Masimba Holdings to create construction opportunities

Malunga, right, with Tapera

Published: 10 June 2013

Masimba Holdings will focus on developing adequate long-term funding structures in order to help the group exploit developing opportunities in the country as well as to match long term requirements of the business, group CEO Canada Malunga told an analyst briefing yesterday.

"Essentially we have come to the realisation that our future is in our hands; therefore we can't wait for people to bring construction work to us. Rather, we must create the construction opportunities ourselves, we must go and build opportunities and convert that into order book," said Malunga.

Furthermore, he noted that the group made an announcement to the shareholders that "times are tough and the perceived risk profound of the company is absolutely high."

According to Malunga the $450 million project (rehabilitation of the Plumtree road to Mutare high way) which was snatched by Group Five in South Africa "could have been done by any other Zimbabwean company."

"Certainly they were very smart in terms of structuring that project."

He said available public projects are no longer about tendering only but they require "creativity, innovations, going outside of the box."

He added that the landscape is now about public private partnerships which are packaged with financing.

He indicated that the environment which they operate in is highly competitive since they have to compete with the likes of China and South Africa.

Malunga said their role as a Zimbabwean contractor "is firstly to identify the opportunities as they are and build partnerships."

"Certainly, as Masimba going forward we believe that we have got the capacity and the technical methods to be able to engage in similar projects.

"We also believe that this is the time for us to decouple ourselves from Murray and Roberts and be able to stand on ourselves," he noted.

Malunga said they are changing their year end from June to December in order to align their financial year with tax year.

Under contract prospects, the group has confirmed an order book of $33 million and is working on a turnaround strategy implementation.

"We are at the final stage of negotiating a potential contract that is in excess of $15 million; which is in a specialised industry as soon as we conclude the discussions in that particular product we shall advise you on the developments," he said.

The group will also focus on improving project supervision and execution as well as make use of the 66 000 square meters available for property development.

"We are also focusing on growing rental yield on investment property from 4% to at least industry average of 7.5%," he added.

Under manufacturing prospects Malunga noted that liquidity pressures are affecting demand from merchants and that water and sewer reticulation works in urban councils slowed down.

The group is also aiming at increasing exports to 10% of revenue from current 3%.

Group FD Michael Tapera said the group is pleased that their volumes are picking up.

Revenue for the group increased by 20% from $22.0 million in 2011 to $26.5 million in 2012, with manufacturing and construction contributing $8.8million and $17.6million respectively.

The group's operating profit recorded a 38% fall at $1 million and this was mainly due to the once-off restructuring cost as well as wage and utility cost increases.

"We have spent about $300 000 on restructuring, mostly employee related. What we are trying to achieve is flexibility in terms of our employee costs…" said Tapera.

He also added that the group is operating below the targeted capacity utilisation in both units with the manufacturing unit operating at 48%.

However, Tapera noted that there has been a higher growth in contracting revenues than manufacturing resulting in increased contribution towards total revenue from 62% to 67%.

"In terms of contracting objectives we achieved more because of some deliberate costs decisions that we have made in preparations for future initiatives.

"The contracts that we are now working on are short-term in nature compared to the previous year and our inventory loan levels have also come down slightly, "noted Tapera.

He said the group achieved to convert their short term borrowings into long term borrowings "which really is in line with the nature of this business."

"The group still has $11.2 million worth of unutilised facilities and that is the cornerstone of how the business is going to be structured, in terms of the financing of the business' operations," he added.

Commenting on mining, Malunga said; "There are concerns in mining in terms of the inconsistencies of government policies…we are calling for the restoration of consistencies of government policies… particularly in the mining sector."

The mining sectors' contribution to the group's revenue increased from 45% to 63% and there are liquidity constraints at government and other private projects which are contributing 33% and 4% respectively.

The group is also focusing on introducing new products.

"Come April this year we should be launching new products to ensure the competitiveness of the business," he said.

- zfn