Johannesburg - Wilson Bayly Holmes-Ovcon (WBHO) has reached a settlement agreement with the Competition Commission and agreed to a fine of R10.24 million for collusive tendering on the Transnet project to upgrade a portion of the Sishen-Saldanha iron ore rail line.

This was one of four cases implicating the listed construction and engineering group that it did not settle with the commission in terms of the construction fast-track settlement process.

WBHO disclosed yesterday when it released its financial results for the six months to December that it had signed a settlement agreement for a transgression with the commission on February 11 but did not provide details about the case.

The commission’s filing notice to the Competition Tribunal said the complaint was initiated after it received a leniency application by Lennings Rail Services in April 2009.

It conducted an investigation and found that Transnet had invited eight companies in August 2006 to submit an expression of interest for the Sishen-Saldanha project, which involved civil earthworks, track laying and overhead traction equipment work.

This investigation found that in November 2006, WBHO had reached an agreement with Lennings and Concor, now part of Murray & Roberts, related to this project in terms of which Lennings would submit a tender price for all the works that was higher than the price submitted by WBHO and Concor.

It was agreed that the track work would be sub-contracted to Lennings, whose quote for the track work would be identical to those of WBHO and Concor. WBHO was awarded the southern section of the project while the northern section went to Concor.

The settlement agreement still has to be confirmed by the tribunal. A date has not yet been set for the hearing.

In terms of the fast-track settlement agreement reached by WBHO with the commission last year and confirmed by the tribunal, it agreed to pay a R311m fine for 11 non-prescribed prohibited practices.

WBHO reported lower earnings in the six months to December amid subdued mining activity, a R36m loss by Capital Africa Steel and a decrease in operating profit from its roads and earthworks division.

Revenue rose 11.3 percent to R13.38 billion. Operating profit before non-trading items dropped 15 percent to R480.6m and the operating margin deteriorated to 3.6 percent from 4.7 percent.

Headline earnings a share slumped by 20.4 percent to R5.864 from R7.363.

Cash generated from operations declined by 35 percent to R411m from R637.58m.

Cash and cash equivalents at the end of the period dropped by almost 8 percent to R2.65m. This was attributed to the consolidation of a net overdraft of R271m within the Capital Africa Steel group, the working capital utilisation of R424m and taxation paid for R361m.

An unchanged dividend of R1.35 a share was declared.

The order book grew by 16 percent to R25.28bn.

WBHO shares inched up 32c to close at R141.32 yesterday. - Business Report