Raoul Gamsu, Consolidated Infrastructure Group CEO. Picture: RUSSELL ROBERTS
Raoul Gamsu, Consolidated Infrastructure Group CEO. Picture: RUSSELL ROBERTS

Consolidated Infrastructure Group’s share price crashed 37% to R5 on Tuesday, after it said its expected earnings decline would be worse than its earlier forecast of 55%.

Tuesday’s crash followed a 21% drop on November 9, when the engineering group issued a trading statement saying it expected to report before November 30 that its basic and headline earnings per share for the year to end-August would decline by as much as 55%.

Consolidated Infrastructure Group said in Tuesday’s statement that at a board meeting on Monday to approve the results, directors decided that risks related to three large, multiyear engineering contracts on which power projects subsidiary Conco was working, were not being accounted for fully.

"Whilst these contracts remain profitable, the margins previously recognised may result in adjustments to the results in the current reporting period," the updated trading statement said.

Some of Conco’s projects had become more expensive due to adjustments to the original scope of the work required, and it was struggling to recoup this money.

"Conco, in addition, took on a significantly higher number of overhead lines contracts, resulting in higher execution risks and cost overruns having a negative impact of R52m on the August 31 2017 results.

"The results will be further impacted by R9m as a result of a reduction in anticipated profit recognised from Angola Environmental Services, additional amortisation of intangible assets of R12m and a final adjustment to our foreign exchange loss of R19m."

Echoing problems reported by other engineering groups, Consolidated Infrastructure Group said it had suffered from political and civil unrest, delays in the award of and technical signoff on the start of projects, and the contraction of opportunities in the South African power sector.

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