Government spending had been rolling out in a number of focused pockets, such as water, healthcare and power, but there had been little movement on government’s “big themed strategic projects” as part of its national infrastructure plan, said Group Five CEO Mike Upton on Monday.

He noted Cabinet would “really need to get down to business” after the election, in order to “create the infrastructure that creates jobs”.

“The traditional markets have been slow, and it is a concern to us.”

However, added Upton, Group Five had, during this period of slow government spend, secured a number of building projects based on its strong reputation, as well as projects in new sectors, such as oil and gas, and in new territories in Africa.

Group Five on Monday reported a 56% increase in revenue, to R7.66-billion, from ongoing operations for the six months ended December 31, compared with the same period in 2012.

Operating profit was up 28% to R328-million, and net profit up 54% to R219-million.

At 4.3%, however, operating margin was down from the 5.2% recorded in the comparable prior period. Two problematic civil engineering contracts, which would realise lower margins than originally expected, added to this decline.

The civil engineering division recorded a margin of 1.5% for the period, well below the 4% to 6% target range.

Group Five had a R14-billion contracting order book, said Upton, with building and housing responsible for R6.64-billion of work, projects for R1.48-billion, engineering and construction for R2.54-billion, and civil engineering for R3.36-billion of work.

Building and housing was up roughly R1-billion on the order book announced in August last year, and civil engineering down around R200-million.

Upton said Group Five’s mining housing component had doubled, with work secured at good margins.

He believed the civil engineering business had “worked hard” to achieve R3.3-billion in a slow market.

The order book was weighted 82% towards the local market, with 18% of work outside South Africa.

Upton, however, emphasised that this did not reflect the over-border replenishment effort currently on the go.

He also noted that Africa was gaining ground in the group’s order book, with the company seeing some new contract awards in Liberia, for example.

The order book at October 2013 was R14.6-billion, and R13.5-billion at December 2012.

Upton added that power projects “had doubled” in the group’s pipeline of projects in which it hoped to participate.

Group Five’s operations and maintenance order book was R4.8-billion on Monday, bringing its total order book to R18.8-billion.

“We want it to be bigger, but are happy we could hold steady in a tough market,” said Upton.

COMPETITION COMMISSION UPDATE
Group Five remained in discussion with the Competition Commission around four outstanding cases, not settled in the penalty process completed last year, said Upton.

The commission in 2013 imposed R1.46-billion in penalties on 15 companies in the construction industry for collusive tendering related to projects concluded between 2006 and 2011.

Group Five, as a whistleblower on these collusive practices, had been granted leniency by the commission on all 25 of its submissions.

However, despite its cooperation over a period of four years, the group in 2013 received notice from the commission that it intended to fine the group for infringements on four projects in which it was implicated and for which no leniency was granted.

Group Five had made provision for a fine, said Upton. The amount was not disclosed.