Construction group Wilson Bayly Holmes-Ovcon (WBHO) has advised that it will report an attributable loss a share of between 892c and 985c apiece for the year ended June 30, as a result of project delays taking its toll amid Covid-19.
This is around 200% lower than the earnings a share of 938c reported for the year ended June 30, 2019.
The company, in a trading update released on October 28, advised that it had reached agreement with the state government of Victoria, in Australia, related to the completion of eight projects, which constitute the WRU project, and a settlement of agreed terms and payment of submitted claims.
In WBHO resolving its position with the government, it would pursue its entitlements against the design consultants.
However, the anticipated cost to complete the works had kept on increasing owing to the delay and costs resulting from the discovery of further services, causing protracted design finalisation, continuing utility provider delays and subcontractor failures.
Nonetheless, WBHO expects to complete all these project by the end of January next year and to receive commercial acceptable of all projects by April 30.
The company further said that the impact of Covid-19 on its African operations would result in revenue decreasing by between 5% and 15% year-on-year, for the year ended June 30, in the building and civil engineering division.
This while operating profit would decrease by between 45% and 55%.
Revenue from the roads and earthworks division is expected to decrease by between 0% and 10%, while operating profit is expected to decrease by between 25% and 35% year-on-year.
The company’s construction materials business – which is dependent on construction activity – had also been adversely affected. Revenue is expected to be between 10% and 20% lower year-on-year and the business would incur an operating loss for the year to June 30.
“The Covid-19 pandemic curtailed what would have been a strong performance from the UK operations. Despite the reduced productivity experienced over the final quarter of the reporting period, revenue from the UK operations was expected to increase by between 10% and 20% with operating profit up by between 25% and 35%,” WBHO explains.
Revenue from the Australian operations was expected to increase by between 10% and 20%; however, the material losses incurred, which were further exacerbated by the impact of Covid-19, had resulted in the operating loss increasing by between 260% and 270%.
As a going concern, the knock-on effect of the pandemic on the global economy had resulted in a number of awards being delayed and a negligible intake of new work over the last quarter of the reporting year had a detrimental effect on the secured order book of WBHO and forward-looking pipeline of the group.
Additionally, a resurgence of infections in Australia and the UK in the first half of the new reporting period had resulted in stricter lockdown restrictions being implemented, which continued to disrupt productivity for the company in these regions.
While it is anticipated that the overall liquidity of the group will be constrained in the short term, the company’s cash reserves would allow it to adequately manage its liquidity position.
The company will publish its results for the year ended June 30 on November 17.
Meanwhile, WBHO says the proposed transaction, whereby a major international construction and civil services company made a proposal to acquire WBHO’s 88% stake in Australian construction subsidiary Probuild, is progressing well.
While an in-principle agreement has been reached on the majority of key terms and negotiations are materially advanced, the proposed transaction remains subject to finalisation and execution of binding transaction documentation and conditions around counterparty, regulatory and shareholder approvals.