| Fri 11 Feb 2011, 12:00 | | GRF - Group Five Limited - Revised trading update |
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GRF
GRF
GRF - Group Five Limited - Revised trading update
Group Five Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1969/000032/06)
Share code: GRF ISIN: ZAE000027405
("Group Five" or "the group")
Revised Trading Update
Shareholders are referred to the trading update released on SENS on 18
January 2011 ("the previous trading update"). Whilst the group`s Construction,
Manufacturing and Concessions businesses have performed in line with
expectations, further adverse cyclical and fundamental changes in the
Construction Materials markets, particularly in the aggregates and readymix
markets, have occurred. This resulted in the group taking a revised and more
conservative view with respect to both the future of this cluster and the value
of the long term assets, including intangibles, on its balance sheet for this
cluster. The operational performance for the period under review remains
unchanged and in line with expectations. The asphalt, mobile crushing, sand and
mining services operations have not been as materially affected.
Management has concluded that the foreseeable market valuation of the aggregate
and certain readymix assets is now considerably less than the current carrying
amount on the balance sheet. The group therefore deems it responsible to further
impair the affected intangible and supporting fixed assets within this cluster.
This requires an increase in the gross impairment of the Construction Materials
assets from the R152m inferred in the previous trading update to a gross
impairment of R550m (R536m net of taxation). This is in addition to the
impairment of R326 million taken at 30 June 2010.
The impairment does not affect the headline earnings stated in the previous
trading update. Fully diluted headline earnings per share ("FDHEPS") will still
be between 15% and 25% lower (187 cents per share to 212 cents per share).
Following the increased impairment, fully diluted earnings per share ("FDEPS")
will be a loss of 328 cents per share and earnings per share ("EPS") will be a
loss of 354 cents per share.
The impairment does not affect the group`s dividend policy, which is based on
underlying operational performance and liquid resources.
The increased impairment was processed due to the following factors:
Cyclical factors
Independent research confirms this down cycle as the most severe for decades.
The dearth of workflow into the Gauteng construction sector has resulted in
industry volumes and prices within the aggregates and readymix markets recently
dropping substantially below the group`s most conservative forecast levels. The
aggregates and readymix markets have seen declines of 30-70% in volume and 10-
40% in price from the peak of the market in 2008.
Fundamental structural factors
Large quantities of low-cost mine dump rock have entered the aggregates market
in the last few weeks and vast quantities are expected to follow. This will
structurally change the business environment for an extended period. Cement
producers, active in the readymix market, also continue to aggressively cut
prices to protect cement powder volumes.
Recovery plans have been intensified to mitigate the significant adverse shift
in the market. These include severely reducing output in line with demand,
changing product mix, closing, selling, consolidating and relocating multiple
sites and possible divestment of business units.
The above information has not been reviewed or reported on by Group Five`s
auditors. The group`s results will be released on SENS on 14th February 2011
when the group will be updating the market on its business in a presentation in
Johannesburg on the same day, and in Cape Town on 15th February 2011. The
presentation will be available on the 14th February 2011 for all stakeholders on
the group`s website, www.groupfive.co.za.
Johannesburg
11 February 2011
Sponsor
Nedbank Capital
Date: 11/02/2011 12:00:06 Produced by the JSE SENS Department.
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