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MURRAY & ROBERTS HOLDINGS LIMITED - PRELIMINARY REPORT FOR THE YEAR ENDED 30
JUNE 2003
Murray & Roberts Holdings Limited
(Registration number 1948/029826/06)
("Murray & Roberts" or "the Group")
Share Code: MUR
ISIN code: ZAE00008983
Preliminary Report for the year ended 30 June 2003
Highlights
* Dividend up 50%
* Operating margin up to 6,1%
* Operating profit up 61%
* Core earnings up 47%
The audited results for the year ended 30 June 2003 are set out below:
Summarised consolidated income statement
Audited Audited
(R millions) 30 June 2003 30 June 2002
Revenue 10 111 9 027
Earnings before interest, exceptional 844 619
items, depreciation and amortisation
(EBITDA)
Depreciation (218) (227)
Amortisation of goodwill (5) (6)
Earnings before interest and exceptional 621 386
items (EBIT)
Exceptional items (5) (2)
Headlease and other discontinued (54) (58)
property activities
Other 49 56
Earnings before interest and taxation 616 384
Interest (66) 71
Net interest paid (17) (10)
Unrealised currency (loss) gain on (49) 81
offshore treasury funds
Earnings before taxation 550 455
Taxation (74) (36)
Earnings after taxation 476 419
Income from associate 97 90
Minority shareholders" interest (9) (4)
Earnings attributable to ordinary 564 505
shareholders
Reconciliation of headline earnings
Attributable earnings 564 505
Exceptional items as above 5 2
Amortisation of goodwill 5 6
Non-headline portion of income from 8 (2)
associate
Headline earnings 582 511
Headline earnings 582 511
Currency movement on offshore treasury 49 (81)
funds
Headline earnings excluding currency 631 430
movement on offshore treasury funds
Average number of ordinary shares in 331 893 331 893
issue ("000)
Earnings per share
- attributable (cent) 170 152
- headline (cent) 175 154
- headline excluding currency movement 190 129
on offshore treasury funds (cent)
Total dividend per ordinary share (cent) 52,5 35,0
Operating cash flow per ordinary share 107 215
(cent)
Summarised consolidated balance sheet
Audited Audited
(R millions) 30 June 2003 30 June 2002
ASSETS
Non-current assets 1 909 2 007
Property, plant and equipment 1 179 1 339
Associate company - Unitrans Limited 571 503
Other investments 159 165
Current assets 4 232 4 504
Accounts receivable and other 2 688 2 525
Bank balances and cash 1 544 1 979
Total tangible assets 6 141 6 511
Goodwill 10 15
TOTAL ASSETS 6 151 6 526
EQUITY AND LIABILITIES
Permanent capital 2 572 2 657
Ordinary shareholders" funds 2 559 2 648
Minority shareholders" interest 13 9
Non-current liabilities 515 733
Long-term provision 243 293
Long-term loans 218 387
Deferred taxation 54 53
Current liabilities 3 064 3 136
Bank overdrafts and short-term loans 258 268
Accounts payable and other 2 806 2 868
TOTAL EQUITY AND LIABILITIES 6 151 6 526
Net asset value per share (cent) 771 798
SUPPLEMENTARY INFORMATION (Rm)
Commitments
Capital expenditure
- spent 238 456
- authorised but unspent 405 384
Operating lease commitments 176 107
Contingent liabilities 16 11
Summarised consolidated cash flow statement
Audited Audited
(R millions) 30 June 2003 30 June 2002
Cash generated by operations before 824 592
working capital changes
(Increase) decrease in working capital (369) 135
Cash generated by operations 455 727
Interest and taxation (99) (15)
Operating cash flow 356 712
Dividends paid (166) -
Dividends paid to minority shareholders (4) (3)
Cash retained in operations 186 709
Net investment activities (142) (247)
Net funds flow 44 462
Unrealised currency (loss) gain on (49) 81
offshore treasury funds
Net funds flow, including unrealised (5) 543
currency (loss) gain on offshore
treasury funds
Summarised statement of changes in equity
Audited Audited
(R millions) 30 June 2003 30 June 2002
Opening balance 2 648 1 982
AC133 transitional adjustment (33) -
Earnings attributable to ordinary 564 505
shareholders
Movement in non-trading financial assets 13 -
reserve
Movement in hedging reserve (5) -
Foreign currency translation movement on (440) 169
investments
Change in cost of shares held by The (22) (8)
Murray & Roberts Trust
Dividend declared and paid (166) -
2 559 2 648
Segmental analysis
Audited Audited
(R millions) 30 June 2003 30 June 2002
REVENUE
Buildings and civil engineering 3 486 3 076
Industry and mining 1 578 1 288
Fabrication and manufacture 1 491 1 264
Supplies and services 3 526 2 900
Corporate 30 60
Ongoing operations 10 111 8 588
Discontinued operations - 439
Revenue as reported 10 111 9 027
EBIT
Buildings and civil engineering 155 117
Industry and mining 155 97
Fabrication and manufacture 114 79
Supplies and services 292 172
Corporate (95) (91)
Ongoing operations 621 374
Discontinued operations - 12
EBIT as reported 621 386
Notes:
1. The accounting policies and methods of computation for the financial
statements for the year ended 30 June 2003 are in all material respects
consistent with those applied in prior years except for the adoption of AC133,
Financial Instruments: Recognition and Measurement, and are in accordance with
South African Statements of Generally Accepted Accounting Practice.
2. 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.
Rebuilding Murray & Roberts
The Group has powered through the third year of Rebuilding Murray & Roberts
against a strong currency headwind, to deliver ahead of its commitment to a
material increase in earnings per share from real growth in revenues and a
further improvement in profit margins.
Commentary
The directors of Murray & Roberts are pleased to report a strong performance for
the year ended 30 June 2003, with operating profit (EBIT) up by 61% to R621
million (2002: R386 million), and core earnings (headline earnings excluding
currency movements on surplus offshore treasury funds) up by 47% to 190,3 cents
per share (2002: 129,3 cents per share).
The translation effect caused by a stronger SA Rand relative to the currencies
in which the Group conducts its international operations has limited the
increase in ongoing revenues to 18% in the year. The Group"s operating margin
has improved to 6,1% (2002: 4,3%) and reflects the further efficiencies achieved
throughout the Group in this third year of Rebuilding Murray & Roberts.
Surplus funds in the Group"s international treasury were redeployed to
strengthen the balance sheets of selected offshore operations, with effect from
1 January 2003. A R369 million increase in working capital in the year limited
operating cash flow to R356 million (2002: R712 million).
The Group returned 21,7% on average shareholders funds (2002: 21,8%).
Accounting Standards
In the year, the Group adopted South African Statement of Generally Accepted
Accounting Practice AC133, Financial Instruments: Recognition and Measurement.
This has resulted in a debit of R14 million to the opening accumulated profit
and a debit of R19 million to the opening non-trading financial asset reserve.
The effect in the current year has been to increase earnings before interest and
taxation by R9 million, an increase in the non-trading financial asset reserve
for the year of R13 million and a decrease in the hedging reserve for the year
of R5 million.
Latest accounting convention requires the inclusion of associate headline
earnings in the calculation of the Group"s headline earnings, which are enhanced
by 2,4 cents per share in the year.
Performance
The new leadership teams appointed into the Group"s major operations and
corporate office over the past three years have continued the process of
transformation and consolidation necessary to meet the changing demands and
increased volatility evident in the Group"s domestic and international markets.
During the year the Group refined its principal market focus into the
construction economies of South and southern Africa, the rest of Africa and the
Middle East, which represent more than 75% of total activity.
Construction operations serving the building, infrastructure, mining and
industrial markets delivered operating profits of R187 million (2002: R145
million) on revenues of R3,98 billion (2002: R3,52 billion) at a margin of 4,7%
(2002: 4,1%).
Consolidation of the construction operations within South Africa and within SADC
allowed each to perform well in a steady market. The Group has gained a foothold
in selected markets in West Africa, which should deliver better value in future
years. The Middle East experienced some difficulties in the year, doing well to
deliver a flat performance through a competitive and volatile period.
Road construction in remote regions of Africa has continued to be a challenge.
Recovery strategies are being pursued where possible and only the Benin contract
remains to be completed. Construction of the first phase of the N3 Toll Highway
in South Africa has been completed. A dispute resolution process is under joint
development by all the parties that should lead to an appropriate allocation of
the responsibilities anticipated in the finalisation of the total project.
Investment uncertainty has dampened activity in the domestic mining sector. A
marginal performance in South Africa was offset by good results from
international underground projects including Switzerland and Australia.
Construction services and material supplies to the building, infrastructure,
mining and industrial markets delivered operating profits of R260 million (2002:
R159 million) on revenues of R3,00 billion (2002: R2,44 billion) at a margin of
8,7% (2002: 6,5%).
The general level of domestic construction activity throughout the year and
selected major projects, offered improved market conditions to the Group"s
asphalt and piping operations. The demand for various forms of steel products
improved marginally, with growth available from improved efficiencies and
selected international markets.
Engineering contracting and services to the industrial and mining markets
delivered operating profits of R116 million (2002: R75 million) on revenues of
R955 million (2002: R714 million) at a margin of 12,1% (2002: 10,5%).
The Mozal and Hillside smelter expansions both reached performance milestones
ahead of budget and schedule in the year. The long gestation period for new
projects in South Africa has been exacerbated by investment uncertainty and the
Group has declined to participate in the unreasonable risk profile expected by
some clients, or offered in some proposed smelter projects.
The Group"s commitment "We are South African" has focused its investment in
industrial manufacturing, which operate exclusively from South Africa serving
the domestic and selected global markets. The Group also manages on contract, a
number of sugar production facilities and associated agricultural estates in
various locations throughout the developing world, its principal international
market.
The manufacture and supply of automotive components to the domestic and selected
global markets generated operating profits of R52 million (2002: R27 million) on
revenues of R673 million (2002: R998 million) at a margin of 7,7% (2002: 2,7%).
One-third of the Group"s capital expenditure over the past three years has been
directed into the foundry business serving this sector. Improved efficiencies
under new leadership and greater production capacity have enabled new
opportunities to be sourced. The aluminium wheels facility in Port Elizabeth
performed satisfactorily in the year but was negatively impacted by currency
volatility.
The fabrication and assembly of specialist products for the domestic and global
transport markets generated operating profits of R62 million (2002: R51 million)
on revenues of R818 million (2002: R643 million) at a margin of 7,6% (2002:
7,9%).
Manufacturers of tank containers in South Africa supply approximately two-thirds
of the world market, which took opportunity from the volatile currency and the
Group manufactured a record number of units in the year. A major cost reduction
programme is being implemented to maintain market leadership in this sector.
Refurbishment of commuter rail coaches has been the mainstay of the Group"s
rolling stock activities in recent years. The plan to renew South Africa"s
mainline locomotive asset as well as the potential of the proposed Gautrain
project, will offer new levels of opportunity in this sector.
Industrial services companies Booker Tate, Criterion, Johnson Arabia, Improvair,
Elgin and Pefco generated operating profits of R39 million (2002: R20 million)
on revenues of R658 million (2002: R651 million).
Corporate overheads for the year amounted to R95 million (2002: R91 million)
having been reduced by more than R50 million per annum over the past three
years. Overheads will increase in future years as the Group gears its leadership
capacity to expand its business model into new markets.
Cash on hand at year-end is R1,54 billion, having absorbed the conversion impact
of a stronger SA Rand and the first-half increase in working capital. The Group
delivered on its commitment to keep the change in working capital no worse than
at the level recorded in the first half-year.
Approximately two-thirds of the Group"s cash is denominated in hard currencies,
which are required to support the performance bond and guarantee requirements of
international contracting activities.
Unitrans
Unitrans delivered headline earnings up 20,3% at R234 million (2002: R194
million) on revenues of R7,4 billion (2002: R6,0 billion). Operating margin
remained at 5,2% and attributable earnings grew to R216 million (2002: R199
million).
Details are available in the Unitrans preliminary report published on 26 August
2003.
Exceptional Items
The Group has continued with its policy to offset the costs of rationalisation
against both the impairment provision taken in June 2000 as appropriate, and the
benefits where accrued, from the disposal of non-core assets.
The impairment provision was utilised against a loss incurred on the disposal of
Gearings Foundry and closure of the Cosmar business. Profits from the sale of
fixed assets in South Africa were used to cover the costs of rationalisation
this year in a number of minor operations.
A profit of R47,4 million realised from the sale of the AWI property in the UK
has been allocated against the increased risks associated with headleases and
other discontinued property assets. A further review of the property headlease
provision against projected losses through to 2015 has been completed.
Disposals
The Group is pleased to note the sale of 50% of the business of AWI South Africa
to Borbet GmbH of Germany effective 1 July 2003 (post balance sheet) and subject
to approval by the competition authorities. The company will be renamed Borbet
South Africa and the Group will continue to play a key role in partnering Borbet
management through their introduction into the South African manufacturing
environment. The transaction is at net asset value and will be settled partially
in cash on transaction, with the remainder interest bearing and payable over
three years.
The Group entered a partnership arrangement with J&J Group ("J&J") in respect of
the business of Union Carriage & Wagon Company ("UCW") whereby J&J and other
empowerment partners share in 30% of all future project work acquired by The UCW
Partnership. The underlying assets of UCW remain the property of the Group, with
J&J responsible for funding its share of performance bonding and working
capital.
Prospects
With two years of Rebuilding Murray & Roberts still in hand, the directors have
considered and approved a framework for the Group to expand its business model
into new markets and opportunities beyond 30 June 2005. The foundation of this
strategy is a primary focus on the construction economies of the developing
world and the leverage of South African competitiveness through industrial
manufacturing.
The Group"s project order book stood at R4,8 billion at year-end, offering the
same level of opportunity as a year ago and nominally down on the half-year, if
adjusted for the exchange rate differential. It reflects a better quality of
opportunity to continue the non-negotiable commitment to sustainable earnings
growth and value creation.
The Group has been cautious in its engagement of major project opportunities in
its various markets. As contractor the Group is increasingly expected to absorb
levels of risk over extended periods that are often unreasonable and unjustified
by the levels of reward available.
The Group"s supply and services companies are reporting good levels of activity
and automotive has a secured long-term order book.
Overall, the Group foresees some performance consolidation in the year to 30
June 2004. With investor uncertainty due to pending mining legislation in South
Africa and expectations of continuing strength in the SA Rand, growth in
headline earnings is expected to be at a lower rate than achieved over the past
three years.
Directorate
Mr Martin Shaw and Mr Roy Andersen were appointed to the Board as independent
directors in the half-year. Mr Peter Joubert and Ms Brigalia Bam have reached
the mandatory retirement age but have been requested to remain as independent
directors until 30 June 2004.
Mr David Brink will stand down as chairman effective 31 December 2003. The
directors have elected Mr Roy Andersen as chairman with effect from 1 January
2004.
Mr Martin Shaw has been appointed chairman of the Audit and Risk Management
Committee and Mr Allen Morgan as Chairman of the Health, Safety, Environment and
Corporate Social Involvement Committee.
Company Secretary
Mrs Elsabe Marx joined the Group on 15 August 2003 as Company Secretary.
Dividend
The directors have declared a final dividend of 37,5 cents per share in respect
of the year ended 30 June 2003 making the total dividend 52,5 cents per share
for the year.
Attention is drawn to the formal dividend announcement contained herein.
On behalf of the directors
David Brink Chairman of the Board
Brian Bruce Group Chief Executive
Roger Rees Group Financial Director
Bedfordview
27 August 2003
NOTICE TO SHAREHOLDERS
Declaration of final ordinary dividend (No. 103)
Notice is hereby given that the final dividend, dividend No. 103 of 37,5 cents
per share in respect of the financial year ended 30 June 2003 has been declared
payable to shareholders recorded in the register at the close of business on
Friday 17 October 2003.
The salient dates for the final ordinary dividend are as follows:
Last day to trade cum the dividend Friday 10 October 2003
Shares commence trading ex dividend Monday 13 October 2003
Record date Friday 17 October 2003
Payment date Monday 20 October 2003
Share certificates may not be dematerialised or re-materialised between Monday
13 October 2003 and Friday 17 October 2003, both days inclusive.
On Monday 20 October 2003, 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 20 October 2003 will be posted on that date.
Dematerialised shareholder accounts will be credited at their CSDP or broker on
Monday 20 October 2003.
By order of the Board
E Marx Secretary
Bedfordview
27 August 2003
Directors: DC Brink* (Chairman) BC Bruce (Managing and Chief Executive) RC
Andersen* BN Bam* WP Esterhuyse* SE Funde* PG Joubert* SJ Macozoma* AJ Morgan*
RW Rees 1 AA Routledge* MJShaw* KE Smith 2 JJM van Zyl*
1 British 2 Irish *Non executive
Secretary: E Marx
Registered office
Douglas Roberts Centre,
Skeen Boulevard, Bedfordview
Registrar
Computershare Limited, Investor Services Division,
70 Marshall Street, Johannesburg 2001
Additional information available at www.murrob.com
"Our commitment to sustainable earnings growth and value creation is not
negotiable."
Date: 27/08/2003 04:00:13 PM Supplied by www.sharenet.co.za
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