The valuation of a substantial track of developable vacant land with the potential for township establishment poses special challenges to property valuers.

Friday, 07 August 2009 02:00

A firm foundation

Stephen Pell has his job cut out. The head of Stefanutti Stocks building unit is at the centre of the majority of the activity around the recent corporate merger.

Stephen PellA large part of the R1,1bn merger between the construction groups Stefanutti & Bressan and Stocks is taking place in Pell’s unit. That is because Stocks was largely a building business with a small civil engineering operation. So the essence of the 2008 merger that created the R6,3bn Stefanutti Stocks is being experienced in the building business unit.

Pell entered Stefanutti Stocks from the former Stocks, whose building operations had spread across the Southern African region and the Middle East. Pell says the merger was attractive because it provided good synergistic operational and cultural blends. He says the old Stefanutti & Bressan had its roots and a strong building base in KwaZulu Natal, whereas the former Stocks was stronger in other regions. The combined operation has produced a geographically diversified and strong entity, he says.

The new building unit spans a number of sectors that include the residential and commercial markets. The unit recently concluded work on the prestigious One&Only, the luxurious new Cape Town hotel undertaken by hospitality mogul Sol Kerzner. The group was also in the joint venture that won the R1,4bn expansion of the Cape Town International Airport and the R500m extension at the OR Tambo International Airport.

The unit also contains a focused housing operation, which operates mainly in the affordable housing sector. A large portion of the housing development work is from mining and industrial linked developments, as well as some private developers. This operation does, however, have the ability to operate in the low-cost RDP arena.

The building market is going through a lull due to the global economic meltdown, but Pell is confident that his division is well positioned. He says the merger has retained the entrepreneurial vibe, backed by a bigger operation. “Size does matter,” says Pell. “We are beginning to see the benefit by being recognised more often in larger projects.” Stefanutti Stocks’ building unit is probably within the top four in terms of size in the Southern African region, he says.

Pell says the group has successfully dealt with integration issues and more specifically the people factor. “This was important to us as it speaks to the strategic objective of the company. We want to be the best in our market by delivering quality service, on time. The only way we can achieve this is to ensure that all our people exude enthusiasm and proactiveness towards all our clients and customers because that will be our critical differentiating factor.”

Though the local building market has gone quieter, Pell sees growth opportunities, which can be derived through offering clients extra value. He says in such a tight market, Stefanutti Stocks’ black economic empowerment (BEE) credentials will add to the competitive edge. Stefanutti Stocks boasts the best empowerment credentials in the construction sector of the JSE. It was recognised as a leading BEE player in the FM’s 2009 Top Empowerment Companies survey.

Pell also sees opportunities for growth in the Middle East, where his unit maintains a fair amount of exposure. “When we talk about the Middle East people focus on Dubai,” says Pell. The region is bigger than Dubai and offers opportunities in places like Abu Dhabi, Bahrain and Qatar, he says. “Our Middle East operations include interior fit-out and refurbishment business Al Tayer Stocks and the electromechanical business Zener Steward. We have also recently announced that we intend to start up a general construction operation focused on the infrastructure market in the Middle East, which will be an area of growth to us in the long term.”

Pell also expects work to flow in from the broader Southern African region. The group has satellite offices in Swaziland, Botswana, Zambia and Mozambique.

He says that though building margins remain tight, the group is expecting an increase in business. He says the order book is geared to remain solid into 2010 and beyond. The unit will rely on its geographical diversification to navigate the market.

The building unit derived 20% of its total 2009 financial year revenue of R2,7bn from foreign operations. This is projected to reach the 35% mark in the near future. The backing of an enlarged group also promises synergistic opportunities.

 

 

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