| Fri 21 Oct 2011, 13:17 | | MUR - Murray & Roberts Holdings Limited - Business update |
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MUR
MUR
MUR - Murray & Roberts Holdings Limited - Business update
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")
BUSINESS UPDATE
The strong global demand for commodities continues although the world
economy remains vulnerable. The South African construction economy is
depressed but there are early signs of a slow recovery in the local
market and the medium term outlook is positive given the major and
growing infrastructural backlog in South Africa. The South African
Government`s R810 billion infrastructure investment programme supports
the long term growth prospects for the construction and engineering
sector, although the timing of this programme is uncertain.
Operating Platform Update and Market Outlook
All Operating Platforms, other than Construction Africa and Middle East,
are forecast to experience improved trading conditions in the short- to
medium-term:
* Construction Africa and Middle East - the South African
construction economy remains weak whilst market conditions in
the Middle East have deteriorated further. The building market
in Dubai has come to a complete standstill and activity in Abu
Dhabi is muted. The business is shifting its focus to Qatar
which in the medium term will present opportunity for civil
and building works.
The Gorgon Pioneer Materials Offloading Facility (GPMOF)
project undertaken by Murray & Roberts Marine is experiencing
programme delays. Piling works are progressing slower than
planned as a consequence of adverse weather, productivity and
geological issues. The project is envisaged to be completed
towards the end of the third quarter of the financial year,
about three months later than previously expected. The current
forecast loss at completion has increased by an estimated R520
million, which is over and above the loss accounted for at the
end of the previous financial year. A geotechnical analysis is
underway to establish the extent of the geological issues. The
outcome of this analysis is important to determine whether the
additional costs are recoverable.
The water ingress rectification works on the Gautrain project
are currently progressing in line with the assumptions used to
calculate the costs to completion as accounted for in June
2011 and should be substantially completed by the end of
December 2011.
* Construction Australasia Oil & Gas and Minerals - growth is
expected from this business in Western Australia due to strong
global demand for minerals as well as several large oil & gas
project opportunities.
* Construction Global Underground Mining - due to strong global
demand for commodities, this business is well positioned for
continued growth.
* Construction Products Africa - although this business is
dependent on the level of activity in the local construction
sector, an improved performance is expected for the current
financial year.
* Engineering Africa - this business is currently mainly
involved with the Eskom power programme which is progressing
in line with financial forecast. Various other opportunities
in the market are being explored.
Progress on Major Claims
The Group is engaged in claims resolution processes on a number of its
major projects:
* The Statement of Case for the Gautrain delay and disruption
claim has been submitted to the Arbitration Foundation of
Southern Africa. The Group, together with its partners,
continues with its preparation for the arbitration process.
Resolution of the claim is not expected before 2013.
* Several claims on the GPMOF project are in arbitration and the
Group is in consultation with the main contractor, Boskalis,
and the client, Chevron, in an attempt to resolve its claims.
No resolution is expected prior to project completion.
* The Medupi Civil Works project is progressing well and the
Group continues to work with Eskom on meeting the tight
programme and resolving various contractual disputes.
* Settlement of the Dubai Airport final account is in
arbitration and the arbitration hearing is expected to be
heard towards the end of the current financial year.
Competition Commission
As previously reported, the Group participated in the Competition
Commission`s Fast-Track Application process in April 2011. The Group has
received provisional leniency for some of the contracts included in the
submission and some of the contracts have prescribed. On the remaining
contracts the Commission has engaged various employees (both past and
current) to obtain clarification on certain aspects of the submission.
The penalty provision raised in the previous financial year is based on
known transgressions by former subsidiary company employees and in terms
of the guideline schedules provided by the Competition Commission.
However, it is possible that the Fast-Track Process may identify further
projects, unknown to the board, where the provisions of the Competition
Act may have been transgressed and which may give rise to additional
penalties. At this stage the timing for closing out this matter remains
uncertain.
Liquidity
The Group`s liquidity remains under pressure and will return to a net
debt position by December 2011 due to ongoing funding requirements to
complete the Gautrain and GPMOF projects.
The Group is in the process of restructuring its debt facilities, which
upon conclusion will enhance headroom for the Group to engage in new
opportunities as presented by the market.
Disposals
The disposal of discontinued operations is well advanced:
* Proceeds, in the order of R91,5 million, from the sale of
Johnson Arabia will be received by end-October 2011.
* Clough announced the sale of its marine construction division
for approximately R860 million on 8 August 2011 and the
proceeds are expected to be received by December 2011.
* The Group will endeavour to complete an agreement for the
disposal of the Steel business by 31 December 2011 and, if
achieved, the proceeds are expected to be received towards
June 2012.
Prospects
The Group`s order book remains strong at R56 billion, marginally up from
the R55 billion as reported at the June 2011 year-end.
It is the Group`s objective to return to profitability as soon as
practicably possible and further guidance will be provided with the
publication of the half-year results on or about 29 February 2012.
The above financial information has not been reviewed or reported on by
the Group`s external auditors.
Bedfordview
21 October 2011
Sponsor
Deutsche Securities (SA) (Pty) Ltd
Date: 21/10/2011 13:17:02 Produced by the JSE SENS Department.
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