success. We brought a new residential land development, Courchamps, to the market. We proposed land on a long term leasehold basis to a younger age group with a view to maintain a certain age mix within the Moka region. Phase 1, made up of 37 plots of land, sold out at attractive prices and we expect to put 40 additional plots for sale under Phase 2 of the project next year.

The domestic market for built-up units in the high-end segment reached maturity stage and the overall sales level has gone down. We completed the construction of Bagatelle Les Residences Belle-Rive and L’Estuaire, a small nautical centre on the West Coast, nonetheless. Sales of the units have progressed slowly but steadily.

Interesting opportunitiesSales of units in our residential resorts targeting the international market also remained under pressure as a result of the global economic slowdown and increasing competition both internationally and locally. The Property Development Scheme (PDS) offers interesting opportunities, especially in the North. We took up one such opportunity in Saint Antoine in partnership with Red4.

The project, Saint Antoine Private Residence, comprises 100 residential units built in two phases and 30 plots of residential land. Total project cost is estimated at Rs 2bn. ENL Property has contributed Rs 20m to hold a 50% equity stake and has the overall project management. The project is expected to yield a profit of Rs 300m. Subject to achieving a minimum sales level, construction works are expected to start in 2017.

On the sales and marketing front Mauritius Sotheby’s International Realty (SIR) opened two new outlets in Grand Bay and Black River this year. As the agency establishes itself on the local market for high-end properties, we expect to benefit more from the SIR worldwide network.

Saint Antoine Private Residence 100 apartments

30 land plots



Retail and Office ParksOur retail assets, through Ascencia, delivered a solid set of results despite a challenging economic environment. Driven by Bagatelle Mall of Mauritius which continues to deliver strong results, Ascencia has improved its trading densities, increased average monthly foot count from 1.5m to 1.6m in one year and average occupancy rate reached 95%. This segment of our activities yielded Rs 1.1bn in rental revenue this year compared to Rs 924m last year.

We currently own and operate 115,000m2 of retail space. We continue to improve this park, investing in niche market segments. We opened a new wing dedicated to home products and leisure in Bagatelle Mall in December 2015. The food court of Phoenix Commercial Centre is being uplifted for a total cost of Rs 380m.

Going digitalIn parallel, we are investing to modernise and enhance the soft infrastructure of our retail park. We are currently equipping our malls to make the most of digital marketing in order to improve shoppers’ experience and performance. We have embarked on an ambitious project to provide full Wi-Fi coverage free of charge in our mall. This development will be accompanied by the creation of an application which will allow us to collect valuable data and generate analytics that should help us further improve our management and shoppers’ experience. The Wi-Fi plan was rolled out in Bagatelle Mall this year and it will be extended to Phoenix Commercial Centre by the end of 2016. Riche Terre Mall should join the network by the beginning of 2017.

We believe there is still good business to be done in selected regions of the island which are well suited for customised outlets. One such opportunity presented itself in Floreal and we came up with the So’flo Boutique Mall concept for this upmarket neighbourhood. Unfortunately, we experienced some serious setback onsite and we had to restart construction works anew in order to uphold the high standards and quality of works we are known for. The mall is now due to open in September 2017, almost a year later than initially planned. This impacted overall project costs which have gone up by Rs 160m. Notwithstanding this setback, the project is anticipated to yield positive results.

Our offices facilities spread over Vivea Business Park and Bagatelle Office Park. They are both performing well, enjoying close to full occupancy rates.

Retail and office space rental drives our strategy to develop sustainable, cash-generating activities in the property sector for our company. Enatt, our property and asset manager, has

grown into a uniquely experienced and expert body of professionals on the strength of its partnership with Atterbury. Enatt’s expertise is now well recognised and its services are also offered to entities outside the ENL Group.

The coming financial year should see us busily completing developments initiated these past months. We expect our retail assets to maintain high performance levels as a result of improved occupancy, contractual rental escalation and the reopening of Centre Commercial Phoenix. We are also working on the launch of a new retail development in the south.

Smart initiativesThe company has now obtained its Letter of Intent from government which will enable the launch of the smart city of Moka in January 2017. This green light opens the door to a host of incentives which should impact development costs favourably and the possibility to sell to foreign nationals. This development paves the way for new standards of excellence for a modern model of development based on smart and integrated urbanisation concepts.

We have already earmarked a number of developments to begin next year, namely:

• a new residential zone at Les Allées d’Helvétia,

• student accommodations at Telfair in partnership with a major South African operator,

• a new 4,800m2 office building in Vivéa Office Park,

• an office building for a reputable firm in the Telfair region, and

• a second office building of some 6,000m2 in the Gardens of Bagatelle Office Park

The year ahead should also see us taking decisive steps to strengthen our business model for property development. We are working at creating a property development fund which will leverage our land bank to generate enough cash flows to support our developments. We are confident that this initiative will allow our stakeholders to better understand how we create value sustainably.

Retail park

115,000 m2Monthly foot count

1.6 m

La

nd B

an

k

Development

Yielding

“

Smar

t City

” F

und Fund

Our business model



Full swing on the way to recoveryThrough VLH, our subsidiary and associate New Mauritius Hotels (NMH), we represent 20% of the total room capacity of the Mauritian hotel sector. In addition to hotel services, we also provide a comprehensive range of leisure services as well as travel solutions to airlines and to their customers.

The year under review was marked by our move to strengthen our shareholding in NMH: we subscribed to the July 2015 preference shares issue and acquired additional stakes in the issued ordinary share capital, bringing our holding to 29.87%. These transactions were effected for a total consideration of Rs 1.7bn. These investments bear testimony to our strong belief in the growth potential of the hospitality sector as well as our full confidence in the new management team’s capacity to bring fresh impetus to the company’s ambitions. Decisive steps have already been taken in this direction through the rebranding of NMH and through initiatives to reduce indebtedness.

Attractive and accessible The year ahead looks promising. We expect to stay on a path of continued growth for the hospitality cluster. Tourist arrivals are predicted to grow by 8% in 2016 as the industry and government maintain efforts to make the destination more accessible and attractive. We are however concerned by the weakening of the GBP following the Brexit vote.

Our continuous efforts to improve our hotel assets will see Heritage Le Telfair Golf and Spa as well as Veranda Paul & Virginie undergo renovation in 2017. Veranda Resorts is also in the process of acquiring a new hotel in Mauritius. The Domaine de Bel Ombre experiences will be upgraded with several projects in the pipeline, including the development of a second 18-hole golf course.

Going forward, we expect contri-butions to performance from NMH to improve. The recent rebranding undertaken by the hotel group is expected to provide a new focus and trigger a renewed energy within its team, while initiatives to further reduce debt should improve both profits and cash flows.

A strong upturn in tourism arrivals resulting from targeted destination marketing initiatives and increased airline capacity impacted positively on the national hotel occupancy level. VLH, which runs the Veranda Resorts and Heritage Resorts brands, performed very well on the back of better occupancy rates achieved as a result of a more effective brand positioning. The sector posted a loss of Rs 35m nonetheless. This is attributable to:

• NMH making a negative contribution of Rs 33m due to the recording of one-off costs and a significant deferred tax charge,

• the results being distorted as they were accounted for as from the date of the ENL Land- ENL Investment merger.

HOSPITALITY

“Heavenly trip to Thailand went so smoothly thanks to Blue Sky”

29.87% holding in NMH



A successful come-backFollowing the end of our non-compete agreement with the Cim group, we signed our come-back in the financial services sector last year with the acquisition of two existing companies, Kross Border and Consilex. These two companies merged in January 2016 and we confirmed our re-emergence in the sector with another acquisition, that of River Court Administrators, this year. This acquisition falls in line with our strategy to expand further through building additional capacity and expertise in specific areas of corporate and fiduciary services, among others.

We have restructured the financial services segment of our businesses to also include technology services. The cluster brings together Rogers Capital, Kross Border and EIS as well as our investments in Swan General, Swan Financial Solutions and Axa Customer Services.

Revenues in this segment totalled Rs 357m and profit after tax amounted to Rs 46m, for the five months that were consolidated. Our share of profits from associates Swan General and Swan Financial Solutions amounted to Rs 27m.

Notwithstanding the challenges facing the industry, the softness of the global economy and significant time and effort spent integrating our new acquisitions, our operations in the Global Business Services sector delivered a net profit, driven by moderate growth in revenue. Operational costs remained stable and under control while there was an increase in training, business and development expenditure.

EIS reported solid results for the year under review. The sluggish private sector demand for ICT products and services that prevailed throughout the financial year was mitigated to some extent by public sector investments in the domestic market. Moreover, fierce competition on a reduced number of initiatives adversely impacted margins.

AXA Customer Services reported equally good results on account of a growing book of business and a better management of foreign exchange translation mechanisms.

New avenues of growthGoing forward, we expect the integration of complementary business activities under Rogers Capital to open up new avenues of growth. In spite of losing key competitive advantages, the India-Mauritius DTA now provides certainty as to the treatment of shares acquired prior to 1 April 2017 and offers a competitive platform for debt investments into India. The challenge is to optimise international exposure with the potential setting up of overseas representation in France, India, South Africa and the UK.

EIS is uniquely positioned to tap into the growing demand for cloud solutions and services and will leverage on Cloud24 and extended connectivity capabilities. Further development of payroll and accounting outsourcing services are expected.“Nothing like partners you can trust”

FINANCIAL SERVICES



Taking on the headwinds successfullyOur presence in the logistics sector is spearheaded by Velogic which is active in: freight forwarding, customs clearing, domestic transport, warehousing, air cargo GSA, exhibitions, parcel & courier services, sugar packaging activities and shipping and stevedoring activities. The company is positioned as an international and integrated logistics platform, with offices in major cities in France, India, Madagascar, Mozambique, Reunion Island, Bangladesh, Singapore and Kenya.

We performed better than last year in the sector despite challenging market conditions. Revenues totalled Rs 1.5bn and profit after tax amounted to Rs 16m, for the five months that were consolidated. This performance was achieved against a backdrop of fierce competition across all activities and geographies, sluggish economic conditions in the euro zone and the Brexit vote which affected trading activities with the UK.

Performance was driven by overseas operations, which benefited from the company’s East Africa development strategy. We partnered with The Kibo Fund to invest Rs 169m to acquire two Kenyan companies that operate customs brokerage and transportation businesses, representing USD 8.5m in turnover and a workforce of 200. Overall performance also benefitted from an income boost

in the Freeport business: we rented a substantial part of our facilities to an international conglomerate which is setting up a manufacturing plant that will service Southern and Eastern African markets.

The results were however negatively impacted mainly by the performance of our Mauritian transport business which had to deal with rising costs of running and/or replacing aging equipment. Margins for the ship chartering business were also hit by falling contractual rates with its customers as charter buying rates plunged to a 20-year low due to excess market capacity.

Customer base diversificationWe do not expect the economic conditions in which the logistics sector operates to improve significantly in the coming year. Our performance should improve nonetheless. Our energy will be focused on the turnaround of the transport business while opportunities for customer base diversification in countries like India, Reunion and Madagascar are being explored. We expect ongoing port development works scheduled to be completed in 2017 to benefit the logistics segment.

LOGISTICS

“the sector that never sleeps”



Pursuing efficiency gains for profitabilityWe grow mainly sugar cane, food crop and ornamentals on a total of some 13,500 arpents. Chicken breeding is also a significant component of our production mix. Our 39% shareholding in the Eclosia group further contributes to our strong position in the agro-industrial sector in Mauritius. This business cluster performed quite satisfactorily during the year under review posting profit after tax of Rs 126m.

Our cane growing operations were profitable despite very challenging conditions that negatively impacted the 2015 crop. Cane growth was affected by the spill over effect of the harvest extension the previous year as well as by unfavourable climatic conditions towards the end of the growing period. These factors added up to qualify 2015 to be declared an event year by the Sugar Insurance Fund (SIFB).

Expectedly, cane yield and extraction rates were suboptimal and our sugar production decreased from 28,940 tonnes to 23,335 tonnes. The sugar price, on the other hand, was higher than the preceding year: Rs 13,166/tonne compared to Rs 12,694/tonne in 2015. Sugar revenues were further boosted by a Rs 55m compensation from the SIFB.

Performance in our agribusiness cluster was further impacted by the following:

• cost reductions due to increased mechanisation, leaner processes and an efficient use of resources, in line with the seasonal nature of our business,

• a 10% increase in turnover in our landscaping line of business despite greater competition and sluggish demand,

• the positive performance from poultry production and continued progress in the agro-supplies and syndic management services.

“It’s harvesting time !”

agrO-Industry

13,500 arpents

under agro-industry

2015 20162014

51%

57%64%

FY15 FY16 FY17

2015 20162014FY15 FY16 FY17

9.87 %

9.14 %

9.92 %

86.85

75

80

2015 20162014

327,

297

375,

872

28,940

23,335

27,862

360,

000

FY15 FY16 FY17

SUGAR PRICE BY CROP YEARS (RS)

SUGAR ACCRUING FOR CANES HARVESTED

2015 20162014

13,1

66

12,6

94

15,3

00

FY15 FY16 FY17

Tonnes of cane harvested

Tonnes of sugar accruing



The results were mainly driven by a positive contribution from our associates Avipro and Madco amounting to Rs 143m. These companies performed well, due notably to lower commodity prices that brought their import costs down.

During the year, we disposed of part of our stake in the Eclosia group for the substantial sum of Rs 550m enabling us to maintain a reasonable level of indebtedness whilst remaining a 39% shareholder in this group. We have been a significant shareholder in this group from its very beginnings and we intend to keep it that way in the future.

% OF CANES HARVESTED MECHANICALLY

PRODUCTIVITY RATIOS BY CROP YEARS

Sugar extraction rate

Tonnes of cane per hectare

Challenging but promising The prospects seem brighter for next year. We expect a better crop with superior cane and sugar yields as well as further increases in sugar prices given that the world market is currently in short supply. Sugar prices should rise up to Rs 15,300/tonne for the coming year.

However, 2017 will also see expected further reforms of the European sugar sector take place. European sugar producers will no longer be subjected to production quotas and we can expect competition to toughen up with an ensuing increase in price volatility. However, we are confident that the Mauritian sugar industry is equipped to face the challenge. We expect greater marketing focus on value-added sugars, a niche in which Mauritius has a definite competitive advantage.

At a purely operational level, we intend to maintain our cost optimisation strategy with a planned Rs 18m additional investment in field preparation works. This should enable us to increase the acreage of cane harvested mechanically from 57% to 64%. Cost containment, product and market diversification and enhancement of production capacity should also be the main drivers of business for our non-sugar operations.

39% holding in Eclosia group



Diversifying the customer base and service offeringConstruction company Cogir is multiplying efforts to achieve efficiency gains in order to compensate for the downward pressure on profit margins as the building and construction sector remains under stress. The company finished the year on a Rs 16m loss.

This year, it embarked on a promising lean construction project in order to achieve efficiency gains. It also opened a training academy to enhance the skills of existing and new employees.

Cogir’s challenge for the upcoming year will be to broaden its customer base as well as to diversify its service offering. However, the outlook remains challenging with competition remaining fierce. The economic environment is expected to start improving given the positive signs presently being observed in the construction industry.

COMM

ERCE

& INDUSTRY

“CONSTRUCTION PROGRESSING SO FAST AND SMOOTHLY WITH COGIR”



Strategic support to a diversified activity baseENL Land is the custodian of the ENL group’s land assets. This segment of our activities consists of managing 14,600 arpents, excluding land assets held through the Bel Ombre Sugar Estate, and representing land which is still largely under agricultural use. It supports ENL Agri and ENL Property in their mission to generate cash from land assets under management.

This segment derives income from the sale of investments and of non-strategic land assets as well as from the rental of land for our agribusiness activities. Its profit for the year under review amounted to Rs 76m compared to Rs 259m in 2015. Two factors impacted performance:

• After the merger in February 2016, the share of profits from ENL Investment, previously an associate in which our company had a 28.3% stake, ceased to be accounted for in this segment;

• Last year’s results were boosted by a profit of Rs 218m realised on the sale of Attacq shares.

investment

“It will yield results in a few years”

Land

&

14,600 arpentsunder custody

2.21 generating businesses and 3.18 FINANCIALS ... - ENL Group · This year’s results did not...

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