Wrap Text
ESR - Esorfranki Limited - Audited abridged consolidated results for the year
ended 29 February 2012
ESORFRANKI LIMITED
(Registration number: 1994/000732/06)
Incorporated in the Republic of South Africa
JSE Code: ESR ISIN: ZAE000133369
("Esorfranki" or "the company" or "the group")
AUDITED ABRIDGED CONSOLIDATED RESULTS
FOR THE YEAR ENDED 29 FEBRUARY 2012
HIGHLIGHTS
HEPS 6,2 CENTS PER SHARE
REVENUE R1,8 BILLION
FOREIGN REVENUE R274 MILLION
ORDER BOOK R1,8 BILLION
COMMENTARY
Introduction
The audited condensed consolidated financial results for the year to 29
February 2012 ("the year") reflect Esorfranki`s successful turnaround with a
resumption of profitability. The group`s performance was enhanced by effective
rationalisation and optimisation processes in all divisions cementing a
healthier contract base. A number of major new contract wins saw the order book
stabilise at a solid R1,8 billion at year-end.
Financial results
Consolidated revenue increased to R1,8 billion from R1,4 billion in the
previous year. Earnings before interest, taxation, depreciation, impairments
and amortisation ("EBITDA") increased by 170,4% to R132,7 million (2011: R49,1
million). Headline earnings per share ("HEPS") was up 148%, reversing prior
year loss into a positive 6,2 cents. Net asset value ("NAV") per share
increased to 241,5 cents (2011: 238,9 cents) based on the number of shares in
issue at year-end, net of treasury shares.
Review of operations
Revenue from foreign operations in Esorfranki Geotechnical grew 34% to R273,7
million, driving growth in the division`s total revenue of 4% year-on-year.
Record revenues were recorded specifically in Mozambique and Mauritius. Foreign
operations achieved an operating margin of 14% and contributed 68% to the
division`s total operating profit. In contrast South African-based revenue was
down 8% year-on-year due to intensifying competition, which further saw a
reduced gross margin contribution. Operating margins did, however, improve
substantially in the second half of the year to 10%.
Esorfranki Civils` revenue increased 59% and the division returned to
profitability in the second half of the year, following prior losses and margin
reversals on the R21 contract and contract completion costs on the N4 project
(Phase I). These contracts have now been concluded. The division has adopted
stringent risk management in its contract tendering and project execution
policies to avoid a recurrence of such adverse challenges in the future.
Operating margins in the division improved substantially to 10% in the second
half of the year due to optimised operational efficiency on existing long-term
contracts. Exceptional plant utilisation was achieved on the back of the
ongoing capital expansion programme.
Despite tightly competitive conditions in the Government projects sector, the
division managed to grow its order book by 41%. Private sector awards included
a R271 million construction contract for an integrated township development
related to the mining industry.
Esorfranki Pipelines` revenue was up 35%, notwithstanding a turbulent financial
year which included the cancellation of the Western Aqueduct contract. Revenue
was further negatively impacted by contractual disputes on the flagship BG 3
contract. However, the latter was resolved in Esorfranki`s favour on mediation.
It has since been referred to arbitration by the client and is expected to be
finalised in FY2013. Operating margins sustained a break even financial
performance.
The division secured a number of new major contracts in the last quarter of the
financial year.
CAPEX
During the year the group acquired property, plant and equipment amounting to
R257,7 million (2011: R50,4 million).
Esorfranki Geotechnical acquired land and developed workshops and offices in
Mauritius totalling R4,5 million, and invested R51,1 million in rebuilds and
new equipment including a R17,0 million BG 28 oscillator piling rig. Esorfranki
Civils spent R205,3 million in acquiring plant to enhance capacity on the back
of long-term secured contracts while Esorfranki Pipelines invested R0,6
million.
The total capex approved for the year ahead is R199 million.
BEE
Esorfranki is currently a `Level 4` contributor in terms of the Department of
Trade & Industry`s B-BBEE Codes of Good Practice. During the year ownership was
diluted by 8,67 points following the completion of the rights issue. In line
with the Construction Charter`s targeted increase in ownership from 27,5% to
30,0% by December 2013, the group will consider a B-BBEE equity transaction. To
this end Esorfranki has initiated an evaluation process to ensure that the
group`s strategic objectives, compliance with the Codes and properly
representative ownership are achieved.
78% of the group`s 3 402 (2011: 3 184)-strong workforce is Black and emphasis
is on skills training and development to accelerate promotion into middle and
senior management.
Prospects
Esorfranki will continue to explore further expansion into Africa, while also
keeping a keen eye on the domestic market. The focus going forward will remain
on expansion into new markets in Africa, to strengthen and diversify revenue
streams while taking advantage of the South African Government`s renewed
commitment to infrastructure as per February`s State of the Nation Address. It
should offer Esorfranki significant opportunity, especially in terms of
development and unlocking of South Africa`s resource wealth through transport,
energy and water logistics.
The group has secured a number of significant local and African contracts in
all divisions to overcome tough market conditions. Esorfranki Geotechnical`s
first contract in Ghana, worth R13 million, has been completed and formed the
foundation for a further three contracts in the country for lateral support and
marine structures worth R120 million. Esorfranki Civils has scooped long-term
contracts including from Bakwena Corridor Concessionaire, Gauteng Roads
Department, Eskom and Anglo Coal, amongst others. Esorfranki Pipelines` recent
new contracts include a major project in KwaZulu-Natal for Umgeni Water valued
at R130 million.
The next year to 18 months will see Esorfranki continue optimising efficiencies
and prioritising diversification of products, including opportunities in the
solar green energy arena for Esorfranki Geotechnical.
Within South Africa, infrastructure development in power, water, transport and
resources is desperately required. Esorfranki is well-positioned to take
advantage of new projects as and when they come to the market.
Directorate
Andy Brookstein, former Managing Director of Esorfranki Civils, was appointed
as an executive director of the group with effect from 26 August 2011.
Dividend declaration
The board has resolved not to declare a dividend in respect of this financial
year (2011: Nil). It remainsthe policy of the company to review the dividend
policy annually in light of solvency, liquidity, cash flow, gearing and capital
requirements.
Events after the reporting date
There were no significant events after the reporting date.
Statement of compliance
The audited abridged consolidated results for the year have been prepared in
accordance with the recognition and the measurement requirements of
International Financial Reporting Standards, the presentation and disclosure
requirements of IAS 34: Interim Financial Reporting, the AC 500 standards and
the JSE Limited Listings Requirements and in the manner required by the South
African Companies Act, 71 of 2008. The accounting policies applied in
preparation of the audited abridged consolidated annual financial statements
are consistent with those applied in the group`s audited consolidated annual
financial statements for the year ended 28 February 2011, which comply with
International Financial Reporting Standards.
Audit opinion
The auditors, KPMG Inc., have issued an unmodified audit opinion on the group`s
annual financial statements for the year ended 29 February 2012. The audit was
conducted in accordance with International Standards on Auditing. A copy of
their audit report is available for inspection at the company`s registered
office. These audited abridged consolidated annual financial statements have
been derived from the group audited annual financial statements and are
consistent in all material respects.
Annual general meeting
The annual general meeting of the company will be held at the company`s
offices, 30 Activia Road, Activia Park, Germiston on Friday, 13 July 2012 at
10:00. The salient dates relating to the annual general meeting are as
follows:
Last day to trade to be eligible to vote at the
annual general meeting Friday, 29 June 2012
Record date for determining those shareholders
entitled to vote at the annual general meeting Friday, 6 July 2012
Appreciation
We thank our management and staff for their steadfast commitment during another
trying year.We also thank our board for their continued invaluable guidance and
extend our appreciation to our business associates, customers and shareholders
for their ongoing support.
On behalf of the board
Bernie Krone Wayne van Houten
CEO CFO
28 May 2012
Abridged consolidated statement of comprehensive income
2012 2011
R`000 R`000
Revenue 1 771 692 1 366 433
Cost of sales (1 549 955) (1 204 988)
Gross profit 221 737 161 445
Other income 1 705 3 654
Operating expenses (90 786) (116 033)
Profit before interest, income tax, 132 656 49 066
amortisation, impairments and
depreciation
Depreciation, impairments and (79 510) (65 489)
amortisation
Results from operating activities 53 146 (16 423)
Finance costs (73 233) (54 371)
Finance income 49 726 23 703
Profit/(loss) before income tax 29 639 (47 091)
Income tax expense (11 423) 6 330
Profit/(loss) after tax 18 216 (40 761)
Other comprehensive income
Foreign currency translation differences 13 655 (21 334)
for foreign operations
Actuarial loss on post-retirement benefit (73) (261)
Income tax on translation differences (1 862) 2 441
Other comprehensive income for the year, 11 720 (19 154)
net of tax
Total comprehensive income attributable
to:
Owners of the company 29 936 (59 915)
Basic earnings/(loss) per share (cents) 4,7 (13,9)
Diluted earnings/(loss) per share (cents) 4,7 (13,8)
Headline earnings/(loss) per share 6,2 (12,9)
(cents)
Diluted headline earnings/(loss) per 6,2 (12,8)
share (cents)
Reconciliation of headline
earnings/(loss):
Profit/(loss) attributable to ordinary 18 216 (40 761)
shareholders
Adjusted for:
Loss on disposal of property, plant and 5 830 4 609
equipment
Gain on disposal of subsidiary - (3 654)
Impairment of assets - 2 032
Headline earnings/(loss) attributable to 24 046 (37 774)
ordinary shareholders
Number of ordinary shares (`000)
in issue 395 185 302 162
diluted weighted average 386 731 294 555
weighted average 386 731 293 763
Abridged consolidated statement of financial position
2012 2011
R`000 R`000
ASSETS
Non-current assets 1 151 181 966 187
Property, plant and equipment 737 312 565 775
Intangible assets 88 226 90 117
Goodwill 305 715 305 715
Financial assets at fair value through 1 291 -
profit or loss
Deferred tax assets 18 637 4 580
Current assets 665 288 498 164
Inventories 20 622 16 983
Non-current assets held-for-sale 3 293 -
Other investments - 420
Taxation 15 617 3 855
Trade and other receivables 529 103 413 768
Cash and cash equivalents 96 653 63 138
Total assets 1 816 469 1 464 351
EQUITY AND LIABILITIES
Share capital and reserves 937 432 703 156
Share capital and premium 592 045 389 449
Equity compensation reserve 16 188 14 444
Foreign currency translation reserve (21 395) (33 188)
Retained earnings 350 594 332 451
Non-current liabilities 316 658 195 562
Secured borrowings* 179 911 84 516
Post-retirement benefits 1 806 1 657
Deferred tax liabilities 134 941 109 389
Current liabilities 562 379 565 633
Current portion of secured borrowings* 105 923 241 527
Bank overdraft 3 047 -
Taxation 15 872 9 953
Provisions 16 350 3 213
Trade and other payables 421 187 310 940
Total equity and liabilities 1 816 469 1 464 351
Net asset value per share (cents) 241,5 238,9
Net tangible asset value per share 168,5 142,1
(cents)**
* Interest-bearing debt
** (Net asset value less intangible assets, net of tax)/(shares in issue less
treasury shares)
Abridged consolidated statement of cash flows
2012 2011
R`000 R`000
Cash flows from operating activities 124 205 58 075
Cash receipts from customers 1 541 006 1 464 009
Cash paid to suppliers and employees (1 385 546) (1 330 934)
Cash generated from operations 155 460 133 075
Dividends paid - (43 642)
Finance income 49 726 23 703
Finance cost (73 090) (54 224)
Taxation paid (7 891) (837)
Cash flows from investing activities (256 057) (41 979)
Proceeds from sale of property, plant and 8 872 3 032
equipment
Disposal of business, net of cash - (980)
acquired
Acquisition of property, plant and (257 722) (50 373)
equipment
(Acquisition)/disposal of investments and
financial assets (7 207) 6 342
Cash flows from financing activities 162 320 (69 820)
Proceeds from the issue of share capital 202 596 1 261
Decrease in secured borrowings (40 209) (70 665)
Post-retirement benefits paid (67) (416)
Net increase/(decrease) in cash and cash 30 468 (53 725)
equivalents
Cash and cash equivalents at beginning of 63 138 116 863
year
Cash and cash equivalents at end of year 93 606 63 138
Abridged consolidated statement of changes in equity
Share Share Equity
compensation
capital premium reserve
R`000 R`000 R`000
Balance at 1 March 2010 292 396 664 8 253
Loss for the year - - -
Other comprehensive income
Foreign currency translation - - -
differences from foreign
operations
Post-retirement benefit - - -
adjustment
Total other comprehensive income - - -
Total comprehensive income for - - -
the year
Transactions with owners,
recorded directly in equity:
Contributions by and
distributions to owners
Share issue expenses - (8 768) -
Dividends to equity holders - - -
Share-based payment transactions - - 6 191
Treasury shares - options 2 1 259 -
exercised
Total contributions by and 2 (7 509) 6 191
distributions to owners
Balance at 28 February 2011 294 389 155 14 444
Profit for the year - - -
Other comprehensive income
Foreign currency translation - - -
differences from foreign
operations
Post-retirement benefit - - -
adjustment
Total other comprehensive income - - -
Total comprehensive income for - - -
the year
Transactions with owners,
recorded directly in equity:
Contributions by and
distributions to owners
Rights issue 93 199 907 -
Share-based payment transactions - - 1 744
Treasury shares - options 1 2 595 -
exercised
Total contributions by and 94 202 502 1 744
distributions to owners
Balance at 29 February 2012 388 591 657 16 188
2012 2011
Dividends per ordinary share - -
(cents)
Translation Retained Total
reserve earnings equity
R`000 R`000 R`000
Balance at 1 March 2010 (14 295) 417 115 808 029
Loss for the year - (40 761) (40 761)
Other comprehensive income
Foreign currency translation (18 893) - (18 893)
differences from foreign
operations
Post-retirement benefit - (261) (261)
adjustment
Total other comprehensive income (18 893) (261) (19 154)
Total comprehensive income for (18 893) (41 022) (59 915)
the year
Transactions with owners,
recorded directly in equity:
Contributions by and
distributions to owners
Share issue expenses - - (8 768)
Dividends to equity holders - (43 642) (43 642)
Share-based payment transactions - - 6 191
Treasury shares - options - - 1 261
exercised
Total contributions by and - (43 642) (44 958)
distributions to owners
Balance at 28 February 2011 (33 188) 332 451 703 156
Profit for the year - 18 216 18 216
Other comprehensive income
Foreign currency translation 11 793 - 11 793
differences from foreign
operations
Post-retirement benefit - (73) (73)
adjustment
Total other comprehensive income 11 793 18 143 29 936
Total comprehensive income for 11 793 18 143 29 936
the year
Transactions with owners,
recorded directly in equity:
Contributions by and
distributions to owners
Rights issue - - 200 000
Share-based payment transactions - - 1 744
Treasury shares - options - - 2 596
exercised
Total contributions by and - - 204 340
distributions to owners
Balance at 29 February 2012 (21 395) 350 594 937 432
Information about Reportable Segments
Geotechnical Civils
2012 2011 2012 2011
R`000 R`000 R`000 R`000
External revenue 734 475 684 989 820 396 512 439
Inter-segment revenue 10 617 21 683 3 655 6 348
Segment revenue 734 092 706 672 824 051 518 787
Segment result:
Profit/(loss) before 50 253 18 747 25 376 (3 113)
interest and taxation
Finance cost (56 352) (53 608) (15 680) (9 286)
Finance income 50 561 24 858 4 224 4 168
Taxation (921) 7 773 (8 242) (3 014)
Segment profit/(loss) 43 541 (2 230) 5 678 (11 245)
Segment assets 722 746 662 228 583 537 454 761
Segment liabilities 321 438 643 020 531 512 219 261
Capital and non-cash
items:
Additions to property, 51 100 11 794 205 317 17 964
plant and equipment
Depreciation 21 686 23 183 45 452 21 039
Impairment loss - 1 624 - -
Number of employees 1 191 1 287 1 820 1 453
Pipelines Corporate and
Eliminations
2012 2011 2012 2011
R`000 R`000 R`000 R`000
External revenue 227 821 169 005 - -
Inter-segment revenue - - (14 272) (28 031)
Segment revenue 227 821 169 005 (14 272) (28 031)
Segment result:
Profit/(loss) before 2 234 (3 548) (24 717) (28 509)
interest and taxation
Finance cost (72) (79) (1 129) 8 602
Finance income 1 915 3 361 (6 974) (8 684)
Taxation (4 407) (794) 2 147 2 365
Segment profit/(loss) (330) (1 060) (30 673) (26 226)
Segment assets 84 007 87 092 426 179 260 270
Segment liabilities 83 817 54 024 (57 730) (155 109)
Capital and non-cash
items:
Additions to property, 620 6 104 685 14 512
plant and equipment
Depreciation 2 817 1 640 9 555 14 807
Impairment loss - - - 1 200
Number of employees 373 434 18 10
Consolidated
2012 2011
R`000 R`000
External revenue 1 771 692 1 366 433
Inter-segment revenue - -
Segment revenue 1 771 692 1 366 433
Segment result:
Profit/(loss) before 53 146 (16 423)
interest and taxation
Finance cost (73 233) (54 371)
Finance income 49 726 23 703
Taxation (11 423) 6 330
Segment profit/(loss) 18 216 (40 761)
Segment assets 1 816 469 1 464 351
Segment liabilities 879 037 761 196
Capital and non-cash
items:
Additions to property, 257 722 50 374
plant and equipment
Depreciation 79 510 60 669
Impairment loss - 2 824
Number of employees 3 402 3 184
Geographical information
South Africa Other regions
2012 2011 2012 2011
R`000 R`000 R`000 R`000
Total revenue 1 497 994 1 162 814 273 698 203 619
Property, plant and 625 352 463 705 111 960 102 070
equipment
Consolidated
2012 2011
R`000 R`000
Total revenue 1 771 692 1 366 433
Property, plant and 737 312 565 775
equipment
DIRECTORS:
DM Thompson* (Chairman)
B Krone (CEO)
W van Houten (CFO)
AC Brookstein
EG Dube*
MB Mathabathe*
Dr FA Sonn*
*Independent non-executive
REGISTERED OFFICE:
30 Activia Road, Activia Park, Germiston, 1401
(PO Box 6478, Dunswart, 1508)
Telephone: +27 11 776 8700
Fax: +27 11 822 1158
SPONSOR:
Vunani Corporate Finance
Vunani House, Athol Ridge Office Park
151 Katherine Street, Sandton, 2196
(PO Box 652419, Benmore, 2010)
TRANSFER SECRETARIES:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
COMPANY SECRETARY:
iThemba Governance and Statutory Solutions (Pty) Limited
Monument Office Park, Suite 5 - 102
79 Steenbok Avenue, Monument Park, 0181
(PO Box 25160, Monument Park, 0105)
INVESTOR RELATIONS:
Envisage Investor & Corporate Relations
4th Floor, South Wing, Hyde Park Offices
(Hyde Park Shopping Centre)
Jan Smuts Avenue, Hyde Park 2196
(PO Box 413031, Craighall, 2024)
www.esorfranki.co.za
Date: 28/05/2012 07:05:09 Supplied by www.sharenet.co.za
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