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Market Update: June 2017
WILSON BAYLY HOLMES - OVCON LIMITED
Building and civil engineering contractors
(Registration no. 1982/011014/06)
ISIN No: ZAE 000009932
Share code: WBO
MARKET UPDATE: JUNE 2017
The directors of Wilson Bayly Holmes-Ovcon Limited (‘WBHO’ / ‘the group’) wish to advise shareholders of
developments within the group during the second half of the financial year ending 30 June 2017.
Order Book:
Order book by segment (Rm) % 30 June % 31 December % 30 April
2016 2016 2017
Building and civil engineering 20 8 683 20 8 090 16 6 946
Roads and earthworks 8 3 041 15 5 839 15 6 870
Australia 72 30 976 65 26 224 69 30 630
100 42 700 100 40 153 100 44 446
Building and civil engineering:
The Building division commenced FY17 with a strong order book and has executed projects effectively
throughout the year. As was reported in the latest interim results, local building markets are showing signs of
tapering, particularly within the retail and commercial office sectors. Additionally various high value projects
have either reached completion or are nearing completion which together with a lower order intake is
reflected in the 14% decrease in the overall building and civil engineering order book at 30 April 2017.
While the Civil engineering division has struggled with a low order intake for some time, the award of the
commercial crude oil terminal at Saldanha, to be executed in conjunction with the Roads and earthworks
division, has alleviated some pressure.
Roads and earthworks:
The Roads and earthworks division has performed well in the current year to date. The second half of the year
saw a marked improvement in the value of secured work across a wide range of sectors resulting in an 18%
increase in the division’s order book since 31 December 2016. Pleasingly, activity levels in West Africa have
improved with the division securing new mining projects in Guinea, Burkina Faso and Ghana.
Australia:
Despite the previously reported loss-making project in Brisbane, the building divisions within Probuild continue
to perform satisfactorily and, having secured a number of iconic projects during the year, the order book
remains healthy. The planned strategy to strengthen the business’s presence in other key states in order to
reduce reliance on the Victorian market continues to progress well.
Whereas WBHO Infrastructure’s penetration of the metropolitan infrastructure markets has been slower than
anticipated, the business has performed above expectations in Western Australia.
Construction materials:
Reinforced Mesh Solutions (RMS) continued to encounter strong competition and aggressive pricing during the
second half of the year.
Corporate activity:
The group has recently concluded a number of corporate transactions. These relate to the restructuring of two
subsidiaries, namely Edwin Construction and Capital Africa Steel, and a new investment as the group seeks
access to new geographies.
Edwin Construction
In order for Edwin Construction to qualify as a ‘black-owned’ company under the Settlement Agreement
signed with Government earlier in the year and to enable WBHO to meet its obligations under that agreement,
the group has reduced its controlling interest in the company from 57% to 49% through a share buy-back , for
which WBHO received a consideration of R44 million.
Capital Africa Steel (CAS)
Following a decision of the minority shareholders to exit the business and place their shares on the market, the
group decided to purchase the 44% minority shareholder interest in CAS for a consideration of R95 million.
Despite the challenging conditions currently facing the steel market, CAS remains a strategic asset in support
of the group’s local construction activities.
Byrne Group plc
Limited growth prospects within local sectors and the potential to build for existing clients in developed
markets in Europe and the United Kingdom (UK) prompted the group to explore a possible entry into these
markets during the course of the year. After due consideration the UK market was identified as offering the
most potential at acceptable levels of risk.
The group has acquired a 40% interest in the Byrne Group for a consideration of £12 million. The Byrne Group,
established in 1969 is one of the leading frame contractors within the Greater London area as well as a smaller
main contractor, a strong strategic and cultural fit which will benefit both the Byrne Group and WBHO’s
growth objectives.
Settlement Agreement:
While certain companies which are party to the above agreement have elected to dispose of an interest in
their businesses, WBHO elected the second option and has identified three established black construction
companies whom we will work together with over the coming years. Subject to the approval from the
Competition Commission, the commencement of the 7 year period over which to meet the 25% turnover
target is 1 July 2017.
The full liability in respect of the contributions to the socio-economic fund was recognised in the consolidated
financial statements of the group at 31 December 2016.
This statement has not been reviewed or reported on by the company’s auditors.
By order of the board
Johannesburg
23 June 2017
Sponsor: Investec Bank Limited
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