JSE-listed construction company Group Five expects to report a loss a share and headline loss a share of at least 170c apiece for the six months to December 31, down from headline earnings of 168c apiece in the comparative period of 2015.

In a statement to shareholders published on Wednesday, the group attributed the significant loss to recognition of a financial socioeconomic contribution of R255-million, in terms of an agreement reached with the government of South Africa to implement a programme of initiatives that will significantly accelerate transformation of the South African construction sector.

Although payment will occur at R21.25-million a year over a 12-year period, the total liability must be recorded in the current reporting period, as it is the period in which the liability has been incurred, the company explained.

The commercial close-out and final settlement of certain long outstanding contracts also negatively impacted on its financial statements, while a disappointing performance by the engineering and construction (E&C) cluster would also bring profits considerably below margin guidance.

The E&C cluster suffered under continued weak trading conditions, impacting the civil engineering, projects and energy segments, with a subdued order intake for the cluster during the period. Contract losses and operational difficulties also affected the cluster.

However, while overall short-term market conditions for construction were remaining weaker for longer than expected, the construction industry in the group’s targeted geographies and sectors continued to show solid medium- and long-term prospects.

The group’s manufacturing cluster also delivered a steady performance in flat markets, and the investments and concessions cluster also performed well on the back of an ongoing solid performance from the European operations.