| Wed 26 May 2010, 7:05 | | ESR - Esorfranki Limited - Audited summarised consolidated results for the year |
|
ESR
ESR
ESR - Esorfranki Limited - Audited summarised consolidated results for the year
ended 28 February 2010
ESORFRANKI LIMITED
(Registration number 1994/000732/06)
Incorporated in the Republic of South Africa
(JSE Code: ESR ISIN: ZAE000133369)
("Esorfranki" or "the company" or "the group")
AUDITED SUMMARISED CONSOLIDATED RESULTS
for the year ended 28 February 2010
HIGHLIGHTS
Revenue up 31,3%
PAT up 37,8%
NAV per share up 23,5%
HEPS up 15,6%
Summarised consolidated statement of financial position
2010 2009
R`000 R`000
Assets
Non-current assets 999 551 987 520
Property, plant and equipment 596 429 588 545
Intangible assets 93 737 113 022
Goodwill 305 715 280 173
Deferred tax assets 3 670 5 780
Current assets 648 273 875 972
Inventories 14 827 11 379
Other investments 6 762 14 269
Taxation 9 952 4 699
Trade and other receivables 499 869 572 800
Cash and cash equivalents 116 863 272 825
Total assets 1 647 824 1 863 492
EQUITY AND LIABILITIES
Share capital and reserves 808 028 619 577
Share capital and premium 396 956 339 078
Equity compensation reserve 8 253 3 917
Foreign currency translation reserve (14 296) 14 651
Retained earnings 417 115 261 931
Non-current liabilities 405 711 470 080
Secured borrowings* 275 031 370 603
Post-retirement benefits 1 665 1 587
Deferred tax liabilities 129 015 97 890
Current liabilities 434 085 773 835
Current portion of secured borrowings* 121 677 147 664
Taxation 6 644 84 358
Provisions 21 087 31 118
Trade and other payables 284 677 510 695
Total equity and liabilities 1 647 824 1 863 492
Net asset value per share (cents) 275,6 223,2
Tangible net asset value per share (cents)** 177,5 121,2
* Interest-bearing debt
** (Net asset value less intangible assets)/(shares in issue less treasury
shares)
Summarised consolidated statement of comprehensive income
2010 2009
R`000 R`000
Revenue 1 857 817 1 414 722
Cost of sales (1 361 041) (981 829)
Gross profit 496 776 432 893
Other income 3 937 1 631
Operating expenses (111 661) (108 601)
Profit before interest, tax and depreciation, 389 052 325 923
impairments and amortisation
Depreciation, impairments and amortisation (83 478) (92 473)
Results from operating activities 305 574 233 450
Finance costs (93 106) (78 279)
Finance income 63 281 55 600
Profit before income tax 275 749 210 771
Income tax expense (78 108) (67 389)
Profit after tax 197 641 143 382
Other comprehensive income
Foreign currency translation differences for (32 630) 7 968
foreign operations
Actuarial (loss)/gain on post retirement (28) 155
benefit
Income tax on other comprehensive income 3 683 -
Other comprehensive (loss)/income for the (28 975) 8 123
period, net of tax
Total comprehensive income for the period 168 666 151 505
Profit attributable to:
Owners of the company 197 641 143 382
Total comprehensive income attributable to:
Owners of the company 168 666 151 505
Basic earnings per share (cents) 69,4 56,9
Diluted earnings per share (cents) 68,6 54,1
Headline earnings per share (cents) 71,3 61,7
Diluted headline earnings per share (cents) 70,5 58,5
Reconciliation of headline earnings
Profit attributable to ordinary shareholders 197 641 143 382
Adjusted for:
Profit on disposal of property, plant and (131) (266)
equipment
Loss on disposal of property, plant and 5 527 227
equipment
Impairment of intangible assets - 11 944
Headline earnings attributable to ordinary 203 037 155 287
shareholders
Number of ordinary shares (`000) in issue 302 162 289 496
diluted weighted average 288 038 265 149
weighted average 284 743 251 780
Summarised consolidated statement of cash flows
2010 2009
R`000 R`000
Cash flows from operating activities 159 635 161 628
Cash receipts from customers 1 930 748 1 066 242
Cash paid to suppliers and employees (1 572 090) (802 960)
Cash generated from operations 358 658 263 282
Dividends paid (42 429) (48 639)
Finance income 63 281 55 600
Finance cost (92 977) (78 279)
Taxation paid (126 898) (30 336)
Cash flows from investing activities (199 270) (323 846)
Proceeds on disposal of property, plant and 3 085 1 234
equipment
Acquisition of businesses net of cash acquired (113 828) (130 683)
Addition to property, plant and equipment (96 034) (188 355)
Investments disposed/(acquired) 7 507 (6 042)
Cash flows from financing activities (116 327) 319 184
Proceeds from share issue, net of expenses 5 311 2 990
Increase in unsecured loans - 2 911
(Decrease)/increase in secured borrowings (121 559) 319 646
Post-retirement benefits paid (79) (6 363)
Net (decrease)/increase in cash and cash (155 962) 156 966
equivalents
Cash and cash equivalents at beginning of 272 825 115 859
period
Cash and cash equivalents at end of period 116 863 272 825
Summarised consolidated statement of changes in equity
Share Share Equity
compensation
R`000 capital premium reserve
Balance at 1 March 2008 248 213 344 2 361
Profit
Other comprehensive income
Foreign currency translation
differences for foreign operations
Post-retirement benefit adjustment
Total other comprehensive income
Total comprehensive income for the
year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Issue of ordinary shares related 33 125 800
to business combinations
Share issue expenses (344)
Dividends to equity holders
Share-based payment transactions 8 1 556
Treasury shares (11)
Total contributions by and 30 125 456 1 556
distributions to owners
Balance at 28 February 2009 278 338 800 3 917
Profit
Other comprehensive income
Foreign currency translation
differences for foreign operations
Post-retirement benefit adjustment
Total other comprehensive loss
Total comprehensive (loss)/income
for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Issue of ordinary shares related 13 57 869
to business combinations
Share issue expenses (5)
Dividends to equity holders
Share-based payment transactions 4 336
Treasury shares 1
Total contributions by and 14 57 864 4 336
distributions to owners
Balance at 28 February 2010 292 396 664 8 253
2010 2009
Dividends per ordinary share 15,0 15,0
(cents)
Translation Retained Total
R`000 reserve earnings equity
Balance at 1 March 2008 6 683 167 033 389 669
Profit 143 382 143 382
Other comprehensive income
Foreign currency translation 7 968 7 968
differences for foreign operations
Post-retirement benefit adjustment 155 155
Total other comprehensive income 7 968 155 8 123
Total comprehensive income for the 7 968 143 537 151 505
year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Issue of ordinary shares related to 125 833
business combinations
Share issue expenses (344)
Dividends to equity holders (48 639) (48 639)
Share-based payment transactions 1 564
Treasury shares (11)
Total contributions by and (48 639) 78 403
distributions to owners
Balance at 28 February 2009 14 651 261 931 619 577
Profit 197 641 197 641
Other comprehensive income
Foreign currency translation (28 947) (28 947)
differences for foreign operations
Post-retirement benefit adjustment (28) (28)
Total other comprehensive loss (28 947) (28) (28 975)
Total comprehensive (loss)/income (28 947) 197 613 168 666
for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Issue of ordinary shares related to 57 882
business combinations
Share issue expenses (5)
Dividends to equity holders (42 429) (42 429)
Share-based payment transactions 4 336
Treasury shares 1
Total contributions by and (42 429) 19 785
distributions to owners
Balance at 28 February 2010 (14 296) 417 115 808 028
Segmental report
Geographical information
R`000 Esorfranki
Geotechnical Civils
2010 2009 2010 2009
Segment revenue 944 862 1 190 192 715 033 148 993
Segment result
Profit before interest and 164 147 167 418 144 520 61 746
taxation
Finance cost (95 345) (68 718) (8 530) (3 743)
Finance income 63 956 56 539 4 805 -
Taxation (36 724) (49 827) (40 278) (15 778)
Segment profit/(loss) 96 034 105 412 100 517 42 225
Segment assets 754 541 994 471 442 162 382 169
Segment liabilities 717 460 1 006 706 197 009 223 673
Capital and non-cash items
Additions to property, 52 844 163 831 49 711 14 435
plant and equipment
Depreciation 32 226 46 887 19 430 17 493
Impairment loss
Number of employees 1 562 1 812 1 228 1 170
Geographical information
R`000 Esorfranki
Pipelines Eliminations
2010 2009 2010 2009
Segment revenue 229 231 85 361 (31 309) (9 824)
Segment result
Profit before interest and 31 068 32 027 (34 161) (27 741)
taxation
Finance cost - (86) 10 769 (5 732)
Finance income 5 404 1 977 (10 884) (2 916)
Taxation (11 885) (9 493) 10 779 7 709
Segment profit/(loss) 24 587 24 425 (23 497) (28 680)
Segment assets 167 121 197 011 284 000 289 841
Segment liabilities 127 733 167 798 (202 406) (154 262)
Capital and non-cash items
Additions to property, 3 096 8 824 (9 617) 1 265
plant and equipment
Depreciation 3 120 384 9 417 3 853
Impairment loss 16 590
Number of employees 427 354 8
Geographical information
R`000
Consolidated
2010 2009
Segment revenue 1 857 817 1 414 722
Segment result
Profit before interest and 305 574 233 450
taxation
Finance cost (93 106) (78 279)
Finance income 63 281 55 600
Taxation (78 108) (67 389)
Segment profit/(loss) 197 641 143 382
Segment assets 1 647 824 1 863 492
Segment liabilities 839 796 1 243 915
Capital and non-cash items
Additions to property, 96 034 188 355
plant and equipment
Depreciation 64 193 68 617
Impairment loss 16 590
Number of employees 3 225 3 336
South Africa Other regions
2010 2009 2010 2009
Total revenue from 1 600 070 1 128 748 257 747 285 974
external customers
Property, plant and 494 531 509 069 101 898 79 476
equipment
Consolidated
2010 2009
Total revenue from 1 857 817 1 414 722
external customers
Property, plant and 596 429 588 545
equipment
COMMENTARY
The audited summarised consolidated results of Esorfranki for the year ended 28
February 2010 ("the year") demonstrate the group`s delivery of promised returns
through sustained leadership and continued resilience in a challenging market,
with significant year-on-year increases in profit after tax ("PAT") and headline
earnings per share ("HEPS").
Revenue of R1,9 billion reflects the group`s expansion from a geotechnical
leader to a broader civil engineering operation, including the positive
contributions of the civil engineering and pipelines acquisitions in 2009.
In a strategic milestone Esorfranki transferred to the `Heavy Construction`
sector of the Main Board of the JSE on 25 June 2009, capping three successful
years on AltX. The group is now appropriately positioned alongside civil
engineering construction peers.
Financial results
Revenue increased 31,3% compared to the previous year with PAT of R197,6 million
translating into HEPS of 71,3 cents, 15,6% higher than the previous year.
Earnings before interest, taxation, deprecation, impairments and amortisation
("EBITDA") increased 19,4% to R389 million from R325,9 million. EBITDA includes
a R19,3 million amortisation of customer contracts following the acquisition of
Esorfranki Civils (formerly Patula Construction (Pty) Limited) and Esorfranki
Pipelines (formerly Shearwater Plant Hire (Pty) Limited).
The strengthening of the South African Rand in the second half of the year
negatively impacted on the translation of foreign operation income, resulting in
a post tax charge of R28,9 million.
Cash generated by operations remained robust at R159,6 million (2009: R161,6
million), after tax payments of R126,9 million following changes to the South
African provisional tax regulations which became effective in the year.
Esorfranki met all its loan covenants during the year.
Review of operations
Notwithstanding the negative impact of excessive rain in the second half of the
year, contract delays and pressure on margins, the business units achieved
pleasing results in a challenging macro-economic environment.
Esorfranki Geotechnical (comprising Esor Africa and Franki Africa)
As anticipated, revenue declined 20,6% to R944,8 million from R1,2 billion due
to the adverse economic and trading conditions, resulting in a contracting
market. Operating margins improved year-on-year by 3,3% to 17,4%. Foreign
operations accounted for 27,2% (2009: 24%) of Geotechnical revenue.
The business unit recently won a number of major cross-border projects with a
combined value of R55 million. These include pipe-jacking for a Gaborone sewer
and piling and dynamic compaction for the Jwaneng Cut 8 project. Current
contracts for both Gautrain and the new Kusile Power Station remain ongoing in
the short-term.
Esorfranki Civils
Revenue increased 17,4 % to R715 million from R609 million in the previous year.
The business unit achieved PAT of R100,5 million and respectable operating
margins of 20,2%.
Esorfranki Civils is continuing work on Johannesburg`s R21 between the N12
interchange and Pomona Road, and is also progressing with the R174 million
contract for the second carriageway from the Modikane interchange to the R512
Brits West interchange on the N4.
Esorfranki Pipelines
Esorfranki Pipelines posted year-on-year revenue growth of 13,6% to R229
million. Notwithstanding the negative impact of contract delays in the latter
part of the year, the business unit posted operating profits of R31 million
equating to operating margins of 13,6%.
The business unit was recently awarded a R240 million contract from Rand Water
for the construction of the BG3 Pipeline.
CAPEX
Esorfranki regards fleet maintenance and enhancement as key to growth and a
significant differentiator. During the year the group invested R96 million
(2009: R188,4 million) in property, plant and equipment ("PPE") to expand and
maintain operations. The Geotechnical business unit accounted for R42,8 million
of this, with R49,7 million invested in PPE at Esorfranki Civils and R3,0
million at Esorfranki Pipelines.
To accommodate future growth and to maintain its competitive edge, the board has
approved capital expenditure for Esorfranki of R72,0 million for the 2011
financial year.
Black Economic Empowerment
During the year Esorfranki improved its rating to a `Level 5` contributor (from
`Level 6`) in terms of the Department of Trade & Industry`s B-BBEE Codes of Good
Practice. The group has set the short-term target of elevation to `Level 4` and
intends to focus on improving all areas of scorecarding to achieve this
objective.
Incorporating retail shareholders on the open market, direct black ownership
stands at 29%. Included in this is the 4,4% stake in the company held by black
staff through the Esor Broad Based Share Ownership Scheme.
More than 85% of the group`s 3 225 strong workforce is black and emphasis is
placed on skills training and development to accelerate promotion into middle
and senior management.
Prospects
The board remains positive that Esorfranki is on track to achieve its targets
for the year ahead despite the continued tough trading conditions. With an order
book in hand of approximately R1,6 billion (Geotechnical: R534 million;
Esorfranki Civils: R726 million; Esorfranki Pipelines: R314 million) prospects
for growth are sufficiently promising to support the board`s optimistic outlook.
Esorfranki will continue to focus on Africa and is expected to benefit from an
established presence and operating track record in growth nodes on the
continent. In the Geotechnical business unit the intention is to significantly
escalate the foreign contribution to revenue from 27% to 40% to improve growth.
Esorfranki is therefore actively re-deploying plant and personnel across the
continent including to Angola, Botswana, the DRC and Mozambique.
Esorfranki Civils anticipates continued construction projects, with work phases
on the Medupi Power Station expected to come back on-stream following the IMF
loan award to Eskom. In addition, the business unit is targeting opportunities
in the mining sector, particularly in the coal and platinum arenas.
Esorfranki Pipelines is expected to benefit from increasing demand in KwaZulu-
Natal, Gauteng and Mpumalanga mainly from municipalities and parastatals
including Trans-Caledon Tunnel Authority.
Directorate
During the year Jonathan (Mlungisi) Hlongwane resigned as an independent non-
executive director with effect from 26 February 2010. Alternate director to Dr
FA Sonn, Johan van Reenen, resigned with effect from 30 November 2009. We thank
both Mlungisi and Johan for their contribution.
Dividend declaration
The board has declared a dividend of 15,0 cents per share (2009: 15 cents per
share), which equates to 4,75 times dividend cover on HEPS. It remains the
policy of the group to review the dividend annually in light of cash flow,
gearing and net external debt on the statement of financial position, future
availability of credit and the covenants imposed in terms of current financing
arrangements.
The salient dates for the dividend are as
follows:
Last day to trade cum dividend Thursday, 10 June 2010
Shares trade ex dividend Friday, 11 June 2010
Record date Friday, 18 June 2010
Payment date Monday, 21 June 2010
No share certificates may be dematerialised or rematerialised between Friday, 11
June 2010 and Friday, 18 June 2010, both dates inclusive.
Statement of compliance
The audited summarised consolidated results for the year have been prepared in
accordance with the recognition and the measurement requirements of
International Financial Reporting Standards, the presentation and disclosure
requirements of IAS 34: Interim Financial Reporting, and the JSE Listings
Requirements and in the manner required by the South African Companies Act,
1973. The accounting policies applied in preparation of the audited summarised
consolidated annual financial statements are consistent with those applied in
the group`s audited consolidated annual financial statements for the year ended
28 February 2010, which comply with International Financial Reporting Standards.
Audit opinion
The auditors, KPMG Inc., have issued an unmodified audit opinion on the group`s
financial statements for the year ended 28 February 2010. 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 audited summarised annual financial statements have been derived
from the group audited annual financial statements and are consistent in all
material respects.
Annual general meeting
The annual general meeting of the company will be held at the company`s offices,
30 Activia Road, Activia Park, Germiston on Friday, 25 June 2010 at 10h00.
Appreciation
We thank our management and staff for their commitment and tenacious efforts,
which have helped drive our continued success in the face of difficult trading
conditions. We also thank our fellow directors for their valuable input and our
advisors, suppliers, clients and stakeholders for their ongoing support.
On behalf of the board.
Bernard Krone Wayne van Houten
Chief Executive Officer Chief Financial Officer
26 May 2010
CORPORATE INFORMATION
DIRECTORS:
DM Thompson* (Chairman)B Krone (CEO)
W van Houten (CFO)
EG Dube*
MB Mathabathe*
Dr FA Sonn*
*Independent non-executive
REGISTERED OFFICE:
30 Activia Road, Activia Park, Germiston, 1401
(PO Box 6478, Dunswart, 1508)
Telephone: +27 11 822 3906
Fax: +27 11 822 3112
SPONSOR:
Vunani Corporate Finance
Vunani House
Athol Ridge Office Park, 151 Katherine Street, Sandton, 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:
iThemba Governance and Statutory Solutions (Pty) Limited
Monument Office Park, Suite 5-102
79 Steenbok Avenue, Monument Park
(PO Box 25160, Monument Park, 0105)
AUDITORS:
KPMG Inc.
KPMG Crescent
85 Empire Road, Parktown, 2193
(Private Bag 9, Parkview, 2122)
www.esorfranki.co.za
Date: 26/05/2010 07:05:21 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.
ESR
ESR - Esorfranki Limited - Audited summarised consolidated results for the year
ended 28 February 2010
ESORFRANKI LIMITED
(Registration number 1994/000732/06)
Incorporated in the Republic of South Africa
(JSE Code: ESR ISIN: ZAE000133369)
("Esorfranki" or "the company" or "the group")
AUDITED SUMMARISED CONSOLIDATED RESULTS
for the year ended 28 February 2010
HIGHLIGHTS
Revenue up 31,3%
PAT up 37,8%
NAV per share up 23,5%
HEPS up 15,6%
Summarised consolidated statement of financial position
2010 2009
R`000 R`000
Assets
Non-current assets 999 551 987 520
Property, plant and equipment 596 429 588 545
Intangible assets 93 737 113 022
Goodwill 305 715 280 173
Deferred tax assets 3 670 5 780
Current assets 648 273 875 972
Inventories 14 827 11 379
Other investments 6 762 14 269
Taxation 9 952 4 699
Trade and other receivables 499 869 572 800
Cash and cash equivalents 116 863 272 825
Total assets 1 647 824 1 863 492
EQUITY AND LIABILITIES
Share capital and reserves 808 028 619 577
Share capital and premium 396 956 339 078
Equity compensation reserve 8 253 3 917
Foreign currency translation reserve (14 296) 14 651
Retained earnings 417 115 261 931
Non-current liabilities 405 711 470 080
Secured borrowings* 275 031 370 603
Post-retirement benefits 1 665 1 587
Deferred tax liabilities 129 015 97 890
Current liabilities 434 085 773 835
Current portion of secured borrowings* 121 677 147 664
Taxation 6 644 84 358
Provisions 21 087 31 118
Trade and other payables 284 677 510 695
Total equity and liabilities 1 647 824 1 863 492
Net asset value per share (cents) 275,6 223,2
Tangible net asset value per share (cents)** 177,5 121,2
* Interest-bearing debt
** (Net asset value less intangible assets)/(shares in issue less treasury
shares)
Summarised consolidated statement of comprehensive income
2010 2009
R`000 R`000
Revenue 1 857 817 1 414 722
Cost of sales (1 361 041) (981 829)
Gross profit 496 776 432 893
Other income 3 937 1 631
Operating expenses (111 661) (108 601)
Profit before interest, tax and depreciation, 389 052 325 923
impairments and amortisation
Depreciation, impairments and amortisation (83 478) (92 473)
Results from operating activities 305 574 233 450
Finance costs (93 106) (78 279)
Finance income 63 281 55 600
Profit before income tax 275 749 210 771
Income tax expense (78 108) (67 389)
Profit after tax 197 641 143 382
Other comprehensive income
Foreign currency translation differences for (32 630) 7 968
foreign operations
Actuarial (loss)/gain on post retirement (28) 155
benefit
Income tax on other comprehensive income 3 683 -
Other comprehensive (loss)/income for the (28 975) 8 123
period, net of tax
Total comprehensive income for the period 168 666 151 505
Profit attributable to:
Owners of the company 197 641 143 382
Total comprehensive income attributable to:
Owners of the company 168 666 151 505
Basic earnings per share (cents) 69,4 56,9
Diluted earnings per share (cents) 68,6 54,1
Headline earnings per share (cents) 71,3 61,7
Diluted headline earnings per share (cents) 70,5 58,5
Reconciliation of headline earnings
Profit attributable to ordinary shareholders 197 641 143 382
Adjusted for:
Profit on disposal of property, plant and (131) (266)
equipment
Loss on disposal of property, plant and 5 527 227
equipment
Impairment of intangible assets - 11 944
Headline earnings attributable to ordinary 203 037 155 287
shareholders
Number of ordinary shares (`000) in issue 302 162 289 496
diluted weighted average 288 038 265 149
weighted average 284 743 251 780
Summarised consolidated statement of cash flows
2010 2009
R`000 R`000
Cash flows from operating activities 159 635 161 628
Cash receipts from customers 1 930 748 1 066 242
Cash paid to suppliers and employees (1 572 090) (802 960)
Cash generated from operations 358 658 263 282
Dividends paid (42 429) (48 639)
Finance income 63 281 55 600
Finance cost (92 977) (78 279)
Taxation paid (126 898) (30 336)
Cash flows from investing activities (199 270) (323 846)
Proceeds on disposal of property, plant and 3 085 1 234
equipment
Acquisition of businesses net of cash acquired (113 828) (130 683)
Addition to property, plant and equipment (96 034) (188 355)
Investments disposed/(acquired) 7 507 (6 042)
Cash flows from financing activities (116 327) 319 184
Proceeds from share issue, net of expenses 5 311 2 990
Increase in unsecured loans - 2 911
(Decrease)/increase in secured borrowings (121 559) 319 646
Post-retirement benefits paid (79) (6 363)
Net (decrease)/increase in cash and cash (155 962) 156 966
equivalents
Cash and cash equivalents at beginning of 272 825 115 859
period
Cash and cash equivalents at end of period 116 863 272 825
Summarised consolidated statement of changes in equity
Share Share Equity
compensation
R`000 capital premium reserve
Balance at 1 March 2008 248 213 344 2 361
Profit
Other comprehensive income
Foreign currency translation
differences for foreign operations
Post-retirement benefit adjustment
Total other comprehensive income
Total comprehensive income for the
year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Issue of ordinary shares related 33 125 800
to business combinations
Share issue expenses (344)
Dividends to equity holders
Share-based payment transactions 8 1 556
Treasury shares (11)
Total contributions by and 30 125 456 1 556
distributions to owners
Balance at 28 February 2009 278 338 800 3 917
Profit
Other comprehensive income
Foreign currency translation
differences for foreign operations
Post-retirement benefit adjustment
Total other comprehensive loss
Total comprehensive (loss)/income
for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Issue of ordinary shares related 13 57 869
to business combinations
Share issue expenses (5)
Dividends to equity holders
Share-based payment transactions 4 336
Treasury shares 1
Total contributions by and 14 57 864 4 336
distributions to owners
Balance at 28 February 2010 292 396 664 8 253
2010 2009
Dividends per ordinary share 15,0 15,0
(cents)
Translation Retained Total
R`000 reserve earnings equity
Balance at 1 March 2008 6 683 167 033 389 669
Profit 143 382 143 382
Other comprehensive income
Foreign currency translation 7 968 7 968
differences for foreign operations
Post-retirement benefit adjustment 155 155
Total other comprehensive income 7 968 155 8 123
Total comprehensive income for the 7 968 143 537 151 505
year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Issue of ordinary shares related to 125 833
business combinations
Share issue expenses (344)
Dividends to equity holders (48 639) (48 639)
Share-based payment transactions 1 564
Treasury shares (11)
Total contributions by and (48 639) 78 403
distributions to owners
Balance at 28 February 2009 14 651 261 931 619 577
Profit 197 641 197 641
Other comprehensive income
Foreign currency translation (28 947) (28 947)
differences for foreign operations
Post-retirement benefit adjustment (28) (28)
Total other comprehensive loss (28 947) (28) (28 975)
Total comprehensive (loss)/income (28 947) 197 613 168 666
for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Issue of ordinary shares related to 57 882
business combinations
Share issue expenses (5)
Dividends to equity holders (42 429) (42 429)
Share-based payment transactions 4 336
Treasury shares 1
Total contributions by and (42 429) 19 785
distributions to owners
Balance at 28 February 2010 (14 296) 417 115 808 028
Segmental report
Geographical information
R`000 Esorfranki
Geotechnical Civils
2010 2009 2010 2009
Segment revenue 944 862 1 190 192 715 033 148 993
Segment result
Profit before interest and 164 147 167 418 144 520 61 746
taxation
Finance cost (95 345) (68 718) (8 530) (3 743)
Finance income 63 956 56 539 4 805 -
Taxation (36 724) (49 827) (40 278) (15 778)
Segment profit/(loss) 96 034 105 412 100 517 42 225
Segment assets 754 541 994 471 442 162 382 169
Segment liabilities 717 460 1 006 706 197 009 223 673
Capital and non-cash items
Additions to property, 52 844 163 831 49 711 14 435
plant and equipment
Depreciation 32 226 46 887 19 430 17 493
Impairment loss
Number of employees 1 562 1 812 1 228 1 170
Geographical information
R`000 Esorfranki
Pipelines Eliminations
2010 2009 2010 2009
Segment revenue 229 231 85 361 (31 309) (9 824)
Segment result
Profit before interest and 31 068 32 027 (34 161) (27 741)
taxation
Finance cost - (86) 10 769 (5 732)
Finance income 5 404 1 977 (10 884) (2 916)
Taxation (11 885) (9 493) 10 779 7 709
Segment profit/(loss) 24 587 24 425 (23 497) (28 680)
Segment assets 167 121 197 011 284 000 289 841
Segment liabilities 127 733 167 798 (202 406) (154 262)
Capital and non-cash items
Additions to property, 3 096 8 824 (9 617) 1 265
plant and equipment
Depreciation 3 120 384 9 417 3 853
Impairment loss 16 590
Number of employees 427 354 8
Geographical information
R`000
Consolidated
2010 2009
Segment revenue 1 857 817 1 414 722
Segment result
Profit before interest and 305 574 233 450
taxation
Finance cost (93 106) (78 279)
Finance income 63 281 55 600
Taxation (78 108) (67 389)
Segment profit/(loss) 197 641 143 382
Segment assets 1 647 824 1 863 492
Segment liabilities 839 796 1 243 915
Capital and non-cash items
Additions to property, 96 034 188 355
plant and equipment
Depreciation 64 193 68 617
Impairment loss 16 590
Number of employees 3 225 3 336
South Africa Other regions
2010 2009 2010 2009
Total revenue from 1 600 070 1 128 748 257 747 285 974
external customers
Property, plant and 494 531 509 069 101 898 79 476
equipment
Consolidated
2010 2009
Total revenue from 1 857 817 1 414 722
external customers
Property, plant and 596 429 588 545
equipment
COMMENTARY
The audited summarised consolidated results of Esorfranki for the year ended 28
February 2010 ("the year") demonstrate the group`s delivery of promised returns
through sustained leadership and continued resilience in a challenging market,
with significant year-on-year increases in profit after tax ("PAT") and headline
earnings per share ("HEPS").
Revenue of R1,9 billion reflects the group`s expansion from a geotechnical
leader to a broader civil engineering operation, including the positive
contributions of the civil engineering and pipelines acquisitions in 2009.
In a strategic milestone Esorfranki transferred to the `Heavy Construction`
sector of the Main Board of the JSE on 25 June 2009, capping three successful
years on AltX. The group is now appropriately positioned alongside civil
engineering construction peers.
Financial results
Revenue increased 31,3% compared to the previous year with PAT of R197,6 million
translating into HEPS of 71,3 cents, 15,6% higher than the previous year.
Earnings before interest, taxation, deprecation, impairments and amortisation
("EBITDA") increased 19,4% to R389 million from R325,9 million. EBITDA includes
a R19,3 million amortisation of customer contracts following the acquisition of
Esorfranki Civils (formerly Patula Construction (Pty) Limited) and Esorfranki
Pipelines (formerly Shearwater Plant Hire (Pty) Limited).
The strengthening of the South African Rand in the second half of the year
negatively impacted on the translation of foreign operation income, resulting in
a post tax charge of R28,9 million.
Cash generated by operations remained robust at R159,6 million (2009: R161,6
million), after tax payments of R126,9 million following changes to the South
African provisional tax regulations which became effective in the year.
Esorfranki met all its loan covenants during the year.
Review of operations
Notwithstanding the negative impact of excessive rain in the second half of the
year, contract delays and pressure on margins, the business units achieved
pleasing results in a challenging macro-economic environment.
Esorfranki Geotechnical (comprising Esor Africa and Franki Africa)
As anticipated, revenue declined 20,6% to R944,8 million from R1,2 billion due
to the adverse economic and trading conditions, resulting in a contracting
market. Operating margins improved year-on-year by 3,3% to 17,4%. Foreign
operations accounted for 27,2% (2009: 24%) of Geotechnical revenue.
The business unit recently won a number of major cross-border projects with a
combined value of R55 million. These include pipe-jacking for a Gaborone sewer
and piling and dynamic compaction for the Jwaneng Cut 8 project. Current
contracts for both Gautrain and the new Kusile Power Station remain ongoing in
the short-term.
Esorfranki Civils
Revenue increased 17,4 % to R715 million from R609 million in the previous year.
The business unit achieved PAT of R100,5 million and respectable operating
margins of 20,2%.
Esorfranki Civils is continuing work on Johannesburg`s R21 between the N12
interchange and Pomona Road, and is also progressing with the R174 million
contract for the second carriageway from the Modikane interchange to the R512
Brits West interchange on the N4.
Esorfranki Pipelines
Esorfranki Pipelines posted year-on-year revenue growth of 13,6% to R229
million. Notwithstanding the negative impact of contract delays in the latter
part of the year, the business unit posted operating profits of R31 million
equating to operating margins of 13,6%.
The business unit was recently awarded a R240 million contract from Rand Water
for the construction of the BG3 Pipeline.
CAPEX
Esorfranki regards fleet maintenance and enhancement as key to growth and a
significant differentiator. During the year the group invested R96 million
(2009: R188,4 million) in property, plant and equipment ("PPE") to expand and
maintain operations. The Geotechnical business unit accounted for R42,8 million
of this, with R49,7 million invested in PPE at Esorfranki Civils and R3,0
million at Esorfranki Pipelines.
To accommodate future growth and to maintain its competitive edge, the board has
approved capital expenditure for Esorfranki of R72,0 million for the 2011
financial year.
Black Economic Empowerment
During the year Esorfranki improved its rating to a `Level 5` contributor (from
`Level 6`) in terms of the Department of Trade & Industry`s B-BBEE Codes of Good
Practice. The group has set the short-term target of elevation to `Level 4` and
intends to focus on improving all areas of scorecarding to achieve this
objective.
Incorporating retail shareholders on the open market, direct black ownership
stands at 29%. Included in this is the 4,4% stake in the company held by black
staff through the Esor Broad Based Share Ownership Scheme.
More than 85% of the group`s 3 225 strong workforce is black and emphasis is
placed on skills training and development to accelerate promotion into middle
and senior management.
Prospects
The board remains positive that Esorfranki is on track to achieve its targets
for the year ahead despite the continued tough trading conditions. With an order
book in hand of approximately R1,6 billion (Geotechnical: R534 million;
Esorfranki Civils: R726 million; Esorfranki Pipelines: R314 million) prospects
for growth are sufficiently promising to support the board`s optimistic outlook.
Esorfranki will continue to focus on Africa and is expected to benefit from an
established presence and operating track record in growth nodes on the
continent. In the Geotechnical business unit the intention is to significantly
escalate the foreign contribution to revenue from 27% to 40% to improve growth.
Esorfranki is therefore actively re-deploying plant and personnel across the
continent including to Angola, Botswana, the DRC and Mozambique.
Esorfranki Civils anticipates continued construction projects, with work phases
on the Medupi Power Station expected to come back on-stream following the IMF
loan award to Eskom. In addition, the business unit is targeting opportunities
in the mining sector, particularly in the coal and platinum arenas.
Esorfranki Pipelines is expected to benefit from increasing demand in KwaZulu-
Natal, Gauteng and Mpumalanga mainly from municipalities and parastatals
including Trans-Caledon Tunnel Authority.
Directorate
During the year Jonathan (Mlungisi) Hlongwane resigned as an independent non-
executive director with effect from 26 February 2010. Alternate director to Dr
FA Sonn, Johan van Reenen, resigned with effect from 30 November 2009. We thank
both Mlungisi and Johan for their contribution.
Dividend declaration
The board has declared a dividend of 15,0 cents per share (2009: 15 cents per
share), which equates to 4,75 times dividend cover on HEPS. It remains the
policy of the group to review the dividend annually in light of cash flow,
gearing and net external debt on the statement of financial position, future
availability of credit and the covenants imposed in terms of current financing
arrangements.
The salient dates for the dividend are as
follows:
Last day to trade cum dividend Thursday, 10 June 2010
Shares trade ex dividend Friday, 11 June 2010
Record date Friday, 18 June 2010
Payment date Monday, 21 June 2010
No share certificates may be dematerialised or rematerialised between Friday, 11
June 2010 and Friday, 18 June 2010, both dates inclusive.
Statement of compliance
The audited summarised consolidated results for the year have been prepared in
accordance with the recognition and the measurement requirements of
International Financial Reporting Standards, the presentation and disclosure
requirements of IAS 34: Interim Financial Reporting, and the JSE Listings
Requirements and in the manner required by the South African Companies Act,
1973. The accounting policies applied in preparation of the audited summarised
consolidated annual financial statements are consistent with those applied in
the group`s audited consolidated annual financial statements for the year ended
28 February 2010, which comply with International Financial Reporting Standards.
Audit opinion
The auditors, KPMG Inc., have issued an unmodified audit opinion on the group`s
financial statements for the year ended 28 February 2010. 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 audited summarised annual financial statements have been derived
from the group audited annual financial statements and are consistent in all
material respects.
Annual general meeting
The annual general meeting of the company will be held at the company`s offices,
30 Activia Road, Activia Park, Germiston on Friday, 25 June 2010 at 10h00.
Appreciation
We thank our management and staff for their commitment and tenacious efforts,
which have helped drive our continued success in the face of difficult trading
conditions. We also thank our fellow directors for their valuable input and our
advisors, suppliers, clients and stakeholders for their ongoing support.
On behalf of the board.
Bernard Krone Wayne van Houten
Chief Executive Officer Chief Financial Officer
26 May 2010
CORPORATE INFORMATION
DIRECTORS:
DM Thompson* (Chairman)B Krone (CEO)
W van Houten (CFO)
EG Dube*
MB Mathabathe*
Dr FA Sonn*
*Independent non-executive
REGISTERED OFFICE:
30 Activia Road, Activia Park, Germiston, 1401
(PO Box 6478, Dunswart, 1508)
Telephone: +27 11 822 3906
Fax: +27 11 822 3112
SPONSOR:
Vunani Corporate Finance
Vunani House
Athol Ridge Office Park, 151 Katherine Street, Sandton, 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:
iThemba Governance and Statutory Solutions (Pty) Limited
Monument Office Park, Suite 5-102
79 Steenbok Avenue, Monument Park
(PO Box 25160, Monument Park, 0105)
AUDITORS:
KPMG Inc.
KPMG Crescent
85 Empire Road, Parktown, 2193
(Private Bag 9, Parkview, 2122)
www.esorfranki.co.za
Date: 26/05/2010 07:05:21 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.
