WBHO may benefit from infrastructure deals in three continents
CAPE TOWN - WILSON Bayly Holmes-Ovcon (WBHO) will be a smaller business if its Australian building company Probuild is sold, but lessons learnt in Australia would be applied to grow the two UK businesses, chairperson Louwtjie Nel said in their 2020 Integrated Report.
WBHO tried to sell Probuild to an international construction and engineering suitor which it did not name, but the deal failed last week due to regulatory hurdles in Australia. WBHO had considered the offer to purchase due to the increasing size and complexity of Probuild, the losses being made in Australia and the depreciating rand exchange rate.
The group entered the Australian construction market in 2001 when it acquired 40 percent of Probuild, then a mid-tier construction business. Since then, Probuild grew to become a tier one contractor with a national footprint.
In the 2020 financial year, WBHO’s Australian operations generated R24.7 billion of turnover and an operating loss of R1.2bn, UK R6.5bn and an operating profit of R302 million, while the African operations’ R12bn turnover yielded an operating profit of R355.9m.
WBHO’s civil engineering and infrastructure businesses in Western Australia had performed consistently over the years, but the Western Roads Upgrade (WRU) project, which was to have been a flagship project, turned into a thorn in the group’s side in 2020.
WBHO’s first ever operating loss in 2020 was largely due to significant losses on the WRU and 443 Queen Street projects in Australia, as well as about R400 m in unrecoverable Covid-19-related costs.
WBHO’s overall headcount fell 20 percent to 9 470 from 11 775 in 2019 during the year.
Chief executive Wolfgang Neff said about WRU: “The perpetual delays caused primarily by the non-performance of utility providers and additional works to be performed due to ongoing scope-creep, together with the difficulty this presented in accurately forecasting the costs to completion, have been immensely frustrating.” However, he said the WRU project was approaching completion and complex groundworks on the 443 Queen Street project “are also behind us”.
Nel said “a substantial amount of work” had been secured since construction activity picked up in the second half of last year and group order books were beginning to recover. “We are fortunate to have reasonable visibility of our activity levels for the next 12 months,” he said.
The total order book in the 2020 financial year had fallen 25 percent to R35bn from R47bn, which comprised a 22 percent and 9 percent decrease in the roads and earthworks and building and civil engineering divisions respectively, a decrease of 28 percent in the order book relating to Australia and a 31 percent decline in the order book of the UK operations. The UK operations grew operating profit 31 percent in 2020 from solid performances of both the Byrne Group and Russell-WBHO in the UK, said Neff.
He said new work had been secured since the financial year-end, including a number of highvalue projects, which would provide the group with sufficient work over the next 12 months.
A right-sizing last year as well as in the first quarter of the 2021 financial year had also reduced the fixed-cost base. Over the medium term, the South African, Australian and UK governments had committed to public infrastructure development as part of the economic stimulus packages aimed at relieving the devastating effects of Covid-19 on economies.
Gas infrastructure projects in Mozambique, the renewable energy sector and a number of proposed large-scale public-private partnerships in South Africa also offered prospects for additional future work, he said.
While overall liquidity was expected to be constrained over the short term, cash reserves of R7.6bn would allow the group to adequately manage its liquidity position, he said.