WBHO is considering a number of options to recoup the losses on a road contract in Australia that resulted in the group making an unprecedented A$50 million (R496.1m) loss provision in the six months to December. Photo: Reuters
PRETORIA – Listed Wilson Bayly Holmes-Ovcon (WBHO) is considering a number of options to recoup the losses on a road contract in Australia that resulted in the group making an unprecedented A$50 million (R496.1m) loss provision in the six months to December.

Louwtjie Nel, the chief executive of WBHO, said on Wednesday that there was a culture in Australia not to enrich yourself on behalf of somebody else if there was a genuine mistake.

“But talk is easy. It (the mistake) has to be contractually proven.

"That in essence is the approach we are taking and that is how the Australians feel about it.

“We have just felt the waters and maybe there is a more amicable way to deal with this than going the full claims route, which is not quite our style,” he said.

Nel said WBHO was quite prepared to “play open books” with the concessionaire and the end user, which was Victoria Roads.

However, Nel said there were a lot of issues WBHO and its consultants needed to deal with to sift out where the problem arose.

“There were three big international design engineering companies on the project.

"If somebody has made a genuine mistake, they have to own up to it.

"We (ideally) want an amicable settlement. If it comes down to a claim, we will do a claim,” he said.

The loss provision related to a design and construct contract, comprising eight packages for the widening and upgrading of various roads and intersections in the western suburbs of Melbourne.

Nel said the loss was caused by the incorrect interpretation of certain technical specifications, resulting in the under-estimation of the physical work necessary to meet the output specifications of the contract.

He said WBHO had terminated 22 members of the corporate leadership and bidding teams for the contract in December and had temporarily withdrawn from a design and construct role on new project bids with the same risk profile in the eastern region of Australia.

Nel stressed the losses recognised on the project overshadowed the solid delivery from WBHO’s African and UK operations as well as its Australian building business.

WBHO this week reported an 80percent reduction in diluted earnings a share to 145.5cents from 726.6c in the prior period.

Total operating profit slumped to R3m from R510m, because of loss provision for anticipated losses to be incurred on the roads project, with the Australian business making a R445m operating loss compared to a R143m operating profit in the prior period.

Shares in WBHO closed 0.80percent lower on the JSE on Wednesday at R115.07.

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