Johannesburg, 05 Apr 2018 — Global Credit Ratings (“GCR”) has today placed Group Five Limited’s national scale Issuer ratings of BBB(ZA) and A2(ZA) on Rating Watch, signalling possible negative rating action.
This follows Group Five Limited’s (“Group Five” or “the group”) general trading update issued on the 1st of March 2018, as well as the trading update and trading statement update released on the 29th of March 2018, which indicate a material increase in losses and pressure on the group’s free cash flows.
In addition to the Kpone contract, a challenging South African construction market as well as the further rationalisation of overheads in the construction businesses and the corporate office are squeezing the group’s free cash resources. Accordingly, Group Five has signed and executed a term sheet with a funding consortium (subject to the fulfilment of conditions precedent), which would give it access to R650m in bridge funding.
Having failed to release its interim results by 31 March 2018, Group Five has since committed to announcing the same on 12 April 2018. Thereafter, GCR will be in a better position to effectively assess Group Five’s financial position and to communicate any potential rating action to the market.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (December 2006)||Last rating (October 2017)|
|Long term: A(ZA); Short term: A1(ZA)||Long term: BBB(ZA); Short term: A2(ZA)|
|Outlook: Stable||Outlook: Stable|
|Primary Analyst||Committee Chairperson|
|Patricia Zvarayi||Sheri Morgan|
|Senior Analyst||Senior Analyst|
|(011) 784-1771||(011) 784-1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Master Criteria for Rating Corporate Entities, updated February 2018
Group Five Limited rating reports, 2006-17
RATING LIMITATIONS AND DISCLAIMERS
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|Cash Flow||The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.|
|Consortium||A group of companies that combine some or all of their resources to undertake a joint project.|
|Credit Rating||An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.|
|Debt||An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.|
|Interest||Scheduled payments made to a creditor in return for the use of borrowed money. The size of the payments will be determined by the interest rate, the amount borrowed or principal and the duration of the loan.|
|Long-Term Rating||A long term rating reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.|
|National Scale Rating||The national scale provides a relative measure of creditworthiness for rated entities only within the country concerned. Under this rating scale, a ‘AAA’ long term national scale rating will typically be assigned to the lowest relative risk within that country, which in most cases will be the sovereign state.|
|Rating Watch||Indicates that a rating is under review for possible change in the short term and the movement may be either positive or negative.|
|Short-Term Rating||A short term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including interest payments and debt redemptions.|
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the ratings are based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings are an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the ratings is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
Group Five Limited participated in the rating process through written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit ratings have been disclosed to Group Five Limited with no contestation of the ratings.
The information received from Group Five Limited and other reliable third parties to accord the credit rating(s) included:
- SENS announcements dated 19 December 2017, 1 March 2018 and 29 March 2018
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
Global Credit Ratings places Group Five Limited’s Issuer rating of BBB(ZA) on Rating Watch