Group Five results hit by major loss in Ghana

The performance of diversified construction company Group Five [JSE:GRF] during the past financial year was materially below expectations, it said on Tuesday.

The group, which anticipated as much in a recent trading update to the market, released its audited results for the financial year ended June 30 2018.

Although the group reported revenue of R7.3bn, it shows a net loss of R1.3bn.

The main contributor to the loss was the significant loss reported on its independent engineer, procure and construct (EPC) gas and oil-fired combined cycle power contract in Kpone, Ghana.

Headline earnings per share (HEPS) and fully diluted HEPS (FDHEPS) weakened from a loss of R8.53 per share in the 2017 financial year to a loss of R13.80 per share in the 2018 financial year.

Earnings per share (EPS) and fully-diluted EPS (FDEPS) weakened from a loss of R8.29 per share in 2017 to a loss of R13.35 per share in the current financial year.

The difference between earnings and headline earnings this year was mainly as a result of a loss on the fair value adjustment of an investment property, profit on the sale of Group Five Pipe and profits on disposal of property, plant and equipment.

Group revenue decreased by 26.2% from R9.9bn to R7.3bn, mainly as a result of a 20.2% decrease in revenue from Construction SA and an 82.3% decrease in revenue from its Procure and Construct (EPC) division.

Construction: Rest of Africa grew its revenue by 71.8%, and the Investments and Concessions (I&C) cluster’s revenue increased by 11% compared to the 2017 financial year.

The Manufacturing cluster, reflected as discontinued operations, grew its revenue by 19.3%.

Construction South Africa’s results were impacted by the closure and rationalisation of a number of businesses, resulting in the cluster not pursuing opportunities originally anticipated. It was further impacted by a lack of contract awards.

Retrenchment costs also made an impact.

The board and executive management have implemented strong actions to assess the ongoing financial position of the group.

To address the risk of short-term cash pressure, management has prepared budgets for the 2019 and 2020 financial years, as well as a robust liquidity model.

The group established R650m in short-term bridge funding to address the mismatch between the timing of the expected cash recoveries from these initiatives and its short-term funding requirements.

Subsequent to June 30 2018, the board approved a partial disposal of the group’s investment in service concessions assets in Eastern Europe.

The overall group reported order book at June 2018 stands at R11.2bn.

It was decided to decrease its focus on EPC and Turnkey Project Solutions (TPS) activities. This will mean some additional retrenchments.

Although the business is operating on a much lower cost structure, further interventions are required due to the lack of contract awards and the increased cost of doing business, the group said.

By early afternoon trade (13:47pm) the share price was up 20.00% at R1.14 per share.

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