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MUR
MUR
Murray & Roberts - Unaudited Summarised Consolidated Results for the six months
to 31 December 2005
Murray & Roberts Holdings Limited
(Registration No: 1948/029826/06)
("Murray & Roberts" or "the Group")
Share code: MUR ISIN code: ZAE000073441
Unaudited Summarised Consolidated Results for the six months to 31 December 2005
in accordance with International Financial Reporting Standards (IFRS)
- Highlights
- Interim dividend up 33% to 20 cents per share
- Operating profit up 50%
- Operating cash flow up R107 million
- Strong order book up 13% to R9,6 billion
- Headline earnings maintained (excluding BBBEEE transaction)
- Empowerment transaction concluded
Supplementary Header information
Over the past six months, Murray & Roberts has secured a leading partnership
position in a number of major public sector programs with a Total Investment
Value of more than R100 billion, this includes:
- VRESAP Pipeline for TCTA
- Pebble Bed Modular Reactor Demonstration Plant
for PBMR
- Coalink Locomotive Program for Spoornet
- Gautrain Rapid Rail Link for Gauteng Province
- Engineering Services for ESKOM Generation
Expansion
This positions Murray & Roberts at the forefront of the South African
engineering & construction market.
Summarised consolidated income statement
Restated Restated
R millions 31.12.05 31.12.04 30.6.05
Revenue 5 528 5 089 10 282
Earnings before interest,
exceptional items,
depreciation and 416 311 772
amortisation (EBITDA)
Depreciation (111) (109) (221)
Amortisation of intangible (4) (1) (2)
assets
Earnings before interest and 301 201 549
exceptional items (EBIT)
Exceptional items (96) 90 75
Headlease and other property - 7 11
activities
Broad-based black economic
empowerment
(BBBEE) expense (95) - -
Other (1) 83 64
Earnings before interest and 205 291 624
taxation
Net interest income 21 (5) -
(expense)
Earnings before taxation 226 286 624
Taxation (58) (64) (152)
Earnings after taxation 168 222 472
(Loss) income from (13) 68 77
associates
Earnings from continuing 155 290 549
operations
Earnings from discontinued 14 (27) (49)
operations (notes 2.4 and 3)
Attributable earnings for 169 263 500
the period
Attributable to:
Minority interest 21 9 30
Ordinary shareholders 148 254 470
169 263 500
Reconciliation of headline
earnings
Attributable earnings to 148 254 470
ordinary shareholders
Non-headline exceptional 1 (90) (75)
items
(Profit) loss on disposal of (18) 28 53
discontinued operations
Taxation on above 4 17 16
adjustments
Non-headline portion of - - 3
income from associate
Headline earnings 135 209 467
Reconciliation of weighted
average
number of shares in issue
(000)
Weighted average number of 331 893 331 893 331 893
ordinary shares in issue
Less: weighted average
number of shares
held by The Murray & Roberts (13 455) (13 640) (13 664)
Trust
Less: weighted average
number of shares
held by the Letsema BBBEE (1 840) - -
trusts
Weighted average number of
shares
used for basic per share 316 598 318 253 318 229
figures
Add: dilutive adjustment for 5 864 5 018 4 611
share options
Weighted average number of
shares
used for diluted per share 322 462 323 271 322 840
figures
Earnings per share (cents)
- Diluted 46 79 146
- Basic 47 80 148
Earnings per share from
continuing operations
(cents)
- Diluted 42 87 161
- Basic 42 88 163
Headline earnings per share
(cents)
- Diluted 42 65 145
- Basic 43 66 147
Total dividend per ordinary 20 15 45
share (cents)
Operating cash flow per - (32) 201
share (cents)
Reconciliation of headline
earnings
excluding BBBEE expense
Headline earnings as above 135 209 467
BBBEE expense 95 - -
Taxation effect on BBBEE (22) - -
expense
Headline earnings excluding 208 209 467
BBBEE expense
Headline earnings per share
excluding
BBBEE expense (cents)
- Diluted 65 65 145
- Basic 66 66 147
Summarised consolidated balance sheet
Restated Restated
R millions 31.12.05 31.12.04 30.6.05
ASSETS
Non-current assets 2 860 2 250 2 500
Property, plant and 1 414 1 341 1 378
equipment
Investment property 257 270 259
Associate companies 766 407 505
Other investments 423 232 358
Current assets 3 551 4 269 4 779
Accounts receivable and 2 438 3 693 2 848
other
Bank balances and cash 1 113 576 1 931
Total tangible assets 6 411 6 519 7 279
Goodwill 93 48 48
Other intangible assets 65 9 18
Deferred taxation assets 21 28 21
TOTAL ASSETS 6 590 6 604 7 366
EQUITY AND LIABILITIES
Permanent capital (Total 2 793 2 841 3 156
equity)
Ordinary shareholders" funds 2 700 2 801 3 055
Minority shareholders" 93 40 101
interest
Non-current liabilities 859 741 869
Long-term provision 4 20 5
Obligations under finance 253 321 274
headleases*
Other long-term liabilities* 355 302 339
Deferred taxation 247 98 251
liabilities
Current liabilities 2 938 3 022 3 341
Accounts payable and other 2 308 2 489 2 938
Bank overdrafts and short- 630 533 403
term loans*
TOTAL EQUITY AND LIABILITIES 6 590 6 604 7 366
Net asset value per share 882 893 992
(cents)
* Interest-bearing
borrowings
SUPPLEMENTARY INFORMATION (R
millions)
Commitments
Capital expenditure
- spent 185 151 308
- authorised but unspent 248 240 396
Operating lease commitments 209 40 236
Contingent liabilities 124 67 157
Financial institution 2 061 1 352 1 788
guarantees
Summarised consolidated cash flow statement
Restated Restated
R millions 31.12.05 31.12.04 30.6.05
Cash generated by operations 370 301 714
before working capital
changes
Cash outflow from (74) - -
exceptional items relating
to BBBEE
Cash outflow from headlease (39) (31) (68)
and other property
activities
(Increase) decrease in (217) (362) 33
working capital
Cash generated by operations 40 (92) 679
Interest and taxation (39) (14) (11)
Operating cash flow 1 (106) 668
Dividends paid (96) (96) (143)
Dividends paid to minority (22) (17) (20)
shareholders
Cash (utilised) retained in (117) (219) 505
operations
Net investment activities (951) (618) 102
Property, plant and (179) (102) (225)
equipment and intangible
assets (net)
Business acquisitions / (344) (559) 317
disposals (net)
Treasury share acquisition
relating to the BBBEE
transaction (421) - -
Other (net) (7) 43 10
Net funds flow (1 068) (837) 607
Summarised statement of changes in equity
Restated Restated
R millions 31.12.05 31.12.04 30.6.05
Opening balance 3 156 2 737 2 737
Earnings attributable to 148 254 470
ordinary shareholders
Earnings attributable to 21 9 30
minority shareholders
Other movements in minority (29) (28) 12
interest
Movement in share-based 23 2 4
payment reserve
Movement in non-trading - 16 16
financial asset reserve
Movement in hedging reserve - - 3
Foreign currency translation (31) (53) 47
movement on investments
Movement in treasury shares (399) - (20)
Dividend declared and paid (96) (96) (143)
2 793 2 841 3 156
Segmental analysis
Restated Restated
R millions 31.12.05 31.12.04 30.6.05
REVENUE
Construction & engineering 3 124 3 228 6 229
Construction materials & 1 983 1 435 3 183
services
Fabrication & manufacture 421 426 869
Corporate - - 1
Ongoing operations 5 528 5 089 10 282
Discontinued operations 46 269 403
(note 3)
Total revenue 5 574 5 358 10 685
EBIT
Construction & engineering 94 65 240
Construction materials & 226 142 326
services
Fabrication & manufacture 39 43 101
Corporate (58) (49) (118)
Ongoing operations 301 201 549
Discontinued operations 1 2 12
(note 3)
Total EBIT 302 203 561
Notes
1. Basis of preparation
The Group has adopted International Financial Reporting Standards (IFRS) for the
year ending 30 June 2006, with a date of transition of 1 July 2004. Previously
the consolidated results were prepared in accordance with South African
Generally Accepted Accounting Practice (SA GAAP). These interim results have
been prepared and presented in accordance with IAS34: Interim Financial
Reporting.
The financial statements for the year ending 30 June 2006 will be the Group"s
first consolidated IFRS-compliant financial statements and hence IFRS1: First-
time Adoption of IFRS has been applied in preparing this interim report.
Comparative information has been restated as required by IFRS and is reflected
as "unaudited" as the adjustments have not been audited by the Group"s external
auditors. The interim financial information does not include all the relevant
information required by IFRS for full annual financial statements.
These interim financial statements have been prepared in accordance with those
IFRS standards and International Financial Reporting Interpretations Committee
(IFRIC) interpretations issued and effective as at the time of preparing these
interim statements. The IFRS standards and IFRIC interpretations that will be
applicable at 30 June 2006 are not known with certainty at the time of preparing
these interim financial statements and may therefore still change. Other changes
to the presentation of information may be made in the statutory annual financial
statements.
2. Significant changes to the Group"s accounting policies
2.1 Property, plant and equipment
Useful lives and residual values of certain items of property, plant and
equipment were reassessed in accordance with the criteria of IAS16: Property,
Plant and Equipment (revised). In future, residual values of all property, plant
and equipment will be reassessed on an annual basis. Previously residual values
were only assessed on initial recognition of the specific items and were not
subject to annual reassessment. The continuous reassessment typically leads to a
change in depreciation charges annually. Depreciation ceases when the residual
value of an asset equals or exceeds its carrying value.
Items of property, plant and equipment that were previously fully depreciated,
were reinstated to reflect the applicable useful lives and residual values from
their respective dates of acquisition. Where not practicable, the Group has
elected to measure individual items of property, plant and equipment at fair
value on 1 July 2004. In future those fair values are deemed to be cost at that
date.
Where significant components of an item of property, plant and equipment have
different useful lives or residual values those components are accounted for as
separate items of property, plant and equipment. Previously all parts of an item
of property, plant and equipment were depreciated at the same rate.
2.2 Share-based payment transactions
In accordance with IFRS2: Share-based Payment the fair value of share options
granted to employees is recognised as an employee expense in operating profit
with a corresponding increase in equity. The fair value is measured at grant
date and expensed over the period during which the employee becomes
unconditionally entitled to the equity instruments (the vesting period). The
fair value of the instruments granted is measured using an appropriate valuation
technique, taking into account the terms and conditions upon which the
instruments are granted. This accounting policy has been applied to all share
options granted after 7 November 2002 that had not yet vested at 1 January 2005.
Previously such expenses were not recognised in the income statement.
2.3 Presentation of minority interest in subsidiary companies
Minority interests are now reflected as part of equity. Any change in ownership
interest in subsidiary companies without a change in control is recognised as an
equity transaction in the consolidated financial statements.
2.4 Discontinued operations
In accordance with the requirements of IFRS5: Non-current Assets Held-For-Sale
and Discontinued Operations, the financial results of discontinued operations
are reported as one line item in the income statement and not on a line-by-line
basis. Refer to note 3.
2.5 Interest free receivables and the recognition of revenue
IAS 39: Financial Instruments: Recognition and Measurement requires that imputed
interest be recognised on interest free receivables. IAS18: Revenue further
requires that revenue be recognised at the fair value of the consideration
received or receivable. Accordingly, where the fair value of the Group"s
consideration is significantly impacted by the time value of money, a portion of
the revenue has been deemed to be interest income recognised on a time
apportionment basis. This has resulted in a decrease in recognised revenue and
certain financial receivables and liabilities.
2.6 Reclassifications and disclosure adjustments
In addition to the above adjustments certain reclassifications and disclosure
adjustments were made to the balance sheet presentation, most notably the
reallocation of certain interest-bearing liabilities from accounts payable to
short-term loans and the separation of computer software from property, plant
and equipment into intangible assets. The depreciation of these intangible
assets is now reflected as amortisation of intangible assets in the income
statement.
IFRS
transition Restated Restated
R millions 01.07.04 31.12.04 30.6.05
Reclassification of
balance sheet items
under IFRS and SA GAAP
improvements
Property, plant and (2) (13) (13)
equipment
Investment property - 10 -
Other investments - (41) -
Associate companies 1 1 -
Other investments (4) (3) (2)
Accounts receivable and (4) (4) (3)
other
Bank balances and cash (37) - (2)
Intangible assets 9 9 18
Other long-term - (168) -
liabilities
Accounts payable and other 66 60 24
Bank overdrafts and short- (29) 149 (22)
term loans
2.7 Reconciliation of
equity
BALANCE SHEET
Equity previously reported 2 603 2 676 2 967
under SA GAAP
SA GAAP adjustments
Adjustment to depreciation - 7 -
of headlease investment
property
Goodwill impairment (5) - -
Accounts receivable and
other - recognition of
operating lease income on - 104 -
a straight-line basis*
Accounts payable and other
- recognition of
operating lease expense on - (102) -
a straight-line basis*
IFRS adjustments
Property, plant and 159 179 197
equipment
Accounts receivable and
other - impairment
provision and discounting 29 (20) (14)
of receivables
Goodwill - (8) -
Reclassification of 54 40 92
minority interest as
equity
Accounts payable and other (90) (26) (22)
Deferred taxation impact (13) (9) (64)
on IFRS adjustments
Equity as reported under 2 737 2 841 3 156
IFRS
2.8 Income statement adjustments Restated Restated
R millions 31.12.04 30.6.05
INCOME STATEMENT
Earnings attributable to ordinary
shareholders
as reported under SA GAAP 244 448
SA GAAP adjustments
Adjustment to depreciation of 2 -
headlease investment property
Recognition of operating lease income
and
expense on a straight-line basis* 4 -
Goodwill 5 5
IFRS adjustments
Revenue recognition (4) (8)
Loss on disposal of minority interest - 4
in subsidiary companies
Property, plant and equipment - 12 22
depreciation
Intangible assets - amortisation (1) (2)
Share options expense (2) (4)
Deferred taxation impact on IFRS (2) (5)
adjustments
Cumulative impact of other non- (4) 10
material adjustments
Earnings attributable to ordinary
shareholders as reported under IFRS 254 470
*June 2005 was previously adjusted for the recognition of operating leases on a
straight-line basis.
3. Earnings from discontinued operations
On 1 October 2005, the Group disposed its forklift truck distribution business
Criterion Equipment for approximately R90 million. The comparative numbers
include businesses that were closed or disposed off in the prior year, being
Consani Engineering, Improvair and Booker Tate.
R millions 31.12.05 31.12.04 30.6.05
The earnings from the
discontinued
operation is analysed as
follows:
Profit (loss) on 18 (28) (53)
disposal/closure
Earnings after taxation for (4) 1 4
the period
14 (27) (49)
The earnings after taxation
for the
period is analysed as
follows:
Revenue 46 269 403
EBITDA 2 7 19
Depreciation (1) (5) (7)
EBIT 1 2 12
Net interest expense (1) (4) (5)
Earnings before taxation - (2) 7
Taxation (4) 3 (3)
Earnings after taxation (4) 1 4
Commentary
On behalf of the directors we are pleased to announce a 33% increase in the
interim ordinary dividend to 20 cents per share in respect of the half-year
ended 31 December 2005. This reflects our confidence in the prospects for our
markets and the strategy of the Group following five years of Rebuilding Murray
& Roberts. It is the intention of the Board to proceed with a dividend policy of
between 2.8 and 3.2 times cover on full-year headline earnings. Attention is
drawn to the formal dividend announcement contained herein.
Headline earnings for the half-year include an expense of R95 million relating
to the Group"s Broad-Based Black Economic Empowerment (BBBEE) transaction.
Excluding this expense, headline earnings of 65 cents per share for the previous
half-year to 30 December 2004 has been maintained. Changes in the income
statement relative to the previous reporting period reflect disposal of the
Group"s minority interest in Unitrans and the impact of new acquisitions
including Ocon Brick and associate Clough.
Ongoing operating profit increased by 50% to R301 million (2004: R 201 million)
with improved contributions from all business segments. Ongoing revenues for the
period increased marginally by 9%, with the Group"s SADC construction activities
recording a relative 30% decline in turnover.
Despite a poor interim result from SADC Construction, the Construction &
Engineering sector recorded strong growth in operating profits on a turnaround
in both Middle East Construction and in Engineering, supported by good growth in
Mining Contracting. The result includes a fair value adjustment on concession
investments at a similar level to the prior half-year.
The South African construction economy continues to offer growth. An increase in
infrastructure investment is benefiting the Group"s Construction Materials &
Services operations. The building materials market remains buoyant and the
inclusion of new acquisition Ocon Brick has boosted the half-year performance in
this sector.
Closure and disposal of non-core businesses and the impact of a strong currency
resulted in a slight decline in performance from the Fabrication & Manufacture
sector.
Minority partners in our business activities recorded an increase in after tax
profits to R21 million (2004: R9 million) for the period.
Associate company Clough is working through its historic problem contracts. A
loss of R13 million has been recorded in the Group"s half-year accounts which
recognises an adjustment for pre-acquisition project losses in Clough. The board
of Clough has informed its shareholders that its "Outlook for the second half of
the financial year is a significant improvement to that recorded thus far."
Most of the net financing income of R21 million (2004: expense of R5 million)
will be reversed in the second half of the financial year. This follows recent
and planned cash outflows of more than R1,0 billion to fund the Ocon Brick,
Clough, Concor and Empowerment transactions. The interim tax charge of R58
million (2004: R64 million including capital gains tax of R17 million on the
surplus from the sale of Unitrans) is at a normalised rate of 26% (2004: 16%).
Cash generated by operations before working capital changes improved 23% to R370
million (2004: R301 million) and cash outflows to fund working capital reduced
by 40% to R217 million (2004: R362 million). Cash management is a focus
throughout the Group, although we are experiencing a trend to delayed payment
and longer final account settlement in all our contracting operations.
Order Book
The Construction & Engineering order book increased by 13% to R 9,6 billion at
31 December 2005, up from R8,5 billion at
30 June 2005. This excludes the Group"s share of the Gautrain Project estimated
at R4,5 billion over a 54 month period following financial closure.
The UCW Partnership (70% Murray & Roberts) is a participant in the recently
announced Spoornet locomotive project for South Africa"s coal export system. The
value to the Group is approximately R1,0 billion over 5 years, which amount is
not recorded in the order book.
The order book comprises Construction Middle East at R2,8 billion (R3,4
billion); Construction SADC at R2,7 billion (R1,2 billion); Mining Contracting
at R3,4 billion (R3,4 billion); and Engineering at R0,7 billion (R0,4 billion).
The amounts in brackets are the comparative levels at 30 June 2005. The regional
composition of the order book is SADC 64% (52%); Middle East 29% (39%); and Rest
of World 7% (9%).
Empowerment
We concluded our primary BBBEE transaction on 19 December 2005 and four
independent trusts have been established that own 10% of the shares of the Group
and through which dividend flows will benefit designated persons.
Acquisitions and Disposals
The Group acquired 80% of Ocon Brick Manufacturing effective 1 August 2005 for a
consideration of R96 million.
The Group increased its shareholding in Clough Limited, based in Perth
Australia, to 46,1% in November 2005, for a consideration of approximately R225
million, plus rights to a further 3,0% on conversion of a loan facility of AUD15
million. The Group has indicated it will raise its shareholding above 50% once
Clough is delivering acceptable financial performance, which is expected by mid-
2008.
Criterion Equipment was sold effective 1 October 2005 to Jay & Jayendra Group in
an empowerment transaction valued at
R92,7 million, of which R45 million was supported through a vendor financing
structure.
The Scheme of Arrangement relating to the acquisition of 100% of Concor Limited
and its delisting from the JSE Limited has been sanctioned by the High Court,
conditional on approval by the South African competition authorities. The cost
of the transaction will be approximately R330 million.
International Financial Reporting Standards (IFRS)
The Group adopted IFRS with effect from 1 July 2005. Appropriate detail of the
changes is included in the unaudited half-year accounts to 31 December 2005 and
the notes thereto. Although the impact has not been material to date, it is
possible that there may be further adjustments in the full-year accounts to 30
June 2006.
There has been a restatement of headline earnings for the year ended 30 June
2005, increasing performance in that year to 145 cents per share.
Prospects
A new performance platform has been established over the five years Rebuilding
Murray & Roberts. Some aspects of the business must still show evidence of
sustainable earnings growth and value creation, which remains a priority.
Murray & Roberts has played a leadership role over more than 100 years in the
development and construction of South Africa"s social and economic
infrastructure. The renewed commitment by the South African government to invest
in primary infrastructure has delivered new opportunity to the Group and its
partners over the past six months. In this respect the PBMR Nuclear
Demonstration Plant, Vresap Pipeline, Gautrain Rapid Rail Link, Coalink
Locomotives and Eskom"s expansion program are five initiatives in which the
Group is contracted to play a key partnership role.
The charge of R95 million to the income statement relating to the granting of
shares to almost 14000 employees in terms of the Group"s BBBEE transaction has
the effect of reducing headline earnings by 23 cents per share. Excluding this,
headline earnings per share should show real growth for the full year to 30 June
2006 over the IFRS restated comparative.
Roy Andersen Brian Bruce Roger Rees
Chairman of the Group Chief Group Financial
Board Executive Director
Bedfordview
2 March 2006
Notice to shareholders
Declaration of interim ordinary dividend (No. 108)
Notice is hereby given that an interim ordinary dividend No. 108 of 20 cents per
share (2005: 15 cents per share) in respect of the financial year ending 30 June
2006 has been declared payable to shareholders recorded in the register at the
close of business on Thursday 13 April 2006.
Salient dates
Last day to trade cum the dividend Thursday 6 April 2006
Trading ex dividend commences Friday 7 April 2006
Record date Thursday 13 April 2006
Payment date Tuesday 18 April 2006
Share certificates may not be dematerialised or re-materialised between Friday 7
April 2006 and Thursday 13 April 2006 both days inclusive.
On Tuesday 18 April 2006 the interim 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 April 2006 will be posted on that date.
Shareholders who have dematerialised their share certificates will have their
accounts at their CSDP or broker credited on Tuesday 18 April 2006.
By order of the Board
SF Linford
Company Secretary
Bedfordview
2 March 2006
Murray & Roberts Holdings Limited
(Registration number 1948/029826/06)
Directors:
RC Andersen* (Chairman) BC Bruce (Managing & Group Chief Executive) SJ Flanagan
SE Funde* N Jorek3 SJ Macozoma*
NM Magau* JM McMahon* IN Mkhize* RW Rees1 AA Routledge* MJ Shaw* KE Smith2 JJM
van Zyl* RT Vice*
1British 2Irish 3German *Non-executive
Secretary:
SF Linford
Registered office:
Douglas Roberts Centre,
22 Skeen Boulevard, Bedfordview
PO Box 1000
Bedfordview 2008
Registrar:
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg 2001
"Our commitment to sustainable earnings growth and value creation is not
negotiable"
website: www.murrob.com e-mail: clientservice@murrob.com
Date: 02/03/2006 04:02:06 PM Produced by the JSE SENS Department
