Johannesburg - Group Five, which faces possible censure from the Competition Tribunal, delivered an improved set of first half results after its restructuring started to pay off.
The construction company reported revenue 5 percent higher at R7.3 billion in the six months to December, and improved operating profit 41 percent to R289.2 million. Its total order book declined 6 percent to R17.6 billion.
Headline earnings per share - seen as a key indicator of performance as this measure strips out unusual items - gained 21 percent to 131 c a share. Group Five declared a 42 c a share dividend, a gain or 40 percent.
The listed company said ina statement issued on Monday that the results were a “pleasing improvement in earnings for the first six months” compared to the low base of the previous comparable period.
It attributed the improved to strong results from the investments and concessions cluster. “This more than offset a continued weak performance from the engineering and construction cluster, which delivered operating results below expectation. The manufacturing cluster delivered a similar result to that of the prior six months against difficult South African markets.”
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Group Five added restructuring action taken and operational improvements within the engineering and construction cluster over the last year have started to deliver results, “with a gratifying improvement in the overall reported contract loss-making ratio achieved”.
However, it warned that construction markets have mostly remained weak, with further pressure in certain areas of the business.
“This necessitated an additional reduction in business carrying costs, over that originally planned, in line with the declining level of new order intake. The corrective action and related negative operational gearing against a declining order intake, particularly in the civil engineering and projects segments, placed pressure on operating margin delivery within the engineering and construction cluster.”
Group Five added it has no gearing and cash and bank balances of R3.6 billion, which is up from the R3.4 billion it recorded at the end of 2015.
The Tribunal is currently probing two instances of alleged collusive tendering, and the company says any fine will be covered in the provision raised in 2013.
The cases relate to a 2006 project for the South African National Roads Agency. The tribunal alleges that Group Five entered into a collusive tendering agreement with WBHO and Murray & Roberts around the project, referred to as the "Senekal project" .
Last March, the Competition Commission complaint, which it started investigating in September 2009, was referred to the tribunal. The commission wants the maximum penalty of 10 percent of annual turnover levied against Group Five.
In 2013, M&R agreed to pay a fine of R309 million for 17 prohibited practices or contraventions of the Competition Act, among which was the Senekal project. WBHO has received conditional leniency.
The listed company has previously pointed to factual and evidentiary discrepancies in the information provided by the commission regarding Group Five’s involvement in four projects, including the Senekal Project. Two of those cases had been dropped by the commission.
During the commission’s previous construction fast-track settlement process, Group Five declared 25 rigged projects and was granted provisional corporate leniency for all of these projects.
However, it was implicated by other companies in four other allegedly rigged projects that it had not declared to the commission.
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