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CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2014.

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Presentation on theme: "CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2014."— Presentation transcript:

1 CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2014

2 2

3 3 STORY LINE Lowlights Loss making contracts in Civils Trading environment Highlights Geotechnical sale Developments established Pipelines maintained growth Financial position GearingOrder bookGoing concern

4 4 AGENDA Salient features Financial overview Operational overview Strategy Prospects and order book Conclusion

5 5 SALIENT FEATURES

6 6 SALIENT FEATURES (CONTINUED OPERATIONS) Non-recurring items in financial year 2014 Sale of Geotechnical business Impairment of goodwill A year of many highs and lows Revenue R1,593bn R1,538bn Order book R2,6bn R2,2bn Gearing 27,0% 32,3% Net cash R20,9 million R33,6 million Health & Safety LTIFR 0,86 LTIFR 0,59 HEPS (11,3) cents 20,5 cents ▲ 3,6%▲ 18,6%▼ 16,4% ▼▲▼ 155,1% Reduced to 0,43 at April 2014

7 7 SALIENT FEATURES CONTINUED Sale of Geotechnical business Approval at GM - 18 November 2013 Disposal valued at R592 million including fair value of contingent consideration of R65 million Cash received to date R497 million Outstanding Issues ›Registration of off-shore properties ›Rationalisation of legacy legal structures Sale proceeds utilised as follows: R’mil ›Settle HYB210 ›Dividend of 38 cents/share150 ›Working capital investment70 ›Geotech borrowings settled45

8 8 FINANCIAL REVIEW

9 9 FINANCIAL RESULTS IN CONTEXT Lowlights Finalisation of loss making contracts ›N4 impacted by Marikana unrest, bridge design error and consequential late completion ›Kriel Civils and Boxhole contracts impacted by changes in construction methodology, subject to claims (not traded) ›Hwelereng road contract for RAL subject to numerous delays and consequential late completion Labour unrest impacted productivity on most sites Civil’s conservative view on estimated final completion margin on Kusile contracts Highlights Increase in revenue and profitability maintained in Pipelines Established Developments business Gearing down to 27% Order book increase to R2,6 billion B-BBEE certified as Level 3 at 78,96 from level 4 Major drainage at N4 On the back of weak markets with margins remaining under pressure

10 10 SUMMARY STATEMENT OF COMPREHENSIVE INCOME Segmental summary of Earnings 2014 R’ R’000 Geotechnical Civils( ) Pipelines Developments962- Corporate and eliminations( )(35 416) Consolidated earnings( ) Adjusted Loss/impairment of assets84 934(10 683) Loss on disposal of discontinued operations Headline earnings(43 043)77 027

11 11 STATEMENT OF COMPREHENSIVE INCOME Continuing operations 2014 R’ R’000 % Change Revenue ,6 EBITDA( ) (182,8) PBIT( )74 890(476,2) -Operating (loss)/profit before non-recurring items( )64 207(347,1) -Non-recurring items( )10 683n/a Net Finance expense(37 440)(31 652)18,9 PBT( )43 238n/a Taxation (18 136)n/a (Loss)/profit from continuing operations( )25 102n/a Order book ,6

12 12 STATEMENT OF COMPREHENSIVE INCOME Discontinued operations 2014 R’ R’000 Revenue EBITDA Attributable earnings Sale consideration NAV of discontinued operation Loss on disposal(31 973) Net profit from discontinued operations Taxation effect Surplus on disposal54 554

13 13 STATEMENT OF COMPREHENSIVE INCOME Earnings per share 2014 R’ R’000 (Loss)/profit after tax( ) Adjustment Headline earnings(43 039) (Loss)/earnings per share (cents)(43,5)23,5 Headline (loss)/earnings per share (cents)(11,3)20,5

14 14 STATEMENT OF FINANCIAL POSITION Financial overview 2014 R’ R’000 Property, plant and equipment Intangibles and goodwill Financial asset at fair value Deferred tax Long-term receivables Trade debtors and contracts in progress Inventories and land for development Taxation Cash and cash equivalents Total assets NAV/share 203,5 cents NTAV/share 168,6 cents 45 days in trade receivable 2014 Current ratio 1,65

15 15 STATEMENT OF FINANCIAL POSITION Financial overview 2014 R’ R’000 Share capital and reserves Secured borrowings Deferred tax liability Bank overdraft Preference shares Taxation Trade and other payables Provisions Total equity and liabilities Debt/equity26,5%32,3% 64 days in trade payables

16 16 CASH FLOW

17 17 OPERATIONAL REVIEW

18 18 THE YEAR GENERAL General market General tough contracting conditions - tight margins and fierce competition Risk transfer to contractor Focus on contract completion Finalising commercial compensation claims Still awaiting budgeted public sector expenditure Tender activity increased but seems to be budgetary Infrequent and delayed awards Reaction Rebuilding order book - focus on skills Cautious approach to Africa Right-sizing Action Look to consolidate construction operations in year ahead Office established in Zimbabwe

19 19 PIPELINES Pipelines 2014 R’ R’000 Revenue PBIT Segment assets Number of employees Revenue growth79%42% Operating margins9%10% Order book Pending awards Prospects Non-government-% Government100%

20 20 PIPELINES CONTINUED Focused on contract completion and commercial compensation (BG3 and Mopani) Infrequent and delayed awards impacting 2014/15 Start-up of major contracts - Northern and Western Aqueduct Competition from new entrants (perceived low barrier of entry) Impact of level 3 B-BBEE rating Cross-border focus - Namibia, Zambia and Zimbabwe ›Time and cost Sanitation project for eThekwini progressing well Plant expansion of R10 million on back of awarded work Focus on project delivery Office established in Zimbabwe BG3 100ton crane pipe lift BG3 100ton crane pipe lift

21 21 CIVILS Civils 2014 R’ R’000 Revenue PBIT( ) Segment assets Number of employees Revenue growth(20,8)%47% Operating margins(13,9)%6% Order book Pending awards Prospects Non-government35%45% Government65%55%

22 22 CIVILS CONTINUED Loss making contracts (N4, Kriel and RAL) Generally tough contracting conditions Focus on contract completion and commercial compensation Rebuilding order book at acceptable margins and risk Still awaiting budgeted public sector expenditure Delayed awards Fierce competition at tight margins Contracts at Kusile ›Crushing nearing completion (no claims) ›General services piping 62% complete (no claims) ›Bulk earthworks - original contract nearing completion with minor claims ›Underground facilities 51% complete with substantial scope changes and claims submitted Plant optimisation nearing completion Look to continue consolidating construction operations in year ahead Reinvigorated business N4 Temporary staging to portal structure N4 Temporary staging to portal structure

23 23 CIVILS LOSS MAKING CONTRACTS N4 Bakwena Contract award4 May 2011 Value at awardR370 million Durationoriginally 30 months What happened Tendered at time of economic crisis at break even Anticipated/historical productivity never achieved resulting in R62 million loss on allowable ›Steel and fuel strikes in 2012/13 ›Marikana killings in March 2013 ›Platinum strike 2014 Consequential effects: ›Plant utilisation achieved 60% and R60 million loss ›Late completion of project forecasted to be August 2014 with impact on P&G What now Agreed programme with client - completion August 2014 Reduced resources to activity levels Negotiating contractual entitlements and claims Design errors - variation agreed with costs Placing selected fill at N4

24 24 CIVILS LOSS MAKING CONTRACTS Kriel Civils and Boxhole What happened Tendered at time of low work on hand at break even Scope changed materially - subject to claim Client imposed restrictions on methodology and access Availability of client supplied materials Consequential effects: ›Productivity and utilisation never achieved, R32 million loss on labour and plant ›Late completion of project –Civils in May 2014 –Boxhole in July 2014 What now Civil contract complete - snags being finalised Agreed Boxhole programme with client - completion July 2014 Reduced resources to activity levels Continued with commercial claims process Earthworks at Kriel Boxhole Contract award11 April 2012 Value at awardR35 million Duration8 months Civils Contract award11 April 2012 Value at awardR109 million Duration12 months

25 25 CIVILS LOSS MAKING CONTRACTS | CONTINUED RAL road contract - Hwelereng Contract award10 March 2011 Value at awardR80 million Duration18 months What happened Tendered at time of economic crisis at break even Re-work impacting completion Availability of crushed materials Never achieved tendered production rates Consequential effects: ›Productivity and utilisation never achieved, R27 million loss on labour and plant ›Late completion of project with associated costs What now Contract complete - handover finalised Awarded associated works contract of R30 million, mainly subcontractors Road upgrade at Hwelereng for RAL

26 26 CIVILS TURNAROUND STARTED NOVEMBER 2012 Actions and timeline Loss making contracts Productivity Utilisation Tender and estimating Commercial Civils Recovery Strategy 2014.ppt Building bridges at Diepsloot

27 27 DEVELOPMENTS Developments 2014 R’ R’000 Revenue PBIT1 401(1 668) Segment assets Number of employees31 Revenue growthN/A Operating margins2,2%N/A Order book Pending awards Prospects Non-government51%N/A Government49%N/A

28 28 DEVELOPMENTS CONTINUED Established division during the year Orchards R30 million sales in 2014 ›Project potential to be realised exceeds R240 million Broke ground at Diepsloot East, north of Johannesburg ›Project potential to be realised exceeds R2 billion, with commercial element Uitvlugt is an integrated residential development in Three Rivers East with land transferred to Esor ›Project potential excluding top structures to be realised exceeds R600 million Soshanguve is a residential development in Tshwane with Esor acquiring development rights ›Project potential to be realised exceeds R150 million Division may expand into top structure development Potential in social and gap housing expected to increase over the next few years Demand for affordable housing exceeds supply, but may be impacted by rising interest rates and unemployment Strategically important division due to secondary work potential for group Orchards Completed houses Orchards Completed houses

29 29 STRATEGY

30 30 STRATEGY Strategic themes Consolidate and rationalise Streamline support functions Build on strong brand Leadership Commercial astuteness Cash flow Positive about SADC Strategic alignment to improve combined strength Keep it simple

31 31 PROSPECTS AND ORDER BOOK

32 32 LOOKING AHEAD Prospects SANRAL - budget of R10 billion pa Transnet - various rail and port projects in the pipeline Eskom - ongoing work at Kusile and Medupi power stations with potential for Coal 3 Major water projects planned for SA, Lesotho and Zambia Schools - R5 billion worth of tenders submitted and still to be awarded Order book Order book increased by 18,6% to R2,6 billion One-year and total order book both at satisfactory levels against FY2014 revenue Work on hand heavily weighted in favour of Government and Parastatal work

33 33 ORDER BOOK 2 year secured order book Order book R’mil Secured revenue FY 2015 R’mil Secured revenue FY R’mil Civils Developments Pipelines Total secured Non-government13%11%15% Government87%89%85% Pending awards Civils Developments Pipelines Total pending

34 34 ORDER BOOK LEGACY LOSS MAKING CONTRACTS IN WOH Impact of loss making contracts on 2015 order book Civils order book - R1,2 billion Included FY15 order book is R25,4 million re legacy loss making contracts Order book includes R203,8 million work secured prior to FY14 New work secured represents 81% of order book

35 35 CAPEX

36 36 CAPEX 2015 R’mil 2014 R’mil 2013 R’mil Civils Pipelines Corporate Total spend/approved Depreciation Depreciation cover0,570,621,89

37 37 CONCLUSION

38 38 IN SUMMARY Tough year across industry Maintained growth in Pipelines Established Developments Actions taken Gearing improved Controlled growth mainly in RSA with prospects in select African countries Rebuilding Civils ›Implemented and tracking progress ›Complete loss making contracts ›Improve commercial acumen

39 39 DISCLAIMER Forward-looking statements This presentation contains forward-looking statements that, unless otherwise indicated, reflect the company’s expectations as at 28 February 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 save as required by statute or regulation.

40 40 Esor Limited 30 Activia Road, Activia Park, Germiston 1401 PO Box 6478, Dunswart, 1508, South Africa Bernie Krone | CEO Wessel van Zyl | CFO CONTACT US


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