R/€ = 15.39Change: 0.16
R/$ = 13.75Change: 0.03
Au 1138.00 $/ozChange: 1.55
Pt 910.00 $/ozChange: 4.00
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?

And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters About Us
RSS Feed
Article   Comments   Other News   Research   Magazine  
Sep 14, 2012

For the first time, contractor earns more abroad than at home

Construction|Engineering|Africa|Contractor|Flow|Mining|PROJECT|Projects|Renewable Energy|Renewable-Energy|Resources|Roads|South African National Roads Agency Limited|Transnet|Africa|Australia|South Africa|Big Mining Groups|Energy|Flow|Maintenance|Louwtjie Nel|Wilson Bayly Holmes Ovcon|The 2010 World Cup
Construction|Engineering|Africa|Contractor|Flow|Mining|PROJECT|Projects|Renewable Energy|Renewable-Energy|Resources|Roads|Transnet|Africa||Energy|Flow|Maintenance||
© Reuse this

Wilson Bayly Holmes Ovcon (WBHO) earned around 60% of its 2012 financial year revenue outside South Africa, says CEO Louwtjie Nel, up from 52% in the previous financial year, which was the first time in the 41-year history of the construction group that the bulk of its revenue was generated outside the country.

WBHO revenue for the year ended June 30 increased by 21.2%, from R14.8-billion in the previous year to R17.9-billion. Profit for the year dropped 9.6% to R713-million. The operating margin declined from 7.4% to 5.5%.

Nel regards the slow place of South African-related revenue growth as “disappointing, as this is home, and this is where we want to be, but we have to go where the work is”.

The company’s future South African earnings “will not be going much lower. We are pretty much in good balance now”.

However, Nel also notes that WBHO does not have a strategy to earn a certain percentage of its revenue in a certain geographic area – “our strategy is to find the best work we can”.

The current WBHO order book comprises 67% of foreign projects, with the balance of work located in South Africa. The order book for the group as at July 1 was R20.9-billion, compared with R16.2-billion as at July 1, 2011 – an increase of R4.6-billion.

“There is a big order book in Australia at the moment,” says Nel.

The negative effect of doing so much business in Australia, however, is that margins are tight there. Nel is hopeful of some improvement going forward.

With big mining groups also cutting down on capital expenditure as global financial jitters continue to spread, Nel admits that WBHO’s exposure to Australia is “a risk” for the company.

He points out, though, that the group is only “a small player” in Australia’s mining industry, involved largely in upgrade and maintenance projects.

“We just upgraded from our bakkie. We have a lot of potential. We are not an engineering, procurement and construction contractor in that field.”

Nel says he can imagine the Australian resources boom potentially cooling down, but that WBHO is confident of a “reasonable run” as it can still secure some market share from the “big guys”.

As for the local market, Nel believes that some segments have bottomed out, with a slight improvement in margins, but notes that it will “take a long time to really come back – in the short term, we don’t expect it to improve much”.

WBHO will “do well to stay in the 5% to 6% [margin] bracket”, he adds, especially as Australia has traditionally been “below 3%.”

Nel says the local construction industry has probably been somewhat “spoilt” by the boom in the run-up to the 2010 World Cup, with contractor margins after tax before this “always” between 3% and 4% – a level the market is again closing in on.

“There is potential in South Africa. We can see the work coming in from the private sector and a little bit on the South African National Roads Agency Limited (Sanral) and Transnet side.”

He adds that the private sector is “keeping most of the contractors alive at the moment”, with the industry still in a bit “of a survivalist mode”.

However, Nel notes that WBHO is also a bit “more bullish” on government spend than a year ago.

“We see two . . . three new tenders floating through our offices each week for roads, either provincial or for Sanral. “We have a lot of pipeline work on the go. If these renewable-energy projects go, it will make a huge difference.”

He says the potential work from Transnet also seems promising, but that this is still “a year away”.

Nel says he is hopeful of enough public-sector work coming to market so that “everyone could get a fair share”.

“I think we have to be patient and, in about a year to 18 months, we we will hopefully really see the work flow through and then we can get going again.”

Free State Roads Update A problem area for WBHO in the past financial year has been nonpayment on a Free State government roads project, which saw work suspended in October 2011.

However, Nel says WBHO has reached a settlement with the provincial government and that work on the project will restart once payment is received.

He says the company has reached a payment agreement “in writing” in a settlement process which has also involved the National Treasury. WBHO received “a small portion” of the payment owing to the company at the beginning of August.

Nel does not want to release the quantum of money WBHO is to be paid, saying only that he is confident the company will get 100% of the “finally negotiated sum”.

“We think we got a fair deal.”

As for another thorny issue, namely the South African Competition Commission’s investigation into collusion in the local construction industry, Nel says WBHO has provided for possible penalties in this long-running process, unlike last year, as it now “has a better idea what that provision should be”.

Nel says the group hopes for finality on the issue in the “next two to three months”.

He does not want to quantify the value of the provision as WBHO has not yet agreed on this with the Competition Commission, saying only that the group has provided for its “best estimate” of the settlement amount.

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor
© Reuse this Comment Guidelines (150 word limit)
Other Infrastructure News
The City of Johannesburg has appointed consulting firm Aurecon to create a consolidated infrastructure plan (CIP) aimed at clearing the city’s current infrastructure backlogs and to meet future growth needs. The CIP would enable the city to integrate and prioritise...
AMSA CEO Paul O’Flaherty
Steel producer ArcelorMittal South Africa (AMSA) confirmed on Wednesday that it would be initiating a broad-based black economic-empowerment (BBBEE) ownership transaction and that KPMG had been retained to advise its board on the proposed transaction. KPMG would...
Article contains comments
Latest News
In the boom times when the price of gold was soaring, Ebenezer Sam-Onuawonto had a dream job and a dollar salary many times the national average in this mining town in southwestern Ghana. When the price fell, he lost his job as human resources chief at a mining...
Property developer Balwin Properties aims to raise between R713-million and R1.6-billion ahead of its listing on the real estate holding and development sector of the JSE on October 15. It would use the funds to settle existing debt facilities and fund future...
The information and communications technology (ICT) in education leg of Operation Phakisa has been launched to transform the basic education sector and leverage ICTs to strengthen teaching, learning and administration of the education system. The Operation Phakisa...
Recent Research Reports
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
This Week's Magazine
Energy analyst and EE Publishers MD Chris Yelland warned recently against excessive optimism regarding timescales for the proposed construction of new nuclear power plants (NPPs) in South Africa. He was speaking at a Nuclear Roundtable in Johannesburg. “I think we...
Malawi’s Lilongwe Water Board (LWB) is inviting eligible bidders to prequalify for the board’s efficiency improvement works, which will be implemented as part of the E24-million Lilongwe Water Resources Efficiency Programme.   LWB CEO Alfonso Chikuni explains that...
CROATIA, AN EU MEMBER BUT NOT A TDCA MEMBER On July 1, 2013, Croatia officially became the twenty-eighth member of the European Union (EU). Despite Croatia’s accession into the EU, it is yet to become party to the Trade, Development and Cooperation Agreement (TDCA)...
The Council for Scientific and Industrial Research (CSIR) has announced that its new Inundu airborne electronics testing, evaluation and training pod had made its first test flight on September 10. The successful flight was undertaken from Lanseria International...
The Development Bank of Southern Africa (DBSA) – which disbursed a record R13-billion during 2015, from R12.7-billion in the prior year – remained optimistic that it could ramp-up loan disbursements to R25-billion a year by 2018 as it sought to give greater emphasis...
Alert Close
Embed Code Close
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96