ELB Engineering Services enters business rescue


ELB Engineering Services enters business rescue

Published Date: 2020-04-07 | Source: Stephen Gunnion | Author: Stephen Gunnion

ELB Engineering Services enters business rescue

The engineering and capital equipment supplier says conditions are likely to continue deteriorating due to Covid-19.

ELB Group has placed its Engineering Services business under business rescue after it failed to meet its business forecast under a restructuring, threatening the rest of the company. Releasing interim results yesterday, the engineering and capital equipment supplier said it could no longer support the unsustainable cash funding requirements Engineering Services had placed on it.

The restructuring, now being driven by Charles Pettit who took over as CEO in December, is aimed at addressing the weak trading environment and losses at its Gamsberg Zinc Project in the Northern Cape, where a delay in final performance testing held up milestone payments last year. Although the project achieved operational completion in January, with performance guarantee testing expected to be completed before the end of March, it was suspended as a result of a plant shut down due to the Covid-19 pandemic.

ELB reported an overall reduction in trading levels across the group in the six months to end-December due to depressed conditions in all its markets. It was also impacted by unrecoverable costs due to delays in finalising some projects. Engineering Services in particular weighed on revenue, which declined 28% to R1.15 billion. However, its loss before tax more than halved to R1.7 million after the previous year's numbers were affected by provisions and impairments of more than R88 million. Its loss per share narrowed to 352.7c from 963.5c and its headline loss per share improved to 64.8c from 966.7c. It hasn't declared an interim dividend.

ELB said there were opportunities to further rationalise its cost base and grow revenue at its Equipment segment. However, prospects for the foreseeable future were muted at best, with trading conditions expected to worsen due to the impact of the coronavirus pandemic.

Its shares fell 2% to R2.45 yesterday.

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