Black fund sum hits WBHO
• Voluntary settlement with state saw headline earnings per share fall
One-off nontrading items hit Wilson Bayly Holmes-Ovcon (WBHO) for a six in the interim period to December 2016.
These included a R170m payment arising from the voluntary agreement the construction and engineering group had signed with the government. This saw headline earnings per share plunge 38%. Without this, earnings per share and headline earnings per share would have risen about 10%.
The payment will see WBHO contribute R21.5m annually over 12 years to a fund aimed at developing black-owned construction groups.
The full liability is recognised in the current period.
The group saw a 16% rise in revenue derived from SA. Revenue from continuing operations of R15.4bn was in line with revenue in the 2015 period. But the lack of mining activity in the rest of Africa saw revenues from the region plunge by 42% over the comparative period.
Meanwhile, Australian revenue in rand was largely flat. This saw operating profit fall by 4.7% to R471m. The overall margin for the group slipped from 3.2% at the end of December 2015 to 3.1% in the 2016 period.
“We have seen good growth in our roads and earthworks order book, with various road contracts and bulk earthworks awards in SA,” CEO Louwtjie Nel said. With the improvement in commodity prices WBHO had been awarded mining projects in West Africa.
“Building markets in Australia remain buoyant. There are infrastructure opportunities in the metropolitan areas and we are pleased with the 37% growth in our infrastructure order book [in Australia],” Nel said.
The settlement agreement with the state had translated into “massive transformation in the construction industry”. This had gone a long way in rebuilding relationships with government.
“We believe that this will unlock more opportunities going forward and do not expect our revenues to be diluted. Rather [we] see this as an opportunity to enter new areas [in construction], creating a winwin [situation] with our enterprise development partners.”
Mish-al Emeran, equity analyst at Electus Fund Managers, said on Tuesday that as with WBHO’s construction sector peers, its results were negatively affected by the liability arising from the settlement agreement with the government. “Adjusting for this one-off liability, Heps [headline earnings per share] would have increased by about 10%, in line with our expectations,” he said.
WBHO’s building and civil engineering operations performed well, with strong growth in building offsetting revenue declines in civil engineering.
“While roads and earthworks revenue and operating profit declined, margins improved in what is a competitive market,” Emeran said.
“But disappointingly the Australian division’s profitability was negatively affected by delays in construction starts and a loss-making residential project, which meant margins decreased to 1.2% from 1.5%,” he said. Total equity invested by WBHO in associated companies, including those supplying gas and electricity in Mozambique, came to R162m.
Income from these associates of R18m came on top of a dividend of R20m from one of these firms.
Group investments fell by R154m since June 2016 following a capital repayment of 14-million Australian dollars from a property development in Australia. Cash balances fell by R601m since June 2016 to R5.2bn, mainly on a stronger rand, share transactions in Australia and the purchase of additional treasury shares during the period. Cash generated from operations came to R136m, compared to R953m in the comparative period.