Business Day (Johannesburg)
Thabang Mokopanele
30 October 2009
Johannesburg — Construction firm Erbacon Investment Holdings, which yesterday posted an 18% increase in headline earnings per share to 22,87c for the six months ended August, said it remained optimistic that public sector infrastructure spend would maintain sizeable momentum over the medium to longer term.
The firm based in KwaZulu- Natal said its combined forward order book was more than R650m. But Erbacon warned while the base load of infrastructure-related projects and opportunities remained positive for the civil construction sector, the global financial crisis had affected local commercial ventures, particularly in the private sector.
Funding constraints and concerns over the short- to medium- term robustness of the regional economy resulted in fewer plans being converted into new-builds.
However, Erbacon stood to benefit from its intention to expand its geographic footprint into civil construction outside its traditional KwaZulu-Natal base with the expected acquisition of Gauteng-based Civcontract Civils, and the entry of Medu Capital as the company's black economic empowerment financing partner.
Turnover for the period increased 16% to R395m and after-tax profits were up 24% to R32m. No interim dividend for the half year was declared as the company intended to pay a year-end annual dividend . However, shareholders would get a special dividend bonus of 21,93c per share, which was intended to reward existing shareholders for past earnings, ahead of the intended acquisition of Civcontract Civils.
Erbacon announced the R267m acquisition of Gauteng- based civil engineering company, Civcon, last month, indicating its intention to spread its activities beyond KwaZulu-Natal and into the lucrative Gauteng construction market. It simultaneously announced a black economic empowerment transaction, bringing Medu Capital Fund in as its financing partner with a significant 29,4% equity stake.
The company's civil construction division saw a massive 240% jump in revenue to R270m. The division now constitutes 68% of group turnover as opposed to 23% during the prior period. Projects included several freeway upgrade s and work on two soccer stadiums in KwaZulu-Natal for the 2010 Soccer World Cup.
At the same time private sector commercial and industrial building activity declined due to the global financial crisis.
CEO Dave Erskine said the revenue contribution from Erbacon's commercial and industrial building division, Armstrong Construction, declined from 64% in the prior period to 20%. However, the division still managed to secure work worth R138m in the first half and had more than R200m on its order book.
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