General 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 Company”)
GENERAL TRADING UPDATE
Subsequent to the update on, inter alia, general trading conditions and the trading statement
issued on the 19th December 2017, the group has finalised most material aspects of its interim
results for the six months ended 31 December 2017. 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.
The group is in the final completion phase of this contract. Management is currently confirming
the final completion date, and the associated completion costs. The abovementioned
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 this review will inform the group’s assessment of
the expected financial performance of the Kpone contract and the resultant impact on the
previously-released trading statement. As advised in the SENS announcement of 19
December 2017, possible delay penalties are capped at $62.5 million. Against these possible
delay penalties, the group is progressing its own contractual claims. The contract continues to
receive daily senior and executive management attention, and ongoing direct involvement
from the CEO, CFO and the main board risk sub-committee.
This contract, together with the ongoing pressure in the South African construction market, as
well as the initial short-term costs of the further rationalisation of overheads in the construction
businesses and the corporate office, continues to place pressure on the group’s free cash
resources. The group has been able to contribute positively to the free cash on hand through
the recovery of long-outstanding debtors and other cash-enhancing initiatives. These cash
recoveries and initiatives are expected to provide an enhancement to the group’s cash position
over an 18-month period, with some initiatives already converting into free cash in Q2 F2018.
The group is currently in discussions with its funding partners in an endeavour to establish
short-term bridging funding where there is a mismatch between the timing of the expected
cash recoveries from these initiatives and its short-term funding requirements.
Regarding the sale of the Manufacturing cluster, multiple revised non-binding offers have been
received by the board. In January 2018, the Independent Board selected its preferred bidder
list, which has now progressed to initial due diligence stage. The disposal programme remains
Expressions of interest continue to be received for the group’s Investments & Concessions
assets and operations. The board of directors of Group Five continues to objectively assess
these, with a view to maximising shareholder value, notwithstanding that these assets and
operations are deemed to be core to the group.
The group will issue a detailed trading update and simultaneously confirm the date of release
of its H1 F2018 results shortly.
01 March 2018
Nedbank Corporate and Investment Banking
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