Moneyweb examines Group Five’s R1bn exposure and looks at M&R.

JOHANNESBURG - Government owned Dubai World looks set to default on its debt, delaying payment for an undetermined period, arguably creating the biggest sovereign default since Argentina's in 2002. What does this mean for SA's multibillion rand construction groups?

Group Five (JSE:GRF) CEO Mike Upton immediately allayed fears saying, "we have no exposure to Dubai World." Group Five (JSE:GRF) is involved in heavy infrastructure development in the region.

Dubai World has a global port management subsidiary and property investments through Nakheel, but the construction company is not exposed there.

Upton confirms that contracts cancelled in the previous financial year are in the process of being resolved in an orderly manner. The sequence of the process involves measurement, final certification and approval of final account, of which the bulk of these steps have been completed. Payment will then be able to proceed within the timeframe previously communicated to stakeholders in August 2009.

This means that both parties are honouring the contracts. He doesn't believe the default will affect the government's ability to pay.

Dubai World is a state-owned enterprise, but the debt crisis is being limited to that corporation.

Ed Jardim, spokesman for Murray & Roberts (JSE:MUR), mirrors Upton in his calm demeanour. He says "we're not owed any money [in Dubai]. The Trump Towers contract was our only exposure to [Dubai World's] Nakheel."

The Middle East was worth R1.6bn (13% of group) in turnover to Group Five (JSE:GRF) for the 2009 financial year. The annual report also indicates R939m of outstanding gross debt in the region, of which R580m relates to Dubai and the balance to contracts in Abu Dhabi and Jordan.

This gross debt is before the offset of advance payments held by the group relating to Dubai (of which the cancelled contracts only amount to R300m) and also before considering back to back arrangements with sub contractors, reflected under creditors, which would offset against the debt owed to the group.

For Murray & Roberts, the focus is more on oil-rich Abu Dhabi and Saudi Arabia. The Middle East was worth just over R5bn in revenue for financial year 2009. The following projects were cancelled in Dubai due to the financial crisis:

Trump International Hotel & Tower                                      AED 3.3bn (R6.6bn)

Concourse 3 at Dubai International Airport                           AED5.7bn (R11.4bn)

The report says: "Full and final settlement has been agreed on Concourse 3 and Trump Tower and final account negotiations on other terminated projects are ongoing". This supports Jardim saying no money is owed in Dubai.

Upton says "it doesn't affect the outlook for us, the Middle East is vibrant outside of Dubai." In the 2009 annual report, Group Five (JSE:GRF) does highlight its concerns over Dubai.

The group currently expects a fall off in revenue from R1,6bn in the prior year to approximately R1bn in the current year, of which R580m was reported as secured at the last financial reporting period in June 2009.

"I think the story has been overcooked", says Upton, commenting that it is not as big as it's been made out to be.

Write to Chris Blaine: chris@moneyweb.co.za

For more on the unfolding Dubai crisis read:

• Murray & Roberts pursues Dubai debt
• UK knew about Dubai default
• No panic among SA banks on Dubai
• Unwelcome black swan waddles in the desert

• Dubai debt delays revive fear of financial crisis

• Dubai struggles to ease debt default fears

• Is the sun setting on vaunted Dubai model?

• Dubai owner of V&A in debt standstill

• Oil falls to $76 amid Dubai debt jitters

• What happens to Spur's Dubai's operation?

Intraday

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Picture That Upton guy looks like Ray MaCauley if he lost 120 kilos by Oracle of Delmas on November 27 2009, 15:01 Find this comment inappropriate? Report it

True but It's not MaCauley but McCuley. Are you jealous? LOL by Dubai Dubai Dubai on November 27 2009, 15:46 Find this comment inappropriate? Report it

UPTON I worked very close to this wainker, he is the most untrustworthy zimbabwean educated waste of a white skin ever to grace RSA. I will everything to upturn UPTONISM LIES ,,, take nothing he says as relieable. by Project Director on November 27 2009, 15:48 Find this comment inappropriate? Report it

That guy in da pic looks like he's Uptonogood by Johnny V on November 27 2009, 15:57 Find this comment inappropriate? Report it

HAHA, HAAAAAAAAAAAAAAAAA WELL SED mate. he wes mike lomas `s favoured bun chum to replace him, what a short sighted lack of decision making he must be regretting ever haing employed this zim wainker. by PD. on November 27 2009, 16:02 Find this comment inappropriate? Report it

THE ANSWER IS YES TROUBLE by JOHN on November 27 2009, 16:32 Find this comment inappropriate? Report it

Murray Murray & Roberts was offered NRW of Western Australia for $40 million lock, stock & barrel in 2003/4. Instead these towering geniuses elected to purchase Clough, (after receiving advice that Clough was a piece of S*** de luxe) NRW listed . .more on 5 September 2007 on the ASX with a value of $613 million. Clough has cost M&R shareholders $200 million and MUCH MUCH more to come. Alec Hogg knows all about this as I asked him to raise Clough's problems with Brian Bruce at the time. . .less by Could not have happened to a nicer mob on November 27 2009, 18:55 Find this comment inappropriate? Report it

COMPETITION COMMISION WHY the silence from the commission, these guys bruce , upton etc are the same as sheik, a bunch of crooks, they should be locked away and the co assets taken, as was the case with sheik, where the difference. oh , maybe paying bigger . .more wedge to their anc mates. . .less by PD on November 27 2009, 20:31 Find this comment inappropriate? Report it

La Cosa Nostra Forget about it... He did'nt see nothing... He looks like a Gotti prodigy by Godfather on November 27 2009, 22:47 Find this comment inappropriate? Report it

Upton seems to have a Downton He should head up the P roject O raganiser E xpeiremnt S ystems known as P*** by Ken F All on November 28 2009, 05:42 Find this comment inappropriate? Report it

TRASH Why all all these Zimbos so problematic - never met a straight one! by onlooker on November 28 2009, 07:44 Find this comment inappropriate? Report it

Some of directors now working at ESKOM???????? OMG by LETSTASTI on November 29 2009, 21:47 Find this comment inappropriate? Report it

Short Murray and Roberts all year and next year Make a R50 Bars by Dave on November 30 2009, 15:21 Find this comment inappropriate? Report it

@Project Director There are a lot of worms to come out of the woodwork. You are not far from the truth as there are lot of venomous, self-serving creatures adorning the hallways by Former Insider on December 10 2009, 14:52 Find this comment inappropriate? Report it

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