Group Five Moving Away from Residential Market - 10-28-08

October 28 - The unstable property market in South Africa is taking its toll on even the most established companies in the market. Group Five, a South-African based construction firm, has announced that it would be realigning its portfolio by moving away from the residential property sector due to the current high interest rates, falling sale figures and reduced profits in the property market.

Group Five is exposed to changes in the residential property market due to three factors: its property development unit, its fiber cement making business, Everite, and its housing construction business unit.  Group Five develops top grade properties for the commercial, industrial and retails sectors in South Africa and receives its returns through development fees, lease rentals, sale of properties and others. Up to 90% of Group Five's profits are from property sales.

As part of their move away from the residential sector, Everite will be refocusing its production line away from private building merchants and towards developing product ranges for the government's low-cost housing units projects. In addition, Group Five's building and housing division will be focusing on building low-cost government-funded housing units, and would also be moving away from the sectional title market.

Paul le Sueur, who heads Group Five's Construction-Building and Housing unit, said that the firm was getting involved in the construction of Breaking New Group (BNG), a government-backed housing project worth R225 million, currently located in Shoshanguve, Esselen Park and Princess Plot.

John Wallace, head of Group Five's manufacturing unit, said: "The changing sales emphasis towards low/medium cost housing and systems housing will be evident in the income state from H1 2009 onwards."