| Wed 29 Feb 2012, 15:52 | | MUR - Murray & Roberts Holdings Limited - Reviewed interim results for the six |
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MUR
MUR
MUR - Murray & Roberts Holdings Limited - Reviewed interim results for the six
months ended 31 December 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" or "Company")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
for the six months ended 31 December 2011
Reviewed Reviewed1 Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2011 2010 2011
R millions
Revenue 16 730 15 063 30 535
Profit/(loss) before
interest, depreciation
and amortisation 119 255 (93)
Depreciation (331) (265) (562)
Amortisation of
intangible assets (11) (13) (23)
Loss before interest
and taxation (note 2) (223) (23) (678)
Net interest expense (90) (99) (194)
Loss before taxation (313) (122) (872)
Taxation (212) (135) (196)
Loss after taxation (525) (257) (1 068)
Income from equity
accounted investments 63 38 86
Loss from continuing
operations (462) (219) (982)
Loss from discontinued
operations (note 3) (19) (368) (666)
Loss for the period (481) (587) (1 648)
Attributable to:
- Owners of Murray &
Roberts Holdings Limited (528) (636) (1 735)
- Non-controlling
interests 47 49 87
(481) (587) (1 648)
Loss per share from
continuing and discontinued
operations (cents)
- Diluted (178) (215) (585)
- Basic (178) (215) (587)
Loss per share from
continuing operations (cents)
- Diluted (179) (105) (387)
- Basic (179) (105) (388)
1 Reclassified as a result of discontinued operations and previously disclosed
exceptional items of R795 million were reclassified to loss before interest and
taxation.
SUPPLEMENTARY STATEMENT OF FINANCIAL PERFORMANCE INFORMATION
Reconciliation of weighted
average number of shares
in issue (000)
Number of ordinary shares in
issue 331 893 331 893 331 893
Less: Weighted average
number of shares held by
The Murray & Roberts Trust (6 026) (6 812) (6 737)
Less: Weighted average number
of shares held by
Murray & Roberts Limited (676) (676) (676)
Less: Weighted average number
of shares held by the
Letsema BBBEE trusts (28 837) (28 946) (28 917)
Weighted average number of
shares used for basic
per share calculation
296 354 295 459 295 563
Add: Dilutive adjustment
for share options 285 780 1 029
Weighted average number of
shares used for diluted
per share calculation
296 639 296 239 296 592
Headline loss per share
from continuing and
discontinued operations
(cents) (note 4)
- Diluted (210) (177) (503)
- Basic (210) (178) (505)
Headline loss per share from
continuing operations
(cents) (note 4)
- Diluted (189) (109) (394)
- Basic (189) (109) (396)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 December 2011
Reviewed Reviewed Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2011 2010 2011
R millions
Loss for the period (481) (587) (1 648)
Effects of cash flow hedges 11 (24) (27)
Foreign currency translation
movements 570 (169) 4
Total comprehensive income
/(loss) for the period 100 (780) (1 671)
Attributable to:
- Owners of Murray & Roberts
Holdings Limited (110) (817) (1 787)
- Non-controlling
interests 210 37 116
100 (780) (1 671)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2011
Attrib-
utable
to
Share owners Non-
capital of Murray control-
and & Roberts ling
share Other Retained Holdings inter-
premium reserves earnings Limited ests Total
R millions
Balance at
30 June 2010 737 215 5 251 6 203 974 7 177
Total compre-
hensive (loss)
/income for
the period - (181) (636) (817) 37 (780)
Net movement
in non-control-
ling interest
loans - - - - (13) (13)
Movement in
treasury
shares 11 - - 11 - 11
Movement in
share-based
payment reserve - 26 - 26 - 26
Transfer to
non-controlling
interests - (2) - (2) 2 -
Dividends
declared and
paid - - (154) (154) (52) (206)
Balance at
31 December 2010 748 58 4 461 5 267 948 6 215
Total compre-
hensive income
/(loss) for
the period - 129 (1 099) (970) 79 (891)
(Disposal)/
purchase of
non-controlling
interests
(net) - - (54) (54) 58 4
Net movement in
non-controlling
interest loans - - - - 49 49
Movement in
treasury shares 9 - - 9 - 9
Movement in
share-based
payment reserve - 6 - 6 - 6
Transfer to
statement of
financial
performance - (3) - (3) - (3)
Transfer to
non-controlling
interests - (1) - (1) 1 -
Dividends
declared and
paid - - (33) (33) (35) (68)
Balance at
30 June 2011 757 189 3 275 4 221 1 100 5 321
Total compre-
hensive income
/(loss) for the
period - 418 (528) (110) 210 100
(Disposal)/
purchase of
non-controlling
interests (net) - - - - (95) (95)
Net movement in
non-controlling
interest loans - - - - (13) (13)
Movement in
treasury shares 3 - - 3 - 3
Movement in
share-based
payment reserve - 18 - 18 - 18
Transfer to
non-controlling
interests - (2) - (2) 2 -
Dividends
declared and
paid - - - - (66) (66)
Balance at
31 December 2011 760 623 2 747 4 130 1 138 5 268
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2011
Reviewed Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
R millions
ASSETS
Non-current assets 5 964 6 171 5 563
Property, plant and equipment 3 511 3 936 3 325
Goodwill 438 549 435
Deferred taxation assets 535 466 470
Investments in associate
companies 679 509 564
Other non-current assets 801 711 769
Current assets 13 518 13 683 11 137
Inventories 866 1 380 817
Trade and other receivables 2 548 3 027 1 929
Amounts due from contract
customers (note 5) 6 462 6 044 5 290
Cash and cash equivalents 3 642 3 232 3 101
Assets classified as
held-for-sale 1 142 1 442 2 860
TOTAL ASSETS 20 624 21 296 19 560
EQUITY AND LIABILITIES
Total equity 5 268 6 215 5 321
Attributable to owners of
Murray & Roberts
Holdings Limited 4 130 5 267 4 221
Non-controlling interests 1 138 948 1 100
Non-current liabilities 3 169 2 646 1 873
Long-term liabilities2 2 615 2 050 1 223
Long-term provisions 147 79 127
Deferred taxation liabilities 334 265 311
Other non-current liabilities 73 252 212
Current liabilities 11 859 12 212 11 184
Amounts due to contract
customers (note 5) 2 985 3 013 2 244
Accounts and other payables 7 826 7 006 7 821
Bank overdrafts2 523 1 568 47
Short-term loans2 525 625 1 072
Liabilities directly
associated with assets
classified as held-for-sale 328 223 1 182
TOTAL EQUITY AND LIABILITIES 20 624 21 296 19 560
2 Interest-bearing borrowings
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
for the six months ended 31 December 2011
Reviewed Reviewed1 Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2011 2010 2011
R millions
Revenue3
Construction Africa and
Middle East 4 379 5 104 9 108
Engineering Africa 2 322 1 322 4 094
Construction Products Africa 1 715 2 261 4 157
Construction Global
Underground Mining 4 696 3 524 7 789
Construction Australasia
Oil & Gas and Minerals 3 618 2 852 5 387
Continuing operations 16 730 15 063 30 535
Discontinued operations 1 151 1 266 2 646
17 881 16 329 33 181
Continuing operations
(Loss)/profit before
interest and taxation4
Construction Africa and
Middle East (779) (432) (1 399)
Engineering Africa 103 (103) (51)
Construction Products Africa 105 199 192
Construction Global
Underground Mining 335 290 602
Construction Australasia
Oil & Gas and Minerals 82 154 269
Corporate (69) (131) (291)
Loss before interest
and taxation (223) (23) (678)
Net interest expense (90) (99) (194)
Loss before taxation (313) (122) (872)
Discontinued operations
Profit/(loss) before
interest and taxation 6 (458) (710)
Net interest expense (20) (25) (58)
Loss before taxation (14) (483) (768)
1 Reclassified as a result of discontinued operations and previously disclosed
exceptional items of R795 million were reclassified
to loss before interest and taxation.
3 Revenue is disclosed net of inter-segmental revenue. Inter-segmental revenue
for the Group is R41 million (2010: R227 million and June 2011:
R506 million).
4 The chief operating decision maker utilises (loss)/profit before interest and
taxation in the assessment of a segment`s performance.
SEGMENTAL ASSETS
at 31 December 2011
Reviewed Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
R millions
Construction Africa
and Middle East 4 996 6 083 5 201
Engineering Africa 1 652 2 117 1 241
Construction Products
Africa 2 762 3 629 3 166
Construction Global
Underground Mining 3 324 2 391 2 708
Construction Australasia
Oil & Gas and Minerals 2 822 2 914 3 354
Corporate 891 464 236
16 447 17 598 15 906
Reconciliation of
segmental assets
Total assets 20 624 21 296 19 560
Deferred taxation assets (535) (466) (470)
Current taxation assets - - (83)
Cash and cash equivalents (3 642) (3 232) (3 101)
Segmental assets 16 447 17 598 15 906
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 December 2011
Reviewed Reviewed Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2011 2010 2011
R millions
Cash (utilised in)/
generated from operations (1 373) (798) 872
Interest received 49 53 106
Interest paid (159) (177) (358)
Taxation paid (146) (124) (286)
Operating cash (outflow)
/inflow (1 629) (1 046) 334
Dividends paid to owners
of Murray & Roberts
Holdings Limited - (154) (187)
Dividends paid to
non-controlling interests (66) (52) (87)
Cash (outflow)/inflow from
operating activities (1 695) (1 252) 60
Acquisition of businesses
(note 7) (14) (31) (70)
Dividend received from
associate companies 16 10 25
Acquisition of associates - (7) (7)
Increase in investments (67) - -
Purchase of intangible
assets other than goodwill (5) (4) (12)
Purchase of property, plant
and equipment by
discontinued operations (36) - (35)
Purchase of property,
plant and equipment (430) (422) (832)
- Replacements (138) (75) (465)
- Additions (292) (347) (367)
Proceeds on disposal of
property, plant and equipment 66 51 132
Proceeds on disposal of
businesses (note 7) 857 - -
Proceeds on disposal of assets
held-for-sale 95 321 635
Proceeds on disposal of
investments in associates 6 - -
Acquisition of other
investments by discontinued
operations (50) - -
Advance payment received in
respect of investment disposal - - 170
Cash related to assets
held-for-sale (83) 28 (111)
Proceeds on disposal
and realisation of investments - 43 45
Other (net) (2) - (2)
Cash inflow/(outflow) from
investing activities 353 (11) (62)
Net increase in borrowings 1 077 527 529
Treasury share disposals (net) 3 11 20
Cash inflow from financing
activities 1 080 538 549
Net (decrease)/increase in
cash and cash equivalents (262) (725) 547
Net cash and cash equivalents
at beginning of period 3 054 2 566 2 566
Effect of foreign exchange
rates 327 (177) (59)
Net cash and cash equivalents
at end of the period 3 119 1 664 3 054
NOTES
1. Basis of preparation
The Group operates in the construction, engineering and mining environment
and as a result the revenue is not seasonal in nature but is influenced by
the nature of the contracts that are currently in progress. Refer to
commentary for a more detailed report on the performance of the different
operating platforms within the Group.
The interim report for the six months ended 31 December 2011 has 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
2011.
This review has been conducted in accordance with International Standards
on Review Engagements 2410, Review of Interim Financial Information
Performed by the Independent Auditor, Deloitte & Touche, and their
unmodified review opinion 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 before interest and taxation
Loss before interest and taxation includes the following significant items:
31 December 31 December 30 June
2011 2010 2011
R millions
Gautrain/Competition
Commission penalties - (510) (1 150)
GPMOF (600) - (582)
Middle East operations (231) (165) (164)
Other impairments - (120) (79)
(831) (795) (1 975)
Items by nature
Cost of sales (15 939) (14 105) (28 428)
Distribution and
marketing expenses (127) (129) (271)
Administration expenses (1 171) (1 028) (3 138)
Other operating income 284 176 624
(16 953) (15 086) (31 213)
3. Loss from discontinued operations
The Group disposed of its mining roof bolt & Alert Steel Polokwane
businesses and Johnson Arabia crane hire while Clough disposed of its
marine operations during the six months ended 31 December 2011. Refer to
note 7 for further details on these disposals.
The remaining discontinued operations comprise of the Group`s properties
and interests in steel reinforcing bar manufacture and trading operations.
31 December 31 December 30 June
2011 2010 2011
R millions
Revenue 1 151 1 266 2 646
Profit/(loss) before
interest, depreciation
and amortisation 9 (417) (641)
Depreciation and amortisation (3) (41) (69)
Profit/(loss) before interest
and taxation 6 (458) (710)
Net interest expense (20) (25) (58)
Taxation (expense)/credit (5) 117 118
Loss from equity accounted
investments - (2) (16)
Loss from discontinued
operations (19) (368) (666)
Non-controlling interests
relating to discontinued
operations 21 42 79
Cash flows from discontinued
operations include the
following:
Cash outflow from
operating activities (236) (328) (129)
Cash inflow from investing
activities 957 204 574
Cash outflow from financing
activities (335) (178) (466)
Net increase/(decrease)
in cash and cash equivalents 386 (302) (21)
4. Reconciliation of headline loss
31 December 31 December 30 June
2011 2010 2011
R millions
Loss attributable to owners
of Murray & Roberts
Holdings Limited (528) (636) (1 735)
Investment property fair
value adjustments - - 5
Profit on disposal of
businesses (64) (16) (17)
Profit on disposal of
property, plant and equipment (30) (13) (49)
Impairment of goodwill and
other assets - 184 398
Fair value adjustment and
(profit)/loss on disposal of
assets held-for-sale (29) 5 32
Adjustments relating to
business acquisitions - (8) (62)
Other - - 1
Non-controlling interests
effects on adjustments 18 (2) (5)
Taxation effects on
adjustments 10 (39) (61)
Headline loss (623) (525) (1 493)
Adjustments for
discontinued operations:
Loss from discontinued
operations 19 368 666
Non-controlling interests (21) (42) (79)
Investment property fair
value adjustments - - (5)
Profit on disposal of
businesses 59 16 17
Profit on disposal of property,
plant and equipment - 3 1
Impairment of goodwill and
other assets - (181) (324)
Fair value adjustment and
profit/(loss) on disposal of
assets held-for-sale 29 (5) (34)
Adjustments relating to
business acquisitions - - 1
Non-controlling interests
effects on adjustments (20) 2 6
Taxation effects on adjustments (3) 42 74
Headline loss from continuing
operations (560) (322) (1 170)
5. Contracts-in-progress and contract receivables
31 December 31 December5 30 June
2011 2010 2011
R millions
Contracts-in-progress
(cost incurred plus
recognised profits,
less recognised losses) 1 435 1 482 557
Uncertified claims and
variations less payments
received on account
(recognised in terms of
IAS 11: Construction Contracts) 2 203 1 842 1 968
Uncertified claims and
variations 2 675 1 842 2 302
Less: Payments received
on account (472) - (334)
Amounts receivable on
contracts (net of
impairment provisions) 2 539 2 413 2 340
Retentions receivable
(net of impairment provisions) 285 307 425
6 462 6 044 5 290
Amounts received in excess
of work completed (2 985) (3 013) (2 244)
3 477 3 031 3 046
Disclosed as:
Amounts due from
contract customers 6 462 6 044 5 290
Amounts due to contract
customers (2 985) (3 013) (2 244)
3 477 3 031 3 046
5 During the financial year ended 30 June 2011 the Group elected to disclose the
uncertified claims and variations less payments received on account separately
from contracts-in-progress. Furthermore, the under claims and over claims per
contract were disclosed on a net basis to determine the net position per
contract whilst in previous periods these amounts were disclosed separately in
amounts due to and from contract customers. This resulted in a reclassification
of R13 million in December 2010 between amounts due to and from contract
customers, however, the net amount remained unchanged.
The reclassification had no impact on the net working capital of the Group, nor
its working capital movement. The Group is of the view that the revised
contracts-in-progress and contract receivables disclosure provides more useful
information to users of the financial statements as the uncertified claims and
variations recognised is easily identifiable.
The Group operates in the construction, engineering and mining environment and
engages in construction contracts with various clients. The contracts end of
site position is continuously re-estimated based on the latest available
information. As a result it is impractical for the nature and amount of the
change in estimate to be disclosed at each reporting period.
6. Contingent liabilities
Contingent liabilities are related to disputes, claims and legal proceedings in
the ordinary course of business.
The Group does not account for any potential contingent liabilities where a back
to back arrangement exists with clients or subcontractors.
31 December 31 December 30 June
2011 2010 2011
R millions
Operating lease
commitments 1 968 2 148 2 155
Contingent liabilities 1 238 555 983
Financial institution
guarantees 9 740 9 260 10 408
The Competition Commission (the "Commission") engaged the construction industry
in April 2011 and submitted applications 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 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.
7. Business disposals/acquisitions
The Group disposed of the following discontinued operations in the six months
ended 31 December 2011:
- The mining roof bolt and Alert Steel Polokwane businesses in July 2011 and
October 2011 respectively with combined proceeds of R94 million received;
- Johnson Arabia crane hire in October 2011 with proceeds of R109 million
received; and
- Clough`s marine business in December 2011 with proceeds of R654 million
received (net of borrowings).
The Group did not make any material acquisitions in the six months ended 31
December 2011. These immaterial acquisitions resulted in a cash outflow of R14
million.
8. Liquidity & debt restructuring
The Group has restructured South African term debt and bank facilities, the new
debt package of approximately R4,3 billion (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. The
facilities are supported by cross guarantees from Group companies and have been
secured by the pledging of Clough shares.
9. Dividend
The Board has resolved not to declare a dividend until the Group`s liquidity and
trading position has improved further.
10. Related party transactions
There have been no significant changes to the nature of related party
transactions since 30 June 2011.
11. Events after reporting date
Subsequent to the period under review, the Gorgon Pioneer Material Offloading
Facility ("GPMOF") project experienced further weather delays, as well as
unexpected safety related stoppages, which have been treated as non-adjusting
events after the reporting period. The impact of these delays is currently
estimated at R220 million which will be accounted for in the second half of the
financial year. The Group is in the process of evaluating the recoverability of
any costs incurred as a result of these delays.
The directors are not aware of any other matter or circumstance arising after
the period ended 31 December 2011, not otherwise dealt with in the Group`s
interim results, which significantly affects the financial position at 31
December 2011 or the results of its operations or cash flows for the period then
ended.
COMMENTARY
SALIENT FEATURES
Revenue up 11% to R16,7 billion
Attributable loss reduced by 17% to R528 million, after providing R600
million for costs to complete on the Gorgon Pioneer Material Offloading
Facility (GPMOF) project and R231 million on projects in the Middle East.
Order book increased to R57,0 billion
- Portside commercial office tower - R1,0 billion
- Booysensdal North Mine, UG2 Project - R1,3 billion
- Beeshoek Mine, Northern Cape - R361 million
- Clough: Ammonium Nitrate/Nitric Acid Plant - R823 million
- Clough: Operations and maintenance services to the Bayu-Undan facilities -
R767 million
Health and Safety
- Lost Time Injury Frequency Rate (LTIFR) reduced from 1.44 to 1.04
- 3 fatalities compared to 10 in the previous comparable period
Debt Restructuring
- Successfully restructured South African term debt and bank facilities
- New debt package of approximately R4,3 billion (previously R3,4 billion)
Announcement of Rights Offer
- Proposed rights offer of approximately R2,0 billion to shareholders
FINANCIAL REPORT FOR THE SIX MONTHS TO 31 DECEMBER 2011**
For the six months ended 31 December 2011, the Group generated revenue of R16,7
billion (2010: R15,1 billion) and reported an attributable loss of R528 million
(2010: R636 million). This loss is primarily as a result of additional cost
provisions, amounting to R831 million, on GPMOF and Middle East contracts. The
Group remains exposed to potential additional costs until the completion of
GPMOF, Gautrain and Middle East contracts.
For the six months to 31 December 2011, the Group recorded a diluted headline
loss per share of 210c (2010: 177c) and diluted loss per share of 178c (2010:
215c).
RECOVERY & GROWTH
Murray & Roberts embarked on the 2012 financial year with new leadership, a
renewed focus on risk management and health and safety, a sound order book and a
determination to grow the business while reducing debt.
The Group`s Recovery & Growth Plan, which aims to return the Group to
profitability as soon as practicably possible, was communicated to shareholders
on 31 August 2011. In implementing this plan during the six months ended 31
December 2011 the:
- Group successfully restructured its South African term debt and bank
facilities in November 2011;
- Board of Directors of Murray & Roberts (Board) proposed a rights offer of
approximately R2,0 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;
- 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 was completed and is now well established; and
- Group raised R952 million through the disposal of non-core assets and
discontinued operations.
Order book increased to R57,0 billion (June 2011: R55,4 billion). The operating
margin contained in the order book is within the Group`s targeted range of 5,0%
to 7,5%.
Liquidity & Debt Restructuring
In order to improve the Group`s liquidity, Murray & Roberts successfully
completed the restructuring of its South African term debt and banking
facilities during November 2011. The new debt package of approximately
R4,3 billion (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 R21 million, compared to a
net debt position of R1,0 billion at 31 December 2010. Debt levels in South
Africa remain high, with significant amounts of restricted cash held offshore
and in joint ventures.
Rights Offer
The Board has given due consideration to the continued implementation of the
Group`s Recovery & 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 proposed a
rights offer to raise approximately R2,0 billion.
While the Board believes that the steps taken above have been essential to
solidifying the Group`s operating and financial position, it has also sought to
retain strategic flexibility and to preserve and grow long-term shareholder
value, particularly in light of the current global economic and financial
markets.
OPERATING PERFORMANCE
Although the business environment continues to be 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 and Construction Products Africa.
Construction Africa and Middle East: Revenues declined 14% to R4,4 billion
(2010: R5,1 billion) with an operating loss of R779 million (2010: operating
loss of R432 million). The losses are primarily due to additional costs on GPMOF
and projects in the Middle East. Further detail on GPMOF is included under
Challenging Projects. The order book is R10,7 billion (June 2011: R10,0
billion).
In the medium to longer term, the outlook for Construction Africa remains
positive, given the major - and growing - infrastructural backlog in South
Africa and the recent commitment and focus on infrastructure spend announced
in the State of the Nation address and budget speech. Government approved
expenditure for infrastructure plans to the amount of R845 billion
in the Medium-Term Expenditure Framework.
The platform will have a particular focus on opportunities in the road, rail,
power, renewable energy and water sectors and through partnerships with other
organisations to access major project opportunities. However, in the near term
the construction industry in South Africa is expected to remain muted, and the
platform is actively pursuing opportunities in Africa.
Conditions in the United Arab Emirates remain challenging and the Group made
additional provisions of R231 million against subcontractor final accounts and
other completion costs on various projects. The Middle East business is shifting
focus to Qatar which, in the medium term, is expected to present opportunity for
civil and building works, particularly associated with the 2022 FIFA World Cup.
Processes to settle the Group`s claims on GPMOF, Gautrain and Dubai
International Airport projects are ongoing. Based on current information, there
is no requirement to impair the claims taken to book as uncertified revenues
valued at approximately R2,2 billion. This is marginally up from the R2,0
billion previously reported, primarily due to foreign exchange movements. These
claims have been taken to book in compliance with IAS 11 (Construction
Contracts) and following engagement with independent legal, commercial and
claims consultants. The Group`s uncertified revenues are significantly lower
than the estimated value of its claims and variation orders. The Board and
management remain committed to the resolution of all contractual disputes and
collection of resultant claims, while recognising that the settlement will be
challenging and protracted.
Johnson Arabia was sold in the period under review for R109 million.
Construction Global Underground Mining: Revenues increased 34% to
R4,7 billion (2010: R3,5 billion) with a 16% increase in operating profit to
R335 million (2010: R290 million). The order book decreased marginally to R16,1
billion (June 2011: R16,7 billion).
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 being impacted by the lower platinum price.
Construction Global Underground Mining will continue to pursue opportunities
globally which may include acquisitions to further strengthen and diversify the
platform`s order book and accelerate revenue growth in key markets, such as
Western Australia.
Construction Australasia Oil & Gas and Minerals: Revenues increased 24% to R3,6
billion (2010: R2,9 billion) with a decrease in operating profit to
R82 million (2010: R154 million) primarily as a result of losses on a completed
contract and fee adjustments pertaining to two fixed fee contracts. The order
book increased substantially to R15,4 billion (June 2011: R11,4 billion). Full
details of the Clough financial results for the half-year and its prospects have
been published on its website www.clough.com.au.
The sale of Clough`s Marine business was concluded in December 2011, with
proceeds of R654 million received, net of borrowings.
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: Revenues increased 77% to R2,3 billion (2010:
R1,3 billion) with an increase in operating profit to R103 million (2010: R103
million loss). The order book is marginally lower at R13,6 billion (June 2011:
R14,2 billion) due to progress on the Medupi and Kusile power station projects.
Through its current contracts, this operating platform will continue to be
actively involved in Eskom`s power programme until 2016. 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
actively pursued in sub-Saharan Africa.
Murray & Roberts Projects is also active in a number of other projects and is
seeking further opportunities in minerals, water and industrial projects and
recently secured an engineering contract for Exxaro`s Hillendale project.
In the short to medium term, Engineering Africa will maintain its focus on
engineering and construction services in Southern Africa with new potential
opportunities including nuclear and renewable energy, water, minerals and oil &
gas market segments.
Construction Products Africa: Revenues declined 26% to R1,7 billion (2010: R2,3
billion) with a decline in operating profit to R105 million (2010:
R199 million).
Much Asphalt continues to perform well on the back of ongoing work on the
Gauteng Freeway Improvement Project, despite a national bitumen shortage.
Technicrete is benefiting from improved trading conditions and efficiency gains.
Hall Longmore`s spiral pipe manufacturing capacity for the remainder of the
financial year will be fully utilised, whilst the 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.
The sale of two operations of the Steel Business have been successfully
concluded for a consideration of R94 million. Negotiations are ongoing for the
disposal of the remaining Steel Business (the rebar distribution business and
Cisco mill) at acceptable value.
CHALLENGING PROJECTS
Gorgon Pioneer Material Offloading Facility: The Group encountered late site
access, material scope changes and continued adverse weather conditions at its
GPMOF project in Western Australia. Costs to complete increased by R600 million
during the period under review. Subsequently, the project experienced further
weather delays, as well as unexpected safety related stoppages. The impact of
these delays is currently estimated at R220 million, which will be accounted for
in the second half of the financial year. The Group is in the process of
evaluating the recoverability of any costs incurred as a result of these delays.
Project completion is now scheduled for the second half of the current financial
year. It is not expected that any significant part of the claims will be settled
before the end of the current financial year.
Gautrain Rapid Rail Link: The project is 96% complete. However, the Group is
still engaged in completing the water ingress rectification work in the section
between Park Station and Rosebank Station. The effectiveness of the work will be
reviewed during March 2012, and may require additional work subject to water
ingress measurements. Bombela Concession Company submitted its Statement of Case
in August 2011 in connection with the delay and disruption and related disputes
on the project. Gauteng Province has received a further extension to May 2012 to
submit its Statement of Defence. The Gautrain arbitration will be a protracted
process and finalisation of the arbitration is now expected by 2014 (previously
2013).
Medupi Civils: Murray & Roberts Construction, in a joint venture, is undertaking
the majority of the civil works at Medupi Power Station. The contract is
progressing satisfactorily despite significant increase in project scope.
Negotiations are in progress with Eskom to resolve outstanding claims related
thereto.
RISK MANAGEMENT
The Group`s revised operating structure now groups businesses with similar
markets and core competencies into five operating platforms. Each operating
platform is led by an operating platform executive reporting to the Group Chief
Executive. Each operating platform is being resourced with commercial and
financial executives, allowing for improved risk management and decision-making
across each platform.
The Group`s risk management processes and systems, including its bespoke
Opportunity Management System, continues to be enhanced to drive a greater level
of risk management closer to each operating environment.
Improved processes and systems include the implementation of additional
procedures designed to increase the commercial, operational, financial and
reputational scrutiny of future clients, partners and subcontractors, as well as
an increased focus on managing contractual and other arrangements proactively in
order to address design and specification changes, access delays and project
disruptions that occur over the span of projects, which can negatively impact
profitability.
HEALTH AND SAFETY
The Board extends its condolences to the families, friends and colleagues of the
three employees who lost their lives while at work in the Group`s operations
during the period under review.
The safety of all people who work for or with the Group is of paramount
importance. The Group`s health and safety vision is "Together to Zero Harm" with
the stated goal of having zero fatalities and disabling injuries and achieving a
LTIFR of less than one per million man hours by June 2012. The LTIFR as at 31
December 2011 was 1.04.
In an effort to achieve this vision, the Group has put in place a clear health
and safety policy; a two-tiered structure that combines a high-level health and
safety framework with programmes designed to foster learning and create an
involved and competent workforce at all levels. The health and safety policy
emphasises the Group`s commitment to the adoption of the highest safety
standards at all of its operations.
We remain committed to addressing safety in the work place with an initiative
primarily focussed on attitudes to safety and safe behaviour across the
organisation.
COMPETITION COMMISSION
The Competition Commission (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
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.
Notwithstanding the Group`s efforts to identify and disclose all anti-
competitive matters to the Commission, there may be certain residual matters
which have not yet come to the Group`s attention.
DIVIDEND
The Board has resolved not to declare a dividend until the Group`s liquidity and
trading position has improved further.
BOARD OF DIRECTORS
Alan Knott-Craig resigned as non-executive director from the Board on
17 January 2012. The Board wish Mr Knott-Craig well in his future endeavours and
thank him for his contribution over the past three years.
PROSPECTS STATEMENT
It remains the Group`s objective to return to profitability as soon as
practically possible. The level and timing will depend on the conversion and
completion of the Group`s challenging projects. The information on which this
prospects 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
29 February 2012
Registered office:
Douglas Roberts Centre,
22 Skeen Boulevard,
Bedfordview 2007
PO Box 1000
Bedfordview 2008
Registrar:
Link Market Services South Africa (Pty) Limited
13th floor, Rennie House,
19 Ameshoff Street,
Johannesburg 2001
PO Box 4844
Johannesburg 2000
Directors:
RC Andersen* (Chairman)
HJ Laas (Managing & Chief Executive)
DD Barber*
AJ Bester
O Fenn1
NM Magau*
JM McMahon1*
WA Nairn*
AA Routledge*
M Sello*
SP Sibisi*
RT Vice*
1British *Non-executive
Secretary:
Y Karodia
website: www.murrob.com
.mobi site: http://murrob.mobi
e-mail: clientservice@murrob.com
Disclaimer
This announcement is not an offer for the sale of securities. The securities
discussed herein have not been and will not be registered under the U.S.
Securities Act of 1933 (the "U.S. Securities Act"), or under any securities laws
of any state or other jurisdiction of the United States and may not be offered,
sold, taken up, exercised, resold, renounced, transferred or delivered, directly
or indirectly, within the United States absent an exemption from, or in a
transaction not subject to, the registration requirements of the U.S. Securities
Act and in compliance with any applicable securities laws of any state or other
jurisdiction of the United States.
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.
Neither the content of the Group`s website, Clough`s website nor any website
accessible by hyperlinks on the Group`s website is incorporated in, or forms
part of, this announcement.
**Unless otherwise noted, all comparisons are to the Group`s performance as at
and for the six month period ended 31 December 2010.
Bedfordview
29 February 2012
Sponsor:
Deutsche Securities (SA) Proprietary Limited
Date: 29/02/2012 15:52:06 Produced by the JSE SENS Department.
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