INTERIM RESULTS
FOR THE PERIOD ENDING 31 AUGUST 2014
OVERVIEW
Highlights
Diepsloot
partnership
Kusile claim
finalisation
Improved
performance
Lowlights
Loss-making contracts
N4, Kriel, Hwelereng
Profitability
Trading
environment
Financial
position
Gearing
Order book
NTAV
2
AGENDA
• Salient features
• Financial overview
• Operational overview
• Strategy
• Prospects and order book
• Conclusion
3
SALIENT
FEATURES
4
SALIENT FEATURES
Revenue
Order book
Gearing
R0,8 billion
R2,4 billion
25,2%
↓ 22,2%
↓ 9,5%
↓ 4,9%
R1,0 billion
R2,6 billion
26,5%
Net cash
Health & Safety
HEPS*
R50,7 million
LTIFR 0,39
(6,59) cents
↑ 142,6%
↓ 33,9%
↑ 45,5%
R20,9 million
LTIFR 0,59
(4,53) cents
• Revenue impacted by tender/contract cancellations
• Slow start at Diepsloot and Western/Northern Aqueduct
• Key achievements in Safety accreditation and management
* HEPS H1 2014 restated to include continuing operations
5
SALIENT FEATURES – 2014 LEGACY
Kusile
• Completed 2/4 work packages – minor claims
• Settled claim on underground terraces package
with R20m reversal
• Guarantee of R100m cancelled
• Received balance of claim in cash
• Re-negotiated way forward
N4
• Contract complete – additional R50 million loss
in H1 2014
Kriel/RAL – Hwelereng
• Contracts complete
Competition Commission
P25 and P26 combined Work on Hand in excess of R900 million
6
FINANCIAL
OVERVIEW
7
FINANCIAL RESULTS IN CONTEXT
Highlights
• Improved performance maintained in Pipelines vs H2 2014
• Cash generated by operations – R38,7 million
• Gearing down to 25%
• Order book stable at R2,4 billion
Operating profit of R40m excluding N4 and Kusile
8
STATEMENT OF COMPREHENSIVE INCOME (31 AUG 2014)
2014
R’000
2013
R’000
789 831
1 014 591
(22,2)
(7 018)
28 008
(125,1)
Depreciation & amortisation
(23 920)
(36 862)
Operating profit
(30 938)
(8 854)
Continuing operations
Revenue
EBITDA
%
Change
35,1
(249,4)
• Revenue down due to consolidation, contract cancellations and delays – mainly civils
• EBITDA down on reduced revenue and impact of N4 (R50 million) and Kusile (R20 million)
• Depreciation reduced due to reduced capex and realignment of fleet
• Operating profit of R40 million on normalised trading
• Retrenchment of 52 employees with a cost of R1,5 million
9
STATEMENT OF COMPREHENSIVE INCOME (31 AUG 2014)
2014
R’000
2013
R’000
789 831
1 014 591
(20,2)
(7 018)
28 008
(125,1)
Depreciation & amortisation
(23 920)
(36 862)
Operating profit
(30 938)
(8 854)
(1 600)
(12 607)
87,3
(32 538)
(21 461)
51,6
Continuing operations
Revenue
EBITDA
Net finance expense
Loss before tax
Taxation
8 546
Loss from continuing operations
(23 992)
Headline (loss)/profit attributable
to ordinary shareholders
(25 139)
Diluted weighted average shares in issue
381 747
Diluted HEPS (cents)
(6,59)
6 618
(14 843)
35
%
Change
35,1
(249,4)
55,5
(61,6)
-
375 606
0,01
-
• Net finance – HYB repaid and forex effect
• HEPS loss of 6,59 cents vs HEPS loss of 11,3 cents for FY 2013
10
STATEMENT OF FINANCIAL POSITION (31 AUGUST 2014)
Aug
2014
R’000
Feb
2014
R’000
289 719
320 135
185 062
185 062
64 923
64 923
Deferred tax
11 393
11 457
Long-term receivables
36 630
32 083
52 days 624 736
in trade
receivable
659 928
256 183
317 463
333 435
331 488
17 952
10 977
624 736
659 928
Property, plant and equipment
Intangibles and goodwill
Financial asset at fair value
Impairment
test at
Feb 2015
Trade debtors and contracts in progress
• Trade debtors and contracts in progress
• Trade debtors
• Contract in progress
• Other receivables
Disposed of
R20.9 million PPE
in H1 2015
11
STATEMENT OF FINANCIAL POSITION (31 AUGUST 2014)
Aug
2014
R’000
Feb
2014
R’000
Property, plant and equipment
289 719
320 135
Intangibles and goodwill
185 062
185 062
Financial asset at fair value
64 923
64 923
Deferred tax
11 393
11 457
Long-term receivables
36 630
32 083
624 736
659 928
Trade debtors and contracts in progress
Inventories and land for development
Taxation
Cash and cash equivalents
Total assets
Cash
increased by
R29,8 million
228 536
221 345
-
13 455
50 681
40 423
1 491 680
1 548 811
2014 current
ratio 1,53
NTAV/share
162,8 cents
12
STATEMENT OF FINANCIAL POSITION (31 AUGUST 2014)
Aug
2014
R’000
Feb
2014
R’000
Share capital and reserves
742 475
777 219
Secured borrowings
228 588
237 393
Deferred tax liability
13 863
21 335
-
19 583
22 279
23 424
7 337
19 131
461 321
437 013
15 817
13 713
1 491 680
1 548 811
25,2%
26,5%
• Long-term
123 372
163 043
• Short-term
105 216
74 350
228 588
237 393
Bank overdraft
Preference shares
Taxation
Trade and other payables
Provisions
Total equity and liabilities
Debt/equity
63 days
in trade
payables
Secured borrowings
13
CASH FLOW
54 413
2 415
4 547
50 681
1 600
20 089
20 840
12 000
2 799
16 948
Cash
EBITDA
balance at cash items
1 March
2014
9 950
Disposal
of fixed
assets
Acquisition Secured Income tax Working
of fixed
borrowings refunded
capital
assets
repaid
movement
Treasury
Other
shares investments
acquired
acquired
Net
interest
paid
Cash
balance at
31 August
2014
14
OPERATIONAL
OVERVIEW
15
PIPELINES
2014
R’000
2013
R’000
318 426
324 590
11 034
31 121
263 611
218 467
1 451
1 266
Revenue growth
(1,9%)
118%
Operating margins
3,47%
9,6%
604 646
407 693
213 000
485 000
1 295 000
1 540 000
-%
-%
100%
100%
Revenue
PBIT
Segment assets
Number of employees
Order book
Pending awards
Prospects
Non-government
Government
Improved by
9,4% compared
to H2 2014
Margins
Still between
8% to 10%
16
PIPELINES CONTINUED
• Focus on contract start-up at Western and Northern
Aqueduct
• Delayed awards impacting 2014/15
• On-going commercial settlements
• Competition from new entrants (perceived low barrier
of entry)
• Sanitation project for eThekwini still progressing well
• Pipejacking awarded substantial work with full order book
• Pipejacking - area for growth
• Current contracts focussed in KZN
Western Aqueduct – Pioneer Road
• Cross-border focus - Zambia and Zimbabwe impacting
on time and cost
• Plant expansion of R11,6 million on back of awarded work
17
PIPELINES PROJECTS
Xonxa Dam pipeline
• Eastern Cape
• Installation of 23km of 600 mm
diameter steel pipeline near
Queenstown
• Contract value
› R70 million
• Contract duration
› 12 months
• Status
› Nearing completion
18
PIPELINES PROJECTS
Water & Sanitation KZN
• eThekwini Munincipality
• Provision of water and sanitation
to informal settlements in
eThekwini
• Contract value
› R200 million
• Contract duration
› 23 months
• Status
› Nearing completion
19
PIPELINES PROJECTS
Northern Aqueduct – Phase 1
and Augmentation
• eThekwini Munincipality
• Installation of 14km of 800mm –
1,400mm pipe, from Phoenix to
Umhlanga Rocks and Ottawa
• Contract value
› R233 million
• Contract duration
› 18 months
• Status
› In progress
20
PIPELINES PROJECTS
Western Aqueduct – Phases 2&4
• eThekwini Munincipality
• Installation of 25km of 1,000mm
– 1,400mm steel pipeline from
Pinetown to Ntuzuma
• Contract value
› R451 million
• Contract duration
› 24 months
• Status
› In progress
21
CIVILS
2014
R’000
2013
R’000
Revenue
463 426
681 864
PBIT
(39 868)
(31 575)
Segment assets
674 837
987 196
1 586
2 486
(32,0%)
14%
(8,6%)
(4,6%)
Number of employees
Revenue growth
Operating margins
Order book
Margin excl
N4 and Kusile
6.5%
1 021 825
704 014
187 000
837 000
1 296 500
1 500 000
Non-government
20,2%
28,2%
Government
79,8%
71,8%
Pending awards
Prospects
Reduced
Workforce
by 900
PBIT of R30 million excluding impact of N4 losses and Kusile claim settlement
22
CIVILS CONTINUED
• Loss-making contract - N4
• Contracts at Kusile
› Underground facilities 57% complete with agreed
way forward
› General services piping 67% complete (no claims)
› Crushing completed and paid
› Bulk earthworks - completed with some claims being
finalised
• Focusing on subsidised housing projects as IA
• Contract completion and commercial compensation
including Kriel contracts
• Plant optimisation under focus
• Diepsloot infrastructure work delayed to mid 2015
• Generally tough contracting conditions with fierce
competition at tight margins
• Still awaiting public sector expenditure to come to market
• Cancelled contracts
• Consolidating operations
23
CIVILS – N4 CONTINUED
• Contract award
4 May 2011
• Estimated completion 4 November 2013
• Value at award
R370 million vs actual R340 million
• Duration
originally 30 months vs
actual 42 months
• Actual completion
4 November 2014
What happened
• Tendered at time of economic crisis at break even
• Anticipated/historical productivity never achieved resulting
in R76 million loss on allowable
› Steel and fuel strikes in 2012/13
› Marikana unrest
› Platinum and construction strike 2014
• Consequential effects:
› Plant utilisation achieved 55% and R71 million loss
• Bridge design and demolishing
24
CIVILS – N4 CONTINUED
What now H1 2015
• Agreed programme with client - completion August 2014
› Impacted by delays on Petroport bridge and ride
ability rejections
› Productivity
• Consequential impact on P&G costs
• Inability to reduce resources to activity levels
• Impact of escalation
Current
• Variation and disruption claim submitted
• Maintenance period
• Relationship and reputation
Lessons learnt
• Formal retrospect scheduled
• 17 Major concrete structures
• Lump sum arrangements
25
CIVILS PROJECTS
Kusile general piping and
terraces contracts – Packages
25 and 26
• Eskom
• Underground service ducts to
completed terraces and general
service pipelines
• Contract value
› In excess of R1 billion
• Contract duration
› 42 months
• Status
› In progress
26
CIVILS PROJECTS
Diepsloot integrated housing
Phase 1 – Pedestrian bridges
• GDoHS
• Provision of pedestrian bridges
over William Nicol drive
• Contract value
› R50 million
• Contract duration
› 18 months
• Status
› Nearing completion
27
CIVILS PROJECTS
Low cost housing, 1000 units
each in rural KZN
• KZNDoHS
• Provision of 40m² low cost RDP
houses
• Contract value
› R60 – R130million
• Contract duration
› 18 months
• Status
› Implementing
28
CIVILS RECOVERY STRATEGY - UPDATE
Plan
Resolution of claims
Reduce the workforce to align with the
business model. Centralise the approval
for engaging any new labour
Plant – utilisation and VAF repayment a risk
due to lack of profitability and cash flow
strain
Optimise on current work and gradually add
on new work within the profit margins set
and approved for the Civils business model
Achieved
Date
Progress

Oct 2014
Kusile Consolidated Claim finalised
Ongoing
Kriel Main Civils & Boxhole
– submitted and in dispute process

Ongoing
Retrenched 52 employees to
Aug 2014. Sec 189 process
started in plant

Feb 2015
Being restructured by Dec 2014
and implemented by Feb 2015

FY 2015/6
Disposing of unproductive plant
Focus on current work and target
selected disciplines within the
Group
29
CIVILS RECOVERY STRATEGY - UPDATE CONTINUED
Plan
Achieved
Date
Progress
Implemented at Kusile and
rolled-out to all sites by Q1 2016
Labour – time keeping a major risk until
implementation of a biometric system

July ’14
Guarantees – late cancellation costing
money and limiting available facilities

July ’14
Done
Physical controls on site

Aug ’14
Done
Consolidation of suppliers and using
buying power

Oct ’14
Implemented in Civils.
Initiatives at Group level
Successful completion and cost
minimisation on loss making jobs

N4, Kriel Civils
and Boxhole,
Hwelereng
Completed 4 November 2014
Completed 17 June 2014
Completed October 2014
30
DEVELOPMENTS
Revenue
PBIT
Segment assets
2014
R’000
2013
R’000
32 075
8 137
(688)
(4 301)
244 321
105 669
3
3
Revenue growth
296%
N/A
Operating margins
2,2%
N/A
Order book
724 632
1 082 894
Pending awards
200 000
240 000
4 000 000
2 750 000
Non-government
77%
100%
Government
23%
-
Number of employees
Prospects
31
DEVELOPMENTS CONTINUED
Slow start to the year
• Orchards R25 million sales in H1 2015
› Project potential to be realised exceeds R200 million
– In line with budget and predictions
• Completing bridges at Diepsloot East, north of Johannesburg
› Project potential to be realised exceeds R2 billion,
with commercial element
– EIA being finalised
• 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
– Feasibility underway
• Soshanguve is a residential development in Tshwane with
Esor acquiring development rights
› Project potential to be realised exceeds R150 million
• General
› 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
32
DEVELOPMENTS PROJECTS
Diepsloot East
• GDoHS
• Integrated housing development
for 9,500 units on 237ha
• Contract value
› R2 billion
• Contract duration
› 7 years
• Status
› Implementing
33
DEVELOPMENTS PROJECTS
The Orchards in Rosslyn
Gauteng
• Esor owned integrated
residential development
• Project includes 1,373 stands of
which only 2 phases or 571
stands left for development
• Contract value
› In excess of R240 million
• Contract duration
› 5 years
• Status
› In progress
34
STRATEGY
35
STRATEGY
• Continue consolidating South African operations
• Rationalise Civils operations
• Restructure plant division
• Streamline support functions
• Approach geographical expansion with caution
• Protect CASH
• Keep It Simple
• Build on strong brand
• Commercial astuteness
36
PROSPECTS
AND ORDER
BOOK
37
ORDER BOOK
Order book
R’m
Secured revenue
FY 2015
R’m
Secured revenue
FY 2015 +
R’m
1 021 825
255 077
766 748
Developments
724 632
37 068
687 564
Pipelines
604 646
216 375
388 271
2 351 103
508 520
1 842 583
Non-government
14,9%
15,7%
13,7%
Government
85,1%
84,3%
86,3%
Civils
187 000
28 000
159 000
Developments
200 000
39 000
161 000
Pipelines
213 700
47 000
166 700
Total pending
600 700
114 000
486 700
2 year secured order book
Civils
Total secured
Pending awards
38
CAPEX
39
CAPEX
2015
R’m
2014
R’m
2013
R’m
-
26 313
132 406
Pipelines
21 228
9 596
17 083
Corporate
6 960
2 117
1 626
Total spend/approved
28 188
38 026
151 115
Depreciation
51 777
61 780
79 807
0,54
0,62
1,89
Civils
Depreciation cover
40
CONCLUSION
41
IN SUMMARY
DONE
• Completed loss-making legacy contracts
• Finalised Kusile claim – money in bank
• Streamlined Support Services
• Concluded 50% sale of Diepsloot development to Calgro
› Partnership with leaders in low cost housing
developments
CURRENT
• Rebuilding Civils
› Restructuring Plant
– Cash saving of R4m per month
› Rightsizing operations
• Tender risk at group
• Selective African growth
• Opportunities in
› Social housing
› Pipejacking
• Finalising systems integration
42
DISCLAIMER
Forward-looking statements
This presentation contains forward-looking statements that, unless otherwise
indicated, reflect the company’s expectations as at 31 August 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 forwardlooking 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.
43
CONTACT US
Esor Limited
30 Activia Road, Activia Park, Germiston 1401
PO Box 6478, Dunswart, 1508, South Africa
Wessel van Zyl | CEO
+ 27 82 498 3518
+27 11 776 8700
+27 11 822 1158
Wessel.vanzyl@esor.co.za
Bruce Atkinson | CFO
+ 27 83 288 9190
+27 11 776 8700
+27 11 822 1158
Brucea@esor.co.za
44
STRUCTURE
Wessel
van Zyl
CEO
Patrick
Africa
Bruce
Atkinson
Kevin
Duncan
Dave
Gibbons
Mark
Rippon
Warren
van der Vyver
Group SHEQ
Manager
CFO
Developments
Managing Director
Pipelines
Managing Director
Civils
Managing Director
Group
Commercial Director
45
THANK YOU