Esorfranki returns to the black
Category Property News
Geotechnical and civil engineering contractor Esrofranki has returned to the black, reporting diluted headline earnings per share of 6.2 cents for the year ended February 2012 from a loss of 12.8 cents a year ago.
The group's performance was enhanced by effective rationalisation and optimisation processes in all divisions cementing a healthier contract base.
A number of major new contract wins saw the order book stabilise at a solid R1.8 billion at year-end.
Consolidated revenue increased to R1.8 billion from R1.4 billion in the previous year and earnings before interest, taxation, depreciation, impairments and amortisation (EBITDA) increased by 170.4% to R132.7 million.
Revenue from foreign operations in Esorfranki Geotechnical grew 34% to R273.7 million, driving growth in the division's total revenue of 4% year-on-year.
Record revenues were recorded specifically in Mozambique and Mauritius.
Foreign operations achieved an operating margin of 14% and contributed 68% to the division's total operating profit.
In contrast SA-based revenue was down 8% year-on-year due to intensifying competition, which further saw a reduced gross margin contribution.
Operating margins did, however, improve substantially in the second half of the year to 10%.
Esorfranki Civils' revenue increased 59% and the division returned to profitability in the second half of the year, following prior losses and margin reversals on the R21 contract and contract completion costs on the N4 project (Phase I). These contracts have now been concluded.
The division has adopted stringent risk management in its contract tendering and project execution policies to avoid a recurrence of such adverse challenges in the future.
Operating margins in the division improved substantially to 10% in the second half of the year due to optimised operational efficiency on existing long-term contracts.
Exceptional plant utilisation was achieved on the back of the ongoing capital expansion programme.
Despite tightly competitive conditions in the Government projects sector, the division managed to grow its order book by 41%.
Private sector awards included a R271 million construction contract for an integrated township development related to the mining industry.
Esorfranki Pipelines' revenue was up 35%, notwithstanding a turbulent financial year which included the cancellation of the Western Aqueduct contract.
Revenue was further negatively impacted by contractual disputes on the flagship BG 3 contract.
However, the latter was resolved in Esorfranki's favour on mediation. It has since been referred to arbitration by the client and is expected to be finalised in FY2013.
Operating margins sustained a break even financial performance. The division secured a number of new major contracts in the last quarter of the financial year.
Looking ahead, the group said it would continue to explore further expansion into Africa, while also keeping a keen eye on the domestic market.
The focus going forward will remain on expansion into new markets in Africa, to strengthen and diversify revenue streams while taking advantage of the SA government's renewed commitment to infrastructure.
This should offer Esorfranki significant opportunity, it said.The group has secured a number of significant local and African contracts in all divisions to overcome tough market conditions.
Esorfranki Geotechnical's first contract in Ghana, worth R13 million, has been completed and formed the foundation for a further three contracts in the country for lateral support and marine structures worth R120 million.
Esorfranki Civils has scooped long-term contracts including from Bakwena Corridor Concessionaire, Gauteng Roads Department, Eskom and Anglo Coal, amongst others.
Esorfranki Pipelines' recent new contracts include a major project in KwaZulu-Natal for Umgeni Water valued at R130 million.
The next year to 18 months will see Esorfranki continue optimising efficiencies and prioritising diversification of products, including opportunities in the solar green energy arena for Esorfranki Geotechnical.
Within SA, infrastructure development in power, water, transport and resources is desperately required. Esorfranki is well-positioned to take advantage of new projects as and when they come to the market.
Author: Warehouse Finder
