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Group Five Limited - Audited results for the year ended 30 June 2004
Group Five Limited
Incorporated in the Republic of South Africa
Reg. no. 1969/000032/06
Share code: GRF
ISIN: ZAE000027405
Audited results for the year ended 30 June 2004
Salient Features
Change 2004 2003
Revenue - R000"s 3,7% 4 252 175 4 100 361
Earnings per share - cents 17,9% 170,7 144,8
Headline earnings per share - cents 17,4% 135,1 115,1
Dividend per share - cents 18,9% 44,0 37,0
Positioned for growth
Customer focused Innovative solutions Co-operative approach Quality &
safety
CONDENSED GROUP INCOME STATEMENT (R"000)
AUDITED
Year ended 30 June
2004 2003
Revenue 4 252 175 4 100 361
Operating profit 179 121 160 127
Finance costs (34 085) (28 530)
Profit before taxation 145 036 131 597
Taxation (27 012) (30 463)
Profit after taxation 118 024 101 134
Minority interests (2 600) (4 366)
Net profit 115 424 96 768
Determination of headline earnings:
Net profit 115 424 96 768
Deduct after tax effect of
- Fair value increase in investment property (5 491) (8 925)
- Profit on disposal of fixed assets (18 562) (10 922)
Headline earnings 91 371 76 921
Operating profit is stated after (charging)/crediting:
(Loss)/income from associates (6 026) 4 774
Fair value increase in investments - net 48 465 -
Depreciation and amortisation (97 144) (88 578)
Foreign exchanges losses - net (33 517) (2 391)
CONDENSED BALANCE SHEET (R"000)
AUDITED
As at 30 June
2004 2003
as restated
ASSETS
Non-current assets
Property, plant and equipment 576 436 509 425
Investments - associates 11 046 14 659
- other 101 443 80 048
Deferred taxation 38 809 -
727 734 604 132
Current assets
Other current assets 1 365 410 1 215 090
Bank balances and cash 275 902 263 618
1 641 312 1 478 708
Total assets 2 369 046 2 082 840
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" interest 536 923 444 767
Minority interest 11 447 9 899
548 370 454 666
Non-current liabilities
Interest bearing borrowings 130 175 60 832
Provision for post-employment obligations 41 515 46 199
171 690 107 031
Current liabilities
Other current liabilities 1 456 922 1 284 968
Bank overdrafts and short-term borrowings 192 064 236 175
Current liabilities 1 648 986 1 521 143
Total liabilities 1 820 676 1 628 174
Total equity and liabilities 2 369 046 2 082 840
CONDENSED CASH FLOW STATEMENT (R"000)
AUDITED
Year ended 30 June
2004 2003
Cash flow from operating activities
Cash from operations 199 836 216 803
Working capital changes (21 131) (89 008)
Cash generated from operations 178 705 127 795
Finance costs (34 085) (28 530)
Taxation and dividends paid (54 007) (53 131)
Net cash from operating activities 90 613 46 134
Fixed assets (net) (102 674) (117 806)
Investments (net) 24 263 3 047
(78 411) (114 759)
Financing activities 44 193 7 622
Net increase/(decrease) in
cash and cash equivalents 56 395 (61 003)
STATISTICS
AUDITED
Year ended 30 June
2004 2003
Number of ordinary shares 68 560 468 67 178 193
Shares in issue 73 573 023 73 573 023
Less: Treasury shares (4 453 432) (4 453 432)
Less: Shares held by share trust (559 123) (1 941 398)
Earnings per share (cents) 170,7 144,8
Fully diluted earnings per share (cents) 169,8 143,1
Headline earnings per share (cents) 135,1 115,1
Dividend cover 3,9 3,9
Dividends per share (cents) 44,0 37,0
Interim 15,0 14,0
Final 29,0 23,0
Net asset value per share (cents) 783,1 662,1
Current ratio 1,0
Earnings per share (cents) - previously reported - 140,0
Headline earnings per
share (cents) previously reported - 111,3
Net asset value per share (cents) - previously reported - 658,4
CONDENSED STATEMENT OF CHANGES IN EQUITY (R"000)
AUDITED
Year ended 30 June
2004 2003
as restated
Balance at 1 July -as previously reported 444 767 381 813
Adjusted for change in accounting for share trust - (11 498)
Attributable profit for the year 115 424 96 768
Issue of shares from share trust to employees 2 999 1 185
Dividends paid (26 267) (23 501)
Balance at 30 June 536 923 444 767
SEGMENTAL ANALYSIS (R million) - primary
AUDITED
Year ended 30 June
2004 2003
Revenue
Construction 3 182 3 204
Manufacturing 720 631
Operations and Maintenance 295 234
Development Services 55 31
4 252 4 100
Operating profit
Construction 47 91
Manufacturing 65 34
Operations and Maintenance 59 16
Development Services 8 19
179 160
CAPITAL EXPENDITURE (R"000)
- Capital expenditure for the year 165 613 161 569
- Capital expenditure committed or authorised
for the next year 18 715 53 420
CONTINGENCIES
There are no legal or arbitration proceedings including any that are pending or
that the Group is aware of or any obligations relating thereto, that have had or
that may have, in the opinion of the directors, a material effect on the Group"s
financial position and accordingly no contingencies or provisions have been
raised.
Total financial institution guarantees given to third parties on behalf of
subsidiary companies amounted to R862 million as at 30 June 2004 as compared to
R1 115 million at 30 June 2003. The directors do not believe any exposure to
loss is likely.
ACCOUNTING POLICIES
These consolidated abridged financial statements for the year ended 30 June 2004
are prepared in accordance with South African Statements of Generally Accepted
Accounting Practise and Schedule 4 of the South African Companies Act. The
accounting policies used are consistent with those used in the annual financial
statements for the year ended 30 June 2003 except for the consolidation of the
Group Five Share Incentive Trust as required by a directive issued by the JSE
Securities Exchange South Africa during February 2004. The 2003 comparatives
have been appropriately restated. There was no effect on net profit previously
reported.
The auditors of Group Five Limited are PricewaterhouseCoopers Inc., Chartered
Accountants (SA), Registered Accountants and Auditors. Their unqualified audit
opinion is available from the company"s registered office.
From a dividend per share point of view disclosure has been provided based on
the period to which the dividends relate. Basic earnings per share is calculated
by dividing net profit by the weighted average number of ordinary shares in
issue (000s) during the year of 67 625 (2003: 66 846). Headline earnings per
share is calculated by dividing headline earnings by the weighted average number
of ordinary shares in issue during the year. In both calculations, treasury and
share trust shares are excluded. Fully diluted earnings per share takes into
account the dilutive effect of shares held by the share trust.
DIVIDEND DECLARATION
The directors have declared a final dividend number 53 of 29 cents per ordinary
share (2003: 23 cents) payable to shareholders.
In order to comply with the requirements of STRATE the relevant details are:
Event Date
Last day to trade Frida, 15 October 2004
(cum-dividend)
Shares to commence trading Monday, 18 October 2004
ex-dividend
Record date Friday, 22 October 2004
(date shareholders recorded in books)
Payment date Monday, 25 October 2004
No share certificates may be dematerialised or rematerialised between
Monday, 18 October 2004 and Friday, 22 October 2004, both dates inclusive.
COMMENTARY
Financial Overview
Revenue increased by 3,7% to R4,3 billion (2003: R4,1 billion), earnings per
share by 17,9% to 170,7 cents (2003: 144,8 cents) and headline earnings per
share by 17,4% to 135,1 cents (2003: 115,1 cents).
The increase in earnings per share is the fourth successive year of earnings
growth and highlights the success of the Group"s strategy to operate across a
broad-based portfolio of businesses to buffer tough market conditions in any one
sector.
During the year the Rand continued to strengthen adversely affecting US Dollar
denominated cross-border revenue by R600 million and resulting in exchange
losses of R33 million (2003: R2 million).
The strengthening Rand also resulted in further deferment of projects in the
resource sector in South Africa, as well as increasing the threat of cheaper
imports for our Manufacturing businesses.
Despite the adverse impact of a stronger currency, operating profit increased by
11,9% to R179,1 million (2003: R160,1 million).
Net finance costs of R34,1 million increased when compared to the R28,5 million
incurred in 2003 due to higher average borrowings over the year. Significant
efforts in containing working capital since January 2004 ensured that cash and
cash equivalents improved by R56,4 million during the year. Long-term borrowings
increased to R130,2 million (2003: R60,8 million) due primarily to the financing
of property, plant and equipment and as part of the strategy to convert short-
term borrowings to long-term.
The effective tax rate for the year was 18,6% (2003: 23,1%) due primarily to
profits earned in lower tax jurisdictions.
The Board is pleased to announce a final dividend of 29 cents which brings the
total dividend declared for the year to 44 cents, an increase of 18,9% over the
37 cents declared in the previous year and in line with the Group"s target of
four times covered.
Operational Review
Development Services
Development Services was restructured into two core focus areas, namely,
property developments and concessions and BOTS. The change in focus has led to
the identification of numerous projects which are currently being negotiated.
Due to the lead times on projects of this nature being 12 to 18 months, benefits
will only become evident in the next two years.
Manufacturing
Manufacturing revenue increased by 14% to R720 million (2003: R631 million) and
operating profit by R30,6 million to R64,8 million.
Everite Building Products improved revenue by 16% and achieved an operating
profit for the year after breaking even in the prior year. The strong financial
performance was largely as a result of continuing improvements in factory
efficiencies.
Vaal Sanitaryware"s continued improvements through technological innovation
resulted in a 26% increase in operating profit despite revenue being affected by
imports.
DPI Plastics improved revenue and operating profit by 26,6% and 21,3%
respectively, as a result of increased sales through its black empowerment joint
ventures and penetration of new markets.
Construction
Construction revenue decreased by 1% to R3,182 million (2003: R3,204 million)
and operating profit decreased by R43,8 million to R46,9 million (2003: R90,7
million) mainly because of the ongoing problems in Roads. After adjusting for
the effects of foreign exchange losses, operating profit decreased by 14% to R80
million (2003: R93 million).
Building revenue increased in line with expectation and operating profit
reflected a 79% increase over the prior year.
The downsizing of Roads was completed during the latter half of the year.
A disappointing operating loss in this business unit reflects the effects of
full provisions against loss-making contracts and the cost of downsizing.
Civils, which was adversely affected by the scarcity of work in the South
African resource sector, reported operating profit 46,4% down from the prior
year. Opportunities are being pursued in the Middle East and the rest of Africa.
Engineering also suffered from the slowdown in the resource sector. Operating
profit decreased by 18,9%. A recent contract award in the African oil and gas
industry provides new opportunities for this business.
The order book of R3,0 billion remains healthy and all operations are expected
to be profitable in the next year. The effects of the strong Rand are being
mitigated through securing high profit margins from cross-border work and
covering foreign currency exposures by ensuring foreign revenues and costs,
where possible, are matched in the same currency.
Operations and Maintenance
Operations and Maintenance had an exceptional performance with revenue
increasing by 26% to R295,4 million (2003: R233,5 million) and operating profit
by R42,5 million to R59,1 million (2003: R16,6 million). The increase in
operating profit was primarily due to the fair value adjustment to the shares
held by Intertoll in the M5 concession. The valuation was determined from the
price at which the Hungarian Government agreed to purchase a stake in the
concession company.
Water and Sanitation Services revenue was in line with prior years, with
operating profit down due to an increasingly competitive market.
Prospects
Africa"s economic growth potential resulting from rising prices of oil, gold and
other resources is anticipated to outstrip growth rates for the global economy.
In South Africa the boom in the property sector and hosting the 2010 Soccer
World Cup will expedite the provision of infrastructure over the next 5 years.
In the Middle East the Group"s establishment of a regional office with a high
profile local partner has been well received and considerable opportunity for
growth exists.
With all major operational problems having been addressed and an order book of
R3,0 billion, the Group is well positioned to report a fifth consecutive year of
strong growth.
On behalf of the board
GM Thomas MH Lomas
Chairman Chief Executive Officer
17 August 2004
371 Rivonia Boulevard, Rivonia PO Box 5016, Rivonia 2128, South Africa
Tel +27 11 806 0111 Fax +27 11 806 0187
Email info@g5.co.za
Website www.g5.co.za
Sponsor
Nedbank Capital
Date: 18/08/2004 09:00:29 AM Supplied by www.sharenet.co.za
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