Job loss bloodbath continues as Group Five sheds 1000 jobs
PRETORIA – The jobs bloodbath in South Africa’s beleaguered construction sector is continuing, with listed construction and engineering company Group Five reducing its headcount by about a 1000 people in the past year, including the retrenchment of 600 permanent employees.
The group said yesterday that its headcount fell 20percent during the period from about 8000 people.
It said the reduction included employees related to the construction businesses, engineering, procurement and construction (EPC) and head office rather than contract workers.
Chief executive Themba Mosai said the group’s developments and investments and operations and maintenance clusters would become a future focal point, while decreasing the focus on the EPC and construction clusters.
Mosai said they had started consultations in the EPC business related to restructuring for current workloads, and it was “unfortunate that further retrenchments would have to happen in this business”.
He was unable to provide any indication of how many people would have to be retrenched in the EPC business. Mosai added that the South African construction business was being right-sized and was expected to return to profitability within the next financial year.
However, Mosai admitted that the increased cost of doing business was a major challenge, because of the reputational damage to the group and access to guarantees.
Group Five reported yesterday that its board had approved a partial disposal of its investment in service concessions assets in Eastern Europe, which were held through the group’s joint venture investment with Aberdeen Infrastructure Funds (AIF) in Intertoll Capital Partners.
Subject to shareholder approval, the group expects to reduce its current 50percent investment to 10percent, with the proceeds from this disposal used to settle the group’s short-term bridge funding and significantly reduce its current liabilities and substantially improve its liquidity.
Intertoll sold an initial 49.9percent of its underlying European public-private partnership infrastructure investment portfolio to AIF for 43million (R705.54m) in 2016.
An almost R1.3billion loss on the group’s independent power plant contract in Kpone in Ghana in the year to June continued to drag down its financial performance.
Group revenue from continuing operations declined to R7.35bn from R9.95bn while the operating loss widened to R1.4bn from R718m.
This resulted in the fully diluted headline loss a share increasing to R13.80 from R8.53.
No dividend was declared.
In addition to the Kpone contract, Mosai said the group had experienced R85.9m in losses from unsecured work that did not materialise and strategic actions taken by the group to rationalise the business and not to pursue some opportunities.
There was a further R63.1m impact from unsecured work being delayed and R70.5m from construction contract losses and contracts running behind time and R56.3m in EPC.
The group had a total order book of R11.2bn at end-June, compared to R14.5bn in the previous year.
Shares in Group Five rose 14.74percent yesterday on the JSE to close at R1.09.