Basil Read's loss of managers raises concerns

GCR's Eyal Shevel says the shortage of management executives at Basil Read is a cause for concern for ratings agencies. Image: Insurance Times

Global Credit Ratings (GCR) affirmed Basil Read's long term rating at BBB+, with a stable outlook.

GCR Corporate Sector Head Eyal Shevel said the firm had achieved good revenue growth despite the difficult operating environment.

But he said while the lack of permanent appointments to the executive team was not expected to affect ongoing operations, delays in appointing personnel could have a negative effect on future performance and thus the rating.

The group has experienced a number of changes in its executive management over the past year.

Des Hughes recently took over as interim Chief Executive, while Amanda Wightman has held the position of interim Chief Financial Officer since November last year.

Margins under pressure

This follows the resignations of Donny Gouveia and PJ Marais as financial directors last year, and Marius Heyns's retirement from the position of CEO this year.

Meanwhile, Shevel said despite Basil Read managing to maintain revenue growth, margin pressure in the industry had resulted in substantial losses on several large projects over recent years.

"While the large loss reported in 2012 was reversed in 2013, further losses are now expected for the first half of 2014 because of one large, and two smaller, loss-making contracts."

However, funding pressure had eased substantially following the receipt of the R839m on the sale of its subsidiary TWP Holdings. This allowed Basil Read to redeem a large portion of debt.

Shevel said positive rating action was unlikely until there was an improvement in the construction environment. He said further large loss-making contracts were likely to result in a downgrade.

Source: Business Day via I-Net Bridge