Esorfranki back in the black
AFTER two years of loss-making contracts, civil engineering group Esorfranki is back in the black posting an R18m profit for the year to February thanks to a rise in construction activity.
AFTER being hit by two years of money-losing contracts, civil engineering and geotechnical group Esorfranki is back in the black, posting an R18m profit for the year to February thanks to a rise in construction activity.
CEO Bernie Krone said yesterday that the two years since the 2010 World Cup had been “tough” and the company had learned its lessons.
“We had two bad years, but we managed a successful turnaround following difficult times and we have now put the group firmly on track for growth … everything is looking much better. We now have a single amalgamated operating entity and our order book has been strengthened, coming out of these two years more focused and leaner,” Mr Krone said.
He said the group had lost R100m in contracts over a couple of years.
Mr Krone said prospects looked promising in the private sector, with increased infrastructure spending in the coal-mining, power and resources sectors.
“There are lots of opportunities in power, resources, roads and housing. We are no longer just dependent on government infrastructure spend — when it comes to government, for us it will be a wait-and-see approach.”
The group’s share price rose as much as 5,4% to an intraday high of R1,55 before settling back at R1,48.
The group reported that revenue rose 30% to R1,8bn from R1,4bn, while headline earnings per share jumped 148% to 6,2c from a 12,9c loss previously. Earnings per share climbed 134% to 4,7c from a 13,9c loss, and profit increased 145% to R18m from a R41m loss previously.
Afrifocus Securities analyst Hugan Chetty said yesterday that Esorfranki had a R6m provision for the Competition Commission fines and “this is a worst-case scenario. Management is a lot more optimistic about the future and feels the fine will be approximately R1,2m.”
Mr Chetty said the group continued to expand into subSaharan Africa, where margins were “better” than in SA.
Mr Krone said the performance of the group’s geotechnical division vindicated its focus on sub-Saharan Africa, with year-on-year growth in foreign revenue, which in turn generated the lion’s share of 68% of the division’s profit. He said the record revenue was achieved from marine projects in Mozambique and Mauritius.
Esorfranki had also made its first foray into Uganda and Ghana, obtaining R120m worth of lateral support and marine projects.
About 40% of Esorfranki’s revenue is generated in sub- Saharan Africa. Mining activity remains buoyant as the group has seven contracts with Anglo Coal worth R300m and a potential R150m award pending.
“Capital expenditure is currently mainly maintenance but if any large contracts are awarded and equipment is required, it could increase,” Mr Chetty said.