1 For the year ending 29 February 2012 Annual results
presentation 2012
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2
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3 TABLE OF CONTENTS INTRODUCTION 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
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4 INTRODUCTION EVERYTHING I REALLY NEED TO KNOW I LEARNED IN
KINDERGARTEN Robert Fulghum
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5 Everything I really need to know I learned in Kindergarten
This passage was written by Robert Fulghum in trying to establish a
Credo by which to live and I believe it provides the means for
humanity to solve the worlds problems and should form the basis of
every Integrated Report. It is entitled: ALL I REALLY NEED TO KNOW
I LEARNED IN KINDERGARTEN All I really need to know about how to
live and what to do and how to be I learned in Kindergarten. Wisdom
was not at the top of the graduate-school mountain, but there in
the Sunday School sand-pile. These are the things I learned: Share
everything Play fair Dont hit people Put things back where you
found them Clean up your own mess
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6 Everything I really need to know I learned in Kindergarten
Dont take things that arent yours Say youre sorry when you hurt
somebody Wash your hands before you eat Flush Warm cookies and cold
milk are good for you Live a balanced life learn some and think
some and draw and paint and sing and dance and play and work every
day some. Take a nap every afternoon When you go out into the
world, watch out for traffic, hold hands and stick together Be
aware of wonder.
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7 Everything I really need to know I learned in Kindergarten
Remember that little seed in the Styrofoam cup the roots go down
and the plant goes up and nobody really knows how or why, but we
are all like that. Goldfish and hamsters and white mice and even
the little seed in the Styrofoam cup they all die. So do we. And
then remember the Dick-and- Jane books and the first word you
learned the biggest word of all LOOK. Everything you need to know
is in there somewhere. The Golden Rule, love, basic sanitation,
ecology, politics, equality and sane living. Take any one of these
items and extrapolate it into sophisticated adult terms and apply
it to your family life or your work or your government or your
world and it holds true and clear and firm. Think what a better
world it would be if we all the whole world had cookies and milk
about three oclock every afternoon and then lay down with our
blankets for a nap. Or if all governments had as a basic policy to
always put things back where they found them and to clean up their
own mess. And it is still true no matter how old you are when you
go out into the world, it is best to hold hands, stick together and
LOOK. By Robert Fulghum
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8 SALIENT FEATURES Be aware of wonder.
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9 Salient Features 29 February 2012 Revenue up 30% to R1.8bn
(2011:R1.4bn) EBITDA up 170% to R132.6 m (2011:R49.1m) Headline
earnings up 163% to R24m (2011:R37.8m loss) HEPS up 148% to
6.2cents (2011:12.9 cents loss) PAT up 145% to R18.2m (2011:R40.8m
loss) EPS up 134% to 4.7cents (2011:13.9 cents loss) Order book up
21% to R1.8b (2011:R1.45b) Operating cash increased by R66.1m to
R124.2m
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10 Sustainability Achievements Put things back where you found
them, clean up your own mess. We have had a successful return to
profitability in H2 FY 2012 Our rights offer has been completed
Acquisition-based debt has been settled We now have a single
amalgamated operating entity Our order book has been strengthened
We have expanded into Ghana and Uganda ISO 9001 accreditation has
been obtained in all divisions Our LTIFR of 0.75 is significantly
better than the industry norm of 1.33 Esorfranki Civils capital
acquisition programme has been successfully implemented Historical
loss-making contracts in all divisions have been concluded Numerous
insurance claims impacting cash flows on certain projects have been
resolved We have retained key staff
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11 FINANCIAL REVIEW 29 February 2012 Dont take things that dont
belong to you.
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12 Statement of Financial Position Salient Features as at 29
February 2012: Feb 2011 R 000 Feb 2012 R 000 Assets Non-current
assets966 1871 151 181 Current assets498 164665 288 Total assets1
464 3511 816 469 Equities and liabilities Share capital and
reserves703 156937 432 Non-current liabilities195 562316 658
Current liabilities565 633562 379 Total equity and liabilities1 464
3511 816 469 Net asset value per share (cents)238,9241.5
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13 Statement of Financial Position Salient Features (1 March
2011 29 February 2012) Total assets PPE Cash reserves Equity
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14 Statement of Income Salient Features Feb 2011 R 000 %Feb
2012 R 000 Revenue1 366 43330%1 771 692 EBITDA49 066170%132 656
Profit/(loss) after tax(40 761)145%18 216 Headline
earnings/(loss)(37 774)163%24 046 HEPS(12,9)148%6.2
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15 STRATEGY Live a balanced life learn some and think some and
draw and paint and sing and dance and play and work every day
some.!
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16 Short-Term Challenges & Progress CHALLENGE Severe
slowdown in public sector infrastructure spend (large scale
projects) PROGRESS Management intervention to improve profitability
and synergy of divisions by focusing on cost structures, tender
submissions and contract execution 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 Articles published in major industry
journals to enhance brand awareness CHALLENGE B-BBEE focus PROGRESS
Level 4 B-BBEE certification maintained
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17 Short-Term Challenges & Progress CHALLENGE Price
competitive environment and increasingly difficult contract terms
and conditions PROGRESS Project execution capabilities improved
Contract portfolio reviewed and restored to profitability 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
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18 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. During the
recent fast track settlement process offered to the construction
industry Esorfranki Limited filed one marker relating to a
prescribed offence Esorfranki was further mistakenly implicated in
one other instance relating to Shearwater prior to acquisition Any
further developments will be communicated to all stakeholders as
they occur.
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19 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 Duplicate assets,
including business properties realised Short-term working capital
facilities secured to accommodate growth and delayed payment cycles
Rights issue finalised and acquisition-based debt settled Capital
asset expansion programmes secured on the back of long-term
contracts, boosting price competitiveness and efficiency and plant
resource expansion
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20 Medium to Long-Term Strategy Harness synergy within the
group Expand product offering and grow market share Geographical
diversity in Civils and Pipelines Environmental accreditation ISO
14001, safety accreditation ISO 18001 Securing long-term contracts
to create future visibility and to underpin sustainability Focus on
sustainable growth nodes within government infrastructure
programmes Supply chain management will take cognisance of
environmental impact and 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
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21 OPERATIONAL REVIEW 29 February 2012 Wash your hands before
you eat flush!
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22 Products & Services
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23 Clients
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24 Competitors and Value Proposition Competitors
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25 Value Proposition
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26 Geographical footprint Currently working in Ghana on 3
contracts. New awards in Kenya & Uganda
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27 Geotechnical - Key Contracts Country &
ContractDescription Angola, Kinaxixi MXD complexPhase I 1 150 soil
nails, 4 200m of gunite, 310 micropiles and over 370 soldier piles.
Phase II comprised the installation of up to five rows of Titan
anchors, 7 500m of gunite arches and approximately 90 jet grout
columns. Duration: 15 months in progress DRC, Kolwezi soil
improvement project Large soil improvement project for a new copper
mine processing plant. Duration 6 months: Completed Tanzania,
PSPFLateral support and piling to new offices for the Public
Services Pension Fund in Dar- es-Salaam Duration: 6 months -
completed Botswana, Jwaneng mine cut 8A piling contract consisting
of 710 straight-shafted, cast-situ auger piles ranging between
600mm 900mm in diameter and inserted to depths ranging from 16m
25m. Esorfranki also completed the dynamic compaction on the
primary stockpile over an area of more than 2 000m. Duration: 10
months - completed South Africa, Argyle storm water outfall (KZN)
Design and construction of a temporary jetty and coffer dam with a
5m high protection wall for the construction of the extended
concrete shotgun outfall. Duration: 12 months - completed
Mozambique, Beira Stacker and Quay Upgrade Deep piling to 28 metres
for new coal export facility. Duration: 10 months - completed
Mauritius, Dry dock in Port LouisConstruction of a diaphragm wall
and piling to the floor slab of the dry dock. Duration: 12 months -
completed
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28 Pipelines - Key Contracts Province & ContractDescription
Limpopo, Mooihoek Bulk Water Supply Phase III Installation of 13km
of a 660mm diameter steel pipeline. Duration: 11 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, BG3Delivering 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
KwaZulu-Natal, Nsezi Bulk Water Pipeline Installation of 4.5km of a
1 300mm diameter raw water steel pipeline. Duration: 8 months -
completed Eastern Cape, Mbizana PipelineInstallation of 13km of a
500mm diameter steel pipeline from the Ludeke dam site to the
Nomlaqu treatment works. Duration: 12 months - completed Eastern
Cape, Milton SiphonReplacement of approximately 1.1 km of a 1 900mm
diameter concrete siphon with new steel pipework. Duration: 6
months - completed
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29 Civils - Key Contracts Province & ContractDescription
North West, Bakwena N4 Toll RoadConstruction of a second 21km
carriageway along a section of the N4. Duration: 30 months in
progress Mpumalanga, Kusile Power StationUnderground service ducts
to completed terraces and general services pipeline Duration: 36
months in progress Gauteng, Sanral R21Upgrade of 12.8km of the R21
national route from the East Rand Mall to Pomona Road. Duration:
approximately 28 months - completed Gauteng, K71/R55Phase 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 in progress Free
State, WesselsbronConstruction of a 4.5 mega-litre waste water
purification plant in Wesselsbron. Duration: 18 months - completed
Northern Cape, KathuConstruction of a 20 mega-litre water reservoir
and water tower. Duration: 18 months - completed Construction of
infrastructure and housing for Bestwood development Duration 15
months in progress
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30 RISK MANAGEMENT When you go out into the world, watch out
for traffic, hold hands and stick together!
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31 Matrix of Major Risks Material Risks Mitigation Dependency
on government infrastructure spend Product & market
diversification, Strategic B-BBEE rating & geographical
diversity Working capital managementMonthly cash flow forecast,
working capital facilities, tougher on debt collection & KPAs
of divisional managers BEEPromotion 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
reportingMonthly review at EXCO meeting, monthly review of contract
financials & KPAs of divisional managers Bribery and
corruptionObtain court interdicts, exposure of corruption through
whistle-blowing & enforce Code of Ethics and Conduct
CompetitionBuild on reputation through strong brand, be competitive
in terms of price and quality, include alternative bids &
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
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32 Risk Management Management Contracts
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33 SEGMENTAL REVIEW
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34 Segmental Review - Geotechnical GEOTECHNICAL Feb 2011 R 000
Feb 2012 R 000 Segment revenue 706 672734 092 PBIT 18 74750 253
Segment assets 662 228722 746 No of employees 12871 191 Revenue
growth (25%)4% Operating margins 3%7% Order book 332 454321 205
Pending awards 263 009150 500 Prospects 454 700468 210
Non-government 60%67% Government 40%33%
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35 Segmental Review - Pipelines PIPELINES Feb 2011 R 000 Feb
2012 R 000 Segment revenue 169 005227 821 PBIT (3 548) 2 234
Segment assets 87 09284 007 No of employees 434373 Revenue growth
(26%) 35% Operating margins (2%) 1% Order book 264 083220 073
Pending awards 631 000260 867 Prospects 5 000 000 3 115 000
Non-government -- Government 100%
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36 Segmental Review - Civils CIVILS Feb 2011 R 000 Feb 2012 R
000 Segment revenue 518 787824 051 PBIT (3 113)25 377 Segment
assets 454 761583 537 No of employees 1 4531 820 Revenue growth
(27%)59% Operating margins(1%)3% Order book 860 267 1 215 762
Pending awards 511 5001 613 000 Prospects2 482 0003 788 500
Non-government 30%23% Government 70%77%
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37 ORDER BOOK AND OUTLOOK Cookies and warm milk are good for
you!
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38 Order book as at 29 February 2012 Business Unit Order Book
(R millions) Secured Revenue FY 2013 (R millions) Secured Revenue
FY 2014+ (R millions) Geotechnical 32128932 Civils 1 216843373
Pipelines 22017842 Total 1 7571 310447
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39 Geotechnical Outlook as at 29 Feb 2012 Johannesburg Cape
Town (including Ghana) Angola Durban, Mozambique, Tanzania &
East Coast Mauritius
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40 Pipelines Outlook as at 29 Feb 2012 Current contracts
Pending & potential awards Key contracts
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41 Civils Outlook as at 29 Feb 2012 Roads Kusile Mine work at
Xstrata & Anglo Coal Current contracts rolled over from last
year as at 29 Feb 2012 Building General
Slide 42
42 Civils Outlook as at 29 Feb 2012 Roads Kusile Mine work at
Anglo Coal Pending awards and targeted key contracts Building
General
Slide 43
43 General Outlook 2013FY and beyond Gautrain Private
Development Spinoff Resource Arena General
Slide 44
44 General Outlook 2013FY and beyond Energy sector Sanral &
other roads Other parastatals
47 CONCLUSION Having successfully turned the corner, we find
ourselves leaner, meaner, happier, more focused and realistically
bullish for the future of Esorfranki Limited and all its
stakeholders! THANK YOU
Slide 48
48 Disclaimer Forward-looking statements This presentation
contains forward-looking statements that, unless otherwise
indicated, reflect the companys expectations as at 29 February
2012. Actual results may differ materially from the companys
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.
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49 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
[email protected] Bernie Krone| CEO + 27 84 556 2486
+27 11 776 8700 +27 11 822 1158 [email protected]
Wayne van Houten| CFO
