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Group Five looks to boost margins at loss-making construction unit

The group will now ‘chase quality revenue with good margins’.

JOHANNESBURG – South African construction company Group Five plans to boost profit margins after restructuring into more geographically focused units, the group’s new chief executive said on Monday.

The company has been grappling with lower margins at its construction business, which has been split into South Africa Construction, Rest of Africa Construction and engineer, procure and construct businesses (EPC), due to the poor performance on roads contracts and a subdued order intake.

“What we will not do going forward, is to sacrifice margin in order to get revenue. We will rather walk away than to do a job that we know from day one that we’re going to lose money from that job,” CEO Themba Mosai, who took the top job last month, told Reuters in an interview.

Mosai said the group will now “chase quality revenue with good margins,” without giving any figures or time frame.

Core operating margin in the Engineering and Construction division decreased to -7.6% for the six-months ended December 2016 from 1.0% in the comparable period in 2015, excluding the R255 million ($19.87 million) impact of a settlement agreement with the country’s government.

The construction company split its construction business in May and trimmed it down from 11 divisional units to four, which resulted in the loss of 149 jobs.

“We’re now closer to the clients, we’re now geographically focused as well, there is a greater span of control, we are closer to the issues better,” Mosai said.

Mosai said through its partnership with Aberdeen Infrastructure Funds, a wholly owned subsidiary of Aberdeen Asset Management Plc, its investment and concessions business will now expand deeper into Western Europe. ($1 = R12.8335)

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