Basil Read, one of seven major construction and engineering groups that has agreed with the government to speed transformation by selling assets or mentoring black contractors, has been placed in business rescue, amid a crunch in cash-flows.
The JSE-listed company said late on Friday it had tried to raise bridge funding for the finalisation of contracts, but that a majority of a consortium of lenders had indicated they would not make this available outside of business rescue.
This had come despite the group having managed to raise R300m through a rights offer in February 2018, which was used to improve working capital and settle loans.
The share plunged from a high of 21c to close at 2c on the bourse on Friday.
The fall from grace comes after the group reported a R743m operating loss in the year to December 2017, from profit of R64m a year earlier.
The net loss was R1bn for the period from a loss of R53.6m in 2016.
This meant that at year-end the group’s current liabilities of R2.1bn exceeded current assets of R1.4bn, while cash had fallen to R126.4m.
Basil Read told Business Day on Friday that executives would be available for interviews only from Monday.
But Meyrick Barker, investment analyst at Kagiso Asset Management, said that the country’s stumbling economy, coupled with “aggressive tendering margins and poor project execution” had compounded Basil Read’s woes.
“While the government hasn’t explicitly decided not to allocate work to the listed construction players, they are certainly proactive in subdividing larger projects so as to facilitate the development of smaller construction firms.
“This shift has been further aggravated by a general slowdown in fixed capital formation that has been evident in SA for a number of years,” Barker said.
Stephen Meintjes, head of research at Momentum Securities, said: “Given the sector and economic situation [business rescue] is probably the best course of action to take in order to preserve some capacity and skills for the inevitable time when it is needed.”
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