45
1 For the period ending 31 Aug 2012 Interim results presentation 2013FY
1
For the period ending 31 Aug 2012
Interim results presentation
2013FY
2
TABLE OF CONTENTS • WELCOME
• SALIENT FEATURES
• SUSTAINABILITY ACHIEVEMENTS
• FINANCIAL REVIEW
• STRATEGY
• Short-term challenges & progress
• Medium to long-term strategy
• OPERATIONAL REVIEW
• Products, services & clients
• Competitors & value proposition
• Geographical footprint and key contracts
• RISK MANAGEMENT
• SEGMENTAL REVIEW
• ORDERBOOK & OUTLOOK
• CAPEX
• CONCLUSION
3
WELCOME
4
SALIENT FEATURES
5
Salient Features – 31 August 2012
• Revenue up 33% to R1.14bn (2011:R857m)
• EBITDA up 437% to R136.4 m (2011:R25.4m)
• Headline earnings up 295% to R29.2m (2011:R15m loss)
• HEPS up 300% to 7.8cents (2011:3.9 cents loss)
• PAT up 353% to R47.3m (2011:R18.7m loss)
• EPS up 363% to 12.6cents (2011:4.8 cents loss)
• Order book up 35% to R2.43b (2011:R1.8b)
• Operating cash increased by R100.8m
6
Sustainability Achievements
• Continued improved profitability in H1 FY 2013
• Our order book continues to strengthen with more long term contracts
• We have cemented our expansion into Ghana and continue our focus on Uganda & DRC
• We have successfully entered the housing development market through the purchase of
Safdev Land 1 for the Orchards Project
• ISO 9001 quality accreditation remains in all divisions
• OHSA 18001 safety accreditation has been obtained in all divisions
• Our LTIFR of 0.74 is significantly better than the industry norm of 1.33 and our tolerance
threshold of 1.0
• A High Yield Bond Programme for R202.5m was successfully concluded
• We have retained or replaced key staff
7
FINANCIAL REVIEW 31 August 2012
8
Statement of Income (as at 31st August 2012)
Salient Features
Aug 2011
R’ 000
% Aug 2012
R’ 000
Revenue 857 524 33.3% 1 142 776
EBITDA 25 407 437% 136 405
Profit/(loss) after tax (18 677) 353% 47 336
Headline earnings/(loss) (15 047) 294% 29 211
HEPS (3.90) 300% 7.80
9
Statement of Financial Position (as at 31st August 2012)
Salient Features
Aug 2011
R’ 000
Aug 2012
R’ 000
Assets
Non-current assets 1 085 923 1 230 999
Current assets 626 951 960 341
Total assets 1 712 874 2 191 340
Equities and liabilities
Share capital and reserves 893 375 1 003 921
Non-current liabilities 298 564 535 757
Current liabilities 520 935 651 662
Total equity and liabilities 1 712 874 2 191 340
Net asset value per share (cents) 230.1 267.9
10
Statement of Financial Position (as at 31st August 2012)
Salient Features Aug 2011 Aug 2012
• Cash
• Trade & other receivables
• No impairment of intangibles
R49.5m
R556.7m
R218.1m
R640.1m
• Investment in construction equipment
• Book value of PPE
R152.3m
R678.2m
R126.0m
R807.1m
• Operational cash-flow generated
• Dividends paid
• Net secured borrowings
• Debt/(debt+equity) ratio
(R55.7m)
Nil
R271.8m
23.3%
R45m
Nil
R268.7m
21.1%
• Profit after tax
• FCTR
• Dividend paid
(R18.7m)
R26.3m
Nil
R47.3m
R3.1m
Nil
Total assets
PPE
Cash reserves
Equity
11
STRATEGY
12
Short-Term Challenges & Progress
CHALLENGE
• Continued slowdown in public sector infrastructure spend (large scale projects)
PROGRESS
• Management intervention to improve profitability and synergy of divisions by focusing on tender submissions, contract execution & operational delivery
• Expansion into Ghana and Uganda (Esorfranki Geotechnical)
• Private sector clients targeted and market share grown through efficient project execution, high safety standards and timeous delivery
• Enhance brand awareness locally and cross-border
CHALLENGE
• B-BBEE focus
PROGRESS
• Level 4 B-BBEE certification maintained
• Proposed share deal
13
Short-Term Challenges & Progress
CHALLENGE
• Price competitive environment and increasingly difficult contract terms and
conditions
PROGRESS
• Project execution capabilities improved
• Contract portfolio reviewed and profitability maintained by improving cost reporting standards
and standardising policies and procedures across all divisions
• Civil plant capacity expansion (enhancing efficiency and resource optimisation)
• Focus on brand awareness
• Group operations integrated into a single entity to harness cost effectiveness and
standardisation
• Group driven by common values, business philosophies and practices
• Resources rationalised to enhance shared values and cohesiveness
• CIDB level 9 achieved in CE, GB, SC and SJ categories
14
Short-Term Challenges & Progress
CHALLENGE
• Organisational development
PROGRESS
• Succession and development plans implemented
CHALLENGE
• The Competition Commission investigation into alleged anti-competitive
behaviour in the piling and drilling markets is currently inactive after having the
matter referred to a tribunal following a failed settlement offer to the
Commissioner.
PROGRESS
• The board has raised an estimated provision in the financial statements for the
likely penalty.
• There has been no further progress on the fast track settlement
• Any further developments will be communicated to all stakeholders as they
occur.
15
Short-Term Challenges & Progress
CHALLENGE
• Delayed payment cycles from government and main contractors
PROGRESS
• Significant advance payments on foreign contracts secured
• Strict working capital management and reporting enforced
• Short-term working capital facilities secured to accommodate growth and delayed payment
cycles
• Capital asset expansion programmes secured on the back of long-term contracts, boosting
price competitiveness and efficiency and plant resource expansion
• Successful implementation of High Yield Bond Programme
16
Medium to Long-Term Strategy
• Harness synergy within the group
• Expand product offering and maintain market share
• Geographical diversity in Civils, Pipelines & Geotechnical
• Environmental accreditation ISO 14001
• Further securing of long-term contracts to create future visibility and to
underpin sustainability
• Focus on sustainable growth nodes within government infrastructure
programmes
• Carbon emissions will be measured and managed
• Addressing Construction Charter requirements to improve BEE scoring by
31 December 2013
• Focus on concession and development projects
• Focus on private sector clients to balance dependency on government
contracts
17
OPERATIONAL REVIEW 31 Aug 2012
18
Products & Services
GEOTECHNICAL PIPELINES CIVILS
• Pilling
• Lateral support
• Marine structures
• Pipejacking
• Thrust boring
• Bridgejacking
• Diaphragm walls
• Ground improvement
• Dynamic compaction
• Ground remediation
• Soils investigation
• Geotechnical design
• Gas & petrochemical
steel pipelines
• Water & wastewater
pipelines
• Sewer pipelines
• Pump stations
• Pipeline refurbishments
• Cement mortar lining
• Valve chambers
• Associated concrete
structures
• Associated
infrastructure
• Road construction
• Bridge construction
• Township infrastructure
• Mining infrastructure
• Water reticulation
• Water towers
• Reservoirs
• Sewer reticulation
• Bulk earthworks
• Building
• Housing
• Development
Products & Services
19
Clients
GEOTECHNICAL PIPELINES CIVILS
• Civil contractors
• Building contractors
• Listed & private
contractors
• Government at:
• Central
• Provincial
• Municipal levels
• Property development
companies
• Parastatals:
• Eskom
• Transnet
• Rand Water
• Umgeni Water
• Portnet, etc
• Mining sector including
most major mining houses
• Government at:
• Central
• Provincial
• Municipal level
• Parastatals:
• Transnet
• Rand Water
• Umgeni Water
• Portnet
• TCTA & DWAF
• Mining sector
• Private clients
• RBM
• Foscor
• Mondi
• Cross-border
• FIPAG Mocambique
• Botswana Government
• Mining sector
• Zimbabwe & DRC
• Eskom
• Sanral
• Anglo Coal
• Xstrata
• RAL
• Gauteng Province
• Government
• Central
• Provincial
• Municipal
• Private developers
• Bakwena Concessions
• Debswana
Clients
20
Competitors
GEOTECHNICAL PIPELINES CIVILS
• Steffanutti Stocks in-
house geotechnical
division
• Aveng in-house
geotechnical division
• Dura (Solentache Bachy
is a large global
contractor)
• Wepex
• Gauteng Piling
• Offshore – international
geotechnical contractors
• WK Pipelines
• WBHO
• Group 5
• Steffanutti Stocks
• Cycad
• Aveng
• Cerimele Construction
• Murray & Dixen
• Concor
• Ikon
• Murray & Roberts
• Aveng
• WBHO
• Group 5
• Steffanutti Stocks
• Basil Read
• Raubex
• Erbacon
• Protech-Khutheli
• Diesel Power
• Haw & Inglis
Competitors
21
Value Proposition
GEOTECHNICAL PIPELINES CIVILS • Geotechnical market
leader in South Africa with
good reputation and well
known brand in SSA
• Design alternatives
constantly investigated
• Geographical diversity
entrenched and expanded
• Depth of management
know-how with well
established business
processes for over 65
years
• Plant capacity retooled
and modernised
• ISO 9001 accredited
• OHSA 18001 accredited
• Niche leader in welded
pipelines
• Supply and install all
aspects of cross-
country pipelines
• Supply and install
pipelines in a myriad of
materials
• Experienced and
talented management
team
• Excellent track record
with blue-chip clients
• ISO 9001 accreditation
• OHSA 18001
accredited
• Diversified range of
construction services
• Plant capacity and
capability expanded
• Excellent workshop
facilities
• Strong relationships
with mines and
consulting engineers
• Experienced and
talented management
team
• ISO 9001 accredited
• OHSA 18001
accredited
Value Proposition
22
Geographical footprint
Currently
working in Ghana
5th contract
awarded.
New awards in
Kenya & Uganda
23
Geotechnical - Key Contracts
Country & Contract Description
Angola, Kinaxixi MXD complex Phase I – 1 150 soil nails, 4 200m² of gunite, 310 micropiles and over 370 soldier
piles. Phase II comprised the installation of up to five rows of Titan anchors, 7 500m²
of gunite arches and approximately 90 jet grout columns.
Duration: 15 months – in progress
Ghana, ADA Groynes Construction of 7 jetties for rock placement ranging in length from 112-212m. Jetties
are 700m apart and require sheetpile cofferdams and side jetties extending 65m to
120m out to sea. Jetties support 75t service cranes, 100t excavators and 60t rock
bogeys. ADA Groynes Ghana.pptx
Duration: 15 months
South Africa, 102 Rivonia Road,
Lateral Support to Basement
Excavation
5600m2 of permanent lateral support to basement excavation, comprising 182No x
600mm diam perimeter piles up to 22m deep with reinforced gunite arches and
540No ground anchors 450-750kn capacity up to 19m in length. 30No internal
structural piles of maximum diam 1200mm.
Duration: 5 months – complete 102 Rivonia Road.pptx
South Africa, The Bluff Military Base
(KZN)
Duration: 5 months – current Bluff Military Base - Stormwater Disposal - New.pptx
Mozambique, Beira Stacker and
Quay Upgrade
Deep piling to 28 metres for new coal export facility.
Duration: 10 months - completed
Mauritius, La Balisle
La Balisle Mauritius.pptx
24
Pipelines - Key Contracts
Province & Contract Description
KwaZulu-Natal Umlaas Road
Contract for Umgeni Water
Installation of 13 km of 1 200mm diameter steel pipeline and associated concrete
structures consisting of air-valves, scour valves, 15m vertical shaft and 120m
pipejack under N3 freeway. An energy dissipating intake works will take 500m3 of
concrete to construct.
Duration: 18 months – in progress
Limpopo, Nebo Plateau Bulk Water
Pipeline
Installation of 32km of a 450mm diameter steel pipeline from Nebo to Jane Furst.
Duration: 24 months - completed
Gauteng, BG3 Delivering water from the Vaal Dam, a distance of 8.6km, in a 3 500mm diameter
steel pipe to the canal feeding Zuikerbos Pump Station.
Duration: 24 months – in progress BG3 Contract Progress.pptx
KwaZulu-Natal, Lower Thukela Water
Pipeline
Installation of 30km of a 900mm diameter bulk potable water steel pipeline and
associated structures including pipejacking under essential services.
Duration: 18 months – still to commence
Eastern Cape, Mbizana Pipeline Installation of 13km of a 500mm diameter steel pipeline from the Ludeke dam
site to the Nomlaqu treatment works.
Duration: 12 months – completed
KwaZulu-Natal, Eshowe
Kwahlokohloko Pipeline
Installation of 5.7kms of continuous welded steel waterpipe for Kwahlokohloko
including associated structures.
Duration: 8 months
25
Civils - Key Contracts
Province & Contract Description
North West, Bakwena N4 Toll Road Construction of a second 21km carriageway along a section of the N4. Including 7No
major structures, 5 large culverts and 160 No cross drainage structures
Duration: 30 months – in progress
Mpumalanga, Kusile Power Station Package 26 - Underground service ducts to completed terraces.
Package 25 - general services pipeline. General terraces earthworks and crushing
contracts.
Duration: 36 months – in progress
Gauteng, K71/R55 Phase 1 of the 6.5km R55 from the N14 to the Wierda Road (Kl03) intersection
including two road-over-river bridges.
Duration: 24 months - completed
Final phase comprising 4.2km construction of a dual carriageway from the Kl03
intersection to Laudium and an additional two road-over-river bridges.
Duration 24 months – complete
Gauteng, Orchards Development The servicing and sale of 1373 residential 1 erven near Rosslyn and Acacia to “top-
structure developers”
Duration: 40 months – in progress
Northern Cape, Kathu Construction of infrastructure to 1437 stands, houses and apartments for Bestwood
development
Duration 42 months – in progress Bestwood D evelopment.pptx
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Matrix of Major Risks
Material Risks Mitigation
Dependency on government
infrastructure spend
Product & market diversification, Strategic B-BBEE rating &
geographical diversity
Working capital management Monthly cash flow forecast, working capital facilities, tougher on debt
collection & KPAs of divisional managers
BEE Promotion from within & careful management of transformation process
Material shortages
material delivery delays
Proper planning, qualifying bids, site contracts and manuals & KPAs of
divisional managers
Credit risk and cost reporting Monthly review at EXCO meeting, monthly review of contract financials
& KPAs of divisional managers
Bribery and corruption Obtain court interdicts, exposure of corruption through whistle-blowing &
enforce Code of Ethics and Conduct. Internal resource investigator
appointed.
Competition Build on reputation through strong brand, be competitive in terms of
price and quality, include alternative bids & in-house design
Underperforming contracts Immediate identification and response, follow up with possible
disciplinary action, ensure accountability, appoint the right people to the
right jobs, minimise non-conforming reports & compliance reviews
against policies and procedures
28
Risk Management
Meetings
Tender committees
Site visits
Risk management officer &
internal audit
Monthly cost and resource
meetings
Authority levels
Board, Risk, EXCO, Divisional & Site
Finalisation meetings
Regular and varied
Continuous programme of checking and
assessment
Attended by CEO & CFO in all divisions
Regularly updated and adhered to
Basic conditions of tender
Pricing
Project management software
Costs
Scope
Margins
Tendering process
Quality ISO 9001
Safety ISO 18001
Environmental ISO 14001
FIDIC, NEC, GCC, client specific
Overhead, mark-up, risk
Production, programme, current prices
Resource planning & management (people &
plant)
Tender finalisations, limits of authority, policies &
procedures
Accreditation certificate received
Currently in accreditation process
Management
Contracts
29 SEGMENTAL REVIEW
30
Segmental Review - Geotechnical
GEOTECHNICAL Aug 2011
R’ 000
Aug 2012
R’ 000
Segment revenue 405 611 410 327
PBIT 15 211 39 246
Segment assets 674 136 726 991
No of employees 1 408 1013
Revenue growth (4.2%) 1.2%
Operating margins 3.75% 9.6%
Order book 244 017 311 154
Pending awards 94 775 193 700
Prospects 1 246 870 944 639
Non-government 58% 65.5%
Government 42% 34.5%
31
Segmental Review - Pipelines
PIPELINES Aug 2011
R’ 000
Aug 2012
R’ 000
Segment revenue 113 320 149 163
PBIT 637 10 418
Segment assets 115 445 125 166
No of employees 475 387
Revenue growth 10.8% 32%
Operating margins 0% 7%
Order book 567 618 314 808
Pending awards 170 000 688 000
Prospects 500 000 1 540 000
Non-government - -
Government 100% 100%
32
Segmental Review - Civils
CIVILS Aug 2011
R’ 000
Aug 2012
R’ 000
Segment revenue 354 366 598 765
PBIT (25 958) 28 670
Segment assets 718 654 795 274
No of employees 1 544 2499
Revenue growth 57% 69%
Operating margins (7.3%) 4.8%
Order book 983 954 1 803 838
Pending awards 2 200 000 1 005 000
Prospects 3 000 000 2 400 000
Non-government 34% 41.7%
Government 66% 58.3%
33
ORDER BOOK AND OUTLOOK
34
Order book as at 31 August 2012
Business Unit Order Book
(R millions)
Secured Revenue
FY 2013
(R millions)
Secured Revenue
FY 2014+
(R millions)
Geotechnical 311 283 28
Civils 1 804 581 1 223
Pipelines 315 195 120
Total 2 430 1 059 1 371
35
Geotechnical Outlook as at 31 Aug 2012
Awarded Pending & Key
R94m R227m
R44m R301m
R17m R209m
R38m R102m
R90m R326m
TOTAL R1 441m R283m R1 165m
Johannesburg
Cape Town (including Ghana)
Angola
Durban, KwaZulu-Natal
Mauritius Mozambique, Tanzania & East Coast
36
Pipelines Outlook as at 31 Aug 2012
Description Value
• BG3 near Vaal
• Kwahlokohloko bulk water supply
• Bluff military base
• Umlaas Road
• Thulele/ Woodmead
• Ezenzeleni raw water treatment works & pump
station
R314m
• Palmiet pump station Rand Water
• Lower Tukhela (Stanger)
• Xonza Dam (Eastern Cape)
• Shakaskraal Starr Family Trust
• Balcombe Ilembe
R689m
• Western Aqueduct
• Northern Aqueduct
• Mooihoek 4
R1 540m
TOTAL R2 543m
Current contracts
Pending & potential awards
Key contracts
37
Civils Outlook as at 31 Aug 2012
Description Value
• K71/R55
• RAL current road contract
• Bakwena N4 (Mooinooi)
R187m (10%)
• Package 26 Terraces contract
• Package 25 General Services Pipeline
• General Terraces
• Crushing
R324m (18%)
• 7 mines
R158m (9%)
• The Rose in Rosebank (5 storey)
• Roedean
• Bestwood Development
• Orchards
R545m (30%)
• Vryberg pipeline
• Pipejacking
• Botswana
R589m (33%)
TOTAL R1 803m
Roads
Kusile
Mine work at Xstrata & Anglo Coal
Current contracts rolled over from last year as at 31 Aug 2012
Building & Development
General
38
Civils Outlook as at 31 Aug 2012
Description Value
• N4 next phase
• Mpumalanga Roads
R900m
• Terraces bulk earthworks
• Housing (details unknown)
R106m
• Kromdraai Pipeline
R180m
• Moz housing & infrastructure (4-5yrs)
• Bestwood (4-5yrs)
• Gauteng housing contract
R4 930m
• Waste water treatment works
R240m
TOTAL R6 356m
Roads
Kusile
Mine work at
Anglo Coal
Pending awards and targeted key contracts
Building
General
39
General Outlook 2013FY and beyond
• Sandton
• Rosebank
• Hatfield
• Park Station surrounds & Braamfontein
• I have no doubt that significant development
will occur around Park Station and into the
Braamfontein surrounds now that this leg is
operational as is evidenced elsewhere.
• Mozambique Coal & Gasfields
• Iron ore & manganese
• Coal
• Platinum
• There is still significant work to be done to
benefit from South Africa’s own huge
resource base as well as that of our
neighbours.
• Private & Commercial Developments
• African new markets
• Presidential infrastructure initiative
• Integrated Housing Developments
• Indication that this is starting to pick up
• Ghana, Kenya, Uganda & Zambia
• As per State of the Nation address
• High priority for government
Gautrain Private Development Spinoff
Resource Arena
General
40
General Outlook 2013FY and beyond
• Medupi & Kusile Power Stations
• Nuclear Power Station/s
• 3rd Coal fired Power Station
• Transmission Lines
• Solar and Wind initiatives
• Some housing still to happen
• Has been in the press extensively lately
• Rumours (independent energy company)
• Geotechnical foundation solutions
• Geotechnical foundation solutions
• 15 000km non-toll roads
• R9.5-billion in 2012 budget
• Coal haul-road upgrades R20-billion
• GFIP phase 2
• Sanral are obviously in a state of flux after
the e-tolling debacle but will ultimately be
supported by central government
• This is due to come out to tender again
• Dependent on e-tolling resolution
• Transnet
• Port authorities
• PetroSA
• Coega
• R330-billion capex spend
• Drydocks and general harbour upgrades
• Refined product line from Maputo
• Refinery, smelter or both
Energy sector
Sanral & other roads
Other parastatals
41
CAPEX
42
Capex
Segments
(R ‘000’s)
Financial years
2013
Total
2013
H1
Actual
2012 2011
Geotechnical 47 000 35 100 51 100 11 793
Civils 151 000 87 700 205 317 17 964
Pipelines 30 000 3 000 620 6 104
Corporate 7 000 0 685 14 512
Total 235 000 125 800 257 722 50 373
Revenue 2 200 000 1 140 000 1 727 000 1 366 433
43
CONCLUSION
THANK YOU
44
Disclaimer
Forward-looking statements
This presentation contains forward-looking statements that, unless
otherwise indicated, reflect the company’s expectations as at 31
August 2012. Actual results may differ materially from the company’s
expectations if known and unknown risks or uncertainties affect its
business or if estimates or assumptions prove inaccurate. The
company cannot guarantee that any forward-looking statement will
materialise and, accordingly, readers are cautioned not to place
undue reliance on these forward-looking statements. The company
disclaims any intention and assumes no obligation to update or
revise any forward-looking statement even if new information
becomes available as a result of future events or for any other
reason.
45
www.esorfranki.co.za
Esorfranki Limited | 30 Activia Road Activia Park Germiston 1401
PO Box 6478 Dunswart 1508 South Africa
+ 27 83 259 2584
+27 11 776 8700
+27 11 822 1158
Bernie Krone| CEO
+ 27 82 498 3518
+27 11 776 8700
+27 11 822 1158
Wessel. [email protected]
Wessel van Zyl | CFO
