Biggest builder’s dividends on hold

Wilson Bayly Holmes-Ovcon (WBHO), SA’s largest construction company by market value, has joined a number of companies in withholding dividends, closing the tap on a R48m shareholder payout to keep itself financially flexible amid the coronavirus pandemic.

Companies in sectors such as mining and property have in recent weeks reviewed their dividend policy due to the uncertainty over coronavirus, which has triggered a 21-day nationwide lockdown that is set to shut down factories, mines and stores and potentially force analysts to throw out their corporate earnings estimates.

Thanks to its diversification strategy, WBHO has held on to most of its value while most of its peers have succumbed to the least construction activity in SA in more than a decade.

The group was supposed to pay a dividend of 80c per share on April 20, but said on Wednesday it expects the 21-day lockdown from midnight on Thursday to affect its SA operations.

“The board will continue to monitor the impact of Covid-19 on the company’s operations and remains committed to consider the continuation of the dividend history in future financial periods, once circumstances permit,” the group said.

“The company has implemented the necessary plans to ensure the start-up and continuity of the SA operations post this period. This lockdown will affect the SA operations. In these uncertain conditions the protection of cash reserves is deemed necessary by the board.”

The group had returned to paying dividends for its half-year to end-December, saying new business in the Western and Eastern Cape had offset further contraction in Gauteng.

WBHO did not declare an interim dividend in the six months ended December 31 2018, citing liquidity volatility in the SA and the rest of Africa markets, its acquisitions in the UK and low profitability. That was after it had acquired a controlling, 60% interest in Manchester, UK-based contractor Russells and a 31.7% share in Russell Homes, for £32.8m (R666m) and £3.3m, respectively.

Russell Homes specialises in land acquisition and planning applications for in-house and developer-led residential schemes and is experienced in delivering a full spectrum of builds, from cost-effective social housing to executive homes and luxurious bespoke.

WBHO’s share price closed 0.7% higher at R81, lagging a 2.4% rise in the JSE all-share index.