South Africa’s premier construction group, Wilson Bayly-Holmes Ovcon (WBHO) reported what can only be described as disastrous numbers, reporting a loss of around R1.5bn. The group has decided to withdraw financial assistance to its Australian unit, Probuild, which incurred a loss of close to R1bn during the period. This unit accounts for nearly half of its revenue, but the competitive landscape within the industry has put increased pressure on margins. Over the years, WBHO has poured R2bn in financial assistance to the Australian unit to enable the business to continue to operate. The group entered Australia at the beginning of millennium in search of opportunities outside a low-growth, stagnating South African economy. Like any divorce, it was an expensive affair. Worse, last year, a proposed R3bn sale of Probuild to an unknown Chinese buyer was blocked by Australian authorities on security grounds. Probuild has subsequently been put into business rescue. The bull case for WBHO will be centred on the supposed government infrastructure drive. There is no evidence that government’s promise has been implemented. Private sector demand alone will be insufficient. Tough times for the industry seem set to continue. – Justin Rowe-Roberts
WBHO media statement:
Unaudited interim financial statements for the six months ended 31 December 2021
Financial highlights:
The Group faced a demanding six-month period in an environment that produced widely varying performances in the regions in which it operates. The African operations delivered solid results and performed well to maintain activity levels. New work procurement in the United Kingdom (UK) remained hampered by the low business confidence experienced due to Covid-19 throughout FY21 that continued to affect activity levels in the current reporting period. Despite the limited availability of new work, the UK operations delivered existing projects well and produced satisfactory results given the prevail.
– Revenue for the year decreased by 22% to R16bn (Dec 2020: R20bn)
– Loss per share of 2 535 cents (Dec 2020: Earnings per share of 32 cents)
– Headline loss per share of 1 613 cents (Dec 2020: Headline earnings per share of 81 cents)
– No interim dividend has been declared for the period ending 31 December 2021 (Dec 2020: Nil cents per share)
– The net asset value amounts to R4.2bn (Dec 2020: R5.6bn)
Events after the reporting date:
Subsequent to the end of the reporting period, the Board elected to withdraw any further financial assistance to the Australian operations. Consequently, the board of WBHO Australia placed the Australian operations into administration and an administrator was appointed on 23 February 2022. This event will result in a loss of control by the Group over its Australian subsidiaries.
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