Basil Read said on Wednesday that two road contracts were largely to blame for the construction group’s R170-million loss for the financial year ended December 31, compared with a R135-million profit in the previous year.

Revenue was up 10% to R6.8-billion, while operating margin ended the year at –3.11%.

CEO Marius Heyns said in Johannesburg that the one problem contract was the Nata to Pandamatenga road, in Botswana, where the company had had disagreements with the government’s representative on several issues. These disagreements were currently under arbitration.

The N12 Tom Jones project, in Gauteng, was also to blame as the contract was behind schedule owing to a series of problems, such as steel and bitumen shortages, as well as strike action in the transport sector.

This contract had “really been a nightmare over the past 12 months”, said Heyns.

Combined, the two roads contracts had recorded a loss of R210-million. However, noted Heyns, both “would be out of the system by May, June”.

In order to remedy the shortage of the correct grade of bitumen necessary for freeway construction, Heyns said Basil Read would establish a plant in the Western Cape to produce the required product.

Bitumen would be supplied from a Cape refinery, with the plant, sourced from a New Zealand firm, then producing multigrade bitumen.

The R20-million plant, to be operational in the second half of 2013, would also be able to supply the rest of the local construction sector.

Other remedies to Basil Read’s loss-making year included the development of a more “accurate feedback system”, as reporting a problem in the group often came back “too late for us to act”, noted Heyns. A new risk division had been established, while project managers were also being freed up to deal with their projects, and not become involved in “fighting with clients about money”.

Overheads had also been reduced by almost R60-million.

No retrenchments were planned, said Heyns.

“We had losses, but it’s the same people that made us profits. We place a high value on our people.”

Looking ahead, Heyns said the group’s order book was still healthy, at R10.2-billion at December 31, a 15% drop from the end of 2011.

The R877-million raised from the sale of TWP Holdings would be used to settle debt, while a portion would also be used as working capital. A special dividend would also be paid to shareholders amounting to R230-million, or 175c a share.

Construction Industry ‘Branded as Criminals’
Heyns said Basil Read had made a provision for a R65-million penalty under the Competition Commission’s probe into anticompetitive behaviour in the construction industry.

He noted that the company had once been confident that it would not face heavy penalties following this investigation, as it was aware of “only six” instances of possible anticompetitive behaviour.

However, said Heyns, as time progressed, it would appear as if the industry was going to face heavy penalties.

He said it also seemed as if the construction industry was being “singled out” and “branded as criminals”.

“I take exception to that.”

He said it would be “anyone’s guess” as to what measure of fines the construction industry would face at the end of the probe. “It could be more and it could be less” than the R65-million provision made by Basil Read.