Group Five shares rally on upbeat trade update

Cape Town - Group Five's [JSE:GRF] share price rallied more than 7% on Monday after the construction firm said it expects fully diluted headline earnings per share to be 60% to 70% higher (326 to 347 cents per share; previous comparable period 204c/share) than the previous corresponding period for the year to end-June 2016.

The group said headline earnings per share are expected to be 60% to 70% higher (328c to 349c/share; previous comparable period 204c/share); fully diluted earnings per share to be 65% to 75% higher (365c to 387c/share; previous comparable period 221c/share); and earnings per share to be 65% to 75% higher (366c to 389c/share; previous comparable period 222c/share).

Group Five placed this in the context of a "pleasing improvement in earnings" for its 2016 financial year over the previous year. This was driven by what the company termed an exceptional result from the investments & concessions cluster, boosted by significant fair value profit from the group's Eastern European project investment portfolio. This was the result of underlying project cash flows being materially better than those originally forecast, said the company.

It added that operating profit performance was also strong, with excellent delivery across all secured contracts. Performance by the engineering & construction cluster continued at low levels, with operating performance below expectation.

While the civil engineering segment's operating performance improved in line with expectations, the group raised a material provision within this segment against a previously certified but now problematic debt. Group Five said it is pursuing its rights in this matter, with a focus on recovery.

The building & housing segment is generally in line with recent guidance provided in February 2016, while a softer performance by the projects and energy segments reflected continued overall tight market conditions. "Despite extremely difficult South African trading conditions, the manufacturing cluster delivered an acceptable, albeit lower, result," said Group Five.

These projections have not been reviewed or reported on by Group Five auditors. The company will release its results for the year to end-June 2016 on August 15 2016.

By 12:15 the shares were changing hands 3.69% higher at R23.62.