consolidated results for the year ended 28 february 2014
TRANSCRIPT
CONSOLIDATED RESULTSFOR THE YEAR ENDED 28 FEBRUARY 2014
2
3
STORY LINE
LowlightsLoss making
contracts in CivilsTrading
environment
HighlightsGeotechnical
saleDevelopments
establishedPipelines
maintained growth
Financial position
Gearing Order book Going concern
4
AGENDA
• Salient features
• Financial overview
• Operational overview
• Strategy
• Prospects and order book
• Conclusion
5
SALIENTFEATURES
6
SALIENT FEATURES (CONTINUED OPERATIONS)
Non-recurring items in financial year 2014
• Sale of Geotechnical business
• Impairment of goodwill
A year of many highs and lows
Revenue
R1,593bn
R1,538bn
Order book
R2,6bn
R2,2bn
Gearing
27,0%
32,3%
Net cash
R20,9 million
R33,6 million
Health & Safety
LTIFR 0,86
LTIFR 0,59
HEPS
(11,3) cents
20,5 cents
▲ 3,6% ▲ 18,6% ▼ 16,4%
▼ ▲ ▼ 155,1%
Reduced to 0,43at April 2014
7
SALIENT FEATURES CONTINUED
Sale of Geotechnical business
• Approval at GM - 18 November 2013
• Disposal valued at R592 million including fair value
of contingent consideration of R65 million
• Cash received to date R497 million
• Outstanding Issues
› Registration of off-shore properties
› Rationalisation of legacy legal structures
• Sale proceeds utilised as follows:
R’mil
› Settle HYB 210
› Dividend of 38 cents/share 150
› Working capital investment 70
› Geotech borrowings settled 45
8
FINANCIAL REVIEW
9
FINANCIAL RESULTS IN CONTEXT
Lowlights
• Finalisation of loss making contracts
› N4 impacted by Marikana unrest, bridge design error and consequential late completion
› Kriel Civils and Boxhole contracts impacted by changes in construction methodology, subject to claims (not traded)
› Hwelereng road contract for RAL subject to numerous delays and consequential late completion
• Labour unrest impacted productivity on most sites
• Civil’s conservative view on estimated final completion
margin on Kusile contracts
Highlights
• Increase in revenue and profitability maintained in Pipelines
• Established Developments business
• Gearing down to 27%
• Order book increase to R2,6 billion
• B-BBEE certified as Level 3 at 78,96 from level 4
Major drainageat N4
On the back of weak markets with margins remaining under pressure
10
SUMMARY STATEMENT OF COMPREHENSIVE INCOME
Segmental summary of Earnings2014
R’0002013
R’000
Geotechnical 50 178 62 203
Civils (142 546) 39 380
Pipelines 29 319 21 543
Developments 962 -
Corporate and eliminations (104 074) (35 416)
Consolidated earnings (166 161) 87 710
Adjusted
Loss/impairment of assets 84 934 (10 683)
Loss on disposal of discontinued operations 38 190
Headline earnings (43 043) 77 027
11
STATEMENT OF COMPREHENSIVE INCOME
Continuing operations2014
R’0002013
R’000%
Change
Revenue 1 592 835 1 538 101 3,6
EBITDA (135 342) 163 454 (182,8)
PBIT (281 761) 74 890 (476,2)
- Operating (loss)/profit before non-recurring items
(158 639) 64 207 (347,1)
- Non-recurring items (123 122) 10 683 n/a
Net Finance expense (37 440) (31 652) 18,9
PBT (319 201) 43 238 n/a
Taxation 102 862 (18 136) n/a
(Loss)/profit from continuing operations (216 339) 25 102 n/a
Order book 2 607 718 2 168 485 18,6
12
STATEMENT OF COMPREHENSIVE INCOME
Discontinued operations2014
R’0002013
R’000
Revenue 724 052 787 857
EBITDA 96 361 106 217
Attributable earnings 50 178 62 608
Sale consideration 592 485
NAV of discontinued operation 624 458
Loss on disposal (31 973)
Net profit from discontinued operations 50 178
Taxation effect 36 349
Surplus on disposal 54 554
13
STATEMENT OF COMPREHENSIVE INCOME
Earnings per share2014
R’0002013
R’000
(Loss)/profit after tax (166 161) 87 710
Adjustment 123 122 10 683
Headline earnings (43 039) 77 027
(Loss)/earnings per share (cents) (43,5) 23,5
Headline (loss)/earnings per share (cents) (11,3) 20,5
14
STATEMENT OF FINANCIAL POSITION
Financial overview2014
R’0002013
R’000
Property, plant and equipment 320 135 822 678
Intangibles and goodwill 185 062 392 051
Financial asset at fair value 64 923 3
Deferred tax 11 457 22 729
Long-term receivables 32 083 27 726
Trade debtors and contracts in progress 659 928 826 713
Inventories and land for development 221 345 69 721
Taxation 13 455 14 513
Cash and cash equivalents 40 423 67 647
Total assets 1 548 811 2 243 781
NAV/share203,5 cents
NTAV/share168,6 cents
45 daysin trade
receivable
2014 Currentratio 1,65
15
STATEMENT OF FINANCIAL POSITION
Financial overview2014
R’0002013
R’000
Share capital and reserves 777 219 1 053 262
Secured borrowings 237 393 447 988
Deferred tax liability 21 335 148 906
Bank overdraft 19 583 34 059
Preference shares 23 424 21 000
Taxation 19 131 4 508
Trade and other payables 437 013 493 816
Provisions 13 713 40 242
Total equity and liabilities 1 548 811 2 243 781
Debt/equity 26,5% 32,3%
64 daysin trade
payables
16
CASH FLOW
0
100 000
200 000
300 000
400 000
500 000
600 000
17
OPERATIONAL REVIEW
18
THE YEAR GENERAL
General market
• General tough contracting conditions - tight margins
and fierce competition
• Risk transfer to contractor
• Focus on contract completion
• Finalising commercial compensation claims
• Still awaiting budgeted public sector expenditure
• Tender activity increased but seems to be budgetary
• Infrequent and delayed awards
Reaction
• Rebuilding order book - focus on skills
• Cautious approach to Africa
• Right-sizing
Action
• Look to consolidate construction operations in year ahead
• Office established in Zimbabwe
19
PIPELINES
Pipelines2014
R’0002013
R’000
Revenue 579 285 323 552
PBIT 39 892 30 583
Segment assets 254 857 191 552
Number of employees 1 163 763
Revenue growth 79% 42%
Operating margins 9% 10%
Order book 654 205 518 822
Pending awards 351 700 32 000
Prospects 1 380 000 1 630 000
Non-government -% -%
Government 100% 100%
20
PIPELINES CONTINUED
• Focused on contract completion and commercial
compensation (BG3 and Mopani)
• Infrequent and delayed awards impacting 2014/15
• Start-up of major contracts - Northern and Western
Aqueduct
• Competition from new entrants (perceived low barrier
of entry)
• Impact of level 3 B-BBEE rating
• Cross-border focus - Namibia, Zambia and Zimbabwe
› Time and cost
• Sanitation project for eThekwini progressing well
• Plant expansion of R10 million on back of awarded work
Focus on project delivery
Office established in Zimbabwe
BG3100ton crane
pipe lift
21
CIVILS
Civils2014
R’0002013
R’000
Revenue 961 599 1 214 549
PBIT (183 881) 76 525
Segment assets 788 590 963 994
Number of employees 1 969 2 701
Revenue growth (20,8)% 47%
Operating margins (13,9)% 6%
Order book 1 228 500 1 269 039
Pending awards 552 000 1 235 000
Prospects 723 000 2 940 000
Non-government 35% 45%
Government 65% 55%
22
CIVILS CONTINUED
• Loss making contracts (N4, Kriel and RAL)
• Generally tough contracting conditions
• Focus on contract completion and commercial
compensation
• Rebuilding order book at acceptable margins and risk
• Still awaiting budgeted public sector expenditure
• Delayed awards
• Fierce competition at tight margins
• Contracts at Kusile
› Crushing nearing completion (no claims)
› General services piping 62% complete (no claims)
› Bulk earthworks - original contract nearing completion
with minor claims
› Underground facilities 51% complete with substantial
scope changes and claims submitted
• Plant optimisation nearing completion
Look to continue consolidating
construction operations in year
ahead
Reinvigorated business
N4
Temporary staging
to portal structure
23
CIVILS LOSS MAKING CONTRACTS
N4 Bakwena• Contract award 4 May 2011
• Value at award R370 million
• Duration originally 30 months
What happened• Tendered at time of economic crisis at break even
• Anticipated/historical productivity never achieved resulting
in R62 million loss on allowable
› Steel and fuel strikes in 2012/13
› Marikana killings in March 2013
› Platinum strike 2014
• Consequential effects:
› Plant utilisation achieved 60% and R60 million loss
› Late completion of project forecasted to be August 2014
with impact on P&G
What now• Agreed programme with client - completion August 2014
• Reduced resources to activity levels
• Negotiating contractual entitlements and claims
• Design errors - variation agreed with costs
Placingselected fill
at N4
24
CIVILS LOSS MAKING CONTRACTS
Kriel Civils and Boxhole
What happened• Tendered at time of low work on hand at break even
• Scope changed materially - subject to claim
• Client imposed restrictions on methodology and access
• Availability of client supplied materials
• Consequential effects:
› Productivity and utilisation never achieved, R32 million losson labour and plant
› Late completion of project – Civils in May 2014
– Boxhole in July 2014
What now• Civil contract complete - snags being finalised
• Agreed Boxhole programme with client - completion July 2014
• Reduced resources to activity levels
• Continued with commercial claims process
Earthworksat Kriel
Boxhole• Contract award 11 April 2012
• Value at award R35 million
• Duration 8 months
Civils• Contract award 11 April 2012
• Value at award R109 million
• Duration 12 months
25
CIVILS LOSS MAKING CONTRACTS | CONTINUED
RAL road contract - Hwelereng
• Contract award 10 March 2011
• Value at award R80 million
• Duration 18 months
What happened
• Tendered at time of economic crisis at break even
• Re-work impacting completion
• Availability of crushed materials
• Never achieved tendered production rates
• Consequential effects:
› Productivity and utilisation never achieved,
R27 million loss on labour and plant
› Late completion of project with associated costs
What now
• Contract complete - handover finalised
• Awarded associated works contract of R30 million,
mainly subcontractors
Road upgradeat Hwelereng
for RAL
26
CIVILS TURNAROUND STARTED NOVEMBER 2012
Actions and timeline
• Loss making contracts
• Productivity
• Utilisation
• Tender and estimating
• Commercial
• Civils Recovery Strategy 2014.ppt
Building bridgesat Diepsloot
27
DEVELOPMENTS
Developments2014
R’0002013
R’000
Revenue 63 356 -
PBIT 1 401 (1 668)
Segment assets 264 454 57 123
Number of employees 3 1
Revenue growth N/A N/A
Operating margins 2,2% N/A
Order book 724 632 410 900
Pending awards 895 876 1 000 000
Prospects 4 000 000 2 000 000
Non-government 51% N/A
Government 49% N/A
28
DEVELOPMENTS CONTINUED
Established division during the year
• Orchards R30 million sales in 2014
› Project potential to be realised exceeds R240 million
• Broke ground at Diepsloot East, north of Johannesburg
› Project potential to be realised exceeds R2 billion,
with commercial element
• Uitvlugt is an integrated residential development in
Three Rivers East with land transferred to Esor
› Project potential excluding top structures to be
realised exceeds R600 million
• Soshanguve is a residential development in Tshwane with
Esor acquiring development rights
› Project potential to be realised exceeds R150 million
• Division may expand into top structure development
• Potential in social and gap housing expected to increase
over the next few years
• Demand for affordable housing exceeds supply, but may
be impacted by rising interest rates and unemployment
Strategically important division
due to secondary work potential
for group
Orchards
Completed houses
29
STRATEGY
30
STRATEGY
Strategic themes
• Consolidate and rationalise
• Streamline support functions
• Build on strong brand
• Leadership
• Commercial astuteness
• Cash flow
• Positive about SADC
Strategic alignment to improve
combined strength
Keep it simple
31
PROSPECTS AND ORDER BOOK
32
LOOKING AHEAD
Prospects
• SANRAL - budget of R10 billion pa
• Transnet - various rail and port projects in the pipeline
• Eskom - ongoing work at Kusile and Medupi power stations
with potential for Coal 3
• Major water projects planned for SA, Lesotho and Zambia
• Schools - R5 billion worth of tenders submitted and still to
be awarded
Order book
• Order book increased by 18,6% to R2,6 billion
• One-year and total order book both at satisfactory levels
against FY2014 revenue
• Work on hand heavily weighted in favour of Government
and Parastatal work
33
ORDER BOOK
2 year secured order bookOrder book
R’mil
Secured revenueFY 2015
R’mil
Secured revenue
FY 2015 + R’mil
Civils 1 228 500 828 500 400 000
Developments 724 632 157 000 567 632
Pipelines 654 586 357 498 297 088
Total secured 2 607 718 1 342 998 1 264 720
Non-government 13% 11% 15%
Government 87% 89% 85%
Pending awards
Civils 552 000 257 000 295 000
Developments 895 876 41 053 854 823
Pipelines 351 700 235 700 116 000
Total pending 1 799 576 533 753 1 265 823
34
ORDER BOOK LEGACY LOSS MAKING CONTRACTS IN WOH
Impact of loss making contracts on 2015
order book
• Civils order book - R1,2 billion
• Included FY15 order book is R25,4 million re
legacy loss making contracts
• Order book includes R203,8 million work secured
prior to FY14
• New work secured represents 81% of order book
R203,8m
R25,4m
R998,3m
Old work still to be completed
Old work still to be completed
Old loss making work to be completed 2015
New secured work
35
CAPEX
36
CAPEX
CAPEX2015
R’mil2014 R’mil
2013 R’mil
Civils - 26 313 132 406
Pipelines 20 300 9 596 17 083
Corporate 6 960 2 117 1 626
Total spend/approved 27 260 38 026 151 115
Depreciation 48 124 61 780 79 807
Depreciation cover 0,57 0,62 1,89
37
CONCLUSION
38
IN SUMMARY
• Tough year across industry
• Maintained growth in Pipelines
• Established Developments
Actions taken
• Gearing improved
• Controlled growth mainly in RSA with prospects in select
African countries
• Rebuilding Civils
› Implemented and tracking progress
› Complete loss making contracts
› Improve commercial acumen
39
DISCLAIMER
Forward-looking statements
This presentation contains forward-looking statements that, unless otherwise
indicated, reflect the company’s expectations as at 28 February 2014. 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
save as required by statute or regulation.
40
Esor Limited
30 Activia Road, Activia Park, Germiston 1401
PO Box 6478, Dunswart, 1508, South Africa
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
CONTACT US