1
WELCOME
2
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
3
SALIENT FEATURES
4
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
5
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
6
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
7
FINANCIAL REVIEW 28 February 2013
8
Statement of Financial Position: salient features as at 28 February 2013
2012
R’000
2013
R’000
1 151 181
1 237 461
665 288
1 006 320
1 816 469
2 243 781
Share capital and reserves
937 432
1 053 262
Non-current liabilities
316 658
540 326
Current liabilities
562 379
650 193
1 816 469
2 243 781
241.5
280.0
Assets
Non-current assets
Current assets
Total assets
Equities and liabilities
Total equity and liabilities
Net asset value per share (cents)
9
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
R33.6m
R826.7m
PPE
 Investment in construction equipment
 Sale of Pinetown property
R193.9m
R25m
Cash reserves





Equity
 Profit after tax
 FCTR
 Dividend paid
Operational cash-flow consumed
Acquisition PPE
Dividends paid
Secured borrowings
Debt/(debt+equity) ratio
(R32.9m)
(R193.9m)
Nil
(R448m)
42.5%
R87.7m
R3.9m
Nil
10
Statement of Income: salient features
2012
R’000
%
2013
R’000
1 771 692
31.3
2 325 958
132 656
103
269 265
Profit/(loss) after tax
18 216
382
87 710
Headline earnings/(loss)
24 046
220
77 027
6.2
231
20.5
Revenue
EBITDA
HEPS
11
STRATEGY
12
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
13
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 finalisation
in 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
14
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 additional
banking facilities
 Provision of company and institutional guarantees to free up cash retentions
15
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 of
ISO 9001, 14001 & 18001
16
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 for
the contract for their further empowerment
 In-house accredited training centre based at Germiston workshop
17
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 reputation
through 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 achieved
2 Actual February 2013 rolling monthly average LTIFR of 0.59
18
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
19
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 programmes
when they occur
 Supply chain management will take cognisance of environmental impact
and carbon emissions will be measured and managed
 Addressing Construction Charter requirements to improve B-BBEE scoring by
31 December 2013
 Focus on concession and development projects
 Focus on private sector clients to balance dependency on government contracts
20
OPERATIONAL REVIEW 28 February 2013
21
Products & Services
Geotechnical
Pipelines
Civils
 Piling
 Gas and petrochemical steel
pipelines
 Road construction
 Water and wastewater
pipelines
 Township infrastructure
 Lateral support
 Marine structures
 Pipejacking
 Thrust boring
 Bridgejacking
 Diaphragm walls
 Ground improvement
 Dynamic compaction
 Sewer pipelines
 Pump stations
 Pipeline refurbishments
 Cement mortar lining
 Valve chambers
 Bridge construction
 Mining infrastructure
 Water reticulation
 Water towers
 Reservoirs
 Sewer reticulation
 Bulk earthworks
 Ground remediation
 Associated concrete
structures
 Soils investigation
 Associated infrastructure
 Housing
 Geotechnical design
 Pressure testing
 Development
 Building
22
Clients
Geotechnical
Pipelines
Civils
 Civil contractors
 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
 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
 Sanral
 Anglo Coal
 Xstrata
 RAL
 Gauteng Province
 Government
› Central
› Provincial
› Municipal levels
 Private developers
 Bakwena Concessions
 Debswana
23
Competitors
Geotechnical
Pipelines
Civils
 Steffanutti Stocks in-house
geotechnical division
 WK Pipelines
 Murray & Roberts
 WBHO
 Aveng
 Aveng
 WBHO
 Group 5
 Group 5
 Steffanutti Stocks
 Steffanutti Stocks
 Wepex
 Cerimele Construction
 Basil Read
 Gauteng Piling
 Murray & Dixen
 Raubex
 Terrastrata
 Concor
 Erbacon
 Geomechanics
 Ikon
 Protech-Khutheli
 Aveng in-house
geotechnical division
 Dura (Solentache Bachy is
a large global contractor)
 Keller (largest global
geotechnical contractor)
 Diesel Power
 Haw & Inglis
24
Value proposition
Geotechnical
Pipelines
Civils
 Geotechnical market leader
in South Africa
 Niche leader in welded
pipelines
 Diversified range of
construction services
 Good reputation and well
known brand in SSA
 Supply and install all aspects
of cross-country pipelines
 Plant capacity and capability
expanded
 Supply and install pipelines
in a myriad of materials
 Excellent workshop facilities
 Design alternatives
constantly investigated
 Geographical diversity
entrenched and expanded
 Depth of management knowhow
 Well-established business
processes over 65 years
 Plant capacity retooled and
modernised
 ISO 9001, ISO14001 and
ISO 18001 accredited
 Experienced and talented
management team
 Strong relationships with
clients and consulting
engineers
 Excellent track record with
blue-chip clients
 Experienced and talented
management team
 Extended work footprint to
Swaziland
 Increased longer-term
projects in order book
 ISO 9001, ISO14001 and
ISO 18001 accredited
 ISO 9001, ISO14001 and
ISO 18001 accredited
25
Geographical footprint
AFRICA
GHANA
UGANDA
KENYA
DRC
SEYCHELLES
TANZANIA
ANGOLA
MALAWI
ZAMBIA
MOZAMBIQUE
NAMIBIA
ZIMBABWE
MADAGASCAR
MAURITIUS
BOTSWANA
SWAZILAND
26
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 columns
Duration: 15 months - in progress
Phase 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
groynes
Phase 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 Foundations
Southern 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)
27
Pipelines - key contracts
Country and contact
Description
Eastern Cape, Xonxa Dam
Pipeline
Installation of 23km of 600mm diameter steel pipeline near Queenstown
Duration: 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 area
Duration: 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 area
Duration 18 months - in progress
KZN, Umlaas Road,
Bulk Water Main
Installation of 13km of 1 100mm pipe, from Richmond off take to Umlaas Road
Duration: 21 months - in progress
KZN, Ethekwini Water &
Sanitation
Provision of Water and Sanitation to Informal Settlements in Ethekwini
Duration: 23 months - in progress
KZN, Hazelmere Raw Water
Pipeline
Installation of 2.4km of 800mm pipeline from Hazelmere Dam to Hazelmere Water Treatment
Works
Duration: 6 months - in progress
KZN, Kwahlokohloko Bulk
Water Supply
Construction of 5,8km of 900mm Steel Pipeline for the Bulk Water Supply to Kwahlokohloko
Duration: 8 months - in progress
KZN, Woodmead, Main Water Supply and install 9 km of 500mm Pipeline to the Thulele / Woodmead Developments and the
Supply
Avon Peaking Power Plant
Duration: 12 months - nearing completion- however, new R22.5m V.O. issued
28
Civils - key contracts
Country and contact
Description
North West, Bakwena
Construction of a second 21km eastbound carriageway along a section of the N4
N4 Toll Road. Phases 2, 3 & 4 Duration: 30 months - in progress and due for completion Dec 2013
Mpumalanga, Kusile Power
Station
Underground service ducts to completed terraces and general services pipelines
Duration: 36 months - in progress
Mpumalanga, Kusile Power
Station
Construction of bulk earthworks to terraces
Duration: 18 months - in progress
Gauteng, Diepsloot East
Housing & Infrastructure
Construction of 8 000 residential houses and associated civils infrastructure
Phase 1: Construction of 2 pedestrian bridges
Duration: 10 months - in progress
Northern Cape, Kathu
Construction of infrastructure and housing for Bestwood development
Duration 15 months - in progress
Gauteng, Rosslyn
Orchards Development
Developer for the infrastructure and construction for 1400 entry level housing units
Duration: 3-7 years – in progress
29
RISK MANAGEMENT
30
Matrix of major risks
Material risks
Mitigation
Dependency on government Product and market diversification, strategic B-BBEE rating and geographical
infrastructure spend
diversity
Working capital
management
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 shortages
material 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
31
Risk management
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







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
Contracts










Basic conditions of tender
Pricing
Project management software
Costs
Scope
Margins
Tendering process
Quality ISO 9001
Safety ISO 18001
Environmental ISO 14001
32
SEGMENTAL REVIEW
33
Segmental review - Geotechnical
2012
R’000
2013
R’000
734 092
787 857
50 253
76 105
722 746
734 464
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%
Geotechnical
Segment review
PBIT
Segment assets
Number of employees
34
Segmental review - Pipelines
2012
R’000
2013
R’000
227 821
323 552
2 234
30 583
84 007
191 552
373
763
35%
42%
1%
9%
Order book
220 073
518 822
Pending awards
260 867
32 000
3 115 000
1 630 000
-
-
100%
100%
Pipelines
Segment review
PBIT
Segment assets
Number of employees
Revenue growth
Operating margins
Prospects
Non-government
Government
35
Segmental review - Civils
2012
R’000
2013
R’000
824 051
1 214 549
25 377
76 525
583 537
963 994
1 820
2 701
59%
47%
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%
Civils
Segment review
PBIT
Segment assets
Number of employees
Revenue growth
Operating margins
36
ORDER BOOK AND OUTLOOK
37
Order book as at 28 February 2013
Order book
(R millions)
Secured revenue
FY 2014
(R millions)
Secured revenue
FY 2015+
(R millions)
327 624
327 624
0
1 269 039
890 039
379 000
Pipelines
518 822
441 776
77 046
Developments
410 900
54 892
356 008
2 526 385
1 714 331
812 054
Business unit
Geotechnical
Civils
Total
38
Geotechnical outlook as at 28 Feb 2013
Awarded
Pending and key
R68m
R190m
R129m
R283m
Angola
R11m
R232m
Durban
R78m
R183m
East Coast (Mozambique, Tanzania, Mauritius)
R41m
R117m
R327m
R1 005m
Johannesburg
Cape Town (including Ghana)
Total R940m
39
Pipelines outlook as at 28 Feb 2013
Description
Current contracts










Pending and potential awards
 Kwahlokohloko Reservoir
Key contracts
 Western Aqueduct
 Northern Aqueduct
Total
BG3 near Vaal
Mooihoek 4
Bluff military base
Umlaas Road
Thulele/ Woodmead
Hazelmere
Stanger
Xonxa Dam
Kwahlokohloko
Warden
Value
R519m
R32m
R1 630m
R2 181m
40
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




R315m (35.4%)
Mine work at Anglo Coal
 Various mines
Building
 Bestwood Housing Development
General
 Pipejacking
 Bestwood Infrastructure
 Thabazimbi Infrastructure
Total
Package 26 Terraces contract
Package 25 General Services Pipeline
Additional Terraces Contract
Crushing Contract
R66m (7.4%)
R101m (11.4%)
R259m (29%)
R890m
41
Civils outlook as at 28 Feb 2013
Pending awards and targeted key contracts
Description
Civils
Building
Pipejacking
Developments
General















Value
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
R6 175m
42
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 operational
as 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
43
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





Sanral and
other 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
Some housing still to happen
Has been in the press extensively lately
Rumours
Geotechnical foundation solutions
Geotechnical and Civils
 R330bn capex spend
 Drydocks, Digout and general harbour
upgrades
 Refined product line from Maputo
 Refinery, smelter or both
44
CAPEX
45
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
1 366 433
1 771 692
2 325 958
Revenue
46
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!
47
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.
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E s o r f r a n k i L i m i t e d | 3 0 A c t i vi a R o a d A c t i vi a P a r k G e r m i s t o n 1 4 0 1
P O B o x 6 4 7 8 D u n s wa r t 1 5 0 8 S o u t h A f r i c a
Bernie Krone | CEO
Wessel van Zyl | CFO
+ 27 83 259 5984
+ 27 82 498 3518
+27 11 776 8700
+27 11 776 8700
+27 11 822 1158
+27 11 822 1158
Bernie.krone@esorfranki.co.za
Wessel.vanzyl@esorfranki.co.za
www. e s o r f r a n k i . c o . z a
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