Against tough market conditions, the group's strategic positioning and business model delivered a broader infrastructure offering, which contributed to the solid performance

Highlights for the year to end June 2014

• Revenue* up 39% to R15,3 billion
• Operating profit* up 22% to R646,8 million
• Earnings per share up 52% to 401 cents per share
• Fully diluted headline earnings per share* up 26% to 400 cents per share
• Reaffirmed as Level 2 BBBEE contributor at 89.14%

*From continuing operations

Commenting on the results, Group Five CEO Mike Upton said:
The South African market remains comparatively subdued with a slowdown in activities in some of the sectors in which the group trades, uncertainty in terms of the timing of larger public sector contract awards and turbulence around local labour. African infrastructure remains an area of focus and a compelling medium to long term growth driver for the group, but is accompanied with long project development periods for the larger contract awards. Market sentiment in Eastern Europe was more positive than that experienced over the last three years.

"Against these market conditions, we are therefore pleased to report improved results, with increased revenue, operating profit and earnings over the comparable reporting period. The underlying performance of all the group's businesses was in line with expectations, with the exception of a slower than expected second half recovery in Civil Engineering.

"The contribution of the group's strategic positioning for annuity-type businesses of Investments and Concessions, Manufacturing and operations and maintenance contracts, as well as the group's strong reputation in African mining and transport and its leading position in the South African real estate, oil and gas and power sector has mitigated the effects of continued fragility in the South African building and civil engineering markets to some extent."

In terms of an update around the group's position following the Competition Commission findings of anti-competitive behaviour in the construction sector, Mr Upton said:

"As previously communicated, during the Competition Commission's 'Fast-Track' process, the group was implicated in four contracts which had not been detected through its internal investigation. We subsequently conducted our own further investigation and consistently raised factual and evidentiary discrepancies with the Commission in respect of these contracts. In the interests of shareholders, we did not hastily settle as there was no reasonable basis for attributing liability to the group in respect of the implicated contracts. In June 2013 a provision was raised against the risk of an administrative penalty, as reported in the group's F2013 results.

"Management have therefore continued to engage with the Commission in an attempt to responsibly settle the outstanding matters on reasonable terms with the Commission, while conscious of its accountability to conclude this matter for the benefit of all its stakeholders. Settlement has not yet been concluded due to a lack of evidence and factual discrepancies which remain and which the group views as very serious, given the reputational impact and potential for civil claims. The group is willing and remains committed to settlement on a reasonable basis, should it be found to have contravened competition legislation on any of the four contracts in question. Based on legal counsel assessment, the settlement would be adequately covered by the provision raised in F2013.

"In parallel, the group is actively working with and through the industry and representative business bodies and government to effect transformation and rebuild the stature of the industry as a precursor to, and in support of, the national agenda for the much-needed roll out of the infrastructure programmes embodied in government's National Development Plan (NDP). Contrary to recent reports, it should be noted that the industry has voluntarily approached government and interested parties with an initiative in this regard."

Looking forward, Mr Upton said:

The group's total secured Contracting order book (Construction and Engineering & Construction order book) stands at R12,5 billion (December 2013: R14,0 billion, June 2013: R14,2 billion). In addition, the group has R4,6 billion in secured operations and maintenance contracts (December 2013: R4,8 billion, June 2013: R4,8 billion).The overall group reported order-book at June 2014 therefore stands at R17,1 billion (December 2013: R18,8 billion, June 2013: R19,0 billion).

"The group is in firm negotiations for a large over-border power contract, which will significantly increase its order book and geographic exposure.

"The value of the group's target opportunity pipeline stands at R202 billion, an increase from R179 billion at June 2013 and R174 billion at December 2013, with R104 billion of this pipeline currently in tender and pre-tender stage. The pipeline indicates future strong demand in mining and a further shift in favour of power and oil and gas, as well as a robust transport sector. Water projects are slowly coming to market, but real estate looks to be somewhat slower after a period of high order book growth.

"We have made good progress against our continuous internal fitness programmes, including the re-location of the majority of its Gauteng businesses this year into a single integrated central office complex. The outlook for the business in the short term is fair to good. The order book, whilst likely to be somewhat more lumpy due to the larger contract nature of the group's sector positioning, is being replenished in line with the group's strategy, with increasing success in positioning the group's integrated infrastructure offering more permanently for larger contracts in key sectors in support of the group's African and East European expansion ambitions."

The board also announced today that after eight years as the group's chief executive officer, Mr Upton will be approaching the group's executive retirement age of 60 at the end of the year. The board has accordingly initiated a process well ahead of time for Mr Upton's successor and expects to be able to make an announcement within the next few months.

YEAR UNDER REVIEW

FINANCIAL OVERVIEW

• Group revenue from continuing operations increased by 38.9% from R11,0 billion^  to R15,3 billion, as a result of increased activity in all of the group's businesses
• The group's core operating profit increased by 18.4% from R552,3 million to R654,1 million on the back of all businesses, other than the Civil Engineering segment, performing in line with expectations and most recent guidance provided
The weaker results from Civil Engineering reduced the group's overall core operating margin from 5.0% in the prior year to 4.2%
• The group's total operating margin also reduced to 4.2% (F2013 restated*^ 4.8%)
• Headline earnings per share (HEPS) of 407 cents per share represents an increase of 43.8%, and fully diluted HEPS (FDHEPS) of 399 cents per share an increase of 42.0%, compared to the restated* HEPS and FDHEPS of 283 cents* and 281 cents* per share respectively for F2013
• Fully diluted headline earnings per share from continuing operations of 400 cents per share represents a 25.8% increase over the restated 318 cents* per share for F2013
• Earnings per share (EPS) of 401 cents per share and fully diluted EPS (FDEPS) of 394 cents per share represents a 51.9% and 50.4% increase respectively over the restated 264 cents* per share and 262 cents* per share for F2013
The difference between earnings and headline earnings in the prior year is mainly as a result of an impairment charge of R11,0 million on assets relating to the disposal of the Construction Materials businesses. This is reflected as non-current assets classified as held for sale on the group's statement of financial position
• The group's statement of financial position continues to be sound, with a nil net gearing ratio and a largely unchanged year-on-year bank and cash balance of R2,9 billion as at 30 June 2014 (F2013: R2,9 billion and H1 F2014: R3,2 billion)
• A dividend for this period of 55 cents per share (H2 F2013: 35 cents) was declared. The full-year dividend for the year is 100 cents (F2013: 67 cents)
Total dividends for the year this represent a 49% increase over last year

^Restated for the effect of the adoption of IFRS 11 Joint Arrangements.

*Restated following the adoption of IAS19 (Revised) where the group's pension fund surplus gains or deficits are allocated between earnings and statement of other comprehensive income.

OPERATIONAL OVERVIEW

The group's underlying businesses - outside of the Civil Engineering segment - performed in line with management expectations and in accordance with the market guidance. The Civil Engineering segment was affected by a decrease in profit recognition reported with the half-year results following management's more cautious view on the forecast completion margin on two contracts, one of which has now been completed, and the slower than expected recovery of margins in H2 F2014.

For comparative purposes, the F2013 results were impacted by losses in the Middle East, reported within the Civil Engineering results. In addition, the F2013 Construction cluster's results were affected by a provision raised for an estimated potential administrative penalty that could be levied by the Competition Commission.

Investments and Concessions - 5.9% of group revenue
Investments and Concessions consists of transport concessions and property developments.

  • Revenue, which consists primarily of fees for the operation and maintenance of toll roads, increased by 24.2% from R728,5 million to R905,0 million
  • The core operating profit margin decreased slightly from 23.9% to 21.8%, but pleasingly still above guidance and with core operating profit of R197,0 million (F2013: R174,3 million)
    • The operating profit includes upward fair value adjustments of R83,8 million (F2013: R86,5 million).

Engineering & Construction (E+C) - 22.9% of group revenue

The E+C business was established to deliver technology-based EPC, multi-disciplinary project management and construction, as well as operations and services solutions to selected growth sectors such as power, oil and gas and water.

  • Revenue increased by 200.9% from R1,2 billion (88% local) to R3,5 billion (99% local)
  • Core operating profit was up 228.9% from R29 million to R94 million
  • This resulted in a core operating profit margin of 2.7% (F2013: 2.4%).

Manufacturing - 6.8% of group revenue
Manufacturing consists of fibre cement building products business, Everite, as well as steel fabrication businesses BRI and Group Five Pipe.

  • Revenue remained largely unchanged from R1,1 billion in F2013 to R1,0 billion
  • The reported core operating profit for the year was 2.8% higher at R86,2 million ((F2013: R83,8 million)
  • The core operating margin was 8.3% (F2013: 7.9%)

Construction - 64.5% of group revenue

  • Revenue increased by 21.5% from R8,2 billion to R9,9 billion
    • Over-border work contributed 30% (F2013: 36%) to Construction revenues
  • Core operating profit increased by 4.3% from R265,6 million to R277,0 million
  • Core operating profit margin percentage was 2.8% (F2013: 3.3%)

Building and Housing

  • Revenue increased by 36.9% from R3,2 billion (95% local) to R4,4 billion (98% local)
  • Core operating profit increased by 125.2% from R40,3 million to R90,8 million
  • Core operating margin percentage increased from 1.2% to 2.0%

Civil Engineering

  • Revenue increased by 16.9% from R3,2 billion (57% local) to  R3,8 billion (54% local)
  • Core operating profit was R66,5 million for the year (F2013: R109,3 million)
  • Core operating margin was 1.8% (F2013: 3.4%)

The segment is experiencing record high revenue demands with a larger African component of the traded revenue. However, as reported at interim date, margins were negatively impacted in the year. Margin recovery progressed more slowly than expected in the second half, however one of the problem contracts mentioned is complete and constructive commercial processes are well in hand with both clients.

Civil Engineering's secured one-year order book stands at R1,8 billion (65% local) (H1 F2014: R2,7 billion and 54% local) (F2013: R3,1 billion and 50% local). The full order book is at R2,4 billion (75% local) (H1 F2014 R3,4 billion and 63% local) (F2013: R3,5 billion and 56% local).

Projects

  • Revenue remained at R1,7 billion (33% local) (F2013: 19% local)
  • Core operating profit increased by 3.2% from R115,9 million to R120,0 million
  • The core operating margin increased to 6.9% (F2013: 6.7%)

The secured one-year order book stands at R1,7 billion (33% local) (H1 F2014 R1,2 billion and 48% local) (F2013: R1,1 billion and 41% local). The full secured order book stands at R2,1 billion (28% local) (H1 F2014 R1,5 billion and 52% local) (F2013: R1,2 billion and 37% local).



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