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Statements of financial positionat 28 February 2015
Consolidated results for the year ended 28 February 2015
Abridged consolidated results
for the year ended 28 February 2015
Statements of financial positionat 28 February 2015
Consolidated results for the year ended 28 February 2015
Highlights
Esor Limited | (Registration number 1994/000732/06) | Incorporated in the Republic of South Africa (JSE Code: ESR | ISIN: ZAE000184669) | (“Esor” or “the company” or “the group”)
Headline earnings per share from continuing operations up 23%
Loss-making N4 road contract resolved
Restructured Civils operations and Support Services
Established joint venture with Calgro M3 for Diepsloot development
LTIFR improved to 0,37
Two-year order book stable at R1,9 billion
Level 3 B-BBEE rating maintained
Gearing down to 23,6%
1
Consolidated results for the year ended 28 February 2015
Commentary
IntroductionThe abridged consolidated financial results for the year to 28 February 2015 (“the year”) reflect the results of a challenging period with the impact of legacy loss-making contracts still reflected in the results. However, all legacy problem contracts have since been completed, handed over and resolved.
In accordance with our “back to basics” approach, the group has been restructured into one construction unit with six product areas offering positive prospects, while capitalising on Esor’s strong brand. The business has been consolidated, including rationalising the Civils operations.
Financial resultsThese results were impacted by the impairment of goodwill of R29,7 million and the fair value write down of the contingent consideration from the disposal of the Geotechnical business of R35,4 million and the operating loss of R48,3 million reported in the Civils division.
Revenue was impacted by the group consolidation initiatives as well as the last effects of loss-making contracts, and reduced by 9,1% to R1,45 billion. Earnings improved by 39,9% to a loss of R99,9 million and improved by 53,8% against continuing operations from the preceding period. This translated to a headline loss per share of 18,8 cents compared to a headline loss of 11,3 cents and a headline loss from continuing operations of 24,4 cents at February 2014. Gearing was lowered to 23,6% which was better than our target.
SafetyIt is regrettable to report a fatality at the Northern Aqueduct project post year-end on 2 April 2015. Esor extends its condolences to the family. Any loss of life impacts the wider Esor family too and steps have been put in place to prevent further such incidents.
During the year Esor improved its Lost Time Injury Frequency Ratio (“LTIFR”) to 0,37 (2014: 0,59). The group continues to focus on leading indicators to ensure accidents are prevented and on maintaining its ISO 9001, ISO 14001 and OHSAS 18001 accreditations.
Review of operationsThe group continued to operate through three core divisions in the year: Esor Civils, Esor Pipelines and Esor Developments, and reports accordingly.
The restructuring into a focused construction and developments group happened post year-end, effective 1 March 2015.
Esor Civils remained negatively impacted by macroeconomic conditions. Margins were tight, with contracts which were tendered for in a tough environment now being executed in an even more challenging landscape.
The Kusile contracts account for 60% of Esor Civils’ revenue and approximately one-third of group revenue. The division therefore focused on entrenching its strong relationship with Eskom, who have proven a reliable debtor. The Kusile terrace underground facilities works and the general services piping contracts are currently under way. The crushing and bulk earthworks contracts are completed and claims have been finalised. Historical claims on the terrace underground facilities contract, related to delays and disruptions, were finalised in October 2014 and the settlement received in November 2014.
In the second half of the year Esor Civils successfully completed the Bakwena N4 road contract, its most challenging loss-making contract. Now handed over, the N4 contract incurred a further R56 million loss resulting from late completion, partly due to late changes to the scope of works and the impact of the labour unrest at Marikana mine. This loss was reported in the interim results.
The division successfully targeted refurbishment projects in the year, securing a contract for the conversion of a Johannesburg inner city office block into residences. Other refurb contracts currently under way include the upgrade of OR Tambo Duty Free for ACSA, and the upgrade of Walter Sisulu square for the Johannesburg Development Agency. In addition, Esor grew its footprint in the KwaZulu-Natal RDP housing market with two projects totalling 1 500 units. The group continues to pursue work in the sizable low-cost housing market.
Esor Pipelines has a solid, substantially full order book notwithstanding some project cancellations and delays in the year, and continued to deliver a good performance in an increasingly competitive market. The group successfully completed a number of key pipeline projects. The division has successfully targeted work for eThekwini at the Western and Northern aqueducts, which contracts are progressing well.
On the pipejacking front, Esor was awarded substantial work in the year and remains the
2
Consolidated results for the year ended 28 February 2015
recognised leader in South Africa. The work, although mostly of a smaller nature, geographically covers most of South Africa from Northern, North West, Mpumalanga, KwaZulu-Natal and Gauteng provinces.
The pipelines order book comprises various long-term projects such as the Western and Northern Aqueducts and new awards such as the Malkerns Canal project in Swaziland, the Lion Park and Tshelimnyama pipelines contracts, also in KwaZulu-Natal. Esor continues to drive cross-border expansion and has achieved success in Swaziland. However, procuring work in other SADC countries is proving tougher, impacting time and costs.
The Esor Developments business is progressing well, with five developments in various phases of planning and execution. In the year Esor concluded a joint venture agreement with Calgro M3 on the Diepsloot East integrated residential development project with our share being up to R2 billion. Calgro M3 will be responsible for project development and management, an area we need to outsource, with Esor retaining the “right of first refusal” for the installation of all engineering services and construction of 50% of the top structures. Esor’s new prospective development project in Khayelitsha township in the Western Cape means that the order book value remained steady despite a drop in revenue in terms of the Calgro M3 joint venture.
Looking ahead, delays in spending the allocated budget on the Diepsloot project will impact revenue in FY16.
CAPEXCapital expenditure of R20,5 million (2014: R38 million from continuing operations) was incurred during the year primarily to expand the capacity of the Pipelines division, which has resulted in a relatively new and well-maintained fleet and well-equipped workshops. The plant capacity has been rationalised and aligned with our future growth strategy.
TransformationEsor maintained its Level 3 B-BBEE accreditation in terms the Department of Trade & Industry’s B-BBEE Codes of Good Practice, and is targeting Level 2 by 2016 (based on the 2009 Construction Sector Charter).
The Esor Broad Based Share Ownership Scheme (“EBBSOS”) increased its shareholding during the year and now holds a 5,32% stake in the company.
The group continues to invest heavily in enterprise development with eight SMMEs currently receiving Esor’s support.
ProspectsThe board anticipates Esor’s recovery to continue into the year ahead. Esor has been refocused on what the group does well and profitably. The directors are confident that the streamlined group is agile and nimble to go to where the work is and structured for profitability with clear focus areas and improved synergies between disciplines.
Sanitation has been earmarked as an area of future opportunity following the Minister of Water and Sanitation’s stated commitment to improved access and better infrastructure, particularly in rural areas. Esor, having substantially completed a large sanitation project for the eThekwini Municipality, is able to leverage existing capacity and skills to accommodate this growth area.
The group will continue to focus on reducing debt and improving cash flow.
DirectorateAs announced at interim results, a long-planned restructuring of the board was effected during the year. The restructured board is operating well under the helm of Chairman Bernie Krone and CEO Wessel van Zyl, supported by CFO Bruce Atkinson.
Oswald Franks was appointed as Lead Independent Director and three new independent non-executive directors were added. Dave Thompson and Franklin Sonn retired as independent non-executive Chairman and independent non-executive director, respectively, effective 21 August 2014.
Effective 21 August 2014 Heather Sonn and Eugene Erasmus were appointed as independent non-executive directors, while Keneilwe Moloko was appointed as independent non-executive director effective 6 October 2014.
The new board continues to ensure compliance with governance and transformation requirements, with a valuable mix of business, financial and engineering expertise.
Dividend declarationIn line with group policy, no dividend has been declared (2014: 38 cents interim dividend following
Commentary (continued)
3
Consolidated results for the year ended 28 February 2015
the disposal of the geotechnical business). It remains the policy of the group to review the dividend policy annually in light of cash flow, gearing, capital requirements and bank covenants.
Events after the reporting dateAs of 1 March 2015, Esor restructured the group into six product areas, namely:• Building/Housing• Developments• Infrastructure• Pipe services• Pipelines • Sanitation
On 2 March 2015, the company received notification from the Construction Industry Development Board (“CIDB”) that they were investigating those companies implicated in the Competition Commission enquiry. We are currently in discussions with the CIDB to resolve the matter. The board of the CIDB, on 12 May 2015, resolved to suspend the formal enquiry pending resolution of the legal challenges to its regulations.
There were no other significant events after the reporting date.
Basis of preparationThe summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for abridged reports, and the requirements of the Companies Act applicable to summarised financial statements. The Listings Requirements require abridged reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements, from which the summarised consolidated financial statements were derived, are in terms of International Financial Reporting Standards and are consistent with the accounting policies applied in the preparation of the previous consolidated financial statements. The financial statements that are summarised in this report were prepared by the CFO, Bruce Atkinson.
Audit opinionThis summarised report is extracted from audited information, but is not itself audited. The financial statements were audited by KPMG Inc., who expressed an unmodified opinion thereon.
The audited financial statements and the auditor’s report thereon are available for inspection at the company’s registered office. The directors take full responsibility for the preparation of the summarised report and the financial information has been correctly extracted from the underlying annual financial statements.
The group audited financial statements, which were prepared under the supervision of the CFO, Bruce Atkinson CA(SA), are available for inspection at the company’s registered office and will be included in the Integrated Annual Report 2015 to be posted to stakeholders on or about 28 May 2015.
Annual general meetingThe annual general meeting of the company will be held at the company’s offices, 30 Activia Road, Activia Park, Germiston on Friday, 26 June 2015 at 10:00. The notice of annual general meeting forms part of the Integrated Annual Report 2015, to be posted to stakeholders on or about 28 May 2015.
The board of directors of the company determined that, in terms of section 62(3)(a), as read with section 59 of the Companies Act, 2008 (Act 71 of 2008), as amended, the record date for the purposes of determining which shareholders of the company are entitled to participate in and vote at the annual general meeting is Friday, 19 June 2015. Accordingly, the last day to trade Esor shares in order to be recorded in the Register to be entitled to vote will be Thursday, 11 June 2015.
AppreciationWe thank our directors, both existing and new, for their input and commend management and our employees for their ongoing commitment. We also thank our business partners, suppliers, advisors and our valued clients and shareholders for their continued confidence in the group.
On behalf of the board
Bernie Krone Wessel van ZylChairman CEO
28 May 2015
4 Statements of financial positionat 28 February 2015
Consolidated results for the year ended 28 February 2015
Group
2015 R’000
2014
R’000
Assets
Non-current assets 475 950 613 660
Property, plant and equipment 230 932 320 135
Goodwill 155 323 185 062
Financial asset at fair value through profit or loss 29 488 64 923
Deferred tax asset 10 566 11 457
Investment and loan to joint venture 48 880 –
Loans and long-term receivables 761 32 083
Current assets 753 117 935 151
Loans and receivables 35 014 –
Inventories 149 374 221 345
Non-current assets held-for-sale 20 046 –
Taxation 8 014 13 455
Trade and other receivables 504 330 659 928
Cash and cash equivalents 36 339 40 423
Total assets 1 229 067 1 548 811
Equity and liabilities
Share capital and reserves 667 340 777 219
Share capital and premium 583 730 586 145
Equity compensation reserve – 19 213
Foreign currency translation reserve 27 033 23 665
Retained earnings 56 577 148 196
Non-current liabilities 121 586 207 802
Secured borrowings 101 837 163 043
Preference shares – 23 424
Deferred tax liability 19 749 21 335
Current liabilities 440 141 563 790
Current portion of secured borrowings 82 920 74 350
Current portion of preference shares 21 000 –
Bank overdraft – 19 583
Taxation 2 644 19 131
Provisions 11 458 13 713
Trade and other payables 322 119 437 013
Total equity and liabilities 1 229 067 1 548 811
5
Consolidated results for the year ended 28 February 2015
for the year ended 28 February 2015
Statement of profit or loss and other comprehensive income
Group
CONTINUING OPERATIONS
2015 R’000
2014
R’000
Revenue 1 448 363 1 592 835
Cost of sales (1 385 681) (1 611 624)
Gross profit 62 682 (18 789)
Other income 10 170 10 564
Operating expenses (95 963) (127 117)
Loss before interest, tax, amortisation, impairments and depreciation (23 111) (135 342)
Amortisation, impairments and depreciation (78 650) (146 419)
Results from operating activities (101 761) (281 761)
Finance income 19 538 4 980
Finance costs (22 983) (42 420)
Loss before income tax (105 206) (319 201)
Taxation income 5 314 102 862
Loss from continuing operations (99 892) (216 339)
Discontinued operations
Profit from discontinued operations, net of income tax – 50 178
Loss (99 892) (166 161)
Other comprehensive income:
Items that are or may be reclassified to profit or loss
Foreign currency translation differences for foreign operations (9 770) 25 568
Related taxes 2 198 (5 753)
Other comprehensive income, net of tax (7 572) 19 815
Loss attributable to:
Owners of the company (99 892) (166 161)
Total comprehensive income attributable to:
Owners of the company (107 464) (146 346)
Reconciliation of headline loss:
Loss after tax (99 892) (166 161)
Net (profit)/loss on disposal of property, plant and equipment (893) 294
Impairment of property, plant and equipment and goodwill 29 739 84 638
Loss on disposal of discontinued operations – 38 190
Headline loss (71 046) (43 039)
6
Consolidated results for the year ended 28 February 2015
Group
CONTINUING OPERATIONS
2015 R’000
2014
R’000
Reconciliation of headline loss from continuing operations
Loss after tax (99 892) (216 339)
Net (profit)/loss on disposal of property, plant and equipment (893) 294
Impairment of property, plant and equipment and goodwill 29 739 84 638
Loss on disposal of discontinued operations – 38 190
Headline loss (71 046) (93 217)
Earnings per share
Basic loss per share (cents) (26,4) (43,5)
Diluted loss per share (cents) (26,4) (43,5)
Headline loss per share (cents) (18,8) (11,3)
Diluted headline loss per share (cents) (18,8) (11,3)
Net asset value per share (cents) 178,3 203,5
Net tangible asset value per share (cents) 148,4 168,6
Earnings per share from continuing operations
Basic loss per share (cents) (26,4) (56,6)
Diluted loss per share (cents) (26,4) (56,6)
Headline loss per share (cents) (18,8) (24,4)
Diluted headline loss per share (cents) (18,8) (24,4)
Earnings per share from discontinued operations
Basic earnings per share (cents) – 13,1
Diluted earnings per share (cents) – 13,1
Headline earnings per share (cents) – 13,1
Diluted headline earnings per share (cents) – 13,1
for the year ended 28 February 2015
Statement of profit or loss and other comprehensive income(continued)
7
Consolidated results for the year ended 28 February 2015
for the year ended 28 February 2015
Statements of changes in equity
Group
Share
capital
R’000
Share
premium
R’000
Equity
compen-
sation
reserve
R’000
Foreign
currency
translation
reserve
R’000
Retained
earnings
R’000
Total
equity
R’000
Balance at 28 February 2013 376 570 924 18 606 3 850 459 506 1 053 262
Loss for the year – – – – (166 161) (166 161)
Other comprehensive income – – – 19 815 – 19 815
Total comprehensive income for the year – – – 19 815 (166 161) (146 346)
Transactions with owners,
recorded directly in equity
Contributions by and distributions to owners
Dividends to equity holders – – – – (145 149) (145 149)
Share-based payment transactions – – 607 – – 607
Treasury shares – disposed 6 14 839 – – – 14 845
Total transactions with owners 6 14 839 607 – (145 149) (129 697)
Balance at 28 February 2014 382 585 763 19 213 23 665 148 196 777 219
Loss for the year – – – – (99 892) (99 892)
Other comprehensive income – – – (7 572) – (7 572)
Total comprehensive income for the year – – – (7 572) (99 892) (107 464)
Transactions with owners,
recorded directly in equity
Contributions by and distributions to owners
Transfer to retained earnings – – (19 213) 10 940 8 273 –
Shares acquired (8) (2 407) – – – (2 415)
Total transactions with owners (8) (2 407) (19 213) 10 940 8 273 (2 415)
Balance at 28 February 2015 374 583 356 – 27 033 56 577 667 340
8
Consolidated results for the year ended 28 February 2015
for the year ended 28 February 2015
Statements of cash flow
Group
2015 R’000
2014
R’000
Cash flows from operating activities 97 943 (279 069)
Cash receipts from customers 1 643 961 1 487 579
Cash paid to suppliers and employees (1 532 274) (1 575 788)
Cash generated by/(utilised in) operations 111 687 (88 209)
Finance income 19 538 25 957
Finance costs (22 983) (71 213)
Dividends paid – (145 149)
Taxation paid (10 299) (455)
Cash flows from investing activities (27 393) 422 816
Additions to property, plant and equipment (20 468) (52 564)
Proceeds on disposal of property, plant and equipment 41 954 79 312
Acquisition of business, net of cash * (40 558)
Loan advanced to joint venture (48 880) –
Disposal of discontinued operations, net of cash 1 437 387
Investments acquired – (761)
Cash flows from financing activities (55 051) (156 495)
Decrease in secured borrowings (52 636) (171 340)
Shares acquired (2 415) –
Proceeds from share issue, net of issue expenses – 14 845
Net increase/(decrease) in cash and cash equivalents 15 499 (12 748)
Net cash and cash equivalents at beginning of year 20 840 33 588
Cash and cash equivalents at end of year 36 339 20 840
* Less than R1 000
9
Consolidated results for the year ended 28 February 2015
Segmental analysis
Operating segmentsThe group has three reportable segments, which are the group’s strategic business units.
Civils
R’000
Pipelines
R’000
Develop-
ment
R’000
Corporate
and
eliminations
R’000
Consoli-
dated
R’000
Group
2015
External revenue 787 983 584 507 75 873 – 1 448 363
Inter-segment revenue – 50 824 – (50 824) –
Segment revenue 787 983 635 331 75 873 (50 824) 1 448 363
Segment result
(Loss)/profit before interest and taxation (48 256) 35 470 4 297 (93 272) (101 761)
Net finance (cost)/income (8 063) 2 012 (4 000) 6 606 (3 445)
Taxation 20 948 8 948 (1 668) (22 914) 5 314
Segment (loss)/profit (35 371) 46 430 (1 371) (109 580) (99 892)
Segment assets 415 710 359 878 196 644 216 835 1 189 067
Segment liabilities 554 770 263 774 179 773 (476 590) 521 727
Capital and non-cash items
Additions to property, plant and equipment 4 243 11 496 – 4 729 20 468
Depreciation 2 920 14 024 – 31 967 48 911
Impairment loss – – – 29 739 29 739
Number of employees 1 287 1 094 3 154 2 538
Civils
R’000
Pipelines
R’000
Develop-
ment
R’000
Geo-
technical
R’000
Corporate
and
eliminations
R’000
Consoli-
dated
R’000
Group
2014
External revenue 961 599 579 285 63 356 712 646 – 2 316 887
Inter-segment revenue 42 690 – – 11 406 (54 096) –
Segment revenue 1 004 289 579 285 63 356 724 052 (54 096) 2 316 887
Segment result
(Loss)/profit before interest
and taxation (183 881) 39 892 1 404 71 037 (139 176) (210 724)
Net finance (cost)/income (15 179) 1 318 (342) (6 644) (23 237) (44 084)
Taxation 56 514 (11 891) (100) (14 215) 58 339 88 647
Segment (loss)/profit (142 546) 29 319 962 50 178 (104 074) (166 161)
10
Consolidated results for the year ended 28 February 2015
Segmental analysis (continued)
Civils
R’000
Pipelines
R’000
Develop-
ment
R’000
Geo-
technical
R’000
Corporate
and
eliminations
R’000
Consoli-
dated
R’000
Segment assets 788 590 254 857 264 454 – 313 449 1 621 350
Segment liabilities 875 797 204 802 245 312 – (481 780) 844 131
Capital and non-cash items
Additions to property, plant
and equipment 26 313 9 596 – 14 538 2 117 52 564
Depreciation 50 257 6 176 – 23 435 5 347 85 215
Impairment loss – – – – 84 446 84 446
Number of employees 1 969 1 163 3 – 35 3 170
Revenue generated from significant customers includes:
Customer
Business
unit
2015 R’000
2014
R’000
Eskom Holdings SOC Limited Civils 566 120 596 492
Department of Human Settlements Civils 49 792 –
Airports Company South Africa Civils 30 224 –
Umgeni Water Pipelines 77 744 146 064
Ethekwini Municipality Pipelines 335 845 98 824
uThukela Municipality Pipelines 33 766 –
Bakwena Platinum Corridor Concessionaire (Pty) Limited Civils – 69 213
Anglo American Inyosi Coal Civils – 47 672
Rand Water Pipelines 29 035 23 484
Katu Developers (Pty) Ltd Civils – 59 990
South Africa Other regions Consolidated
Geographical information
2015R’000
2014
R’000
2015R’000
2014
R’000
2015R’000
2014
R’000
Total revenue from external
customers 1 447 464 2 015 474 899 301 413 1 448 363 2 316 887
Property, plant and equipment 249 857 319 014 1 121 1 121 250 978 320 135
Financial asset at fair value through profit or lossThe contingent consideration receivable, a Level 3 financial asset, arose from the disposal of the discontinued
operation in the comparative period, which includes a clause that entitles the seller to an amount of R150 million
if the discontinued operation’s cumulative EBITDA over the next three years exceeds a threshold. The fair value is
determined considering the estimated receivable, discounted to present value. The fair value is based on key
unobservable inputs of EBITDA growth of the business of 3% and 12% in the years ending December 2015 and
2016 respectively, and a discount factor of 9%. Prior year growth was calculated at 8%. The fair value was
determined by the group finance department. Scenarios on EBITDA growth were developed by management
together with management of the discontinued operation considering the economy generally and their
knowledge of the geotechnical business. The estimated fair value increases the higher the annual EBITDA growth
rate, the higher the EBITDA margin and the lower the discount rate. Management considers that changing the
above mentioned unobservable inputs to reflect other reasonably possible alternative assumptions would not
result in a significant change in the estimated fair value.
11
Consolidated results for the year ended 28 February 2015
Welcome
Worker at Kusile
Consolidated resultsfor the year ended 28 February 2015
12
Consolidated results for the year ended 28 February 2015
Overview
3
Highlights
Diepslootpartnership
Historical Kusile Claim finalisation
Restructured group
Lowlights
Loss-making contractsN4, Kriel, Hwelereng
now completed
Profitability
Tradingenvironment
Financial position
Gearing
Order book
NTAV
Agenda
2
Overview Salient features Financial overview
Operationaloverview Strategy Prospects and
order book
Capex Conclusion
13
Consolidated results for the year ended 28 February 2015
Salient features
RDP Housing – Thimude
Progress against interim deliverables
4
Action item Status Action
Financial target to Feb 2015 AchievedDelivered improved performance– PBIT August 2014 (R32 538)– PBIT February 2015 – (R24 459) “normalised”
Rationalise plant holding Done Final disposal of non-core assets scheduled for H1 2016
Consolidate Civils Done Group restructured into focused Construction and Developments divisions
Streamline support services Done Fully implemented on 1 March 2015
Protect cash On-going Cash improved by R15,5m with daily position
Complete legacy contracts Done
N4 – completed 4 November 2014Kriel civils – completed 21 July 2014Kriel Boxhole – completed 22 September 2014Hwelereng – 14 November 2014
Selected African growth On-goingSwaziland – Malkerns awardedZimbabwe/Zambia – Tendering
14
Consolidated results for the year ended 28 February 2015
Salient features – 2014 legacy
▸ N4 – TFY loss R56m– Awarded May 2011 Completed November 2014– Contract value R340m Duration – 42/30 months– Productivity loss R76m and plant loss R71m
▸ Kriel Update – TFY R’Nil– Statement of claim submitted – R51m
▸ Hwelereng – TFY R’Nil– Normal maintenance period
▸ Kusile– Settled historical claims with R20m reversal
7
Salient features
* HEPS FY2014 restated to include continuing operations
▸ Non-recurring items in financial year 2015– Impairment of R35,4m on financial asset (Franki agterskot)– Impairment of R29,7m goodwill – Retrenchment costs of R12m
RevenueR1,448bn
down 9,1%R1,593bn
Order bookR2,0bn down
23,1% R2,6bn
Gearing23,6% down
12,6% 27,0%
Net cashR36,3 million up
73,4% R20,9 million
Health & SafetyLTIFR 0,37 down
132,4% LTIFR 0,86
HEPS*(18,8) cents up
23,0% (24,4) cents
6
15
Consolidated results for the year ended 28 February 2015
Statement of comprehensive income
9
Continuing operations2015
R’0002014
R’000%
Change
Revenue 1 448 363 1 592 835 (9,1)
EBITDA (23 111) (135 342) 82,9
Amortisation and depreciation (78 650) (146 419) 46,3
PBIT (101 761) (281 761) 63,9
– Operating loss before non-recurring items (24 459) (158 639)
– Non-recurring items (77 302) (123 122)
▸ Revenue down 9,1% mainly due to consolidation, contract cancellations and delays in Civils▸ EBITDA impacted by loss at N4 (R56m) and Kusile settlement (R20m) and fair value adjustment
of R35,4m on the Franki contingent consideration▸ Amortisation includes impairment of goodwill in Civils of R29,7m▸ Depreciation reduced by R12,9m after disposals of Civils plant & equipment▸ Retrenchment of 250 employees of which 23 salaried with a cost of R12,1m▸ Operating profit of R51,5m on normalised trading
Financial overview
Western Aqueduct – KZN
16
Consolidated results for the year ended 28 February 2015
Segmental revenue (R’000)
Pipelines 584 507
Civils 787 983
Developments 75 873
TOTAL 1 448 363
Segmental revenue – eliminating Frankiinternal revenue (R’000)
Pipelines 579 285Civils 961 599Developments 63 356 Eliminations (11 405)TOTAL 1 592 835
Contribution to revenue
11
Statement of comprehensive income
10
Continuing operations2015
R’0002014
R’000%
Change
Revenue 1 448 363 1 592 835 (9,1)
PBIT (101 761) (281 761) 63,9
– Operating loss before non-recurring items (24 459) (158 639)
– Non-recurring items (77 302) (123 122)
Net finance expense (3 445) (37 440) 90,8
PBT (105 206) (319 201) 67,0
Taxation 5 314 102 862 (94,8)
Loss from operations (99 892) (216 339) 53,8
Order book 1 927 315 2 607 718 (26,1)
Non-government 15% 13%
Government & Parastatal 85% 87%
Effective tax rate of 5,1% is due to impairments and fair value adjustments not allowed for tax.
17
Consolidated results for the year ended 28 February 2015
Statement of financial position
13
Continuing operations2015
R’0002014
R’000
Property, plant and equipment 230 932 320 135
Goodwill 155 323 185 062
Financial assets at fair value 29 488 64 923
Deferred tax 10 566 11 457
Investment in joint ventures 48 880 –
Long-term receivable 761 32 083
Loans and receivables 539 344 659 928
Loans and receivables
Trade debtors 265 200 223 218
Contract in progress 233 793 384 141
Other receivables 40 351 52569
539 344 659 928
Disposed and held-for-sale of R60,8m
Impairmentof R29,7m
50,4 days in trade
receivables
Earnings per share
12
Earning and headline earnings per share2015
R’0002014
R’000%
Change
Loss after tax (99 892) (216 339)
Adjustment 28 846 123 122
– (Profit)/loss on disposal of PPE (893) 294
– Loss on disposal of discontinued operation 38 190
– Impairment of goodwill 29 739 84 638
Headline loss (71 046) (93 217)
Basic loss per share (cents) (26,4) (56,6) 53,4
Headline loss per share (cents) (18,8) (24,4) 23,0
18
Consolidated results for the year ended 28 February 2015
Statement of financial position
15
Continuing operations2015
R’0002014
R’000
Share capital and reserves 667 340 777 219
Secured borrowings 184 757 237 393
Preference shares 21 000 23 424
Deferred tax 19 749 21 335
Taxation 2 644 19 131
Provisions 11 458 13 713
Trade and other payables 322 119 437 013
TOTAL EQUITY AND LIABILITIES 1 229 067 1 548 811
Secured borrowings
Long-term 101 837 163 043
Short-term 82 920 74 350
184 757 237 393
67,7 days in trade payables
Reduced debt By R52,6m
Debt /Equity reduced to
23,6%
Statement of financial position
14
Continuing operations2015
R’0002014
R’000
Property, plant and equipment 230 932 320 135
Goodwill 155 323 185 062
Financial assets at fair value 29 488 64 923
Deferred tax 10 566 11 457
Investment in joint ventures 48 880 –
Long-term receivable 761 32 083
Loans and receivables 539 344 659 928
Inventories 149 374 221 345
Assets held-for-sale 20 026 –
Taxation 8 014 13 455
Cash 36 339 20 840
TOTAL ASSETS 1 229 067 1 548 811Cash increased
by R15,5mNTAV/share148,4 cents
19
Consolidated results for the year ended 28 February 2015
Esor performance – relative to Construction index
▸ JSE – ALSI– Steady growth over 12 months– Strength over last 3 months
▸ Construction & Materials– Index reflects current sentiment– Tough trading conditions– Volatile and cyclical reporting
▸ Esor relative performance– Largely track ConM index– Perception
17
Cash flow
16
20
Consolidated results for the year ended 28 February 2015
Pipelines
▸ Focus on project delivery– Western Aqueduct– Northern Aqueduct– Lower Tugela
▸ Sanitation project for eThekwini successfully completed– 322 sanitation facilities at informal settlements– Sanitation facilities for 19 schools
▸ Pipejacking– Area of growth– Footprint extended to 7 provinces
▸ Profitability– Impacted by delayed awards in Swaziland and KZN– Project delivery with associated claims
19
Operationaloverview
ACSA – Airline office upgrade at ORT
21
Consolidated results for the year ended 28 February 2015
Pipelines projects
▸ Western Aqueduct Phase 2KZN
– Installation of 25 km of 1 400 mm pipe from Hillcrest to Ntuntuma
– Value – R366m – Duration – 36 months– Progress is generally satisfactory after
delayed start▸ Northern Aqueduct Phase 1 and 3
KZN– Phase 1 – Installation of 14 km of
800 – 1 400 mm pipe from Phoenix to Umhlanga Rocks
– Phase 3 – Installation of 6,2 km of 1 200mm pipe at Phoenix Reservoir
– Value – R208m– Duration – 18 months and 12 months– Progress is on track
21
eThekwini – Western Aqueduct
Started 5 major projects since August 2014
Pipelines
20
Segment report2015
R’0002014
R’000
Revenue 635 331 579 285
PBIT 35 8470 39 892
Segment assets 359 878 254 857
Number of employees 1 094 1 163
Revenue growth 9,7% 79%
Operating margins 8% 9%
Order book 534 910 654 205
Pending awards 261 471 351 700
Prospects 1 374 000 1 380 000
Non-government – –
Government 100% 100%
22
Consolidated results for the year ended 28 February 2015
Civils
23
Segment report2015
R’0002014
R’000
Revenue 787 983 1 004 289
PBIT (48 256) (183 881)
Segment assets 415 710 788 590
Number of employees 1 287 1 969
Revenue growth (21,5)% (20,8)%
Operating margins (5,8)% (13,9)%
Order book 794 790 1 228 500
Pending awards 405 500 552 000
Prospects 340 500 723 000
Non-government 8,3% 35%
Government 91,7% 65%
Margin Excluding N4
of 1,4%
Civils
▸ Focus on project delivery– Kusile Package 25 general services FY2016– Kusile Package 26 underground terraces facilities FY2017– Building – office and retail refurbishments
▸ Kusile bulk earthworks and crushing contracts successfully completed– Claims finalised– All invoices paid
▸ Diepsloot– Area of growth– Delayed but seen as Mega Project
▸ Profitability– Impacted by contract cancellations– Cost associated with completion of legacy contracts and claim settlements
22
23
Consolidated results for the year ended 28 February 2015
Developments
▸ Life cycle– Identify opportunity– Investment decision/feasibility
• Land ownership• Land availability
– Town planning/establishment– Define end user
• Subsidised/social• Rented/bonded & affordable
– Partnering decision• Development• Top structure
– Infrastructure development– Exit strategy
25
Civils projects
▸ Kusile Package 25 and 26Mpumalanga
– Underground service ducts to completed terraces and general services pipelines
– Value – > R1,8bn– Duration – within 60 months– Progress on track to meet Eskom deadline
for first fire. General service pipelines to be completed by December 2015
▸ Office refurbishment for TransnetGauteng
– The contract comprises the refurbishment of 16 floors of offices, including the common lobbies and ablution blocks
– Value – R99m– Duration – 16 months– The bulk of the demolition has been
completed on 6 floors, and we are presently busy with the installation of new services
24
Eskom - Kusile
Started with a further two refurbishment contracts
24
Consolidated results for the year ended 28 February 2015
Developments
27
▸ Focus on Diepsloot project delivery R4bn– JV agreement signed with Calgro M3– First Work package completed – pedestrian bridges– Delays in Government approvals
▸ Orchards – R150m remaining– Performance and sales in line with budget– Negotiating lump sum sales
▸ Uitvlugt– Feasibility completed– Project delayed through JRA change
▸ Soshanguve/Kayalitsha– Approvals still pending
▸ Profitability– On target
Developments
26
Segment report2015
R’0002014
R’000
Revenue 75 873 63 356
PBIT 4 297 1 401
Segment assets 196 644 264 454
Number of employees 3 3
Revenue growth 19,8% N/A
Operating margins 5,7% 2,2%
Order book 597 614 724 632
Pending awards 661 411 895 876
Prospects 4 000 000 4 000 000
Non-government 25,0% 51%
Government 75,0% 49%
25
Consolidated results for the year ended 28 February 2015
Strategy in context
29
Growth SADC Delivery Market Competitive edge Margin Competition Strategy
Building and housing – Hold
Infrastructure – – Consolidate
Pipelines Hold
Pipe services Grow
Sanitation Grow
Low Medium High
Strategy
Batch plant at Hwelereng – Limpopo
26
Consolidated results for the year ended 28 February 2015
Two-year secured revenue (R’000)
Pipelines 534 910
Civils 794 790
Developments 597 614
TOTAL 1 927 314
Contribution to revenue
31
Two-year secured revenue (R’000)
Pipelines 654 586
Civils 1 228 500
Developments 724 632
TOTAL 2 607 718
Prospects and order book
Gauteng DoHS – Diepsloot
27
Consolidated results for the year ended 28 February 2015
CAPEX
33
2015R’000
2014R’000
2013R’m
Civils 4 243 26 313 132 406
Pipelines 11 496 9 596 17 083
Corporate 4 729 2 117 1 626
Total spend 20 468 38 026 151 115
Depreciation 48 911 61 780 79 807
Depreciation cover 0,42 0,62 1,89
Budget approved for FY 2016 26 000
▸ FY 2016 approved capex relates mainly to Pipeline assets▸ Plant & equipment centralised within Construction
Capex
28
Consolidated results for the year ended 28 February 2015
Civils projects
▸ Done– Restructured– Completed legacy contracts– Reduced debt– Secured order book – 1,33 times
FY2015 revenue
▸ Strategy– Gearing for disciplined growth– Deliver on current projects– Increase value chain– Tendering selective cross-border
35
Eskom – Kusile (2015)
Conclusion
Ethekwini – Ethembeni Site
29
Consolidated results for the year ended 28 February 2015
Civils projects
37
Eskom – Package 26 terraces
Esor Limited
30 Activia RoadActivia ParkGermiston1401
PO Box 6478 Dunswart 1508South Africa
Wessel van Zyl | CEO
Cell + 27 82 498 3518
Tel +27 11 776 8700
Fax +27 11 822 1158
E-mail [email protected]
Bruce Atkinson | CFO
Cell +27 83 288 9190
Tel +27 11 776 8700
Fax +27 11 822 1158
E-mail [email protected]
Civils projects
Forward-looking statementsThis presentation contains forward-looking statements that,
unless otherwise indicated, reflect the company’s
expectations as at 28 February 2015. 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.
36
Bakwena – N4 Marikana
30
Consolidated results for the year ended 28 February 2015
Executive structure
38
Dave GibbonsConstructionManaging Director
Bruce AtkinsonCFO
Warren van der VyverDevelopments MD/ GroupCommercial Director
Wessel van ZylCEO
THANK YOU
31
Consolidated results for the year ended 28 February 2015
Notes
32
Consolidated results for the year ended 28 February 2015
Notes
33
Consolidated results for the year ended 28 February 2015
Notes
Company secretaryiThemba Governance and Statutory Solutions (Pty) Limited Monument Office Park, Suite 5 – 102 79 Steenbok Avenue, Monumentpark, 0181PO Box 25160, Monumentpark, 0181
Registered office30 Activia Road, Activia Park, Germiston, 1401 (PO Box 6478, Dunswart, 1508) Telephone: +27 11 776 8700 Fax: +27 11 822 1158
SponsorVunani Corporate Finance, Vunani House, Vunani Office Park, 151 Katherine Street, Sandton, 2196 (PO Box 652419, Benmore, 2010)
Transfer secretariesComputershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Investor relationsEnvisage Investor & Corporate Relations, 4th Floor South Wing, Hyde Park Corner, Jan Smuts Avenue Hyde Park, 2196
Directors: B Krone (Chairman)+; WC van Zyl (CEO); BW Atkinson (CFO); EG Dube*; E Erasmus*;
Dr OW Franks* (Lead Independent); KR Moloko*; HJ Sonn* * Independent non-executive + Non-executive