Economic boom sees Group Five performing well

Posted On Tuesday, 12 August 2008 02:00 Published by eProp Commercial Property News
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JSE-listed construction company Group Five yesterday reported a strong performance for the year to June, despite tougher trading conditions in the second half of its trading period.

Mike UptonIt was able to ride global stock markets turmoil, higher interest rates, a weaker rand and load shedding in the first half of the year thanks to a buoyant construction sector and its product and geographic diversification strategy.

“Against these factors, we believe our strategy of balancing our portfolio of businesses in targeted geographic spread where we have strong markets in African resources and high-growth economies in the Middle East made us much more resilient to the turbulence than before,” said CEO Mike Upton.

The group said revenue rose 16% to R8,9bn from R7,7bn in the previous period, while operating profit before fair value was up 62% as Group Five shifted its focus from private to larger public sector infrastructure projects and consolidated its operations abroad.

Fully diluted headline earnings per share increased 70% to 398c from 233c in the previous year. Disposal of its 3,5% stake in a highway in Hungary had resulted in the fair value adjustment of R111m, the group said.

Cross-border operations, including activities in the Middle East and eastern Europe as well as the rest of Africa, accounted for 34% of total revenue with the rest being generated locally.

Overall operating margin before fair value adjustments improved from 5,1% to 7,1% after all costs, and cash generated from operations rose to R1,8bn for the year to June.

Upton said the results reflected the group’s continued shift from a “pure contractor to that of a diversified construction services, materials and investment group with product and geographic diversification”.

The construction division remained the group’s largest revenue contributor, turning over 79,5% of total revenue and 60% of operating profit. The group reported a record 12-month construction order book of R8,5bn, a growth of 76% from last year, while the current total order book stood at R14bn.

Construction materials and investments and concessions respectively contributed 7,7% and 6,5% of total group revenue and 22,3% and 8,4% of operating profit.

“The construction market, especially in SA, is very healthy and likely to remain so for the foreseeable future in the key sectors in which Group Five has strategically positioned itself,” Upton said. “The opportunities in the order book provide us with the scope to choose higher-margin contracts, improve cash-flow management and maximise our allocation of resources.”

Internationally, Upton said the group would continue focusing on African resources and power markets and continued growth in eastern Europe and the Middle East.

In SA, it would pay particular attention to public sector spending in such areas as low-cost housing, infrastructure public-private partnerships, power generation, roads and water.

“The group has a clear strategy and a balanced portfolio of business diversification aligned to the markets we serve. Given this, we expect to continue on our growth trajectory next year, with strong earnings,” Upton said.

 

Last modified on Tuesday, 08 October 2013 10:22

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