Construction giant Group Five said yesterday the unwinding of its BBBEE transaction with iLima consortium was disappointing.
Releasing its financial results for the year ended June which showed Group Five sliding further into the red; the firm said its remains committed to advancing empowerment.
Group Five made the ILima connection in 2005 in a BBBEEE initiative which promised to transfer about 26% of the group’s shares to a broad based consortium made of ILima, Tokyo Sexwale’s Mvelaphanda and an employee trust.
The Mvelaphanda portion of the transaction remains with its 10.8% interest in Group Five and the employee portion also remains intact. The ILima part which held another 10.8% of Group Five shares and came with an enterprise development aspect has collapsed. The collapse of the deal was mourned widely as it represented a model of BBBEE deal favoured by many. ILima was made by a consortium of black contractors who were organised for development into the mainstream of the construction industry.
Group Five announced in June 2009 that its BBBEE ownership transaction with the iLima Consortium portion of the iLima Mvela Transaction would unwind and that this would entail the return of the shares held by the iLima Consortium to the group.
About 11 million Group Five shares held by iLima was returned to Group Five and cancelled during the course of the financial year ended June. The capital of the group has been reduced.
“The unwinding of the BBBEE transaction with iLima Consortium is a disappointment to Group Five as the group remains committed to the advancement of broad-based black economic Empowerment,” said the group.
The group said it has excluded the iLima shareholding from its current BBBEE scorecard but confirms that its scorecard has not been adversely affected. The group’s BBBEE status is currently a level 2.
In prior years, it has also been reported that the group entered into a formal enterprise development arrangement with iLima.
The iLima Group is the majority shareholder of the iLima Consortium. The total capital amount outstanding on loans due by iLima Group to the group as at 30 June 2011 amounted to R118 million.
The total indirect financial assistance provided to iLima, in the form of bonds and guarantees, which remain in issue, amounts to R54 million (2011: R54 million). The direct financial assistance, reflected as a current asset at 30 June 2011, was set off against the return of the group’s shares by iLima, as described above.
The indirect financial assistance remains reflected as a contingent liability until the guarantees are either returned or cancelled. The favourable close out of these outstanding guarantees remains a focus area for the group’s commercial and legal team as a call on these guarantees would affect both cash and earnings for the group. There is no probable exposure on these contingent liabilities and hence no provision for these can be raised.