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WHAT A HORRIBLE YEAR FOR LISTED CONSTRUCTION SECTOR

29/12/2017 00:12:00 The Editor

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SOUTH AFRICA - At the end of 2016, the local listed construction sector was hoping for a new dawn that would see government resume the workflow the sector lost due to reputation damage, following its earlier admissions to bid rigging.

However, a year later the industry is in tatters. The first payments in its costly agreement with government to speed up transformation hurt the companies’ financials; government work is still by-passing it and one of its biggest public sector clients has thrown a curveball that might see it lose even the little government work that was still coming its way.

The value destroyed in this industry over the past year is tremendous and comes with the loss of jobs that the economy so dearly needs.
The share prices completely reflect the dire state of the sector. With the exception of market darling Wilson Bayly Holmes-Ovcon (WBHO) and Murray & Roberts that completed the sale of its local building and construction business in the first half of the year, all the other big construction companies lost 50 per cent or more of the value of their share price in the year to date.

Group Five

As early as February 2017 Eric Vemer suddenly departed from Group Five, followed by several other executives and board members. PSG Asset Management exited Group Five and Coronation bought shares to the level of 14.49 per cent shareholding.
Themba Mosai was appointed as new CEO.

Following pressure from shareholder Allan Gray the board was ousted and replaced at an extraordinary general meeting, featuring among others former Group Five CEO Mike Upton.
The group reported a loss per share of 829c and headline loss per share of 335 cents for the 2017 financial year.

A rushed offer from Greenbay Properties for the acquisition of Group Five’s crown jewels, its Investment and Concessions business, for E1.6 billion lapsed. It sold Group five Pipe and is in the process of disposing of its other manufacturing assets.

In December the group warned that its interim results for the period ending December 31 could see the loss per share amounting to 409c and headline loss widening to 415c per share. This is due to further delays on its Kpone project in Ghana and the downscaling of its South African roads and civil engineering business.