Basil Read cuts staff and moves offices in fight for survival
Construction company, which went into business rescue in June 2018, retrenches all staff not working on projects
Basil Read, which is fighting for survival after being forced into business rescue a year ago, says it has retrenched all staff who were not working on projects and will move out of its head office in Johannesburg to cut costs.
Basil Read and some other former stalwarts of the construction industry, including Group Five, have succumbed to a shortage of major projects amid a downturn in the SA economy and a deterioration of the country’s public finances.
Basil Read went into business rescue – a process aimed at rehabilitating financially distressed companies – in June 2018 after a consortium of lenders declined to provide it with bridge funding unless it went that route.
The company has since terminated some contracts and cut costs by retrenching staff and reducing the size of its board.
Barring those employees who are working on Basil Read’s last remaining projects – including at the Medupi power station – and the remaining staff at head office, “all other employees have been retrenched and will receive their full retrenchment packages”, the contractor said on Friday.
The group said most of the 20 construction contracts it was working on in June 2018 have been completed or terminated. It was still working on three projects, while five others “are in the process of being descoped or ceded to other contractors”.
Meanwhile, the company’s performance guarantees had been reduced from R1.1bn at the start of its business rescue proceedings to R744m.
“Negotiations with various employers are ongoing to ensure that no further calls on guarantees are made. This significantly reduces the contingent liability risk on the business.”
The group was pursuing contractual claims worth more than R200m and had been paid for claims worth R34m so far in 2019.
Basil Read has also been selling surplus plants and equipment at auctions, and is looking to offload its mining and development businesses.
Meanwhile, the group said it had found new premises and intends to vacate the Basil Read campus “in order to substantially reduce the costs for the company and its continuing business”.
“The business rescue practitioners remain of the view that a full implementation of the plan will achieve a better result than a liquidation.”
Group Five said last week its shareholders were unlikely to get anything out of its business rescue process.
Stefanutti Stocks chair Kevin Eborall wrote in the company’s annual report, published on Friday, that the construction industry has also been contending with “a sharp and widespread increase in the unlawful and often violent activities of local community groups”.
This had brought many construction projects to a halt.
“Indeed, the well-publicised collapse of a number of long-established major construction companies reflects a stark picture of the conditions prevalent in the industry,” Eborall said.
Stefanutti Stocks is mulling the sale of new shares after its cash balances decreased partly because of delayed payments from clients.