Statements of financial position - Esor Pipelines Results... · Statements of financial position at 28 February 2015 Consolidated results for the year ended 28 February 2015 ... The

Statements of financial positionat 28 February 2015

Consolidated results for the year ended 28 February 2015

Abridged consolidated results

for the year ended 28 February 2015

Statements of financial positionat 28 February 2015


Highlights

Esor Limited | (Registration number 1994/000732/06) | Incorporated in the Republic of South Africa (JSE Code: ESR | ISIN: ZAE000184669) | (“Esor” or “the company” or “the group”)

Headline earnings per share from continuing operations up 23%

Loss-making N4 road contract resolved

Restructured Civils operations and Support Services

Established joint venture with Calgro M3 for Diepsloot development

LTIFR improved to 0,37

Two-year order book stable at R1,9 billion

Level 3 B-BBEE rating maintained

Gearing down to 23,6%

1


Commentary

IntroductionThe abridged consolidated financial results for the year to 28 February 2015 (“the year”) reflect the results of a challenging period with the impact of legacy loss-making contracts still reflected in the results. However, all legacy problem contracts have since been completed, handed over and resolved.

In accordance with our “back to basics” approach, the group has been restructured into one construction unit with six product areas offering positive prospects, while capitalising on Esor’s strong brand. The business has been consolidated, including rationalising the Civils operations.

Financial resultsThese results were impacted by the impairment of goodwill of R29,7 million and the fair value write down of the contingent consideration from the disposal of the Geotechnical business of R35,4 million and the operating loss of R48,3 million reported in the Civils division.

Revenue was impacted by the group consolidation initiatives as well as the last effects of loss-making contracts, and reduced by 9,1% to R1,45 billion. Earnings improved by 39,9% to a loss of R99,9 million and improved by 53,8% against continuing operations from the preceding period. This translated to a headline loss per share of 18,8 cents compared to a headline loss of 11,3 cents and a headline loss from continuing operations of 24,4 cents at February 2014. Gearing was lowered to 23,6% which was better than our target.

SafetyIt is regrettable to report a fatality at the Northern Aqueduct project post year-end on 2 April 2015. Esor extends its condolences to the family. Any loss of life impacts the wider Esor family too and steps have been put in place to prevent further such incidents.

During the year Esor improved its Lost Time Injury Frequency Ratio (“LTIFR”) to 0,37 (2014: 0,59). The group continues to focus on leading indicators to ensure accidents are prevented and on maintaining its ISO 9001, ISO 14001 and OHSAS 18001 accreditations.

Review of operationsThe group continued to operate through three core divisions in the year: Esor Civils, Esor Pipelines and Esor Developments, and reports accordingly.

The restructuring into a focused construction and developments group happened post year-end, effective 1 March 2015.

Esor Civils remained negatively impacted by macroeconomic conditions. Margins were tight, with contracts which were tendered for in a tough environment now being executed in an even more challenging landscape.

The Kusile contracts account for 60% of Esor Civils’ revenue and approximately one-third of group revenue. The division therefore focused on entrenching its strong relationship with Eskom, who have proven a reliable debtor. The Kusile terrace underground facilities works and the general services piping contracts are currently under way. The crushing and bulk earthworks contracts are completed and claims have been finalised. Historical claims on the terrace underground facilities contract, related to delays and disruptions, were finalised in October 2014 and the settlement received in November 2014.

In the second half of the year Esor Civils successfully completed the Bakwena N4 road contract, its most challenging loss-making contract. Now handed over, the N4 contract incurred a further R56 million loss resulting from late completion, partly due to late changes to the scope of works and the impact of the labour unrest at Marikana mine. This loss was reported in the interim results.

The division successfully targeted refurbishment projects in the year, securing a contract for the conversion of a Johannesburg inner city office block into residences. Other refurb contracts currently under way include the upgrade of OR Tambo Duty Free for ACSA, and the upgrade of Walter Sisulu square for the Johannesburg Development Agency. In addition, Esor grew its footprint in the KwaZulu-Natal RDP housing market with two projects totalling 1 500 units. The group continues to pursue work in the sizable low-cost housing market.

Esor Pipelines has a solid, substantially full order book notwithstanding some project cancellations and delays in the year, and continued to deliver a good performance in an increasingly competitive market. The group successfully completed a number of key pipeline projects. The division has successfully targeted work for eThekwini at the Western and Northern aqueducts, which contracts are progressing well.

On the pipejacking front, Esor was awarded substantial work in the year and remains the

2


recognised leader in South Africa. The work, although mostly of a smaller nature, geographically covers most of South Africa from Northern, North West, Mpumalanga, KwaZulu-Natal and Gauteng provinces.

The pipelines order book comprises various long-term projects such as the Western and Northern Aqueducts and new awards such as the Malkerns Canal project in Swaziland, the Lion Park and Tshelimnyama pipelines contracts, also in KwaZulu-Natal. Esor continues to drive cross-border expansion and has achieved success in Swaziland. However, procuring work in other SADC countries is proving tougher, impacting time and costs.

The Esor Developments business is progressing well, with five developments in various phases of planning and execution. In the year Esor concluded a joint venture agreement with Calgro M3 on the Diepsloot East integrated residential development project with our share being up to R2 billion. Calgro M3 will be responsible for project development and management, an area we need to outsource, with Esor retaining the “right of first refusal” for the installation of all engineering services and construction of 50% of the top structures. Esor’s new prospective development project in Khayelitsha township in the Western Cape means that the order book value remained steady despite a drop in revenue in terms of the Calgro M3 joint venture.

Looking ahead, delays in spending the allocated budget on the Diepsloot project will impact revenue in FY16.

CAPEXCapital expenditure of R20,5 million (2014: R38 million from continuing operations) was incurred during the year primarily to expand the capacity of the Pipelines division, which has resulted in a relatively new and well-maintained fleet and well-equipped workshops. The plant capacity has been rationalised and aligned with our future growth strategy.

TransformationEsor maintained its Level 3 B-BBEE accreditation in terms the Department of Trade & Industry’s B-BBEE Codes of Good Practice, and is targeting Level 2 by 2016 (based on the 2009 Construction Sector Charter).

The Esor Broad Based Share Ownership Scheme (“EBBSOS”) increased its shareholding during the year and now holds a 5,32% stake in the company.

The group continues to invest heavily in enterprise development with eight SMMEs currently receiving Esor’s support.

ProspectsThe board anticipates Esor’s recovery to continue into the year ahead. Esor has been refocused on what the group does well and profitably. The directors are confident that the streamlined group is agile and nimble to go to where the work is and structured for profitability with clear focus areas and improved synergies between disciplines.

Sanitation has been earmarked as an area of future opportunity following the Minister of Water and Sanitation’s stated commitment to improved access and better infrastructure, particularly in rural areas. Esor, having substantially completed a large sanitation project for the eThekwini Municipality, is able to leverage existing capacity and skills to accommodate this growth area.

The group will continue to focus on reducing debt and improving cash flow.

DirectorateAs announced at interim results, a long-planned restructuring of the board was effected during the year. The restructured board is operating well under the helm of Chairman Bernie Krone and CEO Wessel van Zyl, supported by CFO Bruce Atkinson.

Oswald Franks was appointed as Lead Independent Director and three new independent non-executive directors were added. Dave Thompson and Franklin Sonn retired as independent non-executive Chairman and independent non-executive director, respectively, effective 21 August 2014.

Effective 21 August 2014 Heather Sonn and Eugene Erasmus were appointed as independent non-executive directors, while Keneilwe Moloko was appointed as independent non-executive director effective 6 October 2014.

The new board continues to ensure compliance with governance and transformation requirements, with a valuable mix of business, financial and engineering expertise.

Dividend declarationIn line with group policy, no dividend has been declared (2014: 38 cents interim dividend following

Commentary (continued)

3


the disposal of the geotechnical business). It remains the policy of the group to review the dividend policy annually in light of cash flow, gearing, capital requirements and bank covenants.

Events after the reporting dateAs of 1 March 2015, Esor restructured the group into six product areas, namely:• Building/Housing• Developments• Infrastructure• Pipe services• Pipelines • Sanitation

On 2 March 2015, the company received notification from the Construction Industry Development Board (“CIDB”) that they were investigating those companies implicated in the Competition Commission enquiry. We are currently in discussions with the CIDB to resolve the matter. The board of the CIDB, on 12 May 2015, resolved to suspend the formal enquiry pending resolution of the legal challenges to its regulations.

There were no other significant events after the reporting date.

Basis of preparationThe summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for abridged reports, and the requirements of the Companies Act applicable to summarised financial statements. The Listings Requirements require abridged reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements, from which the summarised consolidated financial statements were derived, are in terms of International Financial Reporting Standards and are consistent with the accounting policies applied in the preparation of the previous consolidated financial statements. The financial statements that are summarised in this report were prepared by the CFO, Bruce Atkinson.

Audit opinionThis summarised report is extracted from audited information, but is not itself audited. The financial statements were audited by KPMG Inc., who expressed an unmodified opinion thereon.

The audited financial statements and the auditor’s report thereon are available for inspection at the company’s registered office. The directors take full responsibility for the preparation of the summarised report and the financial information has been correctly extracted from the underlying annual financial statements.

The group audited financial statements, which were prepared under the supervision of the CFO, Bruce Atkinson CA(SA), are available for inspection at the company’s registered office and will be included in the Integrated Annual Report 2015 to be posted to stakeholders on or about 28 May 2015.

Annual general meetingThe annual general meeting of the company will be held at the company’s offices, 30 Activia Road, Activia Park, Germiston on Friday, 26 June 2015 at 10:00. The notice of annual general meeting forms part of the Integrated Annual Report 2015, to be posted to stakeholders on or about 28 May 2015.

The board of directors of the company determined that, in terms of section 62(3)(a), as read with section 59 of the Companies Act, 2008 (Act 71 of 2008), as amended, the record date for the purposes of determining which shareholders of the company are entitled to participate in and vote at the annual general meeting is Friday, 19 June 2015. Accordingly, the last day to trade Esor shares in order to be recorded in the Register to be entitled to vote will be Thursday, 11 June 2015.

AppreciationWe thank our directors, both existing and new, for their input and commend management and our employees for their ongoing commitment. We also thank our business partners, suppliers, advisors and our valued clients and shareholders for their continued confidence in the group.

On behalf of the board

Bernie Krone Wessel van ZylChairman CEO

28 May 2015

4 Statements of financial positionat 28 February 2015


Group

2015 R’000

2014

R’000

Assets

Non-current assets 475 950 613 660

Property, plant and equipment 230 932 320 135

Goodwill 155 323 185 062

Financial asset at fair value through profit or loss 29 488 64 923

Deferred tax asset 10 566 11 457

Investment and loan to joint venture 48 880 –

Loans and long-term receivables 761 32 083

Current assets 753 117 935 151

Loans and receivables 35 014 –

Inventories 149 374 221 345

Non-current assets held-for-sale 20 046 –

Taxation 8 014 13 455

Trade and other receivables 504 330 659 928

Cash and cash equivalents 36 339 40 423

Total assets 1 229 067 1 548 811

Equity and liabilities

Share capital and reserves 667 340 777 219

Share capital and premium 583 730 586 145

Equity compensation reserve – 19 213

Foreign currency translation reserve 27 033 23 665

Retained earnings 56 577 148 196

Non-current liabilities 121 586 207 802

Secured borrowings 101 837 163 043

Preference shares – 23 424

Deferred tax liability 19 749 21 335

Current liabilities 440 141 563 790

Current portion of secured borrowings 82 920 74 350

Current portion of preference shares 21 000 –

Bank overdraft – 19 583

Taxation 2 644 19 131

Provisions 11 458 13 713

Trade and other payables 322 119 437 013

Total equity and liabilities 1 229 067 1 548 811

5



Statement of profit or loss and other comprehensive income

Group

CONTINUING OPERATIONS

2015 R’000

2014

R’000

Revenue 1 448 363 1 592 835

Cost of sales (1 385 681) (1 611 624)

Gross profit 62 682 (18 789)

Other income 10 170 10 564

Operating expenses (95 963) (127 117)

Loss before interest, tax, amortisation, impairments and depreciation (23 111) (135 342)

Amortisation, impairments and depreciation (78 650) (146 419)

Results from operating activities (101 761) (281 761)

Finance income 19 538 4 980

Finance costs (22 983) (42 420)

Loss before income tax (105 206) (319 201)

Taxation income 5 314 102 862

Loss from continuing operations (99 892) (216 339)

Discontinued operations

Profit from discontinued operations, net of income tax – 50 178

Loss (99 892) (166 161)

Other comprehensive income:

Items that are or may be reclassified to profit or loss

Foreign currency translation differences for foreign operations (9 770) 25 568

Related taxes 2 198 (5 753)

Other comprehensive income, net of tax (7 572) 19 815

Loss attributable to:

Owners of the company (99 892) (166 161)

Total comprehensive income attributable to:

Owners of the company (107 464) (146 346)

Reconciliation of headline loss:

Loss after tax (99 892) (166 161)

Net (profit)/loss on disposal of property, plant and equipment (893) 294

Impairment of property, plant and equipment and goodwill 29 739 84 638

Loss on disposal of discontinued operations – 38 190

Headline loss (71 046) (43 039)

6


Group

CONTINUING OPERATIONS

2015 R’000

2014

R’000

Reconciliation of headline loss from continuing operations

Loss after tax (99 892) (216 339)

Net (profit)/loss on disposal of property, plant and equipment (893) 294

Impairment of property, plant and equipment and goodwill 29 739 84 638

Loss on disposal of discontinued operations – 38 190

Headline loss (71 046) (93 217)

Earnings per share

Basic loss per share (cents) (26,4) (43,5)

Diluted loss per share (cents) (26,4) (43,5)

Headline loss per share (cents) (18,8) (11,3)

Diluted headline loss per share (cents) (18,8) (11,3)

Net asset value per share (cents) 178,3 203,5

Net tangible asset value per share (cents) 148,4 168,6

Earnings per share from continuing operations

Basic loss per share (cents) (26,4) (56,6)

Diluted loss per share (cents) (26,4) (56,6)

Headline loss per share (cents) (18,8) (24,4)

Diluted headline loss per share (cents) (18,8) (24,4)

Earnings per share from discontinued operations

Basic earnings per share (cents) – 13,1

Diluted earnings per share (cents) – 13,1

Headline earnings per share (cents) – 13,1

Diluted headline earnings per share (cents) – 13,1


Statement of profit or loss and other comprehensive income(continued)

7



Statements of changes in equity

Group

Share

capital

R’000

Share

premium

R’000

Equity

compen-

sation

reserve

R’000

Foreign

currency

translation

reserve

R’000

Retained

earnings

R’000

Total

equity

R’000

Balance at 28 February 2013 376 570 924 18 606 3 850 459 506 1 053 262

Loss for the year – – – – (166 161) (166 161)

Other comprehensive income – – – 19 815 – 19 815

Total comprehensive income for the year – – – 19 815 (166 161) (146 346)

Transactions with owners,

recorded directly in equity

Contributions by and distributions to owners

Dividends to equity holders – – – – (145 149) (145 149)

Share-based payment transactions – – 607 – – 607

Treasury shares – disposed 6 14 839 – – – 14 845

Total transactions with owners 6 14 839 607 – (145 149) (129 697)

Balance at 28 February 2014 382 585 763 19 213 23 665 148 196 777 219

Loss for the year – – – – (99 892) (99 892)

Other comprehensive income – – – (7 572) – (7 572)

Total comprehensive income for the year – – – (7 572) (99 892) (107 464)

Transactions with owners,

recorded directly in equity

Contributions by and distributions to owners

Transfer to retained earnings – – (19 213) 10 940 8 273 –

Shares acquired (8) (2 407) – – – (2 415)

Total transactions with owners (8) (2 407) (19 213) 10 940 8 273 (2 415)

Balance at 28 February 2015 374 583 356 – 27 033 56 577 667 340

8



Statements of cash flow

Group

2015 R’000

2014

R’000

Cash flows from operating activities 97 943 (279 069)

Cash receipts from customers 1 643 961 1 487 579

Cash paid to suppliers and employees (1 532 274) (1 575 788)

Cash generated by/(utilised in) operations 111 687 (88 209)

Finance income 19 538 25 957

Finance costs (22 983) (71 213)

Dividends paid – (145 149)

Taxation paid (10 299) (455)

Cash flows from investing activities (27 393) 422 816

Additions to property, plant and equipment (20 468) (52 564)

Proceeds on disposal of property, plant and equipment 41 954 79 312

Acquisition of business, net of cash * (40 558)

Loan advanced to joint venture (48 880) –

Disposal of discontinued operations, net of cash 1 437 387

Investments acquired – (761)

Cash flows from financing activities (55 051) (156 495)

Decrease in secured borrowings (52 636) (171 340)

Shares acquired (2 415) –

Proceeds from share issue, net of issue expenses – 14 845

Net increase/(decrease) in cash and cash equivalents 15 499 (12 748)

Net cash and cash equivalents at beginning of year 20 840 33 588

Cash and cash equivalents at end of year 36 339 20 840

* Less than R1 000

9


Segmental analysis

Operating segmentsThe group has three reportable segments, which are the group’s strategic business units.

Civils

R’000

Pipelines

R’000

Develop-

ment

R’000

Corporate

and

eliminations

R’000

Consoli-

dated

R’000

Group

2015

External revenue 787 983 584 507 75 873 – 1 448 363

Inter-segment revenue – 50 824 – (50 824) –

Segment revenue 787 983 635 331 75 873 (50 824) 1 448 363

Segment result

(Loss)/profit before interest and taxation (48 256) 35 470 4 297 (93 272) (101 761)

Net finance (cost)/income (8 063) 2 012 (4 000) 6 606 (3 445)

Taxation 20 948 8 948 (1 668) (22 914) 5 314

Segment (loss)/profit (35 371) 46 430 (1 371) (109 580) (99 892)

Segment assets 415 710 359 878 196 644 216 835 1 189 067

Segment liabilities 554 770 263 774 179 773 (476 590) 521 727

Capital and non-cash items

Additions to property, plant and equipment 4 243 11 496 – 4 729 20 468

Depreciation 2 920 14 024 – 31 967 48 911

Impairment loss – – – 29 739 29 739

Number of employees 1 287 1 094 3 154 2 538

Civils

R’000

Pipelines

R’000

Develop-

ment

R’000

Geo-

technical

R’000

Corporate

and

eliminations

R’000

Consoli-

dated

R’000

Group

2014

External revenue 961 599 579 285 63 356 712 646 – 2 316 887

Inter-segment revenue 42 690 – – 11 406 (54 096) –

Segment revenue 1 004 289 579 285 63 356 724 052 (54 096) 2 316 887

Segment result

(Loss)/profit before interest

and taxation (183 881) 39 892 1 404 71 037 (139 176) (210 724)

Net finance (cost)/income (15 179) 1 318 (342) (6 644) (23 237) (44 084)

Taxation 56 514 (11 891) (100) (14 215) 58 339 88 647

Segment (loss)/profit (142 546) 29 319 962 50 178 (104 074) (166 161)

10


Segmental analysis (continued)

Civils

R’000

Pipelines

R’000

Develop-

ment

R’000

Geo-

technical

R’000

Corporate

and

eliminations

R’000

Consoli-

dated

R’000

Segment assets 788 590 254 857 264 454 – 313 449 1 621 350

Segment liabilities 875 797 204 802 245 312 – (481 780) 844 131

Capital and non-cash items

Additions to property, plant

and equipment 26 313 9 596 – 14 538 2 117 52 564

Depreciation 50 257 6 176 – 23 435 5 347 85 215

Impairment loss – – – – 84 446 84 446

Number of employees 1 969 1 163 3 – 35 3 170

Revenue generated from significant customers includes:

Customer

Business

unit

2015 R’000

2014

R’000

Eskom Holdings SOC Limited Civils 566 120 596 492

Department of Human Settlements Civils 49 792 –

Airports Company South Africa Civils 30 224 –

Umgeni Water Pipelines 77 744 146 064

Ethekwini Municipality Pipelines 335 845 98 824

uThukela Municipality Pipelines 33 766 –

Bakwena Platinum Corridor Concessionaire (Pty) Limited Civils – 69 213

Anglo American Inyosi Coal Civils – 47 672

Rand Water Pipelines 29 035 23 484

Katu Developers (Pty) Ltd Civils – 59 990

South Africa Other regions Consolidated

Geographical information

2015R’000

2014

R’000

2015R’000

2014

R’000

2015R’000

2014

R’000

Total revenue from external

customers 1 447 464 2 015 474 899 301 413 1 448 363 2 316 887

Property, plant and equipment 249 857 319 014 1 121 1 121 250 978 320 135

Financial asset at fair value through profit or lossThe contingent consideration receivable, a Level 3 financial asset, arose from the disposal of the discontinued

operation in the comparative period, which includes a clause that entitles the seller to an amount of R150 million

if the discontinued operation’s cumulative EBITDA over the next three years exceeds a threshold. The fair value is

determined considering the estimated receivable, discounted to present value. The fair value is based on key

unobservable inputs of EBITDA growth of the business of 3% and 12% in the years ending December 2015 and

2016 respectively, and a discount factor of 9%. Prior year growth was calculated at 8%. The fair value was

determined by the group finance department. Scenarios on EBITDA growth were developed by management

together with management of the discontinued operation considering the economy generally and their

knowledge of the geotechnical business. The estimated fair value increases the higher the annual EBITDA growth

rate, the higher the EBITDA margin and the lower the discount rate. Management considers that changing the

above mentioned unobservable inputs to reflect other reasonably possible alternative assumptions would not

result in a significant change in the estimated fair value.

11


Welcome

Worker at Kusile

Consolidated resultsfor the year ended 28 February 2015

12


Overview

3

Highlights

Diepslootpartnership

Historical Kusile Claim finalisation

Restructured group

Lowlights

Loss-making contractsN4, Kriel, Hwelereng

now completed

Profitability

Tradingenvironment

Financial position

Gearing

Order book

NTAV

Agenda

2

Overview Salient features Financial overview

Operationaloverview Strategy Prospects and

order book

Capex Conclusion

13


Salient features

RDP Housing – Thimude

Progress against interim deliverables

4

Action item Status Action

Financial target to Feb 2015 AchievedDelivered improved performance– PBIT August 2014 (R32 538)– PBIT February 2015 – (R24 459) “normalised”

Rationalise plant holding Done Final disposal of non-core assets scheduled for H1 2016

Consolidate Civils Done Group restructured into focused Construction and Developments divisions

Streamline support services Done Fully implemented on 1 March 2015

Protect cash On-going Cash improved by R15,5m with daily position

Complete legacy contracts Done

N4 – completed 4 November 2014Kriel civils – completed 21 July 2014Kriel Boxhole – completed 22 September 2014Hwelereng – 14 November 2014

Selected African growth On-goingSwaziland – Malkerns awardedZimbabwe/Zambia – Tendering

14


Salient features – 2014 legacy

▸ N4 – TFY loss R56m– Awarded May 2011 Completed November 2014– Contract value R340m Duration – 42/30 months– Productivity loss R76m and plant loss R71m

▸ Kriel Update – TFY R’Nil– Statement of claim submitted – R51m

▸ Hwelereng – TFY R’Nil– Normal maintenance period

▸ Kusile– Settled historical claims with R20m reversal

7

Salient features

* HEPS FY2014 restated to include continuing operations

▸ Non-recurring items in financial year 2015– Impairment of R35,4m on financial asset (Franki agterskot)– Impairment of R29,7m goodwill – Retrenchment costs of R12m

RevenueR1,448bn

down 9,1%R1,593bn

Order bookR2,0bn down

23,1% R2,6bn

Gearing23,6% down

12,6% 27,0%

Net cashR36,3 million up

73,4% R20,9 million

Health & SafetyLTIFR 0,37 down

132,4% LTIFR 0,86

HEPS*(18,8) cents up

23,0% (24,4) cents

6

15


Statement of comprehensive income

9

Continuing operations2015

R’0002014

R’000%

Change

Revenue 1 448 363 1 592 835 (9,1)

EBITDA (23 111) (135 342) 82,9

Amortisation and depreciation (78 650) (146 419) 46,3

PBIT (101 761) (281 761) 63,9

– Operating loss before non-recurring items (24 459) (158 639)

– Non-recurring items (77 302) (123 122)

▸ Revenue down 9,1% mainly due to consolidation, contract cancellations and delays in Civils▸ EBITDA impacted by loss at N4 (R56m) and Kusile settlement (R20m) and fair value adjustment

of R35,4m on the Franki contingent consideration▸ Amortisation includes impairment of goodwill in Civils of R29,7m▸ Depreciation reduced by R12,9m after disposals of Civils plant & equipment▸ Retrenchment of 250 employees of which 23 salaried with a cost of R12,1m▸ Operating profit of R51,5m on normalised trading

Financial overview

Western Aqueduct – KZN

16


Segmental revenue (R’000)

Pipelines 584 507

Civils 787 983

Developments 75 873

TOTAL 1 448 363

Segmental revenue – eliminating Frankiinternal revenue (R’000)

Pipelines 579 285Civils 961 599Developments 63 356 Eliminations (11 405)TOTAL 1 592 835

Contribution to revenue

11

Statement of comprehensive income

10


R’0002014

R’000%

Change

Revenue 1 448 363 1 592 835 (9,1)

PBIT (101 761) (281 761) 63,9

– Operating loss before non-recurring items (24 459) (158 639)

– Non-recurring items (77 302) (123 122)

Net finance expense (3 445) (37 440) 90,8

PBT (105 206) (319 201) 67,0

Taxation 5 314 102 862 (94,8)

Loss from operations (99 892) (216 339) 53,8

Order book 1 927 315 2 607 718 (26,1)

Non-government 15% 13%

Government & Parastatal 85% 87%

Effective tax rate of 5,1% is due to impairments and fair value adjustments not allowed for tax.

17


Statement of financial position

13


R’0002014

R’000


Goodwill 155 323 185 062

Financial assets at fair value 29 488 64 923

Deferred tax 10 566 11 457

Investment in joint ventures 48 880 –

Long-term receivable 761 32 083

Loans and receivables 539 344 659 928

Loans and receivables

Trade debtors 265 200 223 218

Contract in progress 233 793 384 141

Other receivables 40 351 52569

539 344 659 928

Disposed and held-for-sale of R60,8m

Impairmentof R29,7m

50,4 days in trade

receivables

Earnings per share

12

Earning and headline earnings per share2015

R’0002014

R’000%

Change

Loss after tax (99 892) (216 339)

Adjustment 28 846 123 122

– (Profit)/loss on disposal of PPE (893) 294

– Loss on disposal of discontinued operation 38 190

– Impairment of goodwill 29 739 84 638

Headline loss (71 046) (93 217)

Basic loss per share (cents) (26,4) (56,6) 53,4

Headline loss per share (cents) (18,8) (24,4) 23,0

18



15


R’0002014

R’000

Share capital and reserves 667 340 777 219

Secured borrowings 184 757 237 393

Preference shares 21 000 23 424


Taxation 2 644 19 131

Provisions 11 458 13 713

Trade and other payables 322 119 437 013

TOTAL EQUITY AND LIABILITIES 1 229 067 1 548 811

Secured borrowings

Long-term 101 837 163 043

Short-term 82 920 74 350

184 757 237 393

67,7 days in trade payables

Reduced debt By R52,6m

Debt /Equity reduced to

23,6%


14


R’0002014

R’000


Goodwill 155 323 185 062

Financial assets at fair value 29 488 64 923


Investment in joint ventures 48 880 –

Long-term receivable 761 32 083

Loans and receivables 539 344 659 928

Inventories 149 374 221 345

Assets held-for-sale 20 026 –

Taxation 8 014 13 455

Cash 36 339 20 840

TOTAL ASSETS 1 229 067 1 548 811Cash increased

by R15,5mNTAV/share148,4 cents

19


Esor performance – relative to Construction index

▸ JSE – ALSI– Steady growth over 12 months– Strength over last 3 months

▸ Construction & Materials– Index reflects current sentiment– Tough trading conditions– Volatile and cyclical reporting

▸ Esor relative performance– Largely track ConM index– Perception

17

Cash flow

16

20


Pipelines

▸ Focus on project delivery– Western Aqueduct– Northern Aqueduct– Lower Tugela

▸ Sanitation project for eThekwini successfully completed– 322 sanitation facilities at informal settlements– Sanitation facilities for 19 schools

▸ Pipejacking– Area of growth– Footprint extended to 7 provinces

▸ Profitability– Impacted by delayed awards in Swaziland and KZN– Project delivery with associated claims

19

Operationaloverview

ACSA – Airline office upgrade at ORT

21


Pipelines projects

▸ Western Aqueduct Phase 2KZN

– Installation of 25 km of 1 400 mm pipe from Hillcrest to Ntuntuma

– Value – R366m – Duration – 36 months– Progress is generally satisfactory after

delayed start▸ Northern Aqueduct Phase 1 and 3

KZN– Phase 1 – Installation of 14 km of

800 – 1 400 mm pipe from Phoenix to Umhlanga Rocks

– Phase 3 – Installation of 6,2 km of 1 200mm pipe at Phoenix Reservoir

– Value – R208m– Duration – 18 months and 12 months– Progress is on track

21

eThekwini – Western Aqueduct

Started 5 major projects since August 2014

Pipelines

20

Segment report2015

R’0002014

R’000

Revenue 635 331 579 285

PBIT 35 8470 39 892

Segment assets 359 878 254 857

Number of employees 1 094 1 163

Revenue growth 9,7% 79%

Operating margins 8% 9%

Order book 534 910 654 205

Pending awards 261 471 351 700

Prospects 1 374 000 1 380 000

Non-government – –

Government 100% 100%

22


Civils

23

Segment report2015

R’0002014

R’000

Revenue 787 983 1 004 289

PBIT (48 256) (183 881)


Number of employees 1 287 1 969

Revenue growth (21,5)% (20,8)%

Operating margins (5,8)% (13,9)%

Order book 794 790 1 228 500


Prospects 340 500 723 000

Non-government 8,3% 35%

Government 91,7% 65%

Margin Excluding N4

of 1,4%

Civils

▸ Focus on project delivery– Kusile Package 25 general services FY2016– Kusile Package 26 underground terraces facilities FY2017– Building – office and retail refurbishments

▸ Kusile bulk earthworks and crushing contracts successfully completed– Claims finalised– All invoices paid

▸ Diepsloot– Area of growth– Delayed but seen as Mega Project

▸ Profitability– Impacted by contract cancellations– Cost associated with completion of legacy contracts and claim settlements

22

23


Developments

▸ Life cycle– Identify opportunity– Investment decision/feasibility

• Land ownership• Land availability

– Town planning/establishment– Define end user

• Subsidised/social• Rented/bonded & affordable

– Partnering decision• Development• Top structure

– Infrastructure development– Exit strategy

25

Civils projects

▸ Kusile Package 25 and 26Mpumalanga

– Underground service ducts to completed terraces and general services pipelines

– Value – > R1,8bn– Duration – within 60 months– Progress on track to meet Eskom deadline

for first fire. General service pipelines to be completed by December 2015

▸ Office refurbishment for TransnetGauteng

– The contract comprises the refurbishment of 16 floors of offices, including the common lobbies and ablution blocks

– Value – R99m– Duration – 16 months– The bulk of the demolition has been

completed on 6 floors, and we are presently busy with the installation of new services

24

Eskom - Kusile

Started with a further two refurbishment contracts

24


Developments

27

▸ Focus on Diepsloot project delivery R4bn– JV agreement signed with Calgro M3– First Work package completed – pedestrian bridges– Delays in Government approvals

▸ Orchards – R150m remaining– Performance and sales in line with budget– Negotiating lump sum sales

▸ Uitvlugt– Feasibility completed– Project delayed through JRA change

▸ Soshanguve/Kayalitsha– Approvals still pending

▸ Profitability– On target

Developments

26

Segment report2015

R’0002014

R’000

Revenue 75 873 63 356

PBIT 4 297 1 401


Number of employees 3 3

Revenue growth 19,8% N/A

Operating margins 5,7% 2,2%

Order book 597 614 724 632


Prospects 4 000 000 4 000 000

Non-government 25,0% 51%

Government 75,0% 49%

25


Strategy in context

29

Growth SADC Delivery Market Competitive edge Margin Competition Strategy

Building and housing – Hold

Infrastructure – – Consolidate

Pipelines Hold

Pipe services Grow

Sanitation Grow

Low Medium High

Strategy

Batch plant at Hwelereng – Limpopo

26


Two-year secured revenue (R’000)

Pipelines 534 910

Civils 794 790

Developments 597 614

TOTAL 1 927 314

Contribution to revenue

31

Two-year secured revenue (R’000)

Pipelines 654 586

Civils 1 228 500

Developments 724 632

TOTAL 2 607 718

Prospects and order book

Gauteng DoHS – Diepsloot

27


CAPEX

33

2015R’000

2014R’000

2013R’m

Civils 4 243 26 313 132 406

Pipelines 11 496 9 596 17 083

Corporate 4 729 2 117 1 626

Total spend 20 468 38 026 151 115

Depreciation 48 911 61 780 79 807

Depreciation cover 0,42 0,62 1,89

Budget approved for FY 2016 26 000

▸ FY 2016 approved capex relates mainly to Pipeline assets▸ Plant & equipment centralised within Construction

Capex

28


Civils projects

▸ Done– Restructured– Completed legacy contracts– Reduced debt– Secured order book – 1,33 times

FY2015 revenue

▸ Strategy– Gearing for disciplined growth– Deliver on current projects– Increase value chain– Tendering selective cross-border

35

Eskom – Kusile (2015)

Conclusion

Ethekwini – Ethembeni Site

29


Civils projects

37

Eskom – Package 26 terraces

Esor Limited

30 Activia RoadActivia ParkGermiston1401

PO Box 6478 Dunswart 1508South Africa

Wessel van Zyl | CEO

Cell + 27 82 498 3518

Tel +27 11 776 8700

Fax +27 11 822 1158

E-mail [email protected]

Bruce Atkinson | CFO

Cell +27 83 288 9190

Tel +27 11 776 8700

Fax +27 11 822 1158

E-mail [email protected]

Civils projects

Forward-looking statementsThis presentation contains forward-looking statements that,

unless otherwise indicated, reflect the company’s

expectations as at 28 February 2015. 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.

36

Bakwena – N4 Marikana

30


Executive structure

38

Dave GibbonsConstructionManaging Director

Bruce AtkinsonCFO

Warren van der VyverDevelopments MD/ GroupCommercial Director

Wessel van ZylCEO

THANK YOU

31


Notes

32


Notes

33


Notes

Company secretaryiThemba Governance and Statutory Solutions (Pty) Limited Monument Office Park, Suite 5 – 102 79 Steenbok Avenue, Monumentpark, 0181PO Box 25160, Monumentpark, 0181

Registered office30 Activia Road, Activia Park, Germiston, 1401 (PO Box 6478, Dunswart, 1508) Telephone: +27 11 776 8700 Fax: +27 11 822 1158

SponsorVunani Corporate Finance, Vunani House, Vunani Office Park, 151 Katherine Street, Sandton, 2196 (PO Box 652419, Benmore, 2010)

Transfer secretariesComputershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)

Investor relationsEnvisage Investor & Corporate Relations, 4th Floor South Wing, Hyde Park Corner, Jan Smuts Avenue Hyde Park, 2196

Directors: B Krone (Chairman)+; WC van Zyl (CEO); BW Atkinson (CFO); EG Dube*; E Erasmus*;

Dr OW Franks* (Lead Independent); KR Moloko*; HJ Sonn* * Independent non-executive + Non-executive

Documents

Statements of financial position - Esor Pipelines Results... · Statements of financial position at 28 February 2015 Consolidated results for the year ended 28 February 2015 ... The