Wilson Bayly Holmes-Ovcon (WBHO) last week reported a massive turnaround in fortunes from 12 months ago when it boasted R513-million in operating profit for the year ended June 30, to a position where it suffered an operating loss of R585-million.
The group cited as the main reasons for the decline in profit the additional expected losses provided for on the Western Roads Upgrade project and the lossmaking 443 Queen Street project, both in Australia, and R396-million in potentially unrecoverable costs arising from Covid-19.
The performance of the group was also “significantly affected” by reduced productivity and lost profits over the last quarter of the reporting period as the pandemic spread across the world.
“This is clearly visible in the performance from the African operations, which experienced a 47% decrease in profitability,” noted WBHO.
“Only the UK operations delivered improved profitability amounting to 32%, due to solid performances from both the Byrne Group and Russells-WBHO.”
Revenue for the group for the financial year showed a 6% improvement, to R43-billion.
WBHO said it regarded the current reporting period as one of the most challenging ever faced in its 50-year history.
Order Book and Outlook
WBHO’s total order book decreased by 25%, from R47-billion to R35-billion, which comprised 12% and 9% decreases in the order books of the roads and earthworks, and building and civil engineering divisions respectively; a decrease of 28% in the order book relating to Australia; and a 21% decrease in the order book of the UK operations.
New project awards remained subdued throughout July and August of the new financial year; however, there was a noticeable increase in activity in South Africa from September once the country entered Alert Level 1, said WBHO.
Project awards subsequent to the end of the financial year amounted to R9.4-billion, with a further R8-billion expected to be awarded within the next three months in respect of projects on which the group is the preferred bidder.
Looking ahead, WBHO noted that the current high levels of uncertainty, owing to Covid-19, made it “exceptionally difficult” to predict how markets would behave, and what impact that might have over the medium term.
The group believed that new projects awarded in the first half of the new financial year, together with the awards expected over the next three months, would provide sufficient work over the short term as markets stabilised.
“Private fixed investment across all regions is expected to face continued pressure in the wake of Covid-19, particularly within the hotel, leisure and commercial building sectors.
“The South African, Australian and UK governments have all committed to widespread public infrastructure development as part of the economic stimulus packages aimed at relieving the devastating effects of Covid-19 on economies.
“The roads and earthworks and civil engineering divisions in South Africa and WBHO Infrastructure in Australia are well positioned to participate in these stimulus packages.
“Eskom’s recent recommitment to renewable energy, together with additional private–public partnerships in the commercial building sector, offer promising prospects in South Africa,” said WBHO.
“Mozambique will be the dominant source of activity in the rest of Africa, with the gas infrastructure projects providing a number of construction opportunities. At present, the group has elected to target the lower-risk ancillary civil works.”