Chief executive Khathutshelo Mapasa confirmed this to Business Report this week, but declined to identify the assets that were earmarked for disposal. Mapasa said the group was in the middle of negotiations on the disposals, and they were “fairly advanced”.
He also confirmed that there would be some retrenchments at management and executive level at the group’s head office as part of the process of rightsizing the group’s overheads in each division and the restructuring of its corporate head office.
“Basil Read was aiming to be a R10billion (turnover a year) company, but that is obviously not going to materialise, so we need to rightsize. But as we grow parts of the business, we are able to redeploy a substantial number of people into these growth areas,” Mapasa said. “That has been the focus and to really minimise retrenchments, because they cost money. Where we can’t hide is at head office.”
Mapasa said the restructuring at head office had, for instance, resulted in the merger of the roads and construction divisions under a single executive. Basil Read has about 4500 employees and 2000 subcontractors.
Mapasa said the number of retrenchments would be disclosed once the group received the section 189 Labour Relations Act dispensation from the Department of Labour.
He said the strategic realignment of the group had also resulted in the board deciding on a minimum profit margin threshold and not to chase turnover merely to secure the order book.
“We are making sure there is quality in the order book, and wherever we bid or tender, there is a minimum threshold we seek to have,” he said.
Mapasa said the group needed to invest more into developments and contract mining, where it had a track record of securing good margins and a history of delivering profits even in difficult times.
“We are trying to reposition Basil Read as well in the turnaround strategy,” he said.
Mapasa added that the group last year obtained a R150m bridging loan from the Industrial Development Corporation (IDC) to provide it with sufficient time to execute the turnaround plan.
He said R150m of the R300m it proposed raising through the rights offer would be used to repay the IDC bridging loan, with the balance used in the business to complete some projects, including several distressed projects. These include a Trans Caledon Tunnel Authority contract in Limpopo, several roads projects, and an administration craft basin harbour extension at Coega.
Mapasa said they aimed to complete all these projects in the first half of this year. Irrevocable commitments received from major shareholders to follow their rights would account for 55percent of the R300m to be raised through the rights offer, partially underwritten by the IDC for about R89m.
Major shareholders that made irrevocable commitments in terms of the right offer are Allan Gray, PSG Asset Management, Prudential Investment Managers, Sishen Iron Ore Company Community Development Trust and Ashburton Fund Managers.
Mapasa said the 63percent discount to Basil Read’s share price in the rights offer issue price was to provide shareholders with an incentive to follow their rights. The rights offer is conditional on the group receiving a minimum total subscription of R168m.
Failure to raise the R300m could result in a default under the debt standstill announced in December to provide it “with the necessary breathing room and stability to focus on operations”. The rights offer opens on February 12 and closes on February 26.
Shares in Basil Read gained 23.06percent on the JSE yesterday to close at 30c.
- BUSINESS REPORT