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Murray & Roberts Holdings Limited - Interim report for the six months ended 31
December 2003
Murray & Roberts Holdings Limited
(Registration number 1948/029826/06)
("Murray & Roberts" or "the Group")
Share Code: MUR ISIN code: ZAE00008983
Interim report for the six months ended 31 December 2003
Salient Points
* Headline earnings maintained off lower in revenues and operating profit
* Operating margin remains strong at 4,5%
* Interim dividend maintained and supported by improved cash flow
The unaudited results for the six months to 31 December 2003 are set out below:
Summarised consolidated income statement
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R millions) 31.12.03 31.12.02 30.06.03
Revenue 4 163 5 177 10 111
Earnings before 281 379 844
interest, exceptional
items, depreciation and
amortisation (EBITDA)
Depreciation (92) (116) (218)
Amortisation of goodwill (2) (2) (5)
Earnings before interest 187 261 621
and exceptional items
(EBIT)
Exceptional items - - (5)
Headlease and other (2) (4) (54)
discontinued property
activities
Other 2 4 49
Earnings before interest 187 261 616
and taxation
Interest 15 (51) (66)
Net interest income 15 (2) (17)
(expense)
Unrealised currency loss - (49) (49)
on offshore treasury
funds
Earnings before taxation 202 210 550
Taxation (30) (29) (74)
Earnings after taxation 172 181 476
Income from associate 59 50 97
Minority shareholders" (2) (1) (9)
interest
Earnings attributable to 229 230 564
ordinary shareholders
Reconciliation of
headline earnings
Attributable earnings 229 230 564
Exceptional items as - - 5
above
Amortisation of goodwill 2 2 5
Non-headline portion of 3 4 8
income from associate
Headline earnings 234 236 582
Average number of 331 893 331 893 331 893
ordinary shares in issue
("000)
Earnings per share
- attributable (cents) 69 69 170
- headline (cents) 71 71 175
Dividend per share 15.0 15.0 52.5
(cents)
Operating cash flow per 28 (7) 107
share (cents)
Summarised consolidated balance sheet
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R millions) 31.12.03 31.12.02 30.06.03
ASSETS
Non-current assets 1 955 1 930 1 909
Property, plant and 1 046 1 253 1 179
equipment
Associate company - 598 524 571
Unitrans Limited
Other investments 311 153 159
Current assets 3 210 4 036 4 232
Accounts receivable and 2 132 2 634 2 688
other
Bank balances and cash 1 078 1 402 1 544
Total tangible assets 5 165 5 966 6 141
Goodwill 8 13 10
TOTAL ASSETS 5 173 5 979 6 151
EQUITY AND LIABILITIES
Permanent capital 2 523 2 546 2 572
Ordinary shareholders" 2 513 2 538 2 559
funds
Minority shareholders" 10 8 13
interest
Non-current liabilities 392 478 515
Long-term provision 176 260 243
Long-term loans 162 165 218
Deferred taxation 54 53 54
Current liabilities 2 258 2 955 3 064
Accounts payable and 2 188 2 770 2 806
other
Bank overdrafts and 70 185 258
short-term loans
TOTAL EQUITY AND 5 173 5 979 6 151
LIABILITIES
Net asset value per 757 765 771
share (cents)
SUPPLEMENTARY
INFORMATION (Rm)
Commitments
Capital expenditure
- spent 108 119 238
- authorised but unspent 246 246 405
Operating lease 146 88 176
commitments
Contingent liabilities 15 10 16
Summarised consolidated cash flow statement
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R millions) 31.12.03 31.12.02 30.06.03
Cash generated by 274 367 824
operations before
working capital changes
Increase in working (156) (359) (369)
capital
Cash generated by 118 8 455
operations
Interest and taxation (24) (31) (99)
Operating cash flow 94 (23) 356
Dividends paid (124) (116) (166)
Dividends paid to - - (4)
minority shareholders
Cash (utilised) retained (30) (139) 186
in operations
Net investment (81) (90) (142)
activities
Net funds flow (111) (229) 44
Unrealised currency loss - (49) (49)
on offshore treasury
funds
Net funds flow including
unrealised currency loss
on
offshore treasury funds (111) (278) (5)
Summarised statement of changes in equity
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R millions) 31.12.03 31.12.02 30.06.03
Opening balance 2 559 2 648 2 648
AC 133 transitional - - (33)
adjustment
Earnings attributable to 229 230 564
ordinary shareholders
Movement in non-trading - - 13
financial asset reserve
Movement in hedging - - (5)
reserve
Foreign currency (141) (215) (440)
translation movement on
investments
Change in cost of shares (10) (9) (22)
held by The Murray &
Roberts Trust
Dividend declared and (124) (116) (166)
paid
2 513 2 538 2 559
Segmental analysis
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R millions) 31.12.03 31.12.02 30.06.03
REVENUE
Construction operations 1 750 1 998 3 981
Engineering contracting 337 511 955
and services
Construction services 1 474 1 701 3 383
and material supplies
Fabrication and 602 816 1 521
manufacture
Corporate - 22 30
Ongoing operations 4 163 5 048 9 870
Discontinued operations - 129 241
Revenue as reported 4 163 5 177 10 111
EBIT
Construction operations 32 68 187
Engineering contracting 46 44 116
and services
Construction services 126 122 288
and material supplies
Fabrication and 30 68 111
manufacture
Corporate (47) (42) (95)
Ongoing operations 187 260 607
Discontinued operations - 1 14
EBIT as reported 187 261 621
Note:
1. The accounting policies and methods of computation for the six months ended
31 December 2003 are in all material respects consistent with those applied in
the prior year and are in accordance with South African Statements of Generally
Accepted Accounting Practice.
Commentary
Adverse market conditions have slowed the pace of Rebuilding Murray & Roberts in
the first half of this financial year. The strong SA Rand is a major cause of
the 20% reduction in revenues to R4,2 billion (2002: R5,2 billion). The
operating margin of 4,5% (2002: 5,0%) reflects the pressure on manufacturing
profits and the challenging market conditions associated with international
construction.
Headline earnings are maintained at 71 cents per share (2002: 71 cents per
share) off an operating profit (EBIT) down by 28% at R187 million (2002: R261
million) and a significant improvement of R66 million in net interest received
compared with the corresponding period in the previous year.
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. No loss arises in the income statement in the current period
(2002: R49 million).
Operating cash flow was R94 million compared to a R23 million outflow in the
previous corresponding period. Included in the working capital increase of R156
million (2002: R359 million) is the settlement of a troublesome property
headlease at a cost of R42 million, which had been provided in a previous
period.
The Group is on track to maintain a return above 20,0% on average shareholders
funds in the full year to 30 June 2004.
The directors have maintained an interim dividend at 15 cents per share in
respect of the half-year ended 31 December 2003. Attention is drawn to the
formal dividend announcement contained herein.
Performance
In the business update to shareholders presented at the annual general meeting
in October 2003, the Group defined the environmental framework for performance
in the current financial year. It was noted that order books are under pressure
in some sectors and that specific international contracting risks have
increased.
The average exchange rate for the period under review is R6,99 to the US Dollar,
a reduction of 33% compared with the corresponding period in the previous year.
The Group"s project order book stood at R4,0 billion at 31 December 2003, down
12% in real terms in the first six months of the year. Almost half this
reduction is the result of awarded project terminations in the South African
mining sector. Rationalisation and cost reduction measures have continued
throughout the projects sector, enabling the Group to remain selective in its
pursuit of quality opportunity.
A reversal in operating profit of R8 million in the roads sector and R30 million
in the Middle East compared with the corresponding period in the previous year
reflects the extent of problems experienced in these international contracting
markets. As a result, construction operations delivered a reduced operating
profit of R32 million (2002: R68 million) on revenues of R1,75 billion (2002:
R2,0 billion) at a margin of 1,8% (2002: 3,4%).
Continued buoyancy in the domestic general construction economy allowed the
construction services and material supplies sector to deliver operating profits
of R118 million (2002: R114 million) on revenues of R1,33 billion (2002: R1,51
billion) at a margin of 8,9% (2002: 7,6%). Demand for various forms of steel
product is under pressure, with pricing issues impacting comparative
affordability in the sector.
Improved performance from mechanical, electrical and instrumentation contracting
enabled the engineering contracting and services sector to deliver operating
profits of R46 million (2002: R44 million) on revenues of R337 million (2002:
R511 million) at a margin of 13,6% (2002: 8,6%). The dearth of new project
opportunity in this sector represents one of the Group"s critical challenges
into the immediate future.
The relative strength of the SA Rand against currencies in the Group"s principal
export markets has impacted severely on domestic manufacturing competitiveness.
The manufacture and supply of automotive and transport products delivered lower
operating profits at R24 million (2002: R60 million) on revenues of R484 million
(2002: R670 million) at a margin of 5,0% (2002: 9,0%). The tank container market
has suffered particular distress, inflicting a reversal of R40 million compared
to the previous year. Foundries operations are hedged and have maintained
performance.
Industrial services companies in the Group delivered operating profits of R14
million (2002: R16 million) on revenues of R262 million (2002: R335 million).
Cash on hand is R1,08 billion, again reflecting the conversion impact of a
stronger SA Rand and the first-half increase in working capital. Approximately
half the Group"s cash is denominated in hard currencies, which are required to
support the performance bond and guarantee requirements of international
contracting activities.
Associate
Unitrans Limited, in which the Group has a 44,7% interest, delivered headline
earnings up 15,0% at R138 million (2002: R120 million) on revenues of R4,4
billion (2002: R3,7 billion). Attributable earnings grew to R131 million (2002:
R112 million).
Details are available in the Unitrans interim report published on 24 February
2004.
Exceptional Items
Trading in the property headlease portfolio has been within budget through the
current period and no additional provision is necessary at this stage.
Acquisitions and Disposals
Completion is imminent on transactions to dispose of the Elgin and Pefco
industrial services companies based in Durban. These transactions will be at
net asset value.
Following due diligence, the Group is finalising an offer for the acquisition of
79,13% of the shares of The Cementation Company Africa Limited and 100% of the
mining contracting business of Cementation in Australia and Canada. The
transaction remains subject to approval by the South African competition
authorities and the JSE Securities Exchange South Africa.
Prospects
Rebuilding Murray & Roberts remains an absolute focus for the Board and
executive management of the Group. The directors are confident that the work to
date provides sufficient impetus to engage the challenges presented by difficult
market conditions. Of particular emphasis will be a focus on market development
and order book that secures the Group"s commitment to sustainable earnings
growth and value creation.
The prospects statement in the annual report and the business update at the
annual general meeting cautioned investors of current uncertainty in the Group"s
markets. In this respect, the domestic mining and industrial sector continues to
offer limited major project opportunity.
Manufacturing for export will remain marginal through the remainder of the
financial year, whereas the general construction economy shows signs of
sufficient activity to support current levels of activity in the Group"s
supplies and services business.
Headline earnings for the full year to 30 June 2004 are not expected to be
significantly different to the prior year.
Directorate
Mr Roy Andersen became chairman of the Board on 1 January 2004 following the
retirement of Mr David Brink and in terms of the JSE listing requirements will
replace Mr Peter Joubert as chairman of the Nominations Committee.
Mr Boetie van Zyl succeeds Mr Brink as chairman of the Remuneration and Human
Resources Committee.
On behalf of the directors
Roy Andersen Chairman of the Board
Brian Bruce Group Chief Executive
Roger Rees Group Financial Director
Bedfordview
25 February 2004
NOTICE TO SHAREHOLDERS
Declaration of interim ordinary dividend (No. 104)
Notice is hereby given that an interim dividend of 15 cents per share, dividend
No 104, in respect of the financial year ending 30 June 2004 has been declared
payable to shareholders recorded in the register at the close of business on
Friday 16 April 2004.
The salient dates for the interim ordinary dividend are as follows:
Last day to trade cum the dividend Tuesday 6 April 2004
Shares commence trading ex dividend Wednesday 7 April 2004
Record date Friday 16 April 2004
Payment date Monday 19 April 2004
Share certificates may not be dematerialised or re-materialised between
Wednesday 7 April 2004 and Friday 16 April 2004, both days inclusive.
On Monday 19 April 2004, the dividend will be electronically transferred to the
bank accounts of all certificated shareholders where this facility is available.
Where electronic fund transfer is not available or desired, cheques dated 19
April 2004 will be posted on that date.
Dematerialised shareholder accounts will be credited at their CSDP or broker on
Monday 19 April 2004.
By order of Board
E Marx
Company secretary
Bedfordview
25 February 2004
Directors:
RC Andersen* (Chairman)
BC Bruce (Managing and Chief Executive)
BN Bam* WP Esterhuyse* SE Funde* PG Joubert* SJ Macozoma* AJ Morgan*
RW Rees1 AA Routledge* MJ Shaw* KE Smith2 JJM van Zyl*
1British 2Irish *Independent
Company secretary:
E Marx
Registered office Registrar
Douglas Roberts Centre, Computershare Limited, Investor Services Division,
Skeen Boulevard, Bedfordview 70 Marshall Street, Johannesburg 2001
Additional information available at www.murrob.com
Executive summary
We have maintained focus on our performance commitment in what has become a
challenging year for Murray & Roberts and our associated industries. The general
level of construction activity in South Africa has remained buoyant but new
investment in major projects has stalled under the local impact of a weakened US
Dollar and domestic investment uncertainty.
Manufacturing from South Africa has become relatively expensive for global
markets, intensifying our internal focus on product and process improvement.
International engineering and construction markets still offer focused
opportunity but local country conditions increasingly dominate project risks. We
are cautious on the rest of Africa, positive on Australasia and have increased
our market capability in the Middle East.
With China set to dominate trade and investment affecting our sector over the
next decade at least, Murray & Roberts is actively seeking new opportunities to
access the potential of this growing market.
Brian Bruce
Group Chief Executive
"Our commitment to sustainable earnings growth and value creation is not
negotiable."
Date: 25/02/2004 04:15:23 PM Supplied by www.sharenet.co.za
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