| Thu 26 Aug 2004, 8:57 | | Preliminary Report for the year ended 30 June 2004 |
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MURRAY & ROBERTS HOLDINGS LIMITED - PRELIMINARY REPORT FOR THE ENDED 30 JUNE
2004
Murray & Roberts Holdings Limited
(Registration number 1948/029826/06)
(`Murray & Roberts` or `the Group`)
Share Code: MUR
ISIN code: ZAE000008983
Preliminary Report for the year ended 30 June 2004
The audited results for the year ended 30 June 2004 are set out
below:
Summarised consolidated income statement
Audited
Audited Restated
(R millions) 30 June 2004 30 June 2003
Revenue 8 424 10 111
Earnings before interest,
exceptional items, depreciation
and amortisation (EBITDA) 615 856
Amortisation of goodwill (5) (5)
Depreciation (189) (218)
Earnings before interest and
exceptional items (EBIT) 421 633
Exceptional items (9) (5)
Headlease and other discontinued
property activities (note 2) - (54)
Other (9) 49
Earnings before interest and
taxation 412 628
Interest 10 (66)
Net interest income (expense) 10 (17)
Unrealised currency loss on offshore
treasury funds - (49)
Earnings before taxation 422 562
Taxation (note 3) (27) (76)
Earnings after taxation 395 486
Income from associate 114 97
Minority shareholders` interest (25) (9)
Earnings attributable to ordinary
shareholders 484 574
Reconciliation of headline
Attributable earnings 484 574
Exceptional items as above 9 5
Amortisation of goodwill 5 5
Non-headline portion of income from
Associate 5 8
Headline earnings 503 592
Reconciliation of weighted average
number of shares in issue (`000)
(note 2)
Weighted average number of ordinary
shares in issue 331 893 331 893
Less weighted average number of
shares held by the Murray &
Roberts Trust (13 788) (14 077)
Weighted average number of
shares in issue used in the
determination of basic per
share figures 318 105 317 816
Add: adjustment for share
Options 6 173 9 291
Weighted average number of
shares in issue used in the
determination of diluted per
share figures 324 278 327 107
Earnings per share (cents)
- Excluding treasury shares 146 173
- Diluted 149 175
- Basic 152 181
Headline earnings per share (cents)
- Excluding treasury shares 152 178
- Diluted 155 181
- Basic 158 186
Total dividend per ordinary share
(cents) 45.0 52.5
Operating cash flow per share
(cents) 87 107
Summarised consolidated balance sheet
Audited
Audited Restated
(R millions) 30 June 2004 30 June 2003
ASSETS
Non-current assets 2 355 2 082
Property, plant and equipment 1 099 1 080
Discontinued headlease investment
properties (note 2) 257 277
Associate company - Unitrans Limited 653 571
Other investments 346 154
Current assets 3 664 4 211
Accounts receivable and other 2 560 2 667
Bank balances and cash 1 104 1 544
Total tangible assets 6 019 6 293
Goodwill 5 10
Deferred taxation assets(note 3) 33 -
TOTAL ASSETS 6 057 6 303
EQUITY AND LIABILITIES
Permanent capital 2 661 2 497
Ordinary shareholders` funds 2 607 2 484
Minority shareholders` interest 54 13
Non-current liabilities 580 714
Long-term provision (note 2) 29 59
Discontinued finance headlease
liabilities* (note 2) 346 401
Other long-term liabilities* 139 197
Deferred taxation liabilities 66 57
Current liabilities 2 816 3 092
Accounts payable and other 2 533 2 729
Bank overdrafts and short-term
Loans 283 363
TOTAL EQUITY AND LIABILITIES 6 057 6 303
Net asset value per share (cents) 785 748
*Interest-bearing borrowings
SUPPLEMENTARY INFORMATION (Rm)
Commitments
Capital expenditure
- spent 353 238
- authorised but unspent 397 405
Operating lease
Commitments 55 176
Contingent liabilities 56 16
Summarised consolidated cash flow statement
Audited
Audited Restated
(R millions) 30 June 2004 30 June 2003
Cash generated by operations before
working capital changes 533 824
Cash outflow from
discontinued headlease property
activities (note 2) (114) (99)
Increase in working capital (88) (270)
Cash generated by operations 331 455
Interest and taxation (43) (99)
Operating cash flow 288 356
Dividends paid (167) (159)
Dividends paid to minority
Shareholders (1) (4)
Cash retained in operations 120 193
Net investment activities (253) (142)
Net funds flow (133) 51
Summarised statement of changes in equity
Audited
Audited Restated
(R millions) 30 June 2004 30 June 2003
Opening balance 2 484 2 648
Restatement - headlease and other
discontinued property activities
(note 2) - (72)
AC133 transitional adjustment - (33)
Earnings attributable to
ordinary shareholders 484 574
Movement in revaluation reserve (2) -
Movement in non-trading
financial asset reserve 12 -
Movement in hedging reserve 2 (5)
Foreign currency translation
movement on investments (163) (440)
Movement in treasury shares (note 2) (43) (29)
Dividend declared and paid (167) (159)
Segmental analysis
Audited
Audited Restated
(R millions) 30 June 2004 30 June 2003
REVENUE
Construction operations 3 502 3 981
Engineering contracting and
services 651 955
Construction services and
material supplies 3 011 3 383
Fabrication and manufacture 1 210 1 420
Corporate 1 30
Ongoing operations 8 375 9 769
Discontinued operations 49 342
Revenue as reported 8 424 10 111
EBIT
Construction operations 96 199
Engineering contracting and services 81 116
Construction services and material
Supplies 274 288
Fabrication and manufacture 68 108
Corporate (100) (95)
Ongoing operations 419 616
Discontinued operations 2 17
EBIT as reported 421 633
Notes:
1. These consolidated summarised preliminary financial statements are
prepared in accordance with AC127: Interim Financial Reporting. The
accounting policies and methods of computation for the financial
statements for the year ended 30 June 2004 are consistent with those
applied in the prior year except as described in note 2 below and are
in accordance with South African Statements of Generally Accepted
Accounting Practice and the Companies Act in South Africa.
2. Restatements and comparatives
Headlease and other discontinued property activities
All headleases where the Group has a controlling interest in the
property at the end of the lease term are more appropriately accounted
for as separate finance lease obligations and the underlying leased
assets are accounted for as investment properties. The opening
balance on accumulated profit at 1 July 2002 and the balance sheet
at 30 June 2003 have been restated on this basis and there has been
no impact on the income statement in 2003. The restatement has no
impact on the prior year earnings and headline earnings. The income
statement impact of the headleases and other discontinued property
activities classified as both operating and finance leases will
continue to be disclosed as exceptional items and excluded from
headline earnings. The effect on the current year`s earnings per
share is nil cents.
Concession investments
Concession investments, which constitute a separate business unit and
which will be traded in the relative short-term, have been more
appropriately designated held for-trade financial investments.
Consequently, the 2003 income statement has been restated to reflect
the fair value adjustment to the concession investment amounting to
R 10 million after taxation.
The Murray & Roberts Trust
The Murray & Roberts Trust is consolidated in line with the ruling of
the JSE`s GAAP Monitoring Panel. Where the Trust has purchased the
company`s equity share capital, the consideration paid, including any
attributable incremental external costs net of income taxes, is
deducted from total shareholders` equity as treasury shares until
they are cancelled. Where such shares are subsequently sold, or
reissued, any consideration received is included in shareholders`
equity. The weighted average number of shares held by the trust are
deducted from the average number of shares in issue used in the
determination of earnings and headline earnings per share.
Restatements
The table below provides a detailed breakdown of the effect of the restatements
referred to above on the 2003 financial statements. The
table below provides a detailed breakdown of the effect of the
restatements referred to above on the 2003 financial statements.
The table below provides a detailed breakdown of the effect of the
restatements referred to above on the 2003 financial statements.
Audited
Restated Audited
30.6.03 30.6.03
Effect on the summarised
consolidated income statement
Earnings before interest,
exceptional items,
depreciation and amortisation
(EBITDA) 856 844
Taxation 76 74
Earnings per share (cents)
Excluding treasury shares 173 170
Diluted 175 170
Basic 181 170
Headline earnings per share
(cents)
Excluding treasury shares 178 175
Diluted 181 175
Basic 186 175
Effect on the summarised
consolidated balance sheet
Non-current assets
Property, plant and
Equipment 1 080 1 179
Discontinued headlease
investment properties 277 -
Other investments 154 159
Current assets
Accounts receivable and
Other 2 667 2 688
Permanent capital
Ordinary shareholders`
Funds 2 484 2 559
Non-current liabilities
Long term provision 59 243
Discontinued finance
headlease liabilities 401 -
Other long-term liabilities 197 218
Deferred taxation liabilities 57 54
Current liabilities
Accounts payable and other 2 729 2 806
Bank overdrafts and
short-term liabilities 363 258
Effect on the summarised
consolidated cash flow
statement
Dividends paid (159) (166)
3. Deferred taxation assets totalling R 33 million were recognised
during the current year. It is the Group`s policy to only recognise
deferred taxation assets to the extent that it is probable that
taxable profits within the Group`s budgeting horizon, will be
available against which deductible temporary differences can be
utilised.
4. The results have been audited by the company`s auditors, Deloitte
& Touche. Their unqualified audit opinion is available for inspection
at the company`s registered office.
COMMENTARY
Further to the Trading Statement and Cautionary Announcement released
through the Securities Exchange News Service (SENS) on 9 June 2004,
Murray & Roberts has finalised the year ended 30 June 2004 with fully
diluted headline earnings per share of 152 cents (restated 2003: 178
cents) off a 17% decline in revenue to R 8,4 billion (2003: R 10,1
billion).
The operating margin of 5,0% (restated 2003: 6,3%) is at the minimum
target and reflects the difficult trading conditions experienced by
the Group in this fourth year of Rebuilding Murray & Roberts. The
decline in operating profit (EBIT) to R 421 million (restated 2003:
R 633 million) is more fully detailed in the report below.
Cash reserves in the Group remain strong at R 1,10 billion (2003:
R 1,54 billion). Offshore cash has been translated at an exchange
rate 17% stronger than at the previous reporting period. The Group
returned 19,0% on average shareholders` funds (2003: 22,4%), which
for this year is marginally below the target return of 20%.
Accounting Standards
The Group has restated the measurement and disclosure of its
headlease agreements and other discontinued property activities in
accordance with South African Statements of Generally Accepted
Accounting Practice. The Group`s concession investments have been
reclassified compared to the previous year with no material impact on
prior year earnings. These changes require restatement of the
previous year`s financial statements, full details of which are
included in the notes to the Balance Sheet.
Overview
The Group has experienced mixed fortunes in its different markets
throughout the year, highlighted in the business update issued at the
annual general meeting on 27 October 2003, the Prospects Statement in
the report on interim results for the six months ended 31 December
2003 published on 25 February 2004 and the Trading Statement and
Cautionary Announcement published through SENS on 9 June 2004.
The SA Rand strengthened an average 22% in the year and together with
delays in targeted major projects and disappointing performance from
certain operations, combined to depress the financial results for this
year. In pursuit of the objective of Rebuilding Murray & Roberts by
30 June 2005, the Group has nevertheless 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 parts of Africa.
The Group has continued to source new levels of executive leadership
and human capital, with a particular focus on building its global
leadership capacity. It is from this foundation that Globalising
Murray & Roberts has been approved by the board as the strategy to
extend its commitment to sustainable earnings growth and value
creation.
Order Book
The Group`s project order book stood at R 3,1 billion at 30 June 2004
(2003: R 4,8 billion). This has been enhanced by a further R 1,9
billion through acquisition of the Cementation mining business in
South Africa and Canada effective July 2004. The decline in
traditional order book has had a negative short-term impact on
revenues and is largely due to delays in the flow of major
industrial, mining, infrastructure and building projects. The
recognition of future project losses in this and previous years has
increased the relative percentage of break-even work, which impacts
on operating margin and return on equity in the short-term.
Award of the Soccer 2010 World Cup to South Africa has given
additional impetus to finalisation of the delayed Gautrain project
on which the Group has submitted a tender. It will also maintain the
high levels of fixed investment currently being experienced in the
domestic construction economy. In Dubai, the Group initially
pre-qualified and has since submitted competitive proposals for two
of the world`s largest construction projects.
The long-term order book for foundry work has strengthened with
work-in-hand extending at near current levels beyond 2010.
The Group awaits an announcement on the locomotive replacement
programme in South Africa, which could impact future profitability.
Operations
Construction operations serving global building, infrastructure,
mining and industrial markets delivered disappointing operating
profits of R 96 million (restated 2003: R 199 million) on revenues
of R 3,50 billion (2003: R 3,98 billion) at a margin of 2,7% (2003
restated : 5,0%). This includes a R 27 million realised profit on the
sale of a building concession investment and a R 7 million fair value
increase in concession investments.
South Africa and the SADC countries continue to offer favourable
business conditions and the construction operations achieved good
market access to deliver an operating profit of R 39 million on
revenues of R 1,90 billion.
Difficult business conditions, conservative revenue recognition and
poor operating performances in Equatorial Guinea, Benin, Nigeria and
Egypt resulted in an operating loss of R 23 million on revenues of
R 234 million in the rest of Africa. A period of consolidation in
the Middle East delivered a marginal operating profit on revenues
of R 900 million.
The Middle East business reports independently into the Group`s
international structure and is under new management from 1 July 2004.
In South Africa, the construction, roads and mechanical (MEI)
operations have been linked with the regional building businesses
in SADC from 1 July 2004 to form an integrated regional construction
cluster.
Engineering contracting and services to the industrial and mining
markets delivered an operating profit of R 81 million (2003:
R 116 million) on revenues of R 651 million (2003: R 955 million)
at a margin of 12,4% (2003: 12,2%).
The Mozal and Hillside smelter projects were completed in the year,
ending a 12-year investment programme that has established a global
reputation for Murray & Roberts in mega-project implementation.
Unfortunately, the strength of the SA Rand and some investment
uncertainty in the local economy have resulted in long gestation
periods for new mining and industrial projects.
Construction services and material supplies to the building,
infrastructure, mining and industrial markets delivered operating
profits of R 247 million (2003: R 260 million) on revenues of
R 2,69 billion (2003: R 3,00 billion) at a margin of 9,2%
(2003: 8,7%).The general level of domestic construction
investment has remained
buoyant, offering stable market conditions to the Group`s construction
materials activities. This is particularly evident in the supply of
materials to the infrastructure market, where installed capacity is approaching
full utilisation for the first time in more than a decade.
The market for steel products, however, has been negatively impacted
by price volatility caused by increased global demand.
The manufacture and supply of automotive components to the domestic
and selected global markets generated operating profits of R 39
million (2003: R 52 million) on revenues of R 501 million
(2003: R 673 million) at a margin of 7,8% (2003: 7,7%).
The Group`s three-year investment programme to modernise its foundry
operations has created a world-class business that has successfully
optimised the niche opportunity offered by government`s Motor Industry
Development Plan. Contract partnerships have been established with
leading automotive groups to supply sophisticated engine system
elements into their global supply networks.
The fabrication and assembly of specialist products for the domestic
and global transport markets generated operating profits of R 28
million (2003: R 62 million) on revenues of R 572 million
(2003: R 818 million) at a margin of 4,9% (2003: 7,6%).
The UCW Partnership performed well in the year, creating value that
sets a standard for long-term empowerment in the Group. The demand for
improved rolling-stock capacity in the country requires innovative and
competitive solutions from both client and contractor.
By contrast, industrial manufacturing for export from South Africa has
been negatively impacted by the strong SA Rand and reduced global
demand. Consani has delivered an operating loss in the year and has
been severely rationalised in line with market conditions.
Industrial services companies Booker Tate, Criterion, Johnson Arabia,
Improvair, Elgin and Pefco generated operating profits of R 30 million
(2003: R 39 million) on revenues of R 504 million (2003:
R 658 million). Corporate overheads for the year amounted to
R 100 million (2003: R 95 million) reflecting increased
corporate activity in preparation for the Group`s new globalisation
strategy. Both domestic and international leadership have been
enhanced to ensure the capacity for growth and risk management that will
flow from pursuit of this strategy.
Unitrans Limited (`Unitrans`)
Shareholders are reminded that the company published a cautionary
announcement through SENS on Friday 20 August 2004 advising
shareholders that the company has received an offer for its 44%
shareholding in Unitrans.
The Group has advised shareholders since August 2000 that its
intention was to seek a strategic solution for its investment in
Unitrans. This investment is subject to pre-emptive conditions over
the shares. The above offer includes black economic empowerment.
Unitrans has subsequently announced its intention to engage in a
transaction which if approved by the regulators would have the effect
of diluting existing shareholders` holdings. This decision was made
without first seeking specific approval from shareholders. Murray &
Roberts advises that it intends to proceed with the sale of its
shares, that it is evaluating its options and that a further
announcement will be made in due course.
In its report to its shareholders, Unitrans announced headline
earnings of R 263 million (restated 2003: R 230 million) on revenues
of R 9,3 billion (restated 2003: R 7,6 billion). Operating margin
was 4,5% and attributable earnings grew to R 253 million (restated
2003: R 212 million).
Details are available in the Unitrans preliminary report published
on 24 August 2004.
Exceptional Items
The loss incurred on disposal of non-core assets amounted to
R 9,0 million and no underlying deterioration of the head lease
properties has arisen in the current year.
Acquisitions and Disposals
Acquisition of the Cementation mining contracting companies in
South Africa and Canada was finalised post-year end for a total
consideration of approximately R 160 million. Rights to the name
have been secured in Australia. Minority shareholders have been
advised that an offer will be made for their shares and that an
application will be made to cancel the company`s listing on the JSE.
The Group has finalised the terms of disposal of Elgin Engineering
and the sale of Pefco Foundry is being finalised. Subject to
conditions precedent expected to be fulfilled by 30 September 2004,
agreement has been reached subsequent to financial year-end to
dispose of the Group`s interest in Booker Tate, based in the
United Kingdom. Each of these companies carries unique long-term
liabilities, all of which are eliminated from the Group`s future
risk profile.
Prospects
Globalising Murray & Roberts is a growth strategy focused on three
regional markets and three market sectors. Johannesburg is the
Group`s head office and base for operations in South Africa.
Murray & Roberts International (and its subsidiaries) operates in
three regions, northern hemisphere (including international
treasury), Middle East and South Asia and sub Saharan Africa.
The primary focus of the Group is to serve the construction
economies of the less developed world, with a secondary
involvement leveraging South African competitiveness through
industrial manufacturing. New areas of opportunity are being
sought in the oil and gas sector, with extensions of existing
capability in mining, industrial and construction materials.
The Group is currently involved in tendering for a number of
mega-project opportunities in the Middle East and South Africa.
These include major building projects and airport expansions,
power generation facilities, transport systems and others.
The demand for construction materials in South Africa is expected to
remain buoyant through the year ahead. Whether the risk of new
investment to increase current capacity is justified by future market
confidence, must still be tested, however. The Group has recently
invested in upgrading the capacity of its steel mill output.
In addition to the R 1,9 billion order book brought through
Cementation, the Group is confident that further opportunity will
materialise as resource groups expand capacity to meet increased
global demand for commodities. Expansion is planned for the energy
generation capacity of South Africa and transport infrastructure
is in need of significant upgrades to meet economic development
targets. These will require increased public private partnership
activity.
With a lower interest rate and inflation regime, the Group is
positive that market conditions will improve during the year ahead,
but does not expect any significant increase in Foreign Direct
Investment into South Africa. This will maintain major project
activity at a low level, especially in the industry and mining
sector. Growth will again be driven from government investment
into infrastructure and by commercial investment into buildings
and residential accommodation.
International markets of interest to the Group are expected to
grow in line with a resurgence of economic activity in South and
South-east Asia and demand from China. The Middle East follows its
own dynamic, driven primarily by energy, with increasing attention
to the benefits of diversification into minerals extraction and
tourism.
It is expected that Unitrans will contribute associate earnings
only for the first half-year and that the reduction in second
half-year earnings subsequent to the disposal, will not be fully
compensated by contributions from new acquisitions.
The directors expect that earnings for the year to 30 June 2005 will
not show a material change while the Group reorganises itself to meet
the objectives of Globalising Murray & Roberts.
Directorate and Management
Mr Roy Andersen was appointed chairman of the company following the
retirement of Mr David Brink on 31 December 2003. Mr Peter
Joubert and Ms Brigalia Bam retired with effect from 30 June 2004,
having passed the mandatory retirement age. Mr Allen Morgan
resigned on 26 July 2004 to avoid potential conflicts of interest.
Following board and director evaluations in the context of
Globalising Murray & Roberts, additional independent directors
have been identified and will be announced shortly.
Mr Roy Andersen was appointed chairman of the Nomination Committee
during the year and a new chairman of the Health, Safety, Environment
and Corporate Social Involvement Committee will be announced in due
course, succeeding Mr Allen Morgan.
The directors have mandated an International Advisory Board to assist
the board with its strategic guidance in respect of the growing
international activities of the Group. Appointments to this board
will be notified in due course.
Company Secretary
Mrs Elsabe Marx resigned as Company Secretary for personal reasons on
31 July 2004. A new appointment will be announced through SENS in due
course. Mr Millard Arnold has been appointed acting secretary with
effect from 24 August 2004.
Dividend
The directors have declared a final dividend of 30,0 cents per share
in respect of the year ended 30 June 2004 (2003: 37,5 cents per share)
making the total dividend 45,0 cents per share for the year
(2003:52,5 cents per share).
Attention is drawn to the formal dividend announcement contained
herein.
On behalf of the directors
Roy Andersen Chairman of the Board
Brian Bruce Group Chief Executive
Roger Rees Group Financial Director
Bedfordview
25 August 2004
NOTICE TO SHAREHOLDERS
Declaration of final ordinary dividend (No. 105)
Notice is hereby given that the final dividend, dividend No. 105 of
30,0 cents per share in respect of the financial year ended 30 June
2004, has been declared payable to shareholders recorded in the
register at the close of business on Friday 15 October 2004.
The salient dates for the final ordinary dividend are as follows:
Last day to trade cum dividend Friday 8 October 2004
Shares commence trading ex dividend Monday 11 October 2004
Record date 15 October 2004
Payment date Monday 18 October 2004
Share certificates may not be dematerialised or re-materialised
between Monday 11 October 2004 and Friday 15 October 2004, both days
inclusive.
On Monday 18 October 2004, the dividend will be electronically
transferred to the bank accounts of all certificated shareholders
where this facility is available. Where electronic fund transfer
is not available or desired, cheques dated 18 October 2004 will be
posted on that date.
Dematerialised shareholder accounts will be credited at their CSDP
or broker on Monday 18 October 2004.
By order of the Board
M W Arnold
Acting Secretary
Bedfordview
25 August 2004
Murray & Roberts Holdings Limited Registration No. 1948/029826/06
Directors: RC Andersen* (Chairman) BC Bruce (Managing & Chief
Executive) WP Esterhuyse* SE Funde* SJ Macozoma* RW Rees1
AA Routledge* MJ Shaw* KE Smith2 JJM van Zyl*
Secretary: MW Arnold (acting) 1 British 2 Irish *Non executive
Registrar
Computershare Limited,
Investor Services Division,
70 Marshall Street, Johannesburg 2001
Additional information available at www.murrob.com
Sponsor
Merrill Lynch
Global Markets & Investment
Banking Group
Merrill Lynch South Africa (Pty) Ltd
Registration number 1995/001805/07
Registered Sponsor and Member of the
JSE Securities Exchange
South Africa
Date: 26/08/2004 07:12:32 AM
Produced by the JSE SENS Department
