Basil Read on a hunt for cash in bid to rebuild its balance sheet
Read has embarked on a hunt for cash, announcing yesterday that it planned to raise as much as R300 million in a rights offer to rebuild its balance sheet and be in a strong position when it starts selling off its non-core assets.
Acting chief executive Khathutshelo Mapasa said the adverse impact of the poor performance in the group’s roads division along with a protracted claims process necessitated a review of the group funding approach.
“On a longer-term basis, we are in the process of raising capital through a rights issue,” Mapasa said.
“While we have yet to secure binding commitments, engagements to date suggest that this will receive support from shareholders.
“It is anticipated that total funds arising from this will be in the region of R200m to R300m.”
Basil Read said it had engaged select funders on the market in order to meet its short-term funding constraints and the response had largely been positive.
It said the Industrial Development Corporation had granted it funding support of R90m for its mining division.
Yesterday, the group reported underwhelming results for the six months ended in June, with a net loss of R474m against a R34m profit recorded a year earlier, while it recorded an operating loss of R458.8m.
The group attributed the operating loss to provisions on contracts within the roads division, which included the writedown of goodwill of R88.9m.
The company’s revenue from continuing operations declined from R2.5 billion in the comparative period to R2.3bn in the period under review.
However, the group’s order book saw a marginal improvement from R10.4bn in the same period last year to R10.7bn in the first six months of this year.
The order book is now comprised of R3.1bn construction work, R1.9 bn roads, R1bn from developments and R4.7bn in mining work. Cash and cash equivalents for the period under review was R174.2 m, against the R219.2 m reported in the comparative period.
The company earlier this year said that it had enlisted the assistance of a corporate finance advisory service in its attempt to restructure the company, which has gone through a tough time since 2007 when its share price hit a peak of R39 on the JSE.
Yesterday the group’s share price was trading at just below R1. It ended the day at 78 cents after losing 2.5 percent.
In May, the company lost its second chief executive in less than five years when Neville Nicolau left his post after the company reported that it was expecting a more than 100 percent decrease in earnings a share and headline earnings a share for the six months ended June. In 2014, the company’s then chief executive Marius Heyns announced that he would retire from the group after ten years in the role.
Mapasa, who has been in the acting position since June, said that raising new funding was essential to stabilise the company in the short term and to meet future operating commitments over the medium- to long-term.