Following four lossmaking periods, construction firm Esor has finally returned to profitability.
The group moved from a loss of R24-million for the six months ended August 31 last year to a profit of R6.1-million for the same period this year. Revenue was down 2.2% from last year to R772.6-million.
CEO Wessel van Zyl says restructuring at the group has largely been completed. Employment at the construction division is now 2 242 people, down from 2 887 in the same period last year.
Van Zyl notes that Esor still faces a tough trading environment, while it is also battling to complete the troubled Umzumbe low-cost housing project, in KwaZulu-Natal.
The R66-million project should have been wrapped up in April, but would run to March 2016, as Esor faced on-site logistics and efficiency challenges.
Van Zyl estimates that Esor will make a R10-million loss on the project.
The group’s R4-billion Diepsloot joint venture development (with Calgro M3) also faces “quite painful” bottlenecks in terms of government and environmental approvals.
Van Zyl is hopeful that the first sod on the project will be turned in March 2016.
He says Esor’s two-year order book has declined 23.1% to R1.6-billion, as at August 31.
“We are comfortable at R1.6-billion.”
Van Zyl is also pleased that operating margins at Esor’s construction division have improved from –3.7% in August last year to 2.3% this year.
Around 72% of the current order book is made up of work for government and parastatals, down from 85% in August last year. Work on the Kusile power station makes up between 25% and 28% of the order book.
“Government will always be our single biggest client,” notes Van Zyl.
Looking ahead, he says Esor’s next step is to grow, and specifically in its pipe services division, as well as outside South Africa into neighbouring countries.
The group is currently active in Zimbabwe, Botswana and Swaziland.
Van Zyl adds that a group of individuals has acquired around 32% of Esor’s shares over recent months, with the aim of developing three residential projects in Gauteng. Their intention is not, however, to acquire more shares, as far as he is aware.