Group Five gets new board, ex­pects loss

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

SHARES in Group Five dropped 3.34 per­cent yes­ter­day af­ter re­port­ing that it ex­pected to re­port a sig­nif­i­cant loss for the year to June, and a new board was elected at an ex­tra­or­di­nary gen­eral meet­ing of the com­pany.

The meet­ing was prompted by ir­rec­on­cil­able dif­fer­ences with ma­jor share­holder, as­set man­ager Al­lan Gray, re­sult­ing in the res­ig­na­tion of the ex­ist­ing Group Five board.

The listed con­struc­tion and en­gi­neer­ing group’s shares closed at R19.10 yes­ter­day.

Group Five said it ex­pected to re­port a share and head­line loss of at least 590c for the year to June, from earn­ings a share of 375c and head­line earn­ings a share of 335c in the pre­vi­ous year.

How­ever, it high­lighted that the fi­nan­cial re­sults for the pre­vi­ous year in­cluded an ex­cep­tional re­sult from the in­vest­ments and con­ces­sions clus­ter, which re­sulted in a R730 mil­lion pos­i­tive im­pact on earn­ings.

Philisiwe Mthethwa, the out­go­ing chair­per­son of Group Five, said a large driver of the ex­pected loss was the con­tin­ued dif­fi­cul­ties ex­pe­ri­enced by the en­gi­neer­ing and con­struc­tion clus­ter.

Mthethwa said it was re­gret­table that the cur­rent board was leav­ing with such poor re­sults but ex­pressed con­fi­dence that the long-term fu­ture of Group Five was pos­i­tive, with some of the in­ter­ven­tions al­ready im­ple­mented.

She also be­lieved Group Five had the right team and strat­egy to en­sure it suc­cess.

How­ever, Mthethwa said Group Five’s board still ques­tioned the man­ner in which Al­lan Gray had con­ducted it­self.

“In our view, it is con­trary to what we would ex­pect from one of the most highly re­spected and re­spon­si­ble fund man­agers in South Africa. To de­mand the re­moval of the en­tire board is an un­usual oc­cur­rence in the ab­sence of clear gov­er­nance fail­ures,” she said.

Mthethwa said this type of con­duct had been fur­ther ex­ac­er­bated by Al­lan Gray nom­i­nat­ing five non-ex­ec­u­tive di­rec­tors as a pack­age.

“It is there­fore im­por­tant to dis­close that Al­lan Gray’s in­ten­tion and that one of the key un­der­ly­ing rea­sons for the re­moval of the board was the re­fusal to en­ter­tain dis­cus­sions to un­bun­dle the group and sell off the as­sets,” she said.

Leonard Kruger, a port­fo­lio man­ager at Al­lan Gray, re­futed the sug­ges­tion that Al­lan Gray had nom­i­nated five non-ex­ec­u­tive di­rec­tors as a block or pack­age.

How­ever, Mthethwa said they had this in writ­ing from Al­lan Gray.

Justin Chinyanta, an out­go­ing non-ex­ec­u­tive direc­tor, claimed there was “an agenda on the part of Al­lan Gray”.

But Kruger said Al­lan Gray did not have any ul­te­rior agenda. “We sim­ply want what is best for Group Five and for a new board to take this com­pany for­ward,” he said.

Five of the eight new non-ex­ec­u­tive di­rec­tors elected were nom­i­nated by Al­lan Gray.

They were Rei­tumetse Jackie Hunt­ley, Nazeem Martin, Nonyameko Mandindi, John Job and Mike Up­ton, a for­mer Group Five chief ex­ec­u­tive.

The other non-ex­ec­u­tive di­rec­tors elected were Cora Fer­nan­dez, Thabo Kgogo and Ed­ward Wil­liams.

Themba Mo­sai, the chief ex­ec­u­tive of Group Five, said the meet­ing was a bit­ter-sweet mo­ment for him.

Mo­sai said it was sweet be­cause af­ter a few months of tur­moil, there was hope for fi­nal­ity on this mat­ter and the chance to re­cover and move for­ward as a busi­ness, but bit­ter be­cause he was bid­ding farewell to a group of peo­ple who he had come to greatly ad­mire and re­spect.

He said Group Five had to em­brace trans­for­ma­tion and di­ver­sity to re­main rel­e­vant in South Africa and in Africa.

“It is sick so­ci­ety where the ma­jor­ity has to cre­ate laws to pro­tect it­self against the mi­nor­ity. It is a sick so­ci­ety where per­cep­tions of com­pe­tence is ap­por­tioned on the ba­sis of pig­men­ta­tion.

“We re­leased a trad­ing up­date to­day. Judge us on that. Judge us on our re­sults, our per­for­mance, and not the tone of our skin colour. Those crude mea­sures have proved in­ef­fec­tive,” he said.

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