A total of 18 companies in the WBHO Australia group, including construction giant Probuild, have been placed in administration.
- Probuild’s South African parent company has withdrawn financial support for its Australian operations
- This decision led the directors of Australian construction companies to place them in administration
- The companies involved employ around 750 people and work with thousands of entrepreneurs
Deloitte has been appointed as a trustee by WBHO Australia (WBHOA), which directly employs around 750 people and has thousands of other contractors working on its projects.
The company has annual revenues of $1.4 billion and has 18 major commercial and public projects at various stages of development in Victoria (13), New South Wales (3), Queensland (1) and Australia. Western Australia (1).
Although originally established in Western Australia in 1987, WBHOA is now based in Melbourne, with offices in Sydney, Brisbane and Perth.
The Australian company is owned by South African construction giant Wilson Bayly Holmes-Ovcon Limited (WBHO), and it was a decision by the parent company to end financial support for its Australian operations that led to financial administration .
“WBHO has determined that effective February 22, 2022, the company through WBHOC will no longer provide financial assistance to WBHOA,” the South African company told investors.
“This led the WBHOA Board of Directors to begin with a request for WBHOA administration.”
The South African parent company said it had injected more than 2 billion rand ($183 million) into its Australian subsidiary over the past four years, in addition to providing it with loan guarantees.
COVID delays blamed for company’s demise
He blamed Australia’s strict COVID-19 restrictions as a major factor in the WBHOA’s unprofitability.
“The company’s project delivery capability is of particular concern, which has been negatively impacted by unforeseen COVID-19 restrictions, the contracting environment and the increased difficulty in lifting warranty facilities needed to secure new work.” , said the parent company.
In particular, the parent company blamed COVID-9-related restrictions and lockdowns for some costly project delays.
“Australian companies were unable to complete projects on time and were unable to recover variation and delay claims, resulting in significant losses during the financial period to to date and the need for additional funding and balance sheet support from the WBHOC,” he added. .
He also said his earlier efforts to sell the business had been frustrated by regulators.
“In 2020, the company entered into negotiations with a third party to sell the Probuild business. This transaction progressed to terms agreed in December 2020, but Australian Foreign Investment Review Board approval was not forthcoming. achieved,” the WBHO said.
“Following this, WBHO implemented its strategy of downsizing the business and considered other sale options, which proved unsuccessful due to potential acquirers’ concerns about the impact of the regulatory approach to COVID.
The South African company’s share price plunged more than 27% yesterday on the Johannesburg Stock Exchange after its announcement.
Administrators are looking for buyers
Deloitte’s turnaround and restructuring chief, Sal Algeri, said he and his fellow directors hoped to find a buyer, or buyers, for the companies.
“The COVID-19 pandemic has created difficult business conditions for many companies, and for WBHOA, which has also been impacted by some loss-making projects,” he noted in a statement.
“Our immediate focus will be to undertake an urgent assessment of the financial condition of the entities and to work with key stakeholders to stabilize activity and projects where possible.
“We will also begin a sale and recapitalization process, to secure a new owner for the businesses.”
Despite a construction boom since the pandemic, success is not guaranteed for even the biggest of builders.
The Grocon Group constructed some of Australia’s tallest buildings before its bankruptcy in 2020, blaming a single project for sinking the decades-old business.