Cutting back to build up

The list of “things to be doing in SA in the current economic environment that are more of a laugh than running a construction company” is almost as long as Jacob Zuma’s rap sheet, but somebody’s got to do it, and the man in the hot seat at Group Five is Themba Mosai.

The trajectory of the company’s share price is at the sort of angle that gets extreme skiers excited and suggests the market wasn’t expecting a whole lot from its interims.

But Mosai admits that even against the backdrop of tough market conditions, Group Five’s performance was very disappointing.

The major culprit was the group’s woeful Kpone project in Ghana, where about the only good news is that it is 97% complete and should finally be finished in June. The project has cost the company a cheeky R649m on the back of delays caused by issues as diverse as unexpected marine conditions, late delivery of key components, faulty equipment from subcontractors and inaccurate designs from the engineering subcontractor.

The group has announced a major restructuring that will cut back its construction business dramatically, slashing its cost base and aiming to return to profitability in 2019 with a view to selling off a majority stake in the operation.

A consortium has provided Group Five with R650m in bridging finance, and it will be passing the begging bowl around to shareholders to replace this debt with a more longterm recapitalisation solution.

But no matter what the company does to sort out its basics, recovery will need considerable hard work.