Construction group Basil Read returned to profit in 2015, but CEO Neville Nicolau indicated at a recent presentation that cash was tight and that there were also concerns about finding replacement contracts for the large-scale St Helena Airport job. The first commercial flight to the island was expected in February next year.
Nicolau, the former Anglo American Platinum head, had been at the helm of the struggling company for a year now.
He said Basil Read showed a R41.6-million net profit for the six months ended June 30, compared with a R198-million loss in the same period last year. The loss for the six months ended December 31 amounted to R820.1-million.
Turnover for the six months ended June 30 was down from R3.1-billion to R2.9-billion, with the order book also down, from R12.4-billion to R10.1-billion.
Nicolau said the group was able to deliver “improved results in a challenging environment”.
Also, while the order book and turnover had decreased, it was still “better than the forecast”, he added.
Nicolau said the organisational restructure within the company had been completed, with overheads cut from R600-million to R280-million.
Several noncore businesses have also been or were being sold, such as Basil Read Energy, and others closed, such as engineering subsidiary Matomo. The group was also wrapping up a number of lossmaking contracts, such as in the Roads, and Civils and Plant businesses.
Of the group’s six businesses, two showed a profit, namely St Helena and Mining. Pipelines, Civils and Plant, Buildings and Developments, and Roads all showed operating losses.
Despite this, Nicolau was positive that the group could reach its targeted profit after a tax of R160-million for the full financial year, as well as achieve a turnover of R5-billion.
The order book could, however, come in below the R10-billion targeted for the year, with management focused on growing its project portfolio despite the weak South African economy and government’s slow spending on infrastructure.
Basil Read would also need to focus on its cash resources, with working capital outflows reducing cash balances to R430-million for the period under review.
Debt remained at R485-million.
Opportunities to improve the cash position included the sales of noncore assets, the resolution of outstanding claims, as well as seeking external funding, which was under discussion.
Nicolau noted that Basil Read was 48% black-owned, with the industry transformation charter currently under discussion proposing black ownership of between 30% and 40%.
By Basil Read’s next rating, the company would upgrade from a Level 2 contributor to a Level 1 contributor, he added.
“There are benefits in that.”
These benefits included the ability to attract scarce skills, improved margins, the opportunity to become the preferred partner to other construction firms, and a licence to tender for government contracts.
Nicolau said transformation in the construction industry “would be difficult” without the emergence of a large black company.
He added that there was a lack of communication between government, the traditional construction industry and the emerging construction industry.