Roadworks on the Garsfontein road crossing over the N1 highway . Picture: Liza van Deventer

Roy Cokayne

Basil Read achieved a significant turnaround to profit in the year to December last year, the listed construction group said on Thursday, sending its share price up by 7.20 percent to close at R8.79.

The group also reported that it expected its headline earnings a share to improve to between 80c and 90c for the year to December compared with a loss of R1.3084 in the previous year.

Earnings a share for the same period were expected to be between R2.20 and R2.50 compared with the R1.3654 loss in the previous year.

Earnings a share from continuing operations were expected to be between 90c and R1 compared with the R1.5821 loss in the previous year.

Basil Read said it expected to publish its annual financial results for the 12 months to December on Wednesday.

Basil Read did not provide any explanation for the turnaround to profit in this reporting period.

However, in August last year, the group reported a marked improvement in the performance of its operations and a return to profitability in the six months to June despite the tough trading environment in the local construction sector.

Headline earnings a share for this six-month period increased by 196 percent to 43.69c from 14.75c in the previous corresponding period with operating margins improving to 2.7 percent from a negative margin of 0.5 percent.

Marius Heyns, the group chief executive, said at the time that the group’s loss-making contracts were nearing completion, the order book had been secured at improved margins and the group was targeting further expansion into Africa, where significant opportunities existed.

This followed Basil Read giving its shareholders bittersweet news in the year to December 2012.

It reported the group had been 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, following the finalisation of the sale of its wholly-owned mining consultancy business TWP to Australian Stock Exchange-listed WorleyParsons for R900m.

It reported a headline loss a share of R1.3084 compared with the R1.3965 profit in the previous year. The group said these substantial losses had been incurred on a number of contracts.

This included a further R125m loss in the reporting period on the Nata to Pandamatenga road project in Botswana; an R85m loss on the N12 Tom Jones project with this contract also behind schedule due to various problems, such as shortages of steel and bitumen supply, and the strike action in the transport sector; and a non-recurring non-cash International Financial Reporting Standards 2 charge related to its then recently concluded R60.5m broad-based black economic empowerment transaction with SIOC CDT Investment Holdings.

The group also reported a R26.6m non-cash write-down of development land related to its investment in Rolling Hills Estate in Mpumalanga; a R65m provision to increase its provision to R75m for a Competition Commission penalty related to collusion in the construction sector; a R27m loss incurred on a building contract after losing an arbitration process; and a R25m loss stemming from a settlement reached with the Free State provincial government related to two roads contracts.