WBHO considers shedding 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.