Group Five to sustain push for better margins

Posted On Tuesday, 19 February 2008 02:00 Published by
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Construction company Group Five said yesterday it would continue to focus on margin improvement, increasing real returns and cash generation by picking contracts carefully and monitoring risk closely as it moved into bigger, multidisciplinary contracts.

Construction IndustryCEO  Mike Upton said the group was in a solid position with its one-year order book reaching R7bn and its total secured construction order book at R14,1bn.

“Our results reflect the work we have done to balance our portfolio of core businesses, our competence in securing and executing large, multidisciplinary contracts in key sectors, and our mix of geographies in our areas of operation.

“Only the construction division put a damper on otherwise great results, but this was due to competitive imports,” Upton said.

Revenue grew 12,2% for the six months to December, to R4,5bn from R4bn in the previous first half.

The investments and concessions division contributed 7,5% to the group’s revenue and 9,3% to its operating profit. This was obtained mainly from the group’s operation and maintenance of toll roads and returns on its equity positions in concessions.

Revenue from property developments went up 37% while operating profit more than doubled at R13,8 m.

The manufacturing division was the only disappointment, contributing 7,1% to the group’s revenue and 6,9% to operating profit. But Upton said it was on track to recover and improve margins. The division’s operating profit fell 48,5% to R19,4m from R37,8m, resulting in operating margin percentages dropping from 14,5% to 6,1%.

Construction materials contributed 7,4% to group revenue and 26,3% to operating profit with revenue up R334,3m, generating an operating profit of R73,6m and a 22% margin, which was in line with expectations. Cash and cash equivalents for the period increased R360m to R989m, compared with an increase of R60m for the year to June.

Upton said acquired businesses of Quarry Cats, Sky Sands and Bernoberg Milling contributed to group earnings

The construction division, which consists of building and housing, civil engineering and engineering projects, continued to be a star player, contributing 77,9% to revenue and 57,5% to operating profit. Group Five is migrating resources from the building and housing sector to mega contracts that encompass all construction disciplines.

Construction revenue remained unchanged at R3,5bn, although operating profit rose 80% from R89,2m to R160,7m.

Coronation Fund Managers analyst Dirk Kotze said the results were good and came in as expected, although manufacturing was disappointing.

“This is a company in an expansion mode with plans to acquire more businesses. The positive thing about it all is that all but one division are doing well and cash flow is excellent,” Kotze said.


Last modified on Saturday, 12 October 2013 10:41

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