Basil Read’s share price dropped by 6.33 percent on Friday to close at R11.10 after the listed construction and engineering group gave its shareholders some bittersweet news.
It revealed its financial results for the year to December had been further affected by a number of issues, including substantial losses on certain contracts, but also announced details of a special dividend to shareholders of R230 million or R1.75 a share, which equates to R1.4875 a share after taking into account the 15 percent dividend withholding tax.
The special dividend follows the finalisation of the sale of Basil Read’s wholly owned mining consultancy business TWP to Australian Stock Exchange-listed WorleyParsons for R900m.
Basil Read said last August that it expected headline earnings a share for last year to be between 25 percent and 35 percent lower than the previous year but now expected headline earnings a share for the period to be between 185 percent and 195 percent lower.
It attributed this partly to a non-recurring non-cash International Financial Reporting Standards 2 charge related to its recently concluded R60.5m broad-based black economic empowerment transaction with SIOC CDT Investment Holdings; a R27m non-cash write-down of development land related to its investment in Rolling Hills Estate in Mpumalanga; and a R65m charge in the current year raised for the Competition Commission’s investigation into the construction industry that was expected to be finalised in the second quarter of this year.
In addition, difficult trading conditions, particularly in the construction sector, had led to the group incurring substantial losses on certain contracts.
A further provision of R125m was incurred on the Nata to Pandamatenga road contract undertaken by wholly owned subsidiary Sladden International in Botswana because of disagreements with the client’s representatives about the measurement and other claim entitlements, and an R85m loss recorded on the N12 Tom Jones road contract.
It said the N12 Tom Jones contract was behind schedule and the loss had been recorded because of various problems, including shortages of steel and bitumen supply and the strike action in the transport sector.
Basil Read added that the roads and civils sectors had been affected by difficult working conditions, including labour unrest, planned production targets not being achieved and unseasonal rain, but no further losses were expected to be recorded.
Despite a signed settlement agreement and the receipt of a part payment for the outstanding amount owing by the Free State provincial government, R80m was still due.
But it said it had received confirmation the outstanding amount would be paid in the province’s next financial year.
However, it said its R3.2 billion contract to build an airport on the island of St Helena was performing to expectations and the project team continued to deliver on major milestones, with the logistical and procurement risks to date successfully mitigated.
It would also continue its strategy of expanding in engineering, procurement and construction of renewable energy through its continued investment in Basil Read Matomo and Basil Read Energy.
Basil Read also announced the appointment of Connie Molusi, a former executive director and group chief executive of Johnnic Communications and now chairman of the group’s partner SIOC CDT Investment Holdings, as a non-executive director.
Andiswa Ndoni, previously the company secretary and legal counsel for Ubank and currently a member of the Judicial Services Commission and Competition Tribunal, has been appointed secretary.