Group Five, a South African contractor that has been listed on the Johannesburg stock exchange for 45 years, announced to shareholders on Friday that its financial difficulties now leave it no option but to offer a fire sale of some of its assets.
The company filed for bankruptcy protection last month, the fifth South African contractor to do so in less than a year.
By that time its market valuation had fallen from $575m to $25m. The company’s receivers – or business rescue practitioners – have now formally declared that "all alternative methods of financing have been exhausted", and that selling assets is the only option left.
The assets will now be disposed of as quickly as possible without shareholder approval of the deals. Instead, investors will be updated every month on "key disposals", and are to get more details when a business rescue plan is published at the end of June.
In January, the company announced the sale of some of its manufacturing assets, including Everite, a Johannesburg factory that makes fibre-cement products. It also holds equity stakes in roads in Poland and Hungary, and in property developments such as the Beit Bridge Retail Mall in Zimbabwe.
In its last full-year statement, Group Five’s management blamed its problems on failing to win contracts as a result of tough market conditions, the cost of retrenchment and "extreme losses on the group’s large contract in Ghana, Kpone". This last was a reference to the $410m gas and oil-fuelled power station near the post of Tema, on which Group Five made a loss of more than $90m in 2018.
Themba Mosai, Group Five chief executive, commented: "Delivering another set of extremely poor results is very disappointing for management. Although we have taken firm action in the group and on contracts, especially on our Kpone contract, the losses worsened significantly.
"We continued to actively restructure and right-size the group, cut costs and closed unsustainable businesses. We have also relocated certain businesses and our corporate office … secured short-term bridge funding to address liquidity, and approved the partial disposal of our investment in concessions in Eastern Europe, held through our joint venture investment with Aberdeen in Intertoll Capital Partners. We are also disposing of the manufacturing cluster."
Kpone is presently the subject of a legal dispute before the International Chamber of Commerce in Paris, which is expected to be resolved by the end of the year.
Image: One of Group Five’s equity holdings is in the A1 motorway in Poland (Dreamstime)