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ESR - Esor Limited - Audited financial results: year ended 28 February 2007

Release Date: 23/05/2007 08:50:01      Code(s): ESR
ESR - Esor Limited - Audited financial results: year ended 28 February 2007     
Esor Limited                                                                    
(Incorporated in the Republic of South Africa)                                  
(Registration number: 1994/000732/06)                                           
(JSE code: ESR & ISIN: ZAE000078408)                                            
("Esor" or "the company")                                                       
HIGHLIGHTS                                                                      
All key performance indicators ahead of forecasts                               
Revenue UP 132%                                                                 
HEPS UP 77%                                                                     
EBITDA UP 163%                                                                  
Dividend of 6 cents per share                                                   
Successful integration of Franki acquisition                                    
BEE equity participation at 26,86%                                              
AUDITED FINANCIAL RESULTS                                                       
for the year ended 28 February 2007                                             
CONSOLIDATED INCOME STATEMENT                                                   
                               Year ended     Year ended                        
                               28 February    28 February                       
2007           2006                              
                               Audited        Audited                           
                               R`000          R`000                             
Revenue                         291 392        125 393                          
Cost of sales                   (209 465)      (98 772)                         
Gross profit                    81 927         26 621                           
Other operating income          1 133          1 057                            
Operating expenses              (28 712)       (7 060)                          
Earnings before interest, tax,  54 348         20 618                           
depreciation and amortisation                                                   
Depreciation                    (8 654)        (2 650)                          
Profit before interest and      45 694         17 968                           
taxation                                                                        
Net interest received           1 287          493                              
Profit before taxation          46 981         18 461                           
Taxation                        (12 899)       (5 122)                          
Profit for the year             34 082         13 339                           
Reconciliation of headline                                                      
earnings:                                                                       
Profit attributable to          34 082         13 339                           
ordinary shareholders                                                           
Adjusted for profit on          (184)          (653)                            
disposal of property, plant                                                     
and equipment                                                                   
Headline earnings               33 898         12 685                           
Weighted average shares in      150 771        99 993                           
issue on which earnings are                                                     
based                                                                           
Basic earnings per share        22.6           13.3                             
(cents)                                                                         
Adjusted for -                                                                  
Profit on disposal of           (0.1)          (0.6)                            
property, plant and equipment                                                   
(after tax) (cents)                                                             
Headline earnings per share     22.5           12.7                             
(cents)("HEPS")                                                                 
Dividend per share (cents)      6.0            -                                
CONSOLIDATED CASH FLOW STATEMENT                                                
                               Year ended     Year ended                        
                               28 February    28 February                       
2007           2006                              
                               Audited        Audited                           
                               R`000          R`000                             
Cash flows from operating       32 877         4 781                            
activities                                                                      
Cash receipts from customers    258 833        120 827                          
Cash paid to suppliers and      (216 904)      (114 131)                        
employees                                                                       
Cash generated from operations  41 929         6 696                            
Interest received               3 007          982                              
Interest paid                   (1 720)        (489)                            
Taxation paid                   (10 339)       (2 408)                          
Cash flows from investing       (146 638)      (808)                            
activities                                                                      
Acquisition of property, plant  (41 263)       (2 229)                          
and equipment                                                                   
Proceeds on disposal of         409            571                              
property, plant and equipment                                                   
Proceeds on disposal of         -              850                              
investment property                                                             
Brand name acquired             (94 529)       -                                
Acquisition of subsidiary       (11 255)       -                                
Cash flows from financing       153 773        1 880                            
activities                                                                      
Increase/(decrease) in          (4 419)        2 192                            
unsecured loans                                                                 
(Decrease)/increase in secured  30 905         (312)                            
borrowings                                                                      
Share issue net of issue        127 287        -                                
expenses                                                                        
Net increase in cash and cash   40 012         5 853                            
equivalents                                                                     
Cash and cash equivalents at    12 636         6 783                            
beginning of year                                                               
Cash and cash equivalents at    52 648         12 636                           
end of year                                                                     
CONSOLIDATED BALANCE SHEET                                                      
                               28 February    28 February                       
                               2007           2006                              
                               Audited        Audited                           
R`000          R`000                             
ASSETS                                                                          
Non-current assets              238 579        20 463                           
Property, plant and equipment   139 861        20 463                           
Intangible assets               94 529         -                                
Deferred taxation               4 189          -                                
Current assets                  226 817        40 723                           
Inventories                     6 877          36                               
Unsecured loans                 -              5                                
Taxation overpaid               5 743          -                                
Trade and other receivables     161 549        28 046                           
Bank and cash                   52 648         12 636                           
Total assets                    465 396        61 186                           
EQUITY AND LIABILITIES                                                          
Share capital and reserves      240 020        36 940                           
Share capital and premium       175 352        6 372                            
Equity compensation reserve     658            -                                
Foreign currency translation    41             -                                
reserve                                                                         
Post retirement benefit         (681)          -                                
reserve                                                                         
Accumulated profits             64 650         30 568                           
Non-current liabilities         71 724         4 797                            
Secured borrowings              43 915         2 837                            
Post retirement benefits        10 507         -                                
Deferred taxation               17 302         1 960                            
Current liabilities             153 652        19 449                           
Trade and other payables        121 266        9 546                            
Current portion of secured      7 939          1 909                            
borrowings                                                                      
Taxation owing                  3 047          3 570                            
Provisions                      21 400         -                                
Unsecured loans                 -              4 424                            
Total equity and liabilities    465 396        61 186                           
Shares in issue                 243 371 510    100 000 000                      
Net asset value per share       109.79         36.94                            
(cents)                                                                         
Net tangible asset value per    66.55          36.94                            
share (cents)                                                                   
                                                                                
SEGMENTAL REPORT                                                                
              Southern Africa     Other regions       Consolidated              
              2007      2006      2007     2006       2007      2006            
              R`000     R`000     R`000    R`000      R`000     R`000           
Revenue        256 591   125 393   34 801   -          291 392   125 393        
Profit         36 939    13 339    (2857)   -          34 082    13 339         
Total assets   370 667   61 186    94 729   -          465 396   61 186         
Total          187 549   24 285    37 827   -          225 376   24 285         
liabilities                                                                     
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                                     
                               Equity   Foreign   Post                          
            Share    Share     compens  Currency  Retire-   Accumu-             
ation    transla-  ment      lated               
            capital  premium   reserve  tion      benefit   profits  Total      
                                        reserve   reserve                       
            R`000    R`000     R`000    R`000     R`000     R`000    R`000      
Balance at   *        -         -        -         -         17 229   17 229    
1 March                                                                         
2005                                                                            
Share issue  *        6 855     -        -         -         -        6 855     
Share issue  -        (483)     -        -         -         -        (483)     
expenses                                                                        
Capitalisat  100      (100)     -        -         -         -        -         
ion issue                                                                       
Net profit   -        -         -        -         -         13 339   13 339    
for the                                                                         
year                                                                            
Balance at   100      6 272     -        -         -         30 568   36 940    
1 March                                                                         
2006                                                                            
Share issue  93       137 807   -        -         -         -        137 900   
Share issue  -        (10 613)  -        -         -         -        (10       
expenses                                                              613)      
Share-based  26       41 667    -        -         -         -        41 693    
payments                                                                        
Foreign      -        -         -        41        -         -        41        
currency                                                                        
translation                                                                     
adjustment                                                                      
Post         -        -         -        -         (681)     -        (681)     
retirement                                                                      
defined                                                                         
benefit                                                                         
Share        -        -         658      -         -         -        658       
options                                                                         
granted                                                                         
Profit for   -        -         -        -         -         34 082   34 082    
the year                                                                        
Balance at   219      175 133   658      41        (681)     64 650   240 020   
28 February                                                                     
2007                                                                            
* Amount less than R1 000.                                                      
COMMENTS                                                                        
INTRODUCTION                                                                    
The directors are pleased to present the annual financial results of the company
for the year ended 28 February 2007 ("the year"), which significantly exceed the
forecasts in the revised listing particulars ("revised listing forecasts")      
issued on the acquisition of Franki Africa (Pty) Limited ("Franki") in October  
2006. The successful year was marked by a number of strategic milestones.  On 14
March 2006 Esor listed on the Alternative Exchange ("AltX") of the JSE Limited. 
In the third quarter of 2006 Esor concluded the acquisition of Franki at the    
same time boosting black ownership and directorship ahead of Charter            
requirements and expanding its services offering and footprint.                 
Although only four months of Franki`s trading figures have been consolidated    
into the group results from the effective date of the acquisition, the benefits 
of the acquisition are reflected in Franki`s contribution to the substantial    
increases in all of Esor`s key performance indicators.                          
Esor has declared a final dividend of 6 cents per share for the year, more than 
three times the 1,97 cents per share in the revised listing forecasts.  This    
move further reinforces Esor`s leadership as the first construction-related     
company on AltX  to do so.                                                      
REVIEW OF OPERATIONS                                                            
Esor has continued its strategy of selectively pursuing contracts offering      
higher profit margins.  This has yielded a strong increase in profits           
commensurate with a substantial increase in revenue.                            
Thriving market conditions continue to drive unabated demand for Esor`s         
services. At the same time management`s strict cost control and focus on        
operational efficiency have led to improved operating margins.                  
During the year Esor completed a number of large-scale contracts including      
piling and lateral support for the expansion to OR Tambo International Airport  
valued at R150 million and the R20 million pipejacking and intake work for the  
Vaal River Eastern Subsystem Augmentation Project (VRESAP).                     
FINANCIAL RESULTS                                                               
Group revenue more than doubled to R291,4 million from R125,4 million in the    
previous year, 14,5% ahead of the R254,5 million in the revised listing         
forecasts. EBITDA increased by 163% to R54,3 million from R20,6 million and     
exceeded the revised listing forecast of R41,9 million by 29,6%. Headline       
earnings rose 167,2% to R33,9 million equating to 22,5 cents per share (HEPS),  
53,7% ahead of the revised listing forecast of 14,64 cents per share.           
Cash on hand tripled (317,5%) to R52,6 million. During the year the group       
invested in organic growth with the purchase of capital equipment to the value  
of R41,2 million.                                                               
SEGMENTAL ANALYSIS                                                              
The company is managed in South Africa but operates in two principal areas of   
the world, namely Southern Africa and the other regions. In South Africa, its   
home country, the main focus is on the construction of piles and other related  
geotechnical and civil engineering procedures. The company also operates in     
Namibia, Swaziland, Lesotho, Mozambique, Botswana,Angola, Mauritius and         
Seychelles. The geographical locations are the basis on which the group reports 
its primary segment information.                                                
BLACK ECONOMIC EMPOWERMENT ("BEE")                                              
As part of the Franki acquisition BEE ownership was boosted to 26,86% ahead of  
Charter requirements. In terms of the deal a BEE consortium including Esor and  
Franki staff, funded the cash component of the purchase price.  Black employees 
now hold a 7,7% stake in the company through the Esor Broad Based Share         
Ownership Scheme.                                                               
More than 70% of the group`s 1075 core employees are black.                     
ACQUISITION                                                                     
As previously announced on 25 August 2006 and 9 October 2006 Esor concluded the 
acquisition of Franki for an aggregate consideration of R186 million. Franki has
a 60-year track record and operates throughout South Africa, sub-Saharan Africa 
and the Indian Ocean Islands providing specialist geotechnical services         
including laboratory testing, piling, underpinning and soil improvement, as well
as a full range of services for the marine construction market.                 
The two companies are each strongly branded in the geotechnical contracting     
market, and it is intended that this strategy of independent branding will      
remain in place for the foreseeable future. At the same time synergistic        
cultures, management styles and operating systems have ensured successful       
integration and the group is operating as a seamless entity.                    
DIRECTORS                                                                       
Following the conclusion of the Franki acquisition Roy McLintock and Wayne van  
Houten, the CEO and Financial Director of Franki respectively, were appointed to
the Esor board as executive directors. Further, Ethan Dube, Mlungisi Hlongwane  
and Franklin Sonn were appointed to the board as non-executive directors in     
January 2007, taking black board representation to 30%.                         
Ian Jefferiss resigned from the board with effect from 23 November 2006. The    
board thanks him for his contribution.                                          
PROSPECTS                                                                       
Organic growth and aggressive investment in plant expansion and renewal have    
resulted in increased capacity for Esor.  This together with Franki`s additional
capacity and excellent performance, has ideally positioned Esor to take         
advantage of spiralling demand as government and parastatal infrastructure      
programmes are implemented.  Increasing demand for Esor`s services for the      
municipal and commercial sectors further enhances the group`s prospects.        
The group has a healthy order book with budgeted value for the current financial
year in excess of R570 million. Both Esor and Franki have already secured       
contracts in all areas of government infrastructure spend including the         
Gautrain, 2010 stadia and the Airports Company of South Africa (ACSA). The      
directors are confident of achieving real growth in HEPS subject to market      
conditions remaining favourable.                                                
Esor will continue its strategy of capital expenditure on state-of-the-art      
equipment to revitalise its plant, specifically rigs to boost hydraulic         
efficiency. In the interim new plant will be used to augment current equipment  
and enable Esor to meet demand.                                                 
DIVIDEND POLICY                                                                 
At interim results in November 2006 Esor announced its intention to declare a   
dividend at year-end equating to 40% of after tax profit. The directors of Esor 
have declared a final dividend of R0.06 per share for the year, covered 3.7 by  
HEPS, three times higher than the 1,97 cents per share in the revised listing   
forecasts. The dividend will be financed out of current profits.                
The salient dates for the dividend are as follows:                              
Last day to trade shares cum div   Friday, 8 June 2007                          
Shares trade ex dividend                Monday, 11 June 2007                    
Record date                        Friday, 15 June 2007                         
Payment date                       Monday, 18 June 2007                         
No share certificates may be dematerialised or rematerialised between Monday, 11
June 2007 and Friday, 15 June 2007, both dates inclusive.                       
BASIS OF PREPARATION                                                            
The annual financial statements have been prepared in accordance with           
International Financial Reporting Standards and the Companies Act of South      
Africa, 1973.  The accounting policies used to prepare these annual financial   
statements are consistent with those applied at the previous year-end.          
AUDIT OPINION                                                                   
The annual financial statements for the year ended 28 February 2007 have been   
audited by Esor`s auditors RSM Betty & Dickson (Durban). Their unqualified audit
report is available for inspection at the company`s registered office.          
APPRECIATION                                                                    
The group recognises the value of its staff, many of whom have been with the    
group for more than 15 years. The directors thank them for their loyalty and    
work ethic which have contributed to the successful listing on Altx and Esor`s  
exceptional results. The board also reiterates its welcome and thanks to the    
management and staff of Franki, who have already proved integral to the group,  
and believes the initial goodwill shown by both companies will continue to the  
benefit of all stakeholders. Esor also thanks its business partners, advisors,  
suppliers, clients and shareholders for their ongoing support and faith in the  
group.                                                                          
By order of the Board                                                           
Bernard Krone                 Mauro L Trevisani                                 
Chief Executive Officer       Financial Director                                
23 May 2007                                                                     
Directors: DM Thompson* (Chairman), B Krone (CEO), ML Trevisani# (Financial     
Director), ML Barber, E Dube*, AM Field %, JM Hlongwane*, RP McLintock, FA      
Sonn*, W van Houten, J van Reenen (alternate to F Sonn)                         
Non-executive director                                                          
Independent                                                                     
#Italian Citizen                                                                
% British Citizen                                                               
Registered office: 130 Aberdare Drive, Phoenix Industrial Park, Durban, 4051 (PO
Box 40096, Red Hill, 4071)                                                      
Telephone: 031 507 1051                                                         
Facsimile: 031 507 5709                                                         
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70    
Marshall Street, Johannesburg, 2001 (PO Box 61763, Marshalltown, 2107)          
Designated Adviser: Exchange Sponsors (Pty) Limited                             
Company secretary: ID Stephen                                                   
www.esor.co.za                                                                  
Date: 23/05/2007 08:50:01 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  



                                        
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