Esor to slash its headcount by 33% amid liquidity woes

JOHANNESBURG – Esor, the civil engineering and construction group that has been experiencing serious liquidity issues, has commenced a process to retrench about 33percent of its employees after an almost 120percent widening of its loss to R306.9million in the year to February, from the R139.75m loss in the previous year.

Esor is one of a number of listed construction companies experiencing financial and liquidity problems.

Wessel van Zyl, the chief executive of Esor, said on Friday that the group had made provision in its cash-flow forecast for retrenchment costs of about R10m, with the reduced headcount cutting costs by about R4m a month, and R13.6m in retrenchment costs incurred in the year. Esor retrenched 439 employees in the six months to August last year. It employed an average of 2533 people in its 2017 financial year.

Esor’s auditors determined, after receiving a report on the group’s liquidity position, that there appeared to be reasonable grounds that the company was financially distressed and a “reportable irregularity” was taking place.

However, Van Zyl said the Esor board’s view was that the company was not and would not become financially distressed. He said this was informed by proactive steps that had been taken or matters concluded to avoid becoming financially distressed and ensure its creditors remained satisfied.

These included formal re- payment agreements being concluded with a number of Esor’s major creditors, resulting in a total deferment of R46m of due and payable creditors and subcontractors to future periods.

An agreement related to a R33m shareholder claim against Esor that was due this past Saturday (June 30) was also in the process of being finalised with Geomer, the group’s largest shareholder, with repayment in monthly instalments of R2m commencing in August.

Van Zyl said a number of plant assets had already been sold, resulting in an injection of about R16.6m into Esor; a net insurance claim of R42m in favour of Esor was received in April; and a refinancing facility agreement was concluded that raised R13m cash to improve Esor’s cash flow.

He said Esor’s board consequently believed sufficient steps had been taken to alleviate the group’s immediate cash-flow problems, and that the directors had acted in terms of the requirements of the Companies Act.

Van Zyl said the group’s results had been impacted negatively by further losses of R60m on the Northern Aqueduct and R119m on the Western Aqueduct projects in KwaZulu-Natal, impairment of certain claims valued at R84m and writing off R61.8m in goodwill.

Revenue in the year declined by 30percent to R959.4m from R1.4billion, which was attributed to reduced activity levels and the lack of new contract awards.

The operating loss increased by 81percent to R291.5m from R160.8m.

The diluted loss a share rose by almost 77percent to 64.9c from 36.7c.

Shares in Esor rose 11.11percent on the JSE on Friday to close at 10cents.

– BUSINESS REPORT