CONSOLIDATED RESULTS
FOR THE YEAR ENDED 28 FEBRUARY 2014
2
STORY LINE
Lowlights
Loss making
contracts in Civils
Trading
environment
Highlights
Geotechnical
sale
Developments
established
Pipelines
maintained growth
Financial
position
Gearing
Order book
Going concern
3
AGENDA
• Salient features
• Financial overview
• Operational overview
• Strategy
• Prospects and order book
• Conclusion
4
SALIENT
FEATURES
5
SALIENT FEATURES (CONTINUED OPERATIONS)
Revenue
Order book
Gearing
R1,593bn
R2,6bn
27,0%
▲ 3,6%
▲ 18,6%
▼ 16,4%
R1,538bn
R2,2bn
32,3%
Net cash
Health & Safety
HEPS
R20,9 million
LTIFR 0,86
(11,3) cents
▼
▲
▼ 155,1%
R33,6 million
LTIFR 0,59
20,5 cents
Non-recurring items in financial year 2014
Reduced to 0,43
at April 2014
• Sale of Geotechnical business
• Impairment of goodwill
A year of many highs and lows
6
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
7
FINANCIAL
REVIEW
8
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
Major drainage
at N4
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
On the back of weak markets with margins remaining under pressure
9
SUMMARY STATEMENT OF COMPREHENSIVE INCOME
Segmental summary of Earnings
Geotechnical
Civils
Pipelines
Developments
2014
R’000
2013
R’000
50 178
62 203
(142 546)
39 380
29 319
21 543
962
-
Corporate and eliminations
(104 074)
(35 416)
Consolidated earnings
(166 161)
87 710
Adjusted
Loss/impairment of assets
84 934
Loss on disposal of discontinued operations
38 190
Headline earnings
(43 043)
(10 683)
77 027
10
STATEMENT OF COMPREHENSIVE INCOME
Continuing operations
Revenue
2014
R’000
2013
R’000
%
Change
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
(37 440)
(31 652)
18,9
(319 201)
43 238
n/a
102 862
(18 136)
n/a
(216 339)
25 102
n/a
2 168 485
18,6
Net Finance expense
PBT
Taxation
(Loss)/profit from continuing operations
Order book
2 607 718
11
STATEMENT OF COMPREHENSIVE INCOME
2014
R’000
2013
R’000
Revenue
724 052
787 857
EBITDA
96 361
106 217
Attributable earnings
50 178
62 608
Discontinued operations
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
12
STATEMENT OF COMPREHENSIVE INCOME
Earnings per share
(Loss)/profit after tax
2014
R’000
2013
R’000
(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
13
STATEMENT OF FINANCIAL POSITION
2014
R’000
2013
R’000
Property, plant and equipment
320 135
822 678
Intangibles and goodwill
185 062
392 051
64 923
3
11 457
22 729
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
1 548 811
2 243 781
Financial overview
Financial asset at fair value
Deferred tax
Long-term receivables
Total assets
NTAV/share
168,6 cents
45 days
in trade
receivable
2014 Current
ratio 1,65
NAV/share
203,5 cents
14
STATEMENT OF FINANCIAL POSITION
2014
R’000
2013
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
437 013
493 816
13 713
40 242
1 548 811
2 243 781
26,5%
32,3%
Financial overview
Trade and other payables
Provisions
Total equity and liabilities
Debt/equity
64 days
in trade
payables
15
Thousands
CASH FLOW
600
500
400
300
200
100
0
Cash
balance
March
2013
EBITDA
cash items
Disposal
of
Geotech
division
Dividends
Repaypaid
ment of HYB
Disposal
of fixed
assets
Other
Acquisition Acquisition
secured
of developof fixed
borrowings
ment
assets
properties
Working
capital
Shares
issued
Tax paid
Other
investing
activities
Interest
Cash
balance
February
2014
16
OPERATIONAL
REVIEW
17
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
18
PIPELINES
Pipelines
2014
R’000
2013
R’000
Revenue
579 285
323 552
39 892
30 583
254 857
191 552
1 163
763
79%
42%
9%
10%
Order book
654 205
518 822
Pending awards
351 700
32 000
1 380 000
1 630 000
-%
-%
100%
100%
PBIT
Segment assets
Number of employees
Revenue growth
Operating margins
Prospects
Non-government
Government
19
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
BG3
100ton crane
Focus on project delivery pipe lift
• Plant expansion of R10 million on back of awarded work
Office established in Zimbabwe
20
CIVILS
2014
R’000
2013
R’000
961 599
1 214 549
(183 881)
76 525
788 590
963 994
1 969
2 701
Revenue growth
(20,8)%
47%
Operating margins
(13,9)%
6%
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%
Civils
Revenue
PBIT
Segment assets
Number of employees
Order book
21
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)
N4
Temporary staging
to portal structure
Look to continue consolidating
construction operations in year
ahead
› 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
Reinvigorated business
22
CIVILS LOSS MAKING CONTRACTS
N4 Bakwena
• Contract award
4 May 2011
• Value at award
R370 million
• Duration
originally 30 months
What happened
Placing
selected fill
at N4
• 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
23
CIVILS LOSS MAKING CONTRACTS
Kriel Civils and Boxhole
Civils
Boxhole
• Contract award 11 April 2012
• Value at award R109 million
• Duration
12 months
• Contract award 11 April 2012
• Value at award
R35 million
• Duration
8 months
What happened
•
•
•
•
•
Earthworks
at Kriel
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 loss
on 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
24
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:
Road upgrade
at Hwelereng
for RAL
› 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
25
CIVILS TURNAROUND STARTED NOVEMBER 2012
Actions and timeline
• Loss making contracts
• Productivity
• Utilisation
• Tender and estimating
• Commercial
• Civils Recovery Strategy 2014.ppt
Building bridges
at Diepsloot
26
DEVELOPMENTS
2014
R’000
2013
R’000
63 356
-
1 401
(1 668)
264 454
57 123
3
1
N/A
N/A
2,2%
N/A
Order book
724 632
410 900
Pending awards
895 876
1 000 000
4 000 000
2 000 000
Non-government
51%
N/A
Government
49%
N/A
Developments
Revenue
PBIT
Segment assets
Number of employees
Revenue growth
Operating margins
Prospects
27
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
Orchards
Completed houses
Strategically important division
due to secondary work potential
for group
› 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
28
STRATEGY
29
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
30
PROSPECTS
AND ORDER
BOOK
31
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
32
ORDER BOOK
Order book
R’mil
Secured
revenue
FY 2015
R’mil
Secured
revenue
FY 2015 +
R’mil
1 228 500
828 500
400 000
Developments
724 632
157 000
567 632
Pipelines
654 586
357 498
297 088
2 607 718
1 342 998
1 264 720
Non-government
13%
11%
15%
Government
87%
89%
85%
Civils
552 000
257 000
295 000
Developments
895 876
41 053
854 823
Pipelines
351 700
235 700
116 000
1 799 576
533 753
1 265 823
2 year secured order book
Civils
Total secured
Pending awards
Total pending
33
ORDER BOOK LEGACY LOSS MAKING CONTRACTS IN WOH
Impact of loss making contracts on 2015
order book
Old work still to be completed
• Civils order book - R1,2 billion
R203,8m
• Included FY15 order book is R25,4 million re
legacy loss making contracts
• Order book includes R203,8 million work secured
prior to FY14
R25,4m
• New work secured represents 81% of order book
R998,3m
Old work still to be completed
Old loss making work to be completed 2015
New secured work
34
CAPEX
35
CAPEX
2015
R’mil
2014
R’mil
2013
R’mil
-
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
0,57
0,62
1,89
CAPEX
Civils
Depreciation cover
36
CONCLUSION
37
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
38
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.
39
CONTACT US
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
Bernie.krone@esor.co.za
Wessel van Zyl | CFO
+ 27 82 498 3518
+27 11 776 8700
+27 11 822 1158
Wessel.vanzyl@esor.co.za
40