Revenue from continuing operations increased by 6% to R30,7b for the year ended 30 June 2016 as further growth within the group’s building divisions, both in Africa and Australia, continued to moderate the impact of lower activity levels within the mining and other civil engineering sectors.

The impact of these challenging conditions is evident within the group’s African-based operations where revenue decreased by 7% following declines in revenue from both the Roads and earthworks and Civil engineering divisions. Revenue growth in Australia reflects real growth of 8% in Australian dollar terms but was assisted by a weaker rand, where currency effects amounting to R1,5b resulted in overall growth of 18%.

Operating profit before non-trading items increased by 31% to R1b from R768m. This reflects the healthy recovery in profitability in Australia from R11m to R300m, where in the previous year losses on four civil engineering projects were recognised. Profitability from Australia this year was further supported by R45m in unrealised exchange gains following the devaluation of the Rand. Profitability from African based operations declined by 7% in line with lower activity levels.

While the overall margin of 3,3% reflects an improvement over the margin of 2,7% achieved at 30 June 2015, the volume of Australian-based projects, increased local building activity and a heavier weighting toward roadwork within the Roads and earthworks division resulted in the margin being constrained towards the lower end of the group’s targeted range of between 3% and 4,5%.

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Operating profit before non-trading items at 31 December 2015 increased by 29% to R495m from R384m in the prior period. This is largely attributable to an improved performance from Australia following the losses recognised on three civil engineering contracts in FY15. The margin of 3,2% achieved continues to be impacted by the heavier weighting of lower margin building and road work within the group’s overall project portfolio. The devaluation of the Rand in December 2015 resulted in unrealized currency gains improving overall profitability by R30m, a large portion of which was attributable to Australia. The Australian margin was negatively affected by the cost of the WBHO Infrastructure strategy implementation. The margin within the Building and civil engineering division has improved from 4,4% achieved in the comparative period but remains consistent with the 4,8% achieved at 30 June 2015 and reflects the strength in the building market. Margins within the Roads and earthworks division remain under pressure having declined further to 6,3% in the current six month period when compared to the 7,2% margin achieved in the previous financial period. A sustained lack of mining activity and increased competition in other lower margin sectors remain key factors behind the decline in margin.

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