Despite challenging market conditions and a deteriorating market environment for the six months ended August 31, JSE-listed civils and construction group Esor recorded a “significant improvement” in its finances, with a profit before tax of R3.1-million, compared with a loss recorded in February. The order book for the six-month period stood at R1.41-billion.
Esor’s revenue decreased 17% to R553-million, with earnings per share declining to 0.44c, compared with 2.05c from February to August, and headline earnings per share decreasing to 0.41c from 2.15c.
The half-year was marked by challenging trading conditions, as a result of delays in contracts being awarded, notes Esor CEO Wessel van Zyl, adding that funding constraints in the government infrastructure budget have also had a negative impact on new and existing projects.
“In response to these challenging trading conditions, we decided to restructure the group into a centralised construction business, away from the previous regional structure,” he says, pointing out that this has resulted in reduced overheads and infrastructure, although contracts continue to be executed on a regional basis.
“The move has better positioned the group to meet the challenge of the current operating environment.”
Further, Van Zyl highlights that the irregular timing of payments from debtors and challenging environmental factors, including rain, vandalism and community unrest at the Northern and Western Aqueduct projects, both in KwaZulu-Natal, impacted on the company’s results.
With completion now expected in March 2018, the Western Aqueduct was delayed by the nonrelocation of electrical and communication services, which was beyond Esor’s control.
The Northern Aqueduct is substantially complete and in the primary testing phase, with the insurance claim regarding the weld repairs at an advanced stage of negotiation. Finalisation of this pipeline is expected in the second half of the financial year.
Losses at the Northern and Western Aqueduct contracts were offset by a continued strong performance in the inland region and by the geotechnical division of Esor. This included a pleasing performance from trenchless rehabilitation Esor subsidiary Tuboseal, which completed the largest lining project undertaken in South Africa, comprising 3 434 m of lining at Black Mac, in the Western Cape.
In terms of regional performance, Van Zyl notes that Africa continued to perform strongly during the period, with cross- border work increasing and revenue outside South Africa now accounting for 5.4%. “Our focus in these regions has been on securing funded projects that not only secure payment but also mitigate currency risk through offshore payments.” Since August, Esor has been awarded contracts in Swaziland and Zimbabwe totalling R120-million.