Basil Read Holdings CEO Marius Heyns has successfully completed the group's three-year turnaround, from a R42m loss-making operation in 2004 to operating profits of R170m for the year to December 2007.
For the diversified construction group - offering services in building, civil engineering structures, roads and opencast mining - it is now time for the next phase of its long-term development strategy. This entails growth through offshore acquisitions, signing up bigger and more profitable projects, private/public partnerships and an unbundling of the opencast mining operations.
WHAT IT MEANS
 Offshore acquisitions are on the cards
Target is R5bn annual turnover by 2010
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Heyns is set on accomplishing serious growth over the next few years, which should result in the group nipping on the heels of its larger listed competitors.
One of Heyns' key goals is to make a serious acquisition in Europe or the UK. "Besides some opencast contract mining in neighbouring countries, we have no global presence.
"We will target similar listed or unlisted companies and replicate ourselves offshore. Our sights are set on operations in developed countries that are just an overnight flight away and in the same time zone."
Any Basil Read acquisitions will be funded using an optimal combination of equity, corporate bonds and cash.
"We don't want our earnings to be heavily diluted through large issues of shares and we want to stay close to our conservative debt/equity ratio of 0,5:1." But Heyns says that as the profile of the group changes through acquisitive growth, it will be possible to gear up further, moving closer to the sector debt/equity norm of 1:1.
Though Heyns is adamant on making an acquisition soon, he won't overpay for his purchase and is willing to look at companies on after-tax p:e ratios of between 8 and 15.
"Preferably in the 8-10 band, but it depends on the strategic value of the target. Construction margins in the EU, at around 2%-2,5%, are significantly lower than in SA. But we will certainly be willing to pay a premium for invaluable skills and foreign exchange earnings. The acquired entity would then be fully integrated into the Basil Read group."
A second strategy in this growth phase will be to look at bigger projects than those currently being developed.
"We will look at projects with higher risk but also higher margins, where there is less competition, and not only in SA. The approach would be to partner with financially secure clients," says Heyns.
A perfect example of this would be Basil Read's recent bid against foreign competition for the construction of a new £200m-plus airport project on St Helena Island - about 2 400 km northwest of Cape Town - at present only accessible by ship.
The UK government is the potential client and the process is sitting with two closed bids after a lengthy three-month tender project.
However, if Basil Read is unsuccessful, it will still recoup some of the extensive bid costs incurred.
The third approach is through greater use of higher margin private/public partnerships such as toll roads, government buildings and prisons.
The format here is that the group designs, constructs, maintains and manages the assets in question through a fully financed model that includes treasury guarantees.
With Old Mutual Investment Group as an equal partner, Basil Read will be developing a township in Doornkuil, south of Johannesburg, modelled on Cosmo City's mixed-use integrated model.
The fourth strategy is a separate listing of the group's opencast mining interests. Heyns says this division carries higher risks than other operation in the group. "It is extremely capital intensive and operations can be stopped on short-term notice from the mining company clients."
After the unbundling, Basil Read would remain on as the majority shareholder as the sector continues to promise good returns.
His ultimate goal for the Basil Read group is a R5bn annual turnover by 2010.
