South African construction group Group Five (GRF) reports a 74.4% rise in headline earnings per share before external black economic empowerment expense to 121 cents for the six months ended December from 69.4 cents a year ago.

An interim dividend of 30 cents per share was declared, up from 20 cents before.

Revenue increased by 37.7% to 4 billion rand and operating profit increased by 60.9% to 137.5 million rand. This resulted in the overall operating margin percentage improving from 2.9% to 3.4%, primarily due to an improved operating performance from the group's largest contributor - Construction - where the overall operating margin percentage improved from 1.8% to 2.7%, it said.

The group said it delivered a robust performance with the majority of the its businesses improving performances and Construction posting especially strong results.

Construction revenue increased by 39.1% 3.516 billion rand and operating profit by 102.4% to 93.3 million rand.

Over-border work contributed 52%, from 2005's 41.2%, to construction revenue, above the group's stated target of 33% due to the amount of opportunities currently experienced in Civil Engineering and Engineering Projects.

Building and Housing revenue increased by 22.5% to 1.9 billion rand, while operating profit increased by 45.4% to 46.8 million rand.

The secured order book for F2007 is 3 billion rand (72% local) and the one year secured order book to 31 December 2007 is 1.7 billion rand (92% local) which will facilitate moving the future unutilised capacity to areas of expected higher margin.

Civil Engineering revenue increased by 77.2% to 1.3 billion rand (38% local). Operating profit increased nearly threefold to 29.6 million rand, primarily due to the improved market environment locally and in Africa.

The total Civil Engineering order book for F2007 is 2.8 billion rand (29.8% local) and the order book to 31 December 2007 is also at 2.8 billion rand (21,4% local).

During the period the group sold its interests in the Saudi pipe business, the water and sanitation business, and the Vaal Sanitaryware and DPI Plastics businesses. It also exited its toll road operations and maintenance and concession business in India, for which a claim is being pursued against the Indian highway authorities.

The business refocus also resulted in the 750 million rand acquisition of Quarry Cats, a sand and stone supply, contract crushing and readymix supply business located primarily in Gauteng and for which all conditions precedent are expected to be fulfilled by the end of February.

The Quarry Cats acquisition will be margin-enhancing, but is not expected to have a meaningful impact on margins until the first half of F2008, it said.

The group is currently investigating a number of further opportunities and has launched a one billion rand domestic medium-term funding note programme on the Bond Exchange of South Africa to fund these potential acquisitions, as well as to eliminate expensive short-term debt and manage working capital, as the focus of Construction shifts from Building and Housing to Civil Engineering.

The first tranche of the bond issuance is expected to take place at the end of February.

Looking ahead, the group said it is well positioned to take advantage of the upswing in infrastructure spend in its identified target markets locally, in Africa and in Dubai.

The total secured construction order book for F2007 is at a record 6.5 billion rand (49% local) and the secured one year order book to 31 December 2007 at 5 billion rand (49% local). These order books exclude the effects of the group's preferred bidder status on the King Shaka Airport and new 2010 Durban soccer stadium.

"With the pending acquisition of Quarry Cats and the imminent raising of bonds, the group is gearing itself for significant future growth," it concluded.

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