Construction company Group Five on Wednesday warned of widening losses for the financial year ended June 30, as losses continued in the second half of the year, despite the group’s restructuring and rationalisation programme.
Group Five expects to report a loss a share and a headline loss a share of between R13 and R14.50. This would represent a 56.8% to 74.9% widening on the loss a share of R8.29 and a 52.4% to 70% widening on the headline loss a share of R8.53 recorded for the 2017 financial year.
The losses for the second half of the financial year were mainly the result of additional losses on the independent gas- and oil-fired combined cycle power engineer, procure and construct (EPC) contract, in Kpone, Ghana; Construction: South Africa continuing to be impacted on by weak market conditions with some contract awards not materialising or secured contracts materialising later than anticipated; and South African EPC contracts, although profitable, trading behind forecast.
Group Five stated on Wednesday that construction of the Kpone project is complete and commissioning well advanced, with final completion expected by the end of September. The expected loss on the Kpone contract for the 2018 financial year has grown to R1.3-billion, from the R649-million at the end of the six months to December 31.
The additional losses recorded in the second half of the financial year were the result of further costs incurred to complete the contract, the impact of foreign exchange rates, and a more stringent approach to the timing of the recognition of certain substantial claims.
Meanwhile, Group Five’s Construction: Rest of Africa cluster delivered stronger results in the second half of the financial year than in the first half. The Investments & Concessions cluster also delivered a solid result. Group Five’s share price on the JSE fell by more than 20% on Wednesday afternoon.
