Raubex grows order book to record R20bn

JSE-listed construction group Raubex grew its order book to a record R20 billion in the year to end-February from R17.1 billion the previous year, largely on the back of R2 billion in contracts awarded to the group between October 2022 and the end of its financial year.

Raubex CEO Felicia Msiza said on Monday the group’s future is supported by its record R20 billion order book and highlighted a major contract award that will further boost the group’s order book.

Renewables

Raubex chief operating officer Dirk Lourens said the group’s infrastructure division recently signed an engineering, procurement and construction (EPC) contract with African Clean Energy Developments (ACED) for three wind power generation plants in the Western Cape with a combined value of R2.1 billion.

Lourens said financial close of this contract, which is not yet included in the group’s order book, should be achieved within the next few months.

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He said the renewable energy operations had no major impact on this year’s results due to delay in the award of Renewable Energy Independent Power Producer Programme (Reippp) risk-mitigation round and Bid Window 5 of the Reippp projects.

“The government delay in awarding contracts under the Reippp programme is still a cause of major concern in the industry,” he said.

“We do experience increased activity in the private renewable sector. Various proposals have been submitted are awaiting commercial and financial close.”

Roads and earthworks

Lourens said Raubex is also encouraged by increased activity in tender awards in the roads and earthworks sector over the past few months.

He added that the site establishment on the R2.4 billion Senqu River Bridge project in Lesotho is progressing according to plan. Raubex is a 21% joint venture partner in this project.

“We see a significant contribution from this project in the near future and foresee that this project will fill the gap created by the completion of the Beitbridge Border Post project in this division,” he said.

The Beitbridge Border Post project in Zimbabwe was valued at R2.5 billion while Raubex was also awarded the R1.2 billion Namdeb project in Namibia.

‘Solid pipeline’

Msiza said that of the group’s R20 billion order book, R11.9 billion will be executed in the current financial year, R3.6 billion in its 2025 financial year, R1.7 billion in its 2026 financial year and R2.8 billion beyond that.

“This is a solid pipeline of work in line with our growth,” she said.

In terms of Raubex’s order book split, Msiza said Sanral accounted for 30% of the group’s order book for its for 2023 financial year versus 39% in the previous year.

Msiza said Raubex is also looking at public-private partnership opportunities and would obviously use the group’s Beitbridge Border Post contract experience to execute them.

Minister of Home Affairs Aaron Motsoaledi said in June 2022 that his department plans “in a few months’ time” to issue a public request for proposals for a R6 billion project to completely overhaul and rebuild South Africa’s six busiest border posts.

“We are preparing in terms of responding to those and, in terms of our experience, we believe we are positioned in terms of executing them,” Msiza said.

Financials

Raubex on Monday reported a 32.2% increase in group revenue to R15.31 billion in the year to end-February from R11.58 billion in the previous year.

Operating profit increased 35% to R1.28 billion from R945.3 million.

Headline earnings per share increased 32.1% to 392.8 cents from 297.4 cents.

A final dividend of 76 cents per share was declared, which is 40.7% higher than the 54 cents declared in the prior year.

Marc Ter Mors, global head of equity research at SBG Securities, said Raubex’s financial results are “quite good” on face value and ahead of SBG’s expectations.

Ter Mors said operating profits were about 4% to 5% better than it expected, headline earnings per share 3% better, and while it was anticipating 29% growth in turnover, Raubex achieved 32% growth.

He said some of this growth was from Bauba Resources – the mining and exploration company in which Raubex acquired a majority stake in 2022 – but even if its contribution is stripped out, the growth rates are somewhat lower but still positive and accelerated in the second half of the financial year.

“Our estimates are that Bauba did R1.27 billion [in turnover] for the full year, so if you strip that out, organic growth was about 21% for the year, not 32%,” said Ter Mors.

“But it still accelerates from 16% top line growth in the first half to 27% in the second half.

“Operating profit is similar, with 20% organic growth versus 34% reported but also accelerating from 9% organic Ebit [earnings before interest and taxes] growth in the first half to 30% in the second half.”

Outlook

Ter Mors questioned to what extent new projects and the order book compensate for the Beitbridge Border Post project contribution, particularly as this was a very successful project and Raubex benefitted from substantial foreign exchange gains because of the rand weakening against the dollar.

“It sounds like there might be a little bit of profit still from Beitbridge in the 2024 financial year but quite a lot of that will need to be replaced by the new business. I can’t conclude on that yet,” he said.

“It’s very likely that the new project may be at healthy margins as well but they will not have the same margins as the finalisation margins on the very successful Beitbridge project.”

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Rowan Goeller, an analyst at Chronux Research, said Raubex produced good results and its prospects look decent.

Goeller said Sanral is a very important part of Raubex’s business despite the group not fully relying on contracts from the roads agency.

He added that with a new CEO in place at Sanral, it seems a bit of stability is coming back in terms of the company issuing and adjudicating tenders and awarding contracts.

“This is good for Raubex and the whole construction and roads sector.

“Margins are not yet picking up in this sector … but possibly the next step if you get a continuation of the big R1-billion-plus road projects being awarded, you might start to get a margin recovery as well,” he said.

“That is good for Raubex’s bitumen and asphalt business as well.”

Shares in Raubex rose 3.48% on Monday to close at R25 per share.

This article originally appeared on Moneyweb and was republished with permission. Read the original article here.

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