WBHO targets Central and West Africa as it builds continental portfolio

13th September 2013

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Construction group Wilson Bayley Holmes Ovcon (WBHO) has estab-lished an international civil engineering and building division to drive further growth in Central and West Africa, adding to the work the company’s roads and earthworks division is already doing on the continent.

WBHO CEO Louwtjie Nel says a range of its clients have asked WBHO to do work for them in Africa, but that it has “been a battle” for the company as it has too much work servicing existing clients in South Africa.

“The existing divisions became too stretched. We made a decision at the beginning of the year to formalise a civil and building division in Africa, and we put a formal division in place with a MD and estimating team.”

The division already started work on its first project – a shopping centre in Ghana for a South African property developer.

“We are currently negotiating three more commercial developments in that same area for South African clients.”

The division has also secured work in Zambia and three building contracts in north-ern Mozambique.

“Fortunately, we can ride a little bit on the back of our roads and earthworks team that has been there [in Africa] for so many years. It’s all about logistics; if you can get the logistics right, the jobs aren’t so difficult,” says Nel.

“This division is a little bit of a light in this darkness we have been going through in the last year,” he adds.

“We prefer working in South Africa, but you do get better margins if you go into Africa.”

Nel’s comments come as the construction group earlier this month reported a 32.9% increase in revenue to R23.77-billion for the year ended June 30, compared with the pre-vious financial year, but a 5.4% drop in profit for the year to R675-million.

The growth in revenue was assisted by a weak rand against both the US and Australian dollars.

WBHO’s operating margin dropped to 4%, down from the previous year’s 5.5%.

In South Africa, WBHO’s building division is doing well and is literally turning work away “on a daily basis”, says Nel.

“We are really through that trough, so mar- gins are slightly better. It gives us the oppor-tunity to select the type of work we prefer, the clients, the teams. That is a good news story.

“Civil has been flat in the last year and will be difficult in the next year. The mines are not spending money – the only real work we are doing is on the coal mines. There are about four or five mines on hold. We don’t expect any fireworks this year. It is going to be a tough one,” he notes.

Nel says WBHO’s roads and earthworks division is “holding its own” in South Africa, but that the market remains “very competi-tive”. He believes it will be difficult for this division to show good growth in the current financial year.

In general, he expects WBHO’s business in the South African construction market to lift its head again, with the group, perhaps, now matured in Australia, with 51% of revenue in the last year earned in that country.

WBHO is currently battling three problem projects in Australia, in Melbourne, Sydney and Perth respectively.

Looking ahead into the current financial year, Nel says WBHO is “quietly optimistic” of a general improvement in its performance.

“We hope we can improve our margins going forward. We have to focus on protecting quality margins.”

WBHO’s order book stood at R24-billion on June 30, up 15.1% over the previous year’s number.

Just under 50% of this work was in South Africa, up from 33% in the previous financial year. Australia made up 45% of the order book, down from 58% on June 30, 2012. Africa made up the remaining 6%.

Competition Commission Update
South Africa’s Competition Commission in June imposed a collective R1.46-billion in penalties on 15 companies in the industry for collusive tendering related to projects concluded between 2006 and 2011.

WBHO received a penalty of R311-million, which the group says “has been fully provided for within current and previous reporting periods”.

However, the group has one remaining case to settle with the commission. This trans-gression fell outside of the fast-track settlement process, with no provision made to date.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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