It’s been a I’m gonna - Esor 2012 Ann… · Sub -saharan market -GDP growth of around 5%...

It’s been a tough year but I think I’m gonna make it!

The 2010 World Cup “The recent slowness of government and State-owned enterprises to adjudicate tenders - and

the tardiness of some government-related organisations to make out cheques has cast a pall

over the industry - but most players foresee improvement after the Fifa World Cup is behind us.

Can the sector revive?”

(David Carter, 1 June 2010)

Economic outlook Esorfranki’s outlook

• “The first six months of the current financial year have been tough but prospects are now

looking distinctly brighter despite the current lull in the aftermath of the Fifa World Cup.”

(October 2010, Bernie Krone Esorfranki (CEO))

• “Market overview

South African market - Over the next three years government and state owned

enterprises are expected to spend in excess of R800 billion on infrastructure

development in the transport, power and water sectors.

Sub -saharan market -GDP growth of around 5% anticipated in FY 2012 driven by a

high commodity prices and foreign investment inflows.”

(May 2011, Bernie Krone (CEO) and Wayne van Houten (CFO))

What the Industry had to say… Yes, we do have a headache right now, but I think in some ways it may have been avoidable to an extent. There are two aspects. One is obviously how did we then roll out post the 2010 infrastructure? We didn’t really do that that well. And then obviously we had the global financial crisis, which spoilt the party anyway. So the expectations are, what, 2006 and 2007 have now reversed to an extent.

(Mike Upton, 14th February 2011) "Whilst the decrease in earnings is disappointing, the performance achieved over the past year remains satisfactory given the state of the construction industry and increasingly competitive landscape.”

(Francois Diedrechsen, Raubex 28th February 2011) "In light of the current market the division has had a satisfactory six months, however margins on both tendered and negotiated projects remain under pressure."

(WBHO, March 2011) "Realistic nonetheless, he says the impact of delayed contract awards, contract cancellations and intensified competition was inevitable and reflected in the results."

(Steffanuti Stocks, 10th November 2010)

Overview of challenges experienced in FY2011 • World financial crisis and liquidity constraints (Sub Saharan Africa)

• Disruptive effects of Soccer World Cup

• Cancellations, protracted delays of awards and shrinking markets

• Intensified competition

• Margin squeeze

• Competition Authority

• Current Status

• Fast Track offer by CC

Overview of challenges experienced in FY2011 • First half industry problems invade second half

• Civils

• R21 & N4

• Rain & timing (2 summers)

• Screening & crushing

• Atcom & Anglo

• Pipelines

• BG3

• Activity levels down

• Geotechnical

• Market halved in 2nd half

• Angola has underperformed

• KZN underperformed

• Shared Services

• Activity levels down

Group strategy Short term

• Competition Authority

• Rights offer

• BEE scorecard improvement to Level 4

• Consolidate and integrate operating divisions into one single entity

• Expand market share into SSA growth countries

• Civils - Mozambique

• Geotechnical – Ghana, Kenya

• Restore profitability with existing contract portfolio and divsions

• Cash conservancy

Medium to long term

• Further geographical expansion

• Expanding the product range organically and acquisitively to focus specifically on growth

sectors

• BEE scorecard

Rights Issue • 18,709,152 shares to shareholders (20.11%)

• 59,451,283 shares to Coronation Asset Management (63.91%)

• 14,862,821 shares to Sanlam (15.98%)

• Issued share capital increases by 93,023,256

• Issued share capital now 395,185,430

• Acquisition debt of R178m has been settled

• Further growth of business

New group structure effective 1 March 2011

Divisionalisation

Esorfranki Limited

• Holding company

Esorfranki Construction (Pty) Ltd

• Operations company

• Civils

• Geotechnical

• Pipelines

• Shared Services

• All off-shore companies and

divisions

Esorfranki Properties

Geotechnical merge • Durban

• Esor Africa and Franki Africa will operate as Geotechnical Division from single premises

• Pipelines will also be accommodated there

• Western Aqueduct

• Johannesburg

• Franki will take all Esor operations besides pipejacking to their Wynberg facilities

• Esor Pipejacking will operate under Civils from our Activia Park facilities

Esorfranki Group - Network

Esorfranki management structure

Contents • Key financial features

• Financial review

• Operational review

• CAPEX

• Geographical segmentation

• Corporate Governance

• Conclusion

Key Financial Features 28 February 2011

Financial Review 28 February 2011

Statement of Financial Position Salient Features as at:

Feb 2010

R’ 000

Feb 2011

R’ 000

Assets

Non- current assets 999 551 966 187

Current assets 648 273 498 164

Total assets 1 647 824 1 464 351

Equities and Liabilities

Share capital and reserves 808 028 703 156

Non- current liabilities 405 711 195 562

Current liabilities 434 085 565 633

Total Equity and Liabilities 1 647 824 1 464 351

Net asset value per share (cents) 275.6 238,9

Statement of Financial Position Salient Features (1st March 2010 – 28th February 2011)

• Total assets

• Cash R 63,1m

• Trade & other receivables R 413,7m

• PPE R 565,8m

• Cash reserves

• Operational cash-flow generated R 58,1m

• Acquisition PPE (R50,3m)

• Dividends paid (R43,6m)

• Secured borrowings (R70,6m)

• Debt/(Debt+Equity) ratio 32%

• Equity

• Loss after tax (R40,7m)

• FCTR (R18,9m)

• Dividend paid (R43,6m)

Debt :equity ratio

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

1 000 000

2006 2007 2008 2009 2010 2011 2012

R 0

00's

Financial years

Debt:equity plus debt Equity

Interest bearing debt

Debt:equity ratio

Post Rights

Issue

Statement of Income Salient Features

Feb 2010

R’ 000

% Feb 2011

R’ 000

Revenue 1 857 817 (26,4%) 1 366 433

EBITDA 389 052 (87,3%) 49 066

Profit/(loss) after tax 197 641 (120,6%) (40 761)

Headline earnings/(loss) 203 037 (118,6%) (37 774)

Headline earnings per share 71,3 (118,1%) (12,9)

Operational review

Order book as at 28 February 2011

Business Unit Order Book

(millions)

Secured Revenue

FY 2012

(millions)

Secured Revenue

FY 2013

(millions)

Geotechnical 332 332 -

Civils 860 660 200

Pipelines 264 264 -

Total 1 456 1 256 200

2012 forecast and beyond • Eskom

• Medupi Power Station (housing now Pipejacking)

• Kusile (Bravo) Power Station (Geotechnical now Civils)

• Nuclear Power Station

• 3rd Coal Fired Station

• Sanral

• N1 /N2 PPP concessions (Geotechnical)

• Bakwena N4 Toll Road concession

• Road Agency Limpopo

• Transnet

• Portnet

• Petronet

• Coega

• Refinery

• Smelter

2012 forecast and beyond, continued • Expansion in Resource Arena

• Iron ore and manganese

• Coal

• Platinum

• Mozambique Gasline

• African New Markets

• Ghana

• Mozambique

• Kenya

• Gautrain Private Development Spinoff

• Private & Commercial Developments

Esorfranki Civils

Civils products and services • Road building

• Bridge construction

• Township infrastructure

• Mining infrastructure

• Water reticulation

• Water towers & reservoirs

• Sewer reticulation

• Bulk earthworks

• Building

Geographical

footprint -

some key

contracts

Unusual rainfall

Civils segment revenue Feb 2010

R’ 000

Feb 2011

R’ 000

Segment Revenue 715 033 518 787

Profit/(loss) before interest and tax 144 520 (3 113)

No of employees 1 228 1 453

Revenue growth 17% (27%)

Operating margins 20% (1%)

Order book 726 542 860 267

Pending awards 189 000 511 500

Prospects 615 000 2 482 000

Non-government 22% 30%

Government 78% 70%

Civils outlook 2012 • K71/R55 secured R213m

• RAL secured R80m

• Kusile secured R310m

• Lawley secured R30m

• N4 secured R330m

• Mine work Atcom (Xstrata) and Anglo R200m

• Big dig channels R120m targeted

• Kusile other work targeted R150m

• Mocambique letter of intent R700m

Esorfranki Pipelines

Pipelines products and services • Gas & Petrochemical steel pipelines

• Water & Wastewater pipelines & pump stations

• Sewer pipelines & pump stations

• Pipeline refurbishments

• Cement mortar lining

• Valve chambers

• Associated concrete structures

• Associated infrastructure

Geographical

footprint -

some key

contracts

Pipelines segment revenue Feb 2010

R’ 000

Feb 2011

R’ 000

Segment Revenue 229 231 169 005

Profit/(loss) before interest and tax 31 068 (3 548)

No of employees 427 434

Revenue growth 14% (26%)

Operating margins 14% (2%)

Order book 313 712 264 083

Pending award - 631 000

Prospect 6 330 000 5 000 000

Non-government - -

Government 100% 100%

Pipelines outlook 2012 • BG3 R160m current

• Miscellaneous R35m current

• Western Aqueduct R420m (under appeal)

• Giyani R200m (under appeal)

• Mooihoek 3 secured R60m

• Metalong Lesotho Phase 1 placed 3rd R375m

• Metalong Lesotho Phase 2 placed 3rd R291m

• TCTA

• Rand Water Augmentation Budget

Esorfranki Geotechnical

Geotechnical products and services • Pipejacking

• Bridgejacking

• Piling

• Lateral Support

• Marine Structures

• Ground Improvement

• Dynamic Compaction

• Ground Remediation

• Soils Investigation

Geographical

footprint -

some key

contracts

Geotechnical segment revenue Feb 2010

R’ 000

Feb 2011

R’ 000

Segment Revenue 944 862 706 672

PBIT 164 147 18 747

No of employees 1 562 1 287

Revenue growth (21%) (25%)

Operating margins 17% 3%

Order book 532 778 332 454

Pending awards 182 096 263 009

Prospects 472 093 454 700

Non-government 41% 60%

Government 59% 40%

Geotechnical outlook 2012 • Geotechnical stabilised at around R700m

• Jo’burg R210m (36% + 38% pending + 50% key)

• Cape Town R100m (51% + 38% pending + 40% key)

• Angola R105m (30% + 11% pending + 200% key)

• Growth anticipated at 7-8% 2012

• Durban R100m (40% + 14% pending + 56% key)

• Mocambique R70m (51% + 59% pending + 73% key)

• Growth around 8% 2012

• Tanzania R45m (58% + 116% pending + 60% key)

• Mauritius R40m (68% + 12% pending + 60% key)

• 85% of all geotechnical work on the island

• Esorfranki Pipejacking R70m (50% + 30% pending + 40% key)

CAPEX Segments

(R ‘000’s)

Financial years

2011 2010 2009

Geotechnical 11 792 42 727 163 831

Civils 17 964 49 711 14 435

Pipelines 6 104 3 096 8 824

Corporate 14 512 500 1 265

Total 50 372 96 034 188 355

South Africa 47 509 58 097 139 766

Sub-Sahara 2 863 37 937 48 589

CAPEX requirements for 2012 • Geotechnical – nothing specific

• Civils – site specific (hire where possible)

• K71/R55 (24 months)

• N4 (30 months)

• Mocambique (5 years)

• Kusile (30 months)

• Maintenance capex

• Pipelines

• Western Aqueduct (48 months)

• Maintenance capex

Group Geographical segments South Africa

(R’000)

Africa

(R’000)

Total

(R’000)

Segment Revenue 1 162 814 203 619 1 366 433

(Loss)/profit before interest and

tax

(11 743) 28 166 (16 423)

(Loss)/profit after Tax (65 873) 25 112 (40 761)

Order Book 1 354 272 102 532 1 456 804

No of employees 2 953 231 3 184

Operating margins (1%) 13,8% (1,2%)

Non-government 42%

Government 58%

Corporate governance • Board of Directors

• 4 Independent Non-executives

• 2 Executives

• Audit & RiskCommittee

• Human Resources & Nominations Committee

• Auditors – KPMG

• Company Secretary - iThemba Governance and Statutory Solutions (Pty)

Sustainability • King III

• Formalisation of targets and measures

• Succession planning

• CSI • SAICE Roadshow • Edutrade

• Employment equity

• Standardisation of employee benefits

• Focus on immediate development and employment of Black female staff

• Focus on upskilling of black staff to progress into middle to senior management • SHEQ

• LTIFR of 0,9% vs industry 1,3% • ISO9001 accreditation (Civils and Pipelines) • HIV and AIDS • Education and awareness projects

Contact details Bernie Krone, CEO

+27 83 259 2584

+27 11 822 3906

+27 11 822 1158

bernie.krone@esorfranki.co.za

Wayne van Houten, CFO

+27 84 556 2486

+27 11 822 3906

+27 11 822 1158

wayne.vanhouten@esorfranki.co.za

Tammy Davies, Group Marketing Manager

+27 83 419 2942

+27 11 822 3906

+27 11 822 1158

tammy.davies@esorfranki.co.za

Esorfranki Limited

30 Activia road Activia Park Germiston 1401

PO Box 6478 Dunswart 1508 South Africa