JSE-listed Wilson Bayly Holmes-Ovcon (WBHO), which incurred a loss of R1.5-billion for the six months ended December 3, has reiterated the reasons for its decision to withdraw financial assistance to its Australian operations.

The company made the announcement last week, after which the Australian operations were placed into administration.

WBHO says it has made every effort to contain costs and restore a level of profitability at its Australian operations, but these businesses have been unable to complete projects on time and recover claims, resulting in material operating losses of R988-million for the six months ended December 31.  

Additionally, the impact of lockdown restrictions on the retail, hotel and leisure and commercial office sectors of building markets have created high levels of business uncertainty in Australia and have significantly reduced demand and delayed the award of new projects in these key sectors serviced by the construction industry.

In light of the recent history of substantial losses, it has also been exceptionally difficult to obtain appropriate guarantee facilities in order for the Australian operations to be able to secure new work that is available, WBHO notes.

These factors have contributed to the need for further funding and parent company support in order for the Australian operations to continue to operate.

The WBHO board evaluated the risk to the group and its stakeholders against the potential rewards of continuing further support and concluded that no strategic imperative exists to retain the Australian operations within the group.

Meanwhile, WBHO swung to a loss a share of 2 535c for the six months under review, compared with the earnings a share of 32c reported for the six months ended December 31, 2020.

Excluding the Australian operations, earnings a share from continuing operations would have been 594c compared with 588c in the prior interim period. WBHO says this highlights the healthy profitability of the group.

WBHO reports that it had to manage a demanding six-month period, with widely varying performances in the regions in which it operates.

While the African operations performed well to maintain activity levels, new work procurement in the UK remained hampered by low business confidence as a result of Covid-19.

Revenue from the South African operations grew by 7% year-on-year, while revenue generated from the rest of Africa declined by 35%, mostly as a result of lower activity levels in Mozambique following various suspensions and the termination of projects on the liquid natural gas project in Palma last year.

Revenue in the UK fell by 29% in rand terms owing to low levels of work-on-hand.

The company was again not able to declare an interim dividend.

However, WBHO says world economies appear to have stabilised as the impact of Covid-19 begins to dissipate.

WBHO’s order book stands at R29.8-billion as of the end of December.

The company says it will likely face a challenging period ahead as it navigates through the consequences of its decision to cease funding to the Australian operations.

However, the outlook for both the African and UK operations remains positive.

“Declining government support for economies, rising interest rates and growing business confidence all indicate a sense of normality slowly returning to global markets; however, meaningful growth will probably remain muted over the short term.”