ENGINEERING: Racec Shows Strong Growth
Recent Western Cape Business News
RACEC Group, the Cape Town-based rail and electrification infrastructure solution company, released its interim results for the six months ended 31 March 2009 which reflect 29% growth in revenue to R188,4 million (2008: R146,3 million). Net profit before investment revenue, finance costs and taxation increased by 31% to R13,6 million (2008: R10,4 million) with the gross margin increasing to 23% from 19%.
“We have continued to deliver solid organic revenue growth in line with our strategic imperatives as infrastructure investment flows across our target markets remained strong,” commented Charles Harrod, Chief Executive Officer, RACEC Limited. “The two strategic acquisitions which were finalised in 2008 also contributed to the robust growth which we achieved.”
Diluted headline earnings per share remained constant at 6,6 cents (2008: 6,6 cents) as the fully diluted weighted average shares in issue increased to 104,4 million (2008: 100,0 million) to fund the acquisitions.
With regard to RACEC’s good cash flows from operating activities which increased to R15,5 million compared to cash utilised of R26,0 million for the comparable period, Harrod explained that “we successfully translated the increase in operating performance into cash while our focus on tighter working capital management also paid off.”
The net asset value per share increased by 30,5% from 45,3 cents in March 2008 to 59,0 cents.
RACEC Rail delivered a 5,4% increase in revenue to R68,3 million (2008: R64,8 million). Although it is well positioned as the only specialist in the country with complete turnkey rail track capability, the division was impacted by lengthy adjudication processes among parastatal companies. RACEC Rail is currently involved in a number of cross border opportunities and is actively expanding its footprint into Sub Saharan Africa. This will counteract the long lead times on projects and should dampen the impact of the global economic downturn in the local market.
RACEC Electrification continues to report excellent growth with revenue rising by 47,3% to R120,2 million (2008: R81,5 million). Electrification includes the operations of Greenbro and Northern Electric which were acquired in 2008, both of which were profitable for the period under review. Although a number of anticipated projects did not materialise during the six months under review, RACEC remains confident that they will still be undertaken in the near future. These projects, along with Government’s ongoing commitment to infrastructure investment, positions RACEC Electrification to achieve growth in the next year.
On 18 June 2009, RACEC announced the details of an agreement reached with Solethu Investments, a black economic empowerment investment company. Solethu, through its wholly-owned subsidiary, Solethu Civils, will acquire 25% of RACEC Group. The transaction is valued at R45 million and will be facilitated with the issue of 34,6 million new shares at a price of R1,30 per share.
Solethu is strategically positioned in the rail logistics industry with solid experience in road, rail, sea and related industries. Through this new partnership RACEC will deliver on its strategic imperative of becoming a leading provider of rail and electrification solutions while enhancing its transformation imperatives by introducing a substantial black shareholder to the listed entity, RACEC Group.
“As a result of the continued uncertainty in the local economic environment and the delays which we are seeing on project awards, we anticipate more subdued activity in the second half of the financial year”, concluded Harrod. “However, we are confident that RACEC remains well positioned to show sustainable growth in the longer term. Spending on infrastructure upgrades will continue in our target markets and we are actively pursuing opportunities to diversify our revenue streams.”
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