WBHO HEPS down 1.4 per cent due to low operating profits - CNBC Africa

WBHO HEPS down 1.4 per cent due to low operating profits

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“I suppose one can look at it as a year of consolidation. We have come through tough times where we have had to tender on much lower margins and we've had a few problem contracts but I think we're happy to come out virtually square on last year,” Mike Wylie, Chairman of WBHO told CNBC Africa on Monday.

The company’s revenue increase by 32.9 per cent from 17.9 billion rand in 2012 to 23.8 billion rand in 2013 due to solid growth within each of their operating divisions as well as a general improvement in the construction operating environment.

“The increase in turnover gives us a good base to move forward from. We also haven’t been pushing revenue but rather pushing quality of earnings so to have that growth of 33 per cent is looking positive for the upcoming year,” said Wylie.

WBHO’s [DATA WBO:WILSON BAYLY HOLMES-OVCON LIMITED.]operating profits however were down 3.7 per cent from 976 million rand in 2012 to 939 million rand this year, with a corresponding decrease in the operating margin from 5.5 per cent to 4 per cent.

According to reports, the reduction in the company’s earnings is primarily due to the additional provision of 91 million rand in respect of the Competition Commission’s penalty which they had to pay for their involvement in the construction industry collusion.

The Competition Commission had initially levied 1.46 billion rand in penalties against 15 companies in the construction industry for collusive tendering related to projects concluded between 2006 and 2011.

“We did our best to pay what we though was a fair fine but in the end, we didn’t see eye to eye with the Commission on the criteria which they used and therefore it ended up being 3.9 per cent of our turnover, explained Wylie.

“That was very disappointing but we had to settle and get this thing behind us. At the end of the day, we made some mistakes and we had to move on.”

Another significant factor contributing to the group’s loss was the tax treatment and margin dilution of three of their contracts in Australia.

“Australia has got an upside but it is a tough market, with the current dollar strength and the South African economy being under pressure but we’ve been there for 13 years and started from nothing so I still think we are well placed there,” he said.

Wylie added that a lot of restructuring has also been taking place in management over the past 2 years in their Australian division however he is certain that many opportunities still await.

“There was a lot of restructuring as well but I think we are pretty happy with the management team that is now in place. We are a 1 tier contractor over there which is going to open a lot of doors for us,” he said.

Overall, Wylie pointed out, WBHO will be focusing on improving the quality of their earnings.

“We just have to improve the quality of our earnings and that in construction terms really means that we can’t make mistakes, can’t have bad contracts and need to ensure our guys can cope with what they have got,” he exclaimed.

WBHO’s forthcoming agenda, Wylie projected, will see the company sticking to consolidation instead of expansion as well as work on improving the quality of their earnings.

 He added that they had several contracts in the pipeline for the upcoming years and would soon reach their target of a 30 billion rand turnover.  

“The company is in good shape, our management team and balance sheet are. We also had good cash flows this year. We’ve got a lot to offer and really want to help the government build this country and alleviate poverty. That is what we are here for,” Wylie concluded.