Johannesburg - Basil Read says it has overcome “difficult” trading conditions to report a profit in the six months to June.
It notes the construction sector was characterised by “competitive tendering” but its recent restructuring has started to pay off.
The listed company, which was involved in a Competition Commission probe over collusion, reported revenue lower at R2.8 billion, down from R3.1 billion a year ago, but noted profit after tax came in at R41.6 million. A year ago, the company reported a loss of R198 million.
The group notes, in its results commentary, that its restructuring has eliminated duplicated management and support structures, which generated an immediate saving in overhead costs.
Basil Read has also implemented a “robust” operational structure, and its improved performance at site level has boosted its margins incrementally. It also sold or closed non core units, although this process has been slower than expected.
By centralising its tendering capabilities and reviewing related processes, it has secured new contracts valued at R2.4 billion and maintained its order book above the R10 billion mark.
However, it notes cash resources remain a concern as working capital outflows reduced cash balances to R430 million. “Liquidity is tight, particularly in the construction division, and this is being effectively managed to avoid disrupting day-to-day operations. We are in continued discussions to address this matter.”
Basil Read maintained its debt at R485 million and the first note due, for R60 million, needs to be paid on September 18.
The construction company has also acquired the 30% minority stake in Botswana-based Sladden International it didn’t own, at no cost. It adds selling non core assets - namely SprayPave, African Road Maintenance and Construction and Basil Read Energy - is an ongoing process.
A year ago, the company posted an operating loss of R295.5 million compared with a gain of R80.2 million in the six months to June 2013.
This came as contractual difficulties resulted in a high proportion of work remaining uncertified. Basil Read’s construction division was negatively affected by loss-making contracts in the roads and civil engineering divisions.
At year-end, the company detailed further woes, announcing it had crashed to loss of R820.9 million for the year to December compared with a profit of R281.5m in the previous year.
Key factors that hit the firm’s profits was impairment of goodwill, write down of development land and the costs associated with the 2013 Competition Commission fine of R95 million.
Now it says, the restructuring is mostly complete and it is on track to meet its full-year targets.
The construction company adds its focus remains on the South African market, “given the need for infrastructure to stimulate the economy”. However, growth prospects are muted in the short-term, it notes.
“While conditions remain challenging, we are committed to our strategy which we have clearly defined: grow the company to smooth the impact of cyclical volatility, extract maximum value from our assets and divest of non-core assets, and develop the appropriate corporate culture for a focused, disciplined construction company.”
IOL