Group Five to shrink building operations

Manufacturing firms to go

LISTED construction company Group Five will migrate its construction operations into streamlined, smaller businesses that have a competitive advantage and plans to dispose of its manufacturing businesses “in due course” as part of a revised strategy.

The main aim of the revised strategy is to address underperforming operations and deliver acceptable returns in a rapidly changing and challenging market.

The group said yesterday that businesses in the construction cluster and engineer, procure and construct (EPC) clusters that did not meet set criteria would be exited, and only those businesses with the potential to exceed the group’s targeted minimum return on capital would be retained.

It said exposure to basic construction would be scaled down, resulting in the group benefiting from reduced balance sheet requirements, less operational execution risk and improved capital risk management.

The group said its investments and concessions business, which was the subject of a R1.6 billion offer from Greenbay Properties that lapsed last month and other expressions of interest, met the requirements set out by the company and was central to the group’s revised strategy of enabling the development of infrastructure.

However, Group Five confirmed that its board was assessing the credible expressions of interest received before ratifying and communicating its final strategy for this cluster.

The investments and concessions cluster would also be repositioned to drive the development of infrastructure projects, while the group would have a narrower focus on areas that provided growth and improved margins and returns.

This cluster had been further refined by extracting the investments portion of the portfolio and creating a standalone developments and investments cluster that would access growth within targeted regions.

The operations and maintenance businesses within the cluster would be consolidated with the power operations and maintenance businesses across the group to form a separate cluster that would leverage the group’s skills and experience as an operator of public and private infrastructure.

Sustainable Themba Mosai, the chief executive of Group Five, said the board and management had looked carefully at all the operations to ensure a sustainable operation and saw an increasing role for being an enabler for the development of infrastructure projects.

However, Mosai said this required an increased shift from Group Five’s historical construction emphasis towards development and investment opportunities.

Shares in Group Five closed unchanged at R11.65 on the JSE yesterday.