Basil Read establishes company to manage home construction

LISTED construction group Basil Read has established a new company to manage the construction of the top structure of homes within its developments division.

Chief executive Khathutshelo Mapasa said yesterday that Basil Read Homes was established at the end of last year and had obtained the necessary permits from the National Home Building Registration Council to operate.

Mapasa said the company would initially be involved in the construction of 44 units on a land parcel at Savanna City, south of Johannesburg.

Savanna City is being developed by Basil Read and the Housing Impact Fund of South Africa, a R9 billion fund formed by Old Mutual, the Development Bank of Southern Africa, the Government Employees Pension Fund, and the Eskom Pension and Provident Fund. It will have 18 399 integrated housing units and a total estimated development value of more than R24bn.

Mapasa said the group was previously involved only in the provision of bulk infrastructure for housing developments, but it would now undertake the marketing, sale and securing of financing for the housing units, with the top structure building work done by emerging contractors.

He said the decision to establish the company was in line with their decision to invest in the businesses where it was profitable in the past as part of the group’s turnaround strategy.

“Developments is one area where we are looking to grow. One part of it is this housing portion,” he said.

Mining space Mapasa said the group also wanted to grow its mining business, particularly in the contract mining space. “It used to be a R980 million turnover business in 2013/14, but is now closer to R1.8bn. That business has doubled in size, and we see it growing further,” he said.

At the end of June, Basil Read had a total order book of about R10.7bn, with mining accounting for 44 percent, construction 23 percent, roads 18 percent, developments 9 percent, and St Helena 6 percent.

Mapasa said the group had decided to incorporate St Helena into the construction division, because the group had only about eight-and-a-half years left of a nine-year operation-and-maintenance contract for the airport on the island.

Basil Read was awarded a contract worth more than R4bn to design, build, operate and maintain an airport on St Helena.

Mapasa said the construction and roads divisions were also being combined as part of the turnaround strategy, which would result in a reduction in the group’s operating divisions from five to three.

Basil Read reported a R458.8m operating loss in the six months to June, and its turnaround strategy includes a focus on the quality, rather than the size, of its order book.

However, Mapasa said they could still grow the order book, particularly if they focused on those areas where the group had been successful in the past.

Shares in Basil Read fell 3.33 percent yesterday to close at 29 cents.