On top of Covid-19, the construction group has faced increased losses in Australia as it prepares to scale down its business there.
Wilson Bayly Holmes-Ovcon (WBHO) has swung to a full-year loss after Covid-19 added to an already difficult environment. The construction group says last year was one of the most challenging in its 50-year history as it incurred big losses on its building and infrastructure businesses in Australia and faced a deteriorating economy in SA and uncertainty ahead of the conclusion of Brexit negotiations in the UK.
The hard lockdown in SA saw construction activity plummet over the last quarter of its reporting period. While its operations in the rest of Africa were impacted to a lesser degree, it said the closing of international borders and strict quarantine regulations essentially halted international trade and people movement between countries. Construction was considered an essential service in both Australia and the UK, with the effect that productivity was impacted only by social distancing requirements and an initial reluctance by subcontractors to attend site.
Revenue for the year to end-June increased by 6% to R43 billion. It reported an operating loss of R541 million from a profit of R561 million last year. While Its operations in South Africa and Africa remained profitable at an operating level, and its UK business grew operating profit, Australia’s operating loss more than tripled to R1.2 billion rand. The group has encountered a number of delays and cost increases at its Western Roads Upgrade (WRU) project in Melbourne. Subsidiary Probuild’s 443 Queens Street building contract has also met obstacles. Adding further pressure, it allowed for R396 million in potentially unrecoverable costs arising from Covid-19.
The group reported a net loss of 937c per share, down from earnings for 939c previously, while its headline loss came in at 923c per share from headline earnings of 932c. Cash and cash equivalents increased to R7.6 billion from R6 billion.
Its order book amounted to R35 billion at the end of June, down from R47 billion last year after the knock-on effect of Covid-19 on the global economy resulted in a number of imminent awards being delayed. New project awards remained subdued through July and August of the new financial year, however there was a noticeable increase in local activity from September once the country entered Alert Level 1. Project awards subsequent to the end of the reporting period amount to R9.4 billion with a further R8 billion expected to be awarded within the next three months in respect of projects on which it is the preferred bidder.The current high levels of uncertainty within economic markets due to Covid-19 make it exceptionally difficult to predict how markets will behave, and what impact that may have on the Group over the medium-term,” WBHO said. “Nonetheless, the new projects awarded in the first half of FY2021 together with the imminent awards expected over the next three months, will provide sufficient work for the Group over the short-term as markets stabilise.”
The company said the sale of its Probuild business in Australia remained subject to the finalisation of the binding transaction documentation as well as various counterparty, regulatory and shareholder approvals. In June, it said it had been approached by a major international construction and civil services company interested in buying its 88% stake in the Australian building construction company. The emerging increased size and complexity of projects in Australia presented a growing risk to the SA balance sheet, which is why it chose to engage the unsolicited proposal.
Its shares rose 4.55 to R99 yesterday. They fell sharply in late October after it released a trading statement.
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