Scars from Competition Commission inquiry still sting for Basil Read - CNBC Africa

Scars from Competition Commission inquiry still sting for Basil Read

Southern Africa

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“For us, as an industry, we would like to put this behind us and try and start with a clean slate and in terms of the rollout, it’s obviously negativity hanging over us going forward. It’s a concern and I think if it can be addressed quickly, then it’ll help to improve the sentiment going forward,” Basil Read Holdings Limited CEO Marius Heyns told CNBC Africa on Thursday.

Earlier this year, it was announced that 300 cases of collusion and price-fixing had been identified by the Competition Commission of South Africa, in an investigation into the sector that dated back to 2009.

Fifteen construction firms were subsequently given a penalty amounting to 1.46 billion rand for collusive tendering.

[DATA BSR:Basil Read] was fined R94.9 million rand. Other construction companies fined included Aveng, Murray and Roberts and WBHO, which were served the largest of fines at 311.2 million rand.

Basil Read, which released results for the period ended 30 June 2013 on Thursday, reported a 196 per cent rise in headline earnings per share to 43.69 cents.

The company also saw revenue from continuing operations climb from 2.7 billion rand to 3 billion rand.

Revenue was up at 3 billion rand from 2.7 billion rand, and its order book was also up from 10.2 billion rand to 12.2 billion rand.

“Ours is a combination of the four different sectors. We’ve had good margins in our developments, although very small, but they gave us 25 per cent margins.  Our EPC has had very good growth and that’s where we take the full risk on the project, and that was an outflow out of TWP that we sold.  That has grown significantly for us from a very small outfit, despite the sale of TWP,” Heyns explained.

The company’s construction division is still under pressure, and Heyns expects that the best margins the company expects to gain from the division will be at around 2.5 per cent. This is due to the labour unrest, which has significantly increased risk in the past month.

 “Clients and their representatives are becoming more difficult in terms of settling contractual issues, so it takes longer. We do settle but it does have an effect on your cash, so you’ve got to be cash positive, which we’re lucky that we are at the moment. But we’re going into a more volatile contractual environment,” he said. 

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