Wrap Text
Audited results for the year ended 28 February 2013
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")
ANNUAL RESULTS PRESENTATION
for the year ended 28 February 2013
Highlights
REVENUE UP 31,3% TO R2,33 BILLION
HEPS 20,5 CENTS
ORDER BOOK UP 43,7% TO R2,5 BILLION
NAV 280 CENTS PER SHARE
GROSS PROFIT R375 MILLION
Commentary
Introduction
The audited abridged consolidated financial results for the year to 28 February 2013 ("the year")
reflect Esorfranki's continued solid performance, which has sustained the group's turnaround over
the past two reporting periods. Activity levels improved across all divisions despite the challenging
domestic construction sector. The group's performance reflects the maturity gained
in the past few tough years and also an established foundation for a sustainable turnaround.
The order book has increased for the third consecutive year and stood at R2,5 billion at
28 February 2013, a 43,7% year-on-year gain.
Financial results
Consolidated revenue increased 31,3% to R2,33 billion from R1,77 billion in the previous year.
Earnings before interest, taxation, depreciation, impairments and amortisation ("EBITDA")
increased by 103% to R269,3 million (2012: R132,7 million). Headline earnings per share ("HEPS")
was 20,5 cents up 230,6% (2012: 6,2 cents). Net asset value ("NAV") per share increased to
280,3 cents per share (2012: 241,5 cents).
Review of operations
Esorfranki Geotechnical's revenue increased 7,3% to R787,9 million (2012: R734,1 million), driven
by growth in sub-Saharan Africa. Operating profit was up 52% to R76 million (2012: R50 million),
which includes a profit on sale of a property in KwaZulu-Natal of R25 million. Operating margins
for the year were 10%, with foreign operations achieving an operating margin of 17% and
contributing 79% of the division's profit.
To capitalise on promising cross border prospects the division focused on consolidating its footprint
across sub-Saharan Africa and established on the ground operations in Ghana. In addition
the division secured its first contract in Uganda, which, like Ghana, has significant infrastructure
prospects. Esorfranki Geotechnical is well established across sub-Saharan Africa with regional
offices now in Angola, Ghana, Mauritius, Mozambique, Tanzania and Zimbabwe. With a 20 year
track record in African markets, Esorfranki is well positioned to benefit from the opportunities in the
region, its considerable experience of operating in Africa offsetting the high risk.
In South Africa intense competition continued to squeeze margins. In an effort to diversify, in line
with strategy, the division successfully secured projects in the renewable energy sector and for the
infrastructure for cellular transmission towers.
Revenue in Esorfranki Civils increased 48,4% to R1,2 billion from R824,1 million in the previous year,
generating significantly higher operating profit of R76,5 million (2012: R25,4 million). The order book
grew by 4,5% year-on-year to R1,27 billion on the back of major long-term contracts from amongst
others Eskom, Bakwena Platinum Corridor Concessionaire, Gauteng Department of Roads and
private infrastructure developments. Operational efficiency was honed with a plant expansion
programme totalling R132,4 million.
Esorfanki Civils also expanded into Africa in line with the group focus, securing a contract in
Botswana.
Esorfranki Pipelines' revenue was up 42% to R324 million (2012: R228 million) due to a number of
contract awards which effectively served to offset the cancellation of the Western Aqueduct
contract and add impetus to growth beyond that. In addition the BG3 contract was successfully
completed and handed over post year-end. At year-end the order book totalled R518 million
compared to R220 million in the previous year. Operating profit of R31 million was up significantly
from R2,2 million in the previous year. Esorfranki Pipelines also extended its footprint into Africa
with a new contract in Swaziland.
CAPEX
During the year the group invested R193,9 million (2012: R257,7 million) to improve operational
efficiencies and capacity in anticipation of long-term contracts now in hand.
The total capex approved for the year ahead is R92 million, with the declining trend year-on-year
reflecting the stability and currency of the group's plant and equipment, as well as capacity to
accommodate new contracts.
Transformation
Esorfranki remained a Level 4' contributor in terms the Department of Trade & Industry's B-BBEE
Codes of Good Practice. Considerable effort continues to be channelled into improving the
group's B-BBEE level to a Level 3 in the short term. As per the renewal of cautionary of 10 May 2013,
Esorfranki remains in discussions with a BEE investment consortium for the acquisition of Esorfranki
ordinary shares. The transaction is expected to be finalised in June 2013. In addition the board is
focused on appointing a black female non-executive director by the end of the first half of the
new financial year.
The group has made substantial investment in enterprise development with 11 companies
currently receiving Esorfranki's support.
Prospects
Despite the still challenging environment in the construction sector, which has started showing
only the first slow signs of recovery, Esorfranki has boosted its order book with pleasing contract
awards across the group.
Esorfranki Geotechnical has secured a respectable 45% of its targeted order book for FY2014,
with positive prospects locally and in all regions of sub-Saharan Africa. In South Africa in the year
ahead the division will embark on new piling projects in KwaZulu-Natal and Gauteng, a wind farm
in the Eastern Cape, and a solar farm in the Northern Cape. In addition to the renewable energy
sector in which it is making successful inroads, the division will continue targeting infrastructure
for the cellular transmission towers market. In sub-Saharan Africa two new projects in Ghana and
Uganda will begin, while projects in Angola continue steadily.
Esorfranki Civils intends to further expand its focus in the year ahead to the private housing market,
roads, infrastructure and water in order to broaden its customer base. Esorfranki Civils has an
order book in excess of R1 billion with a number of pending awards. Esorfranki Civils has invested
in property developments such as the Orchards project near Pretoria and other mixed use
developments, securing a five year pipeline. In addition it will continue to pursue contracts outside
South Africa.
Esorfranki Pipelines has secured an order book for FY2014 of R440 million. Contracts throughout
South Africa include work in the Eastern Cape, KwaZulu-Natal, Gauteng and Limpopo.
While challenges remain, Esorfranki's size and experience supported resilience and the group is
well positioned for the year ahead. The growth in the business as well as investments in property
development opportunities has put pressure on the group's cash resources. Cash reduced by
R60 million from R93,6 million to R33,6 million.
Directorate
During the year chief financial officer Wayne van Houten resigned, effective 30 September 2012,
and was replaced by Wessel van Zyl effective 8 October 2012. We welcome Wessel to the board
and are looking forward to his contribution.
Andy Brookstein retired as an executive director with effect from 31 January 2013.
We thank both Wayne and Andy for their valuable service to the group.
Dividend declaration
The board has resolved not to declare a dividend in respect of the year under review, which
accords with the board's decision in the previous year (2012: Nil). It remains the policy of the
company to review the dividend 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 abridged consolidated financial statements are prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting
Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, and also, as a minimum, to contain the information required by IAS 34: Interim
Financial Reporting and the requirements of the Companies Act of South Africa. The accounting
policies applied in the preparation of the audited consolidated financial statements, from which
the abridged 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 audited consolidated financial statements.
The financial statements have been prepared by WC van Zyl, CFO.
Audit opinion
The auditors, KPMG Inc., have issued an unmodified audit opinion on the group's financial
statements for the year ended 28 February 2013. 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 abridged consolidated financial statements are derived from
the audited consolidated financial statements and are consistent in all material respects.
The group audited financial statements are available for inspection at the company's registered
office and will be included in the Integrated Annual Report 2013 to be posted to stakeholders
on or about 27 May 2013.
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, 28 June 2013 at 10h00. The notice of annual general meeting
forms part of the Integrated Annual Report 2013, to be posted to stakeholders on or about
27 May 2013.
Appreciation
We thank our management and staff for their endurance and unflagging spirit in the face of
ongoing challenges. Their efforts make as significant an impact on the group's performance as
does their enthusiasm and positivity. We also thank our business partners, suppliers, advisors and
our valued clients and shareholders for your continued confidence in the group.
On behalf of the board
Bernie Krone Wessel van Zyl
CEO CFO
27 May 2013
Statements of financial position
at 28 February 2013
Group Company
2013 2012 2013 2011
R'000 R'000 R'000 R'000
Assets
Non-current assets 1 237 461 1 151 181 678 466 679 632
Property, plant and equipment 822 678 737 312
Intangible assets 86 336 88 226
Goodwill 305 715 305 715
Financial assets at fair value
through profit or loss 3 1 291
Deferred tax asset 22 729 18 637
Investments in subsidiaries 678 466 679 632
Current assets 1 006 320 665 288 393 997 20 357
Inventories 69 721 20 622
Non-current assets held for sale 3 293
Other investments 27 726
Unsecured loans 388 777 20 335
Taxation 14 513 15 617
Trade and other receivables 826 713 529 103 5 213
Cash and cash equivalents 67 647 96 653 7 22
Total assets 2 243 781 1 816 469 1 072 463 699 989
Equity and liabilities
Share capital and reserves 1 053 262 937 432 869 426 635 754
Share capital and premium 571 300 592 045 607 445 608 232
Equity compensation reserve 18 606 16 188 18 606 16 188
Foreign currency translation reserve 3 850 (21 395)
Retained earnings 459 506 350 594 243 375 11 334
Non-current liabilities 540 326 316 658 202 500
Secured borrowings 368 507 179 911 202 500
Preference shares 21 000
Post-retirement benefits 1 913 1 806
Deferred tax liability 148 906 134 941
Current liabilities 650 193 562 379 537 64 235
Current portion of secured borrowings 79 481 105 923
Unsecured loans 63 482
Bank overdraft 34 059 3 047
Taxation 4 508 15 872
Provisions 38 329 16 350
Trade and other payables 493 816 421 187 537 753
Total equity and liabilities 2 243 781 1 816 469 1 072 463 699 989
Statements of comprehensive income
for the year ended 28 February 2013
Group Company
2013 2012 2013 2012
R'000 R'000 R'000 R'000
Revenue 2 325 958 1 771 692 239 707
Cost of sales (1 950 798) (1 549 955)
Gross profit 375 160 221 737 239 707
Other income 27 239 1 705 218 218
Operating expenses (133 134) (90 786) (4 300) (2 309)
Profit/(loss) before interest, tax,
amortisation, impairments
and depreciation 269 265 132 656 235 625 (2 091)
Depreciation, impairments and
amortisation (118 271) (79 510) (3 584) (286 488)
Results from operating activities 150 994 53 146 232 041 (288 579)
Finance income 42 369 49 726 12 805
Finance costs (86 684) (73 233) (12 805) (2)
Profit/(loss) before income tax 106 679 29 639 232 041 (288 581)
Income tax (expense)/income (18 969) (11 423) 553
Profit/(loss) after tax 87 710 18 216 232 041 (288 028)
Other comprehensive income:
Foreign currency translation
differences for foreign operations 30 157 13 655
Actuarial loss on post-retirement
benefits (97) (73)
Income tax on translation differences (4 912) (1 862)
Other comprehensive income
for the period, net of tax 25 148 11 720
Total comprehensive income
attributable to:
Owners of the company 112 858 29 936 232 041 (288 028)
Basic earnings/(loss) per share (cents) 23,5 4,7 58,7 (73,1)
Diluted earnings/(loss) per share (cents) 23,5 4,7 58,7 (73,1)
Reconciliation of headline
earnings/(loss):
Profit/(loss)after tax 87 710 18 216 232 041 (288 028)
Net (profit)/loss on disposal of property,
plant and equipment (16 988) 5 830
Impairment of intangible assets,
property, plant and equipment
and investments 6 305 3 584 206 271
Headline earnings/(loss) 77 027 24 046 235 625 (81 757)
Statements of changes in equity
for the year ended 28 February 2013
Equity Foreign
compen- currency
Share Share sation translation Retained Total
capital premium reserve reserve earnings equity
Group R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 March 2011 294 389 155 14 444 (33 188) 332 451 703 156
Profit for the year 18 216 18 216
Other comprehensive
income
Foreign currency translation
difference net of taxation 11 793 11 793
Post-retirement benefit
adjustment (73) (73)
Total other comprehensive
income 11 793 (73) 11 720
Total comprehensive income
for the year 11 793 18 143 29 936
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Rights issue 93 199 907 200 000
Share-based payment
transactions 1 744 1 744
Treasury shares options
exercised 1 2 595 2 596
Total contributions by and
distributions to owners 94 202 502 1 744 204 340
Balance at 29 February 2012 388 591 657 16 188 (21 395) 350 594 937 432
Balance at 1 March 2012 388 591 657 16 188 (21 395) 350 594 937 432
Profit for the year 87 710 87 710
Other comprehensive
income
Foreign currency translation
difference net of taxation 25 245 25 245
Post-retirement benefit
adjustment (97) (97)
Total other comprehensive
income 25 245 (97) 25 148
Total comprehensive income
for the year 25 245 87 613 112 858
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Share issue expenses (787) (787)
Share-based payment
transactions 2 418 2 418
Treasury shares options
exercised 1 1 340 1 341
Treasury shares acquired (13) (21 286) 21 299
Total contributions by and
distributions to owners (12) (20 733) 2 418 21 299 2 972
Balance at 28 February 2013 376 570 924 18 606 3 850 459 506 1 053 262
Statements of changes in equity (continued)
for the year ended 28 February 2013
Equity
compen- Common
Share Share sation control Retained Total
capital premium reserve reserve earnings equity
Company R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 March 2011 302 407 930 14 023 261 107 38 255 721 617
Loss for the year (288 028) (288 028)
Transfer to retained earnings (261 107) 261 107
Total comprehensive
income for the year (261 107) (26 921) (288 028)
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Rights issue 93 199 907 200 000
Share-based payment
transactions 2 165 2 165
Total contributions by and
distributions to owners 93 199 907 2 165 202 165
Balance at 29 February 2012 395 607 837 16 188 11 334 635 754
Balance at 1 March 2012 395 607 837 16 188 11 334 635 754
Profit for the year 232 041 232 041
Total comprehensive
income for the year 232 041 232 041
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Share issue expenses (787) (787)
Share-based payment
transactions 2 418 2 418
Total contributions by and
distributions to owners (787) 2 418 1 631
Balance at 28 February 2013 395 607 050 18 606 243 375 869 426
Statements of cash flow
for the year ended 28 February 2013
Group Company
2013 2012 2013 2012
R'000 R'000 R'000 R'000
Cash flows from operating activities (32 853) 124 205 230 196 (9 697)
Cash receipts from customers 1 995 185 1 541 006 239 707
Cash paid to suppliers and employees (1 960 683) (1 385 546) (9 511) (10 248)
Cash generated by/(utilised in)
operations 34 502 155 460 230 196 (10 248)
Finance income 42 369 49 726 12 805
Finance costs (86 684) (73 090) (12 805) (2)
Taxation paid (23 040) (7 891) 553
Cash flows from investing activities (210 980) (256 057)
Additions to property, plant
and equipment (193 930) (257 722)
Proceeds on disposal of property,
plant and equipment 39 132 8 872
Acquisition of business, net of cost (28 456)
Investments acquired (27 726) (7 207)
Cash flows from financing activities 183 815 162 320 (230 211) 9 663
Decrease in unsecured loans (431 924) (190 337)
Increase/(decrease) in secured
borrowings 162 154 (40 209) 202 500
Preference shares issued 21 000
Proceeds from share issue net
of issue expenses 554 202 596 (787) 200 000
Post-retirement benefits paid 107 (67)
Net increase/(decrease) in
cash and cash equivalents (60 018) 30 468 (15) (34)
Net cash and cash equivalents
at beginning of year 93 606 63 138 22 56
Cash and cash equivalents
at end of year 33 588 93 606 7 22
Segmental analysis
for the year ended 28 February 2013
Operating segments
Corporate and
Geotechnical Civils Pipelines eliminations Consolidated
2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
External revenue 787 857 723 475 1 214 549 820 396 323 552 227 821 2 325 958 1 771 692
Inter segment revenue 10 617 8 713 3 655 (8 713) (14 272)
Segment revenue 787 857 734 092 1 223 262 824 051 323 552 227 821 (8 713) (14 272) 2 325 958 1 771 692
Segment result
Profit/(loss) before interest
and taxation 76 105 50 253 76 525 25 376 30 583 2 234 (32 219) (24 717) 150 994 53 146
Net finance (cost)/
income (12 663) (5 791) (22 286) (11 456) (157) 1 843 (9 209) (8 103) (44 315) 23 507
Taxation (1 239) (921) (14 859) (8 242) (8 883) (4 407) 6 012 2 147 (18 969) (11 423)
Segment profit/(loss) 62 203 43 541 39 380 5 678 21 543 (330) (35 416) (30 673) 87 710 18 216
Segment assets 734 464 722 746 963 994 583 537 191 552 84 007 353 771 426 179 2 243 781 1 816 469
Segment liabilities 325 267 321 438 872 001 531 512 169 549 83 817 (84 276) (57 730) 1 190 519 879 037
Capital and non-cash
items
Additions to property,
plant and equipment 42 814 51 100 132 407 205 317 17 083 620 1 626 685 193 930 257 722
Depreciation 27 817 21 686 61 959 45 452 4 082 2 817 13 766 9 555 107 624 79 510
Impairment loss 8 757 8 757
Number of employees 1 169 1 191 2 701 1 820 763 373 21 18 4 654 3 402
South Africa Other regions Consolidated
2013 2012 2013 2012 2013 2012
Geographical information R'000 R'000 R'000 R'000 R'000 R'000
Total revenue from external customers 1 961 439 1 497 994 364 519 273 698 2 325 958 1 771 692
Property, plant and equipment 646 915 625 352 158 473 111 960 805 388 737 312
A separate segment report has not been prepared for the company as it had no trading operations.
DIRECTORS:
DM Thompson* (Chairman)
B Krone (CEO)
WC van Zyl (CFO)
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, Vunani 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, Corner Jan Smuts Avenue, Hyde Park, 2196
30 Activia Road, Activia Park
Germiston, South Africa
Tel: +27 11 776 8700
Fax: +27 11 822 1158
www.esorfranki.co.za
Esorfranki construction (Pty) Ltd is a wholly-owned subsidiary of Esorfranki Limited.
Esorfranki civils I Esorfranki pipelines I Esorfranki Geotechnical
are divisions of Esorfranki constuction (Pty) Ltd.
Date: 27/05/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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