Group Five blaims market conditions for severe earnings drop
Construction sites
Group Five issued on Tuesday a serious warning that concerning the fortunes of the JSE-listed construction company.
The group informed the shareholders that the value of shares will drop dramatically starting with 1st of July. If the headline earnings were 309c a share, it will drop about somewhere between 45-55% reaching a minimum of 253 a share. This compared to the record 561c a share that was recorded in 2010. Fully diluted earnings a share surpassed the expectations of the shareholders. They were estimating diluted earnings that were 195% smaller that would bring them to a value of 269c a share. In truth the minimal value is actually of 243c. How unpredictable is the market?
Group Five gave a statement in which blamed the sharp drop in earnings, to give some explanations regarding the slowdown taking place within the construction, and the weak flux of materials in the construction material sectors. The fact that in the last two years earnings have decreased, affected the performance in the current year since Group Five still holds the majority of all public sector contract that were awarded before the world cup. But for how long?
The company stated that such an obstacle that stood in place for such a long time, deeply affected the construction materials cluster and led to a severe deterioration of the materials market.
This impairment represented the physical difference between the true earnings a share and the foreseen earnings a share.
Furthermore, in the second half of the financial year, Group Five was under review and had sustained a series of once off costs which negatively affected the headline earnings.
These costs also included a rationalization process that was held in the construction materials cluster. They also had to hold the costs in the Middle East due to the material market downfall.
Yet, despite all these drawbacks Group Five sais that, excepting the Middle East, their largest construction segments have been holding the line well. This is due to “good contract execution” and the fact that they had several longer term contracts as well as some African contracts which were secured before.
Short term conditions were more grievous than expected added, Group Five. This slowdown is expected to keep going since the market is barely recovering. Since the financial year was over on 30th of June, Group Five will publish their audited results on th 15th of August.11
