Group Five CEO bows out on record results 
Carli Lourens
Trade and Industry Editor

THE boss of one of SA’s topperforming construction firms, Group Five, bowed out yesterday with record results that saw headline earnings from continuing operations double to R2,22 a share.

Revenue increased by close to a third to R5,9bn in the year ended June, while operating profit jumped 108% to R240,8m compared with the previous financial year.

Group Five’s share price closed nearly 4% up at R30,50.

CEO Mike Lomas announced his retirement yesterday. Engineering Projects MD Mike Upton will take over as CEO in March.

The performance of the construction division, which generates 86% of group revenue, was buoyed by the turnaround of the civil engineering, roads and earthworks business.

The business posted a R51,7m operating profit compared with a R9,7m loss in the previous financial year.

Building and housing activities also boosted the construction division, with revenue from these activities increasing 23% to R2,7bn. Operating profit almost doubled to R81,5m, mainly due to profitable East African contracts.

Group Five’s construction order book was on track to match its capacity of R6bn.

Lomas told analysts the book was already at R4,7bn.

The Everite operation, which makes building products such as ceiling and roof materials, would see a 25% expansion at a cost of R41m on the back of increased investment in low-cost housing.

The Everite business’s revenue rose marginally. Operating profit jumped 66%.

The small but rapidly growing Property Development Services business reported a 34% increase in revenue and a 124% jump in operating profit to R25m.

Group Five sold its interests in WSSA, Group Five Saudi Pipe, Vaal Sanitaryware and DPI Plastics.

It also closed down and sold its concession and operations and maintenance business in India. The group recorded a loss of R21m from discontinued operations.

It said it had rooted out problem areas, mainly in Angola where several staff members were fired after irregularities, such as nonpayment of taxes and permit problems, arose.

The company had paid its taxes and restored it credentials with the Angolan government, and was bidding for two large contracts there.

The problems in Angola had a knock-on effect on a contract in Cabinda that saw the engineering projects division’s operating profit fall 47% to R14,6m.

A problematic roads contract in Malawi was also terminated during the year with all “known” losses being accounted for in prior years.

Group Five, which declared a 36c a share dividend compared with 32c last year, expected “good earnings growth” in the next financial year.

Finance director Paul O’Flaherty said the group’s dividend cover continued to improve — it was at about 3,5 now compared with 3,7 last year and 4,2 the year before.

The group would still have substantial cash after paying the dividend, but O’Flaherty said it was needed for expansion.

Cash generated came to R232m in the period under review, compared with R133,8m made last year