Lack of work on roads, community unrest hurt Raubex stock

Construction and materials group Raubex Group’s headline earning per share plunged 75.1% to 57cents per share in the year to February 28. File picture: Supplied
CAPE TOWN – Construction and materials group Raubex Group’s headline earning per share plunged 75.1percent to 57cents per share in the year to February 28, due to lack of work on roads and violent community unrest at a number of sites.

Revenue was down 0.3percent to R8.52billion, but operating profit fell 69.2percent to R788.9million. The final dividend was lowered to 22c per share (33c in 2018), which chief executive Rudolph Fourie said they declared as the balance sheet remained strong, with about R1bn available in cash.

Cash generated from operations fell 24.1percent to R788.9m. The order book was at R8.01bn from R8.19bn in 2018.

Fourie said that it had been the most difficult year he had experienced in 30 years, but he anticipated an improvement in the new financial year.

“Right-sizing” had put the road construction and maintenance operations on a better footing, additional road work was expected, even though it was not expected to “shoot the lights out”, and the infrastructure operations were expected to perform in line with the second half of the 2018 year.

He said the South African National Roads Authority, for instance, was expected to announce six to seven big projects shortly.

The six-year-old diversification strategy outside of road construction had come to fruition in the past year, he added.

There was also progress in Raubex’s affordable housing business, as it picked up work following the closure of other contractors, and some growth in the sector as a whole.

A solid order had also been secured through participation in the Renewable Energy Independent Power Producer Procurement Programme.

Stable results from the materials division, which provides materials handling and screening services to the mining industry, and the commercial quarry operations, supported group earnings for the year.

This division, which differentiates Raubex from the overall construction sector, was expected to continue to be stable in 2019.

There was a goodwill impairment charge of R51.5m before tax (R51.5m after tax), attributable to the asphalt cash-generating unit in the road surfacing and rehabilitation division.

The unit experienced a big decrease in earnings, due to the lower volume of asphalt supplied to the road construction sector, and initiatives were under way to reduce excess capacity.

Due to a change in control, property development stock of R111.6m has been consolidated into the group results and is included under inventories.

Capital expenditure included R44.1m to buy new offices and workshops in Perth, Australia, which was expected to position the group to grow in the country.

Borrowings decreased by 14.8percent to R661.7m, and consist mainly of instalment sale agreements over plant and equipment, which are repayable in monthly instalments.

The materials division was the main contributor to group operating profit during the year, mitigating losses reported in the roads and earthworks division.

A total of 233 employees were retrenched by the division due to end of life and changes in scope of certain mining contracts, with retrenchment costs of R17.1m being incurred.

Contract crushing operations continue to experience weak demand.

Revenue for the division increased by 6.5percent to R2.75bn, while operating profit fell 2.2 percent.

The division has a secured order book of R3.19bn (2018: R3.69 bn).