WBHO
WBHO CONSTRUCTION
WBHO Surviving and Thriving in Torrid Times PRODUCTION: Timothy Reeder
Wilson Bayly Holmes-Ovcon (WBHO) Construction is among the largest construction companies in Southern Africa, with decades of experience in major projects spanning Africa, the Middle East and Indian Ocean islands. South Africa’s construction sector has been a brutal environment to operate in over the last decade, but WBHO continues to stand firm amid the hardship and challenge which has seen so many others crumble. www.enterprise-africa.net / 3
INDUSTRY FOCUS: CONSTRUCTION
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Today, the WBHO group is one of the largest construction companies in Southern Africa and is listed on the JSE, driven by a core of dedicated, hands-on management professionals whose cumulative experience spans decades of major construction projects. FULL SPECTRUM WBHO’s offices are strategically positioned in Johannesburg, Cape Town, Durban and Port Elizabeth, with construction activities covering the full spectrum divided into three main operating divisions: Building Construction, Civil Engineering and Roads and Earthworks. WBHO also entered the Australian market in 2000 after acquiring an initial 40% interest in Probuild Constructions, its subsidiary with headquarters in Melbourne. “A decade later, with WBHO’s support, Probuild has developed into a tier one contractor having shown consistent yet controlled growth
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throughout the period.” Key to the success of this relationship has been the parallels in the values, culture and attitudes of both sets of management. “WBHO’s building division is recognised as a leader in the South African building industry,” the group goes on, with his arm of its business having gained numerous plaudits over the years for its role in such milestone achievements as PWC Tower and Atterbury’s Mall of Africa. “Having established a reputation for quality, reliability and delivering against budget, the division regularly exceeds client expectations and is able to negotiate a number of projects every year as a result.” The civil engineering arm serves to add diversity to the division’s margin streams, and strengthens the overall earnings of the group with some noteworthy civil works and expansion projects. The roads and earthworks section of the group operates across multiple traditional civil engineering
// YOU CAN FOCUS ON BUSINESS PROCESSES AS MUCH AS YOU LIKE, BUT IT OFTEN COMES DOWN TO THE EXPERIENCE AND JUDGEMENT OF INDIVIDUAL PEOPLE // disciplines, and has undergone strategic acquisitions in order to gain exposure to a number of additional specialist disciplines. “The division has a particular strength when operating in Africa,” it expands, “and has developed a successful formula for trading in the region.” Setting this outfit apart from the crowd is a modern fleet of plant and effective teams, all of whom are encouraged to work in unison with consultants and clients.
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INDUSTRY FOCUS: CONSTRUCTION
AUSTRALIA FAILURE At one time looking like becoming one of WBHO’s crowning glories to date, the upset of the Western Roads Upgrade (WRU) design and construct project has taken a heavy toll on the group. Consisting of the widening of roads and upgrades to various intersections in suburban Melbourne, WBHO Infrastructure was appointed as the lead contractor responsible for the delivery of the project to the concession company: eight high-priority road upgrades, almost 30 kilometres of duplicated lanes and in excess of 260 kilometres of road rehabilitation and maintenance for 20 years across Melbourne’s west formed the bulk of the brief. Unsurprisingly, the Western Roads Upgrade project is Victoria’s largest single investment in arterial roads to date. It is a first of its kind for an arterial roads network in Australia, with its availability-style public-private partnership, and will help enormously to
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not only support the rapid population growth in Melbourne’s west, but to create jobs for local workers and provide less congestion on the roads. The interpretation of the project’s technical specification, however, has caused significant tumult and subsequent losses, as WBHO CEO Louwtjie Nel explained in February. The misunderstanding boils down to the underestimation of the physical work required to meet the output specifications of the contract, and has been blamed for a plunge in operating profit from R510-million for the six months to end December 2017, to R3million for the same period last year. He added, however, that delivery of the project had now started with a strong project team in place, to ensure performance against the revised cost estimates included in the forecast loss. “You can focus on business processes as much as you like, but it often comes down to the experience and judgement of individual people,” Nel elucidated
// WBHO’S BUILDING DIVISION IS RECOGNISED AS A LEADER IN THE SOUTH AFRICAN BUILDING INDUSTRY // for Engineering News, adding that the provision for the WRU project negated otherwise solid results within WBHO. “This could have been a very good six months for us.” The African business, including South Africa, continued to go against the grain and perform well amid turbulent and lacklustre market conditions. In the UK meanwhile, the Byrne Group, in whom WBHO acquired a controlling stake in June 2018, returned to profitability and the recently acquired Russells Limited delivered profitability in line with expectations. WBHO reported an increase in
WBHO CONSTRUCTION
revenue from R18.1-billion to R20.1billion, owing largely to the first time consolidation of the UK businesses. The group’s total order book reached R50.1billion at the end of December, a rise of 1.9% from the close of June 2018. SURVIVAL MODE “SA’s construction industry is being demolished,” is BusinessDay’s stark take on the current state of the sector. “While the construction industry is notoriously cyclical, the current mix of a depressed SA economy, high levels of national debt and low infrastructure spending is proving toxic as contracts dry up.” “Those construction companies that are SA-orientated have gone from bad to worse in the past 12 months,” Marc Ter Mors, head of equity research at Johannesburg-based SBG Securities, said. “In SA, volumes are low, pricing is under pressure and companies are taking on more risk to win contracts, so margins are thin and that hits cash flow. There are no real segments to hide in.”
In April, one of the country’s flagship construction and engineering companies, Group Five, joined a sadly burgeoning list of building firms to have closed its doors. One of the most shocking cessations, it stated that it would retrench a large chunk of its 7000 workforce as it had not been able to service its debt nor to grow its client base. The summer months onwards have brought an unlikely renewed hope, though, and as gaps are left by disappearing businesses these will need to be filled by sturdy, reliable and reputable firms. Last year, too, president Cyril Ramaphosa announced the creation of a massive, centralised infrastructure fund, run by experts in the presidency and using private sector managers. The fund is expected to invest R400 billion over the next three years. If construction demand does start to turn, there is one local firm in particular that has been pegged
to be supremely well positioned by Schalk Louw, portfolio manager and strategist at PSG Wealth Old Oak. “If you have patience and you aren’t short-sighted, I believe there is a good opportunity and solid value in Wilson Bayly Holmes,” he decreed. “Yes, they have certainly made a mistake in Australia,” he admitted. “But it looks like it may be a one-off mistake, and importantly, it looks like they have made sufficient provision for it.” WBHO is still generating good cash flow, with stable growth and very little debt. While the current implosion in the construction sector is proving devastating for some; “it does offer opportunities for companies like WBHO which has been managed conservatively,” Louw rounded off.
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