Mike Lomas is heading for 10 years as CEO of Group Five, SA's third-largest construction group. He is now seeing the benefits of tough calls on operational and strategic direction made soon after he was promoted in 1997.
Lomas presented trend-defying numbers for the six months to end-December - 19,5% headline earnings growth to 53,3c and an interim dividend up 13% to 17c. Revenue rose 13% to R2,3bn. Lomas is on course to deliver a fifth consecutive full year of growth in earnings and dividends - a record that must be the envy of his JSE peers.
What sets Group Five apart?
"Its passion and good depth of management," says Lomas. "We have put in place sound risk management policies, which ensure that we bid sensibly."
Yet in many ways Group Five has had to walk a path similar to that of its main competitors, Aveng and Murray & Roberts. The opening up of the economy to the global community might have brought opportunities, but it also carried potentially fatal challenges. Recognising this, companies ordered management changes in the second half of the 1990s.
New blood was required for these firms to face the rough global market effectively. Brian Bruce of Murray & Roberts, Carl Grim of Aveng and Lomas rose to high office at this time.
Lomas seems to have moved more quickly in knocking Group Five into shape. This could be the result of a less ambitious strategic plan and little disruptive corporate activity. At the end of financial 2001, Group Five had concluded a restructuring that produced four divisions: property development and concessions; manufacturing; construction; and services.
Lomas and his team also appear to have made a better call on the direction of the local construction and building market. This is seen in the activity split between mainstream infrastructure development and building work. Construction accounts at present for 70% of total revenue. Over half of that is from building; civils make up 22%, roads 9% and engineering 16%.
Group Five's building division benefited from the post-1994 shift in the structure of the economy, especially in that higher household incomes enabled previously excluded people to join mainstream economic activity. There has been a boom in the residential property sector and increased retail activity.
This boom has been complemented by a strong building materials manufacturing division, which accounts for 18% of total revenue. Lomas is now preparing for the big push expected from public infrastructure expenditure.
Group Five has issued a cautionary over talks with a potential empowerment partner. An equity deal would give it an edge when it competes for public contracts.
