ENERGY: Impressive Turn Around At Solethu
Recent Western Cape Business News
WHEN the Cape Town-based Racec Group last year sold its electrical interests it had good reasons for doing so, mainly because the financial returns for the group were not exactly sparkling. Some showed heavy losses.
Interestingly there is one outstanding turn-round success story: Solethu Energy (which prior to the buy-out in August last year traded as Racec Electrification) now reports healthy cashflow on profitable business.
Operational director Neil Morris says the change in fortunes for the Cape Town-based company came about not only because of a healthy order book (because of keen competition margins remain slim though), but also thanks to the opportunity Solethu had to substantially cut group costs. The streamlined overhead management top structure together with substantially reduced admin costs – as part of a JSE listed group – and more effective debt collecting procedures, cashflow is much healthier, according to Morris.
As a completely independent operation Solethu Energy has maintained all capabilities at the time of the ownership change. These include electrical reticulation, metering and vending, distribution and the build and maintenance of electrical substations. It is also heavily involved in overhead transmission lines, road and area lighting and the maintenance of electrical networks. All of this translates into much improved finances, with the company’s sales forecast for the year ending December 2012 projected at R150 million, compared to the R90 million in the previous year.
What’s more, Solethu is planning on expanding its operations - mainly in three areas. Firstly, existing business and clients are being vigorously serviced but in addition to that, the company is placing a heavy emphasis on servicing the blossoming renewable energy sector. To this effect is has appointed additional engineers and other staff. Thirdly, it is also planning to expand its range of service offerings to countries outside South Africa.
Some of the work currently in hand include the installation of medium- and low-voltage electrical network at Lerato Park in Kimberley (R35 million) for 740 low-cost houses, turnkey projects (R30 million) for Eskom, mainly installing overhead lines and the upgrading of two substations (R10 million) in Bloemfontein.
Morris points out that the company strategy is also driven by having major contracts as well as ensuring there is an even spread of small to medium projects. The risk implications are obvious.
In order to keep taking on the highly competitive market, Solethu has retained all the important business ratings such as CIBD, 8EP and 5EB. It is also ISO 9001:2008 certified.
For those interested in the new ownership of the company, the shareholding is as follows: Ted Zulu, the driving force behind Solethu Investments being a major shareholder, Siyabonga Buthelezi and Neil Morris, who previously was GM at Racec Electrification.
It seems to be a happy marriage, with the right recipe for business success.
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