WBHO flags lower earnings

Wilson Bayly-Holmes Ovcon (WBHO) expects lower earnings for the year ended June 30 as the construction and materials group works towards wrapping up costs associated with exiting Australia.

JSE-listed construction and materials group Wilson BaylyHolmes Ovcon (WBHO) expects lower earnings for the year ended 30 June as the group works towards wrapping up costs associated with exiting from Australia.

WBHO said on Thursday headline earnings per share (heps) are expected to be at least 3.6% worse than the prior year’s restated figures, to touch 1,274c.

While earnings per share (EPS) are expected to be at least 1.1% lower than the comparative period at 1,279c.

The company valued at R4.9bn on the JSE said total operations, which include the discontinued Australian operations, are expected to produce a loss per share of at least 3,657c and headline loss per share of at least 2,751c compared with earnings per share of 594c and heps of 620c at June 30 2021.

In February, the SA parent company of WBHO announced it had withdrawn all future funding, other than that needed to honour existing obligations of its Australian operations. The action forced WBHO Australia into administration and ended its relationship with the Australian construction industry after more than 20 years of being in that market.

The construction giant said putting that segment of the company into administration had allowed major subcontractors to cancel their contracts, subsequently resulting in increased costs to contract subcontractors to the client to achieve final completion of outstanding work.

It has entered into a deed of company arrangement (DOCA) to resolve issues between creditors and the administration entities in a bid to “significantly reduce any tail of trailing say or litigation” as it orchestrates its Australian exit.

“The DOCA results in the group achieving certainty and a cap on costs with regard to the closure of Australia operations allowing the group to focus on continuing operations,” said WBHO.

Wrapping up costs associated with the exit requires the group to increase the expected costs of closure from A$119m to A$135, it said.

In previous half-year results, the group disclosed that the Australian business needed about R2bn in cash funding from SA, besides support in the form of guarantees — at A$119m — which were provided in order for it to operate in Australia.

WBHO welcomed the improvement in commodity prices over the course of the last two years that has boosted construction spending from the SA mining sector, compensating for the Sanral contract cancellation disappointment.

The Afrimat Construction Index (ACI) released last week, showed that construction activity declined 3.5% in the first quarter of 2022, illustrating that activity levels and confidence in the SA construction sector were declining again after rebounding strongly from the negative effects of the Covid-19 lockdowns.

In SA, where it competes with the likes of Stefanutti Stocks Holdings, Raubex and Afrimat, WBHO said that the emergence of increased demand for data centres had the potential to improve future activity within the building and civil engineering sector, with operating profit expected to be at least 8% better than the comparative period.

WBHO’s share price fell 1.97% to R80.93 having dropped 27.04% in the year to date. Results for the year ended June 30 are expected to be announced on September 13.