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GRF - Group Five Limited - Trading update
GROUP FIVE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1969/000032/06)
Share code: GRF ISIN: ZAE000027405
("Group Five" or "the Group" or "the Company")
Trading update
Shareholders are advised that, for the interim period ended 31st December 2008,
the Group expects:
* Earnings per share (EPS) of between 30% to 40% higher than the prior
comparative period (235 cents per share to 253 cents per share); and
* Headline earnings per share (HEPS) of between 45% to 55% higher than the
prior comparative period (252 cents per share to 269 cents per share).
These results have been achieved against challenging market conditions and
indicates the resilience of the Group`s strategy and its strong positioning in
key growth markets.
The financial statements for the interim period ended 31 December 2008 have not
been reviewed or reported on by the Company`s auditors. The Company`s unaudited
results for the interim period ended 31 December 2008 will be released on SENS
on 16th February 2009, when the Group will be updating the market on its
business in a presentation in Johannesburg on the same day, and in Cape Town on
18thFebruary 2009. The presentation will be available on the 16th February 2009
for all stakeholders to peruse on the Group`s website, www.g5.co.za.
Market conditions
On 27th November 2008, the Group notified shareholders that its view on the
prevailing market conditions at the time was that some markets could come under
pressure in the short term, particularly in mining and in private sector
building activity in South Africa ("SA") and the United Arab Emirates ("UAE").
This was however being mitigated by successfully increasing the Group`s order
book in the prioritised public sector infrastructure spend in SA and in the UAE.
Subsequently, the impact of the global credit crisis has worsened and commodity
markets have remained weak, placing additional pressure on some private sector
industrial, real estate and mining projects. In aggregate, however, the Group`s
South African and African operations continue to perform satisfactorily, with
some sector declines compensated for by growth in others.
The South African Government`s recommitment to circa R800 billion of
infrastructure investment continues to provide opportunities that benefit all of
the Group`s businesses. Since November 2008 the Group has won over R2 billion of
public infrastructure projects which includes contracts in the petrochemical,
defence, healthcare, housing and power sectors.
The Group`s Eastern European concessions remain buoyant. However the Middle East
has been directly impacted by the credit crisis and reduced oil prices -
particularly in Dubai where, in addition to the private property market decline,
the public sector, where the Group operates, has started to experience some
pressure. The Dubai Government itself has just reviewed its own Infrastructure
capital project programme as a result of the worsening of the economic crisis.
Various Dubai government authorities have recently announced that a number of
contracts have been suspended or terminated.
The immediate effect on Group Five has been the suspension (pending further
review by the client) of one contract and the termination of another. The total
value that remains to be executed under the suspended contract is R654 million
(R309 million relating to the 2009 financial year). The total value that
remained to be executed under the cancelled contract is R3,3 billion (R514
million relating to the 2009 financial year).
Such suspension and termination action is catered for in the contracts, such
that the contractor has recovery rights and will be fully compensated for its
costs incurred with a reasonable margin. Group Five and its UAE partner, Al
Naboodah, are actively engaged in demobilising resources and in commercial
negotiations with the relevant Dubai government authorities.
The Group`s other contracts to the value of R563 million in Dubai, Jordan and
Abu Dhabi are unaffected.
Group Five remains committed to the Middle East market and continues to review
its prospects in light of these developments and against the ongoing
opportunities that exist in the region`s economies that have free sovereign
funds, energy resources and industrialisation strategies that suit the Group`s
capabilities.
iLima
The Group wishes to provide an update on the information disclosed within its
2008 Annual Report with respect to its Enterprise Development Agreement ("EDA")
with iLima Projects (Proprietary) Limited . During 2005, Group Five entered into
an EDA WITH iLima Projects (Proprietary) Limited ("iLima Projects"), a
subsidiary of iLima Group (Proprietary) Limited ("iLima Group")(collectively
"iLima"). iLima Group, through its 62% shareholding in iLima Consortium
(Proprietary) Limited ("iLima Consortium"), became a participant in Group Five`s
black economic empowerment equity ownership transaction ("Group Five BEE
transaction").
In terms of the EDA, Group Five periodically advanced technical and
administrative guidance and provided bond and guarantee support and working
capital loans to iLima in relation to construction projects undertaken by iLima
Projects up until September 2007. iLima Projects has for some time experienced
operational and funding difficulties that have recently been further exacerbated
by lack of delivery capacity of its client base at a provincial and municipal
level and by the current state of the markets. The Group has previously
disclosed its commitments in terms of the EDA in its Annual Financial Statements
and, as at 31st December 2008, the value of direct and indirect financial
assistance provided to iLima by the Group was R172 million, reducing from R201
million at 30 June 2008.
Group Five management continues to actively work with iLima management by
providing administrative guidance in support of the refinancing initiatives
undertaken by iLima and in respect of iLima`s contractual obligations.
In calculating the trading update provided above, the Group has taken into
consideration its exposure to the above mentioned financial assistance provided
to iLima on the expectation that iLima will successfully implement their
refinancing arrangement.
Shareholders will be updated on progress made by iLima with their refinancing
plan when a definitive milestone is reached.
Conclusion
Notwithstanding the Middle East developments and tougher market conditions, the
Group continues to be strategically well positioned in active market sectors and
expects to achieve a strong improvement in earnings for the year to 30 June 2009
compared to the prior corresponding period.
Johannesburg
21 January 2009
Sponsor
Nedbank Capital
Date: 21/01/2009 09:55:07 Supplied by www.sharenet.co.za
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