Aug 31, 2012
Group Five keen to accelerate African expansion beyond civilsBack
Construction|Engineering|Tshwane|Africa|Civils|Eskom|Housing|PROJECT|Projects|Renewable Energy|Renewable-Energy|Resources|Africa|India|South Africa|Building|Energy|Maintenance|Mining|Power Generation|Power-generation|Real Estate Sector|Service|Transport|Eric Vemer|Mike Upton|Power|Operations|Middle East
© Reuse this
It was a year that saw the company attempt to wrap up legacy projects in the Middle East and India, as well as close down a loss-making construction materials division.
When balancing out profit from conti- nuing operations at R223-million and loss from discontinued operations, such as construction materials, at R453-million, the JSE-listed construction group reported a net loss of R230-million for the year, following on from a loss of R159-million in the 2011 financial year.
Recording revenue of R8.78-billion for the year, Group Five’s operating margin dropped from 6.9% in the 2011 financial year, to 3.8% in 2012.
The civil engineering business, part of the construction division, took a heavy beating, at a –1.1% margin. However, should the troubled Middle East projects be stripped from this business’ results, the margin was 5.6%, says Upton, “well in line” with the group’s target of between 4% and 6%.
“The underlying business in South Africa and Africa is very healthy.”
Possibility of Improvement
Looking at civil engineering prospects in South Africa, Upton says despite tough conditions remaining, there exists the possibility of improvement. He says tender activity has picked up, but that “pricing is still tight”.
Africa has seen strong growth in the resources and transport sectors, adds Upton. The group also secured 13 new mining construction contracts on the continent in the 2012 financial year, with one power plant contract in progress, and one to start in the 2013 financial year.
Upton believes there is a strong market for the building and operating of assets in Africa, especially in the transport market.
He adds that Group Five has pretty much wrapped up work in the Middle East for the foreseeable future, with one active contract remaining.
“We want to drive our Africa plan,” he notes, not only for civils, but also for the rest of the group.
Around 57% of Group Five’s current R4.4-billion civil engineering order book is outside South Africa, with 99% of this in Africa, says Upton.
In the building and housing business, 5% of projects are outside South Africa, with the projects business, also part of the construction division, at 63% over- border activity, with Upton aiming to take this to 75%.
Group Five’s one-year construction order book was at R8.39-billion at the end of the 2012 financial year, which was 117% of its 2012 revenue.
Total order book was at R11.3-billion, with 62% of this in South Africa, and the remaining work spread across Africa. Around 23% of the order book was in the real estate sector and 24% in the transport market.
At 38% of total order book cross-border, up from 30% in June 2011, the aim was to reach 40% soon, says Upton.
A new order book for Group Five is a multiyear operations and maintenance order book, which stood at R4.85-billion for the year ended June 30.
Upton says the group expects to increase this annuity type revenue stream through the addition of power and service accommodation projects.
When considering the 2013 financial year, Upton expects an improved performance from the company.
Group Five currently employs some 10 400 people, down from a peak of 14 000 during the construction boom four years ago.
Patience Required for Renewable Energy, PPP Projects
There are still “some frustrations” on South Africa’s PPP and REIPPP projects, especially in terms of the time it is taking, but Group Five is “not negative”, says Upton.
Through the REIPPP, the Department of Energy aims to procure 3 725 MW of capacity, which could be introduced into South Africa’s power generation mix between 2014 and 2016.
The department said in July that the schedule and capacity allocation for the third bid window under REIPPP would be confirmed soon, despite the delay to finalise the 28 window-one projects.
Upton tells Engineering News that the REIPPP process appears to be bogged down by its complex nature, requiring the input of a multitude of stakeholders, such as the Department of Energy, Eskom, Treasury and many others.
Each project is also unique in terms of technology, structure and funding, adds Upton.
“We were told that the first project would be signed in late August.”
The PPP process is facing a similar complexity delay, notes head of Group Five’s investments and concessions divi- sion, Eric Vemer.
Group Five is the preferred bidder to provide serviced headquarters to the City of Tshwane and the Department of Rural Development and Land Reform (DRDLR).
“We have to align the interests of a number of parties,” says Vemer.
While the parties are “best aligned” on the DRDLR project, achieving the same on the Tshwane project was proving a difficult task, he adds.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other Construction News
Updated 6 hours ago Anglo American Inyosi Coal and Eskom “are broadly aligned” regarding Eskom’s empowerment imperatives for the New Largo project, Anglo American coal business in South Africa CEO and Anglo American Inyosi Coal chairperson Themba Mkhwanazi reported on Friday. In a...
Technology solutions company Tenova Mining & Minerals South Africa has been awarded a contract by State-owned freight transport utility Transnet to supply three reverse pulse bag filters. Two of the filters are to be installed on multiproduct rail tipplers and one on...
Updated 1 hour 47 minutes ago South Africa’s National Treasury on Friday reissued its amended request for proposal (RFP) for the five-year multibillion-rand project to replace the legacy systems currently in use with an enterprise resource planning (ERP) solution for an integrated financial...
Updated 1 hour 50 minutes ago The handover of specialised computer equipment to the Umfolozi Technical and Vocational Education and Training College would address one of the greatest challenges faced by Transnet Port Terminals (TPT) at the Port of Richards Bay – a lack of skills in a highly...
Updated 2 hours 45 minutes ago Through hosting the WorldSkills 2014 competition’s mechatronic pre-national finals, industrial control and automation company Festo would promote and support skills development. Festo said the mechatronic competition would give schoolchildren, trainees and students...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
As the City of Ekurhuleni continues its bid to develop the largely industrialised metropole into the continent’s first aerotropolis, executive mayor Mondli Gungubele has committed the city to creating a predictable, stable and enabling business environment in which...
While Ford Motor Company of Southern Africa (FMCSA) did not have “significant issues” with power supply in Gauteng, it was a different story in the Eastern Cape, said FMCSA and American Chamber of Commerce in South Africa president Jeff Nemeth earlier this month....
In 2000, exports into Africa from South Africa represented less than 5% of the turnover of Federal Mogul Motorparts Africa, with sales largely centred around Zimbabwe, Zambia, Malawi and Mozambique. Today, African exports represent 30% of sales, with trade expanded...
The Malawi government has launched a $50-million project to upgrade the Kamuzu barrage, on the Shire river, an outlet of Lake Malawi, which is used to control the flow of water from the lake to the lower Shire area. The project will run from this year to 2017 and...
Our new Technical and Vocational Education and Training (TVET) Colleges will replace the Further Education and Training (FET) Colleges which have served us for the past twenty years. The buildings will be the same and most of the staff will be the same but as the...