Construction company Group Five has delayed its financial results for the half-year to December because of challenges it is facing with a project in Ghana.
The group said subsequent to the trading update issued in December, it had finalised most material aspects of its interim results for the six months to December. “However, the assessment of operating conditions on specifically the independent gas- and oil-fired combined cycle power plant EPC contract (Kpone contract) in Ghana remains in progress.”
Group Five was in the final completion phase of the contract.
“Management is currently confirming the final completion date, and the associated completion costs,” it said.
“The above-mentioned assessment is being conducted by Group Five with the client, and is also being supported by an independent external professional review to provide an independent assessment of the time and cost to completion.”
The results of the review would give clarity about the expected financial performance of the Kpone contract and the effects on its financial statements. Possible delay penalties related to the contract had been capped at $62.5m.Group Five will issue a detailed trading update and simultaneously confirm the date of release of its first-half financial year 2018 results shortly.
Group Five warns of widening losses
Group Five expects its interim headline loss per share for the six months to end-December to worsen by 34% to R4.15 from R3.10 in the matching period, it said in a trading update on Tuesday morning, 19 December.
Reasons for its widening loss include delay penalties on its $410m Kpone power station project in Ghana.
Tuesday’s statement said the construction company faced potential fines of $310,000 a day up to a maximum total of $62.5m on the Kpone project.
Group Five said it expected to complete the Kpone project by the end of February rather than December, and was contesting that it must pay penalties for missing the original deadlines because delays were caused by changes to Ghanaian law.
The construction group said it also intended to recoup delay penalties by suing the power station’s design engineer along with various other sub-contractors for causing the project to run late.
In July, institutional investor Allan Gray changed Group Five’s management. Allan Gray instructed the new team to sell or close unprofitable businesses.
The trading statement said there had been “a general unwind in the South African construction order book” during the reporting period.
“Construction will eventually consist of a buildings and housing business, despite the reduction of work anticipated in the first half of 2018, where the group has a proven track record, and a small, nimble civil engineering business in SA.”