Basil Read in intensive care

‘Cash flow critical, raising new funds essential.’
Picture: Supplied

Embattling construction group Basil Read on Monday announced that it plans a rights offer to raise R200 million to R300 million as part of a funding plan to ease “critically tight” liquidity, stabilise the group and fund operations.

Basil Read on Monday reported that revenue from continuing operations dropped from R2.5 billion in the six months ended June 30 last year to R2.3 billion. The order book stood at R10.7 billion at the end of the reporting period, compared to R10.4 billion in the comparative period.

This, however, translated to an operating loss of R458.8 million for the six months ended June 30, compared to R73.5 million operating profit for the six months ended June 30 2016. The net loss amounted to R474.1 million compared to a net profit of R34.4 million in the first six months of 2016.

The group recorded headline loss per share of 295.16c, compared to headline earnings per share of 53.39c in the comparative period.

The share price was unchanged at 80c by midday on Monday. In the year to date it has lost more than 64% of its value.

Addressing the group’s going concern status, Basil Read said: “The board recognises that cash flow is critically tight, and that raising new funding is now essential to stabilise the company in the short term, and to meet future operating commitments over the medium to long term.”

The group’s interim results reflect an impairment loss of R88.9 million, which reduces the carrying amount of the goodwill for the roads unit to zero. Total provisions amounted to R506 million, including R485 million contract provisions of which R199 million relates to “onerous contracts”.

Borrowings increased dramatically and cash at the end of the period dropped from R219.2 million a year before to R174.2 million by June 30.

The board nevertheless stated that based on plans implemented by management the group will have enough cash for the foreseeable future.

Of the group’s five operating units three recorded an operating loss, namely construction, roads and St Helena where the group was involved with construction of the island airport and related projects. The group said trading conditions in roads and construction were challenging “due to poor contract margins, limited public-sector infrastructure spend, low business and consumer confidence, and increased competition that results in margin pressure”.

Mining and developments did well, developments on the back of good sales in industrial developments.

Regarding the funding plan, the Industrial Development Corporation (IDC) has granted the mining division R90 million funding. R61 million of a R150 million bridging finance facility has been approved for the short term and in the long term the R200 million to R300 million rights issue will address the funding needs.

The group said it has not yet secured any binding commitments for the rights issue, but engagements so far suggest shareholder support.

“Internally, we have engaged in a number of initiatives to secure further liquidity. These will be in addition to increased intensity of claims recovery and comprise disposal of non-core assets, which are estimated to yield up to R150 million,” the group said.

The order book has increased from R10.4 billion by June 30 last year to R10.7 billion. This includes R3.1 billion construction work, R1.9 billion roads, R1 billion from developments and R4.7 billion in mining.

The group said going forward it will focus on repositioning the group for the current and future environment. “This entails: continued investment in the divisions and projects that have traditionally been profitable at high margins, as well as closing out the remaining distressed projects,
reducing overhead costs and improving liquidity.”

The group said potential profit of the order book is good and should allow the company to improve profitability.

Basil Read has not yet appointed a permanent CEO since the departure of Neville Nicolau in May. The head of the mining division K2 Mapasa has been acting in the position since June 1.

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when a company’s share price goes from R11.90 to .80c in FIVE years – one knows there is a problem! pointless taking on work if it all it does is make losses. I wouldn’t be taking up their rights – I would be getting out and buying naspers – which seems to be the only worthwhile company left on the jse – even at a pe of 125.8!!!!!!which says it all!

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