WBHO’s earnings take a hit from settlement charge

Listed construction and engineering group, WBHO, recently reported a 4.1 percent increase in full-year revenue to R31.9 billion. Despite facing challenges in various regions, the company managed to achieve higher profitability from its roads and earthworks division, offsetting a decrease in profits from Australia. Revenue from the rest of Africa declined by 33 percent due to lower activity in Mozambique and Botswana. Australia's revenue, on the other hand, saw marginal growth to R18.6 billion, representing 58 percent of the group's total revenue, with South Africa contributing 36 percent. Mike Wylie, Chairman of WBHO, provided insights in an interview with CNBC Africa. Wylie expressed contentment with the company's performance, highlighting that headline earnings and earnings per share increased, even with political and economic challenges. He acknowledged that WBHO had to absorb the full impact of a settlement charge, affecting earnings growth, which would have otherwise been around 15 percent. Despite this, Wylie remained positive about the results, indicating a growth trajectory. Online, the interview led to discussions about the performance of WBHO in the Australian market, particularly pointing out the Queensland project that caused some trouble. Wylie addressed this concern, mentioning the Cooperoo project on the Gold Coast as the only loss-making job. Looking ahead, he reassured that the outlook in Australia was optimistic, emphasizing that without the troublesome project, the results would have been even better. Furthermore, he highlighted the growth in South African turnover, attributing it to the roads and earthworks division's significant expansion, despite a marginal dip in the building sector. While Africa experienced a decline in growth, Wylie conveyed WBHO's cautious approach in selecting projects with lower risk and profitability potential. The company's strong order book, up by 5 percent to approximately R44 billion, demonstrated stability and growth potential. Wylie's optimism extended to the future performance in Australia and South Africa, urging government support for infrastructure spending, which is critical for the construction industry. He emphasized the importance of public-private partnerships and government collaboration to drive infrastructural development in the region. Despite the challenges, Wylie conveyed enthusiasm for the transformation in the industry, particularly with increased black ownership and the industry's charter driving positive change. Regarding potential industry consolidation, Wylie acknowledged the possibility in a scenario where infrastructure spending falls short. He noted the tough competition and tough financial conditions in the sector, indicating that some companies may face failures or consolidation as a result. In summary, WBHO's positive financial results, coupled with strategic planning and cautious project selection, position the company for growth in both the Australian and South African markets, provided there is adequate government support for infrastructure development.