Basil Read outlines turnaround plan as auditor issues going-concern warning
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28th March 2018
By: Irma Venter
Creamer Media Senior Deputy Editor
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Basil Read remains a viable business, despite the group’s auditors noting their apprehension regarding the company’s ability to continue as a going concern, says CEO Khathutshelo Mapasa, who took over the reins at the company in October.
PricewaterhouseCoopers noted in Basil Read’s annual results SENS announcement, issued on Wednesday, that there was “material uncertainty on the timing of the 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”.
Speaking at the group’s annual results presentation in Ekurhuleni, on Wednesday, Mapasa said the board and management of Basil Read “believed it could pull off its plan” to return the business to profitability.
“These are very disappointing results, but we are confident of our turnaround plan.”
He added that a business rescue plan was “not part” of the auditors’ statement.
Basil Read reported a net loss after tax of R1-billion for the year ended December 31, as a result of a number of loss-making legacy contracts, the write-off of goodwill in the roads division and reversal of deferred tax assets in loss-making 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
to R126.4 million.
The group’s order book stood at R12.6-billion at December 31, with at least R3.5-billion of this, however, stretching over an eight-year period.
The board’s turnaround plan, approved in September, included a debt standstill agreement with funders and guarantors, the sale of noncore assets, renegotiating terms with funders, raising new capital and securing new profitable projects.
Basil Read would also focus on resolving legacy claims, selling noncore assets, reducing overheads and completing problem contracts, said Mapasa.
A new construction executive and support team had been put in place.
In order to provide more liquidity, the group had, in 2017, renegotiated terms with six of its major funders and guarantors providing an extension on repayments of long-term financing and securing guarantees on contracts. The group had also disposed of surplus plant and equipment, generating a cash inflow of R80-million into the business.
Bridge funding of R150-million, obtained from the Industrial Development Corporation (IDC), had been repaid this month.
The group had also managed to raise R300-million through a rights offer. The proceeds from the rights offer had been used to improve working capital and settle the IDC bridge loan.
Mapasa said Basil Read had initiated a retrenchment programme, voluntary and otherwise. He did not want to quantify the number of expected job losses at the group.
Edited by: Creamer Media Reporter