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GRF - Group Five Limited - Voluntary market and operating update
GROUP FIVE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1969/000032/06)
Share code: GRF ISIN: ZAI 000027405
("Group Five" or "the Group" or "the Company")
Voluntary market and operating update
The Group issues this voluntary statement to coincide with the hosting of
a Management -Media morning and an Investor-Management afternoon
function, facilitated by the Investment Analysts Society today. The Group
will be providing an update on current market and operating conditions
and the effect that these have had on its strategy, with access to
executive committee management. All presentation material and information
handouts will be available on the Group`s website, www.groupfive.co.za,
concurrently with the release of this announcement.
Market conditions
Since the Group released its full year financial results on 15th August
2011, conditions in the markets in which the Group operates have remained
constrained.
Investments and Concessions
Outlook for new European concession projects remains subdued for the next
few years. The market with best prospects remains Poland. The South
African business continues to perform well off a stable platform from the
recently secured CTROM contracts, but the postponement and cancellation
of PPP`s together with generally protracted processes have subdued the
domestic concessions outlook. By comparison, however, Africa offers
better prospects where the group`s expertise in concession development
has been welcomed.
Manufacturing
The residential market remains depressed although a small recovery in
Fibre-Cement volumes has been noted. The public sector remains sluggish,
with delayed Advance Building Technologies ("ABT") project awards. Export
markets are showing very strong demand, with higher volumes into sub-
Saharan Africa.
Construction Materials
Gauteng fixed location quarry markets continue to struggle as a result of
* a high level of competition in the north of Gauteng;
* the increasing presence of surface (dump) rock crushers in the
East of Gauteng; and
* volumes continuing to drop and pricing still being poor.
The readymix market has declined further since June 2011 with additional
market share being enjoyed by the cement majors in support of their
cement production volumes.
Construction
South African construction market conditions have deteriorated on the
back of excess capacity in general building and civil works, exacerbated
by weak private sector demand and by government`s lack of consistency as
illustrated by:
* recent government announcements delaying or cancelling a number
of active PPP tenders;
* the suspension and/or review of commitments to several large
projects including future phases of the Gauteng Freeway
Improvement Project and the N1-N2 Winelands toll road project;
and
* the delay in releasing for implementation the Department of
Energy`s Peaking power plant projects.
Most of these projects are those in which the Group has established a
strong strategic position, requiring substantial investments in cash and
human capital resources over a number of years, in response to the
government`s stated commitment to these projects and their request for
partnerships with the private sector for the delivery of the much-needed
national infrastructure.
There is, however, positive growth in selected African markets,
particularly in commodity resource rich economies where the Group has
proven capabilities and an enviable track record.
The Middle East market continues to offer potential growth in the medium
to long term, but is currently plagued by over-capacity and a shortage of
liquidity which hampers both work procurement and timeous contract
closure.
Operating Update
Investments and Concessions
The underlying financial performance remains sound on the back of a
quality portfolio of secured contracts with profitable long term revenue
streams in both Eastern Europe and South Africa.
Manufacturing
The Fibre Cement market is showing some signs of recovery, with the level
of order activity slowly improving, aided by increasing export activity
on the back of the weakening Rand. ABT volumes have been hampered during
the first half year due to the fact that government`s housing projects
have been slow to be released.
A decision to close our loss-making Structural Steel business was made as
poor market opportunities and pricing, coupled with weak internal
efficiencies, hampered the viability of the operation.
Construction Materials
Construction Materials continues to experience tough trading conditions.
In response the Group has
* further reduced overheads;
* centralised functions;
* amended crushing runs at its quarries; and
* mothballed another four readymix batch plants.
Management is evaluating near term options for this business.
Construction
The Group`s Construction units are performing well, although in much
tighter markets where margins remain under pressure. The Group`s target
opportunity pipeline remains stable at circa R130 billion which provides
the basis for expectations of improved trading conditions in the medium
term, particularly in key infrastructure sectors in which the Group has
capabilities
The Group`s balance sheet remains healthy and it retains a net debt
ungeared position.
Shareholders, however, are advised that, in the short term, expectations
are that H1 F2012 and F2012 will be weaker than previously expected and
prospects for a recovery remain anticipated in F2013. The Group is not in
a position to provide further guidance at this time but anticipates being
able to release a trading update on H1 F2012 and the outlook for F2012 in
January 2012.
Despite these market conditions, the Group maintains its secured
construction works order book at R9 billion (previously reported August
2011: R8,8 billion)
Johannesburg
29 November 2011
Sponsor
Nedbank Capital
Date: 29/11/2011 13:00:01 Supplied by www.sharenet.co.za
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