WBHO toys with idea of shedding its Australian subsidiary Probuild
WILSON Bayly Holmes-Ovcon (WBHO) is mulling an offer for its 88 percent-held Australian subsidiary Probuild as the group braces for an increase in operating losses from that continent for the year to June.
WBHO’s share price increased 3.1 percent to R103 on the JSE yesterday afternoon, before closing at R102.
One of building company Probuild’s most recent projects is Melbourne CBD’s tallest tower, Aurora Melbourne Central. In the six months to December 31, WBHO’s operating profit had been negatively affected by losses in Australia, with most of the growth in that country coming from the Western Roads Upgrade Project (WRU). Probuild, however, had a strong, but lower order book at that stage.
The group said in a separate trading statement yesterday that while infrastructure and building projects continued during the lockdown in Australia, productivity had been impacted by the pandemic.
Completion of the WRU project had been delayed, with increased costs anticipated “as a result of delayed design completion, the discovery of unknown services, unidentified contaminated soils and the performance and profiteering of utility owners, as well as their subcontractors.”
Also, completion of the 443 Queens Street project had to be extended by a further two months to the end of October 2021.
For the year to June 2020, revenue from Australia was expected to improve by 5 percent over the prior year, mainly due to a weaker rand, but the operating loss was expected to weaken by up to 200 percent due to the impact of Covid-19 and further provisions to complete projects.
WBHO said the Probuild acquisition proposal was subject to a number of conditions, including a due diligence and a mutually agreed share sale agreement, and discussions were under way.
The WBHO board said they were also assessing other options for Probuild
to ensure shareholder value was maximised. WBHO said, however, that it remained optimistic about the longterm fundamentals of Probuild and its longer-term growth prospects in the Australian market.
Revenue and operating profit for WBHO’s building and engineering division were expected to be between 15 and 50 percent lower, respectively, for the year to June 30, due to the impact of the 10-week lockdown in construction in South Africa.
In the roads and earthworks division, revenue was expected to fall at least 10 percent and operating profit at least 40 percent, because most of the projects were suspended through differing lockdown periods, barring in Ghana, where projects had continued to operate.
In the UK, other than four client-suspended projects in London, all remaining projects continued to operate, but productivity had been affected. Nevertheless, revenue and profit for the year were still expected to be up by at least 5 percent.
SANTAM said in a trading update for the four-month to end April yesterday that the lockdown and economic slowdown had negatively impacted premium growth as new business acquisition reduced significantly.
“Santam Commercial and Personal intermediated business continued to experience strained growth in the current economic climate, exacerbated by the impact of Covid-19 on new business acquisition during April.
“The loss ratio benefited from a benign claims environment experienced since January, with the lockdown further reducing claims activity during April. This was partly offset by provisions for Covid-19 related business interruption claims,” Santam said.
Santam said it had provided refunds and discounts of R327 million to policyholders in April as the financial services company received muted claims during the month as a result of the lockdown regulations.
The group said the lockdown resulted in a muted claims environment for the month, mostly impacting the motor class of business.
“Santam and MiWay both provided premium refunds and discounts on motor policies as well as other premium relief support to personal and commercial policyholders amounting to R327m. Support of R42m is also being provided to small, medium and micro-enterprises and other suppliers,” the group said.
The group was satisfied with its conventional insurance business segment, which achieved a net underwriting margin at the midpoint of the target range of 4 to 8 percent.
“Satisfactory growth in gross written premium, excluding the premium relief, was achieved,” the group added.
During the period of uncertainty, the group has assured its shareholders that its balance sheet held up well during the excessive market volatility.
“Significant foreign currency gains following the weakening of the rand were offset to some extent by fair value losses on listed equity and bond portfolios,” the group said.
Its capital, liquidity and funding positions remain robust and the group said it operated effectively in the face of unprecedented global uncertainty presented by the Covid-19 pandemic.
“Santam’s economic capital coverage ratio remains above the 150 percent threshold and its regulatory capital position remains strong, following the payment of the 2019 final dividend on March 30,” the group said.
Santam will release its results for the six months to end June on September 3.
Santam shares closed 3.05 percent higher at R284.38 on the JSE yesterday.