Significant loss of value in the JSE-listed construction sector segments in 2018

ALL SEGMENTS of the listed construction sector, including contractors, suppliers, retailers and property funds, took significant knocks to their value last year, according to an analysis by market intelligence firm Industry Insight.

The latest company results monitoring service (CRMS) index compiled by Industry Insight revealed that the overall index was driven down by all segments of the listed construction sector.

The index lost 18 percent in value last year, compared to the JSE all share index’s 12 percent loss, its worst performance since the global financial crisis.

Industry Insight said contractors lost 12.2 percent in value, with two out of the nine firms, Basil Read and Esor, going into business rescue, and others “on the brink”.

It said it was a similarly bad year for suppliers, which lost 17.4 percent in value, with the collapse of Distribution and Warehousing Network (Dawn), the listed manufacturer and distributor of plumbing and hardware brands, the most notable event.

The firm offer from Polanofield, owned by former Dawn chief executive Derek Tod and Gonsalves Baeta, to acquire Dawn’s entire issued share capital by way of a scheme of arrangement for R5.8 million was supported last year by Dawn’s board, major shareholders, bankers, insurers and landlords.

Industry Insight said construction-based retailers and property funds, which funded much of the built environment, also lost considerable value throughout the year.

It said the CRMS index, comprising hand-picked Industry Insight listed companies on the JSE that were direct stakeholders in the South African construction industry, was flat last month.

Industry Insight said last year that it could arguably be considered an “absolute mess” for listed contractors.

“Overall, contractors collectively lost 12.2 percent of their market capitalisation according to the contractors’ index, which is weighted by the size of the company.

“This is actually not as bad as one would have initially thought, as this is more or less in line with the overall JSE.

“Many contractors were, however, already coming off a low base, as share prices more than halved during 2017 in some cases and 2018 was the year where it just all fell apart for some,” the firm said.

Industry Insight said both Basil Read and Esor entered voluntary business rescue last year, adding Aveng and Group Five were “not far off”, with their share prices contracting by 97.5 and 98.4 percent, respectively.

The firm said Murray & Roberts (M&R) and Stefanutti Stocks were the only contractors to see their share prices increase last year. M&R’s share price increased by 19.3 percent and Stefanutti Stocks’s by 59.1 percent.

With the cement industry coming under increased pressure, Sephaku was another disappointment last year, with its share price down a considerable 37.1 percent, it said.

The share price of steel maker ArcelorMittal declined only by 12.4 percent last year.