Construction company Esor returns to profit in the year to end-February.

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South African construction firms are are well placed to compete for mining and energy contracts in Africa, says Global Credit Rating.

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Shares in JSE-listed civil engineering and construction group Esorfranki close 34.71% lower at 79c.

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Listed civil engineering and construction group Esorfranki on Wednesday announced the sale for R500m of its geotechnical division — the group’s core founding business and only division operating in the rest of Africa

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Thursday, 27 June 2013 01:46

Diversification key for Esorfranki

Construction group Esorfranki\'s revenue climbs 31.3% to R2.33bn from R1.77bn in the year to end February 2013.

\"BernieConstruction group Esorfranki\'s (ESR) group revenue climbed 31.3% to R2.33bn from R1.77bn in the year to end February 2013. CEO Bernie Krone said diversification was key. \"We had to diversify our businesses because margins are tight in SA‚\" he said.

The order book increased for the third consecutive year and stood at R2.5bn at end February - a 43‚7% year-on-year gain. Earnings before interest‚ taxation‚ depreciation‚ impairments and amortisation expense increased by 103% to R269.3m.

Headline earnings per share were up at 20.5 cents‚ a 230.6% improvement. Krone was optimistic about the future.

\"Despite the still challenging environment in the construction sector‚ which has started showing only the first slow signs of recovery‚ Esorfranki has boosted its order book with pleasing contract awards across the group‚\" he said.

Esorfranki Geotechnical secured 45% of its targeted order book for financial year 2014‚ with positive prospects locally and in all regions of sub-Saharan Africa.

In South Africa in the year ahead the division would embark on new piling projects in KwaZulu-Natal and Gauteng‚ a wind farm in the Eastern Cape‚ and a solar farm in the Northern Cape.

In addition to the renewable energy sector in which it is making successful inroads‚ the division would continue targeting infrastructure for the cellular transmission towers market. In sub-Saharan Africa two new projects in Ghana and Uganda will begin‚ while projects in Angola continue steadily.

Esorfranki Civils interded to expand its focus to the private housing market‚ roads‚ infrastructure and water in order to broaden its customer base.

Esorfranki Civils had an order book in excess of R1bn with a number of pending awards. It has invested in property developments such as the Orchards project near Pretoria and other mixed use developments‚ securing a five year pipeline. In addition it would continue to pursue contracts outside South Africa.

\"While challenges remain‚ Esorfranki\'s size and experience supported resilience and the group is well positioned for the year ahead. The growth in the business as well as investments in property development opportunities has put pressure on the group\'s cash resources. Cash reduced by R60m from R93.6m to R33.6m‚\" Krone said.

Published in Construction Industry
Thursday, 27 June 2013 01:28

Esorfranki shares soar on strong results

Esorfranki’s share price climbs as much as 20% to an intraday high of R1.55 after the group released strong financial results for the year to February.

\"BernieCivil engineering and construction group Esorfranki’s (ESR’s) share price climbed as much as 20% to an intraday high of R1.55 after the group released strong financial results for the year to February.

Esorfranki CEO Bernie Krone said his group had experienced “an exceptionally good” year. “All of our important financial metrics have done well. Group revenue reached R2.3bn and earnings doubled to R269.3m‚” he said.Krone said he believed the group’s diversification across Africa had supported the group’s performance.

Esorfranki ended the year with an order book of R2.5bn which was 43.7% stronger than at the previous year-end.

Revenue grew 31.3% year on year and headline earnings per share leapt 230.6% to 20.5c from 6.2c last year.

Earnings increased to R269.3m from R132.7m. The net asset value per share increased to 280.3c compared with 241.5c for the previous financial year.

Krone said despite the good performance‚ the group did not declare a dividend and decided instead to conserve cash for reinvestment and growth. “We have spent a large amount of cash already. We have had to invest in properties in Africa for example‚ so our cash position is not that good‚” Krone said.

At the end of the financial year‚ cash on hand had decreased to R34m from R94m.

Esorfranki also had to pay a R115‚850 fine in the Competition Commission’s investigation around collusion in the South African construction industry. Esorfranki was guilty of one transgression.

The fine was far lower than the penalties suffered by larger groups Raubex (RBX) and Stefanutti Stocks (SSK). They were fined R58.8m and R323m respectively.

Krone said the fine had been paid.“Our solid results for the year denote three profitable half-year periods in a row‚ cementing a foundation for a sustainable turnaround‚” he said.

Esorfranki had worked through its capital expenditure spend‚ bringing it down from R258m at the end of February 2012 to R194m this year‚ and halving next year to only R92m.

Looking at a divisional breakdown‚ Esofranki Geotechnical grew its profit 52% to R76m off a revenue base that increased 7%‚ as a result of highly profitable contracts in sub-Saharan Africa.

These contracts contributed 79% of the division’s bottom line.

Krone said cross-border projects earned the group margins of 17% compared with 10% on domestic geotechnical projects. In line with this focus on Africa‚ the division opened an office in Ghana and gained an infrastructure contract in Uganda.

After 20 years on the continent Geotechnical now has operations in Angola‚ Ghana‚ Mauritius‚ Zimbabwe‚ Tanzania and Mozambique.

The South African geotechnical operations fared less well as they battled margin squeeze.

Esofranki Civils achieved revenue of more than R1bn and tripled profit to R76.5m from R25.4m in the previous year‚ capitalising on improved efficiencies as a result of a R132m investment in plant expansion.

The order book grew on the back of major long-term contracts and a new foray into Africa with a project in Botswana.

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