Sep 03, 2012
WBHO profit dips, but holds steady at above R700mBack
Construction|Engineering|Melbourne|Perth|SYDNEY|Africa|CoAL|Flow|Gas|Ghana|Industrial|Konkola|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|Building|Carrier Pipeline|Construction|Contracting|Energy|Energy Sectors|Flow|Gas-line Project|Mining|Retail|Sierra Ghana|Sierra Guinea|Sierra Leone|Sierra Zambia|Alexander Forbes|Infrastructure|Power|Water|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 5 hours ago Vuli Cuba has resigned as chairperson of JSE-listed construction group Stefanutti Stocks. Cuba took up the position following the resignation as chairperson of Stefanutti founder Gino Stefanutti on July 15.
Updated 6 hours ago South Africa’s development is being hampered by a serious shortage of skilled engineers, especially in the public sector, and the situation has been described as one of the worst capacity crises in years, a research report by professional body Royal Institution of...
Updated 5 hours ago The pump prices of both grades of petrol and wholesale diesel, as well as the maximum retail prices of illuminating paraffin and liquefied petroleum gas (LPG), are set to decrease from September 3, the Department of Energy said on Friday. Petrol would drop by 67c/l,...
Updated 5 hours ago The amount owed to municipalities for services has continued to rise, reaching R94-billion by June, compared with the R93.3-billion recorded in December. Households still accounted for the bulk of the aggregate municipal consumer debts; however, this had declined...
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 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 network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
South African State-owned defence industrial group Denel has announced its fourth consecutive year of profits. The group's results for the financial year 2013/2014 were recently announced at its head office in Centurion, south of Pretoria. Revenues grew by 17%, net...
There is little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, says CEO Mike Upton. He says value can still be found in the private sector, in the renewable and industrial power sector, as well as in...
The National Association of Automobile Manufacturers of South Africa (Naamsa) has announced the event dates of the 2015 Johannesburg International Motor Show (JIMS). The event will take place from October 14 to October 25, 2015, at the Johannesburg Expo Centre, Nasrec.
UK engineering support services provider Babcock is set to deliver the largest order of global truck manufacturer DAF’s truck tractors in Southern Africa to bulk carrier road-based logistics company Ngululu Bulk Carriers (NBC), with 133 trucks to be delivered in...
Digital radio communications in the African local government space can open up the world, but have many challenges to overcome, notes integration and migration of legacy radio communications infrastructure with digital mobile radio company Emcom Wireless head of...