Market Update: June 2019
WILSON BAYLY HOLMES - OVCON LIMITED
Building and civil engineering contractors
(Registration no. 1982/011014/06)
ISIN No: ZAE 000009932
Share code: WBO
MARKET UPDATE: JUNE 2019
The directors of Wilson Bayly Holmes-Ovcon Limited (‘WBHO’ / ‘the group’) wish to advise shareholders of
developments within the group during the second half of the financial year ending 30 June 2019.
Order book by segment (Rm) % 30 June % 31 December % 30 April
2018 2018 2019
Building and civil engineering 12 5 986 13 6 387 14 6 905
Roads and earthworks 9 4 164 11 5 408 13 6 626
Australia 66 32 565 58 29 294 54 25 107
United Kingdom 13 6 446 18 9 016 19 8 671
100 49 161 100 50 105 100 47 309
WBHO continues to deliver to clients’ expectations in an exceptionally competitive Building market. Lower
activity levels continue in Gauteng, while the coastal regions are experiencing increased activity. Eight major
building projects (greater than R1 billion in value) offer good opportunities in the future if these projects
proceed. Building activity in the rest of Africa is constrained with no new projects secured but opportunities
continue to be explored.
Limited opportunities exist in the local civil engineering market; although Prasa depot upgrades offer major
opportunities and work opportunities in Zambia and Mozambique appear promising. Progress on the crude oil
terminal facility in Saldanha was set back due to labour unrest and this has delayed final resolution of the
contractual position. Management remains confident that the contractual position will be satisfactorily resolved,
but the group maintains its conservative approach to profit recognition on this project. The Building and civil
engineering division has executed well in the current market and increased their order book by 8% compared to
The Roads and earthworks division continued to secure work through the year with growth in South Africa and
Botswana (mining sector activity), Lesotho (access road to Lesotho Highlands water project) and Mozambique
(enabling works to gas field development). West African opportunities remain limited and no new work was
secured from SANRAL in South Africa. The South African divisions have performed well but overall profitability
has been impacted by the challenges experienced in Saldanha and on the EN4 road in Mozambique. Importantly,
the Roads and earthworks order book has increased by 23% compared to December 2018. In the SADC region,
nine major projects (greater than R850 million) offer great opportunities for the group if these projects proceed.
Changes in the South African political landscape have yet to take effect and are only expected to positively
influence the industry in the future. Significant challenges experienced in the South African economy coupled
with the state of the construction industry has resulted in a significant increase in skilled employees emigrating.
WBHO is committed to working with government in unlocking projects over the medium-term and management
has reinforced its commitment to the Voluntary Rebuild Programme.
Despite reducing, the Building order book remains strong with growth in student accommodation and
commercial refurbishment sectors. This is in line with the group’s strategy to limit growth in favour of focussing
on profit enhancement. .
The Building business is well positioned to secure work in the commercial sector which has strong future
prospects, particularly in Melbourne. Probuild has secured three projects post 30 April 2019, which have added
R5, 4 billion to the Australian order book. Probuild and the WBHO Infrastructure western region performance is
expected to be in line with the first half of the year.
The forecast loss position on Western Roads Upgrade (WRU) project is expected to remain as reported in the
interim results, with delivery in line with completion programme. The design has been split into functional
packages to achieve sign off, so as not to affect construction delivery program. Discussions continue with the
client with regard to variations and potential claims. Potential claims against professional designers will be
finalized for submission in due course.
Performance from both UK subsidiaries continues to be in line with expectations in terms of delivery, execution
and securing of new work. The uncertainty of Brexit has slowed the market; however, the secured order book
at 30 April 2019 amounting to £468 million is in line with December 2018.
Due to consolidation within the market and opportunities offered by the independent power programme RMS
is performing satisfactorily despite a declining South African market. Aggressive pricing experienced in the first
half of the year persisted during the second half of the year and cashflow management remains a challenge.
Local construction associates continue to struggle with very little work in the RSA market while international
associates are performing in line with expectations.
This statement has not been reviewed or reported upon by the company’s auditors.
By order of the board
28 June 2019
Sponsor: Investec Bank Limited
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