Group Five 2012 - Integrated Report - Managing market conditions

2012 INTEGRATED REPORT

Managing
market
conditions

During the year, the group again canvassed stakeholders on their information needs. This assisted us to further refine our disclosure.

The group has focused geographic and sector strategies. This spread outlines information on how market conditions impacted on both of these.

South Africa

74%
of group revenue

	Public sector	Private sector
% of Construction revenue**	64%	36%
% order book^	50%	50%
% pipeline~	55%	45%

**	F2012 actual revenue.
^	Full secured Construction order book as reported at June 2012.
~	Full Group Five tender construction opportunity pipeline as reported at June 2012.

Market dynamics

Public sector

	INVESTMENTS AND CONCESSIONS
	•	Government public private partnerships (PPPs) and concessions policy uncertain
	•	Market currently dominated by the renewable energy independent power programme (REIPP) and building PPPs; historically by toll road concessions
	MANUFACTURING
	•	Spending in certain areas such as low-cost housing and power station construction, although delays have been experienced
	•	Strong competition in building materials and construction steel market
	CONSTRUCTION AND ENGINEERING*
	•	Mooted spend potentially high
	•	State owned entities (SOEs) digesting current capex and struggling with resourcing for new contracts
	•	Government spending commitment restated, but capacity and timing questioned
	•	Expect new awards from F2013

Private sector

	INVESTMENTS AND CONCESSIONS
	•	Private sector concessions are not currently common in our markets
	MANUFACTURING
	•	Constrained by tight bank credit and continued low activity levels across most construction markets
	•	An increase in spending at lower LSM# levels has supported volumes for building materials
	•	Sustained downturn in steel markets
	CONSTRUCTION AND ENGINEERING*
	•	Historically low activity levels

* Construction and Engineering refers to the group’s Construction and Engineering & Construction Services clusters.

Sector dynamics

Mining

Industrial

Power

Oil and gas

Water

* Construction and Engineering refers to the group’s Construction and Engineering & Construction Services clusters.

Real estate

Transport

Private sector

There are very limited opportunities currently.

†	South African National Roads Agency.
**	Bus rapid transit system.
#	Integrated rapid transit system.

Rest of Africa

21%
of group revenue

	Public sector	Private sector
% of Construction revenue**	29%	71%
% order book^	34%	66%
% pipeline~	49%	51%

**	F2012 actual revenue.
^	Full secured Construction order book as reported at June 2012.
~	Full Group Five tender construction opportunity pipeline as reported at June 2012.

Market dynamics

Public sector

	INVESTMENTS AND CONCESSIONS
	•	Prospects for the rest of the African continent have improved
	•	There is a clearly identified need, with government and public support for private sector financing
	MANUFACTURING
	•	Export volumes are improving on the back of a weaker Rand, economic growth and improved logistics
	CONSTRUCTION AND ENGINEERING*
	•	Growing pipeline in road, rail transport, ports, power and real estate

Private sector

	INVESTMENTS AND CONCESSIONS
	•	Some potential in power, real estate and mining
	MANUFACTURING
	•	Export volumes are improving on the back of the weaker Rand, economic growth and improved logistics
	CONSTRUCTION and ENGINEERING*
	•	Increasing scale of opportunities across more sectors and more of the group’s business segments

Sector dynamics

Mining

Industrial

Power

Oil and gas

Water

Real estate

Transport

Private sector

There are very limited opportunities currently.

Middle East

–%
of group revenue

	Public sector	Private sector
% of Construction revenue**	100%	–%
% order book^	100%	–%
% pipeline~	90%	10%

**	F2012 actual revenue.
^	Full secured Construction order book as reported at June 2012.
~	Full Group Five tender construction opportunity pipeline as reported at June 2012.

Market dynamics

* Construction and Engineering refers to the group’s Construction and Engineering & Construction Services clusters.

Eastern Europe		5% of group revenue

	Only the group’s Investments and Concessions cluster is exposed to Eastern Europe.

Market dynamics

Private sector

The group has not focused on work in this sector at this time.