Basil Read's shares fall on warning of earnings drop

Basil Read said on Friday it expected earnings per share for the year to December to plunge to a loss of between 588c and 635c a share, or between 349% and 369% lower than last year.

Construction group Basil Read’s share price fell about 30% on Friday after it issued a profit warning, saying its earnings were likely to be severely hit by poor economic conditions and difficulties on projects.

The company said on Friday it expected earnings per share for the year to December to plunge to a loss of between 588c and 635c a share, or between 349% and 369% lower than last year.

It said the previous year’s earnings per share included the profit on the disposal of engineering project house TWP for R183m, to Australian-listed global engineering, procurement and construction management services group WorleyParsons.

That meant Basil Read expected headline earnings a share to December to see a loss of between 357c and 374c a share (510%-530%) lower than previously. Basil Read has been reeling from an exodus of executives starting well before it appointed former Anglo American Platinum head Neville Nicolau as CEO in July last year, replacing Marius Heyns.

The company said operating performance in the year had been hurt by losses relating to numerous contracts in the construction and engineering units. It said it had submitted a number of claims for these contracts, which were still being assessed, or were under discussion.

“Although the company is confident of a positive outcome, the possibility of gains through the claims process, and/or the possible impact of delay damages, have not been recognised in terms of the prevailing accounting standards,” it said. It had made once-off adjustments in the overall projected losses that included a nonrecurring, noncash impairment of goodwill amounting to R304m, of which R82m related to noncore assets.