Group Five records revenue growth for the six months to December 2012

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JSE-listed construction company, Group Five (GRF), today announced improved financial results for the six months to December 2012, group revenue increased by 15.9% from R4,4 billion to R5,1 billion. JSE-listed construction company, Group Five (GRF), today announced improved financial results for the six months to December 2012, group revenue increased by 15.9% from R4,4 billion to R5,1 billion.

JSE-listed construction company, Group Five (GRF), today announced improved financial results for the six months to December 2012, group revenue increased by 15.9% from R4,4 billion to R5,1 billion.

Headline earnings per share increased by 63.4% to 152 cents per share and fully diluted HEPS (FDHEPS) increased by 62.4% to 151 cents per share (H1 F2012: restated HEPS and FDHEPS of 93 cents per share)

Despite South African construction market conditions being tough, Group Five revenue was up 16% to R5.1-billion from R4.4-billion in the first half of the previous financial year, while the company’s order book also improved by 19% to R13.5-billion from R11.3-billion in the first six months of the year.

Net asset value rose by 8% to R20.16 per share from June. Cash and cash equivalents from continuing operations grew by R372m to R2.6bn from June 2012.

Commenting on the results, Group Five CEO Mike Upton, said the corrective action we took last year set the base for an improved performance, with all businesses underlying performance outside of Buildings in line with guidance provided in November. Markets remained tough, with the group continuing to implement the conservative approach previously adopted in terms of both the quality of the order book secured and our philosophy towards cash preservation to fund activity which will support future profit growth.

“We are therefore very encouraged by the improvement in the Contracting order book, with a good cash position supporting this strategy. The overall group earnings delivered during the period also demonstrates an improved performance over the comparable reporting period, with an increase in revenue traded and an overall operating margin percentage increase," said Mr Upton.

Mr Upton also said highlighted issues regarding Competition Commission enquiry, that the group wishes to respond to recent speculative media reports that have led to some confusion in terms of the markets’ understanding of the Commission's mandated process. As announced in 2011 already, the group adopted a proactive stance from 2008 in respect of the ongoing investigation by the Competition Commission into alleged anti-competitive behaviour within the construction industry.

The company also indicated that it experienced increased demand in the rest of the African markets in which it operated, particularly in mining, power and transport infrastructure.

Property Developments

The group continues to progress its strategy of disinvestment from the traditional residential sector in favour of securing A-grade commercial and retail property development positions. Some new projects started in South Africa and some progress was seen in West Africa in line with the group’s African strategy.

Construction

Construction continued to be the largest cluster in the group, contributing 75.5% to group revenue, up from 73.9%. Construction revenue increased by 18.5%, from R3.3bn to R3.9bn, and core operating profit grew 24.9%, to R139.1m from R111.3m.

The overall construction core operating profit margin was 3.6% compared with 3.4% in the first half of 2012. Over-border work contributed 37% — up from 29% — to construction revenue. Construction performance was affected by end-of-contract closeout losses in the Middle East. However, the move to cut back the Middle East operations was reducing the region’s drag on the group’s performance.

Group Five continued to focus more on Africa, where concession opportunities remained attractive, with tolling on the Zimbabwean roads projects set to start shortly and other new transport and power projects under development. The group was recently declared reserve bidder for the Mauritius Port Louis bypass project.

Group Five’s share price rose as much as 9% to an intraday high of R31.95 on Wednesday after it reported 62.4% growth in diluted headline earnings per share to R1.51 for the six months ended December.

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Construction Industry in South Africa  |  Group Five  |  Mike Upton