1. 2 welcome 3 table of contents welcome salient features sustainability achievements financial...
TRANSCRIPT
1
2
WELCOME
3
Table of contents
Welcome
Salient features
Sustainability achievements
Financial review
Strategy
› Short-term challenges and progress
› Medium to long-term strategy
Operational review
› Products, services and clients
› Competitors and value proposition
› Geographical footprint and key contracts
Risk management
Segmental review
Order book and outlook
Capex
Conclusion
4
SALIENT FEATURES
5
Salient features – 28 February 2013
Revenue up 31.3% to R2.3bn (2012:R1.8bn)
EBITDA up 103% to R269.3m (2012:R132.6m)
Headline earnings up 220% to R77m (2012:R24m)
HEPS up 231% to 20.5 cents (2012:6.2 cents)
PAT up 382% to R87.7m (2012:R18.2m)
EPS up 400% to 23.5 cents (2012:4.7 cents)
Order book up 43.7% to R2.5bn (2012:R1.8bn)
Operating cash decreased by R60m to R33.6m
6
Salient features continued
Gross margin 16.1%
Operating margin 6.5%
Established on-the-ground presence in Ghana and Tanzania
Esorfranki Pipelines secured project in Swaziland
Invested R194m in property, plant & equipment
Invested R68m in property developments
ISO 18001 safety accreditation achieved
7
Sustainability achievements
We have maintained a successful return to profitability for three successive periods
Gross margin 16.1%
Operating margin 6.5%
Our order book has been strengthened to R2.5bn
Established on-the-ground presence in Ghana and Tanzania
Esorfranki Pipelines secured project in Swaziland
Invested R194m in property, plant & equipment
ISO 9001 Quality accreditation maintained in all divisions
ISO 18001 accreditation has been obtained in all divisions
ISO 14001 accreditation was obtained in all divisions post year-end
Our LTIFR of 0.59 is significantly better than the industry norm of 1.33
Regrettably one fatality at the beginning of this calendar year
8
FINANCIAL REVIEW 28 February 2013
9
Statement of Financial Position: salient features as at 28 February 2013
2012R’000
2013R’000
Assets
Non-current assets 1 151 181 1 237 461
Current assets 665 288 1 006 320
Total assets 1 816 469 2 243 781
Equities and liabilities
Share capital and reserves 937 432 1 053 262
Non-current liabilities 316 658 540 326
Current liabilities 562 379 650 193
Total equity and liabilities 1 816 469 2 243 781
Net asset value per share (cents) 241.5 280.0
10
Statement of Financial Position: salient features (1 March 2012 – 28 February 2013)
Total assets
Cash & cash equivalents Trade and other receivables No impairment of intangibles
R33.6mR826.7m
PPE Investment in construction equipment Sale of Pinetown property
R193.9mR25m
Cash reserves
Operational cash-flow consumed Acquisition PPE Dividends paid Secured borrowings Debt/(debt+equity) ratio
(R32.9m)(R193.9m)
Nil(R448m)
42.5%
Equity
Profit after tax FCTR Dividend paid
R87.7mR3.9m
Nil
11
Statement of Income: salient features
2012R’000 %
2013R’000
Revenue 1 771 692 31.3 2 325 958
EBITDA 132 656 103 269 265
Profit/(loss) after tax 18 216 382 87 710
Headline earnings/(loss) 24 046 220 77 027
HEPS 6.2 231 20.5
12
STRATEGY
13
Material issues
MATERIAL ISSUE
Growth considering the external environment
CHALLENGE
Intensifying competition and margin contraction
RESPONSE & PROGRESS
Expansion in the African market
Targeting higher margin private sector projects such as low cost housing
Taking equity share in developments
14
Material issues
MATERIAL ISSUE
B-BBEE scorecard
CHALLENGE
To continually strengthen Esorfranki’s B-BBEE position and comply with Construction Charter requirements essential for securing government and parastatal contracts
RESPONSE AND PROGRESS
Ownership - in negotiations with potential BEE investor with expected finalisationin June 2013
Management - examination of board structure with intention of appointing black female non-exec by end H1 2014
Maximise procurement, business development and CSI spends
15
Material issues
MATERIAL ISSUE
Liquidity - financial management during times of growth
CHALLENGE
Balancing the group’s growth (double construction sector) with liquidity to service investments in housing and development
RESPONSE & PROGRESS
Sufficient liquidity and capital to meet business objectives through additionalbanking facilities
Provision of company and institutional guarantees to free up cash retentions
16
Material issues
MATERIAL ISSUE
Project execution - on time, within budget and to required quality
CHALLENGE
Ability to start projects efficiently and manage limited senior resources and volatile labour while ensuring quality and safety
RESPONSE & PROGRESS
Efficient risk-controlled delivery of quality projects
Limits of authority depending on size and profile of contracts
Project team monitors risk, execution, cost and payment from appointment on monthly basis
SHEQ compliance continuously monitored within the frameworks ofISO 9001, 14001 & 18001
17
Material issues
MATERIAL ISSUE
Skills shortage
CHALLENGE
Scarce resources undermine delivery and expansion
RESPONSE & PROGRESS
Creation of attractive employment proposition, a people-centred culture,skills development programme and succession planning
Employees are offered bursaries as well as skills training
LDC employees are trained in a wider range of skills than is required forthe contract for their further empowerment
In-house accredited training centre based at Germiston workshop
18
Material issues
MATERIAL ISSUE
SHEQ – impact of safety, health, environment and quality on operations
CHALLENGE
Potential threat to employees, natural resources, client’s and group’s reputationthrough non-compliance
RESPONSE & PROGRESS
ISO 9001, ISO 14001¹ and ISO 18001 accredited
Superior safety record (LTIFR<1.00)² compared to industry average of 1.33
Safety management system implemented in Africa
Rejuvenated fuel-efficient fleet and fuel-efficiency plan
SHEQ training, regular internal & external audits
Strategies for reducing, re-using and recycling resources
1 Post year-end ISO 14001 Environmental accreditation achieved2 Actual February 2013 rolling monthly average LTIFR of 0.59
19
Material issues
MATERIAL ISSUE
Past collusive and anti-competitive practices within the industry
CHALLENGE
To settle all outstanding Competition Commission issues
PROGRESS
The CC investigation into alleged anti-competitive behaviour in the piling and drilling markets was referred to the Tribunal following a failed settlement offer. Negotiations have been reopened post year-end and the board is convinced that the estimated penalty provision previously allowed in the financial statements will suffice
During the recent fast track settlement process offered to the construction industry Esorfranki Limited filed one marker relating to a prescribed offence and will accept an imposed fine of R115 850
Esorfranki was further mistakenly implicated in one other instance relating to Shearwater prior to acquisition which has now fallen away
Any further developments will be communicated to all stakeholders as they occur
20
Medium to long-term strategy
Continue harnessing synergy within the group
Expand product offering and grow market share
Geographical diversity in Civils and Pipelines
Environmental accreditation ISO 14001 obtained post year-end
Securing long-term contracts to create future visibility and to underpin sustainability
Focus on sustainable growth nodes within government infrastructure programmeswhen they occur
Supply chain management will take cognisance of environmental impactand carbon emissions will be measured and managed
Addressing Construction Charter requirements to improve B-BBEE scoring by31 December 2013
Focus on concession and development projects
Focus on private sector clients to balance dependency on government contracts
21
OPERATIONAL REVIEW 28 February 2013
22
Products & Services
Geotechnical Pipelines Civils
Piling
Lateral support
Marine structures
Pipejacking
Thrust boring
Bridgejacking
Diaphragm walls
Ground improvement
Dynamic compaction
Ground remediation
Soils investigation
Geotechnical design
Gas and petrochemical steel pipelines
Water and wastewater pipelines
Sewer pipelines
Pump stations
Pipeline refurbishments
Cement mortar lining
Valve chambers
Associated concrete structures
Associated infrastructure
Pressure testing
Road construction
Bridge construction
Township infrastructure
Mining infrastructure
Water reticulation
Water towers
Reservoirs
Sewer reticulation
Bulk earthworks
Building
Housing
Development
23
Clients
Geotechnical Pipelines Civils
Civil contractors
Building contractors
Listed & private contractors
Government at:
› Central
› Provincial
› Municipal levels
Property development companies
Parastatals:
› Eskom
› Transnet
› Rand Water
› Umgeni Water
› Portnet, etc
Mining sector including most major mining houses
Government at:› Central› Provincial› Municipal levels
Parastatals:› Transnet› Rand Water› Umgeni Water› Portnet› TCTA & DWAF
Mining sector Private clients
› RBM› Foscor› Mondi
Cross-border
› FIPAG Mocambique
› Botswana Government
› Zimbabwe
› Swaziland
Eskom
Sanral
Anglo Coal
Xstrata
RAL
Gauteng Province
Government
› Central
› Provincial
› Municipal levels
Private developers
Bakwena Concessions
Debswana
24
Competitors
Geotechnical Pipelines Civils
Steffanutti Stocks in-house geotechnical division
Aveng in-house geotechnical division
Dura (Solentache Bachy is a large global contractor)
Wepex
Gauteng Piling
Terrastrata
Geomechanics
Keller (largest global geotechnical contractor)
WK Pipelines
WBHO
Aveng
Group 5
Steffanutti Stocks
Cerimele Construction
Murray & Dixen
Concor
Ikon
Murray & Roberts
Aveng
WBHO
Group 5
Steffanutti Stocks
Basil Read
Raubex
Erbacon
Protech-Khutheli
Diesel Power
Haw & Inglis
25
Value proposition
Geotechnical Pipelines Civils
Geotechnical market leader in South Africa
Good reputation and well known brand in SSA
Design alternatives constantly investigated
Geographical diversity entrenched and expanded
Depth of management know-how
Well-established business processes over 65 years
Plant capacity retooled and modernised
ISO 9001, ISO14001 andISO 18001 accredited
Niche leader in welded pipelines
Supply and install all aspects of cross-country pipelines
Supply and install pipelines in a myriad of materials
Experienced and talented management team
Excellent track record with blue-chip clients
Extended work footprint to Swaziland
ISO 9001, ISO14001 andISO 18001 accredited
Diversified range of construction services
Plant capacity and capability expanded
Excellent workshop facilities
Strong relationships with clients and consulting engineers
Experienced and talented management team
Increased longer-term projects in order book
ISO 9001, ISO14001 andISO 18001 accredited
26
Geographical footprint
AFRICA
GHANA
DRC
ANGOLA
NAMIBIA
BOTSWANA
ZIMBABWE
SWAZILAND
MAURITIUS
MADAGASCAR
MOZAMBIQUEZAMBIA
MALAWI
TANZANIA
KENYAUGANDA
SEYCHELLES
27
Geotechnical - key contracts
Country and contact Description
Angola:Kinaxixi MXD complex
Phase I - 1 150 soil nails, 4 200m² of gunite, 310 micropiles and over 370 soldier piles. Phase II comprised the installation of up to five rows of Titan anchors, 7 500m² of gunite arches and approximately 90 jet grout columnsDuration: 15 months - in progressPhase III - diaphragm wall, anchors and piling - under negotiation (R42.5m)
Ghana:ADA Groynes
Phase 1: Construction of the temporary staging jetties for the construction of 7 No permanent groynesPhase 2: Increased scope to 11 No. jetties, and under negotiation. Anticipated commencement January 2014 (R150.0m)
Durban:Mt. Edgecombe Interchange
Piling:Closing out post-tender negotiations with main contractor (R40.0m)
Mozambique:Steval Tank FoundationsSouthern Sun, Maputo
Beira / Maputo - Piling (R16.0m)Piling (R3.2m)
Kenya:Garden City Mall
Piling:Awaiting official order (R15.0m)
Johannesburg:Sasol Offices
Lateral Support:Awarded and on site (R16.0m)
Cape Town:Tenesol Solar Farm
Piling:Awarded and on site (R16.0m)
Namibia:FNB Development, Windhoek
Lateral Support:Awarded and on site (R10.0m)
28
Pipelines - key contracts
Country and contact Description
Eastern Cape, Xonxa Dam Pipeline
Installation of 23km of 600mm diameter steel pipeline near QueenstownDuration: 12 months - in progress
Swaziland, Mhlume Canal - Siphon 4
Installation of 1.5km of 1 900mm steel pipe between two existing canals in the Mhlume areaDuration: 8 Months - site establishment has commenced
KZN, Lower Thukela Pipeline Installation of 29km of 900mm steel pipeline between command reservoir, (Tugela river), and the Mvoti WTW. Stanger areaDuration 18 months - in progress
KZN, Umlaas Road,Bulk Water Main
Installation of 13km of 1 100mm pipe, from Richmond off take to Umlaas RoadDuration: 21 months - in progress
KZN, Ethekwini Water & Sanitation
Provision of Water and Sanitation to Informal Settlements in EthekwiniDuration: 23 months - in progress
KZN, Hazelmere Raw Water Pipeline
Installation of 2.4km of 800mm pipeline from Hazelmere Dam to Hazelmere Water Treatment WorksDuration: 6 months - in progress
KZN, Kwahlokohloko Bulk Water Supply
Construction of 5,8km of 900mm Steel Pipeline for the Bulk Water Supply to KwahlokohlokoDuration: 8 months - in progress
KZN, Woodmead, Main Water Supply
Supply and install 9 km of 500mm Pipeline to the Thulele / Woodmead Developments and the Avon Peaking Power PlantDuration: 12 months - nearing completion- however, new R22.5m V.O. issued
29
Civils - key contracts
Country and contact Description
North West, BakwenaN4 Toll Road. Phases 2, 3 & 4
Construction of a second 21km eastbound carriageway along a section of the N4Duration: 30 months - in progress and due for completion Dec 2013
Mpumalanga, Kusile Power Station
Underground service ducts to completed terraces and general services pipelinesDuration: 36 months - in progress
Mpumalanga, Kusile Power Station
Construction of bulk earthworks to terracesDuration: 18 months - in progress
Gauteng, Diepsloot EastHousing & Infrastructure
Construction of 8 000 residential houses and associated civils infrastructurePhase 1: Construction of 2 pedestrian bridgesDuration: 10 months - in progress
Northern Cape, Kathu Construction of infrastructure and housing for Bestwood developmentDuration 15 months - in progress
Gauteng, RosslynOrchards Development
Developer for the infrastructure and construction for 1400 entry level housing unitsDuration: 3-7 years – in progress
30
RISK MANAGEMENT
31
Matrix of major risks
Material risks Mitigation
Dependency on government infrastructure spend
Product and market diversification, strategic B-BBEE rating and geographical diversity
Working capitalmanagement
Weekly cash flow forecast, working capital facilities, tougher on debt collection and KPAs of divisional managers
BEE Promotion from within, careful management of transformation process at board level. BEE ownership deal under negotiation and board restructure
Material shortagesmaterial delivery delays
Proper planning, qualifying bids, site contracts and manuals and KPAs of divisional managers
Credit risk and cost reporting Monthly review at EXCO meeting, monthly review of contract financials. Credit policy with varying limits for approving client credit limits
Bribery and corruption Obtain court interdicts, exposure of corruption through whistle-blowing and enforce Code of Ethics and Conduct. Social & Ethics Committee established. Zero tolerance
Competition Build on reputation through strong brand, be competitive in terms of price and quality, include alternative bids and in-house design
Underperforming contracts Immediate identification and response, follow up with possible disciplinary action, ensure accountability, appoint the right people to the right jobs, minimise non-conforming reports & compliance reviews against policies and procedures
32
Management
Meetings Tender committees Site visits Risk management officer and internal audit Monthly cost and resource meetings Authority levels
Board, Risk, EXCO, Divisional & Site Finalisation meetings Regular and varied Continuous programme of checking and assessment Attended by CEO and CFO in all divisions Regularly updated and adhered to
Contracts
Basic conditions of tender Pricing Project management software Costs Scope Margins Tendering process Quality ISO 9001 Safety ISO 18001 Environmental ISO 14001
FIDIC, NEC, GCC, client specific Overhead, mark-up, risk Integrated with financials Production, programme, current prices Resource planning & management (people and plant) Contract specific Tender finalisations, limits of authority, policies and
procedures
Risk management
33
SEGMENTAL REVIEW
34
Segmental review - Geotechnical
Geotechnical2012
R’0002013
R’000
Segment review 734 092 787 857
PBIT 50 253 76 105
Segment assets 722 746 734 464
Number of employees 1 191 1 169
Revenue growth 4% 7.3%
Operating margins 7% 10%
Order book 321 205 327 624
Pending awards 150 500 144 515
Prospects 468 210 860 000
Non-government 67% 84%
Government 33% 16%
35
Segmental review - Pipelines
Pipelines2012
R’0002013
R’000
Segment review 227 821 323 552
PBIT 2 234 30 583
Segment assets 84 007 191 552
Number of employees 373 763
Revenue growth 35% 42%
Operating margins 1% 9%
Order book 220 073 518 822
Pending awards 260 867 32 000
Prospects 3 115 000 1 630 000
Non-government - -
Government 100% 100%
36
Segmental review - Civils
Civils2012
R’0002013
R’000
Segment review 824 051 1 214 549
PBIT 25 377 76 525
Segment assets 583 537 963 994
Number of employees 1 820 2 701
Revenue growth 59% 47%
Operating margins 3% 6%
Order book 1 215 762 1 269 039
Pending awards 1 613 000 3 235 000
Prospects 3 788 500 2 940 000
Non-government 23% 45%
Government 77% 55%
37
ORDER BOOK AND OUTLOOK
38
Order book as at 28 February 2013
Business unitOrder book(R millions)
Secured revenueFY 2014
(R millions)
Secured revenueFY 2015+
(R millions)
Geotechnical 327 624 327 624 0
Civils 1 269 039 890 039 379 000
Pipelines 518 822 441 776 77 046
Developments 410 900 54 892 356 008
Total 2 526 385 1 714 331 812 054
39
Geotechnical outlook as at 28 Feb 2013
Awarded Pending and key
Johannesburg R68m R190m
Cape Town (including Ghana) R129m R283m
Angola R11m R232m
Durban R78m R183m
East Coast (Mozambique, Tanzania, Mauritius) R41m R117m
Total R940m R327m R1 005m
40
Pipelines outlook as at 28 Feb 2013
Description Value
Current contracts BG3 near Vaal Mooihoek 4 Bluff military base Umlaas Road Thulele/ Woodmead Hazelmere Stanger Xonxa Dam Kwahlokohloko Warden
R519m
Pending and potential awards Kwahlokohloko Reservoir R32m
Key contracts Western Aqueduct Northern Aqueduct
R1 630m
Total R2 181m
41
Civils outlook as at 28 Feb 2013
Current contracts rolled over from last year as at 28 Feb 2013 (2014FY only)
Description Value
Roads RAL current road Contract Bakwena N4 (Mooinooi)
R149m (16.8%)
Kusile Package 26 Terraces contract Package 25 General Services Pipeline Additional Terraces Contract Crushing Contract
R315m (35.4%)
Mine work at Anglo Coal Various mines R66m (7.4%)
Building Bestwood Housing Development R101m (11.4%)
General Pipejacking Bestwood Infrastructure Thabazimbi Infrastructure
R259m (29%)
Total R890m
42
Civils outlook as at 28 Feb 2013
Pending awards and targeted key contracts
Description Value
Civils N4 next phase Additional crushing at Kusile Temba WWTP Greenside Terrace Munitoria Mafube Remedial Works Kusile Housing (details unknown) PRASA Stations Schools Moz housing and infrastructure (4-5 yrs) Bestwood (4-5 yrs) Platinum Park Rustenburg BRT Solar Energy Diepsloot East Development
Building
Pipejacking
Developments
General
R6 175m
43
General outlook 2014FY and beyond
Gautrain private development spinoff
Sandton Rosebank Hatfield Park Station surrounds
and Braamfontein
Sasol Head Office I have no doubt that significant
development will occur around Park Station and into the Braamfontein surrounds once this leg is operationalas evidenced elsewhere
Resource arena Mozambique Gasfields Iron ore and manganese Coal Platinum
There is still significant work to be done to benefit from South Africa’s own huge resource base as well as that of our neighbours
General Private & Commercial Developments
African new markets Presidential infrastructure initiative Integrated Housing Developments
Indication that this is starting to pick up Ghana, Kenya, Uganda and Zambia As per State of the Nation address High priority for government
44
General outlook 2014FY and beyond
Energy Sector Medupi & Kusile Power Stations Nuclear Power Station 3rd Coal fired Power Station Transmission Lines Solar and Wind initiatives
Some housing still to happen Has been in the press extensively lately Rumours Geotechnical foundation solutions Geotechnical and Civils
Sanral andother roads
15 000km non-toll roads +R10bn in 2014 budget Coal haul-road upgrades R20bn GFIP phase 2
Sanral are obviously in a state of flux after the e-tolling debacle but will ultimately be supported by central government
This is due to come out to tender again
Other parastatals Transnet Port authorities
PetroSA Coega
R330bn capex spend Drydocks, Digout and general harbour
upgrades Refined product line from Maputo Refinery, smelter or both
45
CAPEX
46
Capex
Segments (R’000) Financial years
2011 2012 2013
Geotechnical 11 793 51 100 42 815
Civils 17 964 205 317 132 406
Pipelines 6 104 620 17 083
Corporate 14 512 685 1 626
Total 50 373 257 722 193 930
Revenue 1 366 433 1 771 692 2 325 958
47
Conclusion
Having successfully maintained a profitable position for three
successive periods, we are confident that the leaner, meaner,
happier, more focused persona of Esorfranki Limited will
continue to bode well for the future of all its stakeholders!
THANK YOU!
48
Disclaimer
Forward-looking statements
This presentation contains forward-looking statements that, unless otherwise indicated, reflect the
company’s expectations as at 28 February 2013. Actual results may differ materially from the company’s
expectations if known and unknown risks or uncertainties affect its business or if estimates or
assumptions prove inaccurate. The company cannot guarantee that any forward-looking statement will
materialise and, accordingly, readers are cautioned not to place undue reliance on these forward-looking
statements. The company disclaims any intention and assumes no obligation to update or revise any
forward-looking statement even if new information becomes available as a result of future events or for
any other reason.
49
www.esor f rank i .co.za
Esorf rank i L imi ted | 30 Act iv ia Road Act iv ia Park Germis ton 1401
PO Box 6478 Dunswart 1508 South Af r ica
Bernie Krone | CEO
+ 27 83 259 5984
+27 11 776 8700
+27 11 822 1158
Wessel van Zyl | CFO
+ 27 82 498 3518
+27 11 776 8700
+27 11 822 1158