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Business In The News South Africa

Group Five warns of 590 cents loss per share

JOHANNESBURG, July 24 – Construction and engineering giant Group Five has advised that it will report a loss per share and headline loss per share of at least 590 cents for the year ended 30 June 2017 compared to earnings per share of 375 cents and headline earnings per share of 335 cents the previous year.

Group Five pointed to three key matters which influenced the first half of the financial year.

The first was the recognition in the  first half of the 2017 financial year of the group’s financial socio-economic contribution of R255 million, in terms of the agreement reached with the government to implement a programme of initiatives that will significantly accelerate transformation of the country’s construction sector.

This was in relation to a fine imposed by the Competition Commission after it found major construction companies guilty of collusion during the construction of world cup stadia.

Another key matter that influenced Group Five’s negative results was recognition of the commercial close out and final settlement of the previously- disclosed long outstanding South African public New Multi Product Pipeline contracts reduced operating profit by R244 million.

Thirdly, Group Five said the continuing worsening of markets, with the engineering and construction cluster unable to entirely replace work traded, impacted profitability and a recovery of overheads, and a contract loss-making ratio which remained worse than the target.

“Shareholders should note that the F2017 results should be compared to F2016 results which included an exceptional result from the investments and concessions cluster, boosted by a significant fair value gain realised from the group’s Eastern European project investment portfolio. This had a R730 million positive impact on earnings.

“The full proceeds from the strategic equity partnership with Aberdeen have been received by year-end, which represents free cash. This cash has been retained offshore for application to future investments.”

Group Five’s 2017 financial results still require review and approval by the group’s new board once reconstituted following the group’s extra ordinary
general meeting on Monday, and a further trading update will be released once the company has clarity on the exact range of the decrease.

Five directors resigned, including chairwoman Philisiwe Mthethwa, before Group Five’s extraordinary general meting called by one of the major shareholders, Allan Gray, which said that it had lost faith in the group’s board.

Group Five said the replenishment of the engineering and construction order book remained challenging, and that operational improvements were being implemented to support margin improvement.

Group Five said the benefits of restructuring and the rationalisation programme were only expected to flow from the 2018 financial year, with the cost of retrenchment and restructuring incurred in the current year.

ANA

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