| Tue 31 Jan 2012, 7:15 | | 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" or "Company")
BUSINESS UPDATE
Shareholders of Murray & Roberts ("Shareholders") are advised to read this
Business Update in conjunction with the Notice of General Meeting and
Cautionary Announcement released on the Securities Exchange News Service of
the JSE Limited today.
The board of directors of Murray & Roberts (the "Board") wishes to report
that the Group has made good progress in respect of the following key
matters:
- The Group successfully restructured its South African term debt and bank
facilities in November 2011;
- The Board has decided to propose a rights offer of circa R2 billion to
Shareholders, which will enable the Group to reduce its overall debt, fund
delivery of its order book and continue with its growth strategy;
- The organisation of the business into five operating platforms;
Construction Africa and Middle East, Construction Global Underground Mining,
Construction Australasia Oil & Gas and Minerals, Engineering Africa and
Construction Products Africa is now well established;
- The construction of Gorgon Pioneer Material Offloading Facility ("GPMOF")
is expected to be substantially complete by end-February 2012;
- The water ingress rectification work on the Gautrain project is
progressing and grouting is continuing; and
- The Group`s order book, secured at an acceptable margin, increased to R57
billion at 31 December 2011 (June 2011: R55 billion).
.
As reported in the Business Update dated 21 October 2011 (the "October
Business Update"), it remains the Group`s objective to return to
profitability as soon as practically possible.
Operating Platform Update and Market Outlook
Although the business environment is still being impacted by the uncertain
global economic and financial markets, the Group maintains a strong order
book and is experiencing improved trading conditions in all operating
platforms, other than Construction Africa and Middle East:
- Construction Africa and Middle East
In the medium to longer term, the outlook for Construction Africa remains
positive, given the major - and growing - infrastructural backlog in South
Africa. However, in the near term the construction industry in South Africa
is expected to remain muted.
Given the challenging market conditions in the United Arab Emirates, the
Middle East business is shifting focus to Qatar which, in the medium term,
will present opportunity for civil and building works, particularly
associated with the 2022 FIFA World Cup.
Good progress has been made at the GPMOF project since the October Business
Update and the project team will be demobilised by end-March 2012. Cost to
complete has increased by R80 million in addition to the R520 million
communicated in the October Business Update. All of these costs, some of
which may be recoverable, have been accounted for in the first six months of
the current financial year.
The water ingress rectification work on the Gautrain project is progressing
and grouting is continuing. The effectiveness of this will be evaluated
during March 2012.
- Construction Global Underground Mining
The mining business is performing well as a result of the strong global
demand for commodities, and continues to secure significant contracts
globally with major international mining houses. However, the local platinum
sector is feeling the impact of the low platinum price and some smaller
projects have been stopped.
After a recent review by Aquarius Platinum South Africa ("Aquarius") of its
strategic options available at its Everest Platinum Mine, it was concluded
that mining operations will continue to be undertaken by Murray & Roberts
Cementation ("MRC"). MRC remains the mine operator for Aquarius.
- Construction Australasia Oil & Gas and Minerals
Clough Limited`s longer term outlook remains positive as it continues to win
new work and the level of tendering activity remains high with a number of
significant near term opportunities in the pipeline.
The construction market in Western Australia remains buoyant due to strong
global demand for commodities and significant investment in oil & gas and
mining infrastructure. The Group continues to consider how best to optimise
its investment in this key growth area.
- Engineering Africa
Through its current contracts, this operating platform will continue to be
highly involved in Eskom`s power programme until 2016 and the revised
commercial arrangement with Hitachi for the Medupi and Kusile projects is
working well and delivering value to the Group.
The platform is poised to further develop its market presence in the power
market locally and into Africa, whilst growth opportunities in the minerals
processing markets are being pursued in sub-Saharan Africa.
- Construction Products Africa
Much Asphalt continues to perform well on the back of ongoing work on the
Gauteng Freeway Improvement Project. Technicrete is benefitting from
improved trading conditions and efficiency gains. Whilst Hall Longmore`s
spiral pipe manufacturing capacity for the remainder of the financial year
will be fully utilised, its Electric Resistance Welding pipe mill
utilisation remains low.
UCW remains well positioned to benefit from Transnet`s and PRASA`s capital
renewal programmes, whilst Rocla continues to face tough trading conditions
due to a lack of Government infrastructure spend and little activity in the
residential building market.
Recovery & Growth Plan Update
The Group`s Recovery & Growth Plan was communicated to Shareholders on 31
August 2011, with improvement in liquidity as the main objective for the
recovery year to 30 June 2012. The initiatives identified to improve
liquidity were the restructuring of debt facilities, disposal of non-core
assets and settlement of major claims:
- Debt Restructuring - In order to improve the Group`s liquidity, Murray &
Roberts successfully restructured its South African term debt and bank
facilities in November 2011. The new circa R4.3 billion debt package
(previously R3.4 billion) includes facilities ranging from on-demand to four-
year facilities, achieving the objective of extending the average tenure of
the Group`s debt structure. This better aligns the debt repayment tenure
with the timing of anticipated proceeds to be derived from the settlement of
the Group`s major claims. The Group`s net debt position at 31 December 2011
was circa R100 million. Debt levels in South Africa remain high, with
significant amounts of restricted cash held offshore and in joint ventures.
- Disposals - The disposals of previously identified non-core assets
including Johnson Arabia, two divisions of the Steel Business and various
properties have all been successfully concluded, other than the remaining
Steel Business in respect of which negotiations are ongoing. It remains the
Group`s objective to dispose of this business at fair value.
- Major Claims - Processes to settle the Group`s major claims are
progressing. Based on current information, there is no expectation to impair
the claims taken to book as uncertified revenues valued at circa R2 billion.
At GPMOF, the first arbitration hearing took place towards the end of
calendar year 2011 and the arbitrator`s ruling is awaited. It is not
anticipated that any significant part of the claims will be settled before
the end of the current financial year.
The Gautrain arbitration will be a protracted process and settlement is now
expected by 2014 (previously 2013). Bombela Concession Company submitted its
Statement of Case in August 2011. Gauteng Province has received an extension
to March 2012 to submit its Statement of Defence.
The Dubai International Airport claims process has been delayed by a dispute
between the parties as to the identity of the contracting entities following
a name change effected by the client. The arbitration hearing on this matter
took place in December 2011, and a ruling is awaited. As previously
reported, it is not expected that the claim arbitration will be heard before
the end of the current financial year.
The Board has given due consideration to the continued implementation of the
Group`s recovery and growth plan, the expected funding requirements of the
order book, optimal balance sheet structure, debt repayment tenure and the
protracted nature of the claims settlement process. The Board is of the view
that it is prudent to raise additional equity capital from Shareholders and
intends to propose a rights offer to raise circa R2 billion.
Competition Commission
The Competition Commission (the "Commission") engaged the construction
industry on applications submitted through the April 2011 Fast-Track
process. As previously reported, the Fast-Track process might highlight
further transgressions, unknown to the Board. The Commission has
subsequently presented unreported projects allegedly falling into this
category for the Group to investigate. Based on current information, the
Board is of the view that an increase in the penalty provision raised in the
previous financial year is not necessary.
Bedfordview
31 January 2012
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
This announcement includes certain various "forward-looking statements" that
reflect the current views or expectations of the Board with respect to
future events and financial and operational performance. All statements
other than statements of historical fact are, or may be deemed to be,
forward-looking statements, including, without limitation, those concerning:
the Group`s strategy; the economic outlook for the industry; use of the
proceeds of the rights offer; and the Group`s liquidity and capital
resources and expenditure. These forward-looking statements are not based on
historical facts, but rather reflect the Group`s current expectations
concerning future results and events and generally may be identified by the
use of forward-looking words or phrases such as "believe", "expect",
"anticipate", "intend", "should", "planned", "may", "potential" or similar
words and phrases.
Date: 31/01/2012 07:15:01 Produced by the JSE SENS Department.
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