Basil Read posts R1bn net loss from onerous legacy contracts
Chief executive Khathutshelo Mapasa, who was appointed in October last year, said the loss reflected challenging market conditions and onerous legacy contracts that contributed to the loss.
“Our results were significantly affected by onerous, write-off of goodwill in the roads division, and a reversal of deferred tax assets in loss-making entities,” he said.
Headline loss a share from continuing operations increased to 752.28c from the loss of 21.79c in the previous year, while the total operating loss grew to R743.1m from the loss of R63.7m in the same period.
The roads division was the worst performer, accounting for R589.7m of the total operating loss, with the construction division contributing R224.9m and the St Helena project R23.9m.
This was offset by positive operating profit contributions of R76.1m from the mining division and R19.3m from the developments division.
Basil Read shares closed yesterday flat at 22cents after dropping nearly 17percent to 20c on Tuesday, following the release of a trading update that provided advance warning of the dire financial performance of the group.
Mapasa said a handful of legacy onerous contracts contributed 62percent to the loss.
They included the R116m loss incurred on the Olifants River water resource development project for the Trans Caledon Tunnel Authority and R152m loss on the Admin Craft Basin project at the Port of Ngqura.
There was also an impairment of R172m related to deferred tax assets, an impairment of goodwill of R88.9m related to the roads division and bad debts written off of R77m from defaulting clients.
Mapasa said the group’s financial performance was “disappointing”, but stressed the recent successful rights offer had given the group R300m in new cash and they were on track to effect a solid turnaround.
He said although the group’s auditors had raised an emphasis on their audit opinion related to the group’s ability to remain a going concern, the board had approved turnaround plans, budgets and cash flow forecasts that indicated that Basil Read would “raise sufficient cash resources for the foreseeable future”.
Basil Read’s cash on hand declined to R126.4m from R458.5m and the group’s current liabilities of R2.1bn exceeded current assets at R1.4bn.
But Mapasa said that after the rights issue and repayment of the R150m Industrial Development Corporation bridging loan and costs, a further R138m had been added to the group’s coffers.
The group order book grew to R12.6bn from R12.3bn.
Mapasa was confident that the group would be able to execute the order book despite the liquidity issues, because many of the legacy contract claims would be resolved this year and bring in a lot of cash.
The value of claims are believed to be between R600m and R800m.
He added that the group expected to make a major announcement soon on the sale of its non core assets.
Mapasa said as part of the turnaround strategy, the new Basil Read would focus on the three areas that traditionally delivered profit for the group, which were mining, developments and select areas around civils.
“We have a plan and, as management and the board, are very confident about Basil Read’s turnaround plan,” he said.