Consolidated Infrastructure Group (CIG) has finally laid bare the full scale of a disastrous financial year, posting a loss of R150m against 2016’s R393m profit and forcing a breach to its banking covenants.
Having expected a drop of up to 35% in headline earnings in August, CIG ultimately reported a headline loss of 77.9c a share.
This was due almost entirely to a R441m loss at its oldest subsidiary, power generation business Conco.
CIG blames two large-scale multiyear projects, as well as the evaporation of an expected R800m work in the renewable energy sector.
Management had overestimated projected business, clients had driven harder bargains and it signed on low-margin work in Africa "in an effort to gain market share", it said.
The loss caused a breach to its earnings before interest tax depreciation and amortisation interest cover covenant and CIG now has until February 15 2018 to "satisfy" the requirements of its bankers.
It will have to show progress on implementing a new strategy for Conco, including an independent review of all existing and new contracts.
CIG also has to put in place a mitigation strategy to "ensure there is no further contagion" from Conco.
In addition, CIG said that "rising compliance and regulatory costs in SA resulted in cost creep", while "social disruption and political and civil unrest" affected some of its existing projects, resulting in stoppages and higher costs, which it was not able to recover from customers.
The company, whose shares have shed 83% in 2017, has now established a "war room" to "drive accountability and the rapid adoption of key organisational changes".
These include advance approval of all new bids worth more than R50m, and R100m in yearly savings by sacrificing bonuses and salary increases, as well as a cut to overheads.