Thursday, September 4, 2008

WBHO to expand building division in Africa, Middle East

By Roy Cokayne, Business Report, September 4, 2008

Wilson Bayly Holmes-Ovcon (WBHO), the listed construction and engineering group, is poised to expand the footprint of its building division to the United Arab Emirates (UAE), Mauritius and Zambia.

Louwtjie Nel, WBHO's group chief executive, said yesterday that it would be impossible for the company to sustain its growth from South African operations without having to take market share and cut its margins. However, growth from the domestic market would continue for another two or three years.

Speaking after a presentation on the group's annual results, Nel said the group hoped to establish its building division in the UAE in January.

The company had been doing its homework, and the demand for it to enter the UAE market had come from professionals - such as architects, quantity surveyors and project managers - who had been in the UAE for several years.

There were a lot of civil contractors who needed a building arm, he said. WBHO could add quite a bit in terms of financial, technical and management expertise.

WBHO planned to enter into an equal joint venture with a local partner in the UAE.

It would take three or four key management people from its South African operations and, supported by its local partner, bring in other people using international brokers.

"We really don't want to take out 30 guys here to do a big job," he said.

Nel said the entry of the group's building division into Mauritiust was prompted by demands from its retail clients.

WBHO had been in Mauritius many years ago when it built a few hotels in resorts for the Kerzner group.

It was now negotiating two shopping centre contracts, each worth about R500 million, and its client did not want to use any other contractor.

It aimed grow the unit in Mauritius and "get some dollar income" for the group.

"You never know what the rand is going to do," he said.

WBHO was heavily involved in roads and civil work in Zambia, but not in building because very few subcontractors were available.

But subcontactors in South Africa did not have that much work since the banks tightened up on their credit lending, he said. The group was trying to get five or six key contractors to establish a team before entering the Zambian market.

Boosted by strong growth by its building and civil engineering, and roads and earthworks units, WBHO earlier this week reported growth in headline earnings a share to R12.631 in the year to June from R5.121 the previous year.

Revenue rose by 34 percent to R10.9 billion.

The building and civil engineering division increased its revenue by 37 percent to R7.8 billion, with operating profit falling by 118 percent to R484 million.

WBHO shares fell 1.79 percent to R144 yesterday.