Pretoria - Listed construction company Basil Read has claims worth more than R600 million in process related to the Olifants River water resource development project for the Trans Caledon Tunnel Authority.
Neville Nicolau, chief executive of Basil Read, said this project was the final highly distressed part of Basil Read’s order book and completing this project was critical to the future of the company.
Nicolau said this project was nearing final completion and handover and with it out of the way, Basil Read’s operations would be significantly more efficient. “The cash drain from this project will finally be over with some huge relief,” he said on Friday.
Nicolau said Basil Read had to date incurred costs of R2.07 billion on this project and by its end would have incurred losses of R550 million. “In the past year alone, the cost to Basil Read has been R277 million and we recognised R216 million, of which R139 million is uncertified work. This is a loss of R61 million,” he said.
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Nicolau said the cash flow out of Basil Read during the year was R100 million, which was likely to increase by R50 million to R150 million this year. However, Nicolau said this entire process was subject to claims and Basil Read had claims worth more than R600 million in process.
Basil Read’s operating profit slumped by 72 percent to R63.7 million in the year to December from R226.2 million in the previous year. Nicolau said this included R61 million in losses incurred on the Olifants River project and R32 million from the pipeline business that was shut down in the year.
He said normalised operating profit of R157 million, which excluded these losses, was a better indicator of Basil Read’s future. Revenue dropped to R5.1 billion from R5.5 billion.
Basil Read reported a headline loss a share of 21.79 cents compared to headline earnings a share of 120.28c in the previous year. The order book grew to R12.3 billion from R10.7 billion. Nicolau said the order book had improved in both magnitude and quality and had a gross margin of 11.4 percent.
Nicolau said Basil Read has three strategic thrusts: to grow the company, optimise asset productivity and efficiency and modernise its corporate culture.
Shares in Basil Read dropped 4.76 percent on Friday to close at R2.