Esorfranki grows despite work drying up
November 5, 2009
By Roy Cokayne
Strong acquisitive, organic growth and major government contracts contributed towards Esorfranki delivering impressive financial results in the tough trading conditions of the six months to August, the company said yesterday.
The listed civil engineering and construction group reported an almost 80 percent increase in headline earnings a share to 41.3c from 23c in the previous corresponding period.
Revenue rose by 76 percent to R1.02 billion from R579 million. Profit from continuing operations more than doubled to R114.85m from R55.85m.
Bernie Krone, the chief executive of Esorfranki, attributed the strong growth to organic growth and the two acquisitions that were not included in its interim financial results last year.
"There is a lot of acquisitive growth in there. The acquisitions are diamonds and very good companies," he said.
The acquisitions were civil engineering contractor Patula, now named Esorfranki Civils, and on-shore pipeline expert Shearwater that extended the group's range of services.
Krone said the group had good contracts on the civil side but the pipeline business was slow, although delayed contract awards were expected in the second half of the group's financial year or next year.
He said the geotechnical business experienced tough trading conditions. He said that half of its business disappeared overnight because of the slump in commercial and private work.
Krone said government work accounted for almost all of the group's civil and pipeline work and almost 75 percent on the geotechnical side.
He said 10 percent of group revenue was from outside South Africa but at least half of that was also from the governments in the countries in which the group operated.
Esorfranki Geotechnical, comprising Franki Africa and Esor Africa, with revenue of R527.7m, accounted for 52 percent of the group's turnover and contributed R70.9m to group profit before tax.
Esorfranki Civils is benefiting from SA National Roads Agency Limited (Sanral) road expansion plans and accounted for 36 percent of group revenue and generated R89.2m in profit before tax.
Esorfranki Pipelines, with revenue of R130.5m, accounted for 13 percent of group turnover and R27.6m in profit before tax.
The largest revenue generators to date from this business unit include Gautrain contracts valued at more than R184m for piling, lateral support and earthworks; work at Kusile power station; and several major road projects for Sanral.
The Competition Commission has named Esorfranki in its investigation into the construction industry.
Several companies named by the commission have already been granted conditional corporate leniency.
Krone said the group had not applied for corporate leniency but had made a submission to the commission on information dating back to 1994 that had been requested by the authorities.
Krone believes the commission's investigation revolves around the Gautrain contract because of the companies cited in the investigation.
However, Krone said there "is no cartel" involved in the Gautrain project and that Esorfranki had nothing to worry about in regard to the commission's investigation.
Krone said the group had a healthy order book of R1.2bn at end-August and flowing project pipeline, and expressed confidence of continued growth in the next six months.
Shares in Esorfranki rose 1.9 percent to R4.20 yesterday.
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