The group, which put its substantial, but loss-making Australian construction operations under administration on February 23, would likely face a challenging period in the next six months, its management admitted yesterday.
WBHO had already provided some R2 billion in equity funding and substantial parent company support to its loss-making Australian businesses over the past few years.
“The political tension between Australia and China as well as the recent collapse of the Chinese property sector and subsequent financial difficulties being experienced by some Chinese developers, creates further uncertainty as Chinese developers have historically formed a large proportion of Probuild’s client base. China is also a major supplier of goods to the construction industry in Australia,” the group said.
WBHO’s board decided that in an environment where “a return to profitability is materially uncertain”, and presented “too great a risk to the group and its stakeholders”, the decision was taken to withdraw any further funding of the Australian operations.
However, while the effects of this decision still needed to be navigated, the outlook for WBHO’s African and UK operations remained positive, its management said.
Also, the waning severity of Covid-19 during the fourth wave worldwide would also hopefully limit the scale of disruptions to economies and businesses in the near future.
The order book increased by 7 percent to R29.8bn, and order book levels within each geographic region remained consistent with those at June 30, 2021.
In its Africa division, including South African, the building and civil engineering division was well positioned and an improvement in construction opportunities in local building markets had sustained order book levels.
In the UK, neither Byrne Bros nor Russell-WBHO secured any significant new work over the six-months, indicative of the market hesitancy over the course of 2021 financial year.
However, market sentiment had improved with an increase in the number of available projects upon which to bid.
The group reported a headline loss per share of 1 613 cents in the six months to December 31, compared with headline earnings per share of 81 cents in 2020.
Two weeks ago, the announcement of the expected headline loss per share in a trading statement caused a more than 26 percent decline in the share price and yesterday morning WBHO traded 1.14 percent lower than the previous day at R82.55.
Net asset value slipped to R4.2bn versus R5.6bn in the same period a year before.
The loss to be recognised in Australia would comprise R988m trading losses, a R497m impairment of goodwill, reversal of deferred tax assets of R351m, derecognition of assets and liabilities and non-controlling interests amounting to R108m and a R400m foreign currency gain.
During the six months the African operations delivered solid results and maintained activity levels. New work procurement in the UK remained hampered by the low business confidence.
The Australian government’s approach to controlling Covid-19 infections also had a severe impact on the construction and other industries over the last 12 months.
This resulted in reduced activity and further losses being incurred by WBHO Infrastructure and Probuild Constructions in the interim period.
Revenue from Australia declined by 32 percent due to Covid-19, exit from the states of Queensland and Western Australia by the building business, as well as the completion of the Western Roads upgrade project in the previous reporting period.
A substantial operating loss provided for stemmed from the costs on delayed projects, potential penalties and a decreased reliance on variation and contractual claims.
WILSON Bayly Holmes-Ovcon (WBHO) has called it a day in Australia after its operations there face continuing Covid-19-related losses, while the environment of tension with China, one of the group’s major clients in that country, also made further investment too risky.
The group, which put its substantial, but loss-making Australian construction operations under administration on February 23, would likely face a challenging period in the next six months, its management admitted yesterday.
WBHO had already provided some R2 billion in equity funding and substantial parent company support to its loss-making Australian businesses over the past few years.
“The political tension between Australia and China as well as the recent collapse of the Chinese property sector and subsequent financial difficulties being experienced by some Chinese developers, creates further uncertainty as Chinese developers have historically formed a large proportion of Probuild’s client base. China is also a major supplier of goods to the construction industry in Australia,” the group said.
WBHO’s board decided that in an environment where “a return to profitability is materially uncertain”, and presented “too great a risk to the group and its stakeholders”, the decision was taken to withdraw any further funding of the Australian operations.
However, while the effects of this decision still needed to be navigated, the outlook for WBHO’s African and UK operations remained positive, its management said.
Also, the waning severity of Covid-19 during the fourth wave worldwide would also hopefully limit the scale of disruptions to economies and businesses in the near future.
The order book increased by 7 percent to R29.8bn, and order book levels within each geographic region remained consistent with those at June 30, 2021.
In its Africa division, including South African, the building and civil engineering division was well positioned and an improvement in construction opportunities in local building markets had sustained order book levels.
In the UK, neither Byrne Bros nor Russell-WBHO secured any significant new work over the six-months, indicative of the market hesitancy over the course of 2021 financial year.
However, market sentiment had improved with an increase in the number of available projects upon which to bid.
The group reported a headline loss per share of 1 613 cents in the six months to December 31, compared with headline earnings per share of 81 cents in 2020.
Two weeks ago, the announcement of the expected headline loss per share in a trading statement caused a more than 26 percent decline in the share price and yesterday morning WBHO traded 1.14 percent lower than the previous day at R82.55.
Net asset value slipped to R4.2bn versus R5.6bn in the same period a year before.
The loss to be recognised in Australia would comprise R988m trading losses, a R497m impairment of goodwill, reversal of deferred tax assets of R351m, derecognition of assets and liabilities and non-controlling interests amounting to R108m and a R400m foreign currency gain.
During the six months the African operations delivered solid results and maintained activity levels. New work procurement in the UK remained hampered by the low business confidence.
The Australian government’s approach to controlling Covid-19 infections also had a severe impact on the construction and other industries over the last 12 months.
This resulted in reduced activity and further losses being incurred by WBHO Infrastructure and Probuild Constructions in the interim period.
Revenue from Australia declined by 32 percent due to Covid-19, exit from the states of Queensland and Western Australia by the building business, as well as the completion of the Western Roads upgrade project in the previous reporting period.
A substantial operating loss provided for stemmed from the costs on delayed projects, potential penalties and a decreased reliance on variation and contractual claims.
BUSINESS REPORT ONLINE