| Wed 21 Oct 2009, 12:39 | | MUR - Murray & Roberts Holdings - 61st Annual General Meeting - Business |
|
MUR
MUR
MUR - Murray & Roberts Holdings - 61st Annual General Meeting - Business
Update
MURRAY & ROBERTS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1948/029826/06
JSE Share Code: MUR
ISIN Code: ZAE000073441
("Murray & Roberts" or "Group")
61st ANNUAL GENERAL MEETING
BUSINESS UPDATE
There is growing evidence that key aspects of the global economy are showing
signs of recovery, with many commodity prices and volumes having lifted
appreciably and stabilising off recent lows, global resources groups
cautiously reintroducing new capital expansion plans and the banking sector is
showing strong signs of recovery.
This recovery in key commodity prices has brought some stability to the
Group`s international markets through Clough, Middle East and Cementation.
However, continuing strength of the South African currency will have a
negative impact on the translation of these earnings.
General business conditions in the Group`s South African markets have been
slow through the first quarter of the new financial year, and the local
economy is expected to take longer than previously forecast to emerge from the
effects of recession. There is currently little private sector involvement in
the South African market, which negatively impacts the short to medium term
outlook for domestic mining, industrial and commercial project opportunity.
Public infrastructure projects have continued to support activity in the local
market, with numerous programs underway to either meet 2010 FIFA Soccer World
Cup demand or to overcome service capacity backlogs.
The Group`s project order book at 30 September 2009 remained steady at about
R40 billion, continuing a trend over the past 6 months since March 2009 where
revenue replacement has been possible from a quality Project Opportunity
Pipeline that has increased to R80 billion based on new opportunities of R42
billion in the quarter.
For clarification, the Murray & Roberts Opportunity Pipeline is not the
market. It is the sum of those project opportunities that have passed through
an initial filter system and against which tender investment has or will be
committed.
A number of project-related factors largely outside the control of the Group
are expected to impact the performance of the Engineering SADC cluster in the
short-term.
- First Quantum`s Kolwezi Project in Democratic Republic of
Congo which formed an important order for Wade Walker, has
been suspended by the government.
- Access to site for mechanical erection at Medupi Power
Station is expected to be further delayed, despite
acceleration of the foundation and civil works; and
- structural steel fabrication start-up and performance at
Genrec has been severely disrupted by significant design
changes and information delays.
- Locomotive fabrication and assembly at UCW is ramping up to
full production, but public sector budgetary constraints
have significantly reduced the refurbishment allocation of
metro system units into the company.
The possible impact of these issues on prospects for the half-year to 31
December 2009 and full year to 30 June 2010 is currently being assessed.
In summary, currency translation, performance issues in the Engineering SADC
cluster and a South African market struggling with recession, may limit
operating performance in the current financial year. This is exacerbated by
the fact that the construction economy lags other economic sectors. Additional
revenue recognition from Gautrain to 30 June 2010 will depend on appropriate
progress with the resolution of outstanding claims and variations.
A further Business Update and market guidance for the half-year to 31 December
2009 will be published on 25 November 2009, following a meeting of the
directors to consider first quarter performance and the updated budget for the
financial year to 30 June 2010.
Working Capital
The Group has previously signalled that working capital demand generally
increases with a portfolio of major projects and/or public sector projects.
The cause is often inadequate project definition resulting in scope variations
and cost consequences. The subsequent validation and valuation process
requires the application of complex contract mechanisms. This is particularly
the case in public sector contracts where such matters generally require
formal third party resolution processes such as arbitration or litigation.
The Group has experienced project based working capital demand on Concourse 2
in Dubai and Gautrain in South Africa; through advance inventory build up in
manufacturing companies UCW and Hall Longmore; and increasingly on the
mechanical subcontract for the Medupi Boiler Project.
The Group has secured additional banking facilities to support working capital
demand and a dedicated team under executive committee leadership has been
appointed to manage the Group`s focus on working capital reduction over the
year ahead.
Competition Matters
The Group is committed to open competition in its markets and believes that it
has proactively endeavoured to detect evidence of collusive conduct previously
existed in its operations and has reported such conduct to the Competition
Commission ("Commission") under the Corporate Leniency Policy of the
Competition Act 89 of 1998. In this respect the Group has to date received
conditional leniency in the following market sectors:
1. Concrete Products
2. Mining Roof Bolts
3. Mesh Reinforcing
4. Reinforcing Steel
The Commission has embarked on a comprehensive investigation into many aspects
of the construction and related materials and subcontract industries. This is
a complex process and the Group continues with its proactive internal
investigations and comprehensive education programs across its operations, and
is cooperating fully with the Commission in this respect.
The many levels of complexity in competition matters make it possible that the
Group could still be named by the Commission based on its future findings from
these investigations. However, the Group believes that it would have a valid
defence in such circumstances and remains committed to the establishment of an
open competitive environment in its sector.
A Board Sub-Committee has been appointed to ensure that competition concerns
are appropriately dealt with in the Group and a dedicated team under executive
committee leadership is responsible for the day-to-day detection and
compliance education programs.
The information in this Business Update has not been reviewed or reported on
by the Group`s auditors.
Bedfordview
21 October 2009
Sponsor
Deutsche Securities (SA) (Pty) Ltd
Date: 21/10/2009 12:39:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
