Basil Read Enters Business Rescue
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15th June 2018
By: Irma Venter
Creamer Media Senior Deputy Editor
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Shares in the construction group plummeted 94% in afternoon trade, from a high of 22c to a low of 1c.
Basil Read CEO Khathutshelo Mapasa, who had taken over the reins at the company in October last year, assured investors in March, at the announcement of the group’s annual financial results, that Basil Read remained a viable business, despite the group’s auditors voicing their apprehension regarding the company’s ability to continue as a going concern.
PricewaterhouseCoopers noted in Basil Read’s annual results announcement that there was “material uncertainty on the timing of cash flows that may cast significant doubt on the group’s ability to continue as a going concern and, therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course”.
Cash Flow Issues
Basil Read’s construction division has for some time been experiencing cash flow difficulties emanating from, among others, mismatched cash inflows and cash outflows, said the company on Friday.
The company attempted to raise bridge funding from a consortium of lenders, for the finalisation of its construction contracts.
However, following protracted negotiations, the company was advised that the majority of the consortium of lenders were not prepared to make bridge funding available to Basil Read in an informal process, outside of business rescue.
Without this funding, the board determined that Basil Read would be facing circumstances constituting “financial distress” within the meaning of the Companies Act no. 71 of 2008, and kickstarted voluntary business rescue proceedings.
The requisite documents had been lodged with the Companies and Intellectual Property Commission (CIPC) on Thursday, and Basil Read awaited confirmation of filing from the CIPC.
Basil Read in March reported a net loss after tax of R1-billion for the year ended December 31, as a result of a number of lossmaking legacy contracts, the write-off of goodwill in the roads division and reversal of deferred tax assets in lossmaking entities.
At year-end, the group’s current liabilities, at R2.1-billion, exceeded current assets, at R1.4-billion, and the group’s cash had decreased