JSE-listed construction company Group Five is confident it can benefit from the government’s infrastructure rollout, which is expected to kick into gear next year.

CEO Mike Upton said at a media briefing on Wednesday that even though the state had been “very slow” to bring projects to market, Group Five had been cautious and timed its actions carefully so that it would be ready to act when projects became available.

“We have endorsed the National Development Plan and the infrastructure rollout plan. The infrastructure plan may have moved slowly, but we are in a better place than before when we had no plan.

“We believe we will be the preferred bidder for large parts of the 17 strategic infrastructure projects,” he said.

He said Group Five’s margins were under pressure, but he expected this to be better next year.

Group Five in August released financial results for the year to June, in which it reported a 64% collapse in headline earnings per share. The company suffered due to the disposal of its construction materials business, and problem contracts in the Middle East and India.

But the group said it remained net ungeared and had R2.3bn cash on hand, marginally up from R2.2bn last year.

The multitrillion-rand infrastructure plan, which would be executed over 15 years, had been lauded, but critics were concerned that the State’s recent performance in developing infrastructure would hinder its success.

“Significant infrastructure investment can be a meaningful employment creator and government’s planned infrastructure rollout would boost this.

“However, the current track record is not as good as it should be, from funds earmarked for expenditure remaining unspent to problematic funding mechanisms, and the quality of infrastructure is not uniformly good. Greater private sector involvement will be key in meeting South Africa’s ambitious infrastructure plans,” Investec chief economist Annabel Bishop said on Wednesday.

Group Five investments and concessions executive Eric Vemer said he believed its decision to hold back from projects that did not meet certain regulations, or looked risky during the recession, paid off.

“Many smaller construction enterprises are now trying to get rid of loss-making projects. They may have gone in gung-ho and now are losing money or being liquidated. But the construction sector itself is seeing activity. It is not getting close to the highs before the Soccer World Cup and will not for a long time, but things are moving,” he said.

Group Five’s secured total order book at the end of October sat at R16.68bn. The book included 27% real estate, 23% power projects and 20% transport projects. Mining made up 18%.

Mr Upton said private sector real estate was doing very badly, but public sector real estate was doing very well.

“There is a lot going on with respect to public sector real estate which excites us,” he said.

Mr Upton and Mr Vemer said Africa was the long-term growth destination.

Seventy percent of the group’s order book consisted of South African projects, but this would shift naturally towards those in other African countries.

“It is easier to grow outside of South Africa than it is within South Africa. Outside of South Africa, we do not need to employ only South Africans, and resources are not as constrained, ” Mr Upton said.

Group Five is involved in road-related projects in Eastern Europe, but Africa looks to be its biggest growth area.

http://www.bdlive.co.za/business/industrials/2012/11/28/group-five-confident-it-will-benefit-from-infrastructure-rollout