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ESR - Esor Limited - Reviewed interim results

Release Date: 07/11/2007 08:16:56      Code(s): ESR
ESR - Esor Limited - Reviewed interim results                                   
Esor Limited                                                                    
Registration number: 1994/000732/06)                                            
Incorporated in the Republic of South Africa                                    
(Share Code: ESR & ISIN Code: ZAE000078408)                                     
("Esor" or "the company")                                                       
REVIEWED INTERIM RESULTS                                                        
for the six months ended 31 August 2007                                         
HIGHLIGHTS                                                                      
-    Revenue UP 516%                                                            
-    Earnings per share UP 202%                                                 
-    Headline earnings per share UP 205%                                        
-    Net asset value per share UP 141%                                          
-    Tangible net asset value per share UP 61%                                  
Consolidated income statement                                                   
6 months ended                       Year ended        
                         31 August   31 August                28 February       
                         (Reviewed)  (Reviewed)    Change     (Audited)         
                         2007        2006          %          2007              
R`000       R`000                    R`000             
                                                                                
Revenue                   473 575     76 858        516        291 392          
Gross profit              144 521     17 791        712        81 927           
Other income              433         184                      1 133            
Operating expenses        (50 975)    (3 892)                  (28 712)         
Profit before interest,   93 979      14 083                   54 348           
tax and depreciation                                                            
Depreciation              (10 612)    (994)                    (8 654)          
Profit before interest    83 367      13 089                   45 694           
and taxation                                                                    
Interest paid             (4 394)     (267)                    (1 720)          
Interest received         2 477       1 319                    3 007            
Profit before taxation    81 450      14 141                   46 981           
Taxation                  (25 258)    (4 118)                  (12 899)         
Profit for the period     56 192      10 023        461        34 082           
Reconciliation of                                                               
headline earnings                                                               
Profit attributable to    56 192      10 023                   34 082           
ordinary shareholders                                                           
Adjusted for profit on    (93)        (28)                     (184)            
disposal of property,                                                           
plant and equipment                                                             
Headline earnings         56 099      9 995         462        33 898           
attributable to ordinary                                                        
shareholders                                                                    
Number of ordinary                                                              
shares (`000)                                                                   
in issue               219 515     120 000                  218 621           
  diluted weighted       223 638     118 478                  153 466           
average                                                                         
  weighted average       218 993     118 478                  150 771           
Earnings per ordinary                                                           
share (cents)                                                                   
 basic                   25,7        8,5           202        22,6              
 diluted earnings        25,1        8,5           197        22,2              
headline                25,6        8,4           205        22,5              
Dividends per ordinary    -           -                        6,0              
share (cents)                                                                   
Condensed consolidated cash flow statement                                      
6 months ended            Year ended             
                               31 August    31 August    28 February            
                               (Reviewed)   (Reviewed)   (Audited)              
                               2007         2006         2007                   
R`000        R`000        R`000                  
Cash flows from operating       84 676       11 774       32 877                
activities                                                                      
Cash generated from operations  106 808      14 887       41 929                
Dividend paid                   (14 281)     -            -                     
Interest received               2 477        1 319        3 007                 
Interest paid                   (4 394)      (267)        (1 720)               
Taxation paid                   (5 934)      (4 165)      (10 339)              
Cash flows from investing       (30 566)     (7 497)      (146 638)             
activities                                                                      
Acquisition of property, plant  (30 874)     (7 567)      (41 263)              
and equipment                                                                   
Proceeds on disposal of         308          70           409                   
property plant and equipment                                                    
Brand name acquired             -            -            (94 529)              
Acquisition of subsidiary       -            -            (11 255)              
Cash flows from financing       21 978       18 305       153 773               
activities                                                                      
Net movement in borrowings      20 797       (1 695)      26 486                
Shares issue net of issue       1 181        20 000       127 287               
expenses                                                                        
Cash flows for the period       76 088       22 582       40 012                
Cash and cash equivalents at    52 648       12 636       12 636                
beginning of period                                                             
Cash and cash equivalents at    128 736      35 218       52 648                
end of period                                                                   
Consolidated balance sheet                                                      
                             31 August     31 August     28 February            
(Reviewed)    (Reviewed)    (Audited)              
                             2007          2006          2007                   
                             R`000         R`000         R`000                  
Assets                                                                          
Property, plant and equipment 159 804       26 994        139 861               
Intangible assets             94 529        -             94 529                
Deferred taxation             2 285         -             4 189                 
Current assets                                                                  
Inventories                   9 077         51            6 878                 
Taxation                      8 626         -             5 743                 
Trade and other receivables   194 061       36 351        161 549               
Cash at bank and on hand      128 736       35 218        52 648                
Total assets                  597 118       98 614        465 396               
EQUITY AND LIABILITIES                                                          
Share capital and premium     176 124       23 440        175 352               
Equity compensation reserve   1 582         -             658                   
Foreign currency translation  174           -             41                    
reserve                                                                         
Post retirement benefit       (1 681)       -             (681)                 
reserve                                                                         
Accumulated profits           106 561       40 591        64 650                
Non-current liabilities                                                         
Secured borrowings*           67 078        4 387         51 168                
Post retirement benefits      10 382        -             10 507                
Deferred taxation             17 759        2 714         17 302                
Current liabilities                                                             
Current portion of secured    13 952        2 556         7 940                 
borrowings*                                                                     
Taxation                      22 894        2 769         3 047                 
Provisions                    28 234        -             14 147                
Trade and other payables      154 058       22 157        121 266               
Total equity and liabilities  597 118       98 614        465 396               
Net asset value per share     128,81        53,36         109,79                
(cents)                                                                         
Tangible net asset value per  85,75         53,36         66,55                 
share (cents)                                                                   
* Interest-bearing                                                              
Condensed consolidated segmental analysis                                       
                             6 months ended              Year ended             
                             31 August     31 August     28 February            
(Reviewed)    (Reviewed)    (Audited)              
                             2007          2006          2007                   
                             R`000         R`000         R`000                  
Revenue                                                                         
South Africa                391 113       76 858        256 591                
 Other regions               82 462        -             34 801                 
                             473 575       76 858        291 392                
Profit before interest and                                                      
tax                                                                             
 South Africa                63 374        13 089        51 139                 
 Other regions               19 993        -             (5 445)                
                             83 367        13 089        45 694                 
Profit after tax                                                                
 South Africa                41 591        10 023        36 939                 
 Other regions               14 601        -             (2 857)                
                             56 192        10 023        34 082                 
Total assets                                                                    
 South Africa                503 258       98 614        370 667                
 Other regions               93 860        -             94 729                 
                             597 118       98 614        465 396                
Total liabilities                                                               
 South Africa                278 688       34 583        187 549                
 Other regions               35 669        -             37 828                 
                             314 357       34 583        225 377                
Consolidated statement of recognised income and expenditure                     
                             6 months ended              Year ended             
                             31 August     31 August     28 February            
                             (Reviewed)    (Reviewed)    (Audited)              
2007          2006          2007                   
                             R`000         R`000         R`000                  
Foreign currency translation  134           -             41                    
adjustment                                                                      
Post retirement benefit       (1 000)       -             (681)                 
adjustment                                                                      
Net expenses recognised       (866)         -             (640)                 
directly in equity                                                              
Profit for the period         56 192        10 023        34 082                
Total recognised income and   55 326        10 023        33 442                
expenses for the period                                                         
COMMENTS                                                                        
Introduction                                                                    
The directors of Esor are proud to present the interim financial results for    
the six months ended 31 August 2007 ("the interim period").                     
From Esor`s perspective, the construction industry is at its most robust for    
the past three decades. Infrastructure expansion, the Airport Company of South  
Africa`s ("ACSA") national expansion projects, Gautrain and 2010 fever have     
led to unprecedented demand for construction and related activities. While      
government infrastructure spend may be considered the major driving force,      
other factors are at play for instance commercial developments, which have      
increased in number and scope nationally. All indicators are that this is not   
a flash phenomenon, but a sustainable period of growth that should maintain     
for at least five to eight years.                                               
The directors believe these excellent interim results reflect the buoyancy of   
Esor`s industry and particularly the group`s significant share in its growth.   
The board intends to continue growing Esor`s market share for the benefit of    
all stakeholders.                                                               
Review of operations                                                            
Esor`s financial performance has again reflected substantial growth in all key  
performance indicators. The strategy of selective contracts continues to be     
vindicated with good margins being sustained on significantly increased         
turnover. Trading conditions in the construction industry continue to thrive,   
fuelling continually increasing demand for Esor`s services. Management remains  
committed to exercising strict cost controls with an added focus on optimising  
operational efficiencies within the group. These principles, together with an   
aggressive plant renewal policy, have resulted in the achievement again of      
higher operating margins.                                                       
CAPEX and plant replacement policy                                              
During the interim period the group invested in organic growth through the      
purchase of capital equipment to the value of R30 million. An additional R100   
million of plant is currently on order.                                         
Management remains aggressively committed to complementing the group`s          
existing fleet of equipment with "state-of-the-art" modern rigs. To date at     
least 20 large piling and drilling rigs have seen the company enter an era of   
hydraulic efficiency.                                                           
Black economic empowerment                                                      
26,47% of the group is owned directly by black shareholders. More than 70% of   
the group`s 880-strong workforce is black. Through the Esor Broad Based Share   
Ownership Scheme, implemented in 2006, staff now holds a 7,56% stake in the     
company. Esor is at present rated as a `Level 6` contributor to broad based     
BEE.                                                                            
Acquisitions                                                                    
No new acquisitions were concluded in the interim period. The financial         
results of Franki Africa (Pty) Limited ("Franki"), acquired in November 2006,   
have been consolidated into these financial results for the full six months of  
the interim period. The complementary focus of Esor and Franki enables the      
consolidated group to address all segments of the market by leveraging the      
companies` respective strengths. For the interim period management effort was   
therefore directed to sustaining organic growth in both companies. Appropriate  
acquisition opportunities, if any, will be considered during 2008.              
Financial results                                                               
The group`s financial performance for the interim period shows exciting growth  
on all fronts. Turnover was up 516% to R473 million from R76,8 million and      
gross profit was 712% higher from R17,8 million to R144,5 million. EBITDA       
increased 567% to R94 million from R14,1 million and headline earnings by 462%  
to R56,2 million from R10 million. Net asset value per share leapt by 141% to   
128,8 cents from 53,4 cents (and by 17,3% from the net asset value per share    
for the previous year ended 28 February 2007 of 109,8 cents). Headline          
earnings per share ("HEPS") increased by 205% to 25,6 cents from 8,4 cents.     
Auditor`s independent review                                                    
These condensed consolidated financial results for the interim period have      
been reviewed by the company`s auditors, RSM Betty & Dickson (Durban), in       
terms of International Standards on Review Engagements 2410. The scope of the   
review was to enable the auditors to report that nothing had come to their      
attention that caused them to believe that the accompanying condensed           
consolidated interim financial statements are not presented, in all material    
respects, in accordance with International Accounting Standard 34 - Interim     
Financial Reporting and the South African Companies Act. Their unmodified       
review report on the condensed consolidated interim financial statements is     
available for inspection at the registered office of the company.               
Prospects                                                                       
Demand for construction and related services remains at a record peak. Esor     
and Franki continue to secure contracts across all facets of government`s       
infrastructure spend including ACSA upgrades and expansions, Gautrain and the   
2010 stadia. Increased capacity following the inclusion in the group of Franki  
has also enabled Esor to at the same time continue servicing the needs of its   
more traditional clients in the municipal and private commercial sectors where  
demand is equally strong.                                                       
The group has positive prospects with a healthy order book and budgeted work    
for the 2008 financial year approaching R1 billion. The directors are           
confident that real growth in HEPS in the next six months to year-end will be   
achieved.                                                                       
Dividend policy                                                                 
In line with group policy no interim dividend has been declared. Management     
remain committed to a full year dividend for the year to 28 February 2008.      
Appreciation                                                                    
Our staff, as always, plays a major role in the success of the group and we,    
the directors, thank them unconditionally. We also thank our business           
partners, advisors, suppliers, clients and most importantly our shareholders    
for their ongoing support and faith in the group. Like the Springbok rugby      
team, under the able guidance of Jake White, we believe that we have a winning  
team that will continue to satisfy the expectations of all our stakeholders.    
On behalf of the board.                                                         
Bernard Krone                                                                   
Chief Executive Officer                                                         
7 November 2007                                                                 
CORPORATE INFORMATION                                                           
Non-executive directors: DM Thompson (Chairman), E Dube, JM Hlongwane, FA Sonn  
(Alternate: JC van Reenen)                                                      
Executive directors:  ML Barber, AM Field*, B Krone (Chief Executive), RP       
McLintock, ML Trevisani**, W van Houten   * British ** Italian                  
Group secretary: ID Stephen                                                     
Registered office: 130 Aberdare Drive, Phoenix Industrial Park, Durban, 4051,   
PO Box 40096, Red Hill, 4071.                                                   
Telephone:  +27 31 507 1051 Fax:  +27 31 507 5709                               
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)        
Limited, Ground Floor, 70 Marshal Street, Johannesburg, 2001,                   
PO Box 61051, Marshalltown, 2107                                                
Auditors: RSM Betty & Dickson (Durban), Block A Surrey Park, 6 Barham Road,     
Westville, 3629, PO Box 2120, Westville, 3630                                   
Designated advisors:  Exchange Sponsors (Proprietary) Limited, 39 First Road,   
Hyde Park, 2198                                                                 
www.esor.co.za                                                                  
Date: 07/11/2007 08:16:55 Supplied by www.sharenet.co.za                     
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