| Tue 19 May 2009, 7:05 | | ESR - Esorfranki Limited - Audited condensed consolidated results for the year |
|
ESR
ESR
ESR - Esorfranki Limited - Audited condensed consolidated results for the year
ended 28 February 2009
ESORFRANKI LIMITED
(formerly Esor Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1994/000732/06)
JSE Code : ESR ISIN Code : ZAE000133369
("Esorfranki" or "the company" or "the group")
AUDITED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2009
HIGHLIGHTS
* Revenue up 39% to R1,4 billion
* EBITDA up 78% to R325,9 million
* Headline earnings up 35% to R155,3 million
* Headline earnings per share up 20% to 61,7 cents
* Dividend of 15 cents per share
* Patula and Shearwater acquisitions successfully completed
* Order book of R1,5 billion
CONDENSED CONSOLIDATED BALANCE SHEET
2009 2008
R`000 R`000
ASSETS
Non-current assets 987 520 386 415
Property, plant and equipment 588 545 262 741
Intangible assets 113 022 94 529
Goodwill (1) 280 173 26 468
Deferred tax asset 5 780 2 677
Current assets 875 972 398 524
Inventories 11 379 7 224
Other investments 14 269 -
Taxation 4 699 3 527
Trade and other receivables 572 800 271 914
Cash and cash equivalents 272 825 115 859
Total assets 1 863 492 784 939
EQUITY AND LIABILITIES
Share capital and reserves 619 577 389 664
Share capital and premium 339 078 213 587
Equity compensation reserve 3 917 2 361
Foreign currency translation reserve 14 651 6 683
Accumulated profits 261 931 167 033
Non-current liabilities 470 080 133 791
Secured borrowings 370 603 85 169
Post-retirement benefits 1 587 8 106
Deferred tax liability (1) 97 890 40 516
Current liabilities 773 835 261 484
Current portion of secured borrowings 147 664 21 304
Taxation 84 358 26 781
Provisions 31 118 15 559
Trade and other payables 510 695 197 840
Total equity and liabilities 1 863 492 784 939
Number of ordinary shares in issue (`000) 289 496 247 904
Weighted average number of ordinary shares (`000) 251 780 224 560
Diluted weighted average number of shares (`000) 265 149 228 677
Net asset value per share (cents) 223,2 160,3
Net tangible asset value per share (cents)(2) 121,2 121,4
STATEMENT OF RECOGNISED
INCOME AND EXPENSES
Defined benefit plan actuarial gain 155 685
Foreign currency translation differences for
foreign operations 7 968 6 642
Income and expenses recognised directly to equity 8 123 7 327
Profit for the year 143 382 116 002
Total recognised income and expenses for the year 151 505 123 329
Note:
(1) A restatement was made in the comparative period for the omission to raise
deferred taxation on the intangible asset. The directors have corrected this
error in the current and comparative periods.
(2) Net tangible asset value is calculated by excluding from net asset value
the intangible assets as well as the deferred taxation liability relating to
the intangible assets.
CONDENSED CONSOLIDATED INCOME STATEMENT
2009 2008
R`000 R`000
Revenue 1 414 722 1 017 480
Cost of sales (981 829) (745 546)
Gross profit 432 893 271 934
Other operating income 1 631 1 651
Operating expenses (108 601) (90 087)
Profit before interest, depreciation, impairments,
amortisations and taxation 325 923 183 498
Depreciation, impairments and amortisations (92 473) (30 391)
Profit before interest and taxation 233 450 153 107
Finance costs (78 279) (28 171)
Finance income 55 600 32 883
Profit before taxation 210 771 157 819
Taxation (67 389) (41 817)
Profit for the year 143 382 116 002
Reconciliation of headline earnings:
Profit for the year 143 382 116 002
Profit on disposal of property, plant and equipment (39) (714)
Impairment of intangible assets 11 944 -
Headline earnings 155 287 115 288
Earnings per share
Basic earnings per share (cents) 56,9 51,7
Diluted earnings per share (cents) 54,1 50,7
Headline earnings per share (cents) 61,7 51,3
Diluted headline earnings per share 58,5 50,4
Dividends per share (cents) 15,0 20,0
CONDENSED CONSOLIDATED CASH FLOW
STATEMENT
Cash flows from operating activities 161 628 119 066
Cash receipts from customers 1 066 242 909 365
Cash paid to suppliers and employees (802 960) (759 138)
Cash generated from operations 263 282 150 227
Dividends paid (48 639) (14 290)
Finance income 55 600 10 805
Finance costs (78 279) (8 669)
Taxation paid (30 336) (19 007)
Cash flows from investing activities (323 846) (146 399)
Acquisition of property, plant and equipment (188 355) (147 470)
Proceeds on disposal of property, plant and
equipment 1 234 1 071
Investments acquired (6 042) -
Acquisition of business combinations net of
cash acquired (130 683) -
Cash flows from financing activities 319 184 90 544
Decrease in unsecured loans 2 911 -
Increase in secured borrowings 319 646 54 619
Proceeds from share issue net of issue expenses 2 990 38 235
Post-retirement benefit paid (6 363) (2 310)
Net increase in cash and cash equivalents 156 966 63 211
Net cash and cash equivalents at beginning of year 115 859 52 648
Cash and cash equivalents at end of year 272 825 115 859
SEGMENTAL REPORT
Geotechnical
2009 2008
Operating segments R`000 R`000
Segment revenue
Total revenue 1 190 192 1 017 480
Intersegment revenue - -
Total external revenue 1 190 192 1 017 480
Segment result
Profit before interest and taxation 167 418 153 107
Finance costs (68 718) (28 171)
Finance income 56 539 32 883
Taxation (49 827) (41 817)
Segment profit/(loss) 105 412 116 002
Segment assets 994 471 784 939
Segment liabilities 1 006 706 395 275
Capital and non-cash items
Additions to property, plant and equipment 163 831 147 470
Depreciation 46 887 30 391
Impairment losses - -
Number of employees at year-end 1 812 1 506
Corporate and
Civils Pipelines eliminations
2009 2009 2009
Operating segments R`000 R`000 R`000
Segment revenue
Total revenue 148 993 85 361 (9 824)
Intersegment revenue - - -
Total external revenue 148 993 85 361 (9 824)
Segment result
Profit before interest and taxation 61 746 32 027 (27 741)
Finance costs (3 743) (86) (5 732)
Finance income - 1 977 (2 916)
Taxation (15 778) (9 493) 7 709
Segment profit/(loss) 42 225 24 425 (28 680)
Segment assets 382 169 197 011 289 841
Segment liabilities 223 673 167 798 (154 262)
Capital and non-cash items
Additions to property, plant and
equipment 14 435 8 824 1 265
Depreciation 17 493 384 3 853
Impairment losses - - 16 590
Number of employees at year-end 1 170 354 -
Consolidated
2009 2008
Operating segments R`000 R`000
Segment revenue
Total revenue 1 414 722 1 017 480
Intersegment revenue - -
Total external revenue 1 414 722 1 017 480
Segment result
Profit before interest and taxation 233 450 153 107
Finance costs (78 279) (28 171)
Finance income 55 600 32 883
Taxation (67 389) (41 817)
Segment profit/(loss) 143 382 116 002
Segment assets 1 863 492 784 939
Segment liabilities 1 243 915 395 275
Capital and non-cash items
Additions to property, plant and equipment 188 355 147 470
Depreciation 68 617 30 291
Impairment losses 16 590 -
Number of employees at year-end 3 336 1 506
South Africa
2009 2008
Geographical information R`000 R`000
Total revenue 1 128 748 848 273
Property, plant and equipment 509 069 219 843
Other regions
2009 2008
Geographical information R`000 R`000
Total revenue 285 974 169 207
Property, plant and equipment 79 476 42 898
Consolidated
2009 2008
Geographical information R`000 R`000
Total revenue 1 414 722 1 017 480
Property, plant and equipment 588 545 262 741
INTRODUCTION
The audited condensed consolidated results of Esorfranki for the year ended 28
February 2009 ("the year") reflect solid growth in revenue and profit after tax
("PAT") notwithstanding challenging economic conditions.
During the year the group successfully positioned itself alongside listed civil
engineering construction groups with the acquisitions of Patula Construction
(Pty) Limited ("Patula") and Shearwater Plant Hire (Pty) Limited
("Shearwater"). These acquisitions expanded the group`s services from
sub-surface foundation work to include above-surface civil engineering and
construction services. Following the integration of the acquisitions the group
is competitively advantaged by its broader product range and enhanced economies
of scale.
To leverage the strong brand power of its principal operating subsidiary,
Franki Africa (Pty) Limited ("Franki"), the group changed its name to
Esorfranki subsequent to year-end.
Esorfranki remains firmly aligned with Government`s committed infrastructure
spend.
The results reflect the inclusion of Patula and Shearwater for four months from
the effective date of acquisition on 31 October 2008.
BUSINESS COMBINATIONS
With effect from 1 May 2008, Franki - a wholly-owned subsidiary of Esorfranki -
acquired the business of Geo Compaction Dynamics ("GCD") for R18,0 million. GCD
specialises in geotechnical contracting services for the civil engineering
industry including dynamic compaction, percussion piling and permanent and
temporary lateral support.
With effect from 31 October 2008, Esorfranki acquired civil engineering groups
Patula and Shearwater for purchase considerations of R345 million and R166
million, respectively. Civil engineering construction contractor Patula is
focused on road building, mining and township infrastructure work, water
reticulation contracts and concrete projects for Government, major mining
houses and the private sector. Shearwater is a specialist in the construction
and rehabilitation of onshore pipelines and operates mainly in the oil and gas,
water, stormwater and sewerage sectors.
FINANCIAL RESULTS
Revenue increased 39% to R1,4 billion from R1,0 billion for the previous year,
generating earnings before interest, taxation, depreciation, impairments and
amortisations
("EBITDA") of R325,9 million up 78%. Gross profit margins increased from 27% to
31%, mainly due to the Patula and Shearwater acquisitions which together
achieved higher gross profit margins than the Geotechnical business unit.
Headline earnings rose 35% to R155,3 million, which translated to 61,7 cents
per share ("HEPS"). Net asset value per share increased by 39% from 160,3 cents
to 223,2 cents, based on the number of shares in issue at year-end.
Cash generated by operations remained robust, amounting to R161,6 million
(2008: R119,1 million).
Borrowings
Debt levels have increased due to the expansive capital expenditure programme
and the finance raised to acquire the Esor business unit in terms of an
internal restructuring. Post year-end debt levels have been reduced by R112,5
million due to an early settlement.
Trade and other payables includes a deferred contingent consideration in the
amount of R140,8 million, of which R26,8 million will be settled in shares
subject to certain conditions.
Aggregated financing costs included a pre-tax charge of R7,8 million and a fair
value adjustment of R8,7 million on an interest rate swap agreement on the term
loan funding for the acquisition of the Esor business unit. This reduced growth
in earnings and headline earnings per share by approximately 4,7 cents. The
financial effects of the above are reflected in the Esorfranki Geotechnical
segmental report.
REVIEW OF OPERATIONS
Esorfranki Geotechnical
This division comprises Franki (which includes GCD for ten months of trading
since acquisition in May 2008) and Esor Africa (Pty) Limited ("Esor Africa").
Revenue increased 17% to R1 190 million from the previous year`s R1 017 million,
of which foreign revenue accounted for 24%. The foreign operations contributed
R57,1 million (2008: R33,5 million) to PAT. The operating margin of 14,1% was
down on the previous year`s operating margin of 15%.
As the single largest contract, the Gautrain project generated turnover of R165
million.
Esorfranki Civils (comprising Patula)
Accounting for the full 12 months, Patula recorded revenue up 104,4% to R609,3
million and PAT of R115,9 million. The contribution to Esorfranki PAT for the
four months since acquisition amounted to R42,2 million.
As Patula`s performance for the full 12 months met the profit warranty in terms
of the acquisition agreement, the deferred contingent consideration is payable
in September 2009 in ordinary shares and cash.
The R280 million road contract for the R55/K71, through the Gauteng Department
of Transport, remains the division`s flagship contract and generated R141,1
million revenue in the year. This contract is due for completion in November
2009. A R200 million infrastructure and housing contract near Medupi Power
Station has given Patula good impetus going forward with the potential for two
additional phases in the near future.
Esorfranki Pipelines (comprising Shearwater)
This division achieved PAT of R36,2 million for the full 12 months,
contributing R24,4 million PAT to the group in the four months since
acquisition.
Shearwater`s failure to meet the profit warranty did not result in any
impairment to the fair value of the goodwill paid on acquisition. The profit
warranty was not achieved mainly as a result of a delayed order intake in the
first eight months of the financial year due to the economic slowdown. However,
orders improved in the third quarter of the financial year and should translate
into growth going forward.
The KwaZulu-Natal market has remained buoyant with contracts completed at
Empangeni, Dube and Richards Bay and new awards at Ngcebo and Mkwanazi. In the
Gauteng region contracts at Motherwell, Steelpoort, Milton and Nebo are in
various stages of completion with some projects still to be awarded. The
onshore pipeline market is expected to be particularly robust over the next
three to five years in light of anticipated growth in the oil and gas and
infrastructure sectors.
CAPEX AND PLANT REPLACEMENT POLICY
During the year the group continued its aggressive enhancement of plant and
invested R188,3 million (2008: R147,5 million). In addition property, plant and
equipment increased by R206,8 million as a result of the consolidation of the
acquisitions.
The group`s expansive capital expenditure programme is now complete with R66,9
million spend planned to maintain group operations for the current financial
year ending February 2010. Esorfranki is satisfied that the fleet is now
well-positioned to accommodate future growth and effectively service the
increase in projects.
BLACK ECONOMIC EMPOWERMENT
Esorfranki is currently rated as a "Level 6" contributor to broad-based BEE.
More than 82% of the group`s 3 300 strong workforce is black.
The group`s commitment to transformation is evidenced by its 30,3% black
shareholding (including retail shareholders on the open market). Through the
Esor Broad Based Share Ownership Scheme, staff now hold a 6,48% stake in the
company.
Esorfanki undertakes to be an equal opportunity employer and gives precedence
to appropriately qualified black candidates.
DIRECTORATE
With effect from 5 February 2009 Esorfranki streamlined its board to
appropriately facilitate the group`s recent growth and enhance compliance with
King II and the DTI Transformation Codes. As a result executive directors
Michael Barber, Arthur Field, Roy McLintock and Mauro Trevisani resigned from
the board. They remain with the group as executive directors of their
respective operational entities.
Following the acquisition of Patula, Malemadutje Briss Mathabathe was appointed
to the board as a non-executive director with effect from 5 February 2009.
The reconstituted board of the company now comprises: DM Thompson* (Chairman),
B Krone (CEO), W van Houten (Financial Director), EG Dube*, JM Hlongwane*,
MB Mathabathe* and Dr FA Sonn* (*independent non-executive).
POST BALANCE SHEET EVENTS
Post year-end a special resolution was passed by shareholders at a general
meeting on 20 April 2009 to change the company name to Esorfranki Limited.
PROSPECTS
The board remains positive regarding Esorfranki`s prospects. The order book of
R1,5 billion at the beginning of April 2009 positions the group favourably for
the year ending February 2010.
The Gautrain project is expected to generate explosive developmental growth
around the urban nodes where the stations are located. Notwithstanding the
current slowdown in the commercial building sector, Esorfranki believes this is
likely to result in high-rise office towers, hotels, apartment blocks and
various retail and commercial buildings beyond 2010.
All operating units are expected to benefit from Government`s reaffirmation of
its commitment to infrastructure spend. Esorfranki Geotechnical is already
reaping the benefits at Kusile Power Station and the NMPP pipeline; Esorfranki
Civils at Medupi Power Station and Esorfranki Pipelines from various pipelines
countrywide. Further, SANRAL, Eskom and Transnet all have major projects
awaiting tender and the board is confident that Esorfranki will be awarded its
share of these.
Cross-border the group`s established presence in several African economies
including Angola positions Esorfranki to capitalise on exciting growth
prospects in the sub-Saharan region.
DIVIDEND DECLARATION
The board has declared a final dividend of 15 cents per share for the year. The
dividend policy was reviewed and adjusted in the current year. After taking
cognisance of the market conditions, the current availability of credit and
recent acquisitions made by the company, the directors consider it prudent to
conserve cash. It remains the policy of the group to review the dividend policy
annually in light of cash flow, gearing and capital requirements.
The salient dates for the dividend are as follows:
Last day to trade cum dividend Friday, 5 June 2009
Shares trade ex dividend Monday, 8 June 2009
Record date Friday, 12 June 2009
Payment date Monday, 15 June 2009
Share certificates may not be dematerialised or re-materialised between Monday,
8 June 2009 and Friday, 12 June 2009, both dates inclusive.
BASIS OF PREPARATION
The audited condensed consolidated financial statements for the year have been
prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards, the disclosure requirements of IAS
34: Interim Financial Reporting and in the manner required by the South African
Companies Act, 1973. The accounting policies and method of measurement and
recognition applied in preparation of the audited consolidated annual financial
statements are consistent with those applied in the group`s annual financial
statements for the year ended 29 February 2008, which comply with International
Financial Reporting Standards.
AUDIT OPINION
The auditors KPMG Inc. have issued their unmodified audit opinion on the
group`s financial statements for the year ended 28 February 2009. The audit was
conducted in accordance with International Standards on Auditing. A copy of
their audit report is available for inspection at the company`s registered
office. These condensed financial statements have been derived from the group
financial statements and are consistent in all material respects.
APPRECIATION
We welcome all our new employees and thank our fellow directors, management and
the whole team for their efforts and hard work which have helped drive the
group`s performance. Our appreciation is also extended to our business
partners, advisors, suppliers, clients and shareholders for their ongoing
support.
On behalf of the board
Bernard Krone Wayne van Houten
Chief Executive Officer Financial Director
19 May 2009
Directors: DM Thompson* (Chairman), B Krone (CEO),
W van Houten (Financial Director), EG Dube*,
JM Hlongwane*, MB Mathabathe*, Dr FA Sonn*
(*independent non-executive)
Registered office: 30 Activia Road, Activia Park,
Germiston (PO Box 6478, Dunswart, 1508)
Telephone: +2711 822 3906, Fax: +27 11 822 3112
Designated Adviser: Vunani Corporate Finance, 39 1st Road, Hyde Park,
2196 (PO Box 413972, Craighall, 2024)
Transfer secretaries: Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg,
2001 (PO Box 61051, Marshalltown, 2107)
Company secretary: ID Stephen
Auditors: KPMG Inc., KPMG Crescent, 85 Empire Road, Parktown,
2193 (Private Bag X9, Parkview, 2122)
Date: 19/05/2009 07:05:09 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
