Tuesday, 18 March 2008 02:00

CashBuild share jumps on results

Cashbuild Limited plans to open eight to 10 new stores between January and June this year

Tuesday, 19 February 2008 02:00

Group Five to sustain push for better margins

Construction company Group Five said yesterday it would continue to focus on margin improvement, increasing real returns and cash generation by picking contracts carefully and monitoring risk closely as it moved into bigger, multidisciplinary contracts.

Construction IndustryCEO  Mike Upton said the group was in a solid position with its one-year order book reaching R7bn and its total secured construction order book at R14,1bn.

“Our results reflect the work we have done to balance our portfolio of core businesses, our competence in securing and executing large, multidisciplinary contracts in key sectors, and our mix of geographies in our areas of operation.

“Only the construction division put a damper on otherwise great results, but this was due to competitive imports,” Upton said.

Revenue grew 12,2% for the six months to December, to R4,5bn from R4bn in the previous first half.

The investments and concessions division contributed 7,5% to the group’s revenue and 9,3% to its operating profit. This was obtained mainly from the group’s operation and maintenance of toll roads and returns on its equity positions in concessions.

Revenue from property developments went up 37% while operating profit more than doubled at R13,8 m.

The manufacturing division was the only disappointment, contributing 7,1% to the group’s revenue and 6,9% to operating profit. But Upton said it was on track to recover and improve margins. The division’s operating profit fell 48,5% to R19,4m from R37,8m, resulting in operating margin percentages dropping from 14,5% to 6,1%.

Construction materials contributed 7,4% to group revenue and 26,3% to operating profit with revenue up R334,3m, generating an operating profit of R73,6m and a 22% margin, which was in line with expectations. Cash and cash equivalents for the period increased R360m to R989m, compared with an increase of R60m for the year to June.

Upton said acquired businesses of Quarry Cats, Sky Sands and Bernoberg Milling contributed to group earnings

The construction division, which consists of building and housing, civil engineering and engineering projects, continued to be a star player, contributing 77,9% to revenue and 57,5% to operating profit. Group Five is migrating resources from the building and housing sector to mega contracts that encompass all construction disciplines.

Construction revenue remained unchanged at R3,5bn, although operating profit rose 80% from R89,2m to R160,7m.

Coronation Fund Managers analyst Dirk Kotze said the results were good and came in as expected, although manufacturing was disappointing.

“This is a company in an expansion mode with plans to acquire more businesses. The positive thing about it all is that all but one division are doing well and cash flow is excellent,” Kotze said.

 

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.

 

Friday, 01 February 2008 02:00

Staying ahead

It’s been just over a year since Afrimat, a supplier of building and construction materials throughout Southern Africa, listed on the JSE.

Construction IndustryThe success of the listing marked a pinnacle in the company’s history. From humble beginnings, the company has now entrenched itself as a leader and pioneer in the industry.

Afrimat CEO Andries van Heerden says that the company’s story is, in fact, the story of Prima and the Lancaster Group, two major players within SA’s construction industry.

Established in 1963, Prima was the brainchild of Christiaan du Toit, a grader operator who identified a market opportunity for aggregates. Upon his death, the Worcester-based crusher was taken over by his son Francois, and the younger Du Toit’s driven principles continue to influence the company today.

In 1979, Du Toit was joined by his brother-in-law Theunis Jordaan, whose administrative strengths were the perfect complement to Du Toit’s technical expertise. The duo later became a trio when, in 1985, civil engineer Peter Corbin came on board.

The company now entered into an interesting stage of development: Prima established Meng beton, a readymix cement company intended as a marketing channel for stone; and Boublok, which manufactured bricks from quarry waste products.

Prima also embarked on an acquisition drive that saw it consolidating its base through the purchase of quarries in Paarl, Caledon, Bredasdorp, Stanford and Robertson. Later, it set its sights on greenfields developments, establishing new quarries, including a site in Grabouw.

Though Prima was blazing a trail through the industry with a strategy which was, according to Van Heerden, “visionary for the time”, the Lancaster Group was also notching up impressive growth. The group had its roots in a Vryheid stone mine that was established in 1965 by brothers Gordon and Desmond Lemmon-Warde. The quarry grew rapidly, spurred by the development of the Richards Bay coal line. On the back of this expansion, the brothers decided to establish a second quarry in Ulundi.

This led to the formation of the second company within the Lancaster group, Lancaster Precast. Van Heerden says that the latter was created in 1973 to manufacture precast blocks from the quarry’s waste products in Vryheid.

Though Lancaster Quarries continues to enjoy significant growth — going on to purchase additional quarries in Harrismith, QwaQwa and Hluhluwe — the expansion of Lancaster Precast outstripped its sister company, with the result that it boasted twice the revenue and profit of the quarry business during the previous financial year. This success prompted Lancaster Precast to purchase factories in Harrismith, Ladysmith and QwaQwa. Additional factories were opened in Mkuze and Ulundi and four readymix plants were commissioned.

The link between Prima and the Lancaster Group was forged by Van Heerden. He had joined Prima as operations director in 2001 and was appointed managing director in 2003.

Chief among his achievements during this period was the empowerment transaction concluded between Prima and Mega Oils in 2003. The transaction saw Mega Oils acquire a 25,1% stake in Prima, and has been described by both sides as tremendously successful. “We have been blessed to find a partner who adds enormous value,” Van Heerden says.

Mega Oils’ Loyiso Dotwana, who is now a director at Afrimat, agrees that the transaction unlocked significant shareholder value. “At the time the transaction was made, Mega Oils was well aware of the impending boom in the construction industry, spurred by government’s extensive planning with regard to infrastructure,” he says, explaining the value he recognised in the potential partnership between the two companies. His insights were on target: Dotwana says that the basic principles of good business practice and corporate governance, coupled with a comprehensive knowledge of Afrimat’s business environment, have contributed to the partnerships’ ongoing success, while a team of industry leaders and empowerment shareholders that add real value continue to ensure that Afrimat stands out from competitors.

In spite of his passion and commitment to Prima, Van Heerden resigned in 2005, following a decision not to list the company on the JSE. But his dream was far from forgotten: later that year, he brought together a consortium, including empowerment partners Kwezi Mining, and purchased the Lancaster Group. In May 2006 an agreement was reached to merge Lancaster Group with Prima Quarries to form Afrimat, and by November that year, Van Heerden realised his listing ambitions.

More than meeting his expectations, the listing was something of a triumph for Afrimat. “The shares were oversubscribed 27,5 times, and we raised R125m,” he recalls. Initially priced at R5, the share price has since shown significant growth. Afrimat has also enjoyed significant growth in earnings per share, while the company’s balance sheet remains extremely strong.

This has placed Afrimat in a position for further expansion, which it has achieved through its acquisition of Malan’s and Denver quarries. The acquisition is doubly attractive, Van Heerden says. Not only does it grant Afrimat increased access to the Cape Town metropolitan area, but through a transaction between Malan’s and Denver quarries shortly before the acquisition, Afrimat now also holds assets formerly belonging to the latter in the mushrooming Port Elizabeth node.

The acquisitions and mergers that have taken place over the 40 years leading to Afrimat’s formation have placed the company in a particularly strong position. Today, Afrimat operates 22 quarries, two gravel mines, six sand mines, 19 readymix concrete plants, eight precast concrete bricks and blocks factories and a fleet of mobile crushing equipment. The company also offers transport, drilling and blasting services, with a fleet of 280 vehicles including earthmoving equipment, its own readymix trucks, contracted readymix trucks, tipper trucks, brick delivery trucks and cement tankers.

These resources have enabled Afrimat to entrench itself as a dominant player in the Western and Eastern Cape, KwaZulu Natal, the eastern Free State and Namibia.

“We have been blessed to find a partner who adds enormous value”

 

Wednesday, 23 January 2008 02:00

Cashbuild lifts revenue in ‘difficult year’

Building materials retailer Cashbuild this week said revenue moved up 15% year on year during the second quarter to December, with new stores contributing 6% of the growth

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.

 

Tuesday, 20 November 2007 02:00

Buildworks to raise R50m prior to AltX listing

Construction IndustryHeavy building materials supplier Buildworks Group, which seeks to list on the JSE's AltX on Wednesday November 28, plans to raise 50 million rand via private placing of as many shares at one rand each, it said on Monday.


The Gauteng-based company will list 470 million shares on the AltX's building materials and fixtures sector.

Buildworks is a supplier of heavy building materials to the construction industry, which are used in the construction of houses, roads, stadiums, shopping centres, railways, schools, offices and other infrastructure.

The cash raised from private placing is expected to fund the group's 28 million rand construction of a concrete roof tile plant, which is expected to start early next year. The cash is also expected to help the group to upgrade its maker of crushed sand and stone Drift Supersand, which will cost eight million rand.

Gauteng is currently the company's principal market, but the group intends to expand into other markets within South Africa through acquisitions and distribution agreements.

The group said that after the listing, its black empowerment partner Phatsima Brick Clay will own 21.5%, and Buildworks expects the total empowerment shareholding after the listing to be 26%.

 

Holcim reported a doubling in its nine month net profit and said it expected to post a record result for 2007

Building material costs have risen sharply again in the second quarter of 2007 — industry experts said demand for commercial space was outstripping supply — and developers are having difficulty bringing new projects on stream.

Construction IndustryBuilding costs in the second quarter of 2007 rose by 29%. The index reflects the average building cost per square metre priced by building contractors.

It contains a combination of input costs and pricing which varies due to market conditions.

Retail property showed an increase in building costs of 39.5% in the second quarter — the latest available figures; office space by 26.2% and industrial space 13.9%.

Large construction companies are operating at full capacity with the World Cup stadiums, the Gautrain and the Coega development zone taking up all their activities. Some impact from higher interest rates is also filtering through and a shortage of materials is likely to continue for some years.

While the cost of materials is rising — cement is now being imported — contractors and service providers are increasing their rates at well above inflation levels and there is likely to be renewed pressure on building costs.

“With costs escalating at present rates, rentals for existing properties will be rising as they come up for renewal, said Craig Hallowes, the Association of Property Unit Trusts spokesperson. “We can’t bring a new office block on line in Sandton for under R120/m². Although I don’t think that we are yet at the point where rentals will be running at replacement cost, if the rent is currently R70/m² or R80/m², then I think that you can expect a 20% rise when renegotiation takes place. ”

In the past it would take about 12 months to construct an office block when property was available and rezoning took place quickly, but municipal councils have tightened up on rezoning applications.

In the case of retail developments, a larger number of sub-contractors are being used for items such as glass and aluminium and these specialists are in short supply.

In a twist to the rising building material costs, the Competition Commission has indicated that it will look at the building and construction sectors to assess if there are any anti-competitive practices — as well as bid-rigging, where rival companies decide beforehand which of them will win a tender.

 

Robust growth in the residential building industry over the past two years has spurred another building materials company, African Brick Centre, to list on the JSE’s AltX on Monday to raise money for expansion.

Construction IndustryAfrican Brick Centre has aggressively rolled out its retail network to 24 outlets in five provinces, but the demand for building materials just keeps rising.

Group CEO Beno van Graan said on Friday: “To accommodate the high demand for our products, a third manufacturing facility is planned at Zuurbekom, a 70ha industrial site near the large Syferfontein clay reserves.”

The group consists of two divisions, clay brick manufacturing and the retail distribution of building supplies focusing on the “wet trade”, which Van Graan said were the raw materials used to build the shell of a building, such as cement, sand, roof tiles and paint.

“At a cost of R15m, the plant (in Zuurbekom) should be operational within 30 weeks after construction commences. It will have a capacity to produce 40-million bricks a year, with construction planned to start shortly after the listing date,” said Van Graan.

He said money from the listing would accelerate the planned expansion of the African Brick Centre brand and its retail network and facilitate the introduction of new products. It would also facilitate funding for an empowerment transaction and further acquisitions.

He said additional retail outlets were in the pipeline, with at least six franchise outlets expected to open over the next 12 months. Four of these were at advanced negotiation stages with third parties.

In a prelisting private placement on Friday, the company offered 45-million shares at a subscription price of R1 each, raising R45m. Another R55m will be raised through the sale of 55-million shares by the vendors at a sale price of R1 each.

A total of 320-million shares were issued on Monday on the open market with a par value of 0,1c per share. African Brick Centre’s original manufacturing facility is situated in Krugersdorp, with a second in Lenasia.

“The company also owns a retail division. It is the first face-brick manufacturer also to stock its stores with a full complement of hardware products.

“Its strategic advantage exists in selling through its own branded retail outlets, with its competitors relying mainly on large wholesale consumers and project developers,” said Van Graan.

Through its retail chain, African Brick Centre sells 120-million bricks a year to a client base of 12000. “Since 1983, the company has sold close to 1-billion bricks,” said Van Graan.

 

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