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Wilson Bayly Holmes-Ovcon (WBHO) saw its share price drop by more than 4% on the release of its annual results – despite the fact that the construction group had increased revenue and profit over the past financial year. WBHO announced a 9.8% increase in revenue to R35 billion, R1 billion operating profit, up from R780 million in the previous financial year and headline earnings per share of 1 414.6c, up 8.1% from the previous financial year.

WBHO Louwtjie NelThe share price drop has been attributed to a disappointing result from the company’s UK operations and a shrinking local order book. The revenue contribution from South Africa dropped from 36% to 30%. However, the local market still contributed about half the company’s operating profit. Operations in the rest of Africa grew by 32%, but operating profit dropped from R251 million to R185 million.

Speaking at the release of the results, WBHO CEO Louwtjie Nel said the main detractor from the company’s performance was its building and civil engineering division, which saw revenue and operating profit decline by 10% and 14%, respectively. The division’s order book was also under pressure due to a weak economy and a lack of new demand for construction projects in local building markets, he said.

While South Africa and the UK remained sluggish for the group, Australia saw an 18% increase in revenue.  “Market sentiment was positive in Australia and the UK, while the local construction environment deteriorated rapidly, with a number of large and medium-sized contractors facing financial difficulties,” WBHO said in a statement released with its results.

“Our industry is being disseminated in South Africa,” Nel told the media at the briefing. According to him, WBHO is “everywhere looking for work”, but there is little investment from the private sector or in public infrastructure.

Nel said the South African National Roads Agency (Sanral) has resumed the awarding of contracts to consulting engineers, but this has not yet progressed to awards to contractors. In addition, there is very little work coming from state-owned companies and not much from the renewable energy sector yet. The only increase in work locally has come from the coal mining sector, with WBHO winning bids to construct two new mines for South32 and Anglo, as well as two mine expansions for Exxaro.

Image credit: http://www.wbho.co.za/directors-test/

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