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GRF - Group Five Limited - Trading update
GROUP FIVE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1969/000032/06)
Share code: GRF ISIN: ZAE000027405
("Group Five" or "the Group" or "the Company")
Trading update
The slowdown within the construction sector in the last two years following
the global market crisis has worsened trading conditions in the construction
and materials markets in which Group Five operates. This has negatively
impacted performance in the current year as the Group still benefited in the
2010 financial year from the majority of large public sector contracts
awarded ahead of the World Cup. In the interim, to mitigate this environment
to some extent, the Group has successfully re-entered targeted African
markets where it has an established track record.
Shareholders are therefore advised that, for the full year ended 30 June
2011, the Group expects:
* Fully diluted headline earnings per share ("FDHEPS") to be between
45% and 55% lower (253 cents per share to 309 cents per share)
compared to the 561 cents per share in F2010
* Headline earnings per share ("HEPS") to be between 45% and 55%
lower (277 cents per share to 338 cents per share) compared to the
614 cents per share in F2010
* Fully diluted earnings per share ("FDEPS") to be between 195% and
205% lower (loss of 243 cents per share to loss of 269 cents per
share) compared to the 256 cents per share in F2010
* Earnings per share ("EPS") to be between 190% and 200% lower (loss
of 252 cents per share to loss of 280 cents per share) compared to
the EPS of 280 cents per share in F2010
As outlined in the interim results, an impairment of the Group`s long-term
assets held by the Construction Materials cluster was recorded due to the
severity of the materials market deterioration and weaker forecasts. This
impairment remains the material difference between earnings and headline
earnings.
In addition, in the second half of the financial year under review, the Group
incurred a number of once-off costs which negatively affected headline
earnings. These costs are operational in nature and when combined, they had
an effect on the full year`s results, these costs include:
* Planned restructuring and rationalisation costs within the
Construction Materials cluster, as outlined in the Group`s interim
results
* Holding costs in the Middle East following the market downturn,
including:
* Resources focused specifically on regional business
development and the successful progressive commercial and
financial close of legacy contracts in Dubai.
* The time discounting effect of reflecting the present value of
the unchanged certified debt on one of the Group`s previously
reported cancelled contracts. We have received cash flow in
line with the signed payment plan agreed with our client.
* Costs for corrective action that was successfully implemented
on a Jordanian pipeline contract.
* Steel supply loss on one, near complete, joint venture
contract in manufacturing.
Save for the abovementioned costs and the effects of worsened trading
conditions in manufacturing, the rest of the Group`s businesses performed in
line with guidance issued at the last reporting period.
In spite of sluggish domestic concessions and PPP activities and the economic
pressures in Europe, Investments and Concessions remained stable as new
tolling contracts came on line in Eastern Europe and South Africa.
Manufacturing and Construction Materials suffered from a combination of
declining volumes, delayed contract awards, a strong rand and pricing
pressures. Encouragingly, there have been early signs of price and volume
stability returning to the Construction Materials market in the last few
months.
With the exception of the Middle East, as discussed above, the Group`s
largest segment, Construction, held up well, based on good contract execution
and the benefit of a number of longer term and some African contracts that
were strategically secured in previous periods.
Market conditions
The South African construction and engineering market has seen further
contract award delays and limited work flow into an industry that is already
carrying significant over-capacity. The tender work that is taking place is
heavily contested by large and small contractors with extremely aggressive
pricing. Emphasis on a larger geographical footprint for more of the Group`s
business units and achieving early wins in the re-emergence of the mining and
energy markets in Africa remains the strategy to reduce the reliance on weak
domestic markets.
The construction industry in the Group`s targeted geographies and sectors has
solid medium and long term prospects, but in the short term, conditions are
worse than envisaged. This weakness is expected to extend for longer, with a
slow rate of a broader market recovery materialising from the second half of
F2012 which will inform trading performance for F2013.
The Group`s audited results for the full year ended 30th June 2011 will be
released on SENS on 15thAugust 2011, when the Group will be updating the
market on its business at a presentation in Johannesburg on the same day, and
in Cape Town on 16th August 2011. The presentation will be available on the
15th August 2011on the Group`s website, www.groupfive.co.za
Johannesburg
5 July 2011
Sponsor
Nedbank Capital
Date: 05/07/2011 12:51:01 Supplied by www.sharenet.co.za
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