RAUBEX CLOSES TWO BUSINESSES AMID LOW GOVT INFRASTRUCTURE SPEND

RAUBEX CLOSES TWO BUSINESSES AMID LOW GOVT INFRASTRUCTURE SPEND

7th May 2018

By: Anine Kilian
Contributing Editor Online

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JSE-listed construction group Raubex has closed two businesses – L&R Civils and Strata Civils – as government spend on infrastructure remains low.

Reporting its results for the financial year ended February 28, on Monday, Raubex said challenging market conditions in the South African construction sector require it to focus on new opportunities to supplement revenue streams and maintain growth.

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The group’s earning decreased by 5.1% year-on-year to R8.4-billion.

The value of construction contracts in progress decreased by 15.9% to R280.9-million, owing to lower operating activity in the construction divisions, particularly in the second half of the year.

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“Orders from the South African National Roads Agency Limited (Sanral) halved to R962-million during the period owing to a lack of tenders being released to the market throughout the second half of the year,” CEO Rudolf Fourie said.

Construction orders from provincial government fell by 54% and from municipalities by 11%.

The company’s road surfaces division was directly affected by the lack of government spend and, to compensate, the division focused on rehabilitation and maintenance contracts on the toll roads operated by concessionaires, with several contract awards supporting the current order book.

“Sanral’s lower spend has resulted in increased competition for the limited volume of work available to the rehabilitation and maintenance teams to tender for and has also resulted in lower volumes of asphalt and bitumen being supplied to the external market,” he said.

The division’s revenue decreased by 9.1% to R3.25-billion and operating profit decreased by 14.1% to R222.4-million.

The roll-out of water infrastructure in the country remained slow during the year, with extremely competitive tendering conditions experienced for a limited amount of work available.

Raubex has, therefore, made the decision to discontinue the operations of L&R Civils, a company acquired in July 2012, in anticipation of the much-needed roll-out of water infrastructure projects in the country.

L&R Civils reported revenue of R36.4-million and a net loss after tax of R29.3-million, which included the closure costs of the business.

The group also decided to discontinue the operations of Strata Civils, which specialises in small-scale civil infrastructure projects, particularly in urban environments in the Western and Eastern Cape.

The company also suffered as a result of delays in government’s Renewable Energy Independent Power Producer Procurement Programme.

“The group has secured work to the value of R678-million on two wind farm projects, which are subject to financial close. These projects have not been included in the order book.”

Headline earnings a share increased by 13.3% to 228c and the company had an order book of R8.9-billion as at February 28.

Looking ahead, Raubex expects conditions in the South African construction sector to remain challenging, particularly in the road construction divisions, which are largely dependent on Sanral.

“It is imperative that South African State-owned companies and provincial and municipal governments, start investing in the country’s deteriorating infrastructure.

“This will not only alleviate the current pressure in the construction sector, which has experienced several business failures resulting in severe job losses during the year, but will also better position the country for future economic growth,” Fourie stated.

He added that, while conditions in the South African construction sector remain subdued, the group will focus on maintaining a strong balance sheet and look for medium-term growth from a combination of high-margin opportunities in the rest of Africa, increasing activity levels in Australia and further acquisitions in the local commercial aggregate sector to support the materials division.

The directors have declared a gross final cash dividend from income reserves of 33c a share.

Edited by: Chanel de Bruyn

 

7th May 2018

By: Anine Kilian
Contributing Editor Online

SAVE THIS ARTICLE      EMAIL THIS ARTICLE

Font size: -+

JSE-listed construction group Raubex has closed two businesses – L&R Civils and Strata Civils – as government spend on infrastructure remains low.

Reporting its results for the financial year ended February 28, on Monday, Raubex said challenging market conditions in the South African construction sector require it to focus on new opportunities to supplement revenue streams and maintain growth.

Advertisement
The group’s earning decreased by 5.1% year-on-year to R8.4-billion.

The value of construction contracts in progress decreased by 15.9% to R280.9-million, owing to lower operating activity in the construction divisions, particularly in the second half of the year.

Advertisement
“Orders from the South African National Roads Agency Limited (Sanral) halved to R962-million during the period owing to a lack of tenders being released to the market throughout the second half of the year,” CEO Rudolf Fourie said.

Construction orders from provincial government fell by 54% and from municipalities by 11%.

The company’s road surfaces division was directly affected by the lack of government spend and, to compensate, the division focused on rehabilitation and maintenance contracts on the toll roads operated by concessionaires, with several contract awards supporting the current order book.

“Sanral’s lower spend has resulted in increased competition for the limited volume of work available to the rehabilitation and maintenance teams to tender for and has also resulted in lower volumes of asphalt and bitumen being supplied to the external market,” he said.

The division’s revenue decreased by 9.1% to R3.25-billion and operating profit decreased by 14.1% to R222.4-million.

The roll-out of water infrastructure in the country remained slow during the year, with extremely competitive tendering conditions experienced for a limited amount of work available.

Raubex has, therefore, made the decision to discontinue the operations of L&R Civils, a company acquired in July 2012, in anticipation of the much-needed roll-out of water infrastructure projects in the country.

L&R Civils reported revenue of R36.4-million and a net loss after tax of R29.3-million, which included the closure costs of the business.

The group also decided to discontinue the operations of Strata Civils, which specialises in small-scale civil infrastructure projects, particularly in urban environments in the Western and Eastern Cape.

The company also suffered as a result of delays in government’s Renewable Energy Independent Power Producer Procurement Programme.

“The group has secured work to the value of R678-million on two wind farm projects, which are subject to financial close. These projects have not been included in the order book.”

Headline earnings a share increased by 13.3% to 228c and the company had an order book of R8.9-billion as at February 28.

Looking ahead, Raubex expects conditions in the South African construction sector to remain challenging, particularly in the road construction divisions, which are largely dependent on Sanral.

“It is imperative that South African State-owned companies and provincial and municipal governments, start investing in the country’s deteriorating infrastructure.

“This will not only alleviate the current pressure in the construction sector, which has experienced several business failures resulting in severe job losses during the year, but will also better position the country for future economic growth,” Fourie stated.

He added that, while conditions in the South African construction sector remain subdued, the group will focus on maintaining a strong balance sheet and look for medium-term growth from a combination of high-margin opportunities in the rest of Africa, increasing activity levels in Australia and further acquisitions in the local commercial aggregate sector to support the materials division.

The directors have declared a gross final cash dividend from income reserves of 33c a share.

Edited by: Chanel de Bruyn