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ESOR LIMITED - Abridged consolidated results for the year ended 28 February 2017 and notice of annual general meeting

Release Date: 25/05/2017 08:00:00      Code(s): ESR       PDF(s):  
Abridged consolidated results for the year ended 28 February 2017 and notice of annual general meeting

Esor Limited
(Registration number 1994/000732/06)
Incorporated in the Republic of South Africa
(JSE Code: ESR)
(ISIN: ZAE000184669)
("Esor" or "the company" or "the group")

Abridged consolidated results for the year ended 28 February 2017 and notice of annual general meeting

Highlights
- Order book of R1,5 billion
- Strong performance in Inland region
- African operations contributing positively
- LTIFR improved to 0,29
- Gearing reduced to 14,8%
- Maintained level 3 B-BBEE score
- Tuboseal Services acquisition bedded down and achieving targets
- Orchards development successfully transferred

Commentary
Introduction
The abridged consolidated results for the year ended 28 February 2017 ("the year") saw a
mixed set of results with both highlights and lowlights. Delayed project awards as well as
postponed commencement of projects continued to impact several projects in the second
half of the year.

Inland performed well and is ideally positioned from a work-on-hand and structural
perspective to take advantage of the opportunities in the short term. However, the ongoing
remedial work to address quality issues on the Northern Aqueduct project severely impacted
the East Coast division's full year performance.

The acquisition of Tuboseal Services has been fully bedded down and a new West
Coast division based in Cape Town was formed. This division performed well in line with
expectations. African operations are starting to contribute positively to results with
meaningful work secured in Swaziland and Zimbabwe and good opportunities in Botswana.
The order book at February 2017 was R1,54 billion, which is in line with the prior year
and up 9,4% compared to R1,4 billion at interims.

Financial results
Revenue was flat at R1,4 billion considering revenue losses due to the non-revenue
generating repair work at the Northern Aqueduct. Revenue was also negatively impacted by
several work stoppages due to community and business forum disruptions. Delayed contract
awards as well as postponed commencement of projects caused in excess of 25 000 production
days lost and accounted for R220 million in reduced revenue.

Profitability was severely impacted by losses of R102 million incurred on the Northern
Aqueduct project, impairment of goodwill of R50 million and the write down/fair value
adjustment of R51 million of the Franki Africa contingent consideration following losses
incurred by Franki Africa in the final year of the profit earn-out period. The above losses
were partially offset by improved results in the Inland and West Coast regions resulting in
a loss of R139,8 million compared to a profit of R3,7 million in the prior year. This
resulted in a basic loss per share of 38,1 cents compared to a profit of 1,0 cents per share
in the prior year. Cash flow and liquidity remained challenging and we remain focused on
debtor management with net cash balance at year-end of negative R22,1 million (2016: positive
R42,4 million). The insurer for the professional indemnity on the Northern Aqueduct has to
date accepted liability for the professional indemnity claim against the subcontractor that
failed in their professional duty. The claim comprises two parts, namely weld failures and
the misalignment claim. The weld failure claim quantum is being finalised and based on the
latest estimates and status of agreement, R48 million was recognised in profit or loss.
The misalignment claim is yet to be agreed and therefore no amount was recognised on that
portion of the claim.

Safety
Health and safety remains a priority and the group is committed to a Zero Harm approach.
The Lost Time Injury Frequency Ratio ("LTIFR") improved to 0,29 at year-end (2016: 0,47).
A top down and VFL ("Visible Felt Leadership") approach to safety is encouraged and
management is responsible for ensuring that preventative measures are in place and that
"near miss reporting" and "root cause analysis" are conducted. In doing so, we focus on
safety training and preventive measures. Considering our excellent safety performance, we
have reduced our LTIFR target threshold for the year ahead to 0,15 in line with best
practice and leading industry benchmarks.

Review of operations
For the year under review the group reported in two divisions: Esor Construction (including
Inland, East Coast and West Coast) and Esor Developments.

Esor Construction
Inland
Contrary to the state of the industry, the Inland division enjoyed its most successful year
to date and overcame macro factors causing site delays. We successfully completed Package
25 for Eskom and the completion certificate has been issued. Total revenue on the project
amounted to R482 million over a 54-month period. It has been a profitable contract ahead of
the tender margin. Notably, we demobilised approximately 200 people off site in
December 2016 with no disruptions.

Package 26 is on programme and all modifications to date have been approved. All delays
and disruption claims to December 2016 have been settled with settlement received on
21 December 2016. Ongoing and "way forward" issues are being resolved on a quarterly basis.
Potential additional work remains on the cards. The current contract value is in excess of
R2 billion over 72 months.

The balance of projects in Inland performed in line with expectations. However, one
Johannesburg inner city refurbishment project was impacted by snagging issues which
caused a three-month delay in final handover.

East Coast
Ongoing quality issues at the Northern Aqueduct as well as community and business forum
stoppages at both the Northern and Western Aqueducts made for a tough year. This resulted
in Esor obtaining an interdict against one of the business forums. The projects were further
impacted by wet weather and unusually high rainfall in the second half of the year.

The Northern Aqueduct remains an onerous contract to complete given the challenges of
addressing the legacy quality issues, which remain the key factor to getting off site.
Initial completion was scheduled for August 2015 and we had then planned to complete the
repair work on welds before FY16. However, quality issues emerged in June 2016, further
impacting completion and resulting in cost overruns. These were further exacerbated by
rain and community unrest. The loss to February 2016 totalled R45,4 million and we have
since recorded a further loss of R101,7 million, including onerous contract provisions of
R29,7 million. The nature of the repair work and constrained working areas continue to impact
negatively on productivity. We now expect to complete the project in December 2017 and are
in the process of concluding an agreement with the client on quality repairs and replacement
of select rejected bedding material.

East Coast revenue was further hard hit by three delayed contract awards, with revenue
losses amounting to R100 million. We had already reallocated resources in preparation for
contract starts, which were then delayed.

The Western Aqueduct pipeline project is currently behind programme and due for
completion in September 2017. We are pursuing numerous claims for time extensions but
have not yet taken these to book.

West Coast
Following the successful acquisition of Tuboseal, effective 1 September 2016, the business
was fully integrated as of 1 March 2017. The West Coast region is exceeding initial
preliminary budgets mainly on the back of trenchless rehabilitation work and term-contracts.
Tuboseal's brand and track record are well established in the Western Cape, securing
preferred contractor status. We are currently finalising the largest CIPP project yet
undertaken in South Africa at Black Mac (Blackheath to Macassar) which entails lining 3,3 km
of sewer line of 1,2 metre diameter over a nine month contract period.

We have also been offering trenchless solutions to eThekwini, City of Bulawayo and Eskom,
where we successfully completed a line pathing contract at Kusile. During the year Tuboseal
operated in four provinces-Free State, Gauteng, Mpumalanga and the Western Cape-with
the intention going forward to grow the niche trenchless solution business throughout the
rest of Esor's footprint including Africa.

Africa
Esor made solid progress in Africa with the segment performing well for the year. This
included securing a R554 million joint venture in Swaziland for the Swaziland Water and
Agricultural Development Enterprise and funded by the African Development Bank, which
represents the group's third sizeable job in Swaziland. Our joint venture partner is the
largest Swazi-based construction company and will be responsible for all earthworks while
Esor will construct the pipelines. This 30-month contract is expected to generate a monthly
income of R20 million. We are continuing to secure work on the back of funded projects as
well as client relationships and are carefully selecting partners.

In Botswana, we have partnered with a prominent local company on reticulation work situated
close to the South African border. Eight pipe jacks have been completed with two ongoing.
In Zimbabwe, we completed the six-month R7,5 million Old Mutual piling contract. We were
further awarded three projects by the Zimbabwe National Water Authority, funded by the
World Bank, totalling R75 million for which we are currently mobilising.

Zambia remains a target area, and while we are not currently active in the region, we are
tendering for select work with well-known clients.

Esor Developments
The performance of the segment was in line with expectations. During the year we
completed and transferred the milestone Orchards development, cradle to grave, barring two
commercial properties being marketed for resale or development.

The Diepsloot and Khayelitsha projects continued to be delayed by government
administrative procedures. Khayelitsha remains our short-term focus and following the
land transfer, the project will be ready for the development of 368 top structures. More than
60% of the stands in Khayelitsha CBD are the subject of a sales agreement subject to the
successful transfer of the land into the joint venture entity. Diepsloot remains a medium to
long-term development with a total project potential of over R4 billion revenue and
potential of over 10 000 housing opportunities. Ongoing negotiations with the Department of
Human Settlements is bearing fruit and we foresee breaking ground by mid-year 2017.

The Uitvlugt development is currently in the environmental approval and ROD phase, which
is expected to take 12 months. Township development planning and feasibility studies were
conducted and finalised. This development includes 1 ha smallholdings, mixed use and
integrated developments.

The next financial year will be a low revenue phase as the current projects move toward
the development phases of their life cycles. Numerous other opportunities have surfaced
and we are currently assessing two further developments to replace Orchards on a
focused approach.

Capex
Capital expenditure for the year totalled R20,4 million (2016: R6,7 million) which included
the R8,5 million expansion of our Germiston head office to accommodate all Inland staff.
This followed the disposal of our Midrand property and consolidation at Germiston. Going
forward the group will gear up capex spend to be more in line with depreciation and
replacement costs. It is estimated that the FY 17/18 capex spend will be in excess of
depreciation and return to a normalised replacement policy thereafter. Most of the capex
spend is focused on specialist equipment.

Mandatory offer, rights issue and share capital
In October 2016, Esor's strategic investor, Geomer Investments ("Geomer"), increased its
holding in the company to 42,39% (net of treasury shares) triggering a mandatory offer to
shareholders. Geomer received acceptances from Esor shareholders holding 25 710 447 ordinary
shares, equating to 7,05% of the issued ordinary shares of Esor excluding treasury shares.

This increased Geomer's holding to 49,44% and in February 2017 they increased their stake to
52,89%, following the rights offer that was fully underwritten by Geomer. Geomer has been a
longstanding shareholder with whom Esor had been exploring possible synergies in the water
and sanitation space prior to the mandatory offer, and the board remains confident that
Geomer's support will prove positive for the growth of the group. Geomer provided funding
for the acquisition of Tuboseal and fully underwrote the rights offer to shareholders of
R37,54 million. This saw Esor offer 98 796 357 rights offer shares at 38 cents per share in
the ratio of 25 rights offer shares for every 100 Esor shares. The results of the rights
offer were as follows:

                                                              Number
                                                           of rights         Rand         %
                                                        offer shares        value    rights
Total shares   available for subscription in terms
ofthe rights   offer                                      98 796 357   37 542 616          100
Rights offer   shares subscribed for                      63 132 603   23 990 389         63,9
Rights offer   shares taken up by the underwriter         35 663 754   13 552 227         36,1

Transformation
Esor maintained its Level 3 B-BBEE accreditation based on the revised Codes of Good
Practice. The next audit evaluation is scheduled for October 2017 and will most likely be
subject to the revised construction charter. The group's black ownership rating improved
following the increase in shareholding by Geomer and black ownership now accounts for
65%. The Esor Broad Based Share Ownership Scheme ("EBBSOS") holds 4,25% following
a dilution as a result of the rights issue (see Mandatory offer, rights issue and share
capital above).

Competition Commission/CIDB
Esor was not party to the Competition Commission's settlement reached in October 2016
between government and seven other South African construction companies. Esor settled
amicably in a negotiated manner with the company concerned where Esor was found guilty
of the offence under a fast track settlement that related to a Franki matter. Negotiations
with the Competition Commission are ongoing in relation to the Tribunal Enquiry into the
2009 complaint of collusive tendering practices in the geotechnical exploration and
investigation works.

Esor received a formal enquiry letter in December 2016 related to the CIDB intending to
institute a formal enquiry in terms of Regulation 29 against the construction firms that
were not a party to the voluntary rebuild programme agreement. We are in ongoing
negotiations to reach an amicable settlement.

Prospects
We expect challenging conditions to prevail and the trading environment for the next 12 or
so months remains uncertain. However, we have secured work to see us through the cycle
ahead and with substantial pending awards in excess of R1,6 billion we have not been
aggressively chasing new work. We have been notified by the Department of Water and
Sanitation that subject to the Department allocating the necessary budget to the Olifants
River Phase 2D project in Limpopo before March 2018, we will be awarded this project
to the value of R1,3 billion. The two-year pipeline project for the Department of Water and
Sanitation encompasses the manufacture, delivery, installation, testing and commissioning of
civil, mechanical and electrical work of the raw water pipeline in Steelpoort. New contracts
awarded also include the LUSIP 2 contract in Swaziland awarded to a joint venture in which
Esor has a 50% share.

We have adequate secured work, people and resources and there is a sufficient tender flow
still to come to market, particularly for Inland, and we will adapt our business according to
market requirements. We believe we are in a healthy position to successfully navigate the
short to medium term.

Dividend declaration
In line with group policy, no dividend has been declared (2016: Nil). It remains the policy
of the group to review the dividend policy annually in light of cash flow, gearing, capital
requirements and bank covenants.

Events after the reporting date
There were no significant events after the reporting date.

Basis of preparation
The summarised consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for abridged reports, and the
requirements of the Companies Act applicable to summarised financial statements. The Listings
Requirements require abridged reports to be prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting
Standards ("IFRS") and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and to also, as a minimum, contain the information required by IAS 34
Interim Financial Reporting. The accounting policies applied in the preparation of the
consolidated financial statements, from which the summarised 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 consolidated financial
statements. The financial statements that are summarised in this report were prepared by the
CFO, Bruce Atkinson.

Use of judgements and estimates
In preparing these abridged consolidated results, management has made judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts
of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies
and the key sources of estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 28 February 2017.

Audit opinion
This summarised report is extracted from audited information, but is not itself audited.
The financial statements were audited by KPMG Inc., who expressed an unmodified opinion
thereon. The audited financial statements and the auditor's report thereon are available
for inspection at the company's registered office. The directors take full responsibility
for the preparation of the summarised report and the financial information has been correctly
extracted from the underlying annual financial statements.

The auditor's report does not necessarily report on all of the information contained in this
announcement/financial results. Shareholders are therefore advised that in order to obtain
a full understanding of the nature of the auditor's engagement they should obtain a copy of
the auditor's report together with the accompanying financial information from the issuer's
registered office.

This announcement does not include the information required pursuant to paragraph 16A(j)
of IAS 34. The full report is available on Esor's website, at the registered offices and
upon request.

The group audited financial statements, which were prepared under the supervision of the
CFO, Bruce Atkinson CA(SA), are available for inspection at the company's registered office
and will be included in the Integrated Annual Report 2017 to be distributed to stakeholders
on or about 25 May 2017.

Going concern
The board is satisfied that the company will continue to trade as a going concern in the
following 12 months based on current cash flows and facilities available. Further information
on the boards assessment of going concern is contained in the directors report which forms
part of the annual financial statements.


Summarised statements of financial position
as at 28 February 2017

                                                                                Group


                                                                         2017           2016
                                                                           R'000             R'000
Assets
Non-current assets                                                      337 556            404    539
Property, plant and equipment                                           197 624            178    381
Goodwill                                                                 65 447            112    091
Financial assets at fair value through profit or loss                         -             51    228
Deferred tax asset                                                       31 044             10    186
Investment and loan to joint venture                                     42 680             51    892
Loans and long-term receivables                                             761                   761
Current assets                                                          680 421         696       386
Loans and receivables                                                    40 578          35       428
Inventories                                                              98 557         108       075
Non-current assets held-for-sale                                              -           9       500
Taxation                                                                 13 840          15       552
Trade and other receivables                                             522 086         485       409
Cash and cash equivalents                                                 5 360          42       422
Total assets                                                          1 017 977       1 100       925
Equity and liabilities
Share capital and reserves                                              566 794         669 102
Share capital and premium                                               617 236         581 014
Equity compensation reserve                                                 557              72
Foreign currency translation reserve                                     28 497          27 756
(Accumulated loss)/retained earnings                                    (79 496)         60 260
Non-current liabilities                                                  71 136          72 968
Secured borrowings                                                       38 814          45 726
Deferred tax liability                                                   32 322          27 242
Current liabilities                                                     380 047         358 855
Current portion of secured borrowings                                    31 869          55 093
Current portion of preference shares                                          -          10 605
Bank overdraft                                                           27 487               -
Financial liability at fair value through profit or loss                      -           5 843
Taxation                                                                    146             714
Provisions                                                                    -          17 040
Trade and other payables                                                320 545         269 560
Total equity and liabilities                                          1 017 977       1 100 925

Summarised statements of profit or loss and other comprehensive income
for the year ended 28 February 2017

                                                                                   Group


                                                                            2017              2016
                                                                           R'000             R'000

Revenue                                                               1 373 048       1 435 901
Cost of sales                                                        (1 358 591)     (1 353 798)
Gross profit                                                             14 457          82 103
Other income                                                             28 807          52 589
Operating expenses                                                     (131 141)        (52 899)
(Loss)/profit before interest, tax, impairments and depreciation        (87 877)         81 793
Impairments and depreciation                                            (72 967)        (78 016)
Results from operating activities                                      (160 844)          3 777
Finance income                                                           13 670          12 577
Finance costs                                                            (8 248)         (9 851)
(Loss)/profit before income tax                                        (155 422)          6 503
Taxation income                                                          15 666          (2 820)
(Loss)/profit                                                          (139 756)          3 683
Other comprehensive income:
Items that are or may be reclassified to profit or loss
Foreign currency translation differences for foreign operations              741                  933
Related taxes                                                                  -                 (210)
Other comprehensive income, net of tax                                       741                  723
(Loss)/profit attributable to:
Owners of the company                                                  (139 756)             3 683
Total comprehensive income attributable to:
Owners of the company                                                  (139 015)             4 406

Summarised statements of changes in equity
for the year ended 28 February 2017

                                                                                            Equity
                                                                                           compen-
                                                             Share         Share            sation
                                                           capital       premium           reserve
Group                                                        R'000         R'000             R'000
Balance at 28 February 2015                                    374       583 356                 -
Profit for the year                                              -             -                 -
Other comprehensive income                                       -             -                 -
Total comprehensive income for the year                          -             -                 -
Transactions with owners, recorded directly in equity
Contributions by and distributions    to owners
Share-based payment                                           -             -                    72
Shares acquired                                              (9)       (2 707)                    -
Total transactions with owners                               (9)       (2 707)                   72
Balance at 29 February 2016                                 365       580 649                    72
Loss for the year                                             -             -                     -
Other comprehensive income
Total comprehensive income for the    year                    -             -                     -
Transactions with owners, recorded    directly in
equity
Contributions by and distributions    to owners
Shares issued                                                98        37 444                     -
Share issue expenses                                          -        (1 320)                    -
Share-based payment                                           -             -                   485
Total transactions with owners                               98        36 124                   485
Balance at 28 February 2017                                 463       616 773                   557

                                                        Foreign
                                                       currency
                                                    translation      Retained               Total
                                                        reserve      earnings              equity
Group                                                     R'000         R'000               R'000
Balance at 28 February 2015                              27 033        56 577             667 340
Profit for the year                                           -         3 683               3 683
Other comprehensive income                                  723             -                 723
Total comprehensive income for the    year                  723         3 683               4 406
Transactions with owners, recorded    directly
in equity
Contributions by and distributions    to owners
Share-based payment                                           -             -                  72
Shares acquired                                               -             -              (2 716)
Total transactions with owners                                -             -              (2 644)
Balance at 29 February 2016                              27 756        60 260             669 102
Loss for the year                                             -      (139 756)           (139 756)
Other comprehensive income                                  741             -                 741
Total comprehensive income for the    year                  741      (139 756)           (139 015)
Transactions with owners, recorded    directly
in equity
Contributions by and distributions    to owners
Shares issued                                                 -             -              37 542
Share issue expenses                                          -             -              (1 320)
Share-based payment                                           -             -                 485
Total transactions with owners                                -             -              36 707
Balance at 28 February 2017                              28 497       (79 496)            566 794

Summarised statements of cash flow
for the year ended 28 February 2017

                                                                                 Group


                                                                         2017             2016
                                                                        R'000            R'000
Cash flows from operating activities                                  (23 946)          76 243
Cash receipts from customers                                        1 379 501        1 454 822
Cash paid to suppliers and employees                               (1 400 847)      (1 376 680)
Cash (utilised in)/generated by operations                            (21 346)          78 142
Finance income                                                          6 573           12 577
Finance costs                                                          (6 220)          (9 851)
Taxation paid                                                          (2 953)          (4 625)
Cash flows from investing activities                                  (31 287)          28 632
Additions to property, plant and equipment                            (20 373)          (6 663)
Proceeds on disposal of property, plant and equipment                  10 473           35 295
Acquisition through business combination                              (36 387)               -
Loan repaid by joint venture                                           15 000                -
Cash flows from financing activities                                   (9 316)         (98 803)
Decrease in secured borrowings                                        (33 179)         (83 938)
Preference shares redeemed                                            (12 359)         (12 149)
Shares issued/(acquired) net of expenses                               36 222           (2 716)
Net (decrease)/increase in cash and cash equivalents                  (64 549)           6 072
Net cash and cash equivalents at beginning of year                     42 422           36 339
Effects of movements in exchange rates on cash held                         -               11
Cash and cash equivalents at end of year                              (22 127)          42 422

Notes to the abridged consolidated results
for the year ended 28 February 2017

                                                                      Accumu-
                                                                        lated            Carrying
                                                           Cost    impairment               value
                                                          R'000         R'000               R'000
1.   Goodwill
     Group
     2017
     Esor Construction                                   273 330       (207 883)                65 447
                                                         273 330       (207 883)                65 447
     2016
     Esor Construction                                   269 700       (157 609)               112 091
                                                         269 700       (157 609)               112 091


     The carrying amount of goodwill can be reconciled as follows:

                                                       Acquisition
                                Carrying                   through                         Carrying
                                value at                  business                            value
                               beginning    Impair-         combi-            Re-            at end
                                 of year       ment         nation     allocation           of year
                                   R'000      R'000          R'000          R'000             R'000
     2017
     Esor Construction           112 091    (50 274)         3 630                 -            65 447
                                 112 091    (50 274)         3 630                 -            65 447
     2016
     Esor Construction                 -    (43 232)               -      155 323              112 091
     Esor Civils                  63 929          -                -      (63 929)                   -
     Esor Pipelines               90 837          -                -      (90 837)                   -
     Brookmay                        557          -                -         (557)                   -
                                 155 323    (43 232)               -            -              112 091

     Goodwill arising from business combinations has been allocated to individual reporting
     units or cash-generating units. Following the group restructure, these reporting units
     are no longer identifiable. Consequently the smallest CGU which is separately
     identifiable is Esor Construction.

     The recoverable amount of this cash-generating unit was estimated based on its value in
     use. The carrying amount was higher than its recoverable amount and an impairment loss
     was recognised. An accumulated impairment loss of R207,9 million (2016: R157,6 million)
     was recognised on the goodwill. The recoverable amount was determined with the assistance
     of independent valuers, is as follows:

                                                                           2017                   2016
                                                                          R'000                  R'000
     Esor Construction                                                  489 391                537 899

     Value in use was determined by discounting the future cash flows generated from the
     continuing use of the individual CGUs and was based on the following key assumptions:
     - Cash flows were projected based on actual operating results and a forecast period of
       five years;
     - Revenue growth was projected at between 5% and 15% based on secured work load
       and past experience;
     - Gross margins were maintained at margins expected in the industry over the forecast
       period based on past experience;
     - Operating expenses were not expected to increase significantly but have been
       increased in line with revenue growth; and
     - A weighted average cost of capital of 16% (2016: 16%) was applied in determining the
       recoverable amount of the cash-generating unit. The discount rate was estimated based
       on weighted average cost of capital and a targeted debt-equity ratio of 20%
       (2016: 30%).

2.   Acquisition through business combinations
     On 1 September 2016, the Esor group acquired the entire issued share capital of
     Tuboseal Services (Pty) Limited and the business operations of Tuboseal (Pty) Limited
     for R37,5 million in cash.

     The group expects the synergies to be achieved through the combining of the Tuboseal
     operations into Esor as well as the expansion of the Tuboseal products into the other
     regions where Esor has a footprint to significantly improve the results of Tuboseal.
     In the six months to 28 February 2017, the subsidiary contributed profit after tax of
     R5,4 million. Had the acquisition occurred on 1 March 2016, management estimates that
     the consolidated revenue would have increased by R36 million, and the consolidated
     profit after tax for the period would have increased by R1,1 million. In determining
     these amounts management has assumed that the fair value adjustments that arose on the
     date of acquisition had occurred on 1 March 2017.

                                                                                       Group


                                                                           2017                   2016
                                                                          R'000                  R'000
     Property, plant and equipment                                       21 968                      -
     Inventories                                                          4 567                      -
     Unsecured loans                                                         10                      -
     Trade and other receivables                                              14 696                        -
     Cash and cash equivalents                                                 1 036                        -
     Secured borrowings                                                       (3 053)                       -
     Deferred taxation                                                        (1 076)                       -
     Trade and other payables                                                 (5 400)                       -
     Taxation                                                                      9                        -
     Total net assets                                                         32 757                        -
     Goodwill on acquisition                                                   3 630                        -
     Consideration paid net of cash                                           36 387                        -

                                                                                            Group


                                                                                2017                  2016
                                                                               R'000                 R'000
3.   Earnings per share
     Basic (loss)/earnings per share (cents)                                   (38,1)                     1,0
     Diluted (loss)/earnings per share (cents)                                 (36,7)                     1,0
     Headline (loss)/earnings per share (cents)                                (24,4)                    14,4
     Diluted (loss)/earnings per share (cents)                                 (23,5)                    14,1
     Reconciliation of headline earnings
     The calculation of the headline (loss)/earnings per share
     attributable to the ordinary equity holders of the parent
     is based on the following information:
     Reconciliation of headline loss:
       (Loss)/profit after tax                                              (139 756)                3 683
       Net profit on disposal of property, plant and equipment                    85                 2 678
       Impairment of property, plant and equipment, investments
       and goodwill                                                           50 274                47 108
     Headline (loss)/earnings                                                (89 397)               53 469
     Weighted average number of ordinary shares:
     Issued ordinary shares                                           493    981    787      395 185 430
     Effect of own shares held                                        (30    244    012)     (24 679 252)
     Effect of shares issued                                          (96    636    874)               -
     Weighted average number of shares                                367    100    901      370 506 178
     Dilutive average number of ordinary shares:
     The calculation of the diluted earnings per share
     attributable to the ordinary equity holders of the parent
     is based on the following information:
     Weighted average number of ordinary shares                       367 100 901            370 506 178
     Effect of share incentive allocations                             13 788 333              8 490 000
     Diluted weighted average number of shares                        380 889 234            378 996 178

4.   Segmental analysis
     Operating segments
     The group has two reportable segments, which are the group's strategic business units.

                                                                                Corporate
                                                 Esor         Esor                and
                                            Construc-     Develop-             elimi-           Consoli-
                                                 tion        ments            nations              dated
                                                R'000        R'000              R'000              R'000
     Group
     2017
     External revenue                       1 306 785       66 263                  -          1 373 048
     Inter-segment revenue                     35 511            -            (35 511)                 -
     Segment revenue                        1 342 296       66 263            (35 511)         1 373 048
     Segment result
     (Loss)/profit before interest and
     taxation                                 (66 288)       3 594            (98    150)       (160      844)
     Net finance (cost)/income                 (2 276)        (703)             8    401           5      422
     Taxation                                       -            -             15    666          15      666
     Segment (loss)/profit after tax          (68 564)       2 891            (74    083)       (139      756)
     Segment assets                           132 842       91 944            793    191       1 017      977
     Segment liabilities                      195 911       87 036            168    236         451      183
     Capital and non-cash items
     Additions to property, plant and
     equipment                                      -             -            20 373               20    373
     Depreciation                                   -             -            22 693               22    693
     Impairment reversal                            -             -            (3 876)              (3    876)
     Number of employees                        2 234             2               259                2    495

     2016
     External revenue                       1 341 162       94 739                  -          1 435 901
     Inter-segment revenue                      8 940            -             (8 940)                 -
     Segment revenue                        1 350 102       94 739             (8 940)         1 435 901
     Segment result
     (Loss)/profit before interest and
     taxation                                  20 225       23 158            (39 606)               3 777
     Net finance (cost)/income                     (4)      (1 603)             4 333                2 726
     Taxation                                                    -             (2 820)              (2 820)
    Segment profit/(loss)                     20 221          21 555     (38 093)        3 683
    Segment assets                           282 261         139 683     678 981     1 100 925
    Segment liabilities                      262 591         124 706      44 526       431 823
    Capital and non-cash items
    Additions to property, plant and
    equipment                                      -               -       7 911         7    911
    Depreciation                                   -               -      28 546        28    546
    Impairment loss                                -               -       3 876         3    876
    Number of employees                        2 184               2         214         2    400

                                                  South Africa                Other regions

                                                2017            2016        2017          2016
    Geographical information                   R'000           R'000       R'000         R'000
    Total revenue from
    external customers                     1 331 735       1 333 827      41 313        43 950
    Property, plant and equipment            195 699         190 209       1 925         1 239

                                                                               Consolidated


                                                                            2017          2016
    Geographical information                                               R'000         R'000
    Total revenue from
    external customers                                                 1 373 048     1 377 777
    Property, plant and equipment                                        197 624       191 448

Notice of 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, 30 June 2017 at 10:00. The notice of annual general
meeting forms part of the Integrated Annual Report 2017, to be distributed to stakeholders
on or about 25 May 2017.

The board of directors of the company determined that, in terms of section 62(3)(a), as read
with section 59 of the Companies Act, 2008 (Act 71 of 2008), as amended, the record date
for the purposes of determining which shareholders of the company are entitled to participate
in and vote at the annual general meeting is Friday, 23 June 2017. Accordingly, the last day
to trade Esor shares in order to be recorded in the Register to be entitled to vote will be
Tuesday, 20 June 2017 and not Thursday, 15 June 2017 as contained in the notice of annual
general meeting distributed as part of the Integrated Annual Report 2017.

Appreciation
We extend our appreciation to our management and staff for their dedication and hard work.
We also thank our fellow directors for their guidance and wise counsel as well as our business
partners, suppliers, advisors and valued clients and shareholders for your loyal support.

On behalf of the board

Bernie Krone
Chairman

Wessel van Zyl
CEO

25 May 2017

Directors
B Krone (Chairman)+
WC van Zyl (CEO)
BW Atkinson (CFO)
Dr OSW Franks*(Lead Independent)
R Masemene*
HJ Sonn*

* Independent non-executive
+ Non-executive

Company secretary
iThemba Governance and Statutory Solutions (Pty) Limited
R21 Corporate Park, 72 Regency Drive
Block A, Irene, 0157
PO Box 25160, Monumentpark, 0181

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
Rosebank Towers, 15 Biermann Avenue, Rosebank
PO Box 61051, Marshalltown, 2107

Investor Relations
Singular Systems IR
28 Fort Street, Birnam, Johannesburg, 2196
PO Box 785261, Sandton, 2146

www.esor.co.za

Date: 25/05/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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