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WBHO local order book drops drastically

Share price down despite ‘credible results’.

The share price of construction group Wilson Bayly Holmes-Ovcon (WBHO) dropped by more than 4% on Tuesday to R142.91 on the back of its annual results that showed a disappointing result from the United Kingdom (UK) and a shrinking local order book.

WBHO CEO Louwtjie Nel however told Moneyweb the group delivered a credible result in a very difficult market. Basil Read, one of its peers, is in business rescue and Group Five and Aveng are experiencing huge financial pressure. WBHO has long been a market favourite in the construction sector, delivering good results consistently.

Source: Moneyweb/Profile Data

On Tuesday WBHO announced a 9.8% increase in revenue to R35 billion, R1 billion operating profit, up from R780 million in the previous financial year and headline earnings per share of 1 414.6c, up 8.1% from the previous financial year.

The annual dividend remained unchanged at 475c per share.

At year-end on June 30 the group had R6 billion in cash, up from R5.5 billion a year before.

WBHO saw strong revenue growth from Australia, which resulted in an increase in contribution from 58% to 63%. It however came at a low operating margin of 1.3%.

The revenue contribution from South Africa dropped from 36% to 30% but the local market still contributed about half the operating profit.

Operations in the rest of Africa grew by 32%, but operating profit dropped sharply from R251 million in the previous financial year to R185 million in the reporting period.

Nel said the Byrne Group in the UK, in which WBHO has increased its stake from 40% to 80%, recorded a bigger loss than expected. This is however not a big problem, he said, since overheads have been reduced and the group has a strong order book.

WBHO is further excited about its 60% stake in Russells Ltd and its 31.7% stake in Russell Homes Ltd, both acquired after the year-end, which strengthen its presence in the UK and, for the first time, gives WBHO exposure to the UK residential market.

He said the group’s current R54 billion order book is now well balanced between South Africa, Australia and the UK. This includes the order books of the Byrne Group and Russells. At the end of June, prior to the acquisition of Russells, the order book was R49 billion.

The local construction market is extremely tough, says Nel. “Our industry is being disseminated in South Africa.”

WBHO’s roads and earthworks order books shrunk by 32%, while the building and civils order book shrunk by 17%.

Nel says the group is “everywhere looking for work”, but there is little investment from the private sector or in public infrastructure. The South African National Roads Agency (Sanral) has resumed the awarding of contracts to consulting engineers, but this has not yet progressed to awards to contractors.

There is very little work coming from state-owned companies and not much from the renewable energy sector yet. WBHO is busy with the solar photovoltaic (PV) plant in Zambia and some construction work in South Africa for renewable energy projects, but nothing significant, says Nel.

There is an increase in work from the coal mining sector, with the group winning bids to construct two new mines for South32 and Anglo respectively and two mine expansions for Exxaro. In Botswana the diamond mining sector has also provided some opportunities.

Nel says where the group does win work in South Africa, the so-called construction mafia, also known as business forums, is a serious obstacle. “There is hardly a project where we started without interference from communities or ‘business forums’,” says Nel.

He estimates that WBHO has lost 6 000 manhours due to such disruptions. “We are used to working with communities and that is no problem for us. We have developed a framework to work through these things, but these are not credible business forums and they want big amounts.”

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ANC have decimated mining and are in the process of decimating agriculture and construction. Coming soon to your industry!

South Africa’s new racism, delivered enthusiastically by the like and Zuma, the ANC and the EFF will have consequences. Unfortunately the masses, who (unfortunately) rely on the ANC as the ruling party to do the right thing will, as usual, be the ultimate losers.

The masses are unfortunately so poor and so badly served by the media ( that blames everything on the ANC; which it also did under apartheid so they know not to believe it) that they have to mostly rely on it’s history to make judgements about it’s future capacities. As is the global tendency in the west capitalist will keep moving good jobs ( unions, decent pay, benefits, pensions) to police states or very poor countries where they can get the same work done for 1/10th of the cost and not benefits.

Now you may not realize that resisting this all to race is racist but that’s what it is even if it has no bearing on real world events.

OK so since the same thing is happening in most countries with mining do you think this goes beyond the ANC or do you think more or less democracy here and elsewhere can solve this situation?

I think it is safe to say that the SA construction industry is just about wiped out, and it’s now a paved way for the chinese construction companies to move right in.

Yes. That is how global capitalism works and since Chinese and billions of other foreign workers are happy to work for that days food this is always going to be the way it ends up. What we would need to do is to protect our markets and for that we are going to need a very educated population or a revolutionary movement to take over the government and risk the global economic backlash/sanctions.

“The revenue contribution from South Africa dropped from 36% to 30% but the local market still contributed about half the operating profit.”
If revenue from SA has reduced to 30% but profits are still 50%, this surely indicates that the building costs in SA are increasing dramatically.

Yes. There are a fantastic number of truly wealthy people in South-Africa that can still afford to build and develop or at least with the right credentials to get the loans.

“Our industry is being disseminated in South Africa” Enough said. Does the ANC care about, or even understand the consequences of these 8 words? Of course not

Spread thin I’m sure but he surely meant ‘decimated’

More so than yesterdays GDP numbers the weak results continously reported by SA focussed firms are very concerning.

Yes part of it is ANC mismanagement of the economy, but part of it is also the reality that SA was overly reliant on mining for 150 years. That will not be the case going forward and I do not see many areas were we are competitive outside of that.

Agriculture, even without the EWC nonsense, will always struggle to compete with heavily subsidised European and American farmers that work on much more arable land.

Manufacturing we can only compete when it is heavily subsidised by governement like the motor assembly industry

In the new economy of tech and digital media our terrible education puts at a disadvantage

I agree but the ANC has been a sabotage outfit (it’s all they know aside from stealing) in SA’s economy. The ANC “government” should have promoted, enhanced and protected SA business into Africa where we can compete in many, many areas. Instead the ANC support other African crooks and despots and almost actively discourage business from SA into Africa because of this. Opportunity lost.

In reality of course SOuth-African companies did exactly as you suggest they should have and we the South-African consumer generously subsidized them with high costs of goods at home. The ANC/South Africa is somewhere in the middle of the global index for corruption which is fact quite good considering our history, lack of education and general poverty. South-African companies have some of the highest ROI’s in the world so again if the ANC were trying to sabotage the South-African economy it really has failed dismally at doing so.

As far as i can figure all the ANC has done is follow the same general policies that turn a small percentage of people into billionaires and reduce the rest to precarious state of survival. Since this is basically what capitalism does everywhere( which is why people voted for Trump) it’s perhaps no surprise that a small economy like South-Africa could not extricate it from the global system that can and does enforce harsh penalties on nations that insist on economic sovereignty.

Governments tax/land policies etc will soon backfire negatively on the fiscus. Already well in progress. Worst is still to come.

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