Family and management control of the recently listed WG Wearne is central to the company's growth strategy.

Sean Wearne, the fourth-generation family manager of a business started in 1910, says the chances of reaching 25% annual organic growth are better if the company goes solo, rather than being snapped up by larger, asset-hungry construction companies.

The company has already had an approach, but Wearne could not be drawn on who made it.

Management and the family now control about 60% and would be willing to lower this, but not to cede control.

Wearne was speaking at the release of the company's maiden results. Attributable income rose 53% to R15,7m, while EPS were up 82% from 8,56c at the end of February last year to 15,65c.

Turnover was up 12% to R196,6m, while the gross profit margin improved from 26% to 30%.

The prices of building materials rose more than 17% in the December quarter of last year, according to the University of Stellenbosch's Bureau for Economic Research.

Wearne says it is the aggregates business that makes the highest margins (38% on a gross profit basis) and the company will be looking to buy more quarries.

Any acquisition will probably be done through a combination of paper and debt. "We'd like to gear ourselves up a bit," says Wearne, as the company is carrying virtually no debt.

The BER report says that while activity in the residential sector has slowed somewhat, there is still fierce competition in the sector, with margins coming under pressure.

This is borne out by Wearne's move to the higher-margin business of larger infrastructure projects, where the company can charge a premium by supplying what it claims is a technically better product.

A constraint on the business, says Wearne, is that it is difficult to get the right kind of skilled people.

He says the company reached its 2007 earnings target of R7,14/share in 2005. "We hope we can grow headline earnings by 15% in the coming year ."

Cy Jacobs , a fund manager with 36ONE Asset Management, says he likes the lower-risk business model that WG Wearne offers investors looking for exposure to the sector. "The fact that WG Wearne is not aligned to a major contractor such as Group 5 or Aveng, which have two- to three-year contracts, is attractive. It is just a small subcontractor which can boost supply on an ad hoc basis. It's a much cleaner business model," says Jacobs .

Since listing in early February, the share price has climbed from 184c to a high of 285c earlier this month. Given the turnout for such a small company at its maiden results presentation, it is likely WG Wearne will be attracting even more attention in the future.

Financial Mail