Public-private partnerships slow, but still promising

Category: Business News

Date Added: 12 March 2010

SIMON MUNDY

Contributing Writer

BASIL Read chief financial officer Donny Gouveia said yesterday the construction company was “cautious about the amount of work coming from government” this year, despite public infrastructure contracts helping it achieve strong earnings growth in the year to December.

“We’re busy pricing a lot of tenders, but the roll-out of state projects has been slower than we expected,” Gouveia said.

The company had noted widespread delays to road construction projects as well as to a range of public-private partnerships (PPPs). “PPPs on prisons have been especially slow.” Gouveia suspected government construction spending was “on hold” until the conclusion of the Soccer World Cup in July.

But the company still regarded PPPs as an opportunity to secure larger contracts, with the combined construction value of its PPP bids placed at more than R15bn.

“There are not a lot of people who can put together a package for those; it’s a big part of our strategy, especially where hospital PPPs are concerned.”

Basil Read was particularly interested in the Chris Hani Baragwanath Hospital in Johannesburg, which is the government’s flagship health PPP project, and would submit a bid “in due course”.

Gouveia said Basil Read would not seek major acquisitions this year, although it planned to take over “a couple” of civil engineering companies in the Eastern Cape.

Its acquisitions last year included the R721m purchase of the TWP Group, which provides services to the mining sector.

Gouveia expected the new division to contribute about a fifth of group revenue in the present financial year, and to increase that share in future.

“All its work is for multinational mining companies.

“If the mining industry turns, and there’s another surge in the resources markets, TWP will be excellently placed to capitalise.”

The group was looking to expand TWP’s scope beyond mining, however, particularly through involvement in infrastructure projects.

Gouveia said Basil Read’s focus on road-building was to be thanked for its strong performance in a tough period for the industry. The company’s revenue rose 34% to R4,66bn, with headline earnings per share up 25% to 333,12c.

mundys@bdfm.co.za

Source: Business Day