Losses of R102-million incurred on the Northern Aqueduct water pipeline project, in KwaZulu-Natal, severely impacted on JSE-listed Esor’s profitability for the year ended February 28.

The nonrealisation of the R50-million Franki agterskot in terms of the three-year earn-out clause under the sale agreement, and the impairment of R51-million goodwill resulted in a loss of R139.8-million, compared with a profit of R3.7-million in the prior year.

During a presentation of the group’s results, on Thursday, CEO Wessel van Zyl said the Northern Aqueduct project remained an onerous contract to complete, given the nature of the repair work in addressing legacy quality issues and working in a constrained area. 

“Many factors prevented completion by year-end, including rain and community unrest, resulting in cost overruns,” he said.

Van Zyl added that the group now expects to complete the project in December and is finalising an agreement with the client on the replacement of bedding materials. 

Esor’s initial professional indemnity insurance claim relating to the repair costs of the defective welds has been accepted and R48-million has been taken to book. 

The group ended the year with an order book of R1.5-billion, on par with last year.

Esor maintained revenue at R1.4-billion.

The group, meanwhile, made solid progress in the rest of Africa, with that segment performing well for the year.

Projects continue to be favourable in Swaziland, where the group is on site with its third contract and has established strong local partnerships, while conditions in Botswana and Zimbabwe are also favourable. 

Van Zyl added that Zambia remains a target area in which Esor is tendering for select work with well-known clients.

Looking ahead, he said Esor was in a healthy position to successfully navigate through the next two years.

While Van Zyl expects little respite in industry conditions over that time, he says pending awards of R1.6-billion as at May 25, mean Esor has secured sufficient work to see the group through the cycle ahead. 

“We have adequate work, people and resources and will continue to focus on our core competencies. Further, we anticipate more work still to come to market particularly for Inland, and we will adapt accordingly to secure our share,” he said.