New-look Murray & Roberts ‘ready for up-cycle’

The restructured and refocused Murray & Roberts (M&R) anticipates improved results in the new financial year as analysts and researchers predict an upswing in the natural resource markets.

The group on Wednesday shortly before market close announced its annual results for the year ended June 30. The share price lost value during the day and closed 4.34% lower at R13.68. It has gained 24.13% in the year-to-date.

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During the reporting period M&R concluded the sale of its South African Infrastructure and Building businesses and transferred its JSE listing from the heavy construction sector to diversified industrials.

CEO Henry Laas said: “Murray & Roberts has transformed itself into a multinational engineering and construction group, with a focused portfolio of businesses providing services primarily in the natural resources market sectors of metals & minerals, oil & gas, and power & water.”

It also settled all its disputes related to the construction of the Gautrain, announced the closure of the Middle East business, and the increase of its stake in the Bombela Concession Company (BCC) from 33% to 50%.

The group reported a 15% decrease in revenue from continuing operations excluding the Middle East, to R20.8 billion. Diluted continuing headline earnings per share (Heps) excluding the Middle East increased by 8% to 212c.

Attributable earnings however dropped from R753 million in the previous financial year to R48 million, reflecting a R570 million loss in the Middle East, R160 million profit in Bombela Civils Joint Venture following the settlement of the Gautrain disputes and a R170 million charge, which is the net present value of the cash contribution over twelve years in terms of an industry settlement with government.

The order book for continuing operations dropped from R28.7 billion at year-end last year to R26.9 billion. The company said the low order book reflects current market conditions, but maintains it is of a high quality “given the prudent approach we apply to mitigate project risk at tendering stage”.

M&R said near orders are looking robust and the medium-term project pipeline is strong, specifically in both the underground mining and the oil & gas businesses.

The dividend was maintained at 45c per share. The company said: “Notwithstanding the losses incurred in the Middle East, the board took into consideration the group’s strong cash position, partly as a result of the Gautrain settlement, as well as the view that FY2018 will be the start of a new Ebit growth period, supported by analyst and third party research citing mainly the current turn in the metals & minerals cycle.”

Looking forward, M&R says its strategy and business model is now clearly defined “and the focus is on optimising business performance and growing shareholder value”.

M&R believes its financial position is strong and expects financial performance to improve. This should support the plans for organic and acquisitive growth.

“Notwithstanding persistently trying market conditions and the possibility for potential future losses from the group’s remaining non-core businesses, the business in the Middle East and Genrec, we believe an improvement in the group’s financial performance can be expected in the next financial year,” the group said.

Laas said while the natural resources market sector is cyclical, leading researchers are of the opinion that the metals & minerals cycle has already turned. He said M&R is well positioned for the up-cycle.

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