Unaudited condensed interim results

for the six months ended 31 August 2017

Lusip - Swaziland

Welcome
Agenda

Financial
Overview Salient features
overview

Operational Prospects and

Strategy
overview order book

Capex Conclusion
Khutala - Mpumalanga

Overview
Overview

Highlights Lowlights Financial position

Status of Northern
Profitability and Western Gearing
Aqueducts

Geographical
Unresolved claims Order book
diversification

Improved SHEQ Trading

NTAV
performance environment
 State of the nation

Delayed awards
o 2D Steelpoort
o Clanwilliam dam
o Weza dam
o Diepsloot
o P700 road upgrade
o Fleurhof pipeline
Community impact
o Active on 102 sites
o RSA with 86 sites
• Community impacted on
6 sites
Vuwani
• Total of 198 employees
impacted and 4 500 hours
Revenue impact of R220 million
State of the nation

FNB/BER Civil Confidence Civil construction: Growth JSE Performance

Index Percentage satisfied in construction activity Construction vs ALSI
Khutala – South 32

Salient features
 Salient features

Revenue Order book Gearing

R553mil 17% R1,41bn 0,5% 14,5% 2,0%
(R666mil) (R1,4bn) (14,8%)

Net cash Health & Safety HEPS

(R2,8) million 87,4% LTIFR 0,17 41,4% 0,41 cents 80,9%
(R22,1 million) (LTIFR 0,29) (2,2 cents)

• Non-recurring items in financial year 2018

– Retrenchment costs of R5,8 million
Malkerns - Swaziland
Western Aqueduct - KZN

Financial overview
 Statement of comprehensive income
2017 2016 %
R’000 R’000 Change
Revenue 553 075 666 286 (17,0)

EBITDA 17 891 23 118 (22,6)

Amortisation and depreciation (14 096) (10 640) 32,5

PBIT 3 795 12 478 (69,6)

• Revenue impacted by delayed awards

• Aqueduct projects accounted for R35m loss in H1
• Excellent Inland performance
 Statement of comprehensive income
2017 2016 %
R’000 R’000 Change
Revenue 553 075 666 286 (17,0)

EBITDA 17 891 23 118 (22,6)

Amortisation and depreciation (14 096) (10 640) 32,5

PBIT 3 795 12 478 (69,6)

Net finance income (649) (576) 12,7

Profit before tax 3 146 11 900 (73,6)

Taxation (1 113) (4 403)

Profit after tax 2 033 7 497 (72,9)

Order book 1 412 411 1 404 950

Non-government 10,9% 14,6%

Government & Parastatals 89,1% 85,4%

 Van Zyl I(f)FRS
2017 Revenue Profit 2017
IFRS adjust adjust VZFRS
R’000 R’000 R’000 R’000
Revenue 553 075 553 075

Delayed revenue 200 000

Aqueduct projects 25 000

Non-recurring items

VZFRS 553 075 778 075 778 075

PBT 3 146 3 146

Delayed revenue 6 750

Aqueduct losses 35 000

Non-recurring items 5 800

Profit before tax 3 146 50 696 50 696

PBT % 0,6% 6,5%

Segmental revenue
Revenues split by segment
2017 2016

5% 7%

95% 93%

Construction Developments Construction Developments

Segmental revenue R’000 Segmental revenue R’000

Construction 556 326 Construction 665 687
Developments 479 Developments 2 871
Corporate eliminations (3 730) Developments (2 182)
TOTAL 553 075 TOTAL 666 376
 Earning per share
2017 2016
Earnings and headline earnings per share R’000 R’000
(Loss)/profit after tax 2 033 7 497

Adjustment (146) 337

Nett loss on disposal of property, plant and equipment (146) 337

Headline (loss)/earnings 1 887 7 834

Weighted average number of shares 463 737 367 941

Basic earnings per share 0,44 2,05

Headline earnings per share 0,41 2,15

Net asset value per share (cents) 122,8 183,2

Net tangible asset per share (cents) 112,6 161,2

 Statement of financial position
2017 2016
R’000 R’000
Property, plant and equipment 185 846 174 774
Acquisition of
Goodwill Tuboseal assets 65 447 112 091
Goodwill R21,9m less
Financial assets at fair value impairment depreciation - 51 226
of R50,3m and acq
Deferred tax R3,6m Tuboseal 11 499 10 173
Investment in joint venture 40 065 60 108
Write down of
Long-term receivable Franki agterskot 761 761
R51,2m
Loans and receivables 446 706 471 474

Loans and receivables

Trade debtors 152 451 281 955
50,4 days in
Contracts in progress trade 253 729 136 659
receivables
Other receivable 40 526 52 860
TOTAL LOANS AND RECEIVABLES 446 706 471 474
 Statement of financial position
2017 2016
R’000 R’000
Property, plant and equipment 185 846 174 774
Goodwill 65 447 112 091
Financial assets at fair value - 51 226
Deferred tax 11 499 10 173
Investment in joint venture 40 065 60 108
Long-term receivable 761 761
Loans and receivables 446 706 471 474
Non current assets held for sale - 9 500
Inventories 103 275 127 435
Current receivable 42 998 37 428
Taxation 14 484 8 928
Cash Cash decreased 12 990 18 533
by R21,3m
TOTAL ASSETS 924 071 1 082 433
 Statement of financial position
2017 2016
R’000 R’000
Share capital and reserves 569 276 668 411
Secured borrowings Debt /equity 80 933 102 084
reduced to
Preference shares 14,5% (2016 – 14,8%) - 5 250
Deferred tax 9 145 29 846
Taxation 5 306 714
Provisions 13 214 6 452
Bank overdraft 15 789 -
Trade and other payables 230 408 270 390
51,4 days in
TOTAL EQUITY AND LIABILITIES trade payables 924 071 1 082 433

Secured borrowings
Long-term 35 678 44 576
Short-term Reduced debt 45 255 57 508
by R21,2m
80 933 102 084
Cash flow graph
20,000
Total Increase Decrease
15,000

10,000

5,000

(2 212)

(2 799)
10 250

(6 261)

195
0
(22 127)

(229)
-5,000

-10,000
17 585

-15,000

-20,000

-25,000
Cash EBITDA Other Acquisition Working Tax paid Interest Cash
balance at cash items secured of fixed Capital balance at
1 March borrowings assets 31 August
2017 advanced / 2017
(repaid)
Northern
Black Mac-Aqueduct
Western -Cape
KZN

Operational overview
Group structure

• Body copy

Construction Geotechnical Africa

Construction

Integrated centralised structure

o Construction
o Geotechnical
o Africa
o Plant & equipment
Growth
o Pipelines
o Water purification
o Trenchless rehabilitation
Profitability
o Aqueduct projects
o Contract delays
Jozini reservoir- KZN o Green shoots
Construction
2017 2016
R’000 R’000
Revenue 556 326 665 687

PBIT 10 533 5 464

Segment assets 118 496 174 203

Number of employees 1 994 2 413

Revenue growth (16,4)% (8,4)%

Operating margins 1,9% 0,8%

Order book 1 392 911 1 335 972

Pending awards 1 902 610 1 855 014

Prospects 1 628 523 1 016 283

Non-government 7% 14%

Government 93% 86%

Inland

Focus on project delivery

o Kusile underground terraces
o Vuwani to Matosi bulk pipeline
o Mining contracts
Growth
o Mooihoek phase 2D
o Trenchless opportunities
Profitability
o Unresolved claims at Kusile from Jan 2017
o Competitive with selective opportunities
o Diversified order book
Prospects
Pedestrian bridge - Diepsloot
o Active tender environment
o Diepsloot mixed use development
Kusile Package 26 – terrace underground facilities

Contract award
Initial May 2011
Contractual completion December 2013
Value at award R311 million
Duration 31 months
Modification to December 2017

• Underground service ducts to

completed terraces
• Project milestones achieved
• Winner of consecutive “contractor of
the month” awards
• Additional works awarded in 2017
• On-track for delivery
P26 - Kusile
• Achieved first-fire CTO
East Coast

Focus on project delivery

o Northern Aqueduct Phases 1 and 3
o Western Aqueduct and Tshelimnyama
Growth
o Smaller to medium size projects
o Trenchless solutions
o Consolidate before growth
Profitability
o Recognised R35m loss on Aqueduct
onerous contracts
o Insurance claims in progress
o Reputational risk
o Competitive with less opportunities

Western Aqueduct - KZN

Northern Aqueduct

Contract award
Phase 1 November 2013
Phase 3 July 2014
Contractual completion September 2015
Value at award R240 million
Duration 22 / 48 months
Actual completion December 2017
• What happened now
– Completion a further 8 months late
– Quality issues related to welds
– Ovalities and bedding sand
– Repaired all weld deficiencies
– Client concessions on 800m not granted
• Where to now
– Programme to complete Dec 2017
– Testing in 3 sectors
Umgeni valley – Northern – Onerous contract
Aqueduct – Insurance claim progress
Western Aqueduct

Contract award
Phase 2 October 2013
Tshelimnyama July 2014
Contractual completion September 2016
Value at award R440 million
Duration 36 / 12 months
Actual completion December 2017/March
2018
• Status
– Completion delayed to March 2018,
17 months late
– Business Forum and community delays
– Violent environment
– Services relocation delays
– Testing 4 sectors

Western Aqueduct
West Coast

Focus on project delivery

o BlackMac
o Term contracts
o Contermanskloof pipe jack and pipeline
Growth
o Established and reputable brand
o Geographical expansion
o Niche trenchless solutions
o Western/Southern Cape
Profitability
o In line with expectations
o Competitive with attractive opportunities
o Desalination opportunities
Contermanskloof pipe jack
BlackMac

Contract award
CCTV inspection 2015
Lining November 2016
Contractual completion November 2017
Value at award R30 million
Duration 12 months

• Largest CIPP project in RSA to date

• Installation of 3 434 m CIPP bulk sewer
lining
• Ranging from 800 mm to 1 200 mm
diameter
• Crossing underneath N2 and Baden Powell
drive
• > 3,000,000 litres of drinking water saved
• Resign used during relining – 150,000kg
• 50 year design life of rehabilitated pipeline
UV curing
Africa

Focus on project delivery

o Swaziland LUSIP Ph2
o Zimbabwe ZINWA 3x projects
o EPC projects
Growth
o Geographical expansion
o Niche solutions in geotechnical and
trenchless technologies
o Strategic partnering
Profitability
o In line with expectations
o Competitive with attractive opportunities
o Building on reputation

Reticulation – Lupane Zimbabwe

Africa

Contract award
Award date February 2017
Award value E554 million
Contractual completion December 2019
Duration 30 months
Joint Venture 50%

• Construction of main conveyance system

• Financed by African Development Bank
• Infrastructure to irrigate 5 000 ha of land
• Directly benefit 10 000 people
• Logistical and planning challenges
• Clearing and blasting underway
• On programme and budget

Lusip 2 – Canal
Developments

Focus on strategy and project delivery

o Lifecycle
o Orchards – “cradle to grave”
o Uitvlugt awaiting EIA
o Diepsloot Township development approval
Growth
o Khayelitsha - land transfer and CoCT approvals
o Short-term smaller developments
o Long-term Kathu 900 ha mixed use
Profitability
o On target
o Cyclical depending on project lifecycle
o Investment phase

Diepsloot - Gauteng
Developments
2017 2016
R’000 R’000
Revenue 479 2 781

PBIT (1 498) 747

Segment assets 85 505 111 804

Number of employees 3 3

Revenue growth (82,8)% (94,2)%

Operating margins n/a 26,9%

Order book 19 500 69 158

Pending awards 275 350 150 000

Prospects 3 050 000 3 800 000

Non-government 100% 100%

Government - -
Khayelitsha

Acquiring land and township development

Acquisition Dec 2017

Number of stands 2 000
Steve Biko Rd Project phases 3
First phase 368 developed stands
Phase 2 Future Phases Phase 2 1060
Social Housing Units (+-500 Units)
(+- 1000 Units / SP =
Total value R300 million
R350,000)

Phase 1
Private Sale or Subsidy Units –
ESOR/KHousing Joint Venture
(368 Units / SP = R450,000
Stormwater - Orchards
• Land ownership
• Value chain opportunities
• CSI initiatives include:
• Local developer initiative
• Employment opportunities
• Social housing component
• Secured exit strategy
Reservoir - Jozini

Strategy
Strategy

• Body copy
Material issues
Project execution
o Finalise underperforming
contracts
o VFL Contract reviews
o External quality review
Insufficient diversity
o Lesser RSA focussed
o Lack of annuity income
o SADC partnering
o Africa – 34% of total WOH
o Expanded into trenchless
o Geotechnical ability
Liquidity
o Consolidation vs growth
o Daily cash management
o Banking facilities
HDPE piping - Kusile
Reputation
o Compcom/CIDB
o Client/supplier
o Training and culture
o Predictability in supply
SHEQ
o Unsafe conditions
o Not qualifying for tenders
o Superior safety record
o LTIFR at 0,17
o ISO9001, 14001 and
OHSAS 18001
Material issues continued

Earnings growth Community unrest

o Intensifying competition o Service delivery
o Government budget o Wildcat
o Agility to follow work o Client involvement
o Product and market o ED and CPG compliance
diversification Industrial action
Skills shortage o Sectorial negotiations
o Open and early engagement
o Loss of supervisory skills
o IR specialists in regions
o Training & Development
o Staff retention scheme
Order book
o Stable level of secured
work
o Over tendering
o Focus on niche
competence
o Client relationship
Vuwani - Community o Panel/database
registration
CIPP lining – UV curing

Prospects and order book

Two-year secured revenue
Order book split by segment
2017 2016

26% 31%

69%
74%

Construction Developments Construction Developments

Segmental revenue R’000 Segmental revenue R’000

Construction 1 392 911 Construction 1 335 792
Developments 19 500 Developments 69 158
TOTAL 1 412 411 TOTAL 1 404 950
Capex
Capex

2017 2016 2015 2014

• Body copy R’000 R’000 R’000 R’000

Construction 1 966 10 974 5 659 15 739 35 909

Corporate 245 9 399 1 004 4 729 2 117

Total spend 2 211 20 373 6 663 20 468 38 026

Depreciation 14 096 22 693 30 909 48 911 61 780

Depreciation cover 0.16 0,90 0,22 0,42 0,62

Budget approved for FY

32 000
2018

Plant rejuvenation exercise underway

Corporate spend relates mainly to office equipment additions
Jozini reservoir – 7 August 2017

Conclusion
Summary

Done
o Secured order book and pending awards
in excess of R3,0 billion
o Reduced debt by a further R21 million to
14,5% debt/equity
o Continued progress on claims
settlements
o Operating model finalised
o Increased value chain

Strategy
o Focus on delivery
o Developments still focus area
o Geared for growth
o Targeting selected African countries
Forward-looking statements

Forward-looking statements
This presentation contains forward-looking statements that,
unless otherwise indicated, reflect the company’s
expectations as at 31 August 2017. Actual results may differ
materially from the company’s expectations if known and
unknown risks or uncertainties affect its business or if
estimates or assumptions prove inaccurate. The company
cannot guarantee that any forward-looking statement will
materialise and, accordingly, readers are cautioned not to
place undue reliance on these forward-looking statements.
The company disclaims any intention and assumes no
obligation to update or revise any forward-looking statement
even if new information becomes available as a result of
future events or for any other reason.
Contact details
Esor Limited
30 Activia Road PO Box 6478
Activia Park Dunswart
Germiston 1508
1401 South Africa

Wessel van Zyl | CEO

Cell +27 82 498 3518
Tel +27 11 776 8700
Fax +27 11 822 1158
E-mail Wesselvz@esor.co.za

Bruce Atkinson | CFO

Cell +27 83 288 9190
Tel +27 11 776 8700
Fax +27 11 822 1158
E-mail Brucea@esor.co.za
Thank You