| Mon 16 Feb 2009, 8:00 | | GRF - Group Five - Unaudited Interim Group Results For the six months ended |
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GRF
GRF
GRF - Group Five - Unaudited Interim Group Results For the six months ended
31 December 2008 and dividend declaration
GROUP FIVE LIMITED
Incorporated in the Republic of South Africa
Reg. no. 1969/000032/06
JSE code: GRF ISIN: ZAE000027405
GROUP FIVE LIMITED
371 Rivonia Boulevard, Rivonia
PO Box 3951, Rivonia 2128, South Africa
Tel: +27 11 806 0111, 0860 55 55 56
Fax: +27 11 803 5829, email: info@g5.co.za
www.g5.co.za
UNAUDITED INTERIM GROUP RESULTS
For the six months ended 31 December 2008
Revenue (R`000)
Up 32.8%
December 2008
5 968 141
December 2007
4 495 273
Profit after tax from continuing operations (R`000)
Up 43.4%
December 2008
253 764
December 2007
177 010
Cash and cash equivalents (R`000)
Up 222 134
December 2008
2 046 348
June 2008
1 824 214
Fully diluted headline earnings per share (cents)
Up 58.6%
December 2008
230
December 2007
145
CONDENSED INCOME STATEMENT
Unaudited Audited
Six months ended Year ended
31 December
% 30 June
(R`000) change 2008 2007 2008
Revenue 33 5 968 141 4 495 273 8 899 578
Operating profit 35 376 660 279 638 635 660
before fair value
adjustments and
associates
Fair value adjustments
relating to investment
in service concessions
11 978 6 327 111 464
Income from associates - - 140
Operating profit 36 388 638 285 965 747 264
Finance costs - net (31 148) (41 026) (81 727)
Profit before taxation 46 357 490 244 939 665 537
Taxation (103 726) (67 929) (208 041)
Profit after taxation
from continuing
operations
43 253 764 177 010 457 496
Loss for the year from
discontinued
operations
(13 087) - (28 207)
Profit for the year 36 240 677 177 010 429 289
Allocated as follows:
Equity shareholders of
Group Five Limited
40 235 084 168 273 418 507
Minority interest 5 593 8 737 10 782
36 240 677 177 010 429 289
Determination of
headline earnings:
Attributable profit 40 235 084 168 273 418 507
Deduct after tax
effect of
- Profit on sale of
property, plant and
equipment and
investment property
- (6 745) (7 328)
- Losses on disposal 13 087 - 28 207
of discontinued
operations
Headline earnings 54 248 171 161 528 439 386
CONDENSED BALANCE SHEET
Unaudited Audited
Six months ended
31 December
Year ended
30 June
(R`000) 2008 2007 2008
ASSETS
Non-current assets
Property, plant and equipment
and investment property
2 381 848 2 095 759 2 256 584
- Goodwill 24 859 - 24 859
- Investments - service 164 327 163 584 135 070
concessions
- Other non-current assets 262 997 160 312 152 448
2 834 031 2 419 655 2 568 961
Current assets
Other current assets 5 366 244 4 492 145 4 709 212
Bank balances and cash 2 067 573 989 125 1 835 813
7 433 817 5 481 270 6 545 025
Non-current assets classified 90 973 163 967 135 760
as held for sale
Total assets 10 358 821 8 064 892 9 249 746
EQUITY AND LIABILITIES
Capital and reserves
Equity attributable to equity 2 211 968 1 760 458 2 006 664
holders of the parent
Minority interest 21 315 16 221 16 517
2 233 283 1 776 679 2 023 181
Non-current liabilities
- Interest bearing borrowings 1 187 087 998 472 1 023 737
- Other non-current 65 628 111 210 149 212
liabilities
1 252 715 1 109 682 1 172 949
Current liabilities
- Other current liabilities 6 851 598 5 178 531 6 042 017
- Bank overdrafts 21 225 - 11 599
6 872 823 5 178 531 6 053 616
Total liabilities 8 125 538 6 288 213 7 226 565
Total equity and liabilities 10 358 821 8 064 892 9 249 746
CONDENSED CASH FLOW STATEMENT
Unaudited Audited
Six months ended
31 December
Year ended
30 June
(R`000) 2008 2007 2008
Cash flow from
operatingactivities
- Cash from operations 482 240 359 958 798 985
- Working capital changes 237 420 364 140 1 018 269
Cash generated from operations 719 660 724 098 1 817 254
- Finance costs (31 148) (41 026) (81 727)
- Taxation and dividends paid (118 537) (106 306) (275 787)
Net cash generated by operating 569 975 576 766 1 459 740
activities
- Property, plant and
equipment and investment
property (net)
(89 841) (17 251) (72 550)
- Investments (net) (146 468) (188 775) (65 828)
Net cash utilised in investing (236 309) (206 026) (138 378)
activities
Net cash utilised in financing (143 232) (10 348) (125 881)
activities
Net cash generated by 31 700 - -
discontinued operations
Net increase in cash and cash 222 134 360 392 1 195 481
equivalents
STATISTICS
Unaudited Audited
Year ended
31 December
Six months
ended
30 June
2008 2007 2008
Number of ordinary 93 995 266 92 664 457 93 740 418
shares
- Shares in issue 119 834 071 119 039 763 119 165 241
- Less: Shares held by (25 838 805) (26 375 306) (25 424 823)
share trusts
Weighted average shares 94 411 93 083 93 545
(`000s)
Fully diluted weighted 107 954 111 259 110 527
average shares (`000s)
Earnings per share - R 2,49 1,81 4,47
Headline earnings per 2,63 1,74 4,70
share - R
Fully diluted earnings 2,18 1,51 3,79
per share - R
Fully diluted headline 2,30 1,45 3,98
earnings per share - R
Dividend cover (based 4,3 4,0 4,3
on earnings per share)
Dividend per share 58,0 45,0 105,0
(cents)
- Interim 58,0 45,0 45,0
- Final - - 60,0
Net asset value per 23,53 19,00 21,41
share - R
Net debt to equity - 22,4 -
ratio
Current ratio 1 1 1
CONDENSED STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
Six months ended
31 December
Year ended
30 June
(R`000) 2008 2007 2008
Balance at 1 July 2 023 181 1 621 922 1 621 922
Translation differences 9 653 7 641 25 907
arising from foreign
operations
Share options expense 16 927 11 104 31 196
Attributable profit for the 240 677 177 010 429 289
year
Distribution to minorities (795) (1 851) (3 600)
Dividends paid (56 360) (39 147) (81 533)
Balance at end of period 2 233 283 1 776 679 2 023 181
SEGMENTAL ANALYSIS
Unaudited Audited
Six months ended
31 December
Year
ended
% 30 June
(R`000) change 2008 2007 2008
Revenue
Investments and - 338 218 337 860 581 685
Concessions
Infrastructure 70 271 262 159 379 326 554
Concessions
Property Developments (62) 66 956 178 481 255 131
Manufacturing 17 374 078 320 092 554 656
Construction Materials 24 413 725 334 312 689 220
Construction 38 4 842 120 3 503 009 7 074 017
Building and Housing (11) 1 332 484 1 502 828 2 848 795
Civil Engineering 48 2 198 778 1 486 677 2 964 184
Engineering Projects 155 1 310 858 513 504 1 261 038
Total revenue 33 5 968 141 4 495 273 8 899 578
H1 2009 %
(R`000) Margin % change
Operating profit
Investments and Concessions 13.5 77
Infrastructure Concessions 16.6 274
Property Developments 1.0 (95)
Manufacturing 10.0 93
Construction Materials 9.1 (49)
Construction 5.3 59
Building and Housing 3.9 -
Civil Engineering 4.7 44
Engineering Projects 7.7 170
Total operating profit 6.3 35
Unaudited Audited
Six months ended
31 December
Year
ended
30 June
(R`000) 2008 2007 2008
Operating profit
Investments and Concessions 45 803 25 877 53 482
Infrastructure Concessions 45 128 12 054 30 735
Property Developments 675 13 823 22 747
Manufacturing 37 407 19 431 56 211
Construction Materials 37 760 73 602 141 946
Construction 255 690 160 728 384 021
Building and Housing 51 714 51 966 140 294
Civil Engineering 102 504 71 170 142 857
Engineering Projects 101 472 37 592 100 870
Total operating profit 376 660 279 638 635 660
CAPITAL EXPENDITURE
Unaudited Audited
Six months Year
ended ended
31 December 30 June
(R`000) 2008 2008
- Capital expenditure for the period 169 935 449 341
- Capital expenditure committed or 84 238 301 644
authorized at the period end
- Depreciation for the period 99 968 150 791
ESTIMATES AND CONTINGENCIES
The group makes estimates and assumptions concerning the future, particularly
with regard to construction contract profit taking, provisions, arbitrations and
claims and various fair value accounting policies. The resulting accounting
estimates and judgments can, by definition, only approximate the actual results.
Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Total financial institution guarantees given to third parties on behalf of
subsidiary companies amounted to R6 886 million as at 31 December 2008, compared
to R6 428 million as at 30 June 2008.
During 2005, Group Five entered into an Enterprise Development Agreement (EDA)
with iLima Projects (Proprietary) Limited ("iLima Projects"), a subsidiary of
iLima Group (Proprietary) Limited ("iLima Group") (collectively "iLima"). iLima
Group, through its 62% shareholding in iLima Consortium (Proprietary) Limited
("iLima Consortium"), became a participant in Group Five`s black economic
empowerment equity ownership transaction ("Group Five BEE transaction").
As outlined in the Group`s trading update on 21 January 2009, iLima Projects has
for some time experienced operational and funding difficulties. The group`s
exposure in terms of the enterprise development agreement, as at 31st December
2008, amounted to R172 million, which was a reduction from the exposure at 30
June 2008 of R201 million. iLima management are currently negotiating
refinancing initiatives in respect of iLima`s contractual obligations. In
presenting the interim results for the six months ended 31 December 2008, the
Group has considered its exposure to iLima on the assumption that iLima will
successfully implement their refinancing arrangement.
DIVIDEND DECLARATION
The directors have declared an interim dividend number 62 of 58 cents per
ordinary share (2007: 45 cents) payable to shareholders.
In order to comply with the requirements of STRATE, the relevant details are:
Event Date
Last day to trade (cum-dividend) Thursday, 16 April 2009
Shares to commence trading (ex-dividend) Friday, 17 April 2009
Record date (date shareholders recorded Friday, 24 April 2009
in books)
Payment date Tuesday, 28 April 2009
No share certificates may be dematerialised or rematerialised between Friday, 17
April 2009, and Friday, 24 April 2009, both dates inclusive.
BASIS OF PREPARATION
These condensed consolidated interim financial statements for the six months
ended 31 December 2008 have been prepared in accordance with IAS 34, "Interim
Financial Reporting" and in the manner required by the Companies Act of South
Africa. The condensed consolidated interim financial information should be read
in conjunction with the annual financial statements for the year ended 30 June
2008, which have been prepared in accordance with International Financial
Reporting Standards (IFRS). The accounting policies applied are consistent with
those of the annual financial statements for the year ended 30 June 2008, as
described in those
financial statements.
COMMENTARY
OVERVIEW
The group delivered strong results in the period under review and is pleased to
announce a 38% increase in earnings per share (EPS), a 44% increase in fully
diluted EPS (FDEPS), a 51% increase in headline earnings per share (HEPS) and a
59% increase in fully diluted HEPS (FDHEPS).
Revenue increased by 33% from R4,5 billion to R6,0 billion and operating profit
before fair value adjustments increased by 35% from R280 million to R377
million. This resulted in the group operating margin improving slightly from
6.2% to 6.3%. After fair value adjustments, the operating profit increased by
36% to R389 million (2007: R286 million).
Net finance costs decreased by 24% and interest cover for the period
substantially improved from 7,0x to 12,5x. The group balance sheet is in good
shape, with a nil net gearing ratio as at 31 December 2008. Cash and cash
equivalents for the period increased by R222 million (2007: increase R360
million). As in the prior comparative period and full 2008 financial year, the
increase in cash was achieved as a result of a focus on working capital
management and increases in cash generated from operations.
The effective taxation rate of 29% is a function of reduced taxation on income
from jurisdictions with taxation rates lower than the South African corporate
tax rate offset by increased taxation charge as a result of STC on dividends.
The interim dividend has been increased by 29% to 58 cents (2007: 45 cents)
congruent with the current dividend cover policy of approximately
4 times covered.
BUSINESS COMBINATIONS
Following previous guidance provided, the group`s Property Developments business
invested R120 million on 1 November 2008 to acquire a 15% investment in the
Waterfall Development Company (WDC). This follows two years of intense
negotiations. WDC indirectly holds the development rights for approximately 1,4
million square meters of a new, mainly commercial development to be built
between Johannesburg and Midrand (the Waterfall Farm), constituting some of the
most valuable, zoned real estate in South Africa. This investment will result in
opportunities for construction and materials supply to the development. The
project development scope is targeted to roll out over the next 12 to 15 years,
with an overall project value estimated at some R35 billion. It is expected to
secure long term investment income for the group, as well as construction
opportunities. The construction opportunities are expected to realise from as
early as the second half of 2009.
In support of the material supply opportunities for this mega-project, as well
as the Gauteng roads programme and the expanding infrastructure in the province,
which includes roads, prisons, power developments, public buildings, pipelines
and hospitals, the group expanded its Construction Materials portfolio and
locations in the period under review by investing in a company holding
exploitable sand reserves in the East Rand Market, BGM. Strategically, the bulk
of the group`s Construction Materials operations are in locations that will
benefit from the current infrastructure developments, with BGM particularly well
placed. Furthermore, the ownership of supply is an essential strategic advantage
as it supports an integrated business from quarry to concrete delivery and
allows control of a further element of the supply chain - a strong advantage in
light of the current shortage of building sand in the sector.
The investment is reflected at a fair value of R75 million and was funded with
an initial cash outflow of R22 million in the period under review, with R8
million cash to follow in H2 2009. The remainder of the funding is linked to the
rate of tonnages of material extracted.
OPERATIONAL REVIEW
INTRODUCTION
On 27 November 2008, the group notified shareholders that its view on the
prevailing market conditions at the time was that some markets could come under
pressure in the short term, particularly in mining and in private sector
building activity both in South Africa and the United Arab Emirates. This was,
however, being mitigated by successfully increasing the group`s order book in
the prioritised areas of public sector infrastructure spend in South Africa,
Eastern Europe and in the Middle East.
Subsequently, the impact of the global credit crisis has worsened and commodity
markets have remained weak, placing additional pressure on some private sector
industrial, real estate and mining projects and, most recently, on public sector
projects in Dubai.
The South African government`s recommitment to R787 billion of infrastructure
investment over the next 3 years in the National Budget announced on 11
February, and its ability to fund this investment, continues to provide
opportunities that benefit all of the group`s businesses. Furthermore, this also
mitigates a large portion of the decline in other markets, as evidenced by the
group`s recently secured infrastructure construction orders.
Against the background of challenging market conditions in a number of sectors,
the group`s performance for the period ended 31 December 2008 reflects an
acceleration of revenue and improved operating profit. This was mainly due to
the resilience of the group`s diversified strategy in several geographies and
its strong positioning in key growth markets such as selected resources,
affordable housing, power, and public sector building, as well as civils spend,
including transport and water.
GROUP
The group`s operating margin is reported net of the following non-
core/operational transactions: profit on sale of assets, pension fund surpluses
and deficits and impairment adjustments. The group`s operating margin, both
including and excluding such adjustments, is reflected below.
Six months Full year Six months
ended ended ended
31 December 30 June 31 December
2008 2008 2007
Revenue - (R`000) 5 968 141 8 899 578 4 495 273
Reported Operating Margin% 6.3% 7.1% 6.2%
Core Operating Margin%* 7.1% 6.8% 6.0%
- = core operating margin % is defined as reported operating margin %
adjusted for the non-core transactions listed above.
- Note that reported operating margin % is defined as operating profit
before fair value adjustments as a % of revenue.
INVESTMENTS AND CONCESSIONS
Six months Full year Six months
ended ended ended
(including Infrastructure 31 December 30 June 31 December
Concessions
and Property Developments) 2008 2008 2007
Revenue 338 218 581 685 337 860
Reported Operating Margin% 13.5% 9.2% 7.7%
Core Operating Margin%* 14.3% 7.1% 4.8%
Revenue for Investments & Concessions remained largely unchanged period on
period and operating profit increased from R26 million to R46 million. Reported
operating margin increased from 7.7% to 13.5% and core operating margin
increased from 4.8% to 14.3%.
Infrastructure Concessions
The concessions business is a core component of the group strategy, as it
provides long term operating revenues at good margins, capital value
appreciation over the life of the investment and the opportunity to establish
relationships with world-class partners.
The benefits of the group`s strategy of securing longer term investments that
also deliver annuity revenue are coming to the fore and continued to deliver
solid results. Revenue grew 70% to R271 million (2007: R159 million) as a result
of growth in Intertoll Europe. This growth was primarily driven by the roll out
of new projects in Poland and Hungary. Improved economies of scale on the
established operational infrastructure increased reported operating margin to
16.6% (2007: 7.6%) resulting in the more than trebling of operating profit to
R45 million (2007: R12 million). Going forward, the Eastern European concessions
are set to remain buoyant, with further new projects under development. These
include toll roads and power opportunities.
Property Developments
As stated in the prior reporting period, the group has been replacing its
current portfolio of mostly residential developments in favour of development
opportunities that are strategically located, commercial, industrial and mixed
use developments that also benefit Construction, Manufacturing and Construction
Materials, such as the Waterfall and Sandton CBD developments.
The group previously provided guidance that this strategy would secure long term
benefits, although it would result in a short term decline in returns, currently
exacerbated by a weak residential market.
Therefore, as expected, revenue reduced by 62% to R67 million (2007: R178
million) and reported operating profit reflected a near break-even result
(2007:R14 million).
MANUFACTURING
Six months Full year Six months
ended ended ended
31 December 30 June 31 December
2008 2008 2007
Revenue - (R`000) 374 078 554 656 320 092
Reported Operating Margin% 10.0% 10.1% 6.1%
Core Operating Margin%* 10.9% 9.9% 6.1%
Manufacturing delivered a good performance in tough market conditions. This
segment comprises Everite, Group Five Pipe and Group Five Steel. Revenue
increased by 17% from R320 million to R374 million. Reported operating profit
increased by 93% from R19 million to R37 million, resulting in a substantial
core operating margin recovery from 6.1% to 10.9%.
The results for the period were achieved through implementing lean production
techniques, an efficient supply chain, quick stock turns and restructuring of
routes to market. Penetration of new growth markets in terms of structural and
reinforcing steel required for large projects, as well as emerging opportunities
in the lower income housing market benefited all of manufacturing. In the period
under review, future loading of the Group Five Pipe factory was positively
impacted after winning water systems projects of R360 million, in the last few
months.
Based on government`s commitment, new project flows due to the work in the
public infrastructure sector, should continue to provide a positive outlook for
Manufacturing for some years to come.
CONSTRUCTION MATERIALS
Six months Full year Six months
ended ended ended
31 December 30 June 31 December
2008 2008 2007
Revenue - (R`000) 413 725 689 220 334 312
Reported Operating Margin% 9.1% 20.6% 22.0%
Core Operating Margin%* 10.0% 20.3% 22.0%
Revenue increased by 24% from R334 million to R414 million, whilst reported
operating profit, in line with the difficult private sector conditions
experienced within the sector, decreased by 49% to R38 million from R74 million.
As expected, trading conditions in the Gauteng private building market continued
to necessitate tight pricing, although the group has been able to mitigate some
volume decline through feeding its own construction projects. Furthermore, the
group`s good quarry locations, close to the major Gauteng projects mentioned
above, buffered the potential impact on earnings. The business will continue to
trade in a difficult market through F2009, although the second half performance,
as well as the financial year 2010 and beyond, are expected to improve as
additional demand from public works in roads, power and transport projects come
on line.
Expanding contract mining services continue to grow in importance in the
business and in this regard, the group was able to add to its contract crushing
mining services portfolio by securing a new contract in the last quarter in the
uranium mining sector in Namibia.
CONSTRUCTION
Construction comprises the business segments of Building and Housing, Civil
Engineering and Engineering Projects.
Six months Full year Six months
ended ended ended
31 December 30 June 31 December
2008 2008 2007
Revenue - (R`000) 4 842 120 7 074 017 3 503 009
Reported Operating Margin% 5.3% 5.4% 4.6%
Core Operating Margin%* 6.0% 5.2% 4.6%
The Construction reported operating margin improved from 4.6% to 5.3%,
indicating consistent progress towards the group`s stated objective of
maintaining a margin in excess of 5% in Construction. The core operating margin
increased from 4.6% to 6.0%. Construction revenue increased by 38% from R3,5
billion to R4,8 billion and reported operating profit increased by 59% from R161
million to R256 million. Over-border work contributed 45% (2007: 37%) to
Construction revenue as a result of substantially increased contract revenue
delivery in Engineering Projects and Civil Engineering. As expected, the over-
border portion of revenue will decrease from the 2nd half of F2009 in the short
term due to the reduction of work in Dubai. This is further discussed below.
Building and Housing
Six months Full year Six months
ended ended ended
31 December 30 June 31 December
2008 2008 2007
Revenue - (R`000) 1 332 484 2 848 795 1 502 828
Reported Operating Margin% 3.9% 4.9% 3.5%
Core Operating Margin%* 4.8% 4.6% 3.5%
In spite of the private building sector remaining extremely weak, Building and
Housing managed to mitigate the impact through the contribution from large
public sector projects, as well as focusing on improved execution and supply
chain savings. Revenue decreased by 11% from R1,5 billion (89% local work) to
R1,3 billion (96% local work) and reported operating profit remained constant at
R52 million, resulting in a improvement in the reported operating margin to 3.9%
(2007: 3.5%). The core operating margin improved from 3.5% to 4.8%.
For at least the next 2 to 3 years, the public sector investment programme,
related to civil and building infrastructure in housing projects, water,
transport and concessions for prisons, government buildings, hospitals and the
initial 7 year plus power station programme, offers future work to partially
mitigate the private sector downturn. The private sector cycle is expected to
recover within these timeframes.
Civil Engineering
Six months Full year Six months
ended ended ended
31 December 30 June 31 December
2008 2008 2007
Revenue - (R`000) 2 198 778 2 964 184 1 486 677
Reported Operating Margin% 4.7% 4.8% 4.8%
Core Operating Margin%* 5.2% 4.6% 4.8%
Civil Engineering revenue increased by 48% from R1,5 billion (44% local work) to
R2,2 billion (56% local work). Reported operating profit increased nearly one
and half times from R71 million to R103 million, resulting in an overall
reported operating margin percentage of 4.7%. Although this was slightly down
from the 4.8% margin achieved in H1 2008, the core operating margin increased
from 4.8% to 5.2%.
As outlined in the group`s trading update on 21 January 2009, the Middle East
has been directly impacted by the credit crisis and reduced oil prices. The
impact has been particularly pronounced in Dubai where the government recently
reviewed its infrastructure capital project programme and announced that a
number of contracts have been suspended or terminated.
As outlined in the group`s trading update, its order book has been impacted by
the suspension and the cancellation of up to R4 billion worth of contracts in
Dubai. Although the cancellation of contracts had no impact on the results for
the period under review, the impact will affect 2nd half F2009 and 2010 in the
form of lost revenue and future operating profit. However, this will be
cushioned by the remedial actions already taken, including suspension and
termination action catered for in the original contracts, as well as the
restructuring of overheads to better align to the revised size of the business.
Furthermore, the contractor has recovery rights with respect to cancelled and
suspended contracts and the group therefore expects to be fully compensated for
its costs incurred, with a reasonable margin.
Over the last three weeks, around 3 700 people from a workforce of about 5 000
have been repatriated and reassigned from Dubai. The business is therefore now
correctly sized to complete the running contracts in Abu Dhabi, Jordan and Dubai
profitably and to continue to bid, win and execute new work in these and other
territories. Tendering activity in the South African public works market remains
strong, including power, water, transport and PPPs. Much of the post 2010
infrastructure work captured in the government`s capital programme in all these
sectors has still to be bid and awarded. The group is therefore confident that,
despite the Dubai cancellations, Civil Engineering will achieve another year of
strong growth for the full year to June 2009. It also has good visibility into
2010 and 2011.
Engineering Projects
Six months Full year Six months
ended ended ended
31 December 30 June 31 December
2008 2008 2007
Revenue - (R`000) 1 310 858 1 261 038 513 504
Reported Operating Margin% 7.7% 8.0% 7.3%
Core Operating Margin%* 8.7% 7.7% 7.3%
Engineering Projects` revenue increased by two and a half times from R514
million (38% local work) to R1,3 billion (12% local work) and reported operating
profit increased nearly three times from R38 million to R101 million. This
resulted in the reported operating margin increasing from 7.3% to 7.7% and the
core operating margin increasing from 7.3% to 8.7%. The strong results are due
to the implementation of a clear strategy of focusing on growing multi-
disciplinary specialist contract delivery capability into selected high value,
high growth markets such as resources, energy, heavy industrial and innovative
power solutions.
Engineering Projects has solid experience in the expanding power, energy,
industrial and mining sectors on the African continent and in the Middle East
region and is well placed to participate in the many opportunities arising in
these sectors in all the geographies and markets in which the group
participates. Whilst the demand from the copper cobalt and platinum mining
sectors has contracted, there are still a significant number of projects to be
secured in the gold, uranium, iron and coal sectors. This will continue to drive
a high rate of growth for the full year and position the business positively for
the large amount of work for execution from 2010 onwards.
PROSPECTS
Going forward, the group continues to be strategically well positioned in active
market sectors such as those detailed above. This, together with the continued
public infrastructure spend, will buffer the group to a large extent against the
turmoil in global economies and markets and the Middle East developments.
Further strong contributions are expected from Manufacturing and Investments and
Concessions earnings for the year to 30 June 2009, although Construction
Materials is likely to remain under pressure. The group has substantially
replaced the orders cancelled in Dubai with South African public works,
resulting in a secured Construction order book of R13,0 billion as at 16th
February 2009 with further awards imminent. The group is therefore well placed
to achieve another year of solid earnings growth to June 2009. Further earnings
growth over the next 2-3 years and beyond is achievable, although the volatility
of the current global economic markets and the potential impacts thereof remain
difficult to forecast.
BOARD CHANGES
During the period under review, the following changes were made to the board of
directors as non-executive directors: Ms LE Bakoro and Dr JL Job were both
appointed on 1 November 2008.
ACKNOWLEDGMENTS
The group wishes to recognise the hard work and commitment of its employees,
without whom these results would not have been achieved.
On behalf of the board
MP Buthelezi MR Upton
Chairperson Chief Executive Officer
13 February 2009
Board of Directors: MP Buthelezi* (Chairperson), MR Upton (CEO), CMF Teixeira
(CFO), L Chalker*^, KK Mpinga*
, SG Morris*, MSV Gantsho*, WV Mavimbela*, JL
Job*, LE Bakoro (*)
*(Non-executive director) ^(British)
(DRC)
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg 2001
please visit our website: www.g5.co.za
Date: 16/02/2009 08:00:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
