Masimba buoyant on construction sector

14 Sep, 2018 - 00:09 0 Views
Masimba buoyant on construction sector

eBusiness Weekly

Kudzanai Sharara
Construction company, Masimba Holdings Limited, recorded a double digit growth rate in revenue for the half year to June 30, 2018, boosted by a solid order book in the housing infrastructure, commercial buildings and civil engineering segments, the company said on Wednesday.

Masimba, which provides engineering and infrastructure solutions to the agricultural, commercial and corporate sector as well as housing, mining, public and water sectors, said revenue for the period under review grew 55 percent to $17,9 million while EBITDA jumped 88 percent to $1,3 million driven by operating efficiencies and growth in the top-line.

The growth in turnover was mainly on the back of a solid order book in the housing infrastructure, building and civil engineering segments. Commercial and industrial buildings contributed 43 percent of the revenue, while infrastructure contributed 28 percent, mining 15 percent and agriculture 14 percent.

Financial director Agnes Makamure said the company had witnessed a pronounced market shift to commercial and industrial buildings driven by a value preservation strategy in an inflationary environment.

The significant growth at both revenue and EBITDA level resulted in a 224 percent growth in profit before tax to $600 441 for the period under review. Basic earnings per share was up 289 percent to 0,23 percent.

Management said the confidence in new Government is likely to spur increased activity in construction.

The company said it is poised to take advantage of any level, in complexity, of infrastructure projects and is confident its business can grow to become a $70-$100 million revenue business in the not so distant future.

“I think from the figures that you have seen the growth trajectory that started three years ago remains on course and certainly in terms of the strategic direction we see ourselves operating within a $70-$100 million business,” chief executive officer Canada Malunga told analysts at the company’s results briefing.

“Everything else that we are doing in terms of capacity building is in view of our three-year strategic plan he added.

Malunga said the company expects mining, infrastructure, agriculture, project development to boost demand for its services. He added that the company has the capacity to take up bigger projects and the trend has been showing given the number of projects Masimba is now doing which have increased in size but decreased in quantity.

“From the capacity point of view, we are not concerned, because we see the industry becoming much more mechanised, compared to where we have been in the past, from being labour intensive. If anything, the constraint may actually be in labour expertise, but over the last years we have been building our skills.”

Business has, however, not been smooth sailing given what is happening in the trading environment which Malunga described as crazy.

“It is absolutely crazy in terms of where the exchange rate is. What it does in terms of material availability, in terms of spares availability, in terms of pricing thereof given that we have contracts, so we give contracts that we will deliver projects on budget, but then we have contracts that we will deliver projects on budget, but then the madness that we have, then it’s absolutely crazy.”

Malunga said even if escalation clauses form part of the contract, there are some areas where it will be difficult to talk of escalation costs, and these will be hard to recover.

He noted that internal inflation is in the range of between 30 percent and 60 percent across Masimba’s operating sectors.

“We are working really hard to make sure we try to mitigate those risks but it’s certainly not easy,” said Malunga.

He also noted that performance for the period could have been much higher, but some projects were suspended because of finance difficulties.

“The growth in turnover could have been by far much better but we have had a significant infrastructure project that was key to our 2018 performance that had to be suspended because of finance difficulties.”

He, however, said together with the client, they are looking at alternative finance as the project is still viable.

Going forward, Malunga said developments on the ground are positive and the economy is performing much better.

In reference to the new Finance and Economic Development Minister Mthuli Ncube, Malunga said although he was saying the right things and seem to be liked, the reality is “we actually want to see action.”

“But I think the one thing that we can’t deny, whether we like it or not, this economy is performing much better compared to where it was two years ago.

“Even before the new dispensation, there were already positive momentum from last year,” said Malunga adding that the amount of money in circulation has provided an incentive for businesses.

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