Group Five insists it can make profit abroad, despite difficulties

SA’s fourth-biggest construction company, Group Five, is adamant it can turn a profit outside SA, despite its difficulties abroad.

The company said yesterday its profit for the second half of the year to June would be dampened by the closing out of its Middle East operations and contracts, and by its construction materials business performing poorly.

The company reported a 44% drop in its fully diluted headline earnings per share for the six months to December. It has struggled along with others in SA’s construction industry while demand has been depressed.

But CEO Mike Upton yesterday said it was unfair to call his company “an African or South African play” and that regardless of some weaknesses in performance, the underlying businesses were strong.

“We work in Africa, the Middle East and Eastern Europe. We had some issues with a contract in the Middle East and, yes, the overall South African industry is weak right now, but I believe our South African business is still resilient and that it will pick up with infrastructure demand.”

Dirk Noeth, an analyst at Avior research, who recently put a buy recommendation on Group Five’s shares, said he was pleased by the company’s exposure to Africa.

“They have very little exposure to, say, Australia. They are an African play. I like how they are valued compared with their peers and I buy into their African business story,” he said.

Mr Upton said outside of Africa Group Five would be strengthened in Eastern Europe. He said the company had toll concession-contracts there which lasted beyond 10 years. The company was looking to expand in that region, perhaps beyond a concessions business in future, he said.

Group Five also announced it had finished unwinding its liquidated black economic empowerment partner, Ilima.

Ilima Projects, which had stakes in the Bombela Concession and elsewhere, was liquidated after most of its government deals were cancelled.

Group Five was the major shareholder of Ilima. The company told shareholders in 2010 that its empowerment transaction with Ilima would be unwound.

It said yesterday that 11 015 959 Group Five shares held by Ilima had been delisted and subsequently cancelled.