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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
Wayne van Houten, CFO
+27 84 556 2486
+27 11 822 3906
+27 11 822 1158
Tammy Davies, Group Marketing Manager
+27 83 419 2942
+27 11 822 3906
+27 11 822 1158
Esorfranki Limited
30 Activia road Activia Park Germiston 1401
PO Box 6478 Dunswart 1508 South Africa
