- Workers were told to leave sites yesterday
- External factors have significantly disrupted the companies operations and revenues
- The 18 businesses that fall under WBHO Australia, including Probuild, have had Deloitte appointed as administrator
South African-based Wilson Bayly Holmes – Ovcon Limited (WBHO) has today confirmed it will no longer provide financial assistance to its Australian division, putting their major construction company Probuild into administration.
Yesterday it became public knowledge that workers were told to leave their sites, fuelling speculation WBHO intended on pulling the pin.
Though several construction companies have been placed into administration over the past year, such as Pindan and Jaxon Constructions, none have been at the scale of Probuild which had a portfolio of about $5 billion.
Writing on the wall
In 2020, the Chinese State Construction Engineering Corporation made a $300 million bid to purchase Probuild. However, this offer was withdrawn in early 2021 due to advice that the Foreign Investment Review Board (FIRB) would likely declare the transaction a risk to national security.
Upon this sale not materialising, WBHO implemented a contingency to consolidate and stabilise the business. The efforts become fruitless the company’s annual report noting that the highly competitive and contractual Australian construction environment saw risks on “large mega-building projects outweighing the current margins available.”
A range of external factors have ploughed their projects, as noted in a report to shareholders.
“The Australian government’s hard-line approach of managing Covid-19 through a combination of border restrictions, snap lockdowns and mandatory work-from-home regulations for many sectors, has had a considerable impact on property markets as well as other industries such as the leisure industry,” the report said.
“Border restrictions have resulted in hundreds of thousands of foreign students, tourists and investors unable to gain entry to the country. Population levels in the two major cities of Melbourne and Sydney have shown negative growth as a result.
“The impact of lockdown restrictions on the retail, hotel and leisure and commercial office sectors of building markets have created high levels of business uncertainty in Australia and have significantly reduced demand and delayed the award of new projects in these key sectors of the construction industry.”
About 2 billion rand ($183 million) had been injected by the parent company over the past four years, along with bank guarantees, to keep the company floating.
The board in Johannesburg said yesterday that is can “no longer see a strategic imperative to retain WBHOA within the group; and WBHOA has significantly depleted the resources of the group.”
The company added the losses will have a significant impact on the overall company’s financial position.
“The Company has the support of its South African financial institutions and intends to honour its existing parent company obligations provided to Australian institutions,” the company said in a statement.
“The losses to date, together with the closure of WBHOA and the cost of the parent company obligations will have a significant impact on the Company’s consolidated statement of financial position and consolidated statement of financial performance, however but the Company remains liquid and the limitation of losses from WBHOA is expected to have a positive effect on the financial position of the Company going forward.”
WBHO’s share price crashed by 27% on the Johannesburg Stock Exchange to a level not seen since the beginning of the pandemic.
What is next?
The company has 18 major commercial and public sector projects nationally with 13 of these in Victoria. Deloitte has been formally appointed as administrator of WBHO Australia Group, which includes Probuild and 17 other businesses. Now the consulting team is seeking an appropriate new buyer.
Sal Algeri of Deloitte said the pandemic had been challenging for many business, and noted WBHOA had been impacted by certain loss-making projects.
“Our immediate focus will be to undertake an urgent assessment of the entities’ financial positions and work with key stakeholders to stabilise the business and projects where possible.
“We will also also be commencing a sale and recapitalisation process, in order secure a new owner for the businesses.”