Raubex pins hopes on R500bn stimulus package
Infrastructure development group has tendered for about R22bn of road construction work
Infrastructure development group Raubex is banking on the government’s R500bn stimulus package to kick-start the local economy and help get the more than R20bn of projects it has tendered for off the ground.
The company says it has tendered for about R22bn of work between October 2019 and March 2020 in the road construction sector.
On Friday, Raubex told shareholders that the timing of certain awards could be delayed due to the effect of the Covid-19 lockdown. However, “it is hoped that the social relief and economic support package of R500bn announced by the SA government” in April, including a substantial infrastructure build programme as part of its economic recovery strategy will help to get things going.
State spending is expected to help to “stimulate the SA economy over the medium term” Raubex said, adding that it should be well positioned to participate in some of the work tendered for, through both its roads and earthworks, and materials divisions.
When the lockdown came into effect, the company was forced to suspend its SA construction operations as the sector had not been deemed as essential by the state. Because of the current crisis, the group has opted to hold on to its dividend for its year to end-February, as the group braces for the effect of Covid-19.
The group, which has about 196-million shares in issue, paid a dividend of 22c previously, and is now pinning its hopes on the government following through with spending plans.
It reported that its order book grew by more than a quarter to R10.14bn for the period.
Earnings per share for the group increased 335.7% to 139.0c compared with 31.9c in the previous year. Headline earnings per share increased 183.7%, from 57.0c in the last financial year to 161.7c.
Raubex ended the year with a net cash inflow of R37.5m and total cash and cash equivalents of R1.01bn, up from R962.6m in 2019.
“We have been encouraged by a substantial increase in tender activity observed in the second half of the year and are hopeful that the relevant state-owned enterprises will continue to adjudicate and award these contracts as a means to stimulate the SA economy and create jobs following the Covid-19 lockdown,” said CEO Rudolf Fourie in a note to shareholders.
“The conditions in the SA construction sector are expected to remain challenging in the short term and the group will be required to manage a number of issues, including the excess capacity being carried in anticipation of future contract awards, relatively low margin contracts in the current order book and the unpredictable impact of Covid-19,” the group said.
In morning trade on Friday the share price of Raubex was up 1.74% to R16.99, having fallen 29.18% so far in 2020. The market continued to favour the stock through the day, closing at R18.55 a share, 11.08% stronger.
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