Western Cape Business News

Send  Share  RSS  Twitter  20 Aug 2009

VENTURES: Construction Firms Still In Demand


Recent Western Cape Business News

TWO well known Cape Town-based construction firms - Civil & Coastal Construction and Civils 2000 - have recently sealed deals that suggest the Cape-based construction sector - has encouraging medium to longer term prospects.

And what’s more, a major JSE steel conglomerate, Argent Industrial, has expanded its presence in Cape Town markedly in anticipation of strong future demand.

The first deal saw empowerment group Vunani - headed by the well respected Ethan Dube - subscribing for a 40% shareholding in Tokai-based Civils 2000 via a special purpose vehicle called Pahana Investments. The deal value is R25 million, and will see Pahana subscribing for new shares in Holdco, which will be a newly created holding company for the Civils group of companies.

Pahana will be 51% owned by Vunani with banking group Absa holding the balance.

Civils 2000 was founded in 1992 and currently holds viable niches in civil engineering and construction sectors in the Western, Eastern and Southern Cape. The group’s clients include the public and private sector.

Civils 2000 is also involved in road-building (Road Smart Asphalting) and plant hire.

Vunani will make for an interesting partner for Civils 2000 as the empowerment group already has extensive interests in the wider construction/building sector. These would include interests in building materials supplier Illiad, steel group BSI, brick-maker Brikor and civil engineering group Esor.

Interestingly, Vunani recently also acquired a 30% investment in Solethu Investments, a black-owned investment group focused on investments in road, rail, sea and related sectors. CBN recently reported that Solethu had bought a strategic stake in Racec, a Cape-based rail and electrical engineering specialist.

It seems Vunani is keen to push Civils 2000 beyond its traditional ‘Cape’ markets.

At the time of the Civils 2000 deal, Vunani indicated a willingness to work with management to identify new project opportunities outside of its current geographical focus.

One specific development from the transaction is that Civils 2000 will be able to use the funds received from Vunani and Absa to upgrade its current category 8CE Construction Industry Development Board certificate to a 9CE certificate. Basically, this means Civils 2000 can tender for larger public work - something which could increase revenue and fatten trading margins.

The second transaction saw JSE-listed Stefanutti Stocks Holdings (Stefstocks) snapping up a 49% stake in Civil & Coastal Construction (Civco) by buying out shares held by directors Greg Moore and Simon Allen for R57.5 million. Stefstocks now owns 100% of Civco after buying an initial 51% interest in 2007.

Civco, also founded in 1992, specialises in marine civil engineering design and construction activities and also concrete repair and rehabilitation throughout the Western Cape (and Angola).

Stefstock’s acquisition of all of Civco should considerably bolster the group’s Cape profit markedly. At last count Stefstocks generated around R850 million of its R6.2 billion turnover in the Western Cape. Profits from the region came in at R48 million - representing just over 15% of Stefstocks’ total profits of R319 million.

Our third development sees Argent Industrial considerably expanding its steel supply footprint in the Western Cape.

The group’s Phoenix Steel subsidiary opened branches in Cape Town and George in June, while its stainless steel supplier, Gammid, increased future capacity by purchasing a 6 000 sq m warehouse in Cape Town.

Argent says the new Cape Town premises - situated on a 20 000 sq m stand - will ultimately be used to expand the capacity in the future.

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