Sep 03, 2012
WBHO profit dips, but holds steady at above R700mBack
Construction|Engineering|Melbourne|Perth|SYDNEY|Africa|Building|CoAL|Flow|Ghana|Industrial|Konkola|Mining|Pipe|Pipelines|PROJECT|Projects|Resources|Road|Roads|Standard Bank|System|Water|WBHO-CARR|Wilson Bayly Holmes Ovcon|Africa|Australia|Botswana|Ghana|Guinea|Mozambique|Sierra Leone|South Africa|Zambia|USD|Grayston Hotel|Kasane Airport|Konkola Mine|Kusile Power Station|Carrier Pipeline|Contracting|Energy|Energy Sectors|Flow|Gas-line Project|Retail|Sierra Ghana|Sierra Guinea|Sierra Leone|Sierra Zambia|Alexander Forbes|Infrastructure|Power|Water|Operations|Pipe|Pipelines|Queensland|Western Australia|Central Africa|Western Africa|Western Australia
© Reuse this
Operating margin declined from 7.4% to 5.5%. WBHO attributed this to competitive conditions in South Africa and Australia, as well as revenue growth within the inherently lower-margin Australian market.
Group revenue increased by 21.2% from R14.8-billion to R17.9-billion.
WBHO’s net cash position increased to R3.1-billion for the year, up from 2011’s R2.9-billion. Cash generated from operations amounted to R1-billion, compared with R345-million generated in the previous period.
Looking at the divisions within the group, WBHO’s building and civil engineering division increased revenue for the year by 20% to R5.2-billion. However, margins decreased from 7.6% to 5.2% owing to the current competitive market and two loss-making projects.
WBHO said a large percentage of the building division’s revenue was driven by the procurement of major building projects in Gauteng, which included the Standard Bank and Alexander Forbes buildings, as well as the refurbishment of the Grayston Hotel and the redevelopment of the Alice Lane precinct, in Sandton.
The division recently secured eight new retail and commercial office developments with a combined value of more than R1.5-billion.
The civil engineering division “had a difficult year”, noted WBHO, but it completed extensions to the Konkola mine, in Zambia, while work continued on the Kusile power station, in South Africa, which “contributed significantly” towards the division's revenue this year.
New projects were secured at the Tweefontein coal mine, in Mpumalanga, as well as in Phase 2 of Project Lion, in Limpopo. In Zambia the division clinched the expansion of a brewery, in Ndola.
The building and civil engineering division’s order book at June 30 amounted to R4.2-billion, compared with R5.7-billion at the same date in 2011, with additional projects to the value of R2.1-billion secured post June 30.
“However, while margin pressures have improved, they remain competitive,” noted the group.
The roads and earthworks division increased revenue in the financial year by 4% to R4.3-billion, after a drop of 11% in the previous year.
Operating profits declined by 6% to R492-million, owing to persistent margin pressures in the local market.
The major focus of the roads and earthworks division remained the strengthening of foreign revenue through the procurement of higher margin projects in Central and West Africa, said WBHO.
Work in Africa included various mining projects in Botswana, Mozambique, Sierra Leone, Ghana, Guinea and Zambia. In Botswana the division secured further contracts for the runways and taxiways at Kasane Airport, and was recently awarded the R1.4-billion north-south carrier pipeline for the Botswana government's Department of Water Affairs.
This project was an engineering, procurement and construction joint venture (JV) with an international contracting company, and would provide work in the region until the 2014 financial year. The division's participation in the JV was 50%.
Locally the division focused on projects for industrial clients in the mining and energy sectors and projects in the national road system.
WBHO Pipelines was progressing well with a gas-line project for Sasol, between Secunda and Sasolburg, executed in JV with a specialist French pipe company.
Work on the Free State Roads projects had been suspended in October 2011, owing to non-payment.
“We are pleased to advise that we have reached a settlement with the provincial government and work on the project will recommence once payment is received,” reported WBHO.
The roads and earthworks division’s order book increased by more than 90% by the end of 2012 to R4.6-billion, compared with R2.4-billion in 2011.
In Australia, WBHO’s operations were able to increase revenue by 39% to R8.3-billion. Although margins decreased to 2.5% from 2011’s 2,9%, operating profit increased by 19% to R203-million.
Highlights for the year included the Melbourne-based Contexx business securing six high-rise-apartment projects with a combined value of A$515-million.
The Queensland-based civil engineering business Probuild Civil completed the $195-million Springvale Homemaker Centre. In Perth, the $120-million Raine Square commercial tower was completed, as was the $100-million Bank Apartments project in Melbourne.
The backbone of the Australian economy is the resources sector, particularly in Western Australia, stated WBHO.
“In order to position the operations to capitalise on the strength of the resources sector, the remaining 49% of WBHO-CARR was acquired during the year and the three Western Australia roads and earthworks businesses with operations that stretch from Kwinana (south of Perth), through Geraldton (Mid West), and up to Karratha, in the far north Pilbara region, were rebranded as WBHO Civil, and formally merged on July 2.”
The revenue from the combined businesses grew by 34% year-on-year.
WBHO Civil and Probuild Civil now represented 33% of total Australian revenue, up from 22%. Capital expenditure of R225-million had been approved to facilitate the expansion of the business.
The Australian operations began the new financial year with a significant growth in order book to R12-billion, up from R7.7-billion.
As for the South African Competition Commission, WBHO said on Monday that it had now provided for possible penalties under the commission's investigation into collusion in the local construction industry.
“The group . . . expects to be advised of the outcome of the settlement process before the end of the calendar year. We have provided for our best estimate of the settlement amount in the current year.”
Looking ahead, WBHO said it was experiencing an increase in the number of projects coming to market, especially in the private sector, where long-awaited contracts had now materialised.
The order book for the group at July 1, 2012, was R20.9-billion, compared with R16.2-billion at July 1, 2011 – an increase of R4.6-billion.
The order book now comprised 67% foreign projects, with the balance of work located in South Africa. Building and civil engineering had 20% of the order book, roads and earthworks 22% and Australia 58%.
The order book at the end of August was R21.8-billion.
WBHO noted that mining infrastructure work remained positive in Africa, but that this had slowed in South Africa. Gas-related infrastructure in Mozambique offered opportunities in the
“The resource sector continues to underpin the prosperity of the Australian economy,” the group added. “Target-market segments that continue to provide opportunities are high-rise residential [projects] in Melbourne and Sydney and, driven by mining, central business district commercial and airport expansion works in Perth.
“Australian universities remain an attractive market segment providing a steady flow of campus and research centre expansion and refurbishment projects. Pipeline opportunities being
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Construction News
Updated 3 hours ago With Africa holding 60% of the world’s arable land, agriculture held one of the keys to unlocking economic opportunities for the continent, but could only be achieved through cooperation with other countries in regions such as Asia. Speaking at the Asia–Africa...
Updated 4 hours ago JSE-listed Consolidated Infrastructure Group (CIG) on Tuesday reported a 26% year-on-year increase in revenue to R1.7-billion for the six months ended February 28, while its aftertax profit grew by 36% year-on-year to R164-million. The higher profit was driven...
Updated 6 hours ago The developers behind the large-scale mixed-use residential development, the “holistic” R20-billion Coega Ridge housing estate, outside Port Elizabeth, in the Eastern Cape, have confirmed that the project remains on track to break ground in 2018 and will likely slash...
Updated 7 minutes ago As one of the most under-developed regions, the African continent must find new ways to reduce its dependence on aid and ensure the sustainable development of the continent’s resources. “A significant part of those resources have to come through taxation,” Finance...
Updated 10 minutes ago The eThekwini municipality will invest R8.7-million in placing solar photovoltaic (PV) panels at the Moses Mabhida Stadium, uShaka Marine World, Kings Park swimming pool, the Metro Police headquarters, eThekwini Water and Sanitation’s (EWS’s) customer service block...
Updated 15 minutes ago The production of food by small subsistence farmers would never be the solution to food insecurity and poverty eradication in Africa, independent agricultural economist Fanie Brink stressed. Speaking at the Fertiliser Association of Southern Africa (Fertasa) annual...
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
Today’s organisations execute projects within increasingly complex environments – particularly in the engineering sector. The ability to successfully execute these projects is what drives the realisation of successful projects and, ultimately, the achievement of...
South Africa’s distribution grid is a twentieth-century relic, which must be changed to serve the country’s modern electricity needs, says South African National Energy Development Institute (Sanedi) Smart Grid Programme manager Dr Minnesh Bipath. “What we are...
There is a disparity in government funding provided to integrated transport networks – bus rapid transit (BRT) networks ¬¬– and that given to conventional bus services, says Putco executive director Thys Heyns. “We have neglected and strangled conventional bus...
The Johannesburg Social Housing Company (Joshco) is building 502 rental housing units, valued at R200-million, in Dobsonville, Soweto, which are scheduled for completion in June 2016.
Automotive component manufacturer and distributor Metair is centralising its research and development (R&D) work in Turkey, in an attempt to bolster the company’s ability to produce affordable start/stop batteries. The new R&D centre is part of an expansion plan in...