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Raubex maintains record R17.1bn order book, produces strong results

And expects further significant project awards.
The group says it is in the running for Sanral projects valued at between R8bn and R10bn. Image: Supplied

JSE-listed construction group Raubex maintained its R17.1 billion record order book in the year to end-February and is awaiting the adjudication of tenders valued at R30 billion it has submitted for South African National Roads Agency (Sanral) projects.

The group is also anticipating getting its fair share of work from the renewable energy sector.

Raubex CEO Rudolf Fourie said on Monday the group maintaining its order book of R17.1 billion was a highlight of its latest financial year because it is currently working R50 million a day off its order book.

“The fact that we have maintained that record order book for the past 12 months is quite encouraging and Sanral has not yet awarded any of the big contracts to date.

Read: SA road network needs R75bn over the next five years

“The good news is we have got enough work for this year and the year beyond that as well,” he said.

Fourie added that of the Sanral tenders submitted, the group is in the running for projects valued at between R8 billion and R10 billion.

However, he said the term of office of Sanral’s board expired and was extended to August 2022 and Raubex is not getting any clarity from Sanral on expected awards.

He noted however that Sanral projects valued at less than R300 million do not go to the tender board and are awarded by a committee.

“Those projects have been awarded and that is how we kept our order book. We were awarded four projects between R200 million and R300 million last month.

“It’s not that nothing is happening. There is uncertainty on the big mega projects of over R1 billion,” he said.

Sanral delays: Projects worth billions waiting in the wings

Sanral confirmed to Moneyweb in March that there has been a significant delay in the adjudication and awarding of its tenders, resulting in 258 projects collectively valued at R31.7 billion being rolled over to the current 2021/22 Annual Procurement Plan from Sanral’s 2020/21 financial year.

Sanral chief financial officer Inge Mulder confirmed at the time that the 2021/22 plan included the commencement of the procurement process for a further 312 projects collectively valued at R30 billion.

Read: Sanral confirms delays to 258 projects valued at R31.7bn

Delays in renewable energy programme too

Fourie said there have been delays with the renewable energy programme but the commercial close of the 25 projects in Independent Power Producer (IPP) Bid Window 5 is now expected in September.

Read: Renewable procurement picks up steam with opening of new bid window

Commercial close on Bid Window 5, which comprises 12 onshore wind and 13 solar photovoltaic (PV) projects selected totalling 2 600 megawatts (MW), was originally estimated to be in February this year.

Fourie said IPP Bid Window 6 is also scheduled to open to the market this year and will be as big as IPP Bid Window 5, which will ensure continuity in the renewable energy market.

“It will happen, the only question is when,” said Fourie.

“We personally don’t foresee a big [amount] of work in this financial year but hopefully by next year it will start falling in place.

“If they award Windows 5 and 6, which I think they will, it is material to the group size-wise and will change our whole infrastructure division,” he said.

Fourie said Raubex’s three divisions are currently executing the group’s order book profitably and he is unconcerned about the capacity of the (entire) group to profitably execute projects.

He said the group is probably running at about 80% of capacity and if all the tendered work is awarded it will have to make a plan.

“In the construction space, there are a lot of smaller listed construction companies that do not fulfil Sanral technical criteria that we will use to help our capacity, but we are not there yet,” he said.

“If [only] some of the work gets awarded, we should be fine. The delay suits us because we obviously have got work at the moment but if everything gets awarded tomorrow, yes there will be capacity issues.

“But the problem is we don’t know when it will get awarded. If it gets awarded in 12 months’ time, we are fine because then we have 50% capacity available,” he said.

Full-year results

Raubex on Monday reported a 30.9% rise in revenue to R11.58 billion in the year to end-February, from R8.85 billion in the previous year.

Operating profit increased 159.4% to R945.3 million from R364.5 million, with the group operating margin improving to 8.2%.

Headline earnings per share increased 263.1% to 297.4 cents from 81.9 cents.

A record final dividend of 54 cents per share was declared, increasing the dividend for the full year to 101 cents per share.

Fourie said the higher level of government spending on infrastructure in South Africa contributed to the group’s growth and is set to sustain its order book going forward.

“Operationally, the continued focus on the highest quality execution resulted in the successful completion of the second milestone on our flagship Beitbridge Border Post project and we are on track to reach completion in line with expectations,” he said.

The R2.5 billion engineering, procurement and construction (EPC) contract for the upgrading of the Beitbridge Border Post in Zimbabwe is Raubex’s single biggest contract to date.

Fourie said Raubex will complete the project in its next financial year but it then has a 17-year maintenance contract to the value of R1.7 billion.

Analyst’s take

Peregrine Capital executive chair David Fraser said Raubex has produced an extremely solid set of results and seems to be executing its order book well.

Fraser stressed that this is exactly what investors need to be looking for at the moment.

“An order book is one thing but executing on that order book is good,” he said.

“There don’t seem to be any problem contracts, so hat’s off to them.”

Shares in Raubex dropped by 0.49% on Monday to close at R40.50 per share.

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