Group Five on the acquisition trail to bolster building-materials portfolio

Posted On Monday, 19 February 2007 02:00 Published by
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JSE-listed construction and engineering firm Group Five was keen on snapping up “two or three” more quarrying and aggregate businesses, in the near future

Mike UptonJSE-listed construction and engineering firm Group Five was keen on snapping up “two or three” more quarrying and aggregate businesses, in the near future, which was shortly after it announced that it would acquire quarrying and readimix firm Quarry Cats, in November, CEO designate Mike Upton said on Friday.

Group Five was looking to spend “a couple of hundred million rands” to this end, and now was the time to buy, he told Engineering News Online, after a presentation of the group's results for the six months ended December 31.

“The opportunity to make these acquisitions is now, but we are going to be responsible about it,” Upton stressed. Meanwhile, Group Five was eagerly awaiting the Competition Tribunal's ruling over its proposed acquisition of Quarry Cats, which was expected either on Friday or on Monday.

“We are looking to invest in our supply chain,” Upton, who was replacing outgoing CEO Mike Lomas, who planned to retire at the end of March, stated. “It makes sense,” he said. “It enhances our margins and our cash flow.”

Further, Upton highlighted that such acquisitions would expand Group Five's product range. “All in all, its good business,” noted Upton. Currently, the South African construction industry is experiencing a significant boom period, and suppliers are struggling to keep pace with demand.

Cement suppliers, in particular, were caught off guard, and all three of South Africa's biggest producers were having to import cement, mainly from China and India, while they hurriedly worked to expand local production capacity.

Meanwhile, Group Five was planning on raising R700-million to R800-million worth of bonds by the end of February, part of which would be used to fund acquisitions, Upton noted. “And if we need more, then we will go to the market,” he added.

The majority of the Quarry Cats acquisition was funded through equity vendor placing, worth R750-million. Lomas also reported that Group Five was swinging the firm's focus from housing construction to infrastructure development.

It was also focusing on improving its operating margins, and Upton believed that the group would be able to achieve a 5% margin in the near future. For the half-year ended December 31, Group Five's operating margin was sitting at 3,4%. Group Five's shares closed 2,02% lower on Friday, at R48,99 a share, after recovering from a daily low of R48,00.

 

Last modified on Thursday, 17 October 2013 09:35

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