Concessions business buffers Group Five from poor SA markets
Group Five on Monday announced a 5% increase in revenue, to R7.26-billion, for the six months ended December 31, compared with the same period in 2014, with operating profit up 41%, to R289-million.
CEO Eric Vemer attributed the improvement to the “excellent performance” from Group Five’s Investment and Concessions business, while the Engineering and Construction business continued “to disappoint” in a “very challenging South African environment”.
The Manufacturing business also struggled “in difficult markets”. The South African market was tougher than the group anticipated six months ago, noted Vemer.
Sizeable projects were scarce in the highly competitive, low-margin civil engineering market, while mining and industrial markets were set to remain weak.
In the building and housing market there was increased competition from a number of medium-sized competitors, while rising interest rates would impact on the market.
Group Five’s Investment and Concessions business, however, provided the company with quite a solid buffer against the gloom of the local market. The business benefited from a number of toll road projects in Africa and Europe, with two new long-term European projects secured in Hungary and Northern Ireland.
Group Five’s Manufacturing business recorded a 33% drop in core operating profit, to R28-million. This had meant job cuts, with the civil engineering unit continuing to face the same fate.
Group Five had cut 2 500 jobs in its civils unit since January last year, with most of these contract employees. The number also included permanent staff, and staff at the unit’s head office. Further retrenchments were expected this year.
Vemer said Group Five expected order book growth in the remainder of the financial year to be low to negative.