Johannesburg - AltX-listed South African specialist geotechnical and civil engineering contractors Esorfranki, previously known as Esor, said it will focus on consolidation and rebranding its operations to grow.
Speaking to Fin24.com on Tuesday after the release of its annual results for the year to end-February, Esorfranki CEO Bernie Krone said: "I think right now we're going to be consolidating, we're going to be bedding down (the two acquisitions made in the 2009 financial year). We want to at least get a full year's results with these companies under the belt."
Esorfranki acquired civil engineering groups Patula and Shearwater in October for R345m and R166m respectively.
Civil engineering construction contractor Patula focuses on road building, mining and township infrastructure work, water reticulation contracts and concrete projects for government, major mining houses and the private sector.
Shearwater is a specialist in the construction and rehabilitation of onshore pipelines and operates mainly in the oil and gas, water, storm water and sewerage sectors.
Esorfranki, worth about R883m, reported a 39% increase in revenue to R1.4bn and earnings before interest, taxation, depreciation, impairment and amortisation of R325.9m (up 78%).
Gross profit margins increased from 27% to 31%, mainly due to the Patula and Shearwater acquisitions, which together achieved higher gross profit margins than the geotechnical business unit. The group declared a final dividend of 15c/share for the year.
Stars of the future
Krone said the acquisitions performed well. "These are going to be our stars going forward - the one's road works and civils and the other is pipelines - and we're expecting very good growth, certainly in the pipelines arena."
He said the state's plans to address the backlog in pipe maintenance and water reticulation, combined with other projects, will give momentum to growth in its pipe operations.
"There are plans for gas lines to come down from Mozambique, and we'll also be bringing up water lines from Clarence (in the Free State), putting the pipeline underground as opposed to having it run through a river and bringing it up to Suikerbos pump station."
He also said there is "quite a lot" of Rand Water Board projects on the cards. Esorfranki also plans to be involved with projects providing water to power stations as well as general irrigation projects.
The group's R1.5bn order book should be realised within the next financial year, he said. "But we're putting up work and putting in tenders all the time, so we're looking forward to a very good year. I think we've gone through the worst of the dip."
Krone said that if it hadn't been for public infrastructure spend, the country and the construction industry would be in a much worse condition. "But compared to five years ago, the whole construction industry is still in a boom."
To leverage the "strong brand power" of its principal operating subsidiary, Franki Africa, Esor changed its name to Esorfranki at the beginning of the financial year.
"We've rebranded now so everything is Esorfranki; Petula is going to be Esorfranki civils and Shearwater will be Esorfranki pipeline. The geotechnical companies will work under the banner Esorfranki geotechnical."
In late morning trade on Tuesday, Esorfranki's share was up almost 5%, trading at 320c.
- Fin24.com