Construction and engineering company Group Five plans to shed 250 jobs in its civil engineering division this financial year, says CEO Eric Vemer.

The restructuring will come at a retrenchment cost of more than R25-million.

The restructuring comes as Group Five has to align the size of its civil engineering division to its outlook on the domestic market, notes Vemer.

He says the South African civil engineering market remains subdued, with the tender market highly competitive, punctuated by a lack of large contract awards.

He notes that the company’s local order book is weak, and that it wants to secure more work, but that the expectation of doing so is low.

Vemer believes a turnaround may be achieved should government make a firm commitment to investment based on the National Development Plan, which is “a well thought-out plan”, able to “drive a multiplier effect down to our industry”.

The poor performance at Group Five’s civil engineering division largely led to what Vemer calls “a very disappointing set of results” for the JSE-listed firm for the six months ended December 31.

Group Five reported a 12% drop in revenue, to R6.9-billion, for the six months ended December 31, compared with the same period in the previous financial year. Net profit was down 33%, to R146-million.

The engineering and construction business, which makes up the bulk of Group Five’s revenue, and which includes the civil engineering division, saw revenue drop by 14%, to R6-billion, and core operating profit by 66%, to R70-million.

The civil engineering division reported a R44-million loss, with the energy, projects and building and housing divisions all in the black.

Vemer says the decline at the civil engineering division is due largely to losses at a particular contract in the energy sector, as well as restructuring costs.

Group Five’s investments and concessions business reported a 6% increase in revenue for the six months, and a 17% increase in core operating profit.

The manufacturing business saw a 3% drop in revenue, but a 1% gain in core operating profit.

Group Five’s contracting order book stood at R13.3-billion at the end of last year, down from the R14-billion reported at the end of 2013.

Forty-three per cent of the work at the end of 2014 was cross-border work, with 57% in South Africa.

This is a significant jump in cross-border work for the group. At the end of 2013, 82% of the company’s order book was in the domestic market.

Vemer says Group Five will continue its geographic expansion into the rest of Africa, with dedicated resources deployed to grow the group’s presence on the continent especially in the power, transport and oil and gas sectors.

The company has recently added the three-year, R4.6-billion Kpone project, in Ghana, to its order book.

The company is responsible for the engineering, procurement and construction of a 350 MW combined-cycle power plant, similar, but bigger, to what it completed for Sasol in 2010.

The project will add 10% to Ghana’s power grid capacity.

Group Five has been active in Ghana for more than 15 years.

Vemer expects continued pressure on Group Five for the rest of the financial year. However, he is positive the company will improve its performance in the 2016 financial year.