A turbulent end to a decade of great change for Murray & Roberts
25 August 2010
"Murray & Roberts ends this first decade of the 21st Century significantly different and in better condition than through the 1990's, perhaps in its 108 year history to date. However, it is stormy economic times in the world and the Group is engaged with a number of significant projects that are experiencing a variety of difficulties associated with such times."
Brian Bruce Group Chief Executive
In releasing its financial results for the year to 30 June 2010, South Africa's leading engineering and contracting group Murray & Roberts, has highlighted the turbulence it has experienced in a year characterised by great achievements and difficulties with funding in its portfolio of major projects.
Group chief executive Brian Bruce stated, "The scale and duration of major projects secured by the Group over the past few years presents a number of challenges, not least of which is how to account for revenues earned relative to cash received. This is particularly the case," he says, "on long duration major projects where significant costs might have been incurred, but for which payment is subject to claims resolution over an extended period."
In this context a cumulative total of R1,4 billion in uncertified revenues has been conservatively recognised in the company's financial accounts to date.
An additional charge of R619 million was expensed in the year on the Gautrain Project which represents the 45% Murray & Roberts share of an increase in the estimated cost to completion of the civil infrastructure works for the project and includes the additional cost of successfully delivering the Sandton to OR Tambo Airport link ahead of schedule for the 2010 FIFA World Cup.
Murray & Roberts also completed a number of major projects in the year, the most noteworthy being Greenpoint Stadium in Cape Town and Sorbonne University in Abu Dhabi. Various subsidiaries made significant contributions to the preparation works for the soccer world cup and in Australia, Clough secured a leading position in a number of major projects.
Murray & Roberts remains strong and cash positive. Its order book has been stable over the past 15 months at about R42 billion, but a general slowdown is evident with only R30 billion of new opportunity entering the company's project pipeline over the past six months.
"The construction sector remains muted in South Africa," says Bruce, "which is in contradiction to the higher levels of activity we are experiencing in our international markets."
The company expanded its presence in Chile during the year, specifically to service the mining sector in the region. "In what has been described as an amazing feat of engineering, our Chilean partner has drilled a 690 metre relief hole to the 33 miners trapped underground for more than 2 weeks at the San Jose mine" says Bruce. "Our existing subsidiary has secured the order to drill and expand a new shaft using its specialist drilling equipment over the next few months, to enable the trapped miners to be brought to surface."
Revenue declined slightly in the year to R32,0 billion with Operating Profit down 36% to R1,8 billion at an Operating Margin of 5,6%. This margin is within the Group's strategic range of 5,0% to 7,5% and if corrected for the Gautrain charge, increases to 7,6%.
An increase in working capital in the year resulted in a higher interest charge and diluted headline earnings was 50% lower than the previous year at 340 cents per share.
A final ordinary cash dividend of 53 cents per share has been declared.
Murray & Roberts has stated that it should expect growth in the year ahead, coming off the low base caused by the Gautrain charge. However, the level of growth will depend on order book development in South Africa, the settlement of major project final accounts, a reduction in working capital and progress with the Eskom Power Program, which to date has been subjected to delay.
For further information contact:
Mr Ed Jardim
Group Communications Manager
Murray & Roberts Client Service
Tel: +27 (0)11 456 1144
Fax: +27 (0)86 637 0113