JOHANNESBURG - Listed construction group Esor has retrenched 439 more employees in response to the current depressed construction industry environment and liquidity challenges.
Wessel van Zyl, the chief executive of Esor, said yesterday that the company reduced the employee numbers from 2495 at end-February to 2056 at end-August, with the restructure resulting in a once-off retrenchment cost of R5.8million during the reporting period and a further R2.9m incurred post the reporting period.
Van Zyl said to retain key skills, the reduction was implemented by not renewing limited duration contracts which had terminated.
He added that liquidity remained a challenge while balancing growth and expansion into Southern African Development Community regions and incurring further repair costs on the Northern and Western Aqueduct projects in KwaZulu-Natal pending insurance settlements.
Van Zyl said that cash was further negatively impacted by delayed payments from clients, which continued to put pressure on Esor’s cash flow.
To improve the company’s working capital, Esor’s majority shareholder, Geomer Investments, had advanced R10m for working capital purposes, which was repayable in February, he said.
Van Zyl added that the insurance claim related to the weld repairs on the Northern Aqueduct project and was in an advanced stage of negotiation and finalisation was expected in the second half of the company’s financial year, but R20m had been received to date as an interim payment.
Esor’s order book was virtually unchanged at R1.41billion at end-August, compared to R1.40bn in the corresponding period last year.
Improved
However, Van Zyl said the slightly improved order book was not reflective of the buoyant tender market.
But Van Zyl said the non-awarding of tenders to contractors was “currently frustrating and problematic”, largely due to funding constraints in government infrastructure budget allocations.
Van Zyl said irregular timing of payments from debtors further contributed to difficult trading conditions in the reporting period.
He said this necessitated a restructure of the group into a centralised construction business away from the regional structure.
But Van Zyl said operationally Esor continued to execute contracts on a regional basis, although infrastructure and overheads in the regions had been reduced in line with the current workload.
He said cross border work had increased, with new contract awards in Swaziland and Zimbabwe post period end for R120m.
“Focus has been on securing funded projects in these regions to ensure security of payment, particularly in Zimbabwe, where payment for imported materials is a challenge due to the availability of currency,” he said.
Revenue from outside South Africa accounted for 5.4percent of total revenue.
Van Zyl said despite current market conditions, Esor had demonstrated a significant improvement in financial performance in the six months to August, compared to the R139.8m loss reported for the year to February.
Esor yesterday reported a R3.1m profit after tax for the six months to August after accounting for R5.8m in restructuring costs, which was 74percent lower than the R11.9m profit reported in the corresponding six months last year.
Headline earnings a share decreased by more than 80percent to 0.41cents from 2.15c.
Revenue dropped by 17percent to R553m from R666m.
Van Zyl said the challenging market conditions were expected to continue, but the group was well positioned to benefit from a number of opportunities, with imminent awards in excess of R2bn.
He said that the group would continue focusing on water projects, such as the desalination projects, while also focusing more on turnkey projects.
Shares in Esor dropped 4.76percent yesterday on the JSE to close at 20c.