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(REGISTRATION NUMBER 05/29826/06)
INTERIM REPORT TO SHAREHOLDERS - 31 DECEMBER 1998
SUMMARISED CONSOLIDATED INCOME STATEMENT
UNAUDITED AUDITED
6 MONTHS ENDED YEAR ENDED
(R MILLIONS) 31.12.98 31.12.97 30.6.98
GROUP TURNOVER 6 445 5 381 12 586
ONGOING OPERATIONS 6 382 4 307 10 703
MAJOR TRAIN CONTRACTS 52 277 372
DISCONTINUED (NOTE 1) 11 797 1 511
-------- -------- --------
EARNINGS BEFORE INTEREST AND
EXCEPTIONAL ITEMS (EBIT) 26 317 545
ONGOING OPERATIONS 27 182 361
MAJOR TRAIN CONTRACTS (1) 68 74
DISCONTINUED (NOTE 1) - 67 110
EXCEPTIONAL ITEMS (46) (1) 348
-------- -------- --------
EARNINGS BEFORE INTEREST
AND TAXATION (20) 316 893
INTEREST (68) (152) (262)
------- -------- --------
(LOSS)/EARNINGS BEFORE TAXATION (88) 164 631
TAXATION (35) (32) (65)
-------- -------- --------
(LOSS)/EARNINGS AFTER TAXATION (123) 132 566
OUTSIDE SHAREHOLDERS' INTEREST (27) (24) (48)
-------- -------- --------
(LOSS)/EARNINGS ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS (150) 108 518
-------- -------- --------
AVERAGE NUMBER OF ORDINARY SHARES
IN ISSUE ('000) 345 968 345 968 345 968
(LOSS)/EARNINGS PER SHARE
- TOTAL (43C) 31C 150C
- HEADLINE (30C) 31C 49C
DIVIDEND PER SHARE - 14,5C 48,5C
OPERATING CASH FLOW PER SHARE (95C) 72C 369C
NOTE:
1. TURNOVER AND EBIT CONTRIBUTIONS FROM ACTIVITIES DISPOSED OF SINCE 1 JULY
1997.
HEADLINE (LOSS)/EARNINGS
ATTRIBUTABLE (LOSS)/EARNINGS (150) 108 518
ADJUSTMENTS:
NET LOSS/(PROFIT) ON
DISPOSALS/CLOSURES 46 21 (338)
PROVISIONS - SUBSIDIARIES'
ASSETS AND HEADLEASES - (20) (10)
-------- -------- --------
(104) 109 170
TAXATION ON ABOVE ITEMS - (2) -
-------- -------- --------
HEADLINE (LOSS)/EARNINGS (104) 107 170
-------- -------- --------
SUMMARISED CONSOLIDATED BALANCE SHEET
UNAUDITED AUDITED
6 MONTHS ENDED YEAR ENDED
(R MILLIONS) 31.12.98 31.12.97 30.6.98
FIXED ASSETS 1 999 2 661 2 091
INVESTMENTS 347 232 243
CURRENT ASSETS (EXCLUDING
BANK BALANCES) 3 597 3 420 3 634
------- ------- -------
TOTAL TANGIBLE ASSETS 5 943 6 313 5 968
GOODWILL 242 434 269
------- ------- -------
TOTAL ASSETS 6 185 6 747 6 237
DEFERRED TAXATION (242) (380) (280)
OTHER NON INTEREST BEARING DEBT (2 795) (2 315) (3 368)
------- ------- -------
CAPITAL EMPLOYED 3 148 4 052 2 589
------- ------- -------
ORDINARY SHAREHOLDERS' FUNDS 2 847 2 666 3 003
OUTSIDE SHAREHOLDERS' INTEREST 352 217 362
------- ------- -------
PERMANENT CAPITAL 3 199 2 883 3 365
NET (FUNDS ON HAND AND CASH
EQUIVALENTS)/BORROWINGS (51) 1 169 (776)
LONG TERM BORROWINGS
- FINANCE LEASES 12 210 39
LONG TERM BORROWINGS
- OTHER 625 895 827
SHORT TERM BORROWINGS 156 497 482
BANK BALANCES AND DEPOSITS (844) (433) (581)
RECEIVABLE - MAJOR DISPOSAL - - (1 543)
------- ------- -------
CAPITAL EMPLOYED 3 148 4 052 2 589
------- ------- -------
SUPPLEMENTARY INFORMATION
NET ASSET VALUE PER SHARE (CENTS) 823 771 868
CONSOLIDATED CAPITAL
EXPENDITURE (RM)
- SPENT DURING PERIOD 237 253 609
- COMMITTED/AUTHORISED 370 401 607
DEPRECIATION CHARGE (RM) 183 187 383
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
UNAUDITED AUDITED
6 MONTHS ENDED YEAR ENDED
(R MILLIONS) 31.12.98 31.12.97 30.6.98
CASH GENERATED BY OPERATIONS 230 463 878
INTEREST AND TAXATION PAID (148) (164) (307)
INCREASE IN WORKING CAPITAL (412) (50) 704
------- ------- -------
OPERATING CASH FLOW (330) 249 1 275
DIVIDENDS PAID (118) (122) (182)
------- ------- -------
CASH RETAINED/(UTILISED) IN
OPERATIONS (448) 127 1 093
NET INVESTMENT ACTIVITIES (279) (198) 979
------- ------- -------
NET CASH UTILISED (727) (71) 2 072
------- ------- -------
COMMENTS
PROFITABILITY
AS FORECAST IN THE ANNOUNCEMENTS TO SHAREHOLDERS DATED 14 DECEMBER 1998 AND 28
JANUARY 1999, THE GROUP HAS INCURRED A LOSS IN THE SIX MONTHS UNDER REVIEW.
THIS REPRESENTS A SEVERE SETBACK TO THE GROUP'S RECOVERY ASPIRATIONS WHICH WERE
COMMUNICATED IN THE 1998 ANNUAL REPORT.
THE EXTENT OF THIS SETBACK IS REFLECTED IN THE FOLLOWING SCHEDULE OF
CONTRIBUTIONS TO CONSOLIDATED EBIT FROM ONGOING OPERATIONS, IN PARTICULAR IN A
COMPARISON OF THE ACTUAL ACHIEVEMENTS AGAINST THE ORIGINAL BUDGET:
6 MONTHS ENDED YEAR ENDED
(R MILLIONS) 31.12.98 31.12.98 31.12.97 30.06.98
ORIGINAL
ACTUAL BUDGET ACTUAL ACTUAL
CONTRACTING 39 84 63 155
CONTRACTING SERVICES
AND MATERIALS 37 77 79 164
SPECIALIST
MANUFACTURING 10 26 28 67
ENGINEERING AND MINING
SUPPLIES 5 9 13 20
AUTOMOTIVE COMPONENTS (113) (67) (19) (103)
CORPORATE (54) (54) (63) (112)
SUB TOTAL -
MURRAY & ROBERTS
LIMITED (76) 75 101 191
UNITRANS 103 125 81 170
27 200 182 361
WITHIN THE CONTRACTING OPERATIONS, LAMA RECORDED A LOSS DUE TO SIGNIFICANT
DELAYS IN RESPECT OF AN OFFSHORE PIPELINE INSTALLATION SOUTH OF DURBAN. AN
INSURANCE CLAIM HAS BEEN SUBMITTED, BUT AT THIS EARLY STAGE, THE EXPECTED
RECOVERY ON THIS CLAIM HAS NOT BEEN RECORDED IN THE RESULTS FOR THE PERIOD
UNDER REVIEW. THE GENREC AND RUC ACTIVITIES ALSO RECORDED LOSSES IN THE SIX
MONTHS UNDER REVIEW.
THE EFFECTS OF THE DETERIORATION IN THE DOMESTIC ECONOMY WERE APPARENT IN THE
CONTRACTING SERVICES AND MATERIALS ACTIVITIES, PARTICULARLY IN THE PIPING
OPERATIONS WHICH EXPERIENCED REDUCTIONS IN TURNOVER AS COMPARED TO THE
COMPARABLE PERIOD LAST YEAR AND ORIGINAL BUDGET.
A SUBSTANTIAL LOSS WAS INCURRED IN THE AUTOMOTIVE COMPONENTS BUSINESSES.
DESPITE GOOD PROGRESS IN IMPROVING THE OPERATING PERFORMANCE OF THE ALLOY
WHEELS INTERNATIONAL (AWI) COMPANIES, THESE ACTIVITIES RECORDED A LOSS OF R79
MILLION BEFORE INTEREST IN THE SIX MONTHS UNDER REVIEW. THIS RESULT WAS SOME
R20 MILLION WORSE THAN BUDGET. THE SOUTH AFRICAN BASED AUTOMOTIVE FOUNDRIES AND
SPECIALIST GEARBOX AND TRANSMISSION MANUFACTURING BUSINESSES ALSO INCURRED
LOSSES.
THE CORPORATE OVERHEAD INCLUDES CERTAIN ACTIVITIES WHICH WERE PREVIOUSLY
CARRIED OUT IN THE HEAD OFFICES OF THE CONTRACTING, MATERIALS AND ENGINEERING
OPERATING GROUPS WHICH HAVE BEEN CLOSED. THE VALUE PROVIDED BY THE VARIOUS
CORPORATE ACTIVITIES IS BEING REVIEWED.
IT SHOULD BE RECORDED THAT A NUMBER OF GROUP BUSINESSES TRADED WELL DURING THE
SIX MONTH PERIOD. THESE INCLUDE THE SOUTHERN AFRICAN AND OTHER INTERNATIONAL
CONTRACTING OPERATIONS, GILLIS-MASON, M&R CIVILS, M&R CAPE, IMPROVAIR, COLAS,
JOHNSON CRANE HIRE, PENTOW MARINE AND CONSANI ENGINEERING.
UNITRANS PRODUCED SATISFACTORY RESULTS FOR THE SIX MONTHS UNDER REVIEW WITH
ATTRIBUTABLE EARNINGS 20% HIGHER THAN IN THE COMPARABLE PERIOD. THIS WAS
ACHIEVED ON HIGHER TURNOVER FOLLOWING THE ACQUISITION OF MAJOR MOTOR RETAILING
AND FINANCE ACTIVITIES FROM THE MALBAK GROUP WITH EFFECT FROM 1 JANUARY 1998.
THE EBIT CONTRIBUTIONS FROM THIS BUSINESS WERE HOWEVER LOWER THAN BUDGETED DUE
TO THE DEPRESSED STATE OF THE RETAIL AND COMMERCIAL VEHICLE MARKET, EXACERBATED
BY A SIX WEEK STRIKE IN THE MOTOR INDUSTRY AND HIGH INTEREST RATES.
THE EBIT CONTRIBUTIONS FROM MAJOR TRAIN CONTRACTS IN THE PRIOR PERIODS
REFLECTED ABOVE, INCLUDE AN INSURANCE RECOVERY OF R78 MILLION ACHIEVED IN
OCTOBER 1997. REMAINING CONTRACTS ARE BEING UNDERTAKEN AT AN APPROXIMATE
BREAK-EVEN POSITION.
THE HISTORICAL EBIT CONTRIBUTION FROM DISCONTINUED OPERATIONS INCLUDES THE
RESULTS OF THE CEMENT AND RELATED ACTIVITIES WHICH WERE SOLD WITH EFFECT FROM
30 JUNE 1998.
DURING THE SIX MONTHS UNDER REVIEW, EXCEPTIONAL LOSSES WERE INCURRED IN RESPECT
OF CERTAIN DISCONTINUED PROPERTY ASSET MANAGEMENT ACTIVITIES AND THE CLOSURE OF
THE HOBAS PLASTIC PIPE MANUFACTURING FACILITY WHICH PROVED UNCOMPETITIVE DUE TO
THE INCREASED COSTS OF IMPORTED RAW MATERIALS.
CASH FLOW AND BALANCE SHEET
AN OPERATING CASH OUTFLOW OF R330 MILLION OCCURRED IN THE SIX MONTHS UNDER
REVIEW, MAINLY AS A RESULT OF A REDUCTION IN NON INTEREST BEARING DEBT. AN
AMOUNT OF R279 MILLION WAS EXPENDED IN INVESTMENT ACTIVITIES, INCLUDING R237
MILLION IN REPLACEMENT AND EXPANSION CAPITAL EXPENDITURE.
AT 31 DECEMBER 1998 THE GROUP HAD NET FUNDS ON HAND OF R51 MILLION. THE NET
FUNDS INCLUDED SIGNIFICANT FUNDS HELD OFFSHORE TO SUPPORT THE GROUP'S
INTERNATIONAL CONTRACTING OPERATIONS. IT SHOULD BE NOTED THAT, IN GENERAL,
THESE OFFSHORE FUNDS ATTRACT INTEREST AT LOWER RATES THAN CURRENTLY EARNED
DOMESTICALLY.
GROUP RESTRUCTURE
AS ADVISED TO SHAREHOLDERS IN RECENT ANNOUNCEMENTS, IT HAS BEEN DECIDED THAT
M&R'S CORE CONTRACTING OPERATIONS AND BUSINESSES ALLIED TO THEM WILL FORM THE
PLATFORM FOR THE GROUP'S FUTURE INVESTMENT AND GROWTH STRATEGIES. AT THE SAME
TIME, THE UNITRANS BUSINESS WILL CONTINUE TO BE DEVELOPED INDEPENDENTLY IN THE
BEST INTEREST OF BOTH UNITRANS AND MURRAY & ROBERTS HOLDINGS.
THE BOARD HAS ALREADY COMMUNICATED ITS VIEW THAT, IN THE LIGHT OF THE GROUP'S
STRATEGY, THE AWI ACTIVITIES ARE NOT CONSIDERED A CORE BUSINESS. DEUTSCHE
MORGAN GRENFELL HAS BEEN APPOINTED TO ADVISE THE BOARD ON THE MOST APPROPRIATE
EXIT STRATEGY. THEIR PRELIMINARY FINDINGS WERE TABLED AT A BOARD MEETING TODAY
AND INDICATE THAT AN APPROPRIATE DIVESTMENT COULD BE ACHIEVED WITHIN A
REASONABLE PERIOD. THE NEW MANAGEMENT WILL CONTINUE EFFORTS TO IMPROVE AWI'S
OPERATING EFFICIENCIES.
EXIT STRATEGIES ARE ALSO UNDERWAY IN RESPECT OF OTHER EXISTING ACTIVITIES WHICH
DO NOT MEET THE GROUP'S STRATEGIC OBJECTIVES AND INVESTMENT CRITERIA. IT IS
LIKELY THAT THESE STRATEGIES WILL BE IMPLEMENTED WITHIN A SIX TO EIGHTEEN MONTH
PERIOD SO AS TO MAXIMISE SHAREHOLDER VALUE. VARIOUS DISCUSSIONS ARE UNDERWAY TO
IMPROVE THE POSITIONING OF, INTER ALIA, M&R FOUNDRIES, ASTAS, MAIN INDUSTRIES,
HALL LONGMORE, ROCIA AND HARVEY TILE.
THIS STRATEGIC DISPOSAL PROGRAMME IS LIKELY TO RESULT IN SIGNIFICANT DISPOSAL
PROCEEDS ACCRUING TO THE GROUP. FURTHER ANNOUNCEMENTS WILL BE MADE AS
APPROPRIATE TO KEEP SHAREHOLDERS INFORMED ON PROGRESS.
MANAGEMENT STRUCTURE
WITH EFFECT FROM 11 FEBRUARY 1999, MR D C BRINK ASSUMED THE LINE AND
OPERATIONAL RESPONSIBILITIES FOR ALL OF THE MURRAY & ROBERTS LIMITED
ACTIVITIES, WITH EACH EXECUTIVE DIRECTOR OF THAT COMPANY REPORTING DIRECTLY TO
HIM. IT IS THE BOARD'S VIEW THAT THE OPERATIONAL EFFECT OF THIS CHANGE WILL BE
A FLATTENING OF THE LEADERSHIP STRUCTURE, PARTICULARLY IN THE CORE CONTRACTING
OPERATIONS. MR GPMCGURK HAS BEEN APPOINTED A DIRECTOR OF MURRAY &ROBERTS
LIMITED WITH EFFECT FROM 16 FEBRUARY 1999.
MR MWMCCULLOCH WAS REQUESTED TO LEAD MURRAY &ROBERTS LIMITED'S STRATEGIC
DEVELOPMENTS INCLUDING ACQUISITIONS, DISPOSALS AND MARKET DEVELOPMENT FOR CORE
BUSINESSES. MR MCCULLOCH DID NOT WISH TO TAKE UP THIS APPOINTMENT AND WILL
RESIGN AS A DIRECTOR OF MURRAY &ROBERTS HOLDINGS LIMITED AND OTHER GROUP
COMPANIES WITH EFFECT FROM 28 FEBRUARY 1999 AND WILL BE LEAVING THE GROUP ON 31
MARCH 1999.
YEAR 2000 COMPLIANCE
THE GROUP HAS CONTINUED THE REVIEW OF THE IMPLICATIONS AND THE POSSIBLE
PROBLEMS ASSOCIATED WITH THE ADVENT OF THE YEAR 2000, INCLUDING THE POSSIBLE
IMPACT ON ITS COMPUTER SYSTEMS. TO DATE, NO MATERIAL OPERATIONAL DIFFICULTIES
(OR RESULTING LIABILITIES) ARE FORESEEN AS A RESULT OF THIS ADVENT. YEAR 2000
COMPLIANCE COSTS TO DATE AND TO BE INCURRED, SHOULD NOT BE SIGNIFICANT IN THE
CONTEXT OF THE OVERALL OPERATING COSTS. THE TARGET DATE FOR COMPLIANCE REMAINS
OCTOBER 1999.
PROSPECTS
ALTHOUGH DIFFICULT MARKET CONDITIONS ARE LIKELY TO PERSIST, THE TRADING RESULTS
IN MURRAY &ROBERTS LIMITED ARE FORECAST TO IMPROVE IN THE SECOND HALF. MUCH OF
THIS IMPROVEMENT IS EXPECTED IN AWI WHICH IS NOW BUDGETING TO INCUR A
RELATIVELY SMALL LOSS BEFORE INTEREST IN THE REMAINDER OF THE FINANCIAL YEAR.
THE TIMING OF THE GROUP'S WITHDRAWAL FROM THIS ACTIVITY WILL ALSO INFLUENCE ITS
IMPACT ON THE RESULTS FOR THE FULL YEAR.
UNITRANS HAVE FORECAST HEADLINE EARNINGS FOR THE SECOND HALF OF THE YEAR AT
SIMILAR LEVELS TO THE ACHIEVEMENT OF THE FIRST SIX MONTHS. THE ATTENTION OF
SHAREHOLDERS IS DRAWN TO THE CAUTIONARY ANNOUNCEMENT PUBLISHED ON 17 FEBRUARY
1999, ADVISING THAT UNITRANS WAS INVOLVED IN DISCUSSIONS WHICH MIGHT HAVE AN
EFFECT ON THAT COMPANY'S SHARE PRICE.
NOTWITHSTANDING THE IMPROVEMENTS FORECAST AT THE OPERATIONAL LEVEL, THE GROUP
IS EXPECTED TO INCUR AN ATTRIBUTABLE LOSS FOR THE YEAR. THIS FORECAST DOES NOT
TAKE INTO ACCOUNT POSSIBLE EXCEPTIONAL PROFITS OR LOSSES ARISING FROM THE
STRATEGIC DISPOSAL PROGRAMME REFERRED TO ABOVE.
DIVIDEND
IN VIEW OF THE LOSS RECORDED IN THE SIX MONTHS AND THE UNCERTAIN TIMETABLE AND
IMPACT OF THE STRATEGIC DISPOSALS, THE BOARD HAS DETERMINED THAT THE YEAR'S
TOTAL DIVIDEND SHOULD BE CONSOLIDATED INTO ONE PAYMENT AND ACCORDINGLY NO
INTERIM DIVIDEND HAS BEEN DECLARED. THE BOARD IS CONFIDENT THAT THE GROUP WILL
BE IN A POSITION TO PAY A FINAL DIVIDEND.
ON BEHALF OF THE BOARD
BEDFORDVIEW D.C. BRINK EXECUTIVE CHAIRMAN
25 FEBRUARY 1999 L.B. BIRD FINANCIAL DIRECTOR
DIRECTORATE: D.C. BRINK EXECUTIVE CHAIRMAN, B.N. BAM, L.B.BIRD, W.P.
ESTERHUYSE, P.G. JOUBERT, M.W. MCCULLOCH, A.A. ROUTLEDGE, J. J. M. VAN ZYL.
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