WBHO hails upbeat outlook
BIG PAYDAY: CONSTRUCTION GIANT PAID A DIVIDEND FOR THE FIRST TIME IN THREE YEARS Optimism high as group sees almost 20% growth in project pipeline.
JSE-listed construction and engineering group WBHO is upbeat about its short to medium future, with CEO Wolfgang Neff stating “it’s not all doom and gloom in our space”.
“I think it [the group’s future] looks pretty good. Our earnings are at their best levels in over a decade,” Neff said this week during a presentation on WBHO’s financial results for the six months to end-December.
The group has also paid a dividend for the first time in three years. Its share price responded to the positive financial results and comments, rising by 5.14% on Wednesday to close at R138.78 per share.
Neff said WBHO’s earnings are at the best levels in over a decade following solid growth and the WBHO team has done exceptionally well in managing the group’s liquidity, which now allows it to resume dividend payments.
“We have made good progress in restrengthening our balance sheet, and our strong order book and robust pipeline across the divisions provide a really positive short- to medium-term outlook.
“I think we are in a really, really good space at the moment,” he said.
Order book
Neff said the group is “very pleased” to have sustained its order book across all divisions, which is at record levels.
“Further to that, there is a big chance of awards by June of about R13 billion in roads and earthworks and about R6 billion within the building and civil division on tenders we have already submitted. That in fact excludes a number of Sanral [SA National Roads Agency] projects … because generally Sanral takes a bit longer to award tenders.”
He added that since June last year, WBHO has been awarded R1.5 billion worth of work on two engineering, procurement and construction wind farm projects apart from other midsized projects in the building and civil and road and earthworks divisions. WBHO’s total order book increased by 22.8% to R32.55 billion at end-December from R26.5 billion in December 2022. An almost 20% growth in the group’s project pipeline has further increased WBHO’s optimism. Neff said they only include projects in their project pipeline that they will likely bid on and where the work will commence on site in the next 24 months.
“Pleasingly the pipeline of work in building and civil engineering has generally increased, with large increases in industrial buildings and warehousing at 60%. Data centres are huge, increasing by 96% on June [2023] and we see increased activity from hotels and health while the energy infrastructure pipeline also remains really high.”
Neff said mining infrastructure was the only sector where there has been a reduction in the pipeline but indicated that this made sense given the lower commodity prices and miners delaying some of their expenditure.
He said it is seeing a similar decline in mining-related infrastructure work in the roads and earthworks space while Sanral is still bringing out huge amounts of work, although there has been a slight decline in the high-value road pipeline work they are targeting.
Swing in ratio between public and private work
Neff said water infrastructure is potentially massive, with opportunities increasing substantially. He said there are a few extremely large water schemes in planning at the moment by the Lebalelo Water User Association and Trans Caledon Tunnel Authority.
“Given all the work from Sanral and the renewable [projects] around, the ratio between public and private work has swung to 80/20 from 56/44 in June [2023].
“But the overall pipeline in this division has improved from R76 billion to R91 billion, so there has been a substantial increase in the potential work out there,” he said.
Neff added that WBHO has definitely retained its ability to negotiate a lot of the group’s work, particularly for repeat clients.
“That is our competitive advantage as the projects get bigger. I think clients seek reliability; clients want to be sure that the contractor they employ has got the resources to execute the work and also guarantee facilities.
“Not all contractors out there are able to raise guarantees on large projects. That does give us a bit of an edge,” he said.
Analyst’s take
Rowan Goeller, an analyst at Chronux Research, said WBHO’s order book, particularly in South Africa, looks very promising and the fact that it has resumed dividend payments, especially in the interim period, is a positive statement to the market.
He added that WBHO’s activity levels and order book have picked up quite substantially over the past year or so and it looks like this will continue.