Construction group Concor arguably took a short cut to deal with the challenges brought by the opening up of SA's economy in the 1980s. It hooked up with a longstanding partner, German group Hochtief.
Concor was thus to a large extent spared the troubles experienced by competitors who chose to engage globalisation on their own, but it seems also to have limited itself.
A seven-year review in last year's annual report shows almost static revenue growth: R1,1bn in 1998 and R1,3bn last year. Granted, this period has not offered the best opportunities, but Concor's competitors have nevertheless found growth.
It's a mission to get a market opinion on Concor. "We do not cover it, it's too small," is the general response from analysts in big investment houses.
Established in 1945, Concor became a household name in the local construction industry. But its market capitalisation of R260m compares poorly with market caps of other relatively small construction groups like Group Five (R1bn) and WBHO (R1,5bn).
It's comforting for companies in emerging markets to have a big brother from the north with a strong balance sheet. The satellite company also benefits from its partner's world-class technology and systems, which means it worries less about research and development. The downside is that Concor has reluctantly been restricted to the SA market.
Perhaps Concor's situation will change as Hochtief prepares to reduce its interest from 49% to 20% over the next two years. The group says this will be done to create an opportunity for a 25% black economic empowerment (BEE) equity partner. It is in negotiations to sell about 10% to a BEE partner and 5% to staff.
As with all companies in the sector, there is a sharp eye on the expected takeoff in public infrastructure expenditure promised by government. That's when BEE credentials will be crucial. Aveng has a head start after selling a 25% stake to a consortium led by Tiso group. All other listed construction groups have announced talks to secure BEE partners.
Actually Concor has not done too badly in the local market and this is visible in its order book, now at R1bn. It has bagged good contracts, including the rehabilitation of Chapman's Peak Drive in Cape Town, the Sand Bypass project at Ngqura harbour, and the new Sasol polypropylene plant at Secunda.
But revenue came under pressure in the six months to December, down to R738m from R753m. Operating profit increased marginally to R12,9m from R12,2m. Operating income is marginally up, due to losses on the Sand Bypass contract. But the group says technical issues there have been resolved.
Concor building materials manufacturing division Technicrete is firing on all cylinders and is pursuing expansion opportunities. Concor has created a fledgling facilities management division which feeds on its participation in toll-road concessions. These divisions have helped the group remain afloat. But remaining afloat is not enough. Concor needs to grow to justify a price:earnings ratio of 13,4.