There was little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, said CEO Mike Upton on Wednesday.
At the group’s annual results function, he said value could still be found in the private sector, in the renewable and industrial power sector, as well as in some public sector pockets, such as water, healthcare and transport.
“It’s not all broken, but those big theme projects of the National Development Plan and the Presidential Infrastructure Coordinating Commission are not coming through.”
Upton said government must face “the reality of the fiscus” and “it’s capacity to implement large projects was not good”.
Unease between government and the construction industry was also pushing Group Five to look for work outside South Africa, he noted, with government’s trust in the industry not yet restored following the Competition Commission investigation into collusion in the sector.
Group Five, as a whistleblower on these collusive practices, had been granted leniency by the commission on all of its submissions. But the commission intended to fine the group for infringements on four projects for which no leniency had been granted.
Around 64% of the company’s current secured total order book of R17.15-billion was in South Africa. A R4-billion contract for an African private sector gas turbine power plant, could reduce this to 51%.
The 50% international target had prompted Group Five to restructure its civil engineering unit to become more agile, more able to work outside South Africa.
A loss-making mining contract, now completed in the Democratic Republic of the Congo (DRC) had taught Group Five a few hard lessons, including choosing better JV partners.
Group Five had also restructured its board to facilitate its African expansion and large project ambitions.
After eight years at the helm, Upton was approaching Group Five’s executive retirement age of 60, so the Board had initiated a process to appoint his successor.
Group Five recorded R15.34-billion in revenue for the financial year ended June 30, up 39% on the previous financial year. Operating profit was up 23%, to R647-million.
Upton noted that margin pressure was likely to remain at current levels for the first half of the 2015 financial year.
By: Irma Venter
Read the full article here: http://www.engineeringnews.co.za/article/group-five-looks-to-africa-as-lack-of-big-projects-distrust-remain-2014-08-13/rep_id:3182
