Key message: The Australian exit is complete, and activity levels in South Africa are picking up. Back to business as usual for WBHO.   

  • WBHO released 1H FY23 results. Overall revenue and operating profit increased by 15% and 10% respectively with the operating margin declining to 4.5% (from 4.7%) due to lower UK margins. HEPS from continuing operations increased by 39% to 819c (from 591c).
  • The exit from Australia is now complete, with minimal further costs from the estimate provided at year-end. A total of R410m was paid to Australia during the period to settle the final bill – this was funded through a R350m load in South Africa. The total cost to settle guarantee obligations was R1.6bn. The operating loss associated with Australia in FY22 was R1.6bn – making the total Australian loss R3.2bn over the last 18 months.
  • WBHO has been able to absorb this payment, with the cash balance falling to R3.3bn by December 2022 (from R5.7bn in June 2021). We expect cash generation to start to build this balance up again, with the R350m loan planned to be paid off by June 2023. A dividend decision will be taken at that time.
  • Building & Civil Engineering (Rev up 31%, OP up 51%): strong performance delivering into a stronger order book. South Africa up in both disciplines. Order book up 2% but was at high levels.
  • Roads & Earthworks (Rev up 0%, OP up 5%): performance in 2H should improve as work started on large new road contracts. Mining and energy project activity also picking up. Order book up 51%.
  • UK (Rev up 0%, OP down 35%): good performance from Byrne Group balanced by loss from Russel-WBHO as capacity was maintained despite low activity levels – a recovery is underway.
  • Gigajoule contributed strongly and paid a R157m dividend.
  • WBHO is starting to feel the benefit of being one of the few capable and liquid large contractors left in South Africa, with a strong order book strong all the country’s challenges. Margin growth may well follow as demand starts to fill capacity. WBHO is negotiating more contracts again.
  • Our Target Price increases to R129 (from R121) as the order book picks up strongly and WBHO starts to concentrate on its core operations.

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