Interim results for the six months ended 31 August 2015 Welcome - - PowerPoint PPT Presentation

Interim results

for the six months ended 31 August 2015

Welcome

 Esor supporting Cancer month

Agenda

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Overview Salient features Financial

• verview

Operational

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Strategy Prospects and

• rder book

Capex Conclusion

Overview

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Highlights

Return to profitability Orchards “Sold Out” Bedded down the restructured group

Lowlights

Slow start in Developments Underperforming RDP contract Trading environment

Financial position

Gearing Order book NTAV

Progress against targets

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Action item Status Action

Financial target to Feb 2016

On-track Delivered improved performance – PBIT August 2014 – (R32 538) – PBIT August 2015 – R10 759

Rationalise plant holding

Done Disposed R29m non-core assets H1 2016 Realised loss on disposal of R1,9m

Restructured operations

Done Focused on stabilising Construction and Developments divisions and product delivery

Streamline support services

Done Achieving optimisation

Protect cash

On-going Cash improved by 10,3% with daily monitoring

Legacy contracts

Done N4 – maintenance complete by 4 November 2015 Kriel Civils & Boxhole – arbitration commenced

Selected African growth

On-going Swaziland – Malkerns awarded Zimbabwe – Completed 3 contracts and 1 on-going Botswana – 2 new contracts > R20m Zambia – Tendering

Salient features

 Orchards – Extension 50

Salient features

▸ Non-recurring items in H1 2016

– Retrenchment costs a further R2,1m – Loss on disposal of PPE of R1,9m

Revenue R772,6bn down

2,2% R789,8bn

Order book R1,6bn down

23,1% R1,9bn

Gearing 18,4% down

22,0% 23,6%

Net cash R40,5 million up

11,8% R36,3 million

Health and safety LTIFR 0,59 up

59,5% LTIFR 0,37

HEPS 2,0 cents up >100% (6,6) cents

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Salient features – 2015

▸ N4 – 12-month maintenance period expired on 4 November 2015

– Completed November 2014 – R300k maintenance costs – Finalising contractual claims <R10m

▸ Kriel Update – TFY R’Nil

– Statement of claim submitted – Mediation and arbitration in progress

▸ Kusile

– Both P25 and P26 on track – Commercial issues being resolved – Payments on time

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 Western Aqueduct – KZN

Financial

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 Pipejack – Steelpoort

Statement of comprehensive income (31 AUG 2015)

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Continuing operations 2015 R’000 2014 R’000 % Change Revenue 772 551 789 831 (2,2) EBITDA 29 579 (7 018) >100 Amortisation and depreciation (16 385) (23 920) 46,3 PBIT 13 194 (30 938) 150,4 ▸ Revenue down 2,2% mainly due to strategic consolidation ▸ EBITDA impacted by R10m loss at Umzumbe low-cost housing project ▸ Depreciation reduced by R7,5m after disposals of Civils plant and equipment ▸ Further retrenchment of mainly operators with associated R2,1m cost ▸ Loss of R1,9m realised on sale of plant and equipment ▸ Operating profit of R27,3m on normalised trading

Statement of comprehensive income (31 AUG 2015)

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Continuing operations 2015 R’000 2014 R’000 % Change Revenue 772 551 789 831 (2,2) EBITDA 29 579 (7 018) >100 PBIT 13 194 (30 938) 150,4 Net finance expense (2 435) (1 600) (52,2) PBT 10 759 (32 538) 133,1 Taxation (4 599) 8 546 (153,8) Profit/(Loss) from operations 6 160 (23 992) 125,7 Order book 1 622 303 1 927 315 (15,8) Non-government 28% 15% Government and Parastatal 72% 85% Finance expense reduced by 8,8% with forex adjustment in PFY. Effective tax rate of 42,8% is due to tax payable in Developments SPV structure.

Segmental revenue (R’000) Pipelines/Pipe services 382 884 Infrastructure/Building and Housing 345 511 Developments 47 883 Eliminations (2 201) TOTAL 772 551 Segmental revenue (R’000) Pipelines/Pipe services 318 426 Infrastructure/Building and Housing 463 426 Developments 32 075 Eliminations (24 096) TOTAL 789 831

Contribution to revenue

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Earnings per share (31 AUG 2015)

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Earning and headline earnings per share 2015 R’000 2014 R’000 % Change Profit/(loss) after tax 6 160 (23 992) 125,7 Adjustment 1 371 (1 147) – (Profit)/loss on disposal of PPE 1 371 (1 147) Headline earnings/(loss) 7 531 (25 139) 130,0 Basic earnings/(loss) per share (cents) 1,65 (6,28) 126,3 Headline earnings/(loss) per share (cents) 2,01 (6,59) 130,5

Statement of financial position (31 AUG 2015)

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Continuing operations 2015 R’000 2014 R’000 Property, plant and equipment 208 786 289 719 Goodwill 155 323 185 062 Financial assets at fair value 29 488 64 923 Deferred tax 11 805 11 393 Investment in joint ventures 51 005 – Long-term receivable 761 36 630 Loans and receivables 448 003 624 736 Loans and receivables Trade debtors 252 652 238 321 Contract in progress 180 211 353 435 Other receivables 15 140 32 980 448 003 624 736

Disposal

• f R28,9m

Review impairment at Feb 2016 38,8 days in trade receivables

Statement of financial position (31 AUG 2015)

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Continuing operations 2015 R’000 2014 R’000 Property, plant and equipment 208 786 289 719 Goodwill 155 323 185 062 Financial assets at fair value 29 488 64 923 Deferred tax 11 805 11 393 Investment in joint ventures 51 005 – Long-term receivable 761 36 630 Loans and receivables 448 003 624 736 Inventories 127 222 228 536 Current receivable 37 619 – Taxation 2 692 – Cash 40 537 50 681 TOTAL ASSETS 1 113 241 1 491 680

Cash increased by R4,2m NTAV/share 152,0 cents

Statement of financial position (31 AUG 2015)

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Continuing operations 2015 R’000 2014 R’000 Share capital and reserves 673 420 742 475 Secured borrowings 142 100 228 588 Preference shares 10 239 22 279 Deferred tax 21 116 13 863 Taxation – 7 337 Provisions 12 813 15 817 Trade and other payables 253 553 461 321 TOTAL EQUITY AND LIABILITIES 1 113 241 1 491 680 Secured borrowings Long-term 83 984 123 372 Short-term 58 116 105 216 142 100 228 588

34,9 days in trade payables Reduced debt by R86,5m Debt /Equity reduced to 18,4%

Cash flow

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36,399 40,538 2,435 1,793 1,349 11,268 10,500 10,500 42,657 26,804 26,910

Esor performance – relative to Construction index

▸ JSE – ALSI

– Steady over 12 months – Strength over last 2 months

▸ Construction & Materials

– Index reflects current sentiment – Tough trading conditions – Volatile and cyclical reporting

▸ Esor relative performance

– Largely track ALSI index – Low base

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 ACSA – Airline office upgrade at ORT

Operational

• verview

 Eskom Kusile (2015)

Construction

▸ Focus on consolidation

– Infrastructure/Housing and Building – Pipelines/Sanitation – Pipe services

▸ Integration successfully completed

– MD Construction – Plant

▸ Growth

– Pipe services – Footprint extended to 7 provinces and 3 SADC countries

▸ Profitability

– Impacted by RDP housing project – Project delivery with associated claims

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Construction

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Segment report 2015 R’000 2014 R’000 Revenue 726 869 781 852 PBIT 16 632 (28 834) Segment assets 659 664 938 448 Number of employees 2 242 2 887 Revenue growth (2,2)% (28,8)% Operating margins 2,3% (3,7)% Order book 1 505 976 1 729 700 Pending awards 302 500 903 700 Prospects 1 290 000 2 103 000 Non-government 21,7% 17% Government 78,3% 83%

Margin excluding RDP

• f 3,7%

Infrastructure/ Building & Housing

▸ Focus on project delivery

– Kusile Package 25 general services Q1 2017 – Kusile Package 26 underground terraces facilities H1 2018 – Building – office and retail refurbishments – In-house infrastructure work at Orchards

▸ Kusile milestones achieved

– Completion and testing of Fire water system – Completion of Raw water system

▸ Growth

– Diepsloot project delayed but seen as Mega Project – Further infrastructure development at Orchards and Khayelitsha

▸ Profitability

– Impacted by consolidation process – Cost associated with RDP housing project in KZN

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RDP Housing – Umzumbe

Contract award October 2013 Estimated completion April 2015 Value at award R66 million Duration 18 months vs 27 months Actual completion March 2016

▸ What happened

– Logistics underestimated – Productivity impacted by subcontractor mix – Consequential effects:

• Employed own teams
• School fees

▸ Lessons learnt

– Impact of Implementation Agent – Logistics – Project team

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Now completing 30 houses per week

Water related – Pipelines, Sanitation and Pipe Services

▸ Focus on project delivery

– Western and Northern Aqueducts – Major pipe jacks at O6, Steelpoort and Botswana – Lepelle MWIG (Municipal Water Infrastructure Grant)

▸ Milestones achieved

– Sanitation delivered 322 sanitation facilities and 19 schools facilities – Completed piling contracts in Zimbabwe

▸ Growth

– Area of growth in trackless technologies – Footprint extended to 3 SADC countries – Piling and lateral support contracts in Zimbabwe

▸ Profitability

– Impacted by delayed awards – Project delivery with associated claims

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Construction projects

▸ Kusile Package 25 and 26 Mpumalanga

– Underground service ducts to completed terraces and general services pipelines – Value – > R2,0bn – Duration – within 72 months – Progress on track to meet Eskom deadline for first fire. General service pipelines to be completed by April 2016

▸ Office refurbishment for Transnet Gauteng

– The contract comprises the refurbishment

• f 16 floors of offices, including the

common lobbies and ablution blocks – Value – R99m – Duration – 16 months – The bulk of the demolition has been completed and 6 floors handed over – “New” offices being occupied

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Completed three refurbishment projects during H1

Water related projects

▸ Western & Northern Aqueducts KZN

– Installation of 25 km of 1 400 mm pipe from Hillcrest to Ntuntuma and installation of 14 km of 800 – 1 400 mm pipe from Phoenix to Umhlanga Rocks with a further installation of 6,2 km of 1 200mm pipe at Phoenix Reservoir – Value > R500m – Duration – 12 to 36 months – Progress is generally satisfactory – Contractual and on-site issues being resolved at highest level

▸ Malkerns Canals Swaziland

– Rehabilitation and upgrading of Malkerns canal infrastructure including flume structures and off-take chambers – Value R60m – Duration – 12 months – Progress is ahead of plan

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 Started three major projects since March 2015

Pipe Services projects

▸ Steelpoort River Crossing Mpumalanga

– Two jackings will be done consecutively from a single jacking pit. A 62 m line towards the South to clear the 1 in 100 year flood line and 48 m line towards the North passing underneath the “fairly calm” river – Value > R30m – Duration – 6 months – Progress is hampered by unrest – Contractual and on-site issues being resolved at highest level

▸ Slip lining at Royal Bafokeng Platinum mine – completed North West

– The scope called for a 356 mm steel pipe to be installed inside an existing 510 mm steel pipe, for a total length of 622 m – Added a further 25 to 30 years’ lifespan

• nto an existing ten-year-old pipeline

– Esor slip lined five 18m sections or 90m in total per day

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 Working in five Provinces and Botswana

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

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Developments

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Segment report 2015 R’000 2014 R’000 Revenue 47 883 32 075 PBIT 5 446 (688) Segment assets 121 213 244 321 Number of employees 3 3 Revenue growth 49,3% 296% Operating margins 11,4% (2,1)% Order book 116 327 724 632 Pending awards 150 000 200 000 Prospects 4 000 000 4 000 000 Non-government 100,0% 77% Government – 23%

Developments

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▸ Focus on Diepsloot project delivery R4bn

– JV with Calgro M3 – First Work package completed and paid – pedestrian bridges – Delays in Government and environmental approvals – Target H1 2017 for implementation

▸ Orchards – R110m remaining

– Performance and sales in line with budget – Signed exclusivity agreement on back of payment guarantees – reducing market risk

▸ Uitvlugt

– Feasibility completed but impacted by iron ore price – Project delayed through JRA changes

▸ Khayelitsha

– MOU signed and approvals still pending

▸ Profitability

– On target

Strategy

 Vision 20/20

Strategy in context

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Growth SADC Delivery Market Competitiv e edge Margin Competition Strategy Progress

Building and Housing

–

Hold Lagging

Infra- structure

– –

Consolidate On track

Pipelines

Hold market share On track

Pipe services

Grow Exceeding

Sanitation

Grow Area of concern

Low Medium High

 Gauteng DoHS – Diepsloot

Prospects and

• rder book

 Shaft sinking – Steelpoort Mpumalanga

Two-year secured revenue (R’000) Pipelines and services 603 605 Infrastructure/Housing and Building 902 371 Developments 116 327 TOTAL 1 622 303

Contribution to revenue

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Two-year secured revenue (R’000) Pipelines and services 534 910 Infrastructure/Housing and Building 1 194 790 Developments 197 614 TOTAL 1 927 314

Diepsloot revenue moved to Infrastructure

Capex

 Soilmech Piling Rig

CAPEX

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2016 R’000 2015 R’000 2014 R’000 2013 R’m Construction – 15 739 35 909 149 489 Corporate 2 051 4 729 2 117 1 626 Total spend 2 051 20 468 38 026 151 115 Depreciation 16 385 48 911 61 780 79 807 Depreciation cover 0,13 0,42 0,62 1,89 Budget approved for FY 2016 21 000

▸ FY 2016 approved capex relates mainly to Pipeline and Pipe services assets ▸ Timing of capex spend to contract awards ▸ Plant and equipment centralised within Construction

Conclusion

 ACSA – office refurbishment OR Tambo

Summary

▸ Done

– Restructured – Completed legacy contracts – Reduced debt – Secured order book – 1,0 x FY2015 revenue

▸ Strategy

– Gearing for disciplined growth – Deliver on current projects – Increase value chain – Tendering selective cross-border countries – Focus on niche markets

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 Eskom – Kusile (2015)

Forward-looking statements

Forward-looking statements

This presentation contains forward-looking statements that, unless otherwise indicated, reflect the company’s expectations as at 31 August 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

• bligation 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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 Bakwena – N4 Marikana  Sanitation Project for eThekwini

Contact details

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 Eskom – Package 26 terraces

Esor Limited

30 Activia Road Activia Park Germiston 1401 PO Box 6478 Dunswart 1508 South Africa

Wessel van Zyl | CEO

Cell + 27 82 498 3518 Tel +27 11 776 8700 Fax +27 11 822 1158 E-mail Wesselvz@esor.co.za

Bruce Atkinson | CFO

Cell +27 83 288 9190 Tel +27 11 776 8700 Fax +27 11 822 1158 E-mail Brucea@esor.co.za

 Pipejack at Carr Street

Executive structure

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Dave Gibbons

Construction Managing Director

Bruce Atkinson

CFO

Warren van der Vyver

Developments MD/ Group Commercial Director

Wessel van Zyl

CEO

Thank you