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1. 2 WELCOME 3 Table of contents  Welcome  Salient features  Sustainability achievements  Financial review  Strategy ›Short-term challenges and.

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Presentation on theme: "1. 2 WELCOME 3 Table of contents  Welcome  Salient features  Sustainability achievements  Financial review  Strategy ›Short-term challenges and."— Presentation transcript:

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3 3 Table of contents  Welcome  Salient features  Sustainability achievements  Financial review  Strategy ›Short-term challenges and progress ›Medium to long-term strategy  Operational review ›Products, services and clients ›Competitors and value proposition ›Geographical footprint and key contracts  Risk management  Segmental review  Order book and outlook  Capex  Conclusion


5 5 Salient features – 28 February 2013  Revenue up 31.3% to R2.3bn (2012:R1.8bn)  EBITDA up 103% to R269.3m (2012:R132.6m)  Headline earnings up 220% to R77m (2012:R24m)  HEPS up 231% to 20.5 cents (2012:6.2 cents)  PAT up 382% to R87.7m (2012:R18.2m)  EPS up 400% to 23.5 cents (2012:4.7 cents)  Order book up 43.7% to R2.5bn (2012:R1.8bn)  Operating cash decreased by R60m to R33.6m

6 6 Salient features continued  Gross margin 16.1%  Operating margin 6.5%  Established on-the-ground presence in Ghana and Tanzania  Esorfranki Pipelines secured project in Swaziland  Invested R194m in property, plant & equipment  Invested R68m in property developments  ISO safety accreditation achieved

7 7 Sustainability achievements  We have maintained a successful return to profitability for three successive periods  Gross margin 16.1%  Operating margin 6.5%  Our order book has been strengthened to R2.5bn  Established on-the-ground presence in Ghana and Tanzania  Esorfranki Pipelines secured project in Swaziland  Invested R194m in property, plant & equipment  ISO 9001 Quality accreditation maintained in all divisions  ISO accreditation has been obtained in all divisions  ISO accreditation was obtained in all divisions post year-end  Our LTIFR of 0.59 is significantly better than the industry norm of 1.33  Regrettably one fatality at the beginning of this calendar year

8 8 FINANCIAL REVIEW 28 February 2013

9 9 Statement of Financial Position: salient features as at 28 February R’ R’000 Assets Non-current assets Current assets Total assets Equities and liabilities Share capital and reserves Non-current liabilities Current liabilities Total equity and liabilities Net asset value per share (cents)

10 10 Statement of Financial Position: salient features (1 March 2012 – 28 February 2013) Total assets  Cash & cash equivalents  Trade and other receivables  No impairment of intangibles R33.6m R826.7m PPE  Investment in construction equipment  Sale of Pinetown property R193.9m R25m Cash reserves  Operational cash-flow consumed  Acquisition PPE  Dividends paid  Secured borrowings  Debt/(debt+equity) ratio (R32.9m) (R193.9m) Nil (R448m) 42.5% Equity  Profit after tax  FCTR  Dividend paid R87.7m R3.9m Nil

11 11 Statement of Income: salient features 2012 R’000% 2013 R’000 Revenue EBITDA Profit/(loss) after tax Headline earnings/(loss) HEPS


13 13 Material issues MATERIAL ISSUE  Growth considering the external environment CHALLENGE  Intensifying competition and margin contraction RESPONSE & PROGRESS  Expansion in the African market  Targeting higher margin private sector projects such as low cost housing  Taking equity share in developments

14 14 Material issues MATERIAL ISSUE  B-BBEE scorecard CHALLENGE  To continually strengthen Esorfranki’s B-BBEE position and comply with Construction Charter requirements essential for securing government and parastatal contracts RESPONSE AND PROGRESS  Ownership - in negotiations with potential BEE investor with expected finalisation in June 2013  Management - examination of board structure with intention of appointing black female non-exec by end H  Maximise procurement, business development and CSI spends

15 15 Material issues MATERIAL ISSUE  Liquidity - financial management during times of growth CHALLENGE  Balancing the group’s growth (double construction sector) with liquidity to service investments in housing and development RESPONSE & PROGRESS  Sufficient liquidity and capital to meet business objectives through additional banking facilities  Provision of company and institutional guarantees to free up cash retentions

16 16 Material issues MATERIAL ISSUE  Project execution - on time, within budget and to required quality CHALLENGE  Ability to start projects efficiently and manage limited senior resources and volatile labour while ensuring quality and safety RESPONSE & PROGRESS  Efficient risk-controlled delivery of quality projects  Limits of authority depending on size and profile of contracts  Project team monitors risk, execution, cost and payment from appointment on monthly basis  SHEQ compliance continuously monitored within the frameworks of ISO 9001, & 18001

17 17 Material issues MATERIAL ISSUE  Skills shortage CHALLENGE  Scarce resources undermine delivery and expansion RESPONSE & PROGRESS  Creation of attractive employment proposition, a people-centred culture, skills development programme and succession planning  Employees are offered bursaries as well as skills training  LDC employees are trained in a wider range of skills than is required for the contract for their further empowerment  In-house accredited training centre based at Germiston workshop

18 18 Material issues MATERIAL ISSUE  SHEQ – impact of safety, health, environment and quality on operations CHALLENGE  Potential threat to employees, natural resources, client’s and group’s reputation through non-compliance RESPONSE & PROGRESS  ISO 9001, ISO 14001¹ and ISO accredited  Superior safety record (LTIFR<1.00)² compared to industry average of 1.33  Safety management system implemented in Africa  Rejuvenated fuel-efficient fleet and fuel-efficiency plan  SHEQ training, regular internal & external audits  Strategies for reducing, re-using and recycling resources 1 Post year-end ISO Environmental accreditation achieved 2 Actual February 2013 rolling monthly average LTIFR of 0.59

19 19 Material issues MATERIAL ISSUE  Past collusive and anti-competitive practices within the industry CHALLENGE  To settle all outstanding Competition Commission issues PROGRESS  The CC investigation into alleged anti-competitive behaviour in the piling and drilling markets was referred to the Tribunal following a failed settlement offer. Negotiations have been reopened post year-end and the board is convinced that the estimated penalty provision previously allowed in the financial statements will suffice  During the recent fast track settlement process offered to the construction industry Esorfranki Limited filed one marker relating to a prescribed offence and will accept an imposed fine of R  Esorfranki was further mistakenly implicated in one other instance relating to Shearwater prior to acquisition which has now fallen away  Any further developments will be communicated to all stakeholders as they occur

20 20 Medium to long-term strategy  Continue harnessing synergy within the group  Expand product offering and grow market share  Geographical diversity in Civils and Pipelines  Environmental accreditation ISO obtained post year-end  Securing long-term contracts to create future visibility and to underpin sustainability  Focus on sustainable growth nodes within government infrastructure programmes when they occur  Supply chain management will take cognisance of environmental impact and carbon emissions will be measured and managed  Addressing Construction Charter requirements to improve B-BBEE scoring by 31 December 2013  Focus on concession and development projects  Focus on private sector clients to balance dependency on government contracts

21 21 OPERATIONAL REVIEW 28 February 2013

22 22 Products & Services GeotechnicalPipelinesCivils  Piling  Lateral support  Marine structures  Pipejacking  Thrust boring  Bridgejacking  Diaphragm walls  Ground improvement  Dynamic compaction  Ground remediation  Soils investigation  Geotechnical design  Gas and petrochemical steel pipelines  Water and wastewater pipelines  Sewer pipelines  Pump stations  Pipeline refurbishments  Cement mortar lining  Valve chambers  Associated concrete structures  Associated infrastructure  Pressure testing  Road construction  Bridge construction  Township infrastructure  Mining infrastructure  Water reticulation  Water towers  Reservoirs  Sewer reticulation  Bulk earthworks  Building  Housing  Development

23 23 Clients GeotechnicalPipelinesCivils  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 levels  Parastatals: ›Transnet ›Rand Water ›Umgeni Water ›Portnet ›TCTA & DWAF  Mining sector  Private clients ›RBM ›Foscor ›Mondi  Cross-border ›FIPAG Mocambique ›Botswana Government ›Zimbabwe ›Swaziland  Eskom  Sanral  Anglo Coal  Xstrata  RAL  Gauteng Province  Government ›Central ›Provincial ›Municipal levels  Private developers  Bakwena Concessions  Debswana

24 24 Competitors GeotechnicalPipelinesCivils  Steffanutti Stocks in-house geotechnical division  Aveng in-house geotechnical division  Dura (Solentache Bachy is a large global contractor)  Wepex  Gauteng Piling  Terrastrata  Geomechanics  Keller (largest global geotechnical contractor)  WK Pipelines  WBHO  Aveng  Group 5  Steffanutti Stocks  Cerimele Construction  Murray & Dixen  Concor  Ikon  Murray & Roberts  Aveng  WBHO  Group 5  Steffanutti Stocks  Basil Read  Raubex  Erbacon  Protech-Khutheli  Diesel Power  Haw & Inglis

25 25 Value proposition GeotechnicalPipelinesCivils  Geotechnical market leader in South Africa  Good reputation and well known brand in SSA  Design alternatives constantly investigated  Geographical diversity entrenched and expanded  Depth of management know- how  Well-established business processes over 65 years  Plant capacity retooled and modernised  ISO 9001, ISO14001 and ISO 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  Extended work footprint to Swaziland  ISO 9001, ISO14001 and ISO accredited  Diversified range of construction services  Plant capacity and capability expanded  Excellent workshop facilities  Strong relationships with clients and consulting engineers  Experienced and talented management team  Increased longer-term projects in order book  ISO 9001, ISO14001 and ISO accredited


27 27 Geotechnical - key contracts Country and contactDescription Angola: Kinaxixi MXD complex Phase I 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 Phase III - diaphragm wall, anchors and piling - under negotiation (R42.5m) Ghana: ADA Groynes Phase 1: Construction of the temporary staging jetties for the construction of 7 No permanent groynes Phase 2: Increased scope to 11 No. jetties, and under negotiation. Anticipated commencement January 2014 (R150.0m) Durban: Mt. Edgecombe Interchange Piling: Closing out post-tender negotiations with main contractor (R40.0m) Mozambique: Steval Tank Foundations Southern Sun, Maputo Beira / Maputo - Piling (R16.0m) Piling (R3.2m) Kenya: Garden City Mall Piling: Awaiting official order (R15.0m) Johannesburg: Sasol Offices Lateral Support: Awarded and on site (R16.0m) Cape Town: Tenesol Solar Farm Piling: Awarded and on site (R16.0m) Namibia: FNB Development, Windhoek Lateral Support: Awarded and on site (R10.0m)

28 28 Pipelines - key contracts Country and contactDescription Eastern Cape, Xonxa Dam Pipeline Installation of 23km of 600mm diameter steel pipeline near Queenstown Duration: 12 months - in progress Swaziland, Mhlume Canal - Siphon 4 Installation of 1.5km of 1 900mm steel pipe between two existing canals in the Mhlume area Duration: 8 Months - site establishment has commenced KZN, Lower Thukela PipelineInstallation of 29km of 900mm steel pipeline between command reservoir, (Tugela river), and the Mvoti WTW. Stanger area Duration 18 months - in progress KZN, Umlaas Road, Bulk Water Main Installation of 13km of 1 100mm pipe, from Richmond off take to Umlaas Road Duration: 21 months - in progress KZN, Ethekwini Water & Sanitation Provision of Water and Sanitation to Informal Settlements in Ethekwini Duration: 23 months - in progress KZN, Hazelmere Raw Water Pipeline Installation of 2.4km of 800mm pipeline from Hazelmere Dam to Hazelmere Water Treatment Works Duration: 6 months - in progress KZN, Kwahlokohloko Bulk Water Supply Construction of 5,8km of 900mm Steel Pipeline for the Bulk Water Supply to Kwahlokohloko Duration: 8 months - in progress KZN, Woodmead, Main Water Supply Supply and install 9 km of 500mm Pipeline to the Thulele / Woodmead Developments and the Avon Peaking Power Plant Duration: 12 months - nearing completion- however, new R22.5m V.O. issued

29 29 Civils - key contracts Country and contactDescription North West, Bakwena N4 Toll Road. Phases 2, 3 & 4 Construction of a second 21km eastbound carriageway along a section of the N4 Duration: 30 months - in progress and due for completion Dec 2013 Mpumalanga, Kusile Power Station Underground service ducts to completed terraces and general services pipelines Duration: 36 months - in progress Mpumalanga, Kusile Power Station Construction of bulk earthworks to terraces Duration: 18 months - in progress Gauteng, Diepsloot East Housing & Infrastructure Construction of residential houses and associated civils infrastructure Phase 1: Construction of 2 pedestrian bridges Duration: 10 months - in progress Northern Cape, KathuConstruction of infrastructure and housing for Bestwood development Duration 15 months - in progress Gauteng, Rosslyn Orchards Development Developer for the infrastructure and construction for 1400 entry level housing units Duration: 3-7 years – in progress


31 31 Matrix of major risks Material risksMitigation Dependency on government infrastructure spend Product and market diversification, strategic B-BBEE rating and geographical diversity Working capital management Weekly cash flow forecast, working capital facilities, tougher on debt collection and KPAs of divisional managers BEE Promotion from within, careful management of transformation process at board level. BEE ownership deal under negotiation and board restructure Material shortages material delivery delays Proper planning, qualifying bids, site contracts and manuals and KPAs of divisional managers Credit risk and cost reporting Monthly review at EXCO meeting, monthly review of contract financials. Credit policy with varying limits for approving client credit limits Bribery and corruption Obtain court interdicts, exposure of corruption through whistle-blowing and enforce Code of Ethics and Conduct. Social & Ethics Committee established. Zero tolerance Competition Build on reputation through strong brand, be competitive in terms of price and quality, include alternative bids and in-house design Underperforming contractsImmediate 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

32 32 Management  Meetings  Tender committees  Site visits  Risk management officer and 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 and CFO in all divisions  Regularly updated and adhered to Contracts  Basic conditions of tender  Pricing  Project management software  Costs  Scope  Margins  Tendering process  Quality ISO 9001  Safety ISO  Environmental ISO  FIDIC, NEC, GCC, client specific  Overhead, mark-up, risk  Integrated with financials  Production, programme, current prices  Resource planning & management (people and plant)  Contract specific  Tender finalisations, limits of authority, policies and procedures Risk management


34 34 Segmental review - Geotechnical Geotechnical 2012 R’ R’000 Segment review PBIT Segment assets Number of employees Revenue growth4%7.3% Operating margins7%10% Order book Pending awards Prospects Non-government67%84% Government33%16%

35 35 Segmental review - Pipelines Pipelines 2012 R’ R’000 Segment review PBIT Segment assets Number of employees Revenue growth35%42% Operating margins1%9% Order book Pending awards Prospects Non-government-- Government100%

36 36 Segmental review - Civils Civils 2012 R’ R’000 Segment review PBIT Segment assets Number of employees Revenue growth59%47% Operating margins3%6% Order book Pending awards Prospects Non-government23%45% Government77%55%


38 38 Order book as at 28 February 2013 Business unit Order book (R millions) Secured revenue FY 2014 (R millions) Secured revenue FY (R millions) Geotechnical Civils Pipelines Developments Total

39 39 Geotechnical outlook as at 28 Feb 2013 AwardedPending and key JohannesburgR68mR190m Cape Town (including Ghana)R129mR283m AngolaR11mR232m DurbanR78mR183m East Coast (Mozambique, Tanzania, Mauritius)R41mR117m Total R940mR327mR1 005m

40 40 Pipelines outlook as at 28 Feb 2013 DescriptionValue Current contracts  BG3 near Vaal  Mooihoek 4  Bluff military base  Umlaas Road  Thulele/ Woodmead  Hazelmere  Stanger  Xonxa Dam  Kwahlokohloko  Warden R519m Pending and potential awards  Kwahlokohloko ReservoirR32m Key contracts  Western Aqueduct  Northern Aqueduct R1 630m TotalR2 181m

41 41 Civils outlook as at 28 Feb 2013 Current contracts rolled over from last year as at 28 Feb 2013 (2014FY only) DescriptionValue Roads  RAL current road Contract  Bakwena N4 (Mooinooi) R149m (16.8%) Kusile  Package 26 Terraces contract  Package 25 General Services Pipeline  Additional Terraces Contract  Crushing Contract R315m (35.4%) Mine work at Anglo Coal  Various minesR66m (7.4%) Building  Bestwood Housing DevelopmentR101m (11.4%) General  Pipejacking  Bestwood Infrastructure  Thabazimbi Infrastructure R259m (29%) TotalR890m

42 42 Civils outlook as at 28 Feb 2013 Pending awards and targeted key contracts DescriptionValue Civils  N4 next phase  Additional crushing at Kusile  Temba WWTP  Greenside Terrace  Munitoria  Mafube Remedial Works  Kusile Housing (details unknown)  PRASA Stations  Schools  Moz housing and infrastructure (4-5 yrs)  Bestwood (4-5 yrs)  Platinum Park  Rustenburg BRT  Solar Energy  Diepsloot East Development Building Pipejacking Developments General R6 175m

43 43 General outlook 2014FY and beyond Gautrain private development spinoff  Sandton  Rosebank  Hatfield  Park Station surrounds and Braamfontein  Sasol Head Office  I have no doubt that significant development will occur around Park Station and into the Braamfontein surrounds once this leg is operational as evidenced elsewhere Resource arena  Mozambique Gasfields  Iron ore and 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 General  Private & Commercial Developments  African new markets  Presidential infrastructure initiative  Integrated Housing Developments  Indication that this is starting to pick up  Ghana, Kenya, Uganda and Zambia  As per State of the Nation address  High priority for government

44 44 General outlook 2014FY and beyond Energy Sector  Medupi & Kusile Power Stations  Nuclear Power Station  3rd Coal fired Power Station  Transmission Lines  Solar and Wind initiatives  Some housing still to happen  Has been in the press extensively lately  Rumours  Geotechnical foundation solutions  Geotechnical and Civils Sanral and other roads  km non-toll roads  +R10bn in 2014 budget  Coal haul-road upgrades R20bn  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 Other parastatals  Transnet  Port authorities  PetroSA  Coega  R330bn capex spend  Drydocks, Digout and general harbour upgrades  Refined product line from Maputo  Refinery, smelter or both

45 45 CAPEX

46 46 Capex Segments (R’000)Financial years Geotechnical Civils Pipelines Corporate Total Revenue

47 47 Conclusion Having successfully maintained a profitable position for three successive periods, we are confident that the leaner, meaner, happier, more focused persona of Esorfranki Limited will continue to bode well for the future of all its stakeholders! THANK YOU!

48 48 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.

49 49 Esorfranki Limited | 30 Activia Road Activia Park Germiston 1401 PO Box 6478 Dunswart 1508 South Africa Bernie Krone | CEO Wessel van Zyl | CFO

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