A tough year for Basil Read as it makes R820.9 million Net loss after tax for the year ended 31 December 2014, despite 4,5% rise in Revenues. According to the company, a combination of a challenging construction sector, loss-making contracts across all construction disciplines, coupled with a struggling engineering division dragged the performance of other divisions.
Overhead costs have been reduced through a rightsizing exercise to an appropriate level of administrative staff, satellite offices have been closed and a critical evaluation of the overhead cost-base has been performed to eliminate unnecessary expenditure. The company has been reorganised into an operational structure comprising two major divisions, construction and mining, assisted by a centralised support team. The company has moved from a group and subsidiaries structure to a company and divisions structure. Subsidiaries are either being incorporated into the divisions or fixed and sold.
"The board and management of Basil Read recognised the company was heading for these dreadful results, CEO Neville Nicolau said. "We had a terrible year last year." Basil Read‚ whose stock value has plummeted 42% in March‚ said it had submitted a number of claims related to the contracts‚ which were being assessed or were in discussion. The write-down of development land relating to its investment in Rolling Hills Leisure Estate also affected its results.
During the reported financial year, Basil Read acquired the entire issued share capital of Hytronix (Pty) Ltd for a cash consideration of R4,2 million and subsequently acquired a 23% stake in Rubicept (Pty) Ltd, owner of Metrowind Van Stadens wind farm in Port Elizabeth. The company disposed of its 20% stake in BR-Tsima Construction (Pty) Ltd for no consideration, disposed of its 51% stake in AngloAfrican Insurance Brokers (Pty) Ltd for no consideration, resulting in the recognition of a loss on disposal of R1,8 million and also disposed of its 23% stake in Metrowind (Pty) Ltd, resulting in the recognition of a loss on disposal of R10,5 million.
The delay in realising claims has tightened cash resources as the company continues to fund losses. Liquidity is being further affected by delayed or non-payment of debtors. Despite the cash constraints, Basil Read remains committed to continuing the various contractual processes to agree claims in a bid to extract maximum shareholder value. New management teams introduced towards the end of the financial year have stabilised operations and the division has been awarded contracts exceeding R1 billion since the start of the 2015 financial year. Tender activity remains competitive and the sector remains under pressure due to delayed roll-out of government work.
