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Business Update
WILSON BAYLY HOLMES - OVCON LIMITED
(Incorporated in the Republic of South Africa)
Registration no. 1982/011014/06
JSE Share code: WBO
ISIN No: ZAE 000009932
(“WBHO” or “the Group”)
BUSINESS UPDATE
The group issued its Annual Integrated Report to stakeholders on 13 October 2014. The Annual
Integrated Report together with the full consolidated financial statements and other supplementary
information has been published on the group’s website at www.wbho.co.za.
The information provided below has not been reviewed or reported on by the group’s external
auditors.
The market conditions across the group’s operating segments are essentially unchanged from those
reported upon in the Annual Integrated Report. The table below reflects the group’s order book by
both segment and geography at 30 September 2014 (Q1 of FY15) after which a brief update on each
of the group’s operating segments is provided.
ORDER BOOK
By segment (Rm) % 30 September 2014 % 30 June 2014
Building and civil engineering 23 8,733 23 8,207
Roads and earthworks 11 4,269 14 5,064
Australia 65 24,572 63 22,880
Total 100 37,574 100 36,151
By geography(Rm) % 30 September 2014 % 30 June 2014
South Africa 31 11,399 31 11,363
Rest of Africa 4 1,603 6 1,907
Australia 65 24,572 63 22,880
Total 100 37,574 100 36,151
BUILDING AND CIVIL ENGINEERING
Activity in the local building markets remains healthy with 6% growth in the book since 30 June
2014. Growth remains localized in Gauteng and Kwa-Zulu Natal (KZN) although conditions in the
Eastern Cape have improved and the division has secured two new contracts at the Coega trade
zone. In Gauteng, the division has secured contracts to construct new offices for Discovery in
Sandton and Abland in Rosebank. In KZN two new office blocks have also been secured.
Internationally, the West Hills mall contract in Ghana was successfully handed over in October, the
division is currently constructing another two retail projects in Ghana and the division is in
advanced negotiations for new projects in Ghana and Mozambique. All current building projects are
progressing well and margins are expected to remain broadly in-line with levels reported on in June.
Activity in the mining sector has shown little sign of improvement and continues to impact the Civil
engineering division. No new contracts have been secured since June and the number of ‘real’
projects on which to bid remains low. At Kusile the environment has improved and the project is
progressing well.
ROADS AND EARTHWORKS
The order book of the Roads and earthworks division declined by 16% over the first quarter .While
no significant projects have been secured in the first quarter, positive scope variations on existing
projects and a number of Smaller project awards have maintained the order book at reasonable
levels.
Production at the North South Carrier Pipeline (NSC), where the division experienced delays in the
prior year, has reached the required levels to complete the contract within the specified dates.
Mining related projects across all the division’s African operations remain scarce although some
opportunities in West Africa are being pursued. Construction of the gas-fired power station in
Mozambique on behalf of the group’s Projects team has begun however other opportunities in
respect of the gas fields in Mozambique are only expected to occur toward the end of FY15. Overall
performance of the division over the first quarter is in line with expectations but the margin
pressure reported on in June persists.
AUSTRALIA
Market conditions remain similar to what was previously reported with the building markets
maintaining reasonable activity levels and the mining sector remaining subdued. The increase in the
order book is predominantly currency related.
The performance of the building divisions in Australia continues in line with expectations. The civil
engineering companies, namely Probuild Civil and WBHO Civil, are both experiencing difficulties in
the execution and completion of two projects which is likely to result in reduced profitability from
these businesses in FY15.
CONSTRUCTION MATERIALS
The continuing operations within Capital Africa Steel (CAS) have performed satisfactorily over the
first quarter although the markets remain challenging.
The sale agreement in respect of Dywidag Systems International (DSI) has been concluded following
Competition Commission approval of the transaction. The competitive bid process for the sale of
Capital Star Steel (CSS) is progressing with the 11 interested parties expected to submit their
purchase proposals by the middle of December at which time all project work in the factory is also
scheduled for completion.
COMPETITION COMMISSION
The Competition Commission has referred a complaint to the Competition Tribunal relating to
alleged collusive tendering , against certain construction companies, including WBHO, in respect of
certain meetings that took place in advance of the 2010 FIFA World Cup, on issues relating to the
construction of the World Cup stadia, such as capacity, skills shortages and mitigation measures for
potential labour disruptions.
As previously indicated, WBHO is firmly of the view that its conduct in this context did not constitute
a contravention of the Competition Act and, on this basis, refused to settle this complaint as part of
the Fast Track Settlement process. WBHO will deal fully with the allegations contained in the referral
at the Tribunal hearing and is confident that it will be able to refute all of the allegations made by
the Commission at the hearing of the matter.
On behalf of the board
Johannesburg
13 November 2014
Sponsor: Investec Bank Limited
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