Wrap Text
Preliminary report for the year ended 30 June 2012
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)
PRELIMINARY REPORT FOR THE YEAR ENDED 30 JUNE 2012
CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL PERFORMANCE
for the year ended 30 June 2012
Audited Audited*
Annual Annual
R millions 30 June 2012 30 June 2011
Continuing operations
Revenue 35 406 30 535
Profit/(loss) before interest, depreciation
and amortisation 522 (93)
Depreciation (658) (562)
Amortisation of intangible assets (25) (23)
Loss before interest and taxation (note 2) (161) (678)
Net interest expense (248) (194)
Loss before taxation (409) (872)
Taxation (245) (196)
Loss after taxation (654) (1 068)
Income from equity accounted investments 143 86
Loss from continuing operations (511) (982)
Loss from discontinued operations (note 3) (81) (666)
Loss for the year (592) (1 648)
Attributable to:
Owners of Murray & Roberts Holdings Limited (736) (1 735)
Non-controlling interests 144 87
(592) (1 648)
Loss per share from continuing and
discontinued operations (cents)
Diluted (214) (528)
Basic (214) (530)
Loss per share from continuing operations
(cents)
Diluted (199) (349)
Basic (199) (351)
Net asset value per share (Rands) 13 13
SUPPLEMENTARY STATEMENT OF
FINANCIAL PERFORMANCE INFORMATION
Number of ordinary shares in issue (000) 444 736 331 893
Reconciliation of weighted average
number of shares in issue (000)
Weighted average number of
ordinary shares in issue 382 712 367 784
Less: Weighted average number
of shares held by The Murray & Roberts Trust (6 338) (7 466)
Less: Weighted average number of shares
held by Murray & Roberts Limited (736) (749)
Less: Weighted average number of shares
held by the Letsema BBBEE trusts (32 115) (32 044)
Weighted average number of shares used
for basic per share calculation 343 523 327 525
Add: Dilutive adjustment for share options 699 1 029
Weighted average number of shares used for
diluted per share calculation 344 222 328 554
* The weighted average number of shares in
issue have been adjusted in the prior year
due to the rights issue made to shareholders
in April 2012.
Headline loss per share from continuing and
discontinued operations (cents) (note 4)
Diluted (246) (454)
Basic (246) (456)
Headline loss per share from continuing
operations (cents) (note 4)
Diluted (210) (356)
Basic (211) (357)
CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 30 June 2012
Audited Audited
Annual Annual
R millions 30 June 2012 30 June 2011
Loss for the year (592) (1 648)
Effects of cash flow hedges 20 (39)
Taxation related to effects of cash flow hedges (4) 12
Effects of available-for-sale financial assets (1) -
Foreign currency translation movements 617 4
Total comprehensive income/(loss) for the year 40 (1 671)
Attributable to:
Owners of Murray & Roberts Holdings Limited (298) (1 787)
Non-controlling interests 338 116
40 (1 671)
CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
at 30 June 2012
Audited Audited
R millions 30 June 2012 30 June 2011
ASSETS
Non-current assets 8 394 5 563
Property, plant and equipment 3 600 3 325
Goodwill 437 435
Deferred taxation assets 634 470
Investments in associate companies 885 564
Amounts due from contract customers (note 5) 2 060
Other non-current assets 778 769
Current assets 13 143 11 137
Inventories 731 817
Trade and other receivables 2 127 1 846
Amounts due from contract customers (note 5) 6 806 5 290
Current taxation assets 91 83
Cash and cash equivalents 3 388 3 101
Assets classified as held-for-sale 905 2 860
TOTAL ASSETS 22 442 19 560
EQUITY AND LIABILITIES
Total equity 7 102 5 321
Attributable to owners of Murray & Roberts
Holdings Limited 5 887 4 221
Non-controlling interests 1 215 1 100
Non-current liabilities 1 596 1 873
Long-term liabilities1 494 1 223
Long-term provisions 165 127
Deferred taxation liabilities 211 311
Other non-current liabilities 726 212
Current liabilities 13 495 11 184
Amounts due to contract customers (note 5) 3 019 2 244
Accounts and other payables 8 609 7 705
Current taxation liabilities 175 116
Bank overdrafts1 39 47
Short-term loans1 1 653 1 072
Liabilities directly associated with assets
classified as held-for-sale 249 1 182
TOTAL EQUITY AND LIABILITIES 22 442 19 560
1 Interest-bearing borrowings
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
for the year ended 30 June 2012
Audited Audited
Annual Annual
R millions 30 June 2012 30 June 2011
Cash (utilised in)/generated from operations (1 580) 872
Interest received 107 106
Interest paid (388) (358)
Taxation paid (429) (286)
Operating cash (outflow)/inflow (2 290) 334
Dividends paid to owners of
Murray & Roberts Holdings Limited (7) (187)
Dividends paid to non-controlling interests (75) (87)
Cash (outflow)/inflow from operating activities (2 372) 60
Acquisition of businesses (note 7) (15) (70)
Acquisition of share capital in start up company (10) -
Acquisition of non-controlling interests (48) -
Dividends received from associate companies 46 25
Acquisition of associates (133) (7)
Increase in investments (67) -
Purchase of other investments by
discontinued operations (40) -
Purchase of investment property (20) -
Purchase of intangible assets other than
goodwill (17) (12)
Purchase of property, plant and equipment by
discontinued operations (34) (35)
Purchase of property, plant and equipment (959) (832)
Replacements (569) (465)
Additions (390) (367)
Proceeds on disposal of property, plant
and equipment 164 132
Proceeds on disposal of businesses (note 7) 822 -
Proceeds on disposal of assets held-for-sale 127 635
Proceeds on disposal of investments in
associates 15 -
Advance payment received in respect of
investment disposal - 170
Cash related to acquisition/disposal of
businesses (271) -
Cash related to assets held-for-sale 258 (111)
Proceeds from loan repayments and dividends
received 165 45
Other (net) 2 (2)
Cash outflow from investing activities (15) (62)
Net increase in borrowings 342 529
Treasury share disposals (net) 43 20
Proceeds on share issue to non-controlling
interests 23 -
Proceeds from rights issue to owners of
Murray & Roberts Holdings Limited
(net of transaction costs) 1 910 -
Cash inflow from financing activities 2 318 549
Net (decrease)/increase in cash and
cash equivalents (69) 547
Net cash and cash equivalents at beginning
of year 3 054 2 566
Effect of foreign exchange rates 364 (59)
Net cash and cash equivalents at end of year 3 349 3 054
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
for the year ended 30 June 2012
Audited Audited
Annual Annual
R millions 30 June 2012 30 June 2011
Revenue3
Construction Africa and Middle East 8 108 9 108
Engineering Africa 5 213 4 094
Construction Products Africa 3 738 4 157
Construction Global Underground Mining 9 859 7 789
Construction Australasia Oil & Gas and Minerals 8 484 5 387
Corporate & Properties 4 -
Continuing operations 35 406 30 535
Discontinued operations 1 738 2 646
37 144 33 181
Continuing operations
Loss before interest and taxation4
Construction Africa and Middle East (1 317) (1 399)
Engineering Africa 200 (51)
Construction Products Africa 197 192
Construction Global Underground Mining 605 602
Construction Australasia Oil & Gas and Minerals 286 269
Corporate & Properties (132) (291)
Loss before interest and taxation (161) (678)
Net interest expense (248) (194)
Loss before taxation (409) (872)
Discontinued operations
Loss before interest and taxation4 (17) (710)
Net interest expense (32) (58)
Loss before taxation (49) (768)
3 Revenue is disclosed net of inter-segmental
revenue. Inter-segmental revenue for the Group
is R257 million (2011: R506 million).
4 The chief operating decision maker utilises
loss before interest and taxation in the
assessment of a segments performance.
SEGMENTAL ASSETS
at 30 June 2012
Audited Audited
R millions 30 June 2012 30 June 2011
Construction Africa and Middle East 5 683 5 201
Engineering Africa 2 102 1 241
Construction Products Africa 2 755 3 166
Construction Global Underground Mining 3 606 2 708
Construction Australasia Oil & Gas and Minerals 3 995 3 354
Corporate & Properties 188 236
18 329 15 906
Reconciliation of segmental assets
Total assets 22 442 19 560
Deferred taxation assets (634) (470)
Current taxation assets (91) (83)
Cash and cash equivalents (3 388) (3 101)
18 329 15 906
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 30 June 2012
Stated Attribut-
capital, able to
share owners of
capital Murray & Non-
and Roberts control-
share Other Retained Holdings ling
R millions premium reserves earnings Limited interests Total
Balance at 30 June 2010 737 215 5 251 6 203 974 7 177
Total comprehensive (loss)/
income for the year - (52) (1 735) (1 787) 116 (1 671)
Net movement in non-controlling
interests loans - - - - 36 36
Movement in treasury shares 20 - - 20 - 20
Recognition of share-based payment - 32 - 32 - 32
Transfer to non-controlling
interests - (3) - (3) 3 -
(Disposal)/purchase of non-
controlling interests (net) - - (54) (54) 58 4
Transferred to statement of
financial performance - (3) - (3) - (3)
Dividends declared and paid - - (187) (187) (87) (274)
Balance at 30 June 2011 757 189 3 275 4 221 1 100 5 321
Total comprehensive income/(loss)
for the year - 438 (736) (298) 338 40
Rights issue to owners of
Murray & Roberts Holdings Limited
(net of transaction costs) 1 910 - - 1 910 - 1 910
Treasury shares acquired (net) 43 - - 43 - 43
(Disposal)/purchase of non-
controlling interests (net) - - (12) (12) (152) (164)
Net movement in non-controlling
interests loans - - - - (21) (21)
Disposal of business - (1) - (1) - (1)
Issue of shares to non-controlling
interests - - - - 23 23
Transfer to retained earnings - (32) 32 - - -
Transfer to non-controlling
interests - (2) - (2) 2 -
Recognition of share-based payment - 33 - 33 - 33
Dividends declared and paid2 - - (7) (7) (75) (82)
Balance at 30 June 2012 2 710 625 2 552 5 887 1 215 7 102
2 Dividends relate to distributions
made by entities that hold treasury
shares.
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 condensed consolidated annual financial statements for the year ended
30 June 2012 have 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 and has been
audited in terms of Section 29(1) of the Act.
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.
External auditors, Deloitte & Touche, have issued their opinion on the
Groups financial statements for the year ended 30 June 2012. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These summarised provisional financial
statements have been derived and are consistent in all material respects
with the Groups financial statements. A copy of their audit report is
available for inspection at the companys registered office. Any reference
to future financial performance included in this announcement has not been
reviewed or reported on by the Groups external auditors.
2. Loss before interest and taxation
Loss before interest and taxation includes the following significant items:
30 June 30 June
R millions 2012 2011
Competition Commission penalties/Gautrain - (1 150)
GPMOF (1 189) (582)
Middle East operations (387) (164)
Other impairments (25) (79)
(1 601) (1 975)
Items by nature
Cost of sales (33 702) (28 428)
Distribution and marketing expenses (262) (271)
Administration expenses (2 524) (3 138)
Other operating income 921 624
(35 567) (31 213)
3. Loss from discontinued operations
The Group disposed of its shareholding in Johnson Arabia LLC, RSC Ekusasa
Mining, Alert Steel Polokwane Proprietary Limited, Freyssinet Posten
Proprietary Limited, BRC Arabia LLC and Cloughs Marine construction
business during the course of this financial year and continues to dispose
of its investment properties.
The remaining discontinued operations relates mainly to Clough Properties
and SA Steel Business. The Group signed a sales agreement to dispose of
the bulk of the SA Steel Business at net book value during August 2012 which
is subject to Competition Commission approval. The remaining portion of the
SA Steel Business is expected to be realised at net book value in the next
12 months.
30 June 30 June
R millions 2012 2011
Revenue 1 738 2 646
Loss before interest, depreciation
and amortisation (11) (641)
Depreciation and amortisation (6) (69)
Loss before interest and taxation (17) (710)
Net interest expense (32) (58)
Taxation (expense)/credit (33) 118
Income/(loss) from equity accounted
investments 1 (16)
Loss from discontinued operations (81) (666)
Non-controlling interests relating
to discontinued operations 29 79
Cash flows from discontinued operations
include the following:
Cash outflow from operating activities (253) (129)
Cash inflow from investing activities 765 574
Cash outflow from financing activities (100) (466)
Net increase/(decrease)in cash and
cash equivalents 412 (21)
4. Reconciliation of headline loss
30 June 30 June
R millions 2012 2011
Loss attributable to owners of
Murray & Roberts Holdings Limited (736) (1 735)
Investment property fair value adjustments (32) 5
Profit on disposal of businesses (net) (47) (17)
Profit on disposal of associates (net) (13) -
Profit on disposal of property, plant
and equipment (net) (44) (49)
Impairment of goodwill and other assets 24 398
Fair value adjustment and (profit)/loss
on disposal of assets held-for-sale (29) 32
Adjustments relating to business
acquisitions - (62)
Other (4) 1
Non-controlling interests effects
on adjustments 21 (5)
Taxation effects on adjustments 14 (61)
Headline loss (846) (1 493)
Adjustments for discontinued operations:
Loss from discontinued operations 81 666
Non-controlling interests (29) (79)
Investment property fair value adjustments 20 (5)
Profit on disposal of businesses (net) 47 17
Profit on disposal of property, plant
and equipment (net) - 1
Loss on sale of associate (2) -
Impairment of goodwill and other assets - (324)
Fair value adjustment and profit/(loss)
on disposal of assets held-for-sale 27 (34)
Adjustments relating to business
acquisitions - 1
Non-controlling interests effects
on adjustments (18) 6
Taxation effects on adjustments (4) 74
Headline loss from continuing operations (724) (1 170)
5. Contracts-in-progress and contract receivables
30 June 30 June
R millions 2012 2011
Contracts-in-progress (cost incurred
plus recognised profits, less
recognised losses) 2 849 557
Uncertified claims and variations
less payments received on account
(recognised in terms of IAS 11:
Construction Contracts) 1 951 1 968
Uncertified claims and variations 2 001 2 302
Less: Payments received on account (50) (334)
Amounts receivable on contracts
(net of impairment provisions) 3 642 2 340
Retentions receivable (net of
impairment provisions) 424 425
8 866 5 290
Amounts received in excess of work completed (3 019) (2 244)
5 847 3 046
Disclosed as:
Amounts due from contract customers
non-current 2 060 -
Amounts due from contract customers
current 6 806 5 290
Amounts due to contract customers
current (3 019) (2 244)
5 847 3 046
During the year under review, circumstances have changed and developed which
resulted in a portion of amounts due from contract customers being expected
to be received only after 12 months from the end of the current year under
review. Therefore, these amounts have been classified as non-current on the
statement of financial position. Management considers these amounts to be
fully recoverable.
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, and there is a legal right to offset.
30 June 30 June
R millions 2012 2011
Operating lease commitments 2 058 2 155
Contingent liabilities 1 445 983
Financial institution guarantees 10 285 10 408
The Competition Commission (Commission) engaged the construction industry
in April 2011 and the Group submitted applications through the April 2011
Fast-Track process. A provision was raised based on the potential violations
that were identified as a result of this process. The Board is of the
opinion that the provision raised for this liability is adequate to cover
any additional penalties that may arise as a result of the investigation.
However, there is no guarantee as to the size of the penalty or the
sufficiency of the provision.
7. Business acquisitions/disposals
The Group did not make any material acquisitions in the year ended
30 June 2012. These immaterial acquisitions resulted in a cash outflow of
R15 million.
The Group disposed of the following businesses during the course of this
financial year:
Johnson Arabia LLC on 31 October 2011 for proceeds of R109 million;
RSC Ekusasa Mining, Alert Steel Polokwane Proprietary Limited and
Freyssinet Posten Proprietary Limited for combined proceeds of
R120 million;
BRC Arabia LLC during June 2012 for a consideration of R2 million; and
Cloughs Marine construction business on 22 December 2011 for proceeds of
R591 million, net of borrowings and other costs.
In addition, the Group disposed of its shareholding in Murray & Roberts
(Zimbabwe) Limited (associate) for a consideration of R10 million as well as
Gryphon Logistics Proprietary Limited (associate) for proceeds of
R5 million. Furthermore, the Group acquired the remaining 33% equity
interest in PT Operational Services Proprietary Limited (subsidiary) for
R48 million and an additional interest of 3% in Forge Group Limited
(associate) for R133 million.
8. Liquidity, Debt Restructuring & Rights Issue
During the year under review, the Board of Directors announced that it had
given due consideration to the continued implementation of the Groups
Recovery and Growth plan, the expected funding requirements of the order
book, optimal balance sheet structure, debt repayment tenure and the
protracted nature of the claims settlement process.
As at November 2011, the Group had restructured its 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 Groups debt structure. The facilities are supported by cross
guarantees from Group companies and have been secured by the pledging of
Clough Limited (Clough) shares.
On Monday, 26 March 2012 a rights offer circular was posted to shareholders
relating to a renounceable rights offer of 112 843 490 shares at an issue
price of R18.00 per share, in the ratio of 34 rights offer shares for every
100 Murray & Roberts shares held at the close of business on Friday,
23 March 2012. The renounceable rights offer closed on Friday, 20 April
2012. On 23 April 2012 shareholders were advised of the results of the
renounceable rights offer. Due to rounding principles as set out in the
rights offer circular, 112 843 499 renounceable rights offer shares were
issued and listed due to rounding up of fractional entitlements.
9. Dividend
The Board has resolved not to declare a dividend.
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
The Group signed a sales agreement to dispose of the bulk of the SA
Steel Business at net book value during August 2012 which is subject to
Competition Commission approval. The remaining portion of the SA Steel
Business is expected to be realised at net book value in the next 12 months.
The directors are not aware of any matter or circumstance arising since the
end of the financial year, not otherwise dealt with in the Group annual
financial statements, which significantly affects the financial position at
30 June 2012 or the results of its operations or cash flows for the year
then ended.
Salient Features
- Revenue up 16% to R35,4 billion
- Attributable loss reduced to R736 million
- Net cash up 58% to R1,2 billion
- Order book of R45,3 billion
- Strong improvement in safety performance
- GPMOF commitments discharged
- Achievement of full operation of the Gautrain system
- Resolution of Medupi Civils Contract commercial issues
- Sale of non-core assets, as well as the discontinued Steel Business
subsequent to year-end
COMMENTARY
Recovery and Growth
The year to June 2012 was defined as the Groups Recovery year and the following two years as its Growth years. The Recovery year has been an exceptional one for the Group, in the context of the achievement of the following Recovery objectives:
- Revenue up 16% to R35,4 billion
- Attributable loss reduced to R736 million
- Net cash up 58% to R1,2 billion
- Order book of R45,3 billion
- Strong improvement in safety performance
- Successful transition to new leadership team
- Successful reorganisation (operating platforms) and restructuring
- Successful R4,3 billion debt restructuring
- Successful R2,0 billion rights issue
- Strong improvement in liquidity
- GPMOF commitments discharged
- Achievement of full operation of the Gautrain system
- Resolution of Medupi Civils Contract commercial issues
- Sale of non-core assets, as well as the discontinued Steel Business
subsequent to year-end
- Vibrant and positive atmosphere within the Group
Financial year to 30 June 2012
Revenue from continuing operations increased by 16% to R35,4 billion
(2011: R30,5 billion). An attributable loss of R736 million (2011: R1 735 million) was incurred, of which R208 million was recorded for the second half of the year.
This result is after accounting for the following losses:
- R1 189 million Gorgon Pioneer Material Offloading Facility (GPMOF)
contract completion costs; and
- R454 million in the Middle East, of which R387 million primarily related
to close-out costs on legacy projects.
The Group recorded a diluted headline loss per share of 246 cents
(2011: 454 cents) and a diluted loss per share of 214 cents
(2011: 528 cents) for the year to 30 June 2012, representing a material
reduction of the loss reported for the previous financial year.
The Group ended the year with an order book of R45,3 billion. The order book
for the Australian-based entities increased by R8,2 billion or 66% year on
year. The average margin in the order book is within the Groups strategic
range of 5,0% to 7,5%. This order book is inclusive of R1,7 billion from the
Middle East and R7,6 billion from the civils and mechanicals major contracts
on Eskoms power programme. There are no other major projects remaining in
the order book.
Health and Safety
Good progress was made in implementing the Groups Zero Harm programme this
year.
Highlights included:
- a continued reduction in the lost time injury frequency rate to
1.14 (2011:1.28), the lowest rate ever recorded by the Group;
- a significant reduction in fatal incidents; and
- achievement of OHSAS 18001 certification by most businesses.
Two operations, Technicrete and Concor Engineering, achieved 12 months
without a lost time injury. This positive development was overshadowed by
the deaths of four employees (2011:12 employees). All four fatalities occurred at
underground mining operations.
The board of directors of Murray & Roberts (Board) extends its condolences
to the families, friends and colleagues of the four employees who lost their
lives while at work in the Groups operations.
We shall not celebrate our safety performance until such time as we are able
to report zero fatalities, but we must acknowledge the hard work that has
gone into creating a safety culture in all of our operations.
We remain committed to addressing safety in the work place with an
initiative primarily focused on attitudes to safety and safe behaviour
across the organisation.
Improved Liquidity
Achievements for this year include the successful restructuring of the
R4,3 billion debt package (previously R3,4 billion) and conclusion of an
oversubscribed R2,0 billion rights issue.
The R1,9 billion net proceeds from the rights issue were used to repay
R1,0 billion of long-term debt during June this year, with the balance
applied to the reduction of short-term debt. Long-term debt will be further
reduced by R500 million and R650 million during September 2012 and
March 2013, respectively.
Notwithstanding significant funding requirements for the completion of the
GPMOF project, the Group completed the year with a substantially improved
net cash position of R1,2 billion (June 2011: R0,8 billion).
Completing Challenging Projects
The uncertified revenues remained unchanged compared to June 2011. The
Groups uncertified revenues previously recognised on challenging projects
are considerably lower than the estimated value of its claims. The Board and
management remain committed to the resolution of all contractual disputes
and the collection of proceeds from claim settlements, while recognising
that this will be a challenging and protracted process. These claims have
been taken to book in compliance with IAS11 (Construction Contracts)
following engagement with independent legal, commercial and claims
consultants.
GPMOF: The Groups commitments on GPMOF were discharged, although later and
at a greater cost than had been anticipated. The cash outlay of more than
R2,0 billion on GPMOF over the past 16 months, represents one of the largest
single cash losses in recent times. The Board is pleased to announce that
the arbitration rulings on the first three disputes on this project,
relating primarily to scope changes from the tendered design, have been
awarded in the Groups favour. The value of these claims will be determined
through a further arbitration scheduled for the final quarter of this
calendar year. It is expected that the commercial process on this project
will be closed out by December 2013.
Gautrain Rapid Rail Link (Gautrain): The achievement of Operating
Commencement Date 2 (OCD2) on Gautrain, with the opening of the final
section of the system between Rosebank and Park Stations on 7 June 2012,
removed substantial risks associated with a delayed OCD2. OCD2 was certified
by the Independent Certifier after the remedial work to address water
ingress in the Rosebank to Park Stations section of tunnel was completed. A
dispute with the Gauteng Provincial Government (Province), regarding the
terms and proper interpretation of the concession agreement and the
resultant completion of the water ingress remedial work (if any), is
scheduled to be heard in arbitration during the final quarter of this
calendar year. Depending on the outcome, further costs may have to be
incurred in the Park-to-Rosebank tunnel.
Resolution through arbitration of the major delay and disruption claim
against Province is expected by December 2014.
No further costs were incurred in the current year on Gautrain which had not
been provided for in the prior year.
Dubai International Airport: The arbitration on the Dubai International
Airport is following its course and the Group expects resolution towards the
end of the 2013 calendar year.
Medupi Power Station Civils: A resolution of all major commercial issues
with Eskom relating to the civil engineering contract at the Medupi power
station was reached during the year under review. The agreement settled all
commercial disputes on the project to date, with the remaining R3,0 billion
of civils work on this project carrying no more than normal construction
risks at acceptable margins.
Operating Performance**
Two of the five operating platforms that are mostly dependent on the South
African construction sector, have continued to experience challenging market
conditions. However, the Groups resilience was ensured through the
diversity of its operations and markets.
Construction Africa and Middle East
Construction Middle
Africa Marine East Total
R millions 2012 2011 2012 2011 2012 2011 2012 2011
Revenue 5 848 5 597 903 1 031 1 357 2 480 8 108 9 108
Operating
profit/(loss) 321 (653) (1 184) (582) (454) (164) (1 317) (1 399)
Ongoing
construction
activities 69 237 (1 184) (582) (67) (1 182) (345)
PPP
Investments
and
Services 252 260 252 260
Competition
Commission
penalties/
Gautrain (1 150) (1 150)
Additional
Contract
completion
and
impairments (387) (164) (387) (164)
Segment
assets 3 447 2 926 658 358 1 578 1 605 5 683 4 889
People 7 393 8 891 131 511 199 318 7 723 9 720
LTIFR
(Fatalities) 1.0(0) 1.6(1) 0.6(0) 4.2(0) 0.5(0) 0.3(0) 0.7(0) 0.9(1)
Order book 7 163 6 929 178 606 1 654 2 430 8 995 9 965
Revenues declined 11% to R8,1 billion (2011: R9,1 billion) with an operating
loss of R1,3 billion (2011: R1,4 billion operating loss). The order book
decreased to R9,0 billion (June 2011: R10,0 billion) .
While most businesses performed well, given the depressed market conditions
in which they operated, the effects of GPMOF and a deterioration of the
financial position in the Middle East accounted for the years loss. The
contractual loss on this project reached R1,8 billion at completion, of
which R582 million was accounted for the previous year. The Middle East had
to account for losses of R454 million related to the close out of sub-
contractor accounts on completed projects, an increase in costs to complete
a project in Abu Dhabi and weak market conditions.
In the medium to long term, the outlook for Construction Africa remains
positive, given the major and growing infrastructural backlog in South
Africa and commitment of R845 billion infrastructure spend announced by
National Government. The platform continues to focus on opportunities in the
road, rail, power, renewable energy and water sectors and through
partnerships with other organisations to access major project opportunities.
The Group was pleased to announce the appointment of Jerome Govender as the
new platform executive for the Construction Africa & Middle East operating
platform. Jerome has been the Managing Director of Bombela Concession
Company since 2007, having joined Murray & Roberts in 2002.
This year the Construction operations of Concor and Murray & Roberts
Construction were successfully merged and two chief operating officers were
appointed, one to oversee the civil engineering businesses and another for
the building businesses.
Construction Global Underground Mining:
Africa Australasia The Americas Total
R millions 2012 2011 2012 2011 2012 2011 2012 2011
Revenue 5 687 4 789 958 714 3 214 2 286 9 859 7 789
Operating
profit 250 307 90 99 265 196 605 602
Segment
assets 1 508 1 288 639 409 1 459 1 011 3 606 2 708
People 16 650 15 265 469 313 1 494 1 374 18 613 16 952
LTIFR
(Fatalities) 2.6(3) 2.1(10) 2.9(0) 6.9(0) 1.7(1) 1.1(0) 2.5(4) 2.2(10)
Order book 3 529 12 035 1 184 959 4 095 3 724 8 808 16 718
Revenues increased 27% to R9,9 billion (2011: R7,8 billion) while operating
profit remained steady at R605 million (2011: R602 million). The order book
decreased to R8,8 billion (June 2011: R16,7 billion) due to the termination
of the Aquarius contract. The impact of this termination was a R7,5 billion
reduction at year end.
The mining business is performing well 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 and
industrial unrest. Operations in Australia, the Pacific Rim, Canada and the
United States of America all achieved exceptional growth and, overall,
margins were in excess of the Groups strategic target range.
A significant development this financial year was the mutual decision to
terminate the contract mining agreement between Aquarius Platinum South
Africa (AQPSA) and Murray & Roberts Cementation.
Murray & Roberts Cementation agreed to provide the necessary support to
AQPSA with the take-over of all resources to ensure a smooth transition to
the owner-operator model. Support could extend to December 2012.
Construction Global Underground Mining will continue to pursue opportunities
globally, which may include acquisitions to further accelerate revenue
growth in key markets, such as Western Australia.
Construction Australasia Oil & Gas and Minerals:
Clough Forge5
R millions 2012 2011 2012 2011
Revenue 8 484 5 387 6 204 2 926
Operating profit 286 269 584 396
Segment assets 3 810 2 056
People 4 785 3 527
LTIFR (Fatalities) 0.1(0) 0.2(0)
Order book 19 444 11 467
5 Reflected at 100%. Forge is equity accounted at 36% (2011:33%) within the
consolidated results.
Clough, in which Murray & Roberts has a 62% share, increased its revenues by
58% to R8,5 billion (2011: R5,4 billion) with an operating profit of
R286 million (2011: R269 million). Operating profit did not increase in line
with revenue, due to significant revenue growth on fixed-fee contracts and
the close-out of a loss-making contract in the first half of the year.
Commercial arrangements on the fixed-fee contracts are under negotiation.
The order book increased substantially to R19,4 billion
(June 2011: R11,5 billion), to be delivered in line with margins achieved in
a much-improved second half of the year.
The new leadership of the company implemented a successful restructuring
process, which will position Clough well to maintain and extend its market
share of infrastructure projects in Australasias energy, chemicals, mining
and minerals sectors.
The sale of Cloughs Marine business was concluded in December 2011,
realising net proceeds of R591 million. The newly-established Clough Seam
Gas business secured its first significant order. Forge Limited returned
another strong performance and during the year, Cloughs investment in Forge
increased from 33% to 36%, following the exercise of a put option by
previous executives.
The construction market in Western Australia remains buoyant with
significant ongoing investment in oil & gas and mining infrastructure. The
Group will be optimising its investment in this key growth market.
Full details of the Clough financial results for the year and its prospects
have been published on its website www.clough.com.au.
Engineering Africa:
Power
Programme6 Engineering7 Total
R millions 2012 2011 2012 2011 2012 2011
Revenue 4 327 3 337 886 757 5 213 4 094
Operating profit/
(loss) 237 (34) (37) (17) 200 (51)
Segment assets 1 556 901 546 340 2 102 1 241
People 6 222 4 362 2 061 831 8 283 5 193
LTIFR (Fatalities) 0.8(0) 1.5(0) 0.2(0) 1.0(0) 0.7(0) 1.3(0)
Order book 6 121 13 411 647 800 6 768 14 211
6 Murray & Roberts Projects power programme contracts and Genrec.
7 Includes Wade Walker, Concor Engineering and Murray & Roberts Projects
non-power programme projects.
Revenues increased 27% to R5,2 billion (2011: R4,1 billion) with an increase
in operating profit to R200 million (2011: R51 million operating loss). The
order book declined to R6,8 billion (June 2011: R14,2 billion), which is
primarily due to the progress in delivering the Medupi and Kusile power
stations, as well as de-scoping by Hitachi Power in terms of the cost-
reimbursable agreement reached in June 2011. The agreement gives greater
predictability to work that will continue until 2018. The Group does not
anticipate any costs as a result of Aveng Limiteds DSE claim against
Genrec, as it is a flow-through cost to Hitachi.
Genrec operated at full capacity this year, fabricating steel for the power
programme, while Murray & Roberts Projects was similarly engaged on boiler
erection work at Medupi and, increasingly, Kusile. A key achievement for
Murray & Roberts Projects was the successful delivery of Transnets New
Multi-Product Pipeline (NMPP) tank farm at Heidelberg, Gauteng.
In the short to medium term, Engineering Africa will maintain its focus on
engineering and construction services in Southern Africa, whilst positioning
itself for new opportunities in nuclear and renewable energy, water,
minerals and the oil & gas market segments.
Construction Products Africa:
Construction Industrial
Products8 Products9 Total
R millions 2012 2011 2012 2011 2012 2011
Revenue 3 203 3 147 535 1 010 3 738 4 157
Operating profit 156 75 41 117 197 192
Ongoing activities 181 154 41 117 222 271
Asset impairment (25) (79) (25) (79)
Segment assets 1 682 1 663 324 438 2 006 2 101
People 3 530 3 808 962 1 122 4 492 4 930
LTIFR (Fatalities ) 2.6(0) 2.6(1) 2.5(0) 7.6(0) 2.6(0) 3.9(1)
Order book 406 587 928 2 421 1 334 3 008
8 Includes Hall Longmore, Rocla, Much Asphalt, Ocon and Technicrete.
9 UCW
Revenues declined 10% to R3,7 billion (2011: R4,2 billion) with a marginal
increase in operating profit to R197 million (2011: R192 million). The order
book decreased to R1,3 billion (June 2011: R3,0 billion).
Overall, the operating platform had a successful year although, given the
variety of products and sectors, operational performances were divergent.
Most businesses are heavily dependent on public sector work, which continued
to be of limited scale.
Much Asphalt managed the increasing bitumen shortage exceptionally well and
maintained last years profitability levels, while Rocla continued to report
reasonable results, although not achieving historic margins. Technicrete and
Ocon Brick succeeded in containing costs and despite some rationalisation,
marginally increased market share.
UCW performed well in the face of a scarcity of opportunities, but remains
well positioned to benefit from Transnets and PRASAs capital renewal
programmes. Hall Longmore under-achieved, primarily due to intense
competition and a shortage of orders, especially for its electric resistance
welded products.
Disposal of non-core assets:
Crane Hire Clough
Services Steel Marine
(Johnson Reinforcing Services & Properties
Arabia) Products Properties SA Total
R millions 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Revenue 117 260 1 179 1 676 384 628 58 82 1 738 2 646
Operating
(loss)/
profit (58) (42) (619) (43) (73) 68 40 (17) (710)
Trading (58) (42) (325) 12 (41) 68 40 38 (384)
Asset
impairment (294) (55) (32) (55) (326)
Segment
assets 312 749 1 065 185 1 298 33 96 967 2 771
People 420 699 1 447 109 6 6 705 1 982
The remainder of the discontinued operations consists mainly of the Clough
investment properties, as well as the Steel Business. The Steel Business,
including Cisco, was disposed of at book value subsequent to the year-end in
two separate transactions. The Steel Business transaction, excluding Cisco,
is subject to Competition Commission (Commission) approval.
Risk Management
Significant strides were made on risk management. The Groups 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 resourced with commercial and financial
executives, allowing for improved risk management and decision-making across
each platform.
This year, the internal audit function was further strengthened and a
regulatory compliance function was established, which together with risk
management form the three pillars of integrated assurance. This will enhance
policies, procedures and controls to minimise risk exposures in managing the
achievement of Group objectives and to avoid or mitigate the impact of
unforeseen events.
The Murray & Roberts Limited Risk Committee has witnessed a considerable
increase in activity, meeting more regularly this past year than in previous
years. This increase is consistent with the enhanced risk management culture
in the Group.
Competition Commission
The Commission engaged the construction industry on applications submitted
through the 2011 Fast-Track process. The Group has not yet reached finality
with the Commission regarding the applications and potential penalty
relating to historic anti-competitive practices. The Board is of the view
that the provision held as at 30 June 2012 is adequate.
Dividend
The Board has resolved not to declare a dividend. Shareholders will be
updated on the prospects of a dividend being declared for the next financial
year at the time that the interim results are announced in February 2013.
Board Of Directors
The Board unanimously agreed to appoint Mahlape Sello as non-executive
chairperson, following the planned retirement of Roy Andersen on
1 March 2013. Roy has served as independent non-executive chairman for the
past nine years. Mahlape, an advocate, has been a non-executive director of
the Company since 2009.
Non-executive director Tony Routledge indicated his intention to retire from
the Board at the annual general meeting in October 2012 after serving for
nearly 19 years. Namane Magau, who is approaching nine years as a non-
executive director of Murray & Roberts, also plans to retire from the Board,
as will Sibusiso Sibisi, who wishes to limit his non-executive directorships
to institutions whose core business is underpinned by science and
technology.
During the year, Alan Knott-Craig resigned to take up an appointment as the
new chief executive of Cell C and during June 2012, Thenjiwe Chikane joined
the Board as a non-executive director and a member of the Audit &
Sustainability Committee and Risk Management Committee.
Rentia Joubert was appointed as company secretary effective 1 August 2012,
succeeding Yunus Karodia, who has taken up a senior financial position at
Murray & Roberts Cementation.
Prospects Statement
The Groups focus on growth is motivated by the objective to enhance
shareholder value through a return to profitability as soon as practically
possible. The growth strategy envisages aligning the Groups portfolio of
businesses selectively with market segments and geographies that present
sustainable growth potential, simultaneously expanding its offshore revenue
base. Our strategy for expanding into the rest of Africa is a cautious one,
which is on track and will be accelerated during the coming year.
Fixed investment in South African infrastructure is sorely needed and the
various platforms are positioned to engage in such opportunities. Any growth
during the next year which could result from a turnaround in the South
African construction economy, which we dont anticipate at present, would
come as a welcome boost.
The information on which this prospects statement is based has not been
reviewed or reported on by the Groups external auditors.
On behalf of the directors
Roy Andersen Henry Laas Cobus Bester
Chairman of the Board Group Chief Executive Group Financial Director
Bedfordview
29 August 2012
**The operating performance information disclosed has been extracted from
the Groups operational reporting systems. The People and LTIFR
information has not been subject to an audit of the Groups annual financial
statements. The Corporate & Properties segment is excluded from the
operational analysis. Segmental assets do not include assets held by
discontinued operations.
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 (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
within the meaning of Section 27A of the US Securities Act 10 1933 and
Section 21 E of the Securities Exchange Act of 1934 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 Groups strategy; the
economic outlook for the industry; use of the proceeds of the rights offer;
and the Groups liquidity and capital resources and expenditure. These
forward-looking statements speak only as of the date of this announcement
and are not based on historical facts, but rather reflect the Groups
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. The Group undertakes no obligation
to update publicly or release any revisions to these forward looking
statements to reflect events or circumstances after the date of this
announcement or to reflect the occurrence of any unexpected events.
Neither the content of the Groups website, Cloughs website nor any website
accessible by hyperlinks on the Groups website is incorporated in, or forms
part of, this announcement.
Registered office:
Douglas Roberts Centre, 22 Skeen Boulevard, Bedfordview, 2007
PO Box 1000, Bedfordview, 2008
Registrar:
Link Market Services South Africa Proprietary Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
PO Box 4844, Johannesburg, 2000
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited
Secretary:
E Joubert
Directors:
RC Andersen* (Chairman)
HJ Laas (Managing and Chief Executive)
DD Barber*
AJ Bester
TCP Chikane*
O Fenn1
NM Magau*
JM McMahon1*
WA Nairn*
AA Routledge*
M Sello*
SP Sibisi*
RT Vice*
1British *Non-executive
website: www.murrob.com
mobisite: http://murrob.mobi
e-mail: clientservice@murrob.com
110
Celebrating 110 years: 1902 to 2012
Date: 29/08/2012 03:51:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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