Construction and infrastructure company Group Five (GRF) reported a 13% rise in headline earnings per share to 43.5 cents for the six months ended December 31 2003 from 38.5 cents previously. An interim dividend of 15 cents per share was declared, up from 14 cents before.

The increase in earnings came despite a 3% decrease in revenue to R2.05 billion from R2.12 billion before.

The increase in earnings per share represents the fourth successive period of earnings growth, the company said.

During the review period the Rand continued to strengthen, adversely affecting cross-border revenue by R100 million and resulting in exchange losses of R18.3 million.

In spite of these adverse external conditions, operating profit increased by 13% to R71.9 million from R63.7 million before.

Commenting on the results Group Five CEO Mike Lomas said tough market conditions prevailed during the period, with infrastructure spend coming down primarily in the resources sector as the rand strengthened.

"Group Five's strategy of restructuring into a properly positioned, broad-based portfolio of businesses to buffer adverse market conditions in any one sector has served us well. We are therefore pleased to report increased operating profits and earnings per share, primarily as a result of the strong performance in our manufacturing division where operating profit margin was up by 169%."

Construction revenue, which represented 75% of Group revenue, decreased by 8% to 1.5 billion due to the effect of the strong rand on cross-border contracts and the general slowdown in infrastructure spend. Operating profit decreased by 30% to R28 million.

After adjusting for the fluctuation in exchange rates, the underlying operating profit in construction showed a 10% improvement.

Building revenue and operating profit both increased in line with expectations due to successfully executing both local and cross-border contracts.

As expected, Roads revenue decreased following the downsizing of its activities. In addition, operating losses persisted on a number of contracts, which have now been completed. The full effect of the downsizing will become evident during the next six months, with a reduction in revenue and the level of capital employed.

Civils was affected by the decline in mining infrastructure spend, which led to a decrease in revenue. However, operating profit remained constant due to increased contract efficiencies.

Engineering is heavily reliant on the resources sector and, because of project deferments and cancellations, both revenue and operating profit were adversely affected.

Manufacturing revenue, which represented 17% of Group revenue, increased by 13% to 359 million rand. The increase in revenue, coupled with significantly improved performances by all manufacturing activities, resulted in an improvement in operating profit of 169% to R35 million.

Everite Building Products achieved growth in operating profits during the current period compared to a loss in the comparative period.

Vaal's revenue remained constant, although operating profit continued to increase due to the introduction of upgraded technology and ongoing factory efficiencies.

DPI Plastics increased both revenue and operating profit significantly. This was achieved through increased sales by the company's black economic empowerment joint ventures and lower than expected raw material costs.

Operations and Maintenance revenue increased by 39% to R147 million mainly due to the improvement at Intertoll where both revenues and operating profits increased substantially.

Infrastructural Development Services was adversely affected by the deferment of major projects in the mining sector. Revenue decreased and operating profit was significantly down, as all project related costs incurred during the period were written off. To address this, the business unit will be diversifying to include clients outside the mining sector.

Looking ahead, Lomas said the group does not expect a turnaround in the resource sector in the short term and its Civils and Engineering operations will therefore continue to be impacted by the deferment of projects and infrastructure spend.

"However, we continue to focus on other opportunities in Africa and the Middle East and look to explore opportunities locally for Building and Roads," he said.

"With an order book of R3.1 billion, continuing improvements in our Manufacturing operations and a strong broad-based offer we are well positioned to achieve meaningful earnings growth for the full year," concluded Lomas.