Crown Publications - Group Five year-end results

Investments and Concessions consists of Infrastructure Concessions and Property Developments. This cluster contributed 5,2% (2009: 5,2%) to group revenue.

Infrastructure Concessions

This segment demonstrated an expected and consistent performance, with growth in both revenue and profit, despite the effects of the deep recession across the Eastern Europe region.

Revenue, which consists primarily of fees for the operation and maintenance of toll roads, and toll equipment supply to new contracts increased by 6% from R527,9-million to R557,2-million
The core operating profit margin remained largely unchanged at 15,1% (2009: 15,2%), with reported operating profit increasing by 7,5% to R85,6-million (2009: R79,6-million)
The cluster also recorded fair value adjustments of R13,5-million (2009: R15,7-million)

Property Developments

Although Property Developments did not generate positive returns during this financial year, its performance was in line with expectations, as the group progressed its strategy of disinvestment from the residential sector in favour of securing A-grade commercial and retail property development positions in South Africa

As expected, revenue decreased by 65% from R98,9-million in F2009 to R34,6-million
This segment posted an operating loss for the year of R10,7-million (2009: profit of R2,3-million). No fair value adjustments on investment properties were reported this year or in the prior year
The group anticipates a return to stronger results post F2011

MANUFACTURING

Manufacturing contributed 7,6% (2009: 6,8%) to group revenue.

The cluster produced resilient results in a market where both private and public sector conditions remained weak. The Fibre Cement business unit achieved reasonable returns by establishing alternative income streams, whilst removing costs within the traditional business model. The group continued to build the Structural Steel business unit under new leadership in a market of volatile input costs and high levels of pricing pressure, as supply exceeded demand. Group Five Pipe benefited from increasing demand for bulk water transport systems

Revenue increased by 6,1% from R816,1-million to R866,2-million.
The reported operating profit repeated the prior year's delivery of R86,8-million (2009: R86- million) although the overall core operating profit margin percentage decreased to 9,5% (2009: 10,6%)

CONSTRUCTION MATERIALS

Construction Materials contributed 4,3% (2009: 5,6%) to group revenue.

This cluster experienced a particularly tough trading year, with volumes and prices depressed by the slow roll out of public infrastructure and current recessionary pressures in the residential property market. Against the weakened market conditions applicable to the Construction Materials cluster and the uncertainty around the timing of a recovery, management adopted a cautious consideration of the carrying value of these assets and processed an impairment of R326-million.

Against these difficult markets, the cluster was re-engineered and re-sized to operate profitably on lowered volumes to create improved returns as the market recovers. Structural, management and operational changes were implemented and a detailed market validation and asset verification and valuation exercise undertaken. Process costs have been reduced and efficiencies gained to limit the margin impact from depressed volumes and prices. A gradual recovery is expected over the next 12 - 18 months.

Revenue decreased by 27% to R492-million (2009: R671-million)
Reported operating profit decreased by 64% to R20,2-million (2009: R55,8-million) and the overall core operating profit margin decreased to 3,6% (2009: 8,4%).

CONSTRUCTION

Construction consists of Building and Housing, Civil Engineering and Engineering Projects. It contributed 82.8% of group revenue (2009: 82,5%).

Construction revenue decreased by 6% from R9,9-billion to R9,4-billion and reported operating profit increased by 21% from R573-million to R695-million. This resulted in a pleasing overall core operating profit margin percentage of 6,9% (2009: 5,8%).

Building and Housing

This segment posted strong results due to the on-time and very successful completion of large contracts, as well as the timeous securing of new over-border contracts and domestic contracts in public buildings and the educational and healthcare sectors.

Revenue increased by 10% from R2,9-billion (98% local) to R3,2-billion (94% local). Total operating profit increased by 68% from R141-million to R236,6-million, resulting in the overall core operating margin percentage increasing from 5% to 6,9%
The secured one-year order book stands at R2,6-billion (78% local) (2009: R3,5-billion and 90% local) and secured work at R3,5-billion (77% local) (2009: R4,6 billion (81% local)

Civil Engineering

Civil Engineering posted healthy results, from well executed contracts and a strong order book,aligned to South African primary infrastructure.

This segment did well to maintain revenue levels from a high base in a year where Middle East activity was subdued. Revenue increased by 1,7% from R4,6-billion (60% local) to R4,7-billion (83% local), while reported operating profit increased strongly by 38% to R310,7-million from R225,7-million
This resulted in a core operating profit margin percentage increase to 6,2% (2009: 4,9%).
- The secured one-year order book stands at R3-billion (85% local), compared to R4,2-billion (86% local) as at 30 June 2009. The full order book is at R3,8-billion (80% local) (2009: R5,9-billion (61% local)).
- Based on the group's tender pipeline, it expects material contract opportunities to realise over the next 12 to 18 months, both in terms of its target geographies and sectors. The group therefore remains cautiously optimistic about future prospects

Engineering Projects

Engineering Projects encountered a more difficult year, with many target projects in Africa and the Middle East delayed due to the financial constraints following the economic downturn. However, during the second half of F2010, a recovery in enquiry levels from the sub-Saharan African mining markets was experienced, which resulted in new contract awards. This trend is expected to continue in certain minerals categories. There was also a significant progression in the South African power, energy and mining markets over the past six months, which augurs well for a recovery.

During the year, revenue decreased by 39,1% from R2,4-billion (12% local) to R1,5-billion (50% local) and reported operating profit decreased by 29% from R206,7-million to R147,7-million
However, the core operating profit margin percentage improved to 9,4% (2009: 8,6%)
The secured one-year order book stands at R1,4-billion (51% local) compared to 30 June 2009, with R921-million secured work (49% local). The full secured order book stands at R1,9-billion (64% local) (2009: R1,1-billion (43% local))