Group Five CEO Eric Vemer has unexpectedly announced his resignation – “within the next few weeks” – from the JSE-listed construction group.
Vemer took over from Mike Upton on December 1, 2014, and spent less than three years at the helm of Group Five. No successor has been named.
Vemer said Group Five Engineering & Construction(E&C) executive director Willie Zeelie would also leave the company on March 31. Mark Humphreys, E&C’s current COO, will be the new head of the E&C business.
Vemer announced a “very challenging” set of numbers on Wednesday, with group revenue falling to R5.83-billion in the six months ended December 31, down from the R7.26-billion reported in the same period in 2015.
The group also reported an operating loss of R343-million, following a poor performance from the E&C business.
The E&C business was impacted by the group’s R255-million contribution in terms of the October 2016 settlement agreement with government – following a collusion investigation into the local construction sector – to a fund set up to accelerate transformation within the South African construction industry.
Although payment will occur over a 12-year period, the total liability has to be recorded in the current reporting period. This means that R152.7-million, reflecting the net present value of the liability, was charged in full against earnings in this reporting period.
The commercial close-out and final settlement of a dispute with Transnet on its new multiproducts pipeline (NMMP) negatively impacted E&C’s operating profit by a further R244-million.
Stripping out the effects of the NMMP deal and government’s settlement agreement with seven of South Africa’s listed construction groups, E&C’s building and housing division showed a R23-million profit, civil engineering a R49-million loss, projects a R106-million loss, and the energy division a R12-million profit.
As part of the settlement agreement reached with government, construction firms are also required to select either developing emerging contractors, or to dispose of a minimum of 40% of their economic interest.
Group Five’s board had opted to conclude a black economic empowerment transaction, said Vemer.
The deadline for the completion of the transaction is 2018, following shareholder approval.
