Delays in Gulf work hit Group Five, M&R
Thématique :
dubai,
sud afrique
Two of South Africa's top listed construction groups, Murray & Roberts (M&R) and Group Five, have been hit by the termination, cancellation and suspension of projects in the Middle East because of a worsening business environment caused by the global financial crisis.
Group Five yesterday reported the termination of one contract and the suspension of another by Dubai government authorities. The value to Group Five of work still to be done on the two unspecified contracts is almost R4 billion.
The group said it would be fully compensated for the costs it incurred in the two contracts with a reasonable margin.
Its other contracts in Dubai, Jordan and Abu Dhabi, valued at R563 million, are unaffected.
Despite these developments and tougher market conditions, Group Five said it expected to achieve strong growth in earnings for the year to June.
Headline earnings a share for the six months to December would be between 45 percent and 55 percent higher than a year earlier, it estimated.
M&R this week reported that Sama Dubai had terminated the Salam Resort Project in Bahrain.
Late last year, M&R reported that the Trump Towers project in Dubai had been suspended until the global economy stabilised. The contract's value in M&R's order book in September amounted to R3.2 billion, of which R500 million related to the current financial year.
M&R said at the time the suspension of Trump Towers would not have a material impact on its prospects. It later won part of a R14.6 billion contract for Dubai International Airport's Concourse 3. M&R said its share in the venture was valued at about R6 billion.
Wilson Bayly Holmes-Ovcon chairman Mike Wylie yesterday confirmed the group was still looking to expand into the Middle East market, but had not yet "put our plans to bed".
Wylie said the group would pursue opportunities in the Middle East carefully.
Quentin Ivan, an analyst at Coronation Fund Managers, said the visibility of work from the region had deteriorated and the outlook for future work continued to be very murky.
"Credit is the oxygen of infrastructure projects because they need to be funded."
He said it might take time for construction firms to replace such projects on their books.
Mike Upton, the chief executive of Group Five, admitted that the group would have to replace the Middle East revenue "in some way or another".
But Upton said a lot of the revenue from these contracts was booked in the group's 2010 financial year and it had time to replace them.
Group Five yesterday reported the termination of one contract and the suspension of another by Dubai government authorities. The value to Group Five of work still to be done on the two unspecified contracts is almost R4 billion.
The group said it would be fully compensated for the costs it incurred in the two contracts with a reasonable margin.
Its other contracts in Dubai, Jordan and Abu Dhabi, valued at R563 million, are unaffected.
Despite these developments and tougher market conditions, Group Five said it expected to achieve strong growth in earnings for the year to June.
Headline earnings a share for the six months to December would be between 45 percent and 55 percent higher than a year earlier, it estimated.
M&R this week reported that Sama Dubai had terminated the Salam Resort Project in Bahrain.
Late last year, M&R reported that the Trump Towers project in Dubai had been suspended until the global economy stabilised. The contract's value in M&R's order book in September amounted to R3.2 billion, of which R500 million related to the current financial year.
M&R said at the time the suspension of Trump Towers would not have a material impact on its prospects. It later won part of a R14.6 billion contract for Dubai International Airport's Concourse 3. M&R said its share in the venture was valued at about R6 billion.
Wilson Bayly Holmes-Ovcon chairman Mike Wylie yesterday confirmed the group was still looking to expand into the Middle East market, but had not yet "put our plans to bed".
Wylie said the group would pursue opportunities in the Middle East carefully.
Quentin Ivan, an analyst at Coronation Fund Managers, said the visibility of work from the region had deteriorated and the outlook for future work continued to be very murky.
"Credit is the oxygen of infrastructure projects because they need to be funded."
He said it might take time for construction firms to replace such projects on their books.
Mike Upton, the chief executive of Group Five, admitted that the group would have to replace the Middle East revenue "in some way or another".
But Upton said a lot of the revenue from these contracts was booked in the group's 2010 financial year and it had time to replace them.
