JSE-listed development and engineering group WBHO grew its order book by 43% to R22.2 billion at end-June despite its exit from the Australian market.
WBHO Group CEO Wolfgang Neff mentioned on Tuesday that put up its year-end, the group has secured a further R1.4 billion in new constructing work and R1.6 billion in new awards inside its roads and earthworks division.
Neff additionally reported progress in personal renewable vitality alternatives and confirmed that the group’s tasks division secured R3 billion in new photo voltaic plant contracts in South Africa after the reporting interval.
He mentioned the UK can also be trying up, with letters of intent acquired for 2 tasks in London price simply over £100 million (R2 billion) whereas the group additionally has £260 million (R5.2 billion) in imminent awards within the UK market.
Neff mentioned there was sturdy progress within the group’s order book throughout all divisions and key areas within the yr to end-June, including that market circumstances stay aggressive however the short- and medium-term pipeline of alternatives is powerful throughout a number of sectors.
Australian exit
Prior to its determination to exit Australia, WBHO labored on a deal in 2019/2020 to get rid of Probuild in Australia, wherein it had an 88% shareholding.
Neff mentioned Chinese-Australian geopolitical pressures received in the best way of the deal, which was disallowed by the Australian authorities.
He mentioned circumstances in Australia subsequently worsened considerably to such an extent that on 23 February 2022 WBHO withdrew all additional monetary assist for its Australian enterprise, leading to these companies being positioned in administration.
“We did this to protect the rest of the business. There is no doubt in my mind that we made the right call in this regard,” mentioned Neff.
“From what I can see, we are now ready for growth and confident our shareholders will soon start seeing value again.”
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WBHO monetary director Charles Henwood mentioned the Australian enterprise contributed about 60% of group income since 2018 and on common contributed 20% to the group’s working revenue previous to 2020.
But, he added, there was excessive underperformance by the Australian enterprise for numerous years, with the working losses and supreme derecognition of the Australian operations eroding about R4.5 billion in fairness over three years.
Henwood mentioned the prevailing market circumstances throughout the Australian development business vindicates WBHO’s determination to exit the nation.
WBHO chair Louwtjie Nel mentioned WBHO solely wants the stamp of approval from the State of Victoria for 2 points on the Western Roads Upgrade (WRU) challenge earlier than the group can finalise its exit from Australia.
Results
WBHO on Tuesday reported a 11% decline in income from persevering with operations to R17 billion within the yr to end-June from R20 billion within the earlier yr.
Operating revenue from persevering with operations declined by 7.6% to R859 million from R930 million.
The group reported a internet loss for the yr of R2.27 billion in comparison with a R351 million revenue within the earlier yr.
Headline earnings per share from persevering with operations decreased by 19% to 1 297 cents from 1 322 cents.
A dividend was not declared.
Comment
Marc Ter Mors, international head fairness analysis at SBG Securities, mentioned there’s a want to tell apart between WBHO’s exit from Australia and the core persevering with enterprise, the place the order book grew considerably.
He highlighted that WBHO’s adjusted order book has virtually doubled – to R32 billion by round mid-August if further contracts awarded put up year-end in addition to some close to orders and revenues that WBHO would have delivered in July 2022 are added.
“The conclusion therefore is that if you, as an investor, can accept some of the continuing risk in Australia, I think there is a very good opportunity and a good outlook,” mentioned Ter Mors.
“We probably have more confidence as well in the stability and the delivery capabilities across the UK and African markets for WBHO, which would derisk the outlook as well.”
Ter Mors mentioned SBG Securities positioned WBHO on a speculative purchase and never a purchase largely due to the continued danger of elevated prices in Australia.
But he mentioned it does look as if WBHO’s exit from Australia has turn out to be extra imminent though two excellent selections are awaited from the state authorities. These relate to the deeds WBHO has agreed on for price overruns and the 12-year guarantee interval on the efficiency of the WRU contract.
He mentioned these two deeds are for about A$30 million (R352 million), which if accepted will lead to an outflow of the identical quantity from South Africa to Australia – however {that a} provision has already been made for this.
“There is still a slight risk if the [Victoria] government were not to accept those deeds and WBHO would have to renegotiate with the operators and the government on WRU to arrange an exit,” he mentioned.
Shares in WBHO declined by 0.45% on Tuesday to shut at R76.65.
