Raubex sees 'substantial' increase in construction tenders

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After many lean years, which landed construction firms like Group Five and Basil Read in business rescue, the 45-year-old construction group Raubex is finally seeing a glimmer of light at the end of the tunnel.

While economic conditions remain tough, and its revenue fell by almost 2% to R4.4bn in the six months to end-August, the firm is seeing more tenders in the market.

"We are encouraged by a substantial increase in tender activity that has been observed in recent months which now needs to materialise into contract awards," the company said.

The group’s secured order book has increased by 8% to R9.08bn.

According the the company, while conditions in the South African construction sector are expected to remain challenging in the second half of the financial year, due to excess capacity being carried and low margin contracts in the order book," the outlook over the medium term is improving and a substantial increase in tender activity has been observed."

Headline earnings rose 61% thanks in part to cost-cutting, and an interim dividend of 22c was declared. 

"Following a very difficult 2019 financial year in which a number of rightsizing initiatives where undertaken, we have managed to stop the bleeding and the group is now better positioned to manage the lower volume of construction work on hand, while it has maintained sufficient capacity to participate in an anticipated improvement in the sector,"  said CEO Rudolf Fourie.

The company's materials division was impacted by a combination of factors including a community unrest, which affected a number of commercial quarry operations across the country.

But Fourie said that the infrastructure division has experienced strong growth during the first half of the year, due to work related to the division's participation in the Renewable Energy Independent Power Producer Procurement Programme, where a number of contracts have been secured. 

The company's Roads and Earthworks business, which is directly and indirectly exposed to government expenditure experienced weak trading conditions. 

It said 61 employees were retrenched during the period at a cost of R1,8m, while a loss making contract, related to the special maintenance of the N2 near Butterworth, resulted in an operating loss of R15.5m. The contract has subsequently been completed.

The company said it will continue to explore the Australian market and look to grow its footprint in Western Australia at a measured pace.

Its share price was flat on Monday morning. Over the course of the past year, Raubex shares have lost 6% of their value.

*This article has been updated to remove reference to Aveng as being under business rescue

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