Key message: The cost to exit Australia seems certain now – the A$135m guided in June 2022 still applies. A strongly growing order book in continuing operations points to a positive outlook.  

  • WBHO released FY22 results. Overall revenue and operating profit from continuing operations fell by 11% and 8% respectively with the operating margin improving to 5.0% (from 4.8%). HEPS from continuing operations declined by 2% to 1297c.
  • The exit from Australia in February 2022 resulted in a large loss from discontinued operations (R1.9bn).
  • The impact of the Australian exit on WBHO’s cash is as follows:
    • Operating cash loss from Australia R1.6bn
    • Payment to settle obligations R853m
    • Loss of control of subsidiary R674m
    • Total cash impact R3.1bn
    • Operational cash from continuing operations R1bn
    • Overall cash balance declined by R2.5bn to R3.3bn.
  • Remaining cash obligations include A$11m of guarantees and A$30m for WRU final settlements (to be funded via R520m facility raised in SA). WBHO remains within the forecast obligation to exit Australia of A$135m. WBHO has provided for these costs in FY22.
  • While an expensive exercise, the exit from Australia looks to be the right decision as conditions in that market remain very difficult. The final costs to exit do appear known now with little risk of further cash outflows.
  • The outlook for the continuing operations has been bolstered by a strong recovery in the order book (+43%) with WBHO able to negotiate large projects again (as opposed to bidding for smaller work).
  • We value the continuing operations and assume there are no further cash losses in Australia.
  • Our Target Price increases to R121 (from R114) as the order book picks up strongly and WBHO starts to concentrate on its core operations.
  • Despite a lack of public infrastructure opportunities, WBHO is well placed for the increasing volume of private sector work, particularly in mining, energy and industrial projects.

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