Finance

R1.88bn government office accommodation project goes to WBHO

JSE-listed building and engineering group WBHO has been awarded a R1.88 billion public-private partnership (PPP) contract to build new office accommodation for the Department of Rural Development and Land Reform.

It is to be developed on the location of the previous Berea Park cricket and soccer grounds on the southern entrance to Pretoria’s central business district.


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WBHO stated public sector infrastructure spending has been fast-tracked, with many shovel-ready initiatives accelerated throughout the entire group’s operations.

It stated there was a noticeable enhance in South Africa within the availability of latest initiatives from state-owned entities, together with nationwide roads company Sanral, Eskom, Transnet, passenger rail company Prasa and Rand Water.

Read: Infrastructure spending enhance within the finances (Feb 24)

The group stated renewable power initiatives have additionally gained momentum below Eskom’s emergency power spherical and that bidding in respect of Round 5 is predicted to be launched within the second quarter of 2021.

However, WBHO continued to bleed from the troublesome Western Roads Upgrade (WRU) project in Australia within the six months to December 2020, which had a big damaging influence on the group’s monetary efficiency for the interval.

WBHO CEO Wolfgang Neff stated on Wednesday the group was awarded the Department of Rural Development and Land Reform PPP project final week and began work on it the subsequent day.

“We have been working on that PPP for 10 years to get it awarded,” he stated.

Neff stated the group’s street and earthworks division’s forward-looking pipeline in South Africa has improved considerably during the last quarter.

“For example, we have R10 billion of tenders in the office for Sanral and there is R5 billion of projects we have priced that still need to be awarded that we believe we have a reasonable chance of securing,” he stated.

Read: Civil project awards enhance to highest degree in 4 years (Dec 2020)

Neff stated Eskom has launched large-scale initiatives at varied energy stations and, encouragingly, mining infrastructure alternatives have picked up as commodity costs have not too long ago gained energy.

He stated the renewable power sector additionally affords alternatives for the group’s street and earthworks division.

Neff stated the group’s project pipeline contains R11 billion of renewable power initiatives, which is huge.

He stated the initiatives pipeline includes initiatives price about R249.3 billion however these are solely initiatives it believes can be awarded within the subsequent 24 months.

Neff added that there was a notable discount within the group’s project pipeline in Australia in contrast with the order e-book, however that is consistent with the plan to cut back Australia to a smaller proportion of the business relative to the opposite divisions.

The group’s order e-book was largely maintained throughout all working segments regardless of the difficult atmosphere; it was at R35.36 billion at end-December 2020 in contrast with R35.77 billion the earlier year.

The numbers

WBHO reported a 11% decline in group income to R20.4 billion within the six months to December from R22.9 billion within the earlier corresponding interval.

Revenue from Australia declined by 27% in Australian greenback phrases due to the lockdown restrictions carried out in Melbourne and strict project choice geared toward securing extra manageable and lower-risk initiatives for the suitable shoppers.

Operating revenue earlier than non-trading objects slumped by 58% to R111 million from R264 million.

The lower was primarily a results of the influence of Covid-19 on the Australian constructing business and an extra lack of Au$28 million offered for on the WRU project in contrast with the popularity of a lack of Au$20 million on this contract within the prior interval.

Headline earnings per share plunged by 80% to 81 cents from 411 cents.

WBHO monetary director Charles Henwood stated the WRU project has been a fabric loss to the business and that the group has in essence accounted for a loss on this project of Au$160 million.

“It’s a huge huge loss to the business. In the period, we sent Au$34 million to Australia in effect to fund the losses on WRU. We are still anticipating an outflow to Australia to June of Au$37 million to close out WRU,” he stated.

Henwood stated the group continues to be under its working revenue margin goal of three% at 0.6% but when the loss on the WRU project was added again, it will have had a 2.2% revenue margin.

“To get to 3%, we might have wanted to obtain a revenue margin in Australia primarily based on the present mixture of about 1.5%.

“We still think that with a reasonable result from Australia we can get within that operating profit margin range. The rest of our businesses are operating well above the bottom end of that range,” he stated.

Further provisions on WRU ‘disappointing’

Peregrine Capital govt chair David Fraser stated WBHO’s monetary outcomes have been a blended bag and it was disappointing that there have been additional provisions on the WRU project in Australia.

Fraser stated WBHO has now made 5 provisions for the WRU project.

“They are simply fortunate that they had such a robust stability sheet as a result of this could have taken out most individuals [companies].

“There are not many companies that can write a R2 billion cheque and live to see the other side,” stated Fraser.

He added that South African infrastructure contracts and potential contracts are “clearly the bright spot on the horizon”, including that WBHO is clearly tendering good on Sanral and doubtless joyful to lose the primary wave of contracts and maybe get the second wave contracts at barely higher margins.

He stated WBHO’s UK business has helped the group during the last 18 months however appears to now be coming off the boil, which is a little bit little bit of a priority.

Shares in WBHO rose 0.16% on Wednesday to shut at R99.50.


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