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MUR
MUR
MUR - Murray & Roberts Holdings Limited - Preliminary report for the year ended
30 June 2011
MURRAY & ROBERTS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1948/029826/06
JSE Share Code: MUR
ISIN: ZAE000073441
("Murray & Roberts" or "Group")
PRELIMINARY REPORT
FOR THE YEAR ENDED 30 JUNE 2011
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
for the year ended 30 June 2011
Audited Audited(1)
Annual Annual
R millions 30.06.11 30.06.10
Revenue 30 535 27 851
(Loss)/profit before interest,
depreciation and amortisation (93) 2 123
Depreciation (562) (566)
Amortisation of intangible assets (23) (22)
(Loss)/profit before interest
and taxation (678) 1 535
Net interest expense (194) (122)
(Loss)/profit before taxation (872) 1 413
Taxation (196) (414)
(Loss)/profit after taxation (1 068) 999
Income from equity accounted investments 86 15
(Loss)/profit from continuing operations (982) 1 014
(Loss)/profit from discontinued
operations (note 2) (666) 215
(Loss)/profit for the year (1 648) 1 229
Attributable to:
- Owners of Murray & Roberts
Holdings Limited (1 735) 1 098
- Non-controlling interests 87 131
(1 648) 1 229
(Loss)/earnings per share (cents)
- Diluted (585) 371
- Basic (587) 373
(Loss)/earnings per share from
continuing operations (cents)
- Diluted (387) 318
- Basic (388) 319
Total dividend per ordinary
share (cents)(2) - 105
Operating cash flow per
share (cents) 101 208
(1) Reclassified as a result of discontinued operations
(2) Based on year to which dividend relates
SUPPLEMENTARY STATEMENT OF FINANCIAL PERFORMANCE INFORMATION
Reconciliation of weighted
average number of shares in issue (000)
Number of ordinary shares in issue 331 893 331 893
Less: Weighted average number of
shares held by
The Murray & Roberts Trust (6 737) (7 658)
Less: Weighted average number
of shares held by
Murray & Roberts Limited (676) (676)
Less: Weighted average number of
shares held by
the Letsema BBBEE trusts (28 917) (28 946)
Weighted average number of shares
used for basic per share calculation 295 563 294 613
Add: Dilutive adjustment for share options 1 029 1 233
Weighted average number of
shares used for diluted per
share calculation 296 592 295 846
Headline (loss)/earnings
per share (cents) (note 3)
- Diluted (503) 340
- Basic (505) 341
Headline (loss)/earnings
per share from continuing
operations (cents) (note 3)
- Diluted (394) 314
- Basic (396) 316
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2011
Audited Audited
Annual Annual
R millions 30.06.11 30.06.10
(Loss)/profit for the year (1 648) 1 229
Effects of cash flow hedges (27) (11)
Foreign currency translation movements 4 123
Total comprehensive (loss)/income
for the year (1 671) 1 341
Attributable to:
- Owners of Murray & Roberts
Holdings Limited (1 787) 1 163
- Non-controlling interests 116 178
(1 671) 1 341
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2011
Attributable Non-
to owners of controlling
Murray & Roberts interests
R millions Holdings Limited Total
Balances at 30 June 2009 5 581 1 053 6 634
Total comprehensive income
for the year 1 163 178 1 341
Purchase/disposal of
non-controlling interests (net) (15) (143) (158)
Recognition of financial
instrument on acquisition of
business (55) - (55)
Disposal of business 7 - 7
Net movement in non-controlling
interest loans - (1) (1)
Movement in treasury shares 19 - 19
Movement in share-based payment
reserve 57 - 57
Transfer to non-controlling
interests 18 (18) -
Dividends declared and paid (572) (95) (667)
Balances at 30 June 2010 6 203 974 7 177
Total comprehensive (loss)/
income for the year (1 787) 116 (1 671)
Purchase/disposal of
non-controlling interests (net) (54) 58 4
Net movement in non-controlling
interest loans - 36 36
Movement in treasury shares 20 - 20
Movement in share-based payment reserve 32 - 32
Transfer to non-controlling interests (3) 3 -
Recycled to the statement of
financial performance (3) - (3)
Dividends declared and paid (187) (87) (274)
Balances at 30 June 2011 4 221 1 100 5 321
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2011
Audited Audited
Annual Annual
R millions 30.06.11 30.06.10
ASSETS
Non-current assets 5 563 6 165
Property, plant and equipment 3 325 4 233
Goodwill 435 554
Deferred taxation assets 470 343
Investment in associate companies 564 376
Other non-current assets 769 659
Current assets 11 137 13 512
Inventories 817 1 707
Trade and other receivables 1 929 2 207
Amounts due from contract
customers (note 4) 5 290 5 787
Cash and cash equivalents 3 101 3 811
Assets classified as held-for-sale 2 860 1 448
TOTAL ASSETS 19 560 21 125
EQUITY AND LIABILITIES
Total equity 5 321 7 177
Attributable to owners of
Murray & Roberts Holdings Limited 4 221 6 203
Non-controlling interests 1 100 974
Non-current liabilities 1 873 2 383
Long-term liabilities(3) 1 223 1 529
Long-term provisions 127 84
Deferred taxation liabilities 311 380
Other non-current liabilities 212 390
Current liabilities 11 184 11 315
Amounts due to contract
customers (note 4) 2 244 2 446
Accounts and other payables 7 821 7 024
Bank overdrafts (3) 47 1 245
Short-term loans (3) 1 072 600
Liabilities directly associated
with assets classified
as held-for-sale 1 182 250
TOTAL EQUITY AND LIABILITIES 19 560 21 125
(3) Interest-bearing borrowings
SUPPLEMENTARY INFORMATION
R millions
Net asset value per share (cents) 1 272 1 869
Capital expenditure (continuing)
- Spent 832 1 093
- Authorised but unspent 852 955
Operating lease commitments 2 155 2 146
Contingent liabilities (note 5) 983 345
Financial institution guarantees 10 408 9 693
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2011
Audited Audited
Annual Annual
R millions 30.06.11 30.06.10
(Loss)/profit before interest,
depreciation and amortisation (734) 2 586
- Continuing (93) 2 123
- Discontinued (641) 463
Non-cash items 1 380 (204)
- Non-cash charges including
impairments 1 009 79
- Non-cash contract completion expenses 585 -
- Fair value adjustments (214) (283)
Cash outflow from headlease and
other property activities (6) (47)
Decrease/(increase) in working
capital 232 (931)
Cash generated from operations 872 1 404
Interest and taxation paid (net) (538) (713)
Operating cash flow 334 691
Dividends paid to owners of
Murray & Roberts Holdings Limited (187) (572)
Dividends paid to non-controlling interests (87) (95)
Cash flow from operating activities 60 24
Property, plant and equipment and
intangible assets (net) (747) (943)
Acquisition of associates (7) (341)
Acquisition of non-controlling interests - (59)
Business (acquisitions)/disposals (net) (70) 592
Assets classified as held-for-sale (net) 741 (154)
Other investments (net) - 183
Other (net) 21 (14)
Cash flow from investing activities (62) (736)
Net increase in borrowings 529 377
Treasury share disposals (net) 20 19
Cash flow from financing activities 549 396
Net increase/(decrease) in cash
and cash equivalents 547 (316)
Net cash and cash equivalents at
beginning of year 2 566 2 876
Effect of foreign exchange rates (59) 6
Net cash and cash equivalents
at end of year 3 054 2 566
SEGMENTAL ASSETS
at 30 June 2011
Audited Audited
Annual Annual
R millions 30.06.11 30.06.10
Reconciliation of segmental assets
Total assets 19 560 21 125
Deferred taxation assets (470) (343)
Current taxation receivable (83) (112)
Cash and cash equivalents (3 101) (3 811)
15 906 16 859
Segmental assets and operating costs relating to Corporate are R140 million
(2010: R66 million) and R291 million (2010: R312 million) respectively. Refer to
the commentary for the detailed segmental analysis.
NOTES
1. Basis of preparation
These condensed consolidated annual financial statements for the year ended 30
June 2011 have been prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting
Standards ("IFRS"), the AC 500 standards as issued by the Accounting Practices
Board or its successor, IAS 34: Interim Financial Reporting and in compliance
with the requirements of the Companies Act, No. 71 of 2008 of South Africa. This
report was compiled under the supervision of AJ Bester (CA) SA, group financial
director.
The accounting policies used in the preparation of these results are in
accordance with IFRS and are consistent in all material respects with those used
in the audited annual financial statements for the year ended
30 June 2010.
The auditors, Deloitte & Touche, have issued their opinion on the Group`s annual
financial statements for the year ended 30 June 2011. The audit was conducted in
accordance with International Standards on Auditing. They have issued an
unmodified audit opinion. This preliminary report has been derived from the
Group`s annual financial statements and is consistent in all material respects.
A copy of their audit report is available for inspection at the company`s
registered office. Any reference to future financial performance included in
this announcement has not been reviewed or reported on by the Group`s auditors.
2. (Loss)/profit from discontinued operations
Discontinued operations include the Group`s property divisions, interests in
steel reinforcing bar manufacture & trading operations, Johnson Arabia crane
hire and Clough`s marine operations.
Prior to 30 June 2011, the Group received conditional offers for Johnson Arabia
crane hire and the steel reinforcing bar roof bolt division.
Post 30 June 2011, Clough Limited received a conditional offer for the sale of
its marine operations.
30 June 30 June
R millions 2011 2010
Revenue 2 646 4 656
(Loss)/profit before interest,
depreciation and amortisation (641) 463
Depreciation and amortisation (69) (117)
(Loss)/profit before interest
and taxation (710) 346
Net interest expense (58) (74)
Taxation credit/(expense) 118 (56)
Loss from equity accounted investments (16) (1)
(Loss)/profit from discontinued operations (666) 215
Non-controlling interest relating
to discontinued operations 79 (57)
Cash flows from discontinued
operations include the following:
Cash flow from operating activities (129) 335
Cash flow from investing activities 574 (357)
Cash flow from financing activities (466) (103)
Net decrease in cash and cash
equivalents (21) (125)
3. Reconciliation of headline (loss)/earnings
30 June 30 June
R millions 2011 2010
(Loss)/profit attributable to owners
of Murray & Roberts Holdings Limited (1 735) 1 098
Investment property fair value
adjustments 5 (101)
Profit on disposal of subsidiaries (17) (10)
Profit on disposal of property,
plant and equipment (49) (6)
Impairment of goodwill and
other assets 398 7
Fair value adjustment and
(profit)/loss on disposal
of assets held-for-sale 32 -
Adjustments relating to business
acquisitions (62) -
Other 1 1
Non-controlling interest
effects on adjustments (5) 4
Taxation effects on adjustments (61) 13
Headline (loss)/earnings (1 493) 1 006
Adjustments for discontinued operations:
Loss/(profit) from discontinued
operations 666 (215)
Non-controlling interests (79) 57
Investment property fair value
adjustments (5) 97
Profit on disposal of
subsidiaries 17 -
Profit on disposal of property,
plant and equipment 1 -
Impairment of goodwill and
other assets (324) -
Fair value adjustment and
profit/(loss) on disposal
of assets held-for-sale (34) -
Adjustments relating to business
acquisitions 1 -
Non-controlling interest effects
on adjustments 6 -
Taxation effects on adjustments 74 (13)
Headline (loss)/earnings from
continuing operations (1 170) 932
4. Contracts-in-progress and contract receivables
30 June 30 June(4)
R millions 2011 2010
Contracts-in-progress
(cost incurred plus recognised
profits, less recognised losses) 557 884
Uncertified claims and variations
less payments received on account
(recognised in terms of
IAS 11: Construction Contracts) 1 968 1 966
Uncertified claims and variations 2 302 1 966
Less: payments received on account (334) -
Amounts receivable on contracts
(net of impairment provisions) 2 340 2 543
Retentions receivable
(net of impairment provisions) 425 394
5 290 5 787
Amounts received in excess of
work completed (2 244) (2 446)
3 046 3 341
Disclosed as:
Amounts due from contract customers 5 290 5 787
Amounts due to contract customers (2 244) (2 446)
3 046 3 341
(4) Amounts due from and to contract customers have been reclassified in the
prior year to provide more meaningful disclosure. The net amounts due from and
due to contract customers remained unchanged.
5. Contingent liabilities
Contingent liabilities are related to disputes, claims and legal proceedings in
the ordinary course of business.
6. Events after reporting date
On 8 August 2011, Clough Limited announced the disposal of its marine
construction business for a cash consideration of AUD127 million. The financial
effects of the transaction have not been brought into account at 30 June 2011.
The results of the marine construction business have been disclosed as a
discontinued operation with the assets and liabilities being recorded as held-
for-sale.
The directors are not aware of any other matter or circumstance arising since
the end of the financial year, not otherwise dealt with in the Group and company
annual financial statements, which significantly affects the financial position
at 30 June 2011 or the results of its operations or cash flows for the year then
ended.
COMMENTARY
RECOVERY & GROWTH
The Group has remained resilient to conditions in its construction markets due
to the diversity of operations and markets. Global mining and natural resource
markets remain buoyant across the world. Construction and related activities in
both southern Africa and the Middle East experienced subdued market conditions
as a result of reduced Government infrastructure spend and unstable financial
markets inhibiting private expenditure. Although significant progress was made
by the Group in resolving contractual claims, the estimated costs to complete,
inclusive of penalties, on a number of major contracts increased significantly
and the decision to dispose of certain business operations resulted in the need
to make material asset impairments. The net result is that the Group recorded a
loss for the year.
The Board extends its condolences to the families, friends and colleagues of 12
employees who lost their lives while at work in the Group`s operations during
the year under review. Executive leadership has taken decisive action to address
safety in the work place with an initiative primarily focussed on attitudes to
safety and safe behaviour across the organisation.
A new leadership team has been appointed with effect from 1 July 2011, led by
Henry Laas as group chief executive. The team has developed a Recovery & Growth
plan which aims to return the Group to profitability in the 2012 financial year,
with an improved liquidity position and growth thereafter.
Financial year to 30 June 2011
Revenues from continuing operations increased by 10% to R30,5 billion (2010:
R27,9 billion). An operating loss of R678 million (2010: profit R1 535 million)
was recorded after accounting for the following charges and contract completion
costs for the 12 months to 30 June 2011:
- SADC Construction - R1 150 million: Gautrain Civils Joint Venture ("Gautrain")
- Contract finalisation costs and provision for potential Competition Commission
("Competition") penalties on identified possible transgressions on other
projects;
- Marine Construction: Gorgon Pioneer Materials Offloading Facility ("GPMOF") -
R582 million of estimated contract completion costs;
- Middle East - R164 million for impairment of contract receivables in respect
of legacy contracts; and
- Construction Products - R79 million impairment of assets.
The above charges and costs totalling R1 975 million increased from the R795
million of exceptional charges recorded to 31 December 2010 as a result of the
following reasons:
- a provision for potential Competition penalties following the submission of
previously unknown possible transgressions to the Commissioner in April 2011;
- a further provision against Gautrain contract receivables as a result of a new
legal opinion received in respect of one component of the total claim;
- a Dispute Resolution Board ruling received in June 2011 requiring
rectification work in respect of water ingress on the Rosebank to Park station
section of the Gautrain tunnel, resulting in increased cost to complete and
further delay penalties;
- a provision for increased arbitration legal costs in relation to the Gautrain
Delay and Disruption claim, which is now only expected to be heard in 2013;
- losses on the GPMOF contract due to further delayed access post 31 December
2010, adverse weather conditions that hindered construction activities and
allowed claims recognition in terms of IAS 11 (Construction Contracts); and
- a change in outlook on a market sector within the Construction Products
platform requiring an impairment of related assets.
Excluding the above mentioned charges, the Group`s normalised earnings before
interest and tax for the year amounted to R1,3 billion. Such normalised earnings
were weaker in the second half of the financial year, primarily as a result of
lower than estimated contract final accounts achieved in the Middle East and
delays in orders received primarily within the Construction Products Africa
businesses.
On discontinued operations, R326 million in respect of impairment of assets held
in businesses to be sold or closed was recorded which is in addition to trading
losses of R384 million for the year under review. Trading losses continued to be
incurred in the second half of the financial year and additional provisions were
made against assets to be sold or closed, based upon indicative disposal values.
As a consequence, the Group recorded a diluted headline loss per share of 394
cents and diluted loss per share of 387 cents, both from continuing operations
for the financial year to 30 June 2011, compared to the previous comparable
period of diluted headline earnings per share of 314 cents and diluted earnings
per share of 318 cents. After accounting for the loss on discontinued
operations, the Group recorded a diluted headline loss per share of 503 cents
and diluted loss per share of 585 cents respectively for the financial year to
30 June 2011, compared to the previous comparable period of diluted headline
earnings per share of 340 cents and diluted earnings per share of 371 cents.
Notwithstanding the deterioration in earnings in the past financial year, the
Group is well positioned for a return to profitability and growth in earnings.
Liquidity
The Group`s liquidity position improved substantially from the net debt position
at 31 December 2010 of R1 billion to a net cash position at 30 June 2011 of R759
million, excluding cash and interest bearing borrowings within discontinued
operations. Whilst future revenue flows are anticipated, funding required to
complete the Gautrain and GPMOF projects over the next six months is likely to
again place the Group in a net debt position by 31 December 2011.
The Group`s restricted liquidity position is being resolved through a structured
approach involving four initiatives:
- profitable and cash generative financial results from all operations;
- sale of non-core operations and assets;
- restructuring of banking facilities, by spreading the term of the facilities
and reducing the reliance on "on-demand" facilities; and
- resolution of project claims.
Good progress has been made on all initiatives. Arbitration proceedings have
been initiated on a number of the Group`s contract claims, however, final
outcomes from these hearings are unlikely prior to 30 June 2012.
Major projects
Murray & Roberts retains the capability and capacity to execute major complex
projects. Such projects will continue to be a substantial part of our business
and a competitive differentiation into the future, but will be subject to more
effective risk management processes.
Murray & Roberts Projects successfully renegotiated its contractual arrangements
with Hitachi for the delivery of the mechanical erection of the Medupi and
Kusile power stations. The revised contract terms have significantly de-risked
the commercial position on these projects and future profitability on the power
projects is now probable.
Murray & Roberts Construction, in joint venture, is undertaking the majority of
the civil works at Medupi Power Station ("Medupi Civil Works"). The contract is
progressing satisfactorily despite the significant scope growth on the contract.
Negotiations are in progress with Eskom to resolve outstanding claims related
thereto.
Despite substantial completion of the Gautrain Rapid Rail Link project, the
Group has made a material loss on its participation in construction activities
on this project. During the year additional charges were taken on the
construction contract relating to the impairment of contract receivables,
estimated costs associated with water ingress rectification work, delay
penalties as well as increased costs to complete the project by January 2012.
Bombela Concession Company has submitted its Statement of Case in connection
with the Delay and Disruption and related disputes on the Gautrain Rapid Rail
Link project.
The Group encountered late site access, adverse weather conditions and material
scope changes at its GPMOF project in Western Australia. A significant charge
was taken during the year in respect of the estimated costs to complete the
project. The anticipated completion date of the project is January 2012.
During the year the Group`s construction business in the Middle East
participated in several major projects in Abu Dhabi. The Zayed University was
completed while Saadiyat-St Regis resort complex will be completed during the
course of the 2012 financial year. An arbitration proceeding on the Dubai
International Airport Concourse 2 ("Dubai Airport") is following its course and
the Group expects to resolve the final account settlement in the second half of
the 2012 calendar year.
Clough is undertaking, in joint venture, two major and profitable LNG (liquefied
natural gas) projects, the PNG-C1 contract in Papua New Guinea and the Gorgon
Downstream LNG contract in Western Australia.
The value of still to be agreed Group contract claims and variation orders
included in the statement of financial position at 30 June 2011 was R1 968
million (2010: R1 966 million), net of on-account payments of R334 million.
These claims have been taken to book in terms of IAS 11 (Construction Contracts)
and following engagement with independent legal, commercial and claims
consultants. The majority of this balance relates to claims in respect of
Gautrain, Medupi Civils Works, GPMOF and Dubai Airport. The Board and management
remain committed to the resolution of all contractual disputes and collection of
resultant claims. As previously disclosed to shareholders, adjudication of these
legally complex financial claims and variation orders within major projects has
yet to be finalised, and is subject to arbitration and/or negotiation. As a
consequence the potential exists for a materially higher or lower amount being
finally awarded compared to that recognised in the statement of financial
position at 30 June 2011.
Risk management
Managing risk effectively is at the heart of the Group`s sustainability. The
setbacks during the year on certain major projects have necessitated a renewed
focus on identifying and evaluating risk within the Group. An increase in
staffing of the legal and commercial teams is in progress, the Group`s bespoke
Opportunity Management System is being upgraded and improved project processes
and systems are being implemented.
Competition Commission
The Group has committed to full co-operation with the Competition Commission
("Commission") to eradicate anti-competitive behaviour within the construction
industry. In February 2011, the Commission announced a Fast Track settlement
process aimed at providing a transparent, cost effective and swift resolution to
its investigations into the construction industry. Regrettably, and due mainly
to late notifications by former subsidiary company executives, a limited number
of projects were identified where possible transgressions may have occurred. As
a consequence, the Group lodged its applications for these projects on 15 April
2011. A provision has now been made for potential penalties for these identified
possible transgressions. The Board reiterates that it does not condone any anti-
competitive or collusive conduct and all identified infringements have been
disclosed to the Commission.
Notwithstanding the Group`s efforts to disclose all anti-competitive matters to
the Commission, there may be certain residual matters which have not yet come to
the Group`s attention and that may potentially give rise to additional
penalties.
The Group`s Statement of Business Principles is a detailed exposition of ethical
standards and practices and has been distributed to all employees, service
providers and business partners. The Business Principles leave no room for
unacceptable practices such as collusion or corruption.
Disposal of non-core assets
Crane Hire Steel Clough Properties
Services Reinforcing Marine SA
(Johnson Products Services &
Arabia) Properties
R millions* 2011 2010 2011 2010 2011 2010 2011 2010
Revenue* 260 360 1 676 2 250 628 1 909 82 137
Operating
(loss)/profit* (58) 1 (619) 3 (73) 190 40 152
Trading* (58) 1 (325) 3 (41) 249 40 152
Asset
impairment* - - (294) - (32) (59) - -
Segment assets* 312 480 1 065 1 652 1 298 - 96 692
People 420 446 1 447 1 713 109 109 6 1
Discontinued operations in steel reinforcing bar manufacture and trading,
Johnson Arabia crane hire and Clough`s marine operations all produced losses in
the year to 30 June 2011.
The sale of discontinued operations is well advanced and management is targeting
for the transactions to be concluded by 31 December 2011. Conditional offers for
the Group`s shareholding in the N3 Toll Concession and Johnson Arabia were
received prior to 30 June 2011. Clough announced the sale of its marine
construction division for AUD 127 million on 8 August 2011.
Construction Africa and Middle East
Construction Marine Middle Total
Africa East
R millions* 2011 2010 2011 2010 2011 2010 2011 2010
Revenue* 5 597 7 960 1 031 351 2 480 2 882 9 108 11 193
Operating
(loss)/profit* (653) 133 (582) 77 (164) 300 (1 399) 510
Ongoing
construction
activities* 237 553 (582) 77 - 389 (345) 1 019
PPP
Investments
and Services* 260 199 - - - - 260 199
Gautrain/
Competition
Commission
penalties* (1 150) (619) - - - - (1 150) (619)
Contract
receivables
impairment* - - - - (164) (89) (164) (89)
Segment assets* 2 926 2 725 358 168 1 605 1 881 4 889 4 774
People 8 891 10 210 511 118 318 369 9 720 10 697
LTIFR
(Fatalities) 1.6(1) 2.3(3) 4.2(0) 1.2(0) 0.3(0) 0.4(2) 0.9(1) 1.6(5)
Order book* 6 929 7 184 606 502 2 430 4 393 9 965 12 079
Effective 1 July 2011, Nigel Harvey assumed executive responsibility for the
Murray & Roberts Construction Africa and Middle East operating platform. The
platform comprises the following operations:
- Construction Africa - Murray & Roberts Buildings, Murray & Roberts Western
Cape, Murray & Roberts Botswana, Murray & Roberts Namibia, Concor Civils, Concor
Roads & Earthworks, Concor Opencast Mining
- Murray & Roberts Marine
- Murray & Roberts Middle East
- PPP Investments and Services - Murray & Roberts Concessions and Tolcon.
Consolidated revenues decreased 19% to R9,1 billion (2010: R11,2 billion).
Revenues in Africa were lower as a result of soft market conditions in South
Africa primarily resulting from a reduction in Government`s expenditure on
infrastructure. Revenues were also lower as a result of the Gautrain project
nearing completion.
The reduction in revenues and competitive tendering conditions impacted on the
operating profit from ongoing construction activities in Africa. Further losses
were incurred to ensure timeous opening of the Gautrain system, despite delays
incurred as a result of land deficiencies.
Marine`s revenues were largely related to the GPMOF contract in Australia and
the significant losses are largely related to claims still to be agreed.
Middle East revenues declined in-line with regional market conditions. Despite
the successful delivery of a number of projects, in the light of unstable
financial markets in that region a prudent approach was taken to estimate
contract finalisation values. After accounting for overheads, the result for the
region`s continuing activities was break-even. A further impairment was taken on
long-outstanding contract receivables.
A provision has been raised for identified possible transgressions of
competition laws as submitted in terms of the authorities Fast Track application
process.
Construction Global Underground Mining
Africa Austra- The Total
lasia Americas
R millions* 2011 2010 2011 2010 2011 2010 2011 2010
Revenue* 4 789 3 569 714 404 2 286 1 372 7 789 5 345
Operating
profit* 307 270 99 39 196 138 602 447
Segment
assets* 1 288 983 409 273 1 011 738 2 708 1 994
People 15 265 14 498 313 189 1 374 1 123 16 952 15 810
LTIFR
(Fatalities) 2.1(10) 3.2(4) 6.9(0) 6.0(0) 1.1(0) 0(0) 2.2(10) 3.1(4)
Order book* 12 035 3 313 959 733 3 724 2 944 16 718 6 990
The Construction Global Underground Mining operating platform is led by Peter
Adams. It comprises five Cementation businesses based in Johannesburg, Perth,
North Bay (Canada), Salt Lake City and Santiago.
Consolidated revenues increased 46% to R7,8 billion (2010: R5,3 billion) with
operating profit up 35% to R602 million (2010: R447 million), at a margin of
7,7% (2010: 8,4%). Sustained worldwide demand for commodities resulted in
improved activity in all three operating regions and prospects are expected to
remain positive for the foreseeable future.
The businesses are currently involved in the development of 21 deep level shafts
across all regions.
Construction Australasia Oil & Gas and Minerals
Clough Forge(5)
R millions* 2011 2010 2011 2010
Revenue* 5 387 3 843 2 926 1 642
Operating profit* 269 204 396 277
Segment assets* 2 056 2 667
People 3 527 3 103
LTIFR (Fatalities) 0.2(0) 2.2(0)
Order book* 11 467 6 685
(5) Reflected at 100%. Forge is equity accounted as a 33% (2010: 31%) associate
within the consolidated results. The 2010 results are for a full year for
comparative purposes, even though the interest in Forge was only acquired in
April 2010.
Kevin Gallagher has been appointed Clough CEO to succeed John Smith by the end
of the calendar year. Murray & Roberts holds a 62% shareholding in Clough
Limited, a company that delivers an integrated engineering, procurement and
construction service primarily to oil & gas and minerals projects in Australia
and Southeast Asia. Clough in turn owns 33% of Forge Group Limited, also an ASX
listed company, involved in engineering, construction, procurement and
maintenance in the mineral resources sector.
Revenues increased 40% to R5,4 billion (2010: R3,8 billion) with operating
profit up 32% to R269 million (2010: R204 million) at a margin of 5,0% (2010:
5,3%).
Australian government support for the development of their resources sector,
together with ongoing high levels of investments in oil & gas and minerals
projects, present many opportunities for Clough and the Clough-Forge
relationship.
Full details on the Clough and Forge financial results for the year to
30 June 2011 and its prospects are published on www.clough.com.au and
www.forgegroup.com.au respectively.
Engineering Africa
Power Programme(6) Engineering(7) Total
R millions* 2011 2010 2011 2010 2011 2010
Revenue* 3 337 1 099 757 619 4 094 1 718
Operating (loss)
/profit* (34) 38 (17) 30 (51) 68
Segment assets* 901 1 557 340 245 1 241 1 802
People 4 362 2 557 831 629 5 193 3 186
LTIFR (Fatalities) 1.5(0) 0.8(0) 1.0(0) 2.3(0) 1.3(0) 1.5(0)
Order book* 13 411 15 578 800 569 14 211 16 147
(6) Murray & Roberts Projects power programme contracts and Genrec.
(7) Includes Wade Walker, Concor Engineering and Murray & Roberts Projects non-
power programme projects.
Effective 1 July 2011, Frank Saieva assumed executive responsibility for the
Engineering Africa operating platform. The platform includes Murray & Roberts
Projects, Genrec, Wade Walker and Concor Engineering. The results of Murray &
Roberts Projects and Genrec`s involvement in the Medupi and Kusile power station
projects are grouped together under the Power Programme.
Consolidated revenues increased 138% to R4,1 billion (2010: R1,7 billion)
primarily driven by increased activity on the power station projects.
A new commercial arrangement was entered into between Murray & Roberts Projects
and the main contractor on the power station projects, Hitachi Power. The
arrangement settles past disputes and significantly reduces the commercial risk
and future profitability on the power projects is now probable.
Murray & Roberts Projects is also active in a number of other projects and is
seeking further opportunities in minerals, water and industrial projects.
Genrec is operating at full capacity manufacturing steel for the power station
projects, while positioning itself for future opportunities outside the power
programme.
Wade Walker suffered from delays in the award of new work during the year under
review but now has a strong order book that is well diversified across
geographies and sectors.
Construction Products Africa
Construction Industrial Total
Products(8) Products(9)
R millions* 2011 2010 2011 2010 2011 2010
Revenue* 3 147 4 988 1 010 764 4 157 5 752
Operating profit* 75 612 117 6 192 618
Ongoing activities* 154 612 117 6 271 618
Asset impairment* (79) - - - (79) -
Segment assets* 1 663 1 909 438 823 2 101 2 732
People 3 808 3 939 1 122 1 277 4 930 5 216
LTIFR (Fatalities) 2.6(1) 3.7(0) 7.6(0) 5.1(0) 3.9(1) 4.0(0)
Order book* 587 367 2 421 1 809 3 008 2 176
(8) Includes Hall Longmore, Rocla, Much Asphalt, Ocon and Technicrete.
(9) UCW.
Orrie Fenn leads the Construction Products Africa operating platform. The
platform comprises Hall Longmore, Much Asphalt, Rocla, Technicrete and Ocon
Brick. Industrial Products reflects the Group`s investment in Union Carriage &
Wagon (UCW).
Consolidated revenues decreased 28% to R4,2 billion (2010: R5,8 billion).
Revenues at Hall Longmore declined sharply following the completion of
Transnet`s 720 kilometre New Multi-Product Pipeline project. This major project,
worth more than R2 billion to Hall Longmore, accounted for 70% of its turnover
in the prior year. After incurring idle factory time, progress is being made in
re-establishing the order book.
Much Asphalt again performed well on the back of ongoing freeway and other road
construction in the major metropolitan regions.
Decisive measures were taken in the year to position Rocla for profitability.
The company`s trading environment was extremely challenging, with Government
cutting back on infrastructure spend and little to no activity in the
residential market.
The building products businesses, Technicrete and Ocon, performed well in the
face of difficult conditions in the building industry.
UCW performed well delivering a substantial number of locomotives. A contract
extension for the production of additional locomotives for Transnet was
concluded and UCW is again engaged in PRASA`s refurbishment programme.
Health, safety and environment
The safety of all who work for and with Murray & Roberts is of paramount
importance. The Health, Safety and Environment Committee worked tirelessly with
management, throughout the year, to sharpen its focus on workplace safety and to
chart new and improved principles, practices and procedures.
DuPont Sustainable Solutions ("DuPont") were tasked with assessing our South
African operations against international best practice. An outcome of the DuPont
process, which is still underway, is the formulation of a new Group health and
safety plan to support our vision of "Together Towards Zero Harm" for Health,
Safety and the Environment.
The actions taken in this critical area underscore the importance that Murray &
Roberts attaches to safety. We are determined to increase our efforts across the
Group to keep our people safe and to weave safety considerations into the fabric
of the business.
Murray & Roberts creates permanent value by establishing infrastructure that
serves societies and communities. In doing so, the Group is committed to
inflicting no harm on the environment. Operations mostly have a low
environmental impact but we acknowledge that the Group still has much work to do
in this important aspect of the business.
Human capital, transformation and skills development
Our people give Murray & Roberts its competitive edge. The Group continues to
invest significantly in retaining and developing talent across all of its
operations.
The Group initiated a leadership assessment programme to identify talent for
mentoring and fast-tracking and 187 delegates took part in Leadership
Development Programmes.
Empowering all of our people will be a key driver for success and the Group is
acutely aware of the need to create an environment in which transformation can
take place to become a preferred employer among talented black graduates,
artisans and managers. While there was no major change to the Group`s Broad-
Based Black Economic Empowerment rating this year, Murray & Roberts remains
committed to the principles of equitable, affirmative access to economic and
employment rights. The Group retained Level 4 contributor status.
Leadership
The Group`s future Executive Committee will consist of Henry Laas (chairman),
Cobus Bester, Orrie Fenn, Peter Adams, Nigel Harvey, Ian Henstock, Frank Saieva,
Andrew Skudder and Yunus Karodia as company secretary.
Guided by renewed purpose, values and vision, the Group`s operating structure
has been realigned to best support the Recovery & Growth plan.
The structure has focussed operating platforms with businesses grouped by
similar markets and core competencies allowing better risk management and
decision-making. The five operating platforms are: Construction Africa and
Middle East; Construction Australasia Oil & Gas and Minerals; Construction
Global Underground Mining; Engineering Africa; and Construction Products Africa.
The operating platforms bring together industry leading capabilities and strong
brands. Business plans for all operating platforms have been defined and will be
vigorously pursued to ensure a strong and dynamic Murray & Roberts.
The new executive team is committed to a leadership style that affords the
highest priority to sound relationships with all the Group`s stakeholders. We
seek to build trusted partnerships with employees, the investment community,
suppliers and partners, and most importantly with our customers and clients.
Dividend
The Board has resolved not to declare dividends until the Group`s liquidity
position has improved.
Board of directors
During the year, the Board appointed Bill Nairn as a non-executive director.
Henry Laas and Cobus Bester were appointed as group chief executive and group
financial director respectively with effect from 1 July 2011, following the
retirement of Brian Bruce and Roger Rees. Malose Chaba and Trevor Fowler
resigned as executive directors of the Company and Group during the year. Non-
executive director, Imogen Mkhize retired during the year.
Order book and prospects
The Group`s order book, which now includes Hall Longmore and UCW, at 30 June
2011 was R55 billion (2010: R44 billion). The operating margin contained in the
order book is within the Group`s strategic range of 5,0% to 7,5%.
The Group`s strength lies in its diversity, in terms of the breadth of the
services and products offered across the engineering and construction value
chain, as well as market spread and exposure to different economic cycles.
The Group expects a return to an acceptable level of profitability in the year
ahead and all operating platforms other than Construction Africa are forecast to
experience improved trading conditions. The level of this profitability will
depend on economic conditions, order book development and conversion,
particularly in South Africa and reduction of working capital.
Murray & Roberts embarks on the 2012 financial year with new leadership, a
renewed focus on risk management, health and safety, a sound order book and a
determination to grow the business while shrinking debt.
The information on which this prospect statement is based has not been reviewed
or reported on by the Group`s external auditors.
On behalf of the directors
Roy Andersen
Chairman of the Board
Henry Laas
Group Chief Executive
Cobus Bester
Group Financial Director
Bedfordview
31 August 2011
Registrar:
Link Market Services South Africa (Pty) Limited
13th Floor, Rennie House
19 Ameshoff Street
Braamfontein 2001
PO Box 4844
Johannesburg 2000
Registered office:
Douglas Roberts Centre,
22 Skeen Boulevard,
Bedfordview 2007
PO Box 1000
Bedfordview 2008
website: www.murrob.com
.mobi site: http://murrob.mobi
e-mail: clientservice@murrob.com
Murray & Roberts Holdings Limited Registration No. 1948/029826/06
Directors:
RC Andersen* (Chairman)
HJ Laas (Managing and Chief Executive)
DD Barber*
AJ Bester
O Fenn1
ADVC Knott-Craig*
NM Magau*
JM McMahon1*
WA Nairn*
AA Routledge*
M Sello*
SP Sibisi*
RT Vice*
1 British *Non-executive
Secretary:
Y Karodia
Disclaimer
We may make statements that are not historical facts and relate to analyses and
other information based on forecasts of future results and estimates of amounts
not yet determinable. These are forward-looking statements as defined in the
U.S. Private Securities Litigation Reform Act of 1995. Words such as "believe",
"anticipate", "expect", "intend", "seek", "will", "plan", "could", "may",
"endeavour" and "project" and similar expressions are intended to identify such
forward-looking statements, but are not the exclusive means of identifying such
statements. By their very nature, forward-looking statements involve inherent
risks and uncertainties, both general and specific, and there are risks that
predictions, forecasts, projections and other forward-looking statements will
not be achieved. If one or more of these risks materialise, or should underlying
assumptions prove incorrect, actual results may be very different from those
anticipated. The factors that could cause our actual results to differ
materially from the plans, objectives, expectations, estimates and intentions
expressed in such forward-looking statements are discussed in each year`s annual
integrated report. Forward-looking statements apply only as of the date on which
they are made, and we do not undertake other than in terms of the Listings
Requirements of the JSE Limited, to update or revise any statement, whether as a
result of new information, future events or otherwise. All profit forecasts
published in this report are unaudited. Investors are cautioned not to place
undue reliance on any forward-looking statements contained herein.
Bedfordview
31 August 2011
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 31/08/2011 15:55:11 Produced by the JSE SENS Department.
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