Basil Read on prowl for African fillip to offset erratic SA conditions

29th August 2013

By: Terence Creamer

Creamer Media Editor

  

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The head of JSE-listed construction group Basil Read says he remains “upbeat” about the prospects for a recovery in the South African project economy, especially from the second half of 2014. However, Marius Heyns tells Engineering News Online that the group is also targeting a further expansion into the rest of Africa to offset the erratic roll-out of public-sector projects in South Africa and the prevailing weak outlook for domestic mining investment.

The group’s order book is currently split 60% to 40% between South African and African projects – a ratio that is likely to remain intact until the domestic market recovers.

The company is actively pursuing both private and public opportunities in the rest of the continent, with contracts having already been secured in the Democratic Republic of Congo, Mozambique and Botswana and awards anticipated soon in Guinea, Ghana, Tanzania and Senegal.

Many of the projects outside of South Africa are related to mining or resources logistics, but Basil Read’s flagship non-South African project remains the St Helena Airport, with construction of the terminal buildings set to start during the second half of 2013.

“We are also putting a lot of effort into possible public–private partnership developments in the rest of Africa, covering everything from toll roads and prisons to energy projects,” he reports.

Market conditions in the South African civils sector, by contrast, are expected to remain “quiet” until after the 2014 elections, when Heyns believes a number of projects could move into implementation.

“In fact, we are still seeing solid tender flow in South Africa, particularly from the State-owned companies. The problem is that it is erratic and it is often taking a long time for actual awards to be made.”

Its current order book, which increased by 20% to R12.2-billion at the end of June, from R10.2-billion in December, is sufficient to see the group through to the middle of next year without it having to resort to retrenchments, Heyns assures.

The group is also active in the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) as both a contractor and an equity investor and is also pursuing the development of baseload and cogeneration power prospects. But Heyns says that, while the company participated in the third REIPPPP bidding round, it has more or less reached the limit of its ability to participate as an equity partner.

Besides the volatile public-sector environment, the company is also being affected by the current reluctance of the South African private sector and mining houses to invest in new capital projects.

“The lack of tender activity in the mining sector is of concern,” Heyns says, but he reveals that there has also be an increase in enquiries as miners seek to reduce costs through alternative methods or suppliers.

Basil Read returned to profitability during the year ended June 30, 2013, with operating profit from continuing operations recovering to R80.2-million from a loss of R14.3-million last year. Its operating margins recovered to 2.7% from a negative margin of 0.5% in 2012, while revenue increased by 10% to R3-billion.

Heyns tells Engineering News Online that its troubled projects are being worked out of the system and that it has been able to bid improved margins for the new projects that have been added to its 18-month order backlog. It is aiming for a 2.5% margin from its construction units, 7% for engineering, 20% to 25% for property developments and around 7% for mining.

The company recorded a net profit R257.2-million, which included proceeds for disposals. During the period, it sold TWP Holdings to WorleyParsons, of Australia, for R869.6-million, realising a net profit of R226.8-million.

Edited by Creamer Media Reporter

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