Alteo Limited (Mauritius) – FY22 revenue up 46% to Rs 1.4bn

Alteo Limited (ALT.mu) 2022 Abridged Report

COMMENTS

GROUP REVIEW

The continued improvement in the performance of the sugar and property clusters drives Alteo’s revenue higher.

Note: Given Alteo’s decision to restructure (see last note below), all East African operations that will be transferred to Miwa Sugar Limited (“Miwa Sugar”) and eventually spun off from Alteo Group have been classified as ‘discontinued operations’. Where headline figures include the combined results from both Mauritian and East African operations, they have been termed as ‘consolidated’ within these comments.

The Group’s continuing sugar operations delivered a much-improved performance which saw revenue grow by Rs 1.4bn (up 46%), which translates into an increase of Rs 2.6bn (up 27%) on a consolidated basis. Normalised EBITDA and profit after tax saw mild declines, although these were due to non-recurring items (such as impairment reversals and insurance compensations) contributing to the prior year’s results.

Fair value movements on investment property as well as biological assets are operational in nature and are not included in the ‘non-recurring’ items above.

The net bottom line of Rs 1.8bn across all activities delivers an earnings per share to Rs 3.13 (down 14%) but the Group paid an improved dividend of Rs 0.79 (up 10%), off its better operational performance and cash generation.

SUGAR

Mauritian, Tanzanian and Kenyan operations show enhanced results compared to the prior year.

Headline revenue grew across all 3 segments. Mauritian operations benefitted from tailwinds in the price of sugar increasing from Rs 14,000 to just under Rs 17,000 per tonne, as well as the bagasse remuneration of Rs 3,300 per tonne of sugar and a higher mix of special sugars. However, unfavourable climatic conditions reduced the total cane tonnage harvested, which compounded by a lower extraction rate, resulted in lower sugar accruing. Operating costs also saw significant increases, namely on fertiliser and fuel costs, which resulted in the segment generating a profit after tax of Rs 14m (FY21: Rs 509m). For context, it should be noted that last year’s figure included non-recurring items such as an impairment reversal, a much higher favourable movement on fair value of consumable biological assets and an event year compensation which contributed Rs 656m to the bottom line.

Tanzanian operations saw a higher sales volume compared to last year and a higher average price of sugar on the domestic market which improved revenue (Rs 4.3bn, up Rs 554m) and profitability (Rs 1.3bn up Rs 48m), with the results also benefitting from a favourable FX movement of the rupee versus the US dollar while being also adversely impacted by a one-off tax provision due to a reassessment.

Kenyan operations saw bottom-line losses pared back by 37m to reach Rs 77m. However, core sugar operations, which exclude finance costs related to acquisition debt, turned profitable this year at Rs 14m of profit after tax, reversing a recent trend of losses over the past years (FY21: Rs 31m loss after tax). Additional revenue of Rs 588m to Rs 3.3bn was derived from capacity improvements in factory operations, a higher average price of sugar and volume of cane crushed. This was tempered by a lower extraction rate and one-off expenditure.

ENERGY

Lower bagasse and cane trash contribution and reduced coal efficiency drag profitability downwards. The energy cluster exported lower total energy (down 5GWh) to the grid over the corresponding period last year. This decrease resulted from a 14 GWh reduction in energy produced from bagasse and cane trash. To compensate, a higher proportion of energy was derived from coal (up 7 GWh) which, due to its reduced efficiency, pushed profitability down to Rs 24m from Rs 41m in the prior year.

PROPERTY

Serviced land sales and inflows from tourism boost the performances in property, resort and golf activities.

The property cluster saw a significant revenue increase to Rs 1.6bn, up Rs 698m from the prior year.

A major contributor to this rise was the completion and delivery of plots from the Mont Piton 2 and Balnea 2 residential projects. Other serviced land sales by Anahita Estates Ltd (“Anahita Estates”) also contributed to the cluster’s performance along with villa building progression and a resumption of tourist activity leading to improved golf and resort operations which have seen golf rounds, green fees and resort occupancy rise considerably.

Anahita Residences and Villas Ltd, operating the Anahita Golf and Spa Resort, also experienced higher levels of occupancy which provided additional support to its operating costs and overheads. As a result, the cluster saw an uptick in profitability to Rs 522m (from Rs 194m last year), which also included the flow-through impact of enhanced revenue from operations and Rs 154m of gains on disposal of bulk land sales.

Note: The property activities undertaken by Alteo Agri Ltd (“Alteo Agri”) and historically reported under the group’s sugar segment have recently been restructured into a property division within Alteo Agri. The results of the new property division are now shown within the group’s property segment and the comparative segmental information have been reinstated accordingly.

OUTLOOK

The Group seeks to build on this resilient performance to now execute a strong property development pipeline over the near to medium term, while it consolidates and further enhances its sugar and energy operations FY 2022 has been a strong year for the Group and this showcases the quality of its operations across segments, geographies and markets. The successful completion of 2 land parcelling residential projects within the year cements its credentials as a seasoned property developer as it looks to add further emphasis on property development projects within the coming years in line with its new vision post-restructuring.

Anahita Estates is expected to be a strong cash generator over the new couple of years while ‘Anahita Beauchamp’ was announced as a new smart city during this financial year. Alteo will build on its large base of customers and established goodwill to anchor sustainable and green development in the east of the island – its key differentiating factor. A strong pipeline for the decade has already been established and will include a number of residential, commercial and rental offerings across various segments in targeted locations.

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