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WBHO enters financial year with R38.13bn order book

WBHO enters financial year with R38.13bn order book

Photo by Duane Daws

2nd July 2015

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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Noting that it continues to secure “quality” projects locally as well as in other African building markets, construction major Wilson Bayly Holmes-Ovcon (WBHO) closed the financial year ended June 30 in line with expectations, with an order book of R38.13-billion, it revealed in a business update on Thursday.

Some 66% of all contracts were secured in the Australian market, with the building division within subsidiary Probuild continuing to perform “satisfactorily”. 

WBHO at the end of the first half of the year reported on four lossmaking contracts within its Australia-based civil engineering companies, Probuild Civil and WBHO Civil.

“Completion of the works and the close-out of these four projects has been more difficult than anticipated, particularly in Probuild Civils. With the exception of the Tan Burrup project, in Karatha, all projects are now complete; however, the resolution of claims relating to these projects will not be finalised in the current financial year,” it stated.

Meanwhile, the volume of replacement work anticipated in December did not materialise in the latter half of the year and, thus, further downsizing of these companies had been necessary.

“The poor trading experienced in the current year together with the short-term outlook for these businesses will require an impairment of both goodwill and plant and equipment within the businesses,” stated WBHO.

ROADS & EARTHWORKS
The lack of mining projects, meanwhile, continued to impact the roads and earthworks division, resulting in replacement work being procured from different sectors, predominantly the road and energy sectors.

This division contributed 11% of the order book in the second half of the year.

WBHO explained that the continued delay in the South African government’s infrastructure roll-out, remained a concern, while delays and cost overruns affecting profitability on the North South Carrier Pipeline (NSC) contract, in Botswana, had now been completed.

“The effect on profitability from NSC [and] the lower margins achieved on roadwork have impacted the division’s overall margin this year, which is expected to be consistent with the margin reported at the end of the first half,” it noted.

ASSET SALE
WBHO’s Capital Africa Steel in March signed an exclusive sale of shares agreement for the sale of Capital Star Steel (CSS) – the group’s pipe factory in Mozambique – where production ceased in December.

The purchaser signed a heads of agreement with the funding banks in respect of restructuring the debt within CSS this week and the detailed funding agreements were currently being negotiated.

The operating results from continuing operations in respect of Capital Africa Steel were expected to show some improvement over the results achieved in the first six months.

WBHO added that “limited” progress had occurred with regard to the case referred to the Competition Tribunal relating to collusive tendering.

“WBHO remains confident that it can defend these cases and has not made a provision in this regard,” it held.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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