Construction and engineering group Basil Read has announced a R458.8-million operating loss for the six months ended June 30, compared with a R73.4-million profit for the same period last year.

Revenue from continuing operations declined from R2.5-billion to R2.27-billion.

The Mining and Development divisions delivered a good performance in the six months under review, offset by a significant underperformance in the Construction and Roads divisions.

“The Mining and Developments divisions have seen strong demand for their respective service offerings and value propositions, but the Roads and Buildings divisions both continue to face challenging trading conditions due to poor contract margins, increased competition and slow processes to settle claims,” notes acting CEO Khathutshelo (K2) Mapasa.

Continuing poor trading conditions for the local construction sector and difficulties in claims resolution on distressed legacy projects further impacted the group’s performance, he adds.

Mapasa says Basil Read is continuing with an extensive restructuring and capital raising programme, announced in May, in an effort to turn the company around.

Cash flow is of particular concern.

Cash and cash equivalents at Basil Read for the six months under review amounted to R174.2-million.

The board regards this position as “critically tight”.

The Industrial Development Corporation (IDC) has approved short-term bridge funding of R61-million as part of a loan of around R150-million to assist the company in meeting existing commitments and implementing a long-term funding strategy, says Mapasa.

It is expected that the balance of the loan will be released in September.

The IDC also granted R90-million in funding support for a new mining contract in Namibia.

Basil Read intends to raise between R200-million and R300-million in gross proceeds through a proposed rights offer and has started with the sale of noncore assets aimed at securing cash of more than R150-million.

The proceeds of the rights offer will be used to repay the IDC bridge loan of R150-million, with the balance to fund working capital requirements.

Mapasa expects the rights offer to be co ncluded before year-end.

Going forward, Basil Read will reposition itself to focus on the divisions that have a consistent history of good margins and strong cash flows, says Mapasa. The group will also tender selectively for projects that allow it to remain competitive and profitable.

Another focus area will be the closing out of remaining distressed projects to reduce overhead costs and improve liquidity.

Closer involvement of key management in project execution should enable further improvement in operating performance.

The Basil Read order book was at R10.7-billion at June 30.

Mapasa says he is pleased with the size and quality of the order book, noting that it is dominated by work in areas that have historically yielded good results for Basil Read.

The order book is balanced between the Construction division (R3.1-billion), the Roads division (R1.9-billion), the Developments division (R1-billion) and the Mining division (R4.7-billion).