Photo by: Duane Daws
JSE-listed construction company Group Five on Monday reported net profit of R299-million for the financial year ended June 30, reversing a R230-million loss recorded in 2012. Revenue from contiuing operations was up 27% to R11.13-billion.
With almost all of the group’s problem contracts in the Middle East closed out, as well as its loss-making construction materials businesses sold, Group Five CEO Mike Upton said he was “pleased to show an improved set of results”.
The group’s operating margin improved from 3.8% to 5%, while all of the company’s business units showed a healthy increase in core operating profit and revenue.
Group Five’s construction order book also jumped 26% from June 2012 to June 2013, reaching R14.23-billion.
With 79% of order-book business in South Africa, and 21% in the rest of Africa, Upton said Group Five remained firm in its intent to secure more business cross-border.
A noticeable trend in the construction order book, broken down by sector, was that Group Five’s participation in the mining industry dropped from 20% in the previous financial year, to 10%. However, Upton regarded this as a positive move, as it reduced the group’s reliance on a single sector.
In contrast to this, contracts in the oil and gas sector had increased from 8% to 15% of the order book, with business in the power sector up from 20% to 22%.
The real estate sector made up 34% of the order book.
The group’s non-construction, annuity-type, multiyear secured order book stood at R4.8-billion on June 30.
Commenting on the South African market, Upton said there was no indication yet of government’s infrastructure expansion plans coming to fruition.
He also noted that the local construction market remained tough, with low margins, especially in the building sector. Certain disciplines, such as roads, also faced low prices.
Group Five’s pipe business, however, expected a record year in terms of volumes.
“We are concerned about increased labour activism,” added Upton.
Looking ahead, he said he expected modest improvements in group margin and earnings for Group Five in the 2014 financial year, with this linked more to the company’s internal restructuring than the slight market recovery seen to date.