South African construction and building group Stefanutti & Bressan said on Tuesday that it has agreed to proceed with a transaction to acquire the entire issued share capital of construction company Stocks Limited for a total consideration of R1.121-billion.

Construction IndustryIt said that the acquisition would enable the group to access increased scale and critical mass to help it secure major construction and civil projects, as well as offer it a bigger pool of resources to service the construction sector.

Another reason for the deal is Stocks Ltd's presence and track record in the United Arab Emirates (UAE), which gives Stefannuti opportunities as it exposes it to the UAE's robust construction market, it added.

The company said the deal would also increase its BEE credentials, raising black direct shareholding from 11.3% to 18.3% of the total issued share capital subsequent to the proposed transaction.

However, the transaction will be subject to shareholder, board and regulatory approval, and the effective date of the acquisition will be the 26th day of the month in which the final transaction agreements are signed.

 

Friday, 29 February 2008 02:00

Gautrain to get extra R1bn from province

The Gautrain project will get an extra R1bn injection from the provincial government’s reserves to reduce its borrowing from R5,2bn to R4,2bn.

Thursday, 20 December 2007 02:00

Hospitals on the mend

Health facilities need to have positive, healing environments

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.

 

Pretoria Portland Cement Limited (PPC), on Tuesday, gave its shareholders something to smile about when it declared an increased final dividend of 166c per share from 110c previously, on good trading as a result of the construction industry’s continued demand for cement.

 

Redefine Income Fund, the fourth largest property loan stock company listed on the JSE Limited today announced that it will give effect to a Broad-based Black Economic Empowerment (B-BBEE) transaction

Monday, 30 July 2007 02:00

Boom time builds up to beyond 2010

Government and private sector infrastructure investments are expected to secure the boom in the construction and building industries until well after the 2010 soccer World Cup, according to industry leaders.

Brian BruceThey said the government's decision to go ahead with a R400-billion infrastructure programme, an even bigger commitment by the private sector and economic growth rates well above 5% a year would buoy the industries and drive the economy.

Brian Bruce, chief executive of Murray & Roberts, predicted the boom would continue long after 2010 and well "into the teens of the 21st century".

He cautioned, however, that there might be some ups and downs in the industry during this period.

But, despite this caution, construction companies are flocking to list on the JSE's alternate exchange, which facilitates listing of small companies.

Since AltX was established almost three years ago, 14 of the 50 companies listed are related to the building and construction sector with interests in home improvements, heavy construction and building materials and fixtures.

Among the bigger groups are Esor, Sanyati Holdings, Afrimat and the Raubex Group. The total market capitalisation of these companies this week was R20.6-billion, according to an AltX spokesman.

And Stefanutti & Bressan, with annual turnover of R1.7-billion, plans to list on the JSEs' main board on Friday after raising up to R465-million by placing 35 million shares. A limited offer of a further 11.5 million shares will be offered to vendors.

The company believes that revenues will grow to R2.5-billion in 2008. In the year to February, the group earned a net profit of R67.2-million, after the cost of BEE involvement, and expects this to grow to R115-million in 2008.

The group has a 15% BEE involvement through Mowana Investments.

Chairman and co-founder of Stefanutti & Bressan, Gino Stefanutti, said the construction industry was experiencing unprecedented growth and that there was "a positive picture of long-term growth for the industry".

Last month, the FNB Civil Construction Confidence Index, compiled by the Bureau for Economic Research recorded another increase.

Cees Bruggemans, chief economist at First National Bank, said that the figure reflected "very favourable business conditions". It is reported that the industry had grown by 13% a year since 2003.

The SA Federation of Civil Engineering Contractors noted that the number of people in the construction industry had risen to 114 000 in the first quarter of this year .

But, the FNB Index found , a shortage of skilled labour was affecting construction activities and impinging on completion times. Training would have to be accelerated to contain construction costs as a result of higher wages .

Power generation, with Eskom looking at another nuclear power station, will also help keep activity high. Power generation infrastructure development will begin in earnest next year and this is a 25-year project.

Transport, water and sanitation, schools and hospitals will need to keep pace with the macro- economic growth, said Bruce.

The attractiveness of the building and construction sector has attracted an unsolicited bid for building materials supplier Iliad Africa from a consortium led by Absa Capital. Talks are continuing.

Last week Iliad said it had acquired the Gauteng-based, R220-million-a-year Thorpe Timbers . Recently, the group bought USM Building Supplies and Lumber City in Lephalale (Ellisras). The combined acquisitions should add R350-million to revenues.


South Ocean, the Johannesburg-based manufacturer of building wires, has spent R10-million on the first phase of its expansion plans by purchasing new machinery that will increase its capacity by 10%.

The company, which was listed in February, has begun the second phase of expansion at a cost of R30-million for new machinery, buildings and working capital, which will add 15% to capacity.

The company recently acquired Radiant Lighting for R485-million, which expands its operations into decorative lighting, lamps and bulbs and electrical products.

Black empowerment group Afrimat announced two weeks ago that it had purchased two quarries and a concrete block-and-brick factory in KwaZulu-Natal, its second acquisition since listing in November. This brings its number of quarries to 22 and brick factories to nine.

Thursday, 26 April 2007 02:00

Holed like a Swiss cheese

We may never know why Aveng decided to abandon its 46% stake in Holcim SA. After seven months of "constructive engagement" with Swiss partner Holcim Switzerland, Aveng has decided to take R6,8bn in cash and walk away. The trigger is the contentious black economic empowerment (BEE) deal that was sprung on Aveng by the Swiss in August last year. Holcim Switzerland holds the balance of Holcim SA shares.

Construction IndustryWas there political pressure for the deal after SA's president displayed interest in the transaction? There were also mutterings that Aveng's largest shareholder, the Public Investment Corp, was "supportive". In a JSE statement, Aveng said its strategy was "to achieve operational control over or have a controlling interest in all of its major investments... the disposal at an implied enterprise value of R16,4bn represents an attractive exit opportunity."

But to wait more than 60 years (the length of Aveng's association with Holcim) to decide you would like control is a somewhat delayed reaction. In any event, the Aveng/Holcim empowerment saga brings an expected bonus for Aveng shareholders (R3bn will be returned).

Empowerment partner Afrisam will no longer be paying R6,8bn for 85% of 54%, as in the original deal. Rather, Afrisam will now have to find R13,94bn (85% of R16,4bn). And the Swiss will have to buy Aveng's shares in order to put Aveng's stake, along with its own, into a vehicle (Altur) that can be presented to debt funders for appraisal.

This would be ironic because the Swiss made it clear they were not interested in providing finance for the transaction.

With this level of debt encumbering the balance sheet and sucking up every cent to service loans, will Holcim SA be able to make the investments it needs to avoid losing market share and margin? Mark Ingham, an independent analyst, says the economics of the deal has more holes in it than a Swiss cheese.

Putting a brave face on it, Afrisam says: "Though the headline funding requirement to provide for both the Aveng buy-back and Holcim's BEE transaction has now increased, the funding structure has been simplified with Aveng's exit." A degree of vendor financing now looks like a possibility. Ingham says the deal in effect offers Aveng a 19 price:earnings ratio. He says Holcim's listed rival PPC must have been used in deriving a value - and to the benefit of Aveng, since PPC as a business is far superior to Holcim.

Aveng should return all of the R6,8bn in cash to shareholders. Ingham says it would prejudice shareholders to have more money pumped into Aveng businesses such as Grinaker-LTA and McConnell Dowell, which have delivered "underwhelming performances".

Ingham says an unintended consequence of the deal will be to expose other weaknesses in Aveng. The margins that Holcim provided were cover for mediocre performances in other divisions.

There is no obvious acquisition opportunity for Aveng. Besides which, Ingham says, it needs to sort out difficulties in businesses it already owns. "They need to convince us they know what they're doing with the money," he says.

Other analysts have praised the deal because of the price Aveng has secured and because of the empowerment credits gained for enterprise development.

But this outcome is surely second prize for Aveng. Holcim is a cash-generative business, and demand for cement will grow strongly for years. Asked why Aveng walked away, Ingham says: "It makes no sense; they were the kingmakers. They held all the cards. Maybe they didn't play hard ball enough."

Aveng CEO Carl Grim has refused to talk until the shareholder circular is finalised, which should be early next month.

 

Construction firm Grinaker LTA was excluded from the bidding process to build the King Shaka airport in Durban because it could not commit to the black-economic empowerment procurement required by Airports Company of South Africa (Acsa)

The 14,700m² first phase of the development is set to open for trade in the middle of October.

Page 9 of 15

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