WBHO – Following the yellow brick road

WBO delivered a commendable result in 1H24, driven by a solid performance from the Roads and Earthworks segment, which benefitted from large roadwork projects and increased activity in the mining infrastructure and energy infrastructure sectors.


The group did benefit from a weak rand during the period, which increased revenue and profitability, providing a 14.8% y-y boost to the UK segment. On a GBP basis, the UK segment continues to struggle in tough market conditions, with elevated inflation and interest rates. However, with the exit from Australia now complete and all large liabilities settled, WBO’s balance sheet and cash flow has now been rectified, placing the builder in a good position for growth.


As a result, it has received a number of large project awards in the roadwork, civil engineering and building sectors aided by its improved bonding capacity. However, the increase in activity and order book does not necessarily come with improved profitability.


In this report, we assess WBO’s history with Sanral and its ability to maintain its recent tender successes. We discuss the effects of government and lump-sum projects on profitability and break down the UK segment’s true performance and route to recovery. The weaker rand could assist the UK in FY24, but it is not the solution to the issues in the segment. High inflation and interest rates resulting in project suspensions or delays as well as threatening viability are key risks.


The outlook for the group is positive, with growth expected within SA and a recovery from RoA potentially boosting profitability. Cost management will need to be a key focus, in our view, if management is to recover in the UK and prevent margin slippage.