Thabang Mokopanele
25 February 2008
Johannesburg — FLOORING and chemicals group Safic Holdings is on the acquisition trail as it plans to benefit from increased government infrastructure spending and exports to other African countries this year.
The acquisition of Centurion Aluminium and Glass last year was the first in a number of planned acquisitions, but CE Fred Platt declined to provide more details, merely saying Safic would buy businesses that would expand its product offering.
Platt said the company was under pressure from the market to speed up the process, but would be prudent and conduct a thorough due diligence on potential acquisitions.
Platt said the company would fund planned acquisitions by a combination of cash, debt and equity, but did not disclose how much Safic planned to spend.
Buoyed by the boom in construction , Safic turned in an outstanding set of interim results for the six months ended December with revenue up 11% to R122m.
Headline earnings grew 50% to R9m while headline earnings per share rose to 9,8c, ahead of the 14,65c full-year forecast, despite the weighted average number of shares in issue increasing 27%. Platt said market conditions were not as favourable as in the previous six months.
However, he was still optimistic that Safic would be able to deliver strong, sustainable organic growth throughout its businesses, as well as additional growth through carefully chosen strategic acquisitions.
Safic is 30% black-owned and Thebe Investment Corporation owns 17%. "We are ambitious on growth and our plan involves lots of government work, so black economic empowerment is still an important aspect of our business," Platt said.
However, he stressed the company was not only looking at making up empowerment numbers, but sought partners that had the ability to fund future expansion. "We took a strategic decision to bring Thebe in because it fits that profile."
The company stands to benefit from flooring contracts as the government accelerates spending on the building of classrooms, healthcare facilities, stadiums, police stations and prisons.
Some major contracts Safic's flooring division has won include 10 stadium upgrades for the Soccer World Cup in 2010, phase two of Baragwanath Hospital, and OR Tambo and King Shaka airports and classroom upgrades.
Centurion Glass and Aluminium won contracts for Natalspruit Hospital, Reef Insurance and refurbishments for Edcon.
Growth within the business in the review period was mainly organic, while strict attention to cost controls and operational efficiencies had made a significant contribution to increased profit.
The full benefit of the Centurion Glass & Aluminium acquisition made in November was only likely to be felt in the second half.
Platt said there had been a noticeable uptick in the government's infrastructural spending, but the full effect was only likely to be experienced during the next 18 months. He said the group had little exposure to the interest rate cycles as its core business was driven by the infrastructure spending programme. Also, he said, a weaker rand generally acted as a stimulus for its flooring exports into Africa.
Demand for the group's flooring products was steady. Exploiting synergies within the group was likely to lift demand for glass and aluminium products.
Platt said he was confident a renewed focus on tender and contractual business, as well as the launch of a new domestic cleaning range, Madam & Eve, would also contribute to greater growth . With I-Net Bridge
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