Construction and engineering company Group Five has said the loss expected for the six months ended December 2017 would be R371-million more than the guidance provided in a March 1 trading statement, following continued difficulties at the Kpone project, in Ghana.
The group said it expected to report a loss of around 773c a share and a headline loss of around 779c a share for the six months under review. The group said it had, since the March 1 update, received an independent assessment of the time and cost required to complete the Kpone gas– and oil-fired combined cycle power plant project, as well as the claims associated with the venture.
The increased loss includes additional resources allocated to the Kpone contract to ensure execution, as well as the cost of specialists, technical advisers and employees who will be on site for longer due to the contract finalisation delay. The increase also includes additional costs to ensure acceleration to the earliest possible completion date, as well as unexpected costs, incurred outside of the group’s control.
The final completion date for the Kpone contract has been set as June. Possible delay penalties at the project are capped at $62.5-million, representing the gross maximum penalty exposure possible, assuming the group is responsible for a six-month delay in completion of the contract.
“This penalty does not reflect the counter, and other claims that the group is legally entitled to,” said Group Five. “Against these possible penalties, the group continues to progress its own contractual claims.” Group Five added that the Kpone contract, paired with ongoing pressure in the South African construction market and the further rationalisation of overheads, continued to place pressure on the company’s cash resources.
The company said it had secured up to R650-million in short-term bridge funding. “This will be sufficient to satisfy the group’s cash requirements on a sustainable basis.”
In discussions with the JSE, Group Five has committed to release its interim results on April 12.