Raubex

  • Raubex, a construction and materials handling group, posted a record order book with   a positive outlook following a prolonged downturn in the sector, which peaked   after the 2010 World Cup.

  • The second half results showed a marked improvement with headline   earnings of R148m vs a loss of R48m at the interim results to August 2020,   but do not yet reflect the potential turnaround metrics potential.

  • This is predicated on the back of a roll out of road projects,   including upgrades, new road networks, highways and re-habilitation by   Sanral, with local and provincial authorities playing a secondary role.

  • The groups order book has escalated from R11 billion at the interim   stage to R17 billion due primarily to new contracts from Sanral in the Roads   and Earthworks division.

  • The materials division experienced strong demand for its aggregates   quarrying, material handling and mining operations. The robust mining sector   helped revenues grow 10.8%. The operating profit declined by 17.8% and is   likely to improve once industry growth resumes, resulting in margin   expansion. This division generated 80% of the groups operating the profit of   R364 million.

  • Group CEO Rudolph Fourie, referred to higher industry capacity   utilisation as well as sector consolidation, with many players no longer   operative following the prolonged downturn, as reasons for potential higher   margins in the in the year ahead. He indicated that a group margin objective   of 10%, if achieved, should be a positive driver for group prospects.

  • The Infrastructure division should pick up due mainly to renewable   energy expansion schemes like solar and wind, and projects such as the Beit   Bridge border post.

  • Although revenue only increased by 1.30% to R8.85 billion, this was   significantly better than the first half decline of 10.5% due to the Covid-19   pandemic preventing non–essential activities.

  • Raubex has been strongly cash generative, even in the challenging   first half, resuming the interim dividend payment in lieu of withholding the   final dividend for 2020, which was a positive signal at that time. It   recently declared a 29 cents dividend payment, with a major cut back in capex   and other expenditure resulting in net cash growth quadrupling to R1.1   billion. The strategy of cash preservation is ahead of a burgeoning order   book. As execution of new business takes place, additional working capital   will be a pre-requisite. This is in the back of a buoyant mining sector with   rising commodity prices and a rollout of infrastructure projects.

  • Raubex has a niche operation in Western Australia in the mining and   roadbuilding sectors. It is only involved in smaller contracts, cautiously   feeling its way, in areas in which it has expertise.

  • The results were above market expectations with a positive outlook   enabling the company to continue to deliver quality results. This was aided   by a record order book and a strong possibility of an infrastructure economic   recovery. The share price is reflecting a turnaround in prospects, with the   price up by around 14% to R32.00.

Raubex