Registered users can save articles to their personal articles list. Login here or sign up here

Group Five in business rescue after lenders pull plug

The company’s shares have also been suspended from the JSE.

South African builder Group Five filed for bankruptcy protection on Tuesday after lenders pulled funding, threatening the collapse of one of the biggest names in the local construction industry and more than 8 000 jobs.

Group Five, which traces its roots back to the 1970s with the tie-up of five construction companies, has struggled to make money for years in an industry squeezed by stagnant economic growth and a pullback in infrastructure spending by the government and private sector.

Its cash flow problems were exacerbated late last year when Ghana’s Cenpower Generation Company claimed a total of $62.7 million over a building delay to a power plant in the west African country. The project has since been terminated.

“It appears to be reasonably unlikely that the company will be able to pay all of its debts as they fall due and payable within the immediately ensuing six months,” Group Five said.

“As a result, the board of directors of Group Five and G5 Construction have resolved to place each of these companies into business rescue,” it said in a statement.

South Africa‘s business rescue law, similar to Chapter 11 bankruptcy protection proceedings in the United States, allows a financially distressed to temporarily delay creditors’ claims against it or its assets. Group Five’s problems threaten jobs cuts in country where about one in five is unemployed. The company employs around 8 000 people.

‘Great shame’

Group Five’s equity is all but wiped out following years of losses as the company, alongside rivals such as Murray & Roberts and Aveng, struggled to recover from a sharp slowdown in mega projects since the end 2010 FIFA World Cup.

Shares, which were suspended on Tuesday, last traded at 89 cents, giving it a market value of around 100 million rand ($7 million), a dramatic fall from over R5 billion in 2009.

Group Five, whose liabilities totalled R5 billion at the end of June last year, also told stock holders that “there’s a slim chance for any realisation of value.”

“It’s a great shame because Group Five has been around forever and at one stage was one of the biggest construction companies,” said Wayne McCurrie, a portfolio manager at Ashburton Investments.

“The industry is not totally blameless in all of this. They can’t just say the environment is tough. In the good years, they put on too much capacity, and in the bad years they didn’t cut capacity quick enough.”

Group Five is the second high profile construction company to tumble into business rescue in months, after rival Basil Read filed in the middle of last year with R2.6 billion in liabilities.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   12

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

“Its cash flow problems were exacerbated late last year when Ghana’s Cenpower Generation Company made a $62 million claim over a delay to a power plant in the west African country. The project has since been terminated.”

Ja, it’s not SA where you can mess up as much as you like, so long as you are politically connected. Look at Medupi/Kusile for instance. Waaaaaay over budget and past the deadline… and nothing.

Let’s just get the record straight: Medupi and Kusile are Eskom and thus ANC failures in the first instance; and with the competition in the construction field shrinking fast (you need the big constructors to build the country’s infrastructure), the dismal failure of Eskom and its Black & Veatch and other offshore cronies to manage the power station projects is contributing to the woes of the construction companies, and assisting in destroying South African capacity.

What a disgrace to our government. Another big potential mass employer of unskilled labour going into business rescue. And this while there is so much infrastructure that is needed in this country. But don’t worry, ANC, the masses will still vote for you. You have been so successful at brainwashing the masses.

Not only brainwashing the masses. Also bribing them as follows:
1. Lower classes get 17 million basic income grants to votes
2. Middle class gets grossly overpaid government jobs e.g. SAPS( 100s of generals, Eskom-grossly incompetent etc etc)
3. Top class-very narrow based BEE starting with his majesty himself-never built a corner cafe let alone a business

You sound more brainwashed and bitter than the average person.why the bitterness?.Is brainwashed the only thing you think about those who vote for the anc

No bitterness at all. Simply flabbergasted that so many who are directly suffering poverty under the ANC’s economic policies simply keep voting for them. You tell me who seems brainwashed.

Malvinzamani ….you answered the query for yourself and everyone else, in your last sentence

People vote with their heart, probably more than their mind. To make out ANC voters as useful idiots that are easily manipulated is the exact reason why the majority of black people continue to vote ANC or even more concerning drift to the EFF. Would you associate yourself with people that continue to make you out to be undeserving and incompetent?

My late father and grandfather continued voting NP despite disagreeing with most of its policies. Historical loyalty and fear of the damage damage that the KP and the thugs from the AWB could cause played a part, but I believe the continued condescension and air of superiority from their English speaking compatriots made it unconscionable for them to vote PFP.

Much the same dynamic is playing out now.

We need to start putting ourselves in other peoples shoes. If I was a black middle class professional I would read SAMs comments as 1) Pensioners and single mothers should not get the paltry allowance they get from the state. R1700 for a pensioner? Your old gardener or maid. Is that too much? R400 for a child? Should we let children and the elderly starve?

2 and 3 Successful black people are only successful because of BEE.

I know that was not the intention but we really need to start showing empathy and understanding

The problem started many years ago when the boards started reporting fabricated figures in particular for Middle East and Northern Africa, plus miss management, and as well they brought in a regional general manager who further messed up

Whoever and whatever is to blame: the demise of Group Five is sad, and not good for the country’s capability and capacity. It was a amalgamation of several construction companies way back (hence the “Five”), which must be remembered, and thus quite a bit of history, entrepeneurship and drive is is lost for South Africa. When the large ones fold, we need to worry and make new plans.

Paul O’Flaherty worked for Group 5. Group 5 ended up in business rescue.

Paul O’Flaherty worked for Eskom. Eskom is a financial disaster.

Paul O’Flaherty now works for ABSA, I believe? Oh goody…

Load All 12 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2