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Group Five shares nosedive on profit warning

Nov 17 2014 17:44

Johannesburg - Shares in Group Five tumbled 15% on Monday, its biggest one-day drop in 14 years, after flagging first-half profit would fall by more than 20%, hit by weak performance in its engineering and construction operations.

Group Five said in a statement its civil engineering business had been hit by operational difficulties at a project it did not identify. The company said it had put "focused interventions" in place to address the issues.

"I think there could be some pain coming from there," said Farai Mapfinya, head of equities at JM Busha Investment Group, which owns shares in Group Five.

"We don't see any material recovery in terms of the engineering and construction unit and also on the civil engineering side. It's really quite a tough environment."

Job cuts and restructuring will also inflate costs, the company said.

Johannesburg's fifth-largest construction and engineering company by market value, Group Five is one of several firms that stand accused of price fixing in the building of stadiums for the 2010 soccer World Cup.

The company has said it welcomes the opportunity to address the allegations from South Africa's competition watchdog.

Shares of Group Five were down 14.8% at R29.82 at 14:37 GMT, on track for their biggest one-day decline since October 2000.

The shares are down 27% this year, underperforming a 9% rise in the All-Share index.

group five  |  construction
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