Group Five says African story moving beyond mining

Posted On Wednesday, 30 November 2011 02:00 Published by Commercial Property News
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Group Five says that the African story has started to stretch beyond mining for the group, while the outlook in SA remains challenging.

Mike Upton Group FiveConstruction firm Group Five says that the African story has started to stretch beyond mining for the group, while the outlook in SA remains challenging.

Speaking at the group's offices in Woodmead on Tuesday, CEO Mike Upton said the local market appeared to be starting to bottom, however uncertainty and risks were set to continue for longer.

"The African story is starting to go beyond just mining," Upton said, noting that in building and housing, the group had re-entered central and west Africa, while three projects were being executed in Zambia.

In SA however, in Gauteng, the private sector remained "exceptionally competitive," while KwaZulu-Natal was more buoyant than the Cape.

In its Civil Engineering department, in SA, Group Five said that awards remained low, with many projects being delayed, while timeframes on secured work was being extended. A very competitive bidding environment also put pressure on margins, it said.

In Africa, Group Five said that it had bid on a number of projects and expected to "remain busy". It hoped that transport would increase with concessions gaining traction, while the water sector was also expected to tick up.

In the MENA region, the group said that it had bid for projects in Qatar, Jordan and Saudi Arabia as markets to watch, adding that large volumes in infrastructure was expected in Saudi Arabia, and Qatar leading up to the 2022 World Cup. "It does have legs," Upton said.

On a local front, Upton said that the government was failing in terms of its infrastructure policy and delivery.

He highlighted the trillion-rand SA infrastructure budget, and stressed "backlogs and bottlenecks have to unlock. SA is desperately short of infrastructure. That is SA's weakness in terms of growing faster."

Group Five said it aimed to be less reliant on the SA economy, expanding its geographic footprint to at least 40% of revenue outside of SA. Currently the group is in 24 countries, with 34% of its construction order book over-border.

For building and housing, the group noted an order book of R3.07 billion for August and a 75%/25% SA/cross border split, which increased to R3.3 billion and a 77%/23% split in October.

For civil engineering, the order book declined to R3.5 billion in October, from R3.7 billion in August with the split at 53%/47% SA/over border in October, from 58%/42% in August.

Its engineering order book in October stood at R2.2 billion, with a 68%/32% SA/over border split, from R2.055 billion in August at an 83%/32% SA/over border split.

The Group order book at the end of October stood at R9.058 billion.

The group underlined its multi-year target opportunity pipeline at R138 billion as at September 2011, however it pointed out that this work had not yet been awarded.

Looking ahead, Group Five said that margins were still under pressure, and were unlikely to improve until F2013. Market conditions and the group's order book were expected to improve from H2 F2012, it said.

Upton said that cash preservation would be a priority to fund growth. "We have to run this business for the future," he said.

For the full year 2011 Group Five reported cash in hand at R2.2 billion, down from R3.1 billion in 2010, and a total operating margin of 5.4%. Revenue declined 19% to R9.2 billion for the financial year 2011.

In afternoon trade on Tuesday, shares in Group Five gained 16 cents to R22.52, having reached a year best in December 2010, of R39.53, and a year low of R21.80 October.

Last modified on Thursday, 27 June 2013 21:15

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