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The new retail centre is being hailed as the largest development ever in Gugulethu and the first to be built and maintained using environmentally responsible methods that may help shape the rating tool to be applied to shopping centres by the Green Building Council of South Africa.

South Africa has adapted the Australian Green Star rating system to assess buildings for their energy and resource efficiency and environmental friendliness, says Mzoli Ngcawuzele, of Mzoli Properties.

"As only the office rating tool has been developed at this stage for South Africa, the design team has applied a combination of this and the Australian retail tool to the development of Gugulethu Square," he says.

"The rating system identifies measures that can be taken to produce a green building in the areas of management, indoor environmental quality, energy, transport, water, materials, land use and ecology, emissions and innovation. It sets targets to be achieved for the different measures, awards points for the achievement of targets, totals the points and then awards a rating on the basis of the score. "

Mr Ngcawuzele says energy-saving alternatives applied to Gugulethu Square included an energy efficient water cooled air conditioning system, a rainwater system, intelligent lighting and tilt-up concrete façade construction requiring no external painting and less transport than conventional methods.

Other measures were the use of on-site material for backfilling, re-use of 4 000m² brick paving from the site on which the centre has been developed, salvaging of demolished material for community use, and the introduction of operational waste management systems.

"The former Eyona Centre on which Gugulethu Square has been developed was not demolished conventionally," he says."It was dismantled at a higher cost so that materials and components from this building, with a value of R300 000, could be donated to and recycled by the immediate community.

He says the water-cooled air conditioning system cost 21% more than an air cooled system, but its energy consumption was 30% less.

Gugulethu Square will also supply all irrigation for its landscaping from its own rainwater and grey water tanks.

Speaking at the opening, Mr Ngcawuzele thanked the project team for their perseverance in bringing the project, which was first mooted in 1997, to its conclusion. "It has been a long road, but now Gugulethu has been transformed from a township into a suburb with its own CBD. The people are very happy – they now have magnificent retailers right on their doorstep," he concluded.

Group Five Building, as the main contractor, and Green by Design, a division of diversified engineering group WSP, are at the forefront of the move towards a cleaner environment and put a huge effort into achieving the standards set by the Green Star – Office rating tool.

As far as possible green construction processes are being practised at the multi-storey office block and on completion the building will be sustained by environmentally friendly methods wherever feasible. This includes the use of gas for cooking in the kitchens, solar heated geysers for showers, no hot water in the wash hand basins and push-through geysers which replace conventional geysers.

The main elements that contributed to the four-star rating include the full economy air conditioning system, the Dali lighting system and energy efficient light fittings, the black water treatment system, the implementation of an efficient waste recycling system, both during construction and when the building is in use, and the fact that the building would achieve a 30% energy saving when compared with a conventional building.

GBCSA CEO Nicola Douglas said in a statement that the GBCSA was thrilled to award its first certification.

“The Green Star South Africa rating system represents international best practice. Achievement of a rating is a significant accomplishment and this project has done extremely well to put together a successful submission less than a year after the system was launched in South Africa.”

Nedbank management, who hosted a roof wetting at the building in early November, voiced their approval of the building, calling it a ‘spectacular monument to Nedbank’s confidence.’

Earlier this year the stadium was the overall winner at the Southern African Institute of Steel Construction’s Steel Awards 2009 and won a Concrete Society of Southern Africa’s Fulton Award for Unique Design Aspects.

The stadium was described as a ‘phenomenal project’ which bears witness to the inventiveness of South African contractors ‘and their ability to work together to achieve a common, highly technical goal, within strict time parameters.’

“This is praise of the highest order, not least because it underlines aspects of the stadium design that might not be immediately apparent to the casual observer, but which are precisely the things that make the stadium the marvel it is,” says Julie-May Ellingson, head of the Strategic Projects Unit & 2010 Programme.

“These awards – and others we are sure to get – are testament to the hard work, skill and ingenuity of all of those involved in the construction of the Moses Mabhida Stadium. All have risen to the challenge and all are to be commended,” says Ellingson.

“The awards are also important because if the stadium is a winner, so is the City and all of those who will visit the stadium in years to come.”

Group Five CEO Mike Upton pays tribute to the joint venture team led by Group Five.   “The outstanding leadership shown has resulted in a record project completion, in world terms, in terms of quality and commercial closure in a most professional manner. The dedication of the Group Five team led by Craig Jessop with the implementation of Hans van der Waal and Duncan Craig, is highly commendable.

“Paul le Sueur was the Exco member who oversaw the project and offered support in time of difficulty.  There were many ups and downs, but the team came through admirably. “ 

Mike adds his thanks to the efforts of the workers who built the work class facility and to the eThekwini Municipality for their support.

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Highlights

• Revenue up by 36% from R8,9 billion to a first-time R12 billion
• Fully diluted earnings per share up 28% from R3,79 to R4,86
• Fully diluted headline earnings per share up 28% from R3,98 to R5,08
• Operating profit ,excluding fair value adjustments, increased by 25% from R636 million to R797 million
• Overall operating margin of 6.6% (2008: 7.1%) with the core operating margin at 6.7% (2008: 6.8%)
• Core operating margin reflects the pure business operating margin net of certain non-operational transactions, including profit on sale of assets, pension fund surpluses and deficits and impairment adjustments
• During the year, a deficit on the group’s pension fund surplus had a 0.1% negative impact on margins
• All of the group’s businesses, with the exception of Construction Materials, posted improved operating margins over last year
• The overall margin decrease is therefore directly attributable to the weaker results from the Construction Materials cluster, as well as only moderate profit recognition on the ongoing commercial closure of the two cancelled contracts in Dubai
• Sixth consecutive year of cash generation, with cash generated from operations a very strong at R1,8 billion
• Very healthy balance sheet, with no net gearing
• The final dividend of 72 cents per share (2008: 60 cents per share) brings the total dividend for the year to 130 cents (2008: 105 cents per share)

Commenting on the results, Group Five CEO Mike Upton, said:

“The year under review tested the group’s leadership, its people, clients and its business case. It is thus very rewarding to confirm that we have used this challenging period productively, further investing in the group’s long term sustainability and delivering another set of robust results. In negotiating these troubled times, we stuck to the basics of maximising performance in each of our businesses and increasingly integrating our products and services into a single offering. This integration is the essence of our strategy and has positioned Group Five as a leading engineering and construction contractor in the delivery of large multi-disciplinary infrastructure contracts.

“The benefits of this product and service diversification and integrated approach to large contracts, as well as our ability to navigate change, became very prominent during the year. After losing R4 billion of the Middle East order book due to the global financial crisis, we were able to switch markets and substantially increase our order book in the public sector in South Africa. We also successfully weathered the local decline in the real estate and mining sectors and the temporary, but dramatic, fall-off in profitability in the materials sector.”

Going forward, Upton said:

“The group has already secured 80% of total construction annual sales for F2010 and has a secured order book with line of sight into F2013. These factors have resulted in a positive management view in terms of Group Five’s medium to long term sustainable performance. The group’s competitive advantage in tendering for both local and international concessions and its variety of income streams provide valuable competitive advantages. The group’s total secured construction order book stands at R11,6 billion.

“Looking ahead, management see sufficient opportunities in its current and targeted markets to be confident that Group Five will continue to grow. In the short to medium term, however, the local construction industry is dependent on the South African government succeeding in its capital spending programme – timeously and efficiently rolling out the Eskom base load power station build programme, the suite of PPP contracts and the road, rail, port and airport, housing and water infrastructure improvements. Currently there are delays in awards of the next round of public sector contracts, which is a concern. In summary then, we think that markets will be tougher, but as our strategy has been designed to cope with tough times, we are cautiously optimistic and expect to achieve earnings growth in F2010 and beyond.”

OPERATIONAL OVERVIEW

INVESTMENTS AND CONCESSIONS
Investments and Concessions comprises Infrastructure Concessions and Property Developments. This cluster contributed 5.2% (2008: 6.5%) to group turnover and 10.3% (2008: 8.4%) to group operating profit.

Infrastructure Concessions

• The segment enjoyed an excellent year
• Revenue, which consists primarily of fees for the operations and maintenance of toll roads, increased by 62% to R527,9 million (2008: R326,5 million). Operating profit more than doubled to R79,6 million (2008: R30,7 million) and operating margin increased to 15.1% (2008: 9.4%)
• The segment also recorded fair value adjustments of R15,7 million (2007: R111,4 million) Intertoll Europe achieved an early start date to operations on the A1 Phase I contract (Poland), achieved financial close of the R12 billion A1 Phase II contract (Poland) and reached commercial close of the R3 billion D1 contract (Slovakia)
• Intertoll Africa was awarded the R661 million N2 North Coast contract, valid to 2017

Property Developments

• As stated at interim stage, whilst medium to long term prospects for Property Developments are promising, the group’s continued realignment of its portfolio in favour of  new A-grade opportunities will take time
• Therefore, as expected, Property Developments’ revenue decreased by 61% from R255,1 million in F2008 to R98,9 million. Operating profit decreased to R2,3 million (2008: 22,7 million), with operating margin at 2%

MANUFACTURING
Manufacturing contributed 6.8% (2008: 6.2%) to group turnover and 10.8% (2008: 8.8%) to group operating profit. This business consists of Fibre Cement (Everite) and Steel.

• This cluster posted excellent results, despite tough market conditions
• Revenue was up 47% to R816 million (2008: R555 million), with operating profit up 53% to R86,0 million (2008: R56,2 million) and the operating margin increasing to 10.5% (2008: 10.1%)
• Everite grew volumes, revenue and earnings significantly in a depressed traditional housing market as it strategically increased its presence in the public housing market, which continues to grow robustly
• Steel delivered a strong result, with the effect of the steel price volatility mitigated through natural hedges, previously put in place
• Barnes Reinforcing Industries and the Formwork and Structural Steel units will benefit from the group’s future construction order book
• The largest business in Steel, Group Five Pipe, maintained a healthy order book due to the need for improved delivery of potable water within South Africa.

CONSTRUCTION MATERIALS
This cluster contributed 5.6% (2008: 7.7%) to group turnover and 7.0% (2008: 22.3%) to group operating profit.

• Construction Materials posted a very disappointing result, which affected overall group results
• Revenue remained relatively unchanged at R671 million (2008: R689 million). Operating profit decreased by 61% to R55,8 million (2008: R141,9 million) and operating margin decreased to 8.3% (2008: 20.6%)
• Although South Africa is spending on infrastructure, private sector building – to which this business is currently mainly exposed to – remained extremely depressed
• The year under review was therefore affected by demand dropping more sharply than anticipated, as well as the slow pick up of certain infrastructure contracts (such as roads, to which this business provides aggregates), and severe summer rains
• To address the non-performance, the cluster was restructured to operate profitably in weaker markets

The currently muted market conditions are anticipated to progressively return to more buoyant levels over the next 24 months.

CONSTRUCTION
Construction is the largest cluster in the group. During the year, it contributed 82.5% to group turnover and 71.9% to group operating profit.

• Construction revenue increased by 41% to R9,9 billion (2008: R7,1 billion) and operating profit increased by 49% from R384 million to R573 million. This resulted in an operating margin of 5.7% (2008: 5.4%), above the group’s internal target of 5%

 Building and Housing

• Building and Housing did well to maintain revenue and earnings in a difficult market.
• Revenue increased from R2,8 billion (91% local) to R2,9 billion (98% local). Operating profit of R141,0 million was similar to last year (2008: R140,3 million), resulting in the operating margin remaining at 4.9%
• This business unit has successfully hedged its exposure to the depressed private sector building market through the transfer of capacity to the public sector infrastructure and social housing market

 Civil Engineering

• Civil Engineering achieved substantial growth
• Revenue increased by 56.3% to R4,6 billion (60% local) (2008: R2,9 billion (49% local)), while operating profit increased by 58% to R225,7 million (2008: R142,8 million). This resulted in an operating margin increase to 4.9% (2008: 4.8%)
• Activity in South Africa remained strong and the mix of work continued to shift towards the public sector. Signs of activity have recommenced since year end in the mining sector in the rest of Africa. The group is also pursuing regional infrastructure contracts related to power and transport
• In the Middle East, the group’s business was right-sized and continues to trade profitably
• The focus moved from Dubai to other areas in the region, where economic growth remains strong. Activities in Abu Dhabi have gone well and we have managed to secure a further six contracts, as well as the extension of current contracts in Jordan. Conclusion of the close out of the two cancelled contracts in Dubai is progressing in an orderly fashion.

Engineering Projects

• Engineering Projects had an excellent year
• Revenue increased by 93.7% from R1,3 billion (14% local) to R2,4 billion (12% local) and operating profit more than doubled from R100,9 million to R206,7 million. The operating margin improved to 8.5% (2008: 8.0%)
• Private power continued to be a growing market and, during the year, the group expanded its footprint into the southern African power and energy market, with orders received for power station contracts in South Africa and Botswana
• Although the global economic crisis had a negative impact on the African mining sector where this business has established a strong presence, uranium, coal and gold are still in demand. Tendering activity picked up in the last quarter of F2009, and some curtailed African mining projects have resurfaced for re-tender

Issued by:

The two winners were the Berg River Dam in Franschhoek in the Civil Engineering category and the Moses Mabhida Soccer Stadium in the Unique Design Aspects category. The stadium was also awarded a commendation in the Construction Techniques category.

CEO Mike Upton congratulated the teams for the excellent work. “The Fulton Awards for Excellence in the Use of Concrete qualify as one of the most prestigious and coveted awards in the local construction industry, so we can be particularly proud of these achievements,” he said.

Cees-Jan de Maaker: GE account executive for Group Five