Monday, 18 February 2008 02:00

Group Five reports interim results

South African construction group Group Five on Monday reported a 45% rise in fully diluted headline earnings per share to 145c for the six months ended December from 100c a year ago.

Construction IndustryAn interim dividend of 45c per share was declared, up from 30c a year earlier. Revenue grew 12% to R4.495 billion from R4.004 billion before, while operating profit – at R279.6 million - was up 103% from a year earlier.

The group also generated R360 million in cash in the six months under review. Operating performance improved at all group segments except Manufacturing, it said.

It added that the focus on improving the quality of the order book, improving contract execution and improving cash collections has delivered a robust performance, with the majority of the group's businesses showing an improvement.

The core business of Construction posted an improvement in returns and Construction Materials performed well in line with expectations and delivered margin enhancing returns to the group's results.

Manufacturing activities were affected by slow first quarter sales and pricing pressures from imports.

Group Five formed a new joint venture in August 2007 with the Barnes Group of Companies - Barnes Reinforcing Industries - supplying rebar, weld mesh, brick force and binding wire.

This operation has expanded and strengthened the group's manufacturing portfolio and supported the Construction operations' drive to improve margins, it said.

The group further expanded its Construction Materials portfolio by acquiring 100% of plaster firm Sky Sands for R124 million, with effect from 1 July 2007.

Sky Sands, which is involved in the supply of plaster and washed sand products to building materials merchants, the building industry and the pre-cast concrete products industry, has exploitable sand reserves estimated to be in excess of 25 years of production, together with further mining opportunities on the Sky Sands properties.

The acquisition complements the group's expansion and growth strategy in the infrastructure sector and assists in mitigating the risk of future materials shortages with respect to key building and infrastructure contracts, especially in the Gauteng market.

In addition, Bernoberg, a small niche manufacturer of cement extender, was acquired for R32 million.

Bernoberg further diversifies the business portfolio in the construction materials supply sector and complements the existing product range. The Bernoberg acquisition was effective from 1 October 2007, it said.

Looking ahead, the group said the recent power outages have not materially affected Group Five's construction operations, as measures had already been put in place to address such an occurrence.

Short term risks to performance are primarily related to the effect on suppliers and the group's Manufacturing operations, should the number of power outages worsen.

A detailed investigative risk review of all of the group's operations and construction sites has been completed and steps taken to mitigate the effect of outages.

The group continues to receive a number of attractive opportunities in local fixed investment spending. Mining, power and oil and gas activity in Africa also continues to offer high growth potential.

Group Five's total secured construction order book as at end December 2007 is R14.1 billion (60% local) and the secured one year order book for F2008 is R7 billion ( 62% local).

Management is satisfied that the group has access to sufficient resources to successfully execute the higher levels of activity ahead.

"The group is therefore well placed to achieve another year of solid earnings growth, while delivering improving value to its shareholders," it said.

 

State power utility Eskom is often criticised for its seeming unwillingness to embrace alternative and renewable energy platforms in seeking ways to align its production with fast-increasing demand

Thursday, 20 December 2007 02:00

Hospitals on the mend

Health facilities need to have positive, healing environments

Friday, 07 December 2007 02:00

Moving and shaking

Super-bullish conditions in infrastructure are supporting consolidation and organic growth in the sector, and it seems there are still attractive returns to be had.

Construction IndustryRoads & civils specialist Raubex, which listed in March this year, has made its largest move to date, gobbling up peer company B&E in a R514 million deal that will allow the company to bulk up capacity.

Aneshrin Pillay, an analyst with Afri-focus Securities, says the deal is substantial: "It's in line with their strategy to enhance their materials business and it looks to be earnings-enhancing and margin-enhancing."

B&E will slot in nicely with Raubex's aggregates and crushing operation, Raumix. The market appears to like the deal, with the share moving at least 4% on the announcement.

However, says Pillay, a deal this size does eat into the company's cash resources, and this is compounded by the fact that it has already shelled out about R160 million on capital equipment.

The transaction will be funded through a combination of shares and cash, which will see B&E receive about 9m shares (worth about R295m) and R218m in cash.

Rowan Goeller, an analyst with Macquarie First South Securities, says the transaction grows the company's fleet and skills base, and will allow it to take on more work, since one of Raubex's strengths is to "move their plant around and do crushing work for the other contracts they have".

Goeller says B&E is being bought at a historic price:earnings ratio of about 10, based on the past six months' financial performance.

According to I-Net Bridge, Raubex is trading at almost three times the p:e of B&E. The only concern raised over the deal is the dilution to shareholders, but if the deal delivers more profitable growth, shareholders aren't likely to notice.

Another company that has been moving to strengthen its market position is construction company Sanyati. It continues to expand beyond its roots in KwaZulu Natal, and with its R220 million acquisition of the Meyker Group it is now active in seven of the nine provinces.

In the six months to end-August, Sanyati acquired construction and civils companies Ruthcon and GEM. Before that it bought Hibiscus Asphalt and Mega Pile.

The group will be paying for the Meyker transaction in tranches over the next four years. The transaction is being funded through cash and shares (about 44 million will be issued).

Sanyati CEO Rick Jackson says it's likely the group will make one more large transaction so as to meet its 2012 revenue target of R2,7 billion.

Another company making moves is Protech Khuthele, which this week announced the acquisition of two ready-mix operations for R79 million.

Protech is primarily a fast-track bulk earthworks company, but chief financial officer Nellis Wolmarans says it also does some civils work.

This requires a fair amount of concrete and readymix, which the company has had to rely on suppliers for.

"In the past we have called readymix suppliers and they don't arrive the next day or the day after. Even if we place huge orders we can end up waiting for weeks, which holds us up," says Wolmarans.

He says Protech has in the past moved to make itself more efficient by diversifying its business. "We started our geotechnical laboratory for the same reason, because the labs we were using weren't keeping pace with us."

The company will also be able to diversify the service offering on contracts, as it will now have the plant and skills to take on more civils work, such as culverts and drains.

Protech CEO Gerald Chapman says the six plants the business is acquiring will boost earnings, which "should be handsomely compounded in the months and years ahead, given especially the construction industry's rapid growth".

In related news, M&R said shareholders could look forward to earnings per share that would be between 40% and 50% higher for the six months to end-December and the year to end-June 2008, than in the previous comparable periods.

Proceeds from disposals of noncore assets are likely to lift these respective performances by as much as 110%.

M&R also said it had secured a seven-year, R7 billion contract for Eskom's first new coal-fired power station, Medupi, involving steel fabrication, erection and mechanical installation.

Goeller says it is likely that construction companies will continue to deliver outstanding performances "for a while yet", as government's spending was only beginning to have an impact now.

He also says all the indications are that the private sector is starting to make available the infrastructure spending that had previously been put on hold.

 

Wednesday, 05 December 2007 02:00

Group Five wins road tender in Hungary

Construction company Group Five announced that its infrastructure concessions business, intertoll, was part of a consortium that had been awarded the R11 billion M6 Phase 3 Motorway Project in Hungary.

Construction IndustryIntertoll held 10% of the concession company and would lead the operations and maintenance activities for the project, it said.

Revenue was expected to start flowing through to Intertoll from the beginning of next year, with full-scale operations beginning in 2010.

Intertoll’s partners on the project are Strabag of Germany, France’s Colas and John Laing Infrastructure from the UK.

The 78km dual carriageway project includes the construction and maintenance of 55 structures and four tunnels totalling more than 3km. The 30-year concession project reached financial close on November 21.

Intertoll was part of Group Five’s infrastructure concessions business and offers toll system design, procurement, implementation and operation, together with related services such as routine road maintenance.

The business has equity interests in two other service concessions in Eastern Europe and operates toll roads in SA.

“Since joining the European Union in 2004, the transit traffic through Hungary from Romania and Bulgaria has increased more than 30%.

Hungary has ambitious plans to develop its road infrastructure under an aggressive timeline, and the M6 Phase 3 is an important part of this plan,” said head of Group Five Infrastructure Concessions Eric Vemer.

Vemer said that the project reinforced and added depth to Intertoll’s position in Hungary and the group’s growing profile in eastern Europe.

The project was tendered and closed in record time, with pre-qualifications announced in May, tenders submitted in September, the preferred bidder chosen in October and financial closure last month.

Group Five last month said it had further expanded its manufacturing and construction materials portfolio by acquiring Bernoberg, a small niche manufacturer of cement extender, for R32m.

Early this year, the group said that it planned to increase its revenue from R5,8 billion to R7,3 billion by the end of the 2008 financial year next June.

 

Thursday, 15 November 2007 02:00

Prices rocket north of Durban

Civil engineering and construction group Sanyati Holdings on Tuesday said government contracts and extending operations beyond KwaZulu-Natal had boosted its order book, positioning the black economic empowerment company to achieve its forecast net profit of R53 million for the 2007-08 financial year.

Construction IndustryThe order book included a R25 million contract for civil infrastructure work in Polokwane, a R75 million road rehabilitation contract in Gamtoos, Eastern Cape, and a R1,9 billion contract for civil works on the new King Shaka International Airport in Durban.

Releasing the company’s results for the six months ended August, CEO Rick Jackson said the buoyant growth in the construction industry boded well for the firm. He said though 66% of Sanyati’s contracts came from KwaZulu-Natal, he was pleased at the inroads the company had made in Gauteng.

“The Gauteng operations are up and running with (the group’s piling subsidiary) Mega Pile’s first R2 million contract ,” said Jackson.

Gauteng accounted for 22% of Sanyati’s contracts, with the balance split among Mpumalanga, Eastern Cape and Zambia.

In an effort to grow the business , Sanyati said, it had acquired Gauteng-based Ruthcon Civil Contractors and GEM Earthworks, which has operations in Eastern Cape and Mpumalanga.

Net profit for the period under review doubled to R22,9 million on a 105% increase in revenue to R396,2 million — up from R192,5 million.

Cash generated from operations surged to R10,9 million from a loss of R4,5 million. Headline earnings per share increased to 8,74c from 5,73c.

Of Sanyati’s four business units, Civils Coastal was the biggest contributor to overall performance.

Revenue accumulated by C ivils C oastal was R215 million. Its performance was boosted by large-scale projects such as the R117 million tender to construct roads in Barberton, and the R52 million contract to construct a water pipeline in Umgeni, on the south coast.

The unit also stood to gain R190 million over the next 19 months after the Ilembe Consortium was awarded a R1,9 billion contract to build the R6,8bn King Shaka International Airport.

Wednesday, 14 November 2007 02:00

Sanyati expects to hit forecast net profit

Civil engineering and construction group Sanyati Holdings on Tuesday said government contracts and extending operations beyond KwaZulu-Natal had boosted its order book, positioning the black economic empowerment company to achieve its forecast net profit of R53 million for the 2007-08 financial year.

Construction IndustryThe order book included a R25 million contract for civil infrastructure work in Polokwane, a R75 million road rehabilitation contract in Gamtoos, Eastern Cape, and a R1,9 billion contract for civil works on the new King Shaka International Airport in Durban.

Releasing the company’s results for the six months ended August, CEO Rick Jackson said the buoyant growth in the construction industry boded well for the firm. He said though 66% of Sanyati’s contracts came from KwaZulu-Natal, he was pleased at the inroads the company had made in Gauteng.

“The Gauteng operations are up and running with (the group’s piling subsidiary) Mega Pile’s first R2 million contract ,” said Jackson.

Gauteng accounted for 22% of Sanyati’s contracts, with the balance split among Mpumalanga, Eastern Cape and Zambia.

In an effort to grow the business , Sanyati said, it had acquired Gauteng-based Ruthcon Civil Contractors and GEM Earthworks, which has operations in Eastern Cape and Mpumalanga.

Net profit for the period under review doubled to R22,9 million on a 105% increase in revenue to R396,2 million — up from R192,5 million.

Cash generated from operations surged to R10,9 million from a loss of R4,5 million. Headline earnings per share increased to 8,74c from 5,73c.

Of Sanyati’s four business units, Civils Coastal was the biggest contributor to overall performance.

Revenue accumulated by C ivils C oastal was R215 million. Its performance was boosted by large-scale projects such as the R117 million tender to construct roads in Barberton, and the R52 million contract to construct a water pipeline in Umgeni, on the south coast.

The unit also stood to gain R190 million over the next 19 months after the Ilembe Consortium was awarded a R1,9 billion contract to build the R6,8bn King Shaka International Airport.

 

Thursday, 01 November 2007 02:00

World Cup host cities score R2,6 billion

The host cities of Fifa World Cup matches in 2010 will receive a major boost in the two years before the tournament

Many of South Africa’s independent airports and aerodromes remain technically non-compliant and continue to lose out on increasing opportunities presented through either tourism or large events like the upcoming 2010 FIFA World CupTM

“The upsurge in Public-Private Partnerships (PPPs) and the current “building boom” rippling through our country is providing huge opportunities for the Facilities Management (FM) industry and companies need to capitalise on the expert services of this 11 years young industry”

Construction IndustrySo says Bonang Mohale, CEO of Drake & Scull Facilities Management (DSFM) and key participant in this year’s SAFMA Facilities Management Expo. The FM industry’s services and products will be showcased at the SAFMA Facilities Management Expo, taking place on 22 and 23 August 2007 at the Sandton Convention Centre.

“Outsourcing in general and Facilities Management in particular is recognised as the emerging area for high business impact and increasing shareholder value; commands increasingly high levels of interest at all organizational levels in all industries and in all market segments; senior management is becoming more involved in the Facilities Management outsourcing decisions; etc. Success in the leading FM companies  of today has been achieved through delivering on Customer fundamentals such as predictable and falling unit costs; added value without additional costs; zero risks or surprises; guaranteed results; minimum fixed and maximum variable costs; etc. and the good FM companies have responded by demonstrating through deeds not just an intellectual understanding of issues, among others, that quality and cost reduction are fundamental; asset and risk transfer have a price that must be understood; innovation is a prerequisite; seamless ‘one team’ integration is required; best in class customer service is a must; no performance, no pay, no future; etc.” adds Mohale.
 
The local construction industry is expected to grow at an average rate of 6.41% between 2007 and 2010. According to Statistics SA, the Gauteng province (including Johannesburg and Pretoria) accounts for 38.8% of the value of recorded building plans, with the Western Cape following close behind with 29.8%.

“The demand for facilities management is increasing as the FIFA 2010 World Cup draws nearer, during and long after”, says Mohale. “With new stadiums being built and existing ones being upgraded there are great opportunities for South African companies and especially FM professionals as these “construction marvels” will need to be appropriately designed, professionally project managed and efficiently maintained in a sustainable manner in the way of mechanical engineering equipment, security, cleaning and other services to ensure they robustly stand long after the Soccer World Cup. “

The Government has set aside an estimated R846 billion for infrastructure developments over the period 2006/07 to 2011/12 and the value of the construction industry is forecast to reach R633 billion in 2010 contributing 2.74% to the gross domestic product (GDP). “With the understanding we have gained, we can identify a significant role for facilities management in developing best in class infrastructure”, concludes Mohale.

SAFMA Facilities Management is an exhibition for suppliers and service providers offering assistance in the effective planning, integration and operation of the many different elements which make up the work environment. Now in its second year, the event aims to be the definitive meeting place for all those involved in facilities management, workplace management, occupational health and safety, energy management, security, etc. 

SAFMA Conference
As part of the SAFMA Facilities Management Expo, the SA Facilities Management Association (SAFMA) will host a two-day Conference on “Facilities Management – a strategic enabler”. The Conference will consider issues such as the impact of:
• Accommodation policy and practices on your bottom line
• Planned Preventative Maintenance (PPM) scheduling on your asset value and productivity
• The workplace and environment on staff and equipment productivity
• Energy and utilities management on your profitability
• Property and facilities management decisions on your balance sheet
• Facilities Management on your image and branding
• Statutory compliance and associated risks on your business

For more information on the conference contact Heidi Gouws at SAFMA on 086 516 3821 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. or visit www.safma.org.za.

For more information on the SAFMA Facilities Management Expo 2007, please contact Bette McNaughton of Fair Consultants SA on (021) 713 3360 or This email address is being protected from spambots. You need JavaScript enabled to view it. or contact Catherine Larkin for any media queries on (011) 789-7327 or This email address is being protected from spambots. You need JavaScript enabled to view it..

 

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