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Aug 15, 2007:
A business refocusing strategy by a South African construction company is starting to bear fruit.
Group Five, which reported its final results on Monday, said earlier this year that it has sold some of its businesses and that it planned to buy new ones to achieve its short-to-medium term financial targets.
The business refocus resulted in the R750m acquisition of Quarry Cats - sand and stone supply, contract crushing and ready-mix supply business - in February this year.
The purchase helped the company's manufacturing and construction materials division to almost double its operating profit to R112,1m from R60,2m for the year ended June. The division's contribution to the company's overall revenue of R7,6bn rose from 8,1% to 9,8%.
"The increased contribution from the prior year was primarily due to the acquisition of Quarry Cats," the company said.
Quarry Cats achieved revenue of R231,1m and an operating profit of R45,5m, in line with management's expectations.
Quarry Cats was bought to add to the group's expansion and growth strategy in the infrastructure sector and to allay the risk of future material shortages. "The outlook is extremely positive for this business and further contract mining opportunities are being pursued," the company said.
As part of the business refocusing strategy, the company bought the building materials business Sky Sands last month. "This business complements Quarry Cats and further expands the group's presence in the infrastructure sector," Group Five said.
At the same time, the process resulted in the sale of the group's interests in the Saudi pipe business, the water and sanitation business, and the Vaal Sanitaryware and DPI Plastics businesses. The group also exited its toll road operations and maintenance and concession business in India, for which a claim was being pursued against the Indian highway authorities.
The business refocus strategy also resulted in the group launching a R1bn domestic medium-term funding note programme to help fund potential future acquisitions, eliminate expensive short-term debt, manage working capital and consolidate long-term finance leases.
The bond resulted in a 38,3% increase in finance costs from R30,3m to R41,9m for the year.
Early on Monday Group Five reported a 46,6% increase in headline earnings per share before external Black Economic Empowerment (BEE) ownership ended at 283c in June for the year from 193c a year ago.
A final dividend of 42c per share was declared, bringing the total for the year to 72c - up 28,6% on the previous year's 56c.
Revenue grew 31,1% to R7,689bn, while operating profit was up 62,6% to R391,6m. – Tiisetso Motsoeneng, I-Net Bridge
