In a move that could signal the end of toll booths in SA, government is poised to introduce the first of a new scheme, open road tolling.

Eskom said last year it would not provide electricity to new developments requiring more than 100kVA power because of SA’s low reserve margins.

CONSTRUCTION group Raubex yesterday reported a strong performance for the first half of the year, boosted largely by its recent trail of acquisitions.

Financial director Francois Diedrechsen said the results were in line with expectations and that the group’s pre listing growth strategy was beginning to pay off. Since listing on the JSE in March last year, the company has made several acquisitions, which have ramped up its order book to just under R5bn and positioned it well to take advantage of the billions of rands being spent on Gauteng’s road improvement programme.

Operating profit jumped 108,1% to R398m from R191,2m in the previous comparable period, while headline earnings per share grew 80,5% to 144,6c per share from 80,1c. Revenue increased 131,7% to R2,23bn from R963,5m.

However, group operating margin decreased 10,1% from 19,8% to 17,8% compared with the corresponding prior year period as a result of the acquisitions concluded towards the end of last year, as well as its 5% exposure to the poorly performing residential market.

“While the acquisitions have enhanced our earnings, they have also had dilutive effects on our margins. The fact that the residential property market has not been growing at all has also affected our margins,” Diedrechsen said.

The results included the first set of earnings from the acquisitions completed last year, and which gave Raubex the capacity and depth of skills to take full advantage of the accelerated demand.

“During the period, we also successfully bedded down a number of acquisitions, the financial effects of which are included in this set of results,” Diedrechsen said. “These acquisitions have proved to be value-enhancing and are performing well. Importantly, the depth and breadth of skills and capacity that they’ve brought to the group positioned us well to continue taking full advantage of the spend driven by the government and private sector.”

Raubex said it had especially benefited from the government-led investment programme in national road expansion and rehabilitation. The group has over the past year successfully made five strategic acquisitions, as it geared itself up to meet the increased demand created by the road upgrade programme.

Early this year, the group acquired Bonn Plant Hire and the business of Akasia Road Surfacing for R117m, which fitted in the group’s Roadmac division, specialising in road construction, road surfacing and asphalt manufacturing.

South African road construction group Raubex Group on Monday reported 80.5% rise to 144.6 cents in headline earnings per share for the interim period ended August compared with the same time a year ago.

An interim dividend of 30 cents was declared.

Revenue swelled 131.7% to R2.23 billion, operating profit jumped 108.1% to R398 million and order book grew 113% to R4.9 billion.

Francois Diedrechsen, Financial and Commercial Director of Raubex Group, said the performance was in-line with our expectations.

"During the period we also successfully bedded down a number of acquisitions, the financial effects of which are included in this set of results," he said.

He added that the acquisitions were value-enhancing and performing well.

"Importantly, the depth and breadth of skills and capacity that they've brought to the Group positioned us well to continue taking full advantage of the spend driven by the government and private sector," said Diedrechsen.

Looking ahead, the group expects to deliver a strong performance in the second half as road upgrades gather momentum in the lead up the 2010 Fifa World Cup.

"With the Gauteng Freeway Improvement Project now underway, we expect the South African National Roads Agency Limited (SANRAL) to be announcing a number of reasonably sized contracts to be released for tender in the coming months," Raubex said.

SANRAL remains Raubex largest client, accounting for some 40% of its revenues.

The Melrose Arch Piazza construction site was voted one of the safest places to work in Gauteng, winning six safety awards from the Master Builders Association

At the annual Gauteng Regional Master Builders Association Safety Awards, Amdec Property Development, a company noted for its construction safety records, won first prize for being the ‘Most Proactive Client’ while the Melrose Arch Piazza Scheme won the safety award in the ‘R500-million plus’ category while Murray and Robert’s site agent Miguel Teixeira was voted the ‘Best Site Agent’ and Murray and Roberts sub contractor Bronsair (Pty) Limited won the ‘Best Sub Contractor’ award. Their safety officer on Melrose Arch Piazza, Paul Smit, was placed third in the Best Safety Officer category.

Other parts of the Melrose Arch precinct were also honoured - the Melrose Arch hotel which also forms a later phase of the Piazza Scheme won the ‘R200-million to R500-million’ category.

Adriaan La Grange, Amdec project manager notes he is proud of the company’s safety record on development projects throughout South Africa: “Our safety record at this site an excellent lost time injury frequency rate of 3.09. This is very good considering we have about 2 500 workers on site at any given time and are facing certain challenges like building close to public areas.”

Amdec has over 20 years of industry experience and a current development portfolio in excess of R4,5 billion ranking it as one of the country’s biggest private property developers.

Amdec is currently responsible for the development of, amongst others, Melrose Arch and is also undertaking the refurbishment of the landmark Consolidated Building in the Johannesburg CBD. In the Cape it is developing the new Virgin Active in Steenberg as well as extending and refurbishing Westlake Lifestyle Village. The luxury retirement lifestyle village Evergreen Muizenberg is another of Amdec’s Cape Projects. In the Eastern Cape, it is undertaking the development of the new mixed-use suburb of Parsonsvlei.

Amdec always has specific and stringent requirements for safety, explains La Grange. “For Amdec, any development is also about the process – it’s not only the outcome but how it is achieved. We believe Melrose Arch Piazza to be one of the most high profile and exciting developments in Africa right now and are committed to get everything right.”

Rui Santos, director of Murray and Roberts, puts it simply: a safe site is a happy and productive site. “This is vital to achieve good production levels and to build quality developments,” says Santos who is positive about the high standards of safety which have been achieved on the site. M&R has always had a proactive safety and unitary culture with commitment from top management which reflects it’s corporate priority.

“We are always aiming to up the standards. Amdec is a particularly proactive client and they take a daily interest in the safety of the site. We work together with an independent safety consultant and have in place a number of safety initiatives for the workers,” notes Santos.

Safety initiatives on the Melrose Arch Piazza site include:
Stop. Think.
This is a system of sign language that ensures clear communication between workers which is effective regardless of language barriers and noise on the site. This is an outreach campaign by M&R to all employees to improve safety awareness and to strive for zero harm in the workplace.

Induction
Prior to any staff member or subcontractor staff member coming on site, they are trained in all aspects of the safety and the rules of the site. In addition to creating the foundation for safety, this also creates a platform for skills transfer, creating a ripple effect and providing hands-on experience in working safety.

Daily ‘Toolbox Talks’
These morning meetings are interactive exchanges between the foreman and team on site. Issues discussed include debriefing the previous day’s work, planning the tasks to be carried out that day and the associated safety elements, as well as discussing the potential risk each activity entails. This also provides an opportunity for all staff to communicate any potential risks which they may have noticed. These forums allow appropriate information and lessons to be shared across the site.

Auditing of subcontractors
Subcontractors are stringently audited before they start on site and these audits are continually revalued during while the subcontractor is undertaking their tasks on site. Contractors are involved in site meetings, audits and incident investigations and are required to report regularly on their safety performance.

Daily risk report
Here potential risks are identified, communicated and addressed immediately to ensure prevention. Near misses are reported daily and investigated as if the event occurred to ensure incidents are not repeated.

High-visibility bibs
This is a Melrose Arch Piazza site specific requirement. They are worn by everyone on site and are a proud statement of the commitment to safety.

Safety incentives
Staff members are given monetary rewards for reporting risks or working safe. Each person is encouraged to take ownership of safety and answer ‘me’ to the questions ‘who is responsible for safety on site?

Safety Training
M&R’s aim is to maintain the highest occupational health and safety standards and safety training plays a major role in an industry where shortage of skills is a huge challenge. Benefits of quality training are reaped by having low accidents and incident rates. The process of managing safety is driven through a continuous improvement cycle so that zero harm is achieved and maintained.

Nedbank Corporate Property Finance: Affordable Housing has approved a loan facility to a subsidiary within the Safrich Group of Companies to install services and infrastructure for the top structure construction of 775 homes in Soshanguve

SA Corporate Real Estate Fund, one of the country’s largest listed property funds, declared an interim distribution of 14,5 cents a unit, which was in line with expectations of management

One of the top three or four construction companies in SA within the next few years — that’s the target status for Stefanutti & Bressan (S&B), as a sequel to its impending R1,1bn acquisition of unlisted Stocks Limited. Competition commission approval is expected by the end of July.

S&B has a market capitalisation of R2,4bn. When it listed in August last year the issue was 21 times oversubscribed. After going in at R12/share, S&B has traded as high as R27 but dropped in recent months to around R15,50.

In a joint statement the companies said the merger would position the enlarged group “as a major competitor in the first-tier construction sector, with almost R5bn turnover and 8 000 employees”, and it is not seen as a cost cutting exercise.

Stocks Building Africa was launched in 2001, after the old Stocks & Stocks was taken off the exchange as a consequence of some tough times. Management bought out what was left.

S&B CEO Willie Meyburgh says S&B heard that Stocks was interested in listing again, and that S&B had convinced the company that throwing in its bulk with S&B was the smarter move.

The industry in SA is dominated by a few large companies in terms of capacity. At the top are Murray & Roberts and Aveng subsidiary Grinaker-LTA; in the second tier are Group Five and Wilson Bayly Holmes (WBHO); and the smallest of the traditional big five is Basil Read.

There is not much competition in the top two tiers, and this allows these contractors a lot of leeway when it comes to negotiating price.

“We would like to be in the same league as the Group Fives and WBHOs, and in time get to the level of M&R and Grinaker,” says Meyburgh.

“We need to upscale to be able to take on the larger projects on our own, so that we can keep more of the margin for ourselves. It will also raise the profile of the company.

“Our competitors know the name Stefanutti & Bressan, but investors and the public in general don’t really know the company or the quality of the company.”

Before embarking on this deal, S&B had wanted to diversify itself geographically. “We said we wanted to get into first-class emerging markets such as Dubai or Abu Dhabi,” says Meyburgh.

The transaction entails a swap of about 40m shares, while Rand Merchant Bank — a substantial shareholder in the unlisted Stocks — will be paid R382m by S&B for its stake.

S&B already has a strong offering. The group is well established in civils (concrete structures such as bridges) and construction. It is also exposed to mining, which is expected to continue investing in new capacity. S&B builds and maintains slimes and tailings dams, and is involved in contract mining for open pit mines.

The group also has well-established building divisions in the Western Cape and Gauteng, with a smaller presence in KwaZulu Natal — where Stocks has a strong presence.

The deal may have come at a good time for Stocks, as a slowdown in building is expected after consecutive interest rate rises.

It will be up to the Stocks team to take advantage of the Gulf area, where petrodollar-funded building activity appears to be isolated from global economic pressures. Stocks has a handful of small joint ventures operating in three of the Arab emirates, which S&B are hoping to be able to leverage off into larger contracts.

Perhaps the biggest and most valuable gain for S&B is an experienced team of managers with a strong entrepreneurial flair. Gino Stefanutti, S&B’s founder and chairman, says: “People have asked us, ‘Why are you buying a building company?’ but we say that this is mainly a construction company. For example, if you look at the work they have done at Cape Town airport, the parking lot — it’s a civil's job. These people can be returned to civil's any time,” says Stefanutti.

“The beauty about Stocks is that they are owner-managed. They were all part of the leveraged management buyout — they are just like us. We get on well. Like us they are contractors and not professional managers.”

With more bodies on board, S&B will be able to staff the stream of larger projects that it expects to win tenders on. Government has committed itself to spending about R515bn over the next three to five years, with more work likely to follow.

Meyburgh says the group has a vision of reaching turnover of R10bn within the next three years. A double-digit operating margin is also being pursued.

Though the Stocks acquisition will dilute operating margins slightly (7,2% in financial 2008), it will be earnings-enhancing. The value of the merger will only really make itself felt in February next year. At that point there will have been at least seven months of Stocks trading in the numbers.

On a forward p:e of 12 for S&B, it seems the market is missing out on yet another trick. Meyburgh says the company is going to perform better than its forward p:e would lead one to believe, emphasising that at these levels there is a lot of value to be had.

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.

Despite rand weakness, inflation moving upwards and SA’s electricity crunch, the government will forge ahead with its infrastructure development programme