Construction World October 2016

COMMENT

The last month has been an interesting time for the South African construction industry with the announcement by Murray & Roberts (M&R) that it is exiting the infrastructure and building markets in South Africa and the vastly mixed annual results from three of SA’s listed companies (Aveng, Group Five and WBHO).

>

the Australia and Southeast Asia region (up from 40% last year). Group Five, by contrast, doubled its oper- ating profit – albeit entirely from its toll road concessions in Eastern Europe. Its CEO, Eric Vemer says that only govern- ment spend on infrastructure projects can lead to a recovery of the group’s heavy construction in South Africa. Even thoughWBHO’s results show a healthy jump in profitability, CEO Louwtjie Nel is quick to point out that this is not because of improving conditions in the South African market. He maintains that this is largely due to the fact that the company now has a bigger share of the market. In addition, WBHO’s building divisions in SA and Australia offset lower activity levels in especially mining which pushed up the headline earnings per share.

To start with the almost unthinkable: M&R. After years of stagnation in the infrastructure and building markets, the company has announced that its focus will now be on global underground mining, oil and gas and power and water. It is not only selling its infrastructure and building businesses, but will also dispose of its steel and engineering services. The reason for this dramatic change in focus to what the M&R CEO, Henry Laas calls a ‘new strategic future’, is easy to identify. Since the government’s massive spend on the 2010 Soccer World Cup, spending on huge infra- structure projects have all but dried up. Laas points out that M&R is not exiting the country, but exiting a sector. M&R’s announcement comes after the company announced that its diluted headline earnings per share fell by 10% for the year

to June. Further complications have been the paying by 15 construction companies (R1,5-billion collectively) for alleged collusion in infrastructure for theWorld Cup, empowerment

2

pressures and recurring violent strikes. Critical to core stability

Three other listed construction companies recently announced its latest results: Aveng, Group Five and WBHO. Aveng’s (SA’s largest construction company by turnover) results show that only 37% its pipeline projects for the next two years is made up of domestic building and engineering work. This is down from 56% in 2015. Its revenue also took a plunge: from R578-million in June 2015 to R299-million in June 2016. It is increasingly relying of work outside South Africa: 60% of its work now happens in

Wilhelm du Plessis Editor

@ConstWorldSA

www.facebook.com/construction-worldmagazinesa

EDITOR & DEPUTY PUBLISHER Wilhelm du Plessis constr@crown.co.za ADVERTISING MANAGER Erna Oosthuizen ernao@crown.co.za LAYOUT & DESIGN Lesley Testa CIRCULATION Karen Smith

PUBLISHER Karen Grant PUBLISHED MONTHLY BY Crown Publications cc P O Box 140 BEDFORDVIEW, 2008 Tel: 27 11-622-4770 • Fax: 27 11-615-6108

TOTAL CIRCULATION: (Second Quarter ’16) 4 766

PRINTED BY Tandym Cape

www.constructionworldmagazine.co.za

The views expressed in this publication are not necessarily those of the editor or the publisher.

CONSTRUCTION WORLD OCTOBER 2016