| Tue 11 Aug 2009, 8:00 | | GRF - Group Five - Audited Group Results For The Year Ended 30 June 2009 |
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GRF
GRF
GRF - Group Five - Audited Group Results For The Year Ended 30 June 2009
Group Five Limited
Incorporated in the Republic of South Africa
Reg. no. 1969/000032/06
JSE code: GRF ?ISIN:?ZAE000027405
Group Five Limited
Incorporated in the Republic of South Africa
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@groupfive.co.za
www.groupfive.co.za
Audited Group Results for?the?year?ended 30 June 2009
Highlights
36% Revenue
(R`000)
09 // 12 090 236
08 // 8 899 578
25% Net profit for the year
(R`000)
09 // 534 554
08 // 429 289
52% Bank balances and cash
(R`000)
09 // 2 778 424
08 // 1 824 214
28% Fully diluted headline earnings per share
(Cents)
09 // 508
08 // 398
Condensed income statement for the year ended 30 June 2009
2009 - 2008 Audited
(R`000) % change 2009 2008
Revenue 36 12 090 236 8 899 578
Operating profit 25 797 182 635 660
before fair value
adjustments
Fair value
adjustment relating
to
investments in 15 718 111 464
service concessions
(Loss)/income from (69) 140
associates
Operating profit 9 812 831 747 264
Finance costs - net (30 820) (81 727)
Profit before 18 782 011 665 537
taxation
Taxation (224 567) (208 041)
Profit after 22 557 444 457 496
taxation from
continuing
operations
Loss for the year (22 890) (28 207)
from discontinued
operations
Profit for the year 25 534 554 429 289
Allocated as
follows:
Equity shareholders 514 733 418 507
of Group Five
Limited
Minority interest 19 821 10 782
534 554 429 289
Determination of
headline earnings:
Attributable profit 514 733 418 507
Deduct after tax 22 909 20 879
effect of
?- Loss/(profit) on 19 (7 328)
sale of investment
property
?- Losses on 22 890 28 207
disposal of
discontinued
operations
Headline earnings 22 537 642 439 386
Condensed balance sheet as at 30 June 2009
Audited
(R`000) 2009 2008
ASSETS
Non-current assets
Property, plant and equipment 2 444 837 2 256 584
and investment property
Goodwill 24 859 24 859
Investments - service 186 482 135 070
concessions
Investments - property 120 000 -
developments
Other non-current assets 63 364 152 448
2 839 542 2 568 961
Current assets
Other current assets 4 654 112 4 709 212
Bank balances and cash 2 798 046 1 835 813
7 452 158 6 545 025
Non-current assets classified as 81 170 135 760
held for sale
Total assets 10 372 870 9 249 746
EQUITY AND LIABILITIES
Capital and reserves
Equity attributable to equity 2 373 477 2 006 664
holders of the parent
Minority interest 34 366 16 517
2 407 843 2 023 181
Non-current liabilities
Interest bearing borrowings 897 867 1 023 737
Other non-current liabilities 62 069 149 212
959 936 1 172 949
Current liabilities
Other current liabilities 6 985 469 6 042 017
Bank overdrafts 19 622 11 599
7 005 091 6 053 616
Total liabilities 7 965 027 7 226 565
Total equity and liabilities 1 0372 870 9 249 746
Condensed cash flow statement for the year ended 30 June 2009
Audited
(R`000) 2009 2008
Cash flow from operating
activities
?Cash from operations 1 117 273 760 830
?Working capital changes 682 226 1 056 424
Cash generated from operations 1 799 499 1 817 254
?Finance costs - net (30 820) (81 727)
?Taxation and dividends paid (222 194) (275 787)
Net cash generated by operating 1 546 485 1 459 740
activities
?Property, plant and equipment
and investment
property (net) (213 018) (72 550)
?Investments (net) (191 906) (65 828)
Net cash utilised in investing (404 924) (138 378)
activities
Net cash utilised in financing (219 051) (125 881)
activities
Net cash generated by 31 700 -
discontinued operations
Net increase in cash and cash 954 210 1 195 481
equivalents
Statistics as at 30 June 2009
Audited
2009 2008
Number of ordinary shares 94 614 042 93 740 418
Shares in issue 120 093 047 119 165 241
Less: Shares held by share (25 479 005) (25 424 823)
trusts
Weighted average shares 94 670 93 545
(`000s)
Fully diluted weighted 105 804 110 527
average shares (`000s)
Earnings per share - R 5,44 4,47
Headline earnings per share 5,68 4,70
- R
Fully diluted earnings per 4,86 3,79
share - R
Fully diluted headline 5,08 3,98
earnings per share - R
Dividend cover (based on 4,2 4,3
earnings per share)
Dividends per share (cents) 130,0 105,0
Interim 58,0 45,0
Final 72,0 60,0
Net asset value per share - 25,09 21,41
R
Net debt to equity ratio - -
Current ratio 1 1
Condensed statement of?changes in equity for the year ended 30 June 2009
Audited
(R`000) 2009 2008
Balance at 1 July 2 023 181 1 621 922
Translation differences (78 006) 25 907
arising from foreign
operations
Share options and BEE 41 916 31 196
ownership transaction costs
Attributable profit for the 534 554 429 289
year
Distribution to minorities (1 972) (3 600)
Dividends paid (111 830) (81 533)
Balance at 30 June 2 407 843 2 023 181
Segmental analysis - primary for the year ended 30 June 2009
2009 - 2008 Audited
(R`000) % 2009 2008
change
Revenue
Investments and 8 626 795 581 685
Concessions
Infrastructure 62 527 938 326 554
Concessions
Property (61) 98 857 255 131
Developments
Manufacturing 47 816 132 554 656
Construction (3) 671 317 689 220
Materials
Construction 41 9 975 992 7 074 017
Building and 2 2 899 773 2 848 795
Housing
Civil Engineering 56 4 633 259 2 964 184
Engineering 94 2 442 960 1 261 038
Projects
Total revenue 36 12 090 8 899 578
236
2009
Operating profit Margin
%
Investments and 13.1 53 81 887 53 482
Concessions
Infrastructure 15.1 159 79 636 30 735
Concessions
Property 2.3 (90) 2 251 22 747
Developments
Manufacturing 10.5 53 85 964 56 211
Construction 8.3 (61) 55 835 141 946
Materials
Construction 5.7 49 573 496 384 021
Building and 4.9 1 141 032 140 294
Housing
Civil Engineering 4.9 58 225 733 142 857
Engineering 8.5 105 206 731 100 870
Projects
Total operating 6.6 25 797 182 635 660
profit
Capital expenditure and depreciation for the year ended 30 June 2009
Audited
(R`000) 2009 2008
- Capital expenditure for the year 429 511 449 341
- Capital expenditure committed or
authorised
for the next year 139 561 301 644
- Depreciation for the year 258 370 150 791
ESTIMATES AND CONTINGENCIES
The group makes estimates and judgements concerning the future, particularly
with regards to construction contract profit taking, provisions, arbitrations
and claims and various fair value accounting policies. The resulting
accounting estimates and judgements can, by definition, only approximate the
actual results. Estimates and judgements 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 R6,268 million as at 30 June 2009 (2008:
R6,428 million).
DIVIDEND DECLARATION
The directors have declared a final dividend number 63 of 72 cents per
ordinary share (2008: 60 cents) payable to shareholders.
To comply with the requirements of Strate the relevant details are:
Event Date
Last day to trade (cum- Friday, 25 September 2009
dividend)
Shares to commence Monday, 28 September 2009
trading (ex-dividend)
Record date (date Friday, 2 October 2009
shareholders recorded in
books)
Payment date Monday, 5 October 2009
No share certificates may
be dematerialised or
rematerialised between Monday, 28 September 2009
and Friday, 2 October 2009,
both dates inclusive.
BASIS OF PREPARATION
These consolidated condensed financial statements for the year ended 30 June
2009 have been prepared in accordance with IAS 34, "Interim Financial
Reporting" and in the manner required by the Companies Act of South Africa.
The consolidated condensed financial statements should be read in conjunction
with the annual financial statements for the year ended 30 June 2009 which
have been prepared in accordance with International Financial Reporting
Standards (IFRS). The accounting policies are consistent with those used in
the prior year.
These results have been audited by PricewaterhouseCoopers Inc., Registered
Auditors.
Their unqualified audit opinion is available for inspection at the company`s
registered office.
COMMENTARY
Financial overview
The group is pleased to announce another year of strong growth. This pleasing
performance was mainly due to the resilience of the group`s diversified
strategy and its strong positioning in key growth markets such as selected
resources, public works programmes and infrastructure associated with the 2010
soccer world cup.
These results were achieved despite a R4 billion cancellation in the Dubai
order book, the decline in the Construction Materials market and the slowdown
in mining and private real estate.
Fully diluted earnings per share increased by 28% from R3,79 to R4,86 and
fully diluted headline earnings per share increased by 28% from R3,98 to
R5,08.
Group revenue increased by 36% from R8,9 billion to R12,1 billion, showing a
pleasing acceleration in the rate of trading.
Operating profit before fair value adjustments increased by 25% from R636
million to R797 million.
The group`s operating profit margin is 6.6% (2008: 7.1%). The decrease is
directly attributable to the weaker results from the Construction Materials
cluster, as well as moderate profit recognition on the ongoing commercial
closure of the two cancelled contracts in Dubai. Furthermore, a deficit on the
group`s pension fund surplus of R11,5 million was recorded in the year. All of
the group`s businesses, with the exception of Construction Materials, posted
an improved operating margin over last year.
Fair value net upward adjustments of R15,7 million (2007: R111,4 million) were
recorded during the year, mainly relating to the group`s interests in Eastern
European service concessions.
The large fair value adjustment in the prior year was mainly due to the
group`s disposal of its interest in the M5 motorway in Hungary.
During the year, an amount of R22,9 million (2008: R28,2 million) was charged
to the income statement, mainly as a result of a change in management`s view
on the amount due from India, carried as a discontinued operation.
In line with expectations, finance costs decreased from R81,7 million to R30.8
million. This was assisted by decreases in interest rates, as well as an
increase in cash and cash equivalents in the second half of the financial
year.
The group generated R954 million in cash and R1,8 billion cash from operations
during the period under review. The improvement was as a result of continued
working capital focus, as well as an increase in excess billings over work
performed. Advanced payments on hand decreased by R523 million in line with
expectations, as large contracts progressed to completion.
The effective tax rate of 29% was higher than the South African statutory tax
rate of 28% due to the effect of secondary tax on companies paid. The group
operates in a number of tax jurisdictions with differing taxation rates. The
taxation benefits arising from areas with lower taxation rates have been
largely offset by those countries with higher rates.
The final dividend of 72 cents per share (2008: 60 cents) brings the total
dividend for the year to 130 cents per share (2008: 105 cents), an increase
for the year of 24%. This is in line with the group`s adopted policy of
approximately four times basic earnings per share dividend cover.
Business combinations
The following transactions were concluded during the year under review:
- An investment of R120 million on 1 November 2008 to acquire a 15% interest
in the Waterfall Development Company (WDC). WDC indirectly, through its 22%
investment in Atterbury Investment Holdings, holds the development rights for
approximately 1,4 million square meters of a new, mainly commercial
development to be built between Johannesburg and Midrand. This long term
investment will also result in opportunities for construction and materials
supply to the development. The construction opportunities are expected to
realise from as early as H1 2010.
- In light of the expanding infrastructure works in Gauteng and the current
shortage of building sand in the region, the group expanded its Construction
Materials portfolio by investing in BGM, a higher margin sand supply business
in the East Rand. The ownership of supply is an essential strategic advantage
as it supports an integrated business from quarry to concrete delivery. The
investment is reflected at a fair value of R71 million and was funded with an
initial cash outflow of R31 million and an exchange of assets to the value of
R12,6 million in the period under review. The remainder of the funding is
linked to the rate of tonnages of material extracted.
- The group invested R3 million for a 51% stake in an energy efficiency
business, Kayema Energy Solutions. This business designs and manufactures
solar water heating systems aligned to the group`s interests in large-scale
energy efficient housing contracts and other solar power developments. The
investment was made at fair value to the assets acquired.
OPERATIONAL OVERVIEW
Group
For comparative purposes, we provide both the group`s reported operating
margins and those net of the non-core/operational transactions of profit on
sale of assets, pension fund surpluses and deficits, fair value adjustments
and profit/loss on sale of investment properties. We refer to this as the core
operating margin. The group`s operating margins are reflected below.
Year ended Year ended
30 June 2009 30 June
2008
Revenue - (R`000) 12 090 236 8 899 578
Reported Operating Margin % 6.6 7.1
Core Operating Margin % 6.7 6.8
Note:
1. Reported operating margin % is defined as operating profit before fair
value adjustments as a % of revenue
2. All head office costs are allocated pro-rata across the various business
segments
3. Core operating margin % is defined as reported operating margin % adjusted
for the non-core transactions listed above
Cluster contribution to group revenue and operating profit graphs
INVESTMENTS AND CONCESSIONS
(including Infrastructure Year ended Year ended
Concessions and Property 30 June 2009 30 June
Developments) 2008
Revenue - (R`000) 626 795 581 685
Reported Operating Margin % 13.1 9.2
Core Operating Margin % 13.2 7.1
Investments and Concessions consists of Infrastructure Concessions and
Property Developments. This cluster contributed 5.2% (2008: 6.5%) to group
revenue.
Infrastructure Concessions
The business enjoyed an excellent year, with Intertoll Europe achieving an
early start date to operations on the A1 Phase I contract (Poland), achieving
financial close of the A1 Phase II contract (Poland) and reaching commercial
close of the D.1 contract (Slovakia). Intertoll Africa was awarded the N2
North Coast CTROM contract valid to 2017.
Revenue, which consists primarily of fees for the operation and maintenance of
toll roads, increased by 62% from R326,5 million to R527,9 million.
The operating profit margin increased to 15.1% (2008: 9.4%), with operating
profit more than doubling to R79,6 million (2008: R30,7 million). The cluster
also recorded fair value adjustments as described above.
Property Developments
Property Developments continued to realign its portfolio through selective
divestment from its old residential portfolio in favour of the development of
A-grade property opportunities that are aligned to core group interests in
Construction, Manufacturing and Construction Materials.
Therefore, as expected, Property Developments` revenue decreased by 61% from
R255,1 million in F2008 to R98,9 million. Operating profit decreased to R2,3
million (2008: 22,7 million). No fair value adjustments on investment
properties have been reported this year or in the prior year.
As stated at interim stage, whilst medium to long term prospects for the
business are promising, new developments will take time to realise and a
slight decline in revenue and profitability is therefore forecast over the
next two years.
MANUFACTURING
Year ended Year ended
30 June 30 June
2009 2008
Revenue - (R`000) 816 132 554 656
Reported Operating Margin % 10.5 10.1
Core Operating Margin % 10.6 9.9
Manufacturing contributed 6.8% (2008: 6.2%) to group revenue. This cluster has
posted excellent results, despite tough market conditions with the operating
profit increasing from R56,2 million to R86,0 million and the overall
operating profit margin percentage increased to 10.5% (2008: 10.1%).
Everite grew volumes, revenue and earnings significantly in a depressed
traditional housing market as it strategically increased its presence in the
public housing market, which continues to grow robustly.
Group Five Pipe expanded in the year and maintains a healthy order book due to
the need for improved delivery of potable water and the maintenance of
existing infrastructure within South Africa.
The effect of steel price volatility was mitigated in the Steel business unit
through natural hedges, previously put in place. Barnes Reinforcing Industries
and fabrication of steel will benefit from the group`s future construction
order book.
CONSTRUCTION MATERIALS
Year ended Year ended
30 June 30 June
2009 2008
Revenue - (R`000) 671 317 689 220
Reported Operating Margin % 8.3 20.6
Core Operating Margin % 8.4 20.3
Construction Materials contributed 5.6% (2008: 7.7%) to group revenue.
Operating profit decreased by 61% to R55,8 million (2008: R141,9 million) and
the overall operating profit margin decreased to 8.3% (2008: 20.6%).
Construction Materials consists of businesses concerned with mining, crushing,
slag milling and the supply of aggregates and readymix concrete.
Although South Africa is spending on infrastructure due to the 2010 World Cup
impetus and a backlog in transport and energy infrastructure, private sector
building has remained extremely depressed. The year under review was affected
by demand dropping more sharply than anticipated, as well as the slow pick up
of certain infrastructure contracts, and severe summer rains impacted contract
delivery and plant output.
To address the non-performance, the business was restructured to operate
profitably in weaker markets.
The currently muted market conditions are anticipated to progressively return
to more buoyant levels over the next 24 months. In the short term, activity
will focus on the Gauteng roads programme and the expanding infrastructure in
the region. The tight technical specifications and high peak capacity
requirements involved are expected to favour our Quarry Cats and Afrimix
business units.
CONSTRUCTION
Construction comprises the business segments of Building and Housing, Civil
Engineering and Engineering Projects.
Year ended Year ended
30 June 30 June
2009 2008
Revenue - (R`000) 9 975 992 7 074 017
Reported Operating Margin % 5.7 5.4
Core Operating Margin % 5.8 5.2
Construction contributed 82.5% of group revenue in the period under review
(2008: 79.5%).
Construction revenue increased by 41% from R7,1 billion to R9,9 billion and
operating profit increased by 49% from R384 million to R573 million. This
resulted, in an overall operating profit margin percentage of 5.7% (2008:
5.4%).
Building and Housing
Year ended Year ended
30 June 30 June
2009 2008
Revenue - (R`000) 2 899 773 2 848 795
Reported Operating Margin % 4.9 4.9
Core Operating Margin % 5.0 4.6
Building and Housing did well to maintain revenue and earnings in a difficult
market. Revenue increased from R2,8 billion (91% local) to R2,9 billion (98%
local). The segment reported similar operating profit to that of the prior
year, with operating profit increasing from R140,3 million to R141,0 million,
resulting in the overall operating margin percentage remaining at 4.9%.
The secured one-year order book stands at R3,5 billion (90% local) (2008: R2,2
billion and 100% local) and full secured work at R4,6 billion (81% local).
We have successfully hedged our exposure to the private sector building market
through the transfer of capacity to the public sector infrastructure and
social housing market. The one-year forward order book is weighted 81% in
favour of public works and the group is well placed as a pre-qualified
contractor for the government`s roll out of PPP building contracts.
Civil Engineering
Year ended Year ended
30 June 30 June
2009 2008
Revenue - (R`000) 4 633 259 2 964 184
Reported Operating Margin % 4.9 4.8
Core Operating Margin % 4.9 4.6
Civil Engineering achieved substantial growth, with revenue increasing by
56.3% from R2,9 billion (49% local) to R4,6 billion (60% local), while
operating profit increased to R225,7 million from R142,8 million. This
resulted in an operating profit margin percentage increase to 4.9% (2008:
4.8%).
Civil Engineering activity in South Africa remained strong and the mix of work
continued to shift towards the public sector.
Signs of activity have recommenced since year end in the mining sector in the
rest of Africa and the group is also pursuing regional infrastructure
contracts related to power and transport.
In the Middle East, the Group`s business was right sized and continues to
trade profitably. The focus has moved from Dubai to other areas in the region,
where economic growth remains strong. Activities in Abu Dhabi have gone well
and we have managed to secure a further six contracts, as well as the
extension of current contracts in Jordan. Conclusion of the close out of the
two cancelled contracts in Dubai is progressing in an orderly fashion.
Civils secured one-year order book stands at R4,2 billion (86% local),
compared to R4,3 billion (60% local) as at 30 June 2008. The full order book
is at R5,6 billion (61% local). This is the largest order book of our
construction businesses, reflecting a currently satisfactory level of activity
in this sector. However, certain of the next round of public sector contract
awards in SA are slow to come to market.
Engineering Projects
Year ended Year ended
30 June 30 June
2009 2008
Revenue - (R`000) 2 442 960 1 261 038
Reported Operating Margin % 8.5 8.0
Core Operating Margin % 8.6 7.7
Engineering Projects had an excellent year with revenue increasing by 93.7%
from R1,3 billion (14% local) to R2,4 billion (12% local) and operating profit
more than doubled from R100,9 million to R206,7 million. The operating profit
margin percentage improved to 8.5% (2008: 8.0%).
The global economic crisis had a negative impact on the African mining sector
where this business has established a strong presence. Uranium, coal and gold
are still in demand and new opportunities are now presenting themselves in
this sector. Tendering activity picked up in the last quarter of F2009, and
some curtailed African mining projects have resurfaced for re-tender.
Private power continues to be a growing market and, during the year, the group
expanded its footprint into the southern African power and energy market, with
orders received for power station contracts in South Africa and Botswana.
The secured one-year order book stands at R921 million (49% local) as compared
to 30 June 2008 which reported R1 987 million secured work (31% local). The
full secured order book stands at R1 056 million (43% local). The Groups
target project pipeline for mining and energy related engineering contracts
stands at R32 billion, thus providing some guidance for the continued growth
potential in this sector as it recovers.
PROSPECTS
The group continues to be strategically well positioned in active market
sectors, as detailed above. The Construction 1 year order book as at 30 June
2009 stands at R8,6 billion (2008: R8,5 billion), and reflects the group`s
strategic positioning in the public infrastructure cycle, with a mix of
78%:22% in favour of public works. The group`s total secured construction
order book stands at R11,6 billion (2008: R14,2 billion).
During H2 2009, the national utilities slowed down their rate of order
placement, pending project re-prioritisation and fund raising activities. We
expect this situation to ease in H1 2010, but this process has not aided
accurate short term forecasting. The group commenced disclosing its target
project pipeline at the interim report period. The Pipeline value as at 30
June 2009 stood at R72 billion, up from R56 billion in February 2009, which
supports an expectation of order book replacement opportunities in the new
financial year. Construction Materials, however, has stabilised, but is likely
to remain under pressure in the short term.
Management expects the group to achieve further earnings growth in F2010.
Group Five remains well placed to benefit from:
- Long term drivers in the form of stimulus packages and PPPs as well as its
exposure to defensive SA public sector infrastructure investment when that
takes place
- Its competitive advantage in the African power and mining markets
- Its less cyclical, annuity-based infrastructure concession income and its
competitive advantage in tendering for concessions
- Its variety of income streams which provide some margin protection.
BOARD AND EXCO CHANGES
During the year under review, the following changes were made to the board of
directors as non executive directors:
- Ms LE Bakoro was appointed to the Board on 1 November 2008
- Dr JL Job was appointed to the Board on 1 November 2008
- Mr WV Mavimbela resigned from the Board on 17 June 2009
- Mr Z Mtshotshisa was appointed to the Board on 18 June 2009
During the year under review, the following changes were made to the Executive
Committee:
- Mr TJ Woodhead resigned as Executive Director of Construction Materials
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
P Buthelezi MR Upton
Chairperson Chief Executive Officer
6 August 2009
Board of Directors: P Buthelezi* (chairperson), MR Upton (CEO), CMF Teixeira
(CFO), L Chalker*+, Z Mtshotshisa*, SG Morris*, KK Mpinga*
, Dr MSV Gantsho*,
LE Bakoro, Dr JL Job*
*(Non-executive director) + (British)
(DRC)
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70
Marshall
Street Johannesburg 2001
11 August 2009
Date: 11/08/2009 08:00:01 Produced by the JSE SENS Department.
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