Construction World October 2016

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STRONG IMPROVEMENT in earnings

Commenting on the results, Group Five CEO Eric Vemer, said: “These results bear testimony to our strategy of investing and operating across the infrastructure value chain, which enables the generation of an improved blended group operating margin and the delivery of annuity income to deliver sustained returns. During the year, our Investments & Concessions business especially proved its value in our portfolio, with its performance again balancing the cyclicality of construction earnings and providing a strong underpin to our overall group results. “As a management team, we are continually reviewing our strategy to ensure it remains relevant to changing market landscapes and client requirements, as well as enhancing shareholder value. Our portfolio of assets is therefore tested for its strategic fit and ability to create accept- able return on investment. During the year, a working group with the board and management was created to focus on this. “We believe we are set to deliver strong growth and returns over the longer term, Group Five delivered a pleasing improvement in earnings for the full year to June 2016 due to an exceptional result from the Investments & Concessions cluster, boosted by significant fair value profit realised from the group’s Eastern European project investment portfolio. >

Financial overview • Group revenue remained largely unchanged at R13,8-billion (F2015: R13,9-billion) • Core operating profit increased by 111,4% from R348,4-million to R736,5-million • Overall core operating margin increased from 2,5% in the prior year to 5,3%. Total reported operating margin increased from 2,6% to 5,2% • Headline earnings per share (HEPS) of 335 cents represents an increase of 63,6%, and fully diluted HEPS (FDHEPS) of 335 cents per share an increase of 64,2% compared to the HEPS and FDHEPS of 205 cents and 204 cents per share respectively for F2015 • Earnings per share (EPS) of 375 cents and fully diluted EPS (FDEPS) of 375 cents per share represents a 69% and 69,7% increase respectively over the 222 cents per share and 221 cents per share for F2015. • The statement of financial position continues to be sound, with a nil net gearing ratio and bank and cash balance of R3,3-billion as at 30 June 2016 (F2015: R3,4-billion and H1 F2016: R3,6-billion) • The cash flow position is pleasing o The group generated R449,4 million (F2015: R425,1 million) cash from operations before a minimal level of working capital enhancement of R30,2-million (F2015: R118,9 million) o This resulted in a net cash inflow from operating activities of R146,3- million (F2015: R238,1-million) after settlement of taxation liabilities and the dividend to shareholders of complex multi-disciplinary, international- ly-financed contracts in difficult geographies with complex logistical and local chal- lenges. We have a track record of operating in-country and growing local employees through the establishment of a permanent presence in key target countries. Prime exam- ples are Ghana, Poland and Hungary.” The group’s total secured Engineering & Construction contracting order book stands at R11,2-billion (December 2015: R11,8-billion, June 2015: R14,1billion). In addition, the group has R6,1-billion in secured operations and main-

Group Five CEO, Eric Vemer.

diversification between Euro, US Dollar and Rand revenues, and strong leverage for growth and profitability in periods of infra- structure and resource market expansion.” Looking forward, Vemer said: “Following a period of introspection and cost-reduction, our attention is again more firmly focused outwardly on target markets and securing the orders that will deliver the value-en- hancing growth management seek, while improving our returns on capital employed across the group. “Alongside our South African focus, we have a clear geographic strategy of expanding into high-growth countries in the rest of Africa and Europe. Our localisation prepared to spend development time and capital in partnership with other project developers to secure a preferred position and role in developing, imple- menting and operating new infrastruc- ture assets. Our continued expansion in these markets is based on our proven and growing experience in the delivery strategy is organic, which does not require material capital investment. We take a long term view and are

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with a complementary business portfolio that provides downside protection to earn-

ings through tough times,

tenance contracts (December 2015: R5,8-billion, June 2015: R4,7-billion).

CONSTRUCTION WORLD OCTOBER 2016