Wrap Text
Unaudited interim group results
for the six months ended 31 December 2012
Group Five
(Incorporated in the Republic of South Africa)
(Registration number 1969/000032/06)
Share code: GRF ISIN: ZAE 000027405
(Group Five or the company)
Unaudited interim group results
for the six months ended 31 December 2012
Highlights
REVENUE
from continuing
operations up 16%
to R5,1 billion
Dec 12 = R5,1 bn
Dec 11 = R4,4 bn
Operating profit
from continuing
operations up 23% to
R270 million
Dec 12 = 270
Dec 11 = 219
ORDER BOOK
up 19% to
R13,5 billion
from June 2012
Dec 12 = R13,5 bn
Jun 12 = R11,3 bn
NET ASSET
VALUE
up 8% to
R20,16 per share
from June 2012
Dec 12 = R20,16
Jun 12 = R18,72
Cash
and cash equivalents from continuing operations
up R372 million
to R2,6 billion
from June 2012
Dec 12 = R2,6 bn
Jun 12 = R2,3 bn
HEADLINE EARNINGS
PER SHARE up 63% to 152 cents
per share
Dec 12 = 152 cents
Dec 11 = 93 cents*
EARNINGS
per share up
57% to 140 cents per share
Dec 12 = 140 cents
Dec 11 = 89 cents
DIVIDEND
PER SHARE up
45% to 32
cents per share
Dec 12 = 32 cents
Dec 11 = 22 cents
* Restated to reflect operating losses from Construction Materials in headline earnings comparable with F2012 treatment.
Condensed consolidated income statement
for the six months ended 31 December 2012
Six months Six months Full year
ended ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
(R000) Unaudited Unaudited Audited
Revenue - continuing operations 5 109 173 4 406 818 8 783 378
Operating profit before fair value adjustments 240 934 169 123 263 881
Fair value adjustments relating to investment in service concessions 29 159 38 941 56 652
Fair value adjustments relating to investment properties - 10 970 10 865
Operating profit 270 093 219 034 331 398
Share of profit from associates 5 499 126 1 163
Finance income 24 134 38 442 75 687
Finance costs (30 370) (36 501) (79 487)
Profit before taxation 269 356 221 101 328 761
Taxation (83 901) (65 227) (106 032)
Profit after taxation from continuing operations 185 455 155 874 222 729
Loss for the period from discontinued operations (37 958) (40 960) (452 841)
Profit/(loss) for the period 147 497 114 914 (230 112)
Allocated as follows:
Equity shareholders of Group Five Limited 135 138 86 073 (278 405)
Non-controlling interest 12 359 28 841 48 293
147 497 114 914 (230 112)
Earnings/(loss) per share - R 1,40 0,89 (2,88)
Fully diluted earnings/(loss) per share - R 1,39 0,89 (2,88)
Earnings per share from continuing operations - R 1,79 1,32 1,81
Fully diluted earnings per share from continuing operations - R 1,78 1,31 1,80
Determination of headline earnings
for the six months ended 31 December 2012
Six months
Six months ended Full year
ended 31 Dec 2011 ended
31 Dec 2012 Unaudited 30 Jun 2012
(R000) Unaudited Restated* Audited
Attributable profit/(loss) 135 138 86 073 (278 405)
Adjusted for (net of tax) 11 275 4 170 389 982
- (Profit)/ loss on disposal of property, plant and equipment and
investment property (2 169) 5 386 3 675
- Loss/(profit) on disposal of subsidiary 1 944 619 (36)
- Net profit on fair value adjustments on investment property - (7 796) (7 720)
- Impairment of non-current assets classified as held for sale 11 500 5 961 394 063
Headline earnings 146 413 90 243 111 577
* Restated to reflect operating losses from Construction Materials in headline earnings, comparable with F2012 treatment.
Condensed consolidated statement of comprehensive income
for the six months ended 31 December 2012
Six months Six months Full year
ended ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
(R000) Unaudited Unaudited Audited
Profit/(loss) for the period 147 497 114 914 (230 112)
Other comprehensive income for the period net of tax
Exchange differences on translating foreign operations* 11 213 85 517 68 411
Other comprehensive income for the period 11 213 85 517 68 411
Total comprehensive income/(loss) for the period 158 710 200 431 (161 701)
Total comprehensive income/(loss) for the period attributable to
Equity shareholders of Group Five Limited 146 351 171 590 (209 994)
Non-controlling interest 12 359 28 841 48 293
Total comprehensive income/(loss) for the period 158 710 200 431 (161 701)
* With no resultant tax impact.
Condensed consolidated statement of financial position
as at 31 December 2012
Six months Six months Full year
ended ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
(R000) Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment and investment property 926 271 905 021 893 392
Investments - service concessions 316 269 300 199 296 635
Investments - property developments - 8 691 8 716
Other non-current assets 333 535 174 911 351 243
1 576 075 1 388 822 1 549 986
Current assets
Other current assets 3 404 377 3 682 210 3 498 030
Bank balances and cash 2 640 147 2 335 460 2 268 226
6 044 524 6 017 670 5 766 256
Non-current assets classified as held for sale 160 901 692 995 272 928
Total assets 7 781 500 8 099 487 7 589 170
EQUITY AND LIABILITIES
Capital and reserves
Equity attributable to equity holders of the parent 1 947 559 2 311 776 1 808 736
Non-controlling interest 69 590 102 052 67 968
2 017 149 2 413 828 1 876 704
Non-current liabilities
Interest bearing borrowings 572 073 132 526 613 464
Other non-current liabilities 106 670 50 267 113 126
678 743 182 793 726 590
Current liabilities
Other current liabilities 5 023 801 5 280 606 4 807 515
5 023 801 5 280 606 4 807 515
Liabilities associated with non-current assets classified as
held for sale 61 807 222 260 178 361
Total liabilities 5 764 351 5 685 659 5 712 466
Total equity and liabilities 7 781 500 8 099 487 7 589 170
Condensed consolidated statement of cash flow
for the six months ended 31 December 2012
Six months Six months Full year
ended ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
(R000) Unaudited Unaudited Audited
Cash from operations before working capital changes 348 970 236 035 424 692
Working capital changes 229 833 118 810 154 460
Cash generated from operations 578 803 354 845 579 152
Finance (costs)/income - (net) (6 236) 1 941 (1 514)
Taxation and dividends paid (76 690) (95 124) (148 469)
Cash generated by/(utilised in) operating activities (discontinued
operations) 1 458 (6 876) (18 290)
Net cash generated by operating activities 497 335 254 786 410 879
Property, plant and equipment and investment property (net) (63 230) (110 332) (200 295)
Investments (net) - (22 129) (11 653)
Cash generated from investing activities (discontinued operations) 33 776 4 025 19 184
Net cash utilised by investing activities (29 454) (128 436) (192 764)
Net cash utilised in financing activities - continuing operations (78 985) (67 057) (225 284)
Net cash utilised in financing activities - discontinuing operations (24 148) (22 235) (44 882)
Net cash utilised in financing activities (103 133) (89 292) (270 166)
Effects of exchange rates on cash and cash equivalents 18 259 80 068 76 205
Net increase in cash and cash equivalents 383 007 117 126 24 154
Cash and cash equivalents at beginning of year 2 258 933 2 234 779 2 234 779
Cash and cash equivalents at end of period 2 641 940 2 351 905 2 258 933
- Included in cash and cash equivalents per the statement of
financial position 2 640 147 2 335 460 2 268 226
- Included in non-current assets classified as held for sale 1 793 16 445 (9 293)
2 641 940 2 351 905 2 258 933
Condensed consolidated statement of changes in equity
for the six months ended 31 December 2012
Six months Six months Full year
ended ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
(R000) Unaudited Unaudited Audited
Balance at 1 July 1 876 704 2 265 695 2 265 695
Net profit/(loss) for the period 147 497 114 914 (230 112)
Other comprehensive income for the period 11 213 85 517 68 411
Share options expense 5 996 11 366 29 093
Cancellation of shares - - (117 945)
Distribution to non-controlling interest (10 737) (44 354) (97 890)
Dividends paid (13 524) (19 309) (40 548)
Balance at end of period 2 017 149 2 413 828 1 876 704
Capital expenditure and depreciation
for the six months ended 31 December 2012
Six months Six months Full year
ended ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
(R000) Unaudited Unaudited Audited
- Capital expenditure for the period 151 023 148 278 338 922
- Capital expenditure committed or authorised 428 587 282 042 393 590
- Depreciation for the period 98 604 78 260 165 356
Condensed consolidated segmental analysis
for the six months ended 31 December 2012
Six months Six months Full year
ended ended ended
% % 31 Dec 2012 31 Dec 2011 30 Jun 2012
(R000) margin change Unaudited Unaudited Audited
REVENUE
Investments and Concessions 5 334 700 320 250 647 739
Infrastructure Concessions 4 319 253 305 519 619 915
Property Developments 5 15 447 14 731 27 824
Manufacturing 3 508 641 495 973 1 024 329
Construction 19 3 857 738 3 254 557 6 480 130
Building and Housing 16 1 526 333 1 310 766 2 065 972
Civil Engineering 20 1 458 740 1 217 078 2 997 747
Projects 20 872 665 726 713 1 416 411
Engineering + Construction 21 408 094 336 038 631 180
Total Revenue 16 5 109 173 4 406 818 8 783 378
OPERATING PROFIT
Investments and Concessions 22.6 (15) 75 620 88 965 153 795
Infrastructure Concessions 23.8 (3) 76 134 78 757 143 708
Property Developments (3.3) (105) (514) 10 208 10 087
Manufacturing 6.8 61 34 716 21 587 46 490
Construction 3.6 25 139 117 111 365 116 294
Building and Housing 2.0 (9) 30 349 33 438 52 133
Civil Engineering 3.3 53 48 813 31 827 (37 541)
Projects 6.9 30 59 955 46 100 101 702
Engineering + Construction 2.6 567 10 584 (2 263) 5 021
Total core operating profit 5.1 18 260 037 219 654 321 600
Adjustments for non-operational transactions
Pension fund surplus 12 000 - 15 790
Remeasurement of employment obligation - - (4 593)
Loss on sale of subsidiary/impairment on associates (1 944) (619) (1 399)
Reported total operating profit 270 093 219 034 331 398
Statistics
for the six months ended 31 December 2012
Six months Six months Full year
ended ended ended
31 Dec 2012 31 Dec 2011 30 Jun 2012
Unaudited Unaudited Audited
Number of ordinary shares 96 600 761 96 023 132 96 600 761
Shares in issue 110 709 478 121 571 162 110 645 521
Less: Shares held by share trusts (14 108 717) (25 548 030) (14 044 760)
Weighted average number of shares (000s) 96 601 96 545 96 545
Fully diluted weighted average number of shares (000s) 97 090 96 750 96 946
Total operations
EPS/(loss) per share - R 1,40 0,89 (2,88)
HEPS - R 1,52 0,93* 1,16
Fully diluted EPS/(loss) per share - R 1,39 0,89 (2,88)
Fully diluted HEPS - R 1,51 0,93* 1,15
Continuing operations
EPS - R 1,79 1,32 1,81
HEPS - R 1,83 1,30 1,78
Fully diluted EPS - R 1,78 1,31 1,80
Fully diluted HEPS - R 1,82 1,30 1,77
Dividend per share (cents) 32,0 22,0 36,0
Interim 32,0 22,0 22,0
Final - - 14,0
Net asset value per share - R 20,16 24,07 18,72
Net debt to equity ratio - - -
Current ratio 1,2 1,1 1,2
EPS: Earnings per share
HEPS: Headline earnings per share
* Restated to reflect operating losses from Construction Materials in headline earnings, comparable with F2012
treatment.
Commentary
Introduction
Against on-going tough markets, the group continued to implement the conservative approach previously adopted in terms of both
the quality of the order book secured and its philosophy towards cash preservation to fund activity which will support future profit
growth.
It is thus encouraging to see an improvement in the Construction and Engineering & Construction (E+C) order book, with a good
cash position supporting this strategy. The overall group earnings delivered during the period demonstrates an improved
performance, over the comparable reporting period, with an increase in revenue traded, and an overall operating margin
percentage increase. The earnings for the period are a consolidation of the following key factors:
- Pre-disposal operating losses, in line with forecasts and guidance provided, and a further R11,5 million cost to sell the remaining
Construction Materials businesses.
- In Construction:
- Contract losses (including overhead close out costs in line with forecasts and guidance provided) from the Middle East deflated
an otherwise solid civils segmental performance
- Weak domestic buildings market affected operating margins in this segment as guided
- A solid performance was achieved by the Projects segment following continued strong activity in African mining resources
- Expansion in the Engineering and Construction cluster
- Robust earnings delivery from the groups Manufacturing cluster
- Continued strong performance by Infrastructure Concessions with additional European toll collection contracts awarded in the
period which offset delayed start-ups in African toll contracts
Financial Performance
Headline earnings (HEPS) of 152 cents per share represents an increase of 63.4%, and fully diluted HEPS (FDHEPS) of 151
cents per share an increase of 62.4%, compared to restated* HEPS and FDHEPS of 93 cents per share for the comparable
reporting period. Earnings per share (EPS) was 140 cents per share and fully diluted EPS (FDEPS) 139 cents per share.
* Restated to reflect operating losses from Construction Materials in headline earnings comparable with F2012 treatment.
This represents a 57.3% and 56.2% increase respectively over the 89 cents per share reported for H1 FY2012.
The difference between earnings and headline earnings is mainly as a result of an impairment charge of R11,5 million on assets,
reflected as non-current assets classified as held for sale on the groups statement of financial position, relating to the
Construction Materials businesses being disposed of as described earlier.
Group revenue from continuing operations increased by 15.9% from R4,4 billion to R5,1 billion mainly as a result of increased
activity in all of the groups Construction businesses and the Engineering and Construction cluster.
Whilst profits from the Infrastructure Concessions and Building & Housing segments remained largely unchanged period on
period, the increased operating profit generated by the Manufacturing cluster and the other Construction businesses resulted in
the group's core operating profit increasing by 18.4% and core operating margin percentage held at 5.1% (H1 F2012 5.0%).
In addition to this core operating profit is a surplus on the group's pension fund of R12,0 million (H1 F2012: nil) as a result of an
actuarial valuation assessment.
Fair value net upward adjustments of R29,1 million (H1 F2012: R49,9 million) relating to the group's interests in Eastern European
road transport concessions, positively affected the groups results in the period under review. (H1 F2012: fair value adjustment
included both Eastern European road transport concessions as well as the group's investments in property developments and
investment properties.) Group total operating margin increased to 5.3% (H1 F2012: 5.0%).
In line with expectations, group net finance costs of R6,2 million were recorded for the period compared to net finance income of
R1,9 million in the prior period as a result of a period on period reduction in other finance income earned.
The effective tax rate of 31% (H1 F2012: 30%) was higher than the South African statutory tax rate of 28%. This was mainly due
to a conservative approach adopted to the raising of deferred taxation assets, which was partially offset by liabilities in jurisdictions
with lower taxation rates.
Financial position
It is pleasing to note that the groups statement of financial position continues to be sound, with a nil net gearing ratio and an
increase in bank and cash balances to R2,6 billion as at 31 December 2012 (30 June 2012 R2,3 billion and 31 December 2011
R2,3 billion).
The statement of financial position continues to reflect the net investment in the Construction Materials businesses within non-
current assets classified as held for sale. An impairment on the sale of non-current assets classified as held for sale of R11,5
million (net of tax), was charged against income in the current reporting period as mentioned earlier.
In addition to this impairment, the loss for the period from discontinued operations includes an operating loss (net of tax) from the
Construction Materials businesses of R22,4 million (net of tax), as well as an amount of R4,1 million (net of tax) relating to legal
costs incurred on a terminated Indian toll road contract previously disclosed.
Cash flow
The group generated R349,0 million cash from operations before working capital changes.
In addition, it generated R229,8 million cash from working capital changes, resulting in a net cash inflow from operations of
R497,3 million after settlement of taxation liabilities of R63,2 million. After a net cash investment of R115,5 million in plant and
equipment, R52,2 million proceeds received on disposal of investment property and net repayment of liabilities of R68,6 million,
the group generated an increase in cash of R372 million from continuing operations. The improvement in working capital was as a
result of an increase in excess billings over work performed, as well as an improvement in trade receivables management and a
decrease in work in progress balances.
Dividend
The group has previously disclosed that the company has adopted an approximate four times basic earnings per share dividend
cover policy. This policy is subject to review on a semi-annual basis, prior to dividend declaration, as distributions will be
influenced by business growth, acquisition activity, or movements in earnings as a result of fair value accounting adjustments. In
line with this policy, a dividend for this period of 32 cents per share (H1 F2012: 22 cents) has been declared. The dividend policy
therefore remains unchanged, based on the medium term business outlook and the availability of liquid resources.
Business combinations
There were no business combinations during the current reporting period.
The group progressed with disposing of its Construction Materials businesses. At 30 June 2012 the group disclosed that it had
concluded sale agreements on two of its Construction Materials businesses. During the current reporting period proceeds from
these sales were received and an additional business sold. The group has received and accepted firm offers for the remaining
assets held within the Construction Materials cluster. Implementation of these transactions mainly await the achievement of certain
conditions precedent, which include Competition Commission approval and approval by the Department of Mineral Resources.
Shareholding
The early exit of the original BBBEE ownership transaction shareholder, Mvelaphanda, from the group's ownership structure,
along with the implementation of a Black Professionals Staff Trust and Izakhiwo Imfundo Bursary Trust, was approved by
shareholders on 27 November 2012.
The transaction was concluded on 16th January 2013 following the fulfilment of all conditions precedent. The financial effects of
the revised transaction will therefore be charged against income from H2 F2013. The estimate of the share-based benefit payment
with respect to this transaction has been updated at the effective date. The share-based payment benefit provided to the Izakhiwo
Imfundo Bursary Trust is recognised as a non-recurring equity settled share-based payment. The full estimated charge of R16,8
million (R12,7 million originally estimated as per the circular to shareholders) is recognised fully on grant date charged against.
The estimated share-based payment benefit provided to employees through the Black Professionals Staff Trust is R93,9 million
(R71,4 million originally estimated as per the circular to shareholders) and is recognised as a cash settled share based payment
transaction over the life of the scheme from the effective date of this transaction to the assumed end date of November 2020 with
an amount of R6,0 million estimated to be charged in H2 F2013 (R8,7 million originally estimated as per the circular to
shareholders for the full year).
The implementation of the Izakhiwo Imfundo Bursary Trust portion of the revised transaction will result in an increase in the
groups number of shares in issue by two million shares from grant date. The implementation of the Black Professionals Staff Trust
at the effective date resulted in no increase in the weighted average number of shares in issue. However this must be reassessed
at each reporting period.
Industry matters
As announced on SENS on 1 February 2011, the group adopted a proactive stance from 2008 in respect of the on-going
investigation by the Competition Commission into alleged anti-competitive behaviour within the construction industry. The group
has continued to co-operate with the Commission for the last few years in the interest of determining if it had any exposure and to
take advantage of the Commission's leniency programme to limit the risk of any penalties and/or fines. The group has signed
additional conditional leniency agreements with the Commission without penalty as it progresses its investigations. The group
does not deem a provision for penalties and fines to be required and has subsequently not raised a provision in these reported
results.
Operational review
Group
For comparative purposes, the group provides both the groups total operating margins, as well as the core operating margins
from continuing operations as per the segmental report which is net of non-core/headline transactions such as pension fund
surpluses and deficits and profit/loss on sale or impairment of subsidiaries. The group refers to the latter margin as the core
operating margin, as it reflects the underlying operating performance. Both margins exclude the impairment of non-current assets,
but include the fair value upward and downward adjustments on Investments and Concessions and profit/loss on sale of property,
plant and equipment, as these are within the control of the cluster.
H1 F2013 H1 F2012 F2012
Six months Six months Year
ended ended ended
31 Dec 2012 31 Dec 2011 30 June 2012
Unaudited Unaudited Audited
Revenue - continuing operations (R000) 5 109 173 4 406 818 8 783 378
Total operating margin % 5.3 5.0 3.8
Core operating margin % 5.1 5.0 3.7
The group's underlying businesses performed in line with management expectations and in accordance with the market guidance
provided in November 2012.
As expected, the period's results were impacted by losses in the Construction Materials segment, disclosed as a discontinued
operation, as well as losses in the Middle East, reported within the Civil Engineering results.
Investments and concessions
H1 F2013 H1 F2012 F2012
Six months Six months Year
ended ended ended
(including Infrastructure Concessions 31 Dec 2012 31 Dec 2011 30 June 2012
and Property Developments) Unaudited Unaudited Audited
Revenue - (R000) 334 700 320 250 647 739
Total operating margin % 22.7 27.6 23.7
Core operating margin % 22.6 27.8 23.7
Investments and Concessions consists of Infrastructure Concessions and Property Developments. This cluster contributed 6.6%
(H1 F2012: 7.3%) to group revenue.
Revenue, which consists primarily of fees for the operation and maintenance of toll roads, increased by 4.5% from R320,3 million
to R334,7 million. The core operating profit margin decreased from 27.8% to 22.6%, with core operating profit of R75,6 million (H1
F2012: R89,0 million), mainly as a result of fair value adjustments of R29,1 million recorded in H1 F2013 versus R49,9 million in
H1 F2012.
Infrastructure Concessions
This segment demonstrated a strong performance despite the continued effects of the deep recession across the European region
and the absence of new concessions awards in South Africa. In spite of South African policy uncertainty and delays in awards in
domestic concessions and PPP activities and the economic pressures in Europe, Infrastructure Concessions performed ahead of
expectations as a new tolling and operations contract came on line in Eastern Europe.
There has been progress on some of the delayed public sector building PPPs with some new projects under consideration. The
Renewable Energy Independent Power Programme (REIPP) is running with Round one projects started and Round two preferred
bidders announced. The outcome of the government's deliberations on the resolution of the Gauteng Freeway Tolling impasse, the
dispute over the N1-N2 Winelands concession and the work being done by the Presidential Infrastructure Coordinating
Commission will be crucial in providing more clarity on the outlook for transport concessions. African concession opportunities
remain attractive, with tolling on the Zimbabwe roads projects commencing shortly and further new projects under development in
transport projects and power. The group was recently declared reserve bidder for the Mauritius Port Louis by-pass project.
Property Developments
The group continues to progress its strategy of disinvestment from the traditional residential sector in favour of securing A-grade
commercial and retail property development positions with new projects starting in South Africa and some progress in West Africa
in line with the group's African strategy.
Manufacturing
H1 F2013 H1 F2012 F2012
Six months Six months Year
ended ended ended
31 Dec 2012 31 Dec 2011 30 June 2012
Unaudited Unaudited Audited
Revenue - (R000) 508 641 495 973 1 024 329
Total operating margin % 7.1 4.4 4.2
Core operating margin % 6.8 4.4 4.5
Manufacturing consists of fibre cement building products business, Everite, as well as steel fabrication businesses BRI and Group
Five Pipe. Manufacturing contributed 10.0% (H1 F2012: 11.3%) to group revenue.
Manufacturing produced pleasing results in a market where both traditional private and public sector conditions appear to have
bottomed. The comparable reporting period includes closure costs of the steel fabrication business, which were incurred in the first
half of H1 F2012.
Revenue increased 2.6% from R496,0 million in H1 F2012 to R508,6 million. The reported core operating profit for the year was
R34,7 million. This was 60.8% higher than the prior year of R21,6 million, resulting in a core operating margin of 6.8% (H1 F2012:
4.4%).
An increase in volumes traded in Everite and BRI during the reporting period lifted the Manufacturing performance from the last
reported results. Capacity in Everite has become a constraint in certain product groups, leading to accelerated capital planning.
The modular housing systems business Advanced Building Technologies (ABT) is reflecting increased sales as the technology is
accepted in more applications. Group Five Pipe remains tied to large water transport project demand, with improved project
awards during the reporting period.
Construction
H1 F2013 H1 F2012 F2012
Six months Six months Year
ended ended ended
31 Dec 2012 31 Dec 2011 30 June 2012
Unaudited Unaudited Audited
Revenue - (R000) 3 857 738 3 254 557 6 480 130
Total operating margin % 3.8 3.4 2.0
Core operating margin % 3.6 3.4 1.8
In prior years Projects and Engineering & Construction were consolidated into a single segment called Engineering and reported
within the Construction cluster. With effect from 1 July 2012 the group was restructured with the Engineering & Construction
business now reported as a separate cluster from Construction and the Projects business remaining as part of the Construction
segment.
Construction continued to be the largest cluster in the group, contributing 75.5% to group revenue (H1 F2012: 73.9%).
Construction revenue increased by 18.5% from R3,3 billion to R3,9 billion and core operating profit increased by 24.9% from
R111,3 million to R139,1 million. The overall Construction core operating profit margin percentage was 3.6% (H1 F2012: 3.4%).
Over-border work contributed 37% (H1 F2012: 29%) to Construction revenues. Construction performance was impacted
somewhat by end-of contract close out losses in the Middle East. The group purposefully continued to carry costs related to its
investment in future opportunities and capacity building in local and new over-border transport and real estate PPPs, as well as
geographic expansion.
Building and Housing
H1 F2013 H1 F2012 F2012
Six months Six months Year
ended ended ended
31 Dec 2012 31 Dec 2011 30 June 2012
Unaudited Unaudited Audited
Revenue - (R000) 1 526 333 1 310 766 2 065 972
Total operating margin % 2.1 2.6 2.8
Core operating margin % 2.0 2.6 2.5
The private building sector remains extremely weak. The group has seen an increase in the volume of work coming to local
market. Although underlying operating margins have not worsened, they remain thin. Building and Housing managed to partially
mitigate this impact through the contribution of selected public sector building contracts, an improvement in the housing business,
as well as improved execution and supply chain savings. However as guided in November 2012, this was not sufficient to prevent
a decrease in operating margins.
Building and Housing revenue increased by 16.4% from R1,3 billion (80% local) to R1,5 billion (91% local). The segment reported
a 9.2% decrease in core operating profit from the prior comparable period, from R33,4 million to R30,3 million. This resulted in the
overall core operating margin percentage decreasing from 2.6% to 2.0%.
Governments promised new infrastructure spend programme has not yet materialised. However there has been progress on
some of the delayed public sector building PPPs with new projects under consideration. The coastal region performed well,
although margins were constrained. In the short term the Building business will be under pressure while markets are further
developed and while new awards against tenders under adjudication are awaited. The Housing business has, however, seen a
recent marked improvement in domestic mining and affordable and RDP housing work load.
The secured one-year order book stands at R3,9 billion (100% local) (F2012: R2,8 billion and 94% local) and total secured order
book stands at R5,3 billion (100% local) (F2012: R3,6 billion and 95% local).
Civil Engineering
H1 F2013 H1 F2012 F2012
Six months Six months Year
ended ended ended
31 Dec 2012 31 Dec 2011 30 June 2012
Unaudited Unaudited Audited
Revenue - (R000) 1 458 740 1 217 078 2 997 747
Total operating margin % 3.6 2.6 (1.1)
Core operating margin % 3.3 2.6 (1.3)
Civil Engineering includes the groups civil engineering activities in South Africa, the rest of Africa and the Middle East. Civil
Engineering reported a 19.9% increase in revenue from R1,2 billion (78% local) to R1,5 billion (61% local), while core operations
reported a profit of R48,8 million for the period (H1 F2012: R31,8 million profit).
The Civil Engineering result was again impacted by revenue and margin shifting out in time due to delayed contracts as well as
scope changes on several large South African contracts. The underlying South African and African Civil Engineering business
delivered well on contracts executed in the period.
In the Middle East slow but positive progress continues to be achieved in contract resolution, including cash recovery. The good
underlying Civil Engineering performance was, however, impacted somewhat by remnant costs incurred, as guided, and which
relate to contractual and commercial resources managing contract finalisation and cash collection and less material close out
losses on completed contracts.
Tendering activity is high and increasing, both locally and in Africa. The business is proactively mitigating domestic market
conditions by progressively rebuilding its African order book in geographies in which the group has prior operating experience and
where growth opportunities are stronger.
Civil Engineerings secured one-year order book stands at R3,4 billion (54% local) (F2012: R3,3 billion and 43% local). The full
order book is at R4,1 billion (53% local) (F2012: R4,4 billion and 43% local).
Projects
H1 F2013 H1 F2012 F2012
Six months Six months Year
ended ended ended
31 Dec 2012 31 Dec 2011 30 June 2012
Unaudited Unaudited Audited
Revenue - (R000) 872 665 726 713 1 416 411
Total operating margin % 7.1 6.3 7.4
Core operating margin % 6.9 6.3 7.2
Projects continues to experience strong activity in sub-Saharan African mining resources markets, which resulted in new contract
awards during the period under review. This trend is expected to continue as the business expands its experience in more
minerals categories, technologies and geographies. In addition, cross-group co-operation continues as larger multidisciplinary
projects become more prevalent.
During the period, revenue increased by 20.1% from R726,7 million (46% local) to R872,7 million (19% local). Core operating
profit increased by 30.1% from R46,1 million to R59,9 million. The core operating profit margin percentage increased to 6.9%
(H1 F2012: 6.3%).
The secured one-year order book stands at R1,3 billion (25% local) (F2012: R1,2 billion and 19% local). The full secured order
book stands at R1,4 billion (26% local) (F2012: R1,8 billion and 37% local).
Engineering & Construction
H1 F2013 H1 F2012 F2012
Six months Six months Year
ended ended ended
31 Dec 2012 31 Dec 2011 30 June 2012
Unaudited Unaudited Audited
Revenue - (R000) 408 094 336 038 631 180
Total operating margin % 2.8 (0.7) 1.0
Core operating margin % 2.6 (0.7) 0.8
The Engineering and Construction (E+C) business was established to deliver technology-based EPC, multi-disciplinary project
management and construction, operations and services solutions to selected sectors such as Power, Oil and Gas and Water. The
target markets have been slow to develop, although the demand in the long term is significant.
The group is encouraged by the private sectors commitment to renewable energy. During the period the E+C business secured
three full EPC power plant contracts in Wind and Solar for round 1 of the REIPP along with the long term operations and
maintenance contracts on these plants. Round two REIPP prospects are developing positively.
The oil and gas business stream has seen an increase in its project and long term services order book.
During the period, revenue increased by 21.4% from R336,0 million (96% local) to R408,1 million (79% local). This resulted in a
core operating profit margin of 2.6% (H1 F2012: loss) in line with expectations due to early stages of implementation of a number
of projects.
The group purposefully continued to carry costs related to its investment in future opportunities and capacity building in nuclear
readiness within the E+C business.
The secured one-year order book stands at R1,6 billion (89% local) (F2012: R1,0 billion and 71% local). The full secured order
book stands at R2,6 billion (81% local) (F2012: R1,5 billion and 66% local).
Prospects
The groups total secured Contracting order-book (Construction and Engineering & Construction) stands at R13,5 billion (June
2012 R11,3 billion and December 2011: R10,3 billion). In addition, the group reported R4,6 billion in secured operations and
maintenance contracts (June 2012: R4,8 billion. The overall group reported order-book at December 2012 thus stands at R18,1
billion.
The value of the groups target opportunity pipeline stands at R124 billion, which is down from R148 billion at June 2012 and
R144 billion at December 2011 due to a more conservative targeting of key sector and projects and some awards having been
secured. The pipeline indicates a swing in favour of power, with mining, transport and real estate strong.
The Investments and Concessions cluster is delivering annuity business growth, with group-wide opportunities in active
infrastructure sectors in increasing geographies. Manufacturing has been refocused and its performance is improving on higher
sales volumes to a broadening number of markets. The disposal of the loss-making Construction Materials cluster has resulted in
the reduction in cash drain from this part of the group. The Middle East operations have been substantially reduced and contract
close-outs progressing well, thus further reducing the drag on group performance.
Based on the groups positioning in the key infrastructure growth sectors of power, mining, oil and gas, water and transport and in
the concessions and PPP market for specific projects, underpinned by the groups strong cash position, management expects a
further recovery in group activity levels. This should support continued improvement in the groups trading performance from H2
F2013.
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, therefore 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 R4 596 million as at 31
December 2012, compared to R4 310 million as at 30 June 2012.
Dividend declaration
On 8th February 2013 the directors declared a gross interim dividend of 32 cents per ordinary share (32 cents per ordinary share
net of dividend withholding tax and STC credits) (2012: 22 cents).
The dividend has been declared from income reserves.
In terms of the new Dividends Tax effective 1 April 2012, the following additional information is disclosed:
- The dividend is subject to dividend withholding tax at 15%. In determining dividend withholding tax, STC credits must be taken
into account.
- The STC credits utilised per share amounts to 32 cents per share.
- There is no tax payable which results in a net dividend of 32 cents per share to shareholders who are not exempt from dividends
withholding tax.
- The amount of shares in issue at the date of this declaration is 110 709 478 (96 600 761 exclusive of treasury shares) and the
companys tax reference number is 9625/077/71/5.
In order to comply with the requirements of Strate, the relevant details are:
Event Date
Last day to trade (cum-dividend) Friday, 12 April 2013
Shares to commence trading (ex-dividend) Monday, 15 April 2013
Record date (date shareholders recorded in books) Friday, 19 April 2013
Payment date Monday, 22 April 2013
No share certificates may be dematerialised or rematerialised between Monday 15 April 2013 and Friday, 19 April 2013, both
dates inclusive
Basis of preparation
These consolidated condensed interim financial statements for the six months ended 31 December 2012 have been prepared in
accordance with the framework concepts, the recognition and measurement criteria of International Financial Reporting, Standards
(IFRS) and the information required by International Accounting Standard 34: Interim Financial Reporting as issued by the
International Accounting Standards Board (IASB), the JSE Listings Requirements and the requirements of the Companies Act of
2008, as amended.
The consolidated condensed interim financial information should be read in conjunction with the annual financial statements for
the year ended 30 June 2012, 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 2012, as
described in those financial statements.
The above information has not been reviewed or reported on by Group Fives auditors.
Board changes
Baroness Lynda Chalker retired from the groups board of directors at the annual general meeting held on 6th November 2012.
Acknowledgments
The group wishes to recognise the hard work and commitment of its employees.
On behalf of the board
MP Buthelezi MR Upton
Chairperson Chief Executive Officer
8 February 2013
Board of directors: P Buthelezi* (Chairperson), MR Upton (CEO), CMF Teixeira (CFO), LE Bakoro*, Dr JL Job*, OA Mabandla*,
SG Morris*, KK Mpinga*, DDS Robertson* *(Non-executive director) (British) (DRC)
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg 2001
Please visit our website: www.groupfive.co.za
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
Date: 13/02/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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