JSE-listed construction and engineering company Wilson Bayly Holmes-Ovcon (WBHO) on September 13 said its order book has shown strong growth of 43% across all divisions and key regions for 2023 and beyond, and its Africa order book has reached a record level of R1.44-billion for the 2023 financial year.
"We are confident the ongoing business is strong and lays a solid foundation for the next chapter and history of the company," CEO Wolfgang Neff said during a presentation of the company's results for the financial year ended June 30, 2022.
The company's order book for 2023 and beyond stood at R22-billion, and it had secured an additional R1.4-billion in roads and earthworks building works since financial year-end and had secured an additional R1.6-billion in new awards within the roads and earthworks division since year-end, he said.
"The order book in building and civil engineering increased by 35% to R11.54-billion, and we saw a marked improvement in the second half of the financial year. It should support baseloading of the company for 2023 to 2024," he said.
The company only included projects that were likely to start within 24 months in its order book, he pointed out.
"Market conditions remain competitive; however, the short- to medium-term pipeline is strong across multiple sectors," he said.
Group revenue from continuing operations decreased by 11% to R17-billion for the financial year ended June 30. Revenue from South Africa increased by 1.4% to R11-billion, while revenue from the rest of Africa declined by 35% to R2-billion. Revenue from the UK operations declined by 24% owing to the limited availability of work.
Segment operating profit from continuing operations declined by 8% to R859-million from R930-million in the prior financial year, primarily owing to the lower activity levels in the UK. Operating profit from the African operations increased to R701-million from R667-million at a combined operating margin of 5.4%.
Further, group earnings from continuing operations were 1 303c a share compared with restated earnings a share of 1 293c for the prior financial year. The loss a share from total operations amounts to 4 062c, compared with 594c for the year to June 30, 2021.
Headline earnings from continuing operations amounted to 1 297c a share from 1 322c a share in the comparative period. The headline loss from total operations amounts to 3 693 a share, compared to headline earnings a share of 619c in the preceding financial year.
"The Building division performed well across all regions and experienced a noticeable improvement in procurement activity over the second half of the year, resulting in a substantial increase in order book levels," Neff said.
"Building activity declined by 3.9% and would have likely been in line with that of the prior year had it not been for the suspension of the large-scale River Club development in the Western Cape," he added.
"The improvement in available construction opportunities within local building markets alongside the award of a number of large-scale projects strengthened the Building order book levels. The Gauteng and Western Cape regions have a solid baseload of work extending well into the 2024 financial year and, although general market conditions remain competitive, a more selective approach can now be adopted when considering future opportunities," he said.
The forward-looking pipeline remains robust with further large-scale projects including public-private partnerships in the process of adjudication, Neff added.
Meanwhile, revenue from the civil engineering division declined by 16% as the division struggled to fully replace the suspended liquiefied natural gas infrastructure contract in Mozambique with local projects.
However, improved commodity prices and increased opportunities within the renewable energy sector resulted in an 11% increase in activity in South Africa.
"Two mining infrastructure projects secured in the 2021 financial year that had been completed in the current period, were replaced with a new project at the Two Rivers Platinum mine, secured late in the financial year. Construction at the 147 MW Roggeveld Wind Farm was also completed," he said.
"Other significant projects include the re-access works at Kusile, which is expected to reach final completion in the 2023 financial year, the ongoing construction of a 158-m-diameter concrete reservoir with associated pipework and valve chambers in joint venture with Voluntary Rebuilding Programme partner, Motheo Construction and marine, civil and electrical engineering works for the construction of a new tug jetty at the port in eThekwini."
Further, revenue from the Roads and Earthworks division decreased by 10% compared with the prior financial year. However, the operating margin improved to 6.8% from 5.8%.
"Revenue [from the Roads and Earthworks division] generated in South Africa increased marginally compared with the 2021 financial year, but revenue from the rest of Africa decreased by 33%. The decline in activity within the rest of Africa was centred in Mozambique, where the division was unable to replace the sizeable revenues generated from the large-scale gas infrastructure projects suspended in the 2021 financial year," Neff said.
"Further, in South Africa, the division experienced a strong uptick in activity from mining infrastructure projects as the improvement in commodity prices continues to support new capital expenditure programmes from the major mining houses.
"Existing projects for Seriti Coal, Kumba Iron Ore - a subsidiary of Anglo American - and South32 were complemented by new tailings facilities for Harmony at Kareerand and Gold Fields at Doornpoort, a new contract for Anglo American Platinum that is part of the Mototolo and Der Brochen life extension project and additional works for Kumba at the Kolomela mine," Neff said.
During the current 2023 financial year, building work in the rest of Africa excluding South Africa will be centred in Lesotho and Botswana. Opportunities exist in Ghana and Botswana with further prospects available in Rwanda, Kenya and the Democratic Republic of Congo, he added.
"The high degree of certainty obtained from the imminent finalisation of the group’s exit from Australia, the substantial improvement in order book levels and a solid forward-looking pipeline have boosted the medium-term outlook for the Group and should facilitate the strengthening of its financial position to former levels," he said.
Further, volatility within world markets, driven by supply constraints, rising inflation and Russia's invasion of Ukraine, have increased the possibility of a global recession and creates some uncertainty over future longer-term market conditions.
"Nonetheless, the group has demonstrated its resilience having successfully negotiated its way through depressed economic conditions and a perpetual shrinking of the construction market in South Africa, the impact of Covid-19 on all operations over the last two years and a costly disinvestment from Australia," Neff said.