Johannesburg - O-line Holdings, an AltX-listed cable management and structural support systems supplier, considers moving to the main board of the JSE in 2010.
"I must admit we have been playing around with the idea. Maybe next year we'll look at the main board. It all depends on where we are and what the economy is doing," O-line CEO Graeme Smart told Fin24.com on Thursday, after the release of the group's interim results to end-December 2008.
"It's a question that's often come up. After the acquisition of Armco, everyone said it's time to move across."
O-line acquired Armco, a provider of structural support systems, in June 2008 for R142m.
O-line manufactures carrying systems for high-powered cables, both commercially and industrially.
In offices, the systems take the form of power skirtings and special power poles mines, Smart explained. In mines and petrochemical plants, O-line provides carrying systems that look like railway tracks.
In addition, the group - through Armco - also does structural support systems, galvanizing, construction products, road safety products and signage.
"Like the barriers in the middle of the roads and the crash cushions motorists see at toll-gates," Smart said.
Some of its clients include miners Anglo American, Impala Platinum, Exxaro and Kumba Iron Ore, as well as the SA National Roads Agency, construction firms Grinaker and Group Five.
O-line's interim revenue had increased by 41% to R118.2m for the six months to end-December, while earnings before interest and tax grew by 75% to R18.969m. Net profit rose by 80% to R18.73m.
Its gross margin increased from 34.17% to 35.53% due to lower raw material prices, steel in particular. Headline earnings per ordinary share increased by 28% to 8.56c.
Smart said growth was driven by government infrastructure.
"We benefit from government infrastructure spend, and we're busy with stadiums, the Gautrain process and the roads."
Focus on Africa
Smart expects to be involved in similar projects for the next seven years. "We see it going on; if not here in SA, we'll target any country that does infrastructure expansion."
At present, most of the focus is on Africa. "Business is good and the rand/dollar exchange rate works in our favour," he said.
The group has worked in Zambia, Zimbabwe and Ghana. "We recently started supplying work to Mauritania (in north-west Africa) and we anticipate our next project to be in Burkina Faso (in west Africa). It's really going right up north, further than we've been before."
As predicted, demand for the full spectrum of O-line's products has remained strong, although a slight drop in the third and fourth quarter is anticipated.
Already, the group has seen a slowdown in the mining industry, specifically in platinum, as demand for commodities drops amid a global recession. Contracts in the platinum sector have been shelved as a result. However, the group is still working with mines in the gold, uranium and coal mining sectors.
Smart said the group will regain lost contracts from international interests, as companies and mining houses from Australia and Canada are coming into Africa to do other mining projects outside the platinum sector.
One advantage of the commodity slump is the fall in the price of steel - one of its biggest input costs. Smart expects the price pressure to continue for "a short period of time".
The group isn't looking at any acquisitions for the remainder of the financial year.
"We've barely bedded (Armco) down." Regulatory and international reporting issues have prevented the company from integrating Armco's results. "We've only finalised these regulatory issues in December, so the contribution from Armco was minimal, but in the next six months we do expect the business to play a strategic role in the contribution to the financials."
Looking at the next six months, Smart expects revenue to reach R500m, although the market could see "a couple of surprises".
"We have a couple of tricks up our sleeve that we hope will materialise."
He cautioned, however, that the company is unsure what the full impact of the global meltdown will be on the company. "But we are prepared for it."
- Fin24.com