Basil Read CEO foresees revival
Mapasa hopes it will exit business rescue at the end of the year.
Mapasa hoping company will exit business rescue at the end of the year.
Basil Read chief executive Khathutshelo “K2” Mapasa foresees the listed construction group resurrecting itself from the dust, turmoil and uncertainty of its current business rescue process and returning to its former glory.
“That is the reason why I have stuck around for so long. I believe this company can play a meaningful role in the trillions of rands of infrastructure the president [Cyril Ramaphosa] has been speaking about,” Mapasa said.
Basil Read Limited was placed under voluntary business rescue on 15 June 2018 after in March of that year reporting a net loss after tax of R1 billion for its 2017 financial year.
“We want to continue after we have dealt with our financial problems and the things that have caused us financial stress. Unlike Group Five, we are not trying to wind up the business,” Mapasa added.
Mapasa is hopeful that by the end of this year the business will be out of business rescue, adding that Basil Read has in the past 18 months repaid more than R100 million in post business rescue commencement loans.
“There is enough in the claims for us to start coming good with our creditors both post and pre-business rescue,” he said.
However, Mapasa stressed the only time the business will be able to come out of business rescue is if it repays the post business rescue commencement finance it raised and concurrent creditors.
Options
Mapasa said they were also looking at other means to come out of business rescue, such as “maybe getting a new investor or new funding to get us out of rescue”.
Mapasa said the Basil Read group, including its mining services, developments and construction businesses, now has about 1 000 employees compared to almost 4 000 previously.
He said the construction subsidiary is the only business that has gone into business rescue and its headcount had declined to less than 200 compared to almost 2 600 people previously.
Mapasa said the plan is to rebuild Basil Read from scratch.
David Metelerkamp, senior economist at construction market intelligence firm Industry Insight, expressed surprise at Mapasa’s view.
Metelerkamp said the only upside for the construction industry in the next few years will be civil construction projects from government, adding there will not be any private building work.
“There is scope for its revival on the civil side. But in the general macro-economic environment, there is so much uncertainty because of the state of the fiscus, which means the government has to substantially cut its expenditure. I’m quite certain South Africa is heading for a debt crisis if it doesn’t,” he said.
Tarnished
An analyst who did not want to be named said it will be difficult to revive Basil Read because its name and reputation has been tarnished by going into business rescue.
The analyst doubts Basil Read will be able to find a bank or guarantor to back the company while clients are likely to be wary of contractors who were in business rescue and do not have strong balance sheets.
Basil Read, in an update on its business rescue proceedings released last week, said there were three construction contracts that were still active compared to 27 contracts at the beginning of rescue proceedings.
It said the majority of the contracts have been completed, ceded or descoped amicably, with only four contracts terminated.
It said the business rescue practitioners still believe a full implementation of the business rescue plan will achieve a better result than a liquidation and the implementation of the plan continues.