| Wed 9 Jun 2004, 16:46 | | TRADING STATEMENT AND CAUTIONARY |
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MURRAY & ROBERTS HOLDINGS LIMITED - TRADING STATEMENT AND CAUTIONARY
ANNOUNCEMENT
MURRAY & ROBERTS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1948/029826/06
JSE Share Code: MUR
ISIN Code: ZAE000008983
(`the Group`)
TRADING STATEMENT AND CAUTIONARY ANNOUNCEMENT
Overview
The directors have reviewed the position of the Group at the end of the third
quarter in the light of flat business conditions in its markets, ongoing
rationalisation in terms of the objective of Rebuilding Murray & Roberts by 30
June 2005, continued strength in the South African currency, and the dynamics
and timing of targeted major projects.
The Group continues to experience mixed fortunes in its different markets,
highlighted in the business update issued at the annual general meeting of the
Group on 27 October 2003 and the Prospects Statement in the report on interim
results for the six months ended 31 December 2003 published on 25 February 2004.
Based on the details and information below, shareholders are advised that
headline earnings per share to 30 June 2004 are expected to be approximately 15%
lower than the 175 cents per share recorded in the previous corresponding
reporting period.
The information contained in this announcement has not been reviewed and
reported on by the Group`s auditors and consequently holders of securities must
exercise caution when dealing in their securities until publication of the
financial results for the year ended 30 June 2004, which is planned for 25
August 2004.
Order Book
There is a material decline in the project order book to R3,4 billion at 31
March 2004. (R4,1 billion at 31 December 2003). This has had a negative impact
on revenues which will be down approximately 15% in the year. In addition, the
Group has declined to extend the validity of its preferred tender position on
two major projects with a total value of R3,5 billion. In both instances (a
Middle East airport and southern Africa road) the projects were tendered more
than a year ago and potential profitability has been eroded through exchange
rate volatility, non-recoverable price increases and changed market dynamics.
Work has continued on the preparation of revised proposals and pricing for the
delayed Gautrain project, which has received additional impetus with the
announcement of the Soccer 2010 World Cup.
There has been limited recovery of the forward loss provisions booked against
certain projects in previous reporting periods. The decline in new revenues has
increased the relative percentages of break-even work in the second half-year,
which will have an impact on operating margin and return on equity.
In contrast, the long-term order book for Foundries has strengthened with work-
in-hand extending at near current levels beyond 2010. The Group expects an
announcement in due course on the locomotive replacement programme in South
Africa, which could benefit the UCW Partnership.
Operations
International construction in the rest of Africa outside of the Southern Africa
Development Community (SADC) has proved difficult, with projects in Egypt,
Nigeria, Benin and Equatorial Guinea demanding high levels of management and
cash resources to pursue completion or resolution. Where the collection of
debts is uncertain the Group continues to adopt a conservative approach to
revenue recognition and performance in the current year.
The Middle East has experienced a difficult year of consolidation, with a change
in regional management that has brought into focus working capital management
and the resolution of outstanding claims. Conservative revenue recognition will
result in a marginal performance for the year.
The general construction economy (construction, engineering, materials and
services) in South Africa and the rest of SADC has proved resilient throughout
the year and is estimated to contribute approximately 70% of revenues and 90% of
gross operating profits. More than 75% of the latter is in the domestic South
African market.
Foundries and UCW are stable and remain well positioned in their respective
markets, despite the fact that industrial manufacturing from South Africa is
negatively impacted by currency volatility and reduced global demand.
Rationalisation at Consani has been severe and will deliver an operating loss in
the year. Fabrication and Manufacture is expected to contribute approximately
15% of revenues and gross operating profits.
Corporate
A deferred tax asset of approximately R32 million will be recognised in certain
subsidiaries that have regained sustainable profitability. The accounting of
property head leases will change to record capitalised assets and liabilities.
No underlying deterioration of the head lease properties is expected in the
current year.
The Group has continued to rationalise its activities and exit markets and
sectors where an appropriate growth potential or return on investment is not
evident. This is particularly the case in the rest of Africa. New investment and
market opportunities have been identified, and the Cementation acquisition has
received approval from the Competition Tribunal. The transaction is nearing
completion following a cautious and thorough process of engagement.
The Group continues to source new levels of executive leadership and human
capital, with a particular focus on building its international capacity. A high
level empowerment strategy covering core regional operations and new strategic
business partnerships in both the domestic and international markets are at an
advanced stage of development.
Johannesburg
9 June 2004
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 09/06/2004 04:42:03 PM Produced by the JSE SENS Department
