Feb 19, 2008:
South African construction group Group Five (GRF) on Monday reported a 45% rise in fully diluted headline earnings per share to 145 cents for the six months ended December from 100 cents a year ago.
An interim dividend of 45 cents per share was declared, up from 30 cents a year earlier.
Revenue grew 12% to R4,495bn from R4,004bn before, while operating profit – at R279,6m - was up 103% from a year earlier.
The group also generated R360m in cash in the six months under review.
Operating performance improved at all group segments except manufacturing, it said.
It added that the focus on improving the quality of the order book, improving contract execution and improving cash collections has delivered a robust performance, with the majority of the group's businesses showing an improvement.
The core business of construction posted an improvement in returns and construction materials performed well in line with expectations and delivered margin enhancing returns to the group's results.
Manufacturing activities were affected by slow first quarter sales and pricing pressures from imports.
Group Five formed a new joint venture in August 2007 with the Barnes Group of Companies - Barnes Reinforcing Industries - supplying rebar, weld mesh, brick force and binding wire. This operation has expanded and strengthened the group's manufacturing portfolio and supported the construction operations' drive to improve margins, it said.
The group further expanded its construction materials portfolio by acquiring 100% of plaster firm Sky Sands for R124m, with effect from 1 July 2007.
Sky Sands, which is involved in the supply of plaster and washed sand products to building materials merchants, the building industry and the pre-cast concrete products industry, has exploitable sand reserves estimated to be in excess of 25 years of production, together with further mining opportunities on the Sky Sands properties.
The acquisition complements the group's expansion and growth strategy in the infrastructure sector and assists in mitigating the risk of future materials shortages with respect to key building and infrastructure contracts, especially in the Gauteng market.
In addition, Bernoberg, a small niche manufacturer of cement extender, was acquired for R32m.
Bernoberg further diversifies the business portfolio in the construction materials supply sector and complements the existing product range. The Bernoberg acquisition was effective from 1 October 2007, it said.
Looking ahead, the group said the recent power outages have not materially affected Group Five's construction operations, as measures had already been put in place to address such an occurrence.
Short term risks to performance are primarily related to the effect on suppliers and the group's manufacturing operations, should the number of power outages worsen.
A detailed investigative risk review of all of the group's operations and construction sites has been completed and steps taken to mitigate the effect of outages.
The group continues to receive a number of attractive opportunities in local fixed investment spending. Mining, power and oil and gas activity in Africa also continues to offer high growth potential.
Group Five's total secured construction order book as at end December 2007 is R14,1bn (60% local) and the secured one year order book for F2008 is R7bn (62% local).
Management is satisfied that the group has access to sufficient resources to successfully execute the higher levels of activity ahead. – I-Net Bridge