Zumbani in for long-term

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Masimba Holdings’ major shareholder with a 47% stake, Zumbani Capital, has said it is a long-term investor who will not be chasing after dividends and cash but would like to grow the firm in order to fit it within the broader strategy of infrastructure development.

Zumbani Capital acquired a 47% stake in Masimba, formerly M & R, previously held by Trinvest Investments and Murray & Roberts Limited of South Africa. The deal went through at 1.47US cents a share, a 79% discount to the then trading price of 7 US cents a share.

Speaking at the lauch of the Masimba brand recently, Zumbani Capital’s Sammy Sithole said: “I am excited about the prospects as it brings together the appropriate mix of Zimbabwean talent and offshore capabilities that are key to enabling the group to prosper and fully exploit opportunities in Zimbabwe and the region.”
Sithole said Masimba would explore regional opportunities even in South Africa where it could easily link these up with Zimbabwe.

An executive with Murray & Roberts South Africa, Yunus Karodia, said the decision to offload M & R Zimbabwe was necessitated by the fact that the unit was more focused on manufacturing rather than the group-wide mainstay on construction.

“It no longer fitted with the group’s expansion plans into Africa and the Middle East. However, we sold our stake to investors whom we believe have the capacity to carry the group into the future and create shareholder value,” said Karodia.

Masimba CEO Canada Malunga said there was no translation for the company except that it pointed to remarkable reputation and excellent service delivery.

He said the group would have an increased focus in construction and infrastructure and expected to benefit from the anticipated growth. He said the construction division had capacity to turn over US$60 million with the current overhead structure.

At the analysts’ briefing held recently, Malunga said civil works and construction had traditionally been the company’s revenue driver, accounting for 67% of the US$26,5 million annual revenue, up from 63% prior year. Group revenue grew 20% in 2012 from 2011, but was 2% below the budgeted US$27,9 million “as a number of construction projects took off much later than anticipated,” Malunga said.

Contracting business made a gross profit of US$2,2 million compared to US$1,2 million prior year after a incurring US$15 million in cost of sales. In terms of gross profit contribution, the unit accounted for 49%, up from 35% on account of improved recoveries due to improved capacity utilisation.

The contracting client analysis showed the major clients were from the mining sectors, followed by government and then private customers with a 63%, 33% and 4% contribution in 2012 respectively.

Low levels of gross capital formation in Zimbabwe’s economy were reflected in the subdued performance of Masimba Holdings.

There is simply no sustainable level of funding to support public works and this situation should prevail for the foreseeable future. Masimba is a stock for the long haul, the dilapidated national infrastructure such as roads and water reticulation needs to be redone and this presents enormous opportunity for Masimba.

However, the large projects may remain the preserve of the big international contractors who are also able to mobilise funding for the large projects. Already foreign contractors have taken advantage of this funding problem locally when Group Five took the rehabilitation of the Plumtree – Mutare Highway which was bundled together with the funding, resulting in local players being relegated to subcontractors.
However, under current procurement laws, 25% of construction projects must be handled by local contractors and Masimba should take advantage of this.

Going forward Masimba Group anticipates that its construction order book will grow steadily. Malunga said the company was in the throes of negotiations for a US$15 million contract to be concluded soon.

The ongoing group restructuring should result in a leaner head office structure, reducing overheads. Management also said his company would target larger projects rather than numerous small projects. This would result in greater efficient use of management time and plant and equipment. However, these were medium to long term plans.

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