'No plan for Group Five to unbundle'
Group Five CEO Themba Mosai has a big task ahead of him that includes defining a strategy that will return the business to profitability
With a new board and the start of a restructuring plan, Group Five CEO Themba Mosai has a big task ahead of him that includes defining a strategy that will return the business to profitability.
Although the company still has some right-sizing to do and has implemented a plan to split the group into four divisions - construction; investment and concessions; manufacturing; and engineer, procure and construct - it was still unclear what the group's long-term strategy was.
Mosai admitted on Friday there was still no strategy due to more pressing issues around changes to management and the board and the restructuring of the group. But he did say the new structure was not in preparation for the company to eventually unbundle assets.
"We are not at all talking about unbundling. What we are doing now is talking efficiency of execution and so the pockets that we created allow us to drive business better with the right skills - it's not preparing us for an unbundling, not at all," Mosai said.
The next step was for the board and management to sit down in September and come up with a plan for the business.
Allan Gray, which owns a 25% stake in Group Five, proposed earlier this year that Group Five's best performing cluster, the investments and concessions and manufacturing business, should be unbundled from the under-performing businesses, which were in the engineering and construction arm.
However, the proposal sparked a backlash from the board, resulting in a number of resignations.
After an urgent general meeting last month a new board was appointed.
Under-performing divisions resulted in the group reporting a R907-million loss in the financial year to end-June, while the smaller manufacturing business made a profit.
Another unresolved issue is the Voluntary Rebuild Programme - in which construction companies found guilty of colluding on tenders for World Cup stadiums agreed to participate as part of their reparations. One of the requirements is that 40% of the business is sold to an empowerment partner.
Group Five had hired a consulting firm to evaluate its assets in order to identify a potential BEE partner, Mosai said. About 13 buyers were interested and the consultants were still conducting due diligence.
Some buyers were keen on partnering with the whole group while others were looking atcombinations of businesses.
The company had a deadline of the end of this month to have a VRP partner but said it would not incur a financial penalty at least for the next three years if a deal was not done on time.
An analyst, who did not want to be named, said the group still needed to do a lot of right-sizing because it was still burning cash and an energy project in Ghana was a huge risk.