Wednesday, 11 March 2009 02:00

Aveng eanings up 43%

Aveng has reported a 43% increase in headline earnings per share to 244.4 cents for the six months ended December 2008 from 171.4 cents a year ago.

Thursday, 12 March 2009 02:00

Prototype prison close to completion

The construction of the new medium security correctional centre at Kimberley is nearing completion. The facility will provide accommodation for 3 000 adult male offenders

Construction IndustryContractor Grinaker-LTA, a subsidiary of the JSE-listed Aveng Group, has announced that it’s on track to handover the prototype prison in July this year. The firm’s R821-million construction contract is being undertaken in a joint venture with BEE company Keren Kula construction.

The contract has created significant employment opportunities in the area, with 1 400 people employed on site at its peak. Of these, 140 are ex-offenders, reports Cyril Kitching, senior contracts manager at Grinaker-LTA Building Inland.

Situated on Griekwastad Road, 1 km outside Kimberley, the prison features a design that’s planned to serve as a model for other new correctional facilities in South Africa. “The design is based on the focal point of the layout being the 10m wide ‘street’, which serves as the main corridor for the movement of people and the transportation of goods,” Kitching explains. A central control room is situated in the middle, to monitor this thoroughfare, with additional control rooms at each end of the “street”. Various buildings are situated on either side of it, including medical and education facilities, bakery and textile factory, a vocational training centre, multi-purpose hall, kitchen, laundry, social workers’ units and segregation unit.

“The 12 accommodation blocks and three recreation centres are situated behind these buildings, on both sides of the street,” states Kitching. Visitors’ and administration buildings, stores warehouse, offices and a garage for state vehicles also form part of the complex. Sports fields are being established.

Kitching says that the buildings are generally reinforced concrete structures with brick walls. Roofs are timber or structural steel with sheet metal covering and concrete roofs over secure areas. The prison complex comprises buildings totalling more than 41 574 m2 in size.

In addition to utilising local labourers, sub-contractors and suppliers wherever possible on this contract, Grinaker-LTA also offered a special HIV/Aids awareness programme in which all workers participated. In addition, the contractor worked with the National Youth Service and Training Programme to offer training and employment opportunities to youngsters aspiring to work in the construction industry. A total of 98 youths were trained in plumbing, electrical, carpentry, masonry and painting. The current labour force on this contract consists of 1 287 workers, of which 870 are from the local community and 149 are women, Kitching reports. “We make use of 31 subcontractors, which range from independent subcontractors and domestic subcontractors to nominated subcontractors doing specialised work such as electrical and mechanical installations. A huge number of suppliers are being used, most of which are local enterprises,” he concludes.

 

Wednesday, 10 December 2008 02:00

Stefanutti wins Kusile contract

Stefanutti Stocks said that a consortium of JSE-listed companies it was leading had won a civil works contract for Eskom’s Kusile power station in Mpumalanga.

Friday, 08 August 2008 02:00

First Heineken brewery for South Africa

A R549-million contract to build Heineken’s first brewery in South Africa has been awarded to Grinaker-LTA, part of the JSE-listed Aveng Group.

Construction IndustryThe construction firm’s building and civil engineering business units are undertaking this project in a 50 / 50 joint venture, explains contracts director Richard Amm.

The 70 000 m2 brewery in Randvaal, South East of Johannesburg, will comprise production buildings and cool cellars, as well as a bottling and distribution warehouse for Heineken SupplyCo (Pty) Ltd, the brewing and distribution company for beer brand Amstel. A fast-track construction programme will see the building works completed in June 2009, Amm says. “The programme is very tight as process contractors are required to be given access to each building and sections of each building on sectional completion dates.”

The buildings at the brewery are generally concrete, structural steel and brick structures, with steel roof sheeting on all buildings.  Some 30 000 m3 of concrete will be used in the project, together with 3 500 tons of structural steel and two million bricks.

Amm notes that Grinaker-LTA will be using local labour wherever possible, and a community liaison officer will be employed to help source workers from the surrounding areas.

 

Friday, 04 July 2008 02:00

Taking Stocks for future

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.

Willie MeyburghS&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.

 

Neil Potgieter took the helm of Grinaker-LTA Building earlier this year, following the promotion of predecessor Neil Cloete to Group MD of Grinaker-LTA. Unveiling his first strategic plan for the division, Potgieter notes that Grinaker-LTA Building’s order book has changed in recent months from one dominated by private sector projects to one in which a substantial portion of work is coming from Government.  “In the past number of years, most of our work has traditionally been for private sector clients, on projects like office blocks, shopping centres and residential accommodation. Our current order book has changed - most notably in the Cape - to one in which a large chunk of our work is now being undertaken for Government.”

Construction IndustryThe division is busy with more than R1 billion of work at Cape Town International Airport, a state-of-the-art forensics facility planned to boost the country’s fight against crime, three 2010 soccer stadiums, a prison in Kimberley and a youth care centre for juvenile offenders in Bhisho.

Grinaker-LTA Building, in joint venture with Stocks Africa, is undertaking a R664-million contract to build a new integrated terminal, as well as a R375-million contract for the construction of a new multi-storey parkade, at Cape Town International Airport.
In Plattekloof, Cape Town, the division is currently busy with the construction of a new high-tech forensic facility that will enhance the SA Police Service’s fight against crime. This R359-million contract for the Department of Public Works is scheduled for completion in March 2010.

The construction of the new Kimberley medium security correctional centre is progressing well, and is on track for completion in February next year, Potgieter states. Grinaker-LTA Building is undertaking this R777-million contract in a joint venture with BEE company Keren Kula Construction. Situated on Griekwastad Road, 1 km outside Kimberley, this facility will provide accommodation for 3 000 adult male offenders.

Grinaker-LTA Building’s R230-million contract for the construction of the Department of Public Works’ new “Special Youth Care Centre” in the Eastern Cape capital of Bhisho is due for completion in May 2009. This facility is designed to accommodate 320 juvenile offenders.

The division’s work on 2010 stadiums includes the construction contract for the main event stadium, Soccer City in Soweto, the contract for the construction of the new Orlando Stadium in Soweto - which is due for completion next month (May 2008) – and the construction of Nelson Mandela Stadium in Port Elizabeth. Grinaker-LTA’s Soccer City and Nelson Mandela Stadium contracts are being undertaken in joint venture with Interbeton bv, part of the Royal BAM Group from Holland.

But while Government contracts have bolstered its order book, Grinaker-LTA Building is still keeping busy with private projects ranging from more than R1.5-billion of retail contracts and a striking new casino resort to luxury housing and golf courses in Mauritius.

The division’s retail projects include a R350-million contract to extend and refurbish the popular Eastgate shopping centre in Bedfordview, east of Johannesburg, and a R550-million contract – being undertaken in joint venture with ENZA Construction – to build a new 60 000 m2 shopping centre in Durban’s new Bridge City Precinct, which boarders Kwa-Mashu and Phoenix. Grinaker-LTA is also building two more new malls in Durban – the 35 000 m2 Westwood Shopping Centre in Westville and Philani Valley in Umlazi, and is wrapping up contracts to extend and refurbish Richards Bays’ Boardwalk Shopping Centre.

Near Krugersdorp (Mogale City), Grinaker-LTA Building is close to completing its R733-million contract for the construction of the Silverstar Casino Resort.

Rehm-Grinaker, the Mauritian construction company in which Grinaker-LTA is a shareholder, has an order book in the region of R600 million, Potgieter says. This includes work on several projects falling under the groundbreaking new Mauritian property ownership system, the ‘Integrated Resort Scheme’ (IRS), which is allowing foreigners to purchase property in Mauritius for the first time. Rehm-Grinaker’s contracts include an 18-hole championship golf course designed by Ernie Els at the Anahita resort. This development is set to be the largest and most extravagant IRS development on the East coast of Mauritius. It also aims to be one of the top five developments of its kind in the world in the next five years, amid tough competition from regions like Dubai.
 
With its growing workload, Grinaker-LTA Building has also doubled its people resources, and Potgieter says he currently has in excess of 4 700 people under his leadership. He has cited safety and skills development as strategic priorities going forward, and notes that the shortage of skills in the industry is a challenge. “Training is a critical focus area, and we have numerous learnerships, apprenticeships and bursary schemes in place to begin to address the current skills deficit. An in-house training centre is operating in KwaZulu-Natal and provides training in various construction disciplines such as carpentry and brick-laying.”

Potgieter believes one of the greatest challenges currently facing the building industry is the power outages. “The power crisis could cause significant delays and disruptions on new developments. In most cases, we have stand-by generators on our sites, to minimise downtime, but this is a concern.

“The upside, however, is the new business to be picked up in the construction of new power stations. As part of the multi-disciplinary Aveng Group, Grinaker-LTA Building is well-placed to capitalise on this,” he concludes.

 

Tuesday, 12 February 2008 02:00

Aveng interim EPS, HEPS seen 40%-50% higher

Construction group expects earnings and headline earnings per share for the interim period to December to be between 40% and 50% higher than the same period a year ago

The Nelson Mandela Bay municipality and the 2010 World Cup local organising committee have distanced themselves from any possible mediation bid to avert a strike at the Port Elizabeth stadium

Monday, 05 November 2007 02:00

FNB Stadium construction on track

The FNB Stadium which is under construction, will host the first and final game of the 2010 Fifa World Cup, is ahead of schedule according to senior site manager Corne Esterhuizen of Grinaker Ltd

Construction on the King Shaka International Airport, which will replace the existing Durban International Airport, will continue full-steam ahead

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