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MUR - Murray & Roberts Holdings Limited - Business Update

Release Date: 31/01/2012 07:15
Code(s): MUR
Wrap Text

MUR - Murray & Roberts Holdings Limited - Business Update 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") BUSINESS UPDATE Shareholders of Murray & Roberts ("Shareholders") are advised to read this Business Update in conjunction with the Notice of General Meeting and Cautionary Announcement released on the Securities Exchange News Service of the JSE Limited today. The board of directors of Murray & Roberts (the "Board") wishes to report that the Group has made good progress in respect of the following key matters: - The Group successfully restructured its South African term debt and bank facilities in November 2011; - The Board has decided to propose a rights offer of circa R2 billion to Shareholders, which will enable the Group to reduce its overall debt, fund delivery of its order book and continue with its growth strategy; - The organisation of the business into five operating platforms; Construction Africa and Middle East, Construction Global Underground Mining, Construction Australasia Oil & Gas and Minerals, Engineering Africa and Construction Products Africa is now well established; - The construction of Gorgon Pioneer Material Offloading Facility ("GPMOF") is expected to be substantially complete by end-February 2012; - The water ingress rectification work on the Gautrain project is progressing and grouting is continuing; and - The Group`s order book, secured at an acceptable margin, increased to R57 billion at 31 December 2011 (June 2011: R55 billion). . As reported in the Business Update dated 21 October 2011 (the "October Business Update"), it remains the Group`s objective to return to profitability as soon as practically possible. Operating Platform Update and Market Outlook Although the business environment is still being impacted by the uncertain global economic and financial markets, the Group maintains a strong order book and is experiencing improved trading conditions in all operating platforms, other than Construction Africa and Middle East: - Construction Africa and Middle East In the medium to longer term, the outlook for Construction Africa remains positive, given the major - and growing - infrastructural backlog in South Africa. However, in the near term the construction industry in South Africa is expected to remain muted. Given the challenging market conditions in the United Arab Emirates, the Middle East business is shifting focus to Qatar which, in the medium term, will present opportunity for civil and building works, particularly associated with the 2022 FIFA World Cup. Good progress has been made at the GPMOF project since the October Business Update and the project team will be demobilised by end-March 2012. Cost to complete has increased by R80 million in addition to the R520 million communicated in the October Business Update. All of these costs, some of which may be recoverable, have been accounted for in the first six months of the current financial year. The water ingress rectification work on the Gautrain project is progressing and grouting is continuing. The effectiveness of this will be evaluated during March 2012. - Construction Global Underground Mining The mining business is performing well as a result of the strong global demand for commodities, and continues to secure significant contracts globally with major international mining houses. However, the local platinum sector is feeling the impact of the low platinum price and some smaller projects have been stopped. After a recent review by Aquarius Platinum South Africa ("Aquarius") of its strategic options available at its Everest Platinum Mine, it was concluded that mining operations will continue to be undertaken by Murray & Roberts Cementation ("MRC"). MRC remains the mine operator for Aquarius. - Construction Australasia Oil & Gas and Minerals Clough Limited`s longer term outlook remains positive as it continues to win new work and the level of tendering activity remains high with a number of significant near term opportunities in the pipeline. The construction market in Western Australia remains buoyant due to strong global demand for commodities and significant investment in oil & gas and mining infrastructure. The Group continues to consider how best to optimise its investment in this key growth area. - Engineering Africa Through its current contracts, this operating platform will continue to be highly involved in Eskom`s power programme until 2016 and the revised commercial arrangement with Hitachi for the Medupi and Kusile projects is working well and delivering value to the Group. The platform is poised to further develop its market presence in the power market locally and into Africa, whilst growth opportunities in the minerals processing markets are being pursued in sub-Saharan Africa. - Construction Products Africa Much Asphalt continues to perform well on the back of ongoing work on the Gauteng Freeway Improvement Project. Technicrete is benefitting from improved trading conditions and efficiency gains. Whilst Hall Longmore`s spiral pipe manufacturing capacity for the remainder of the financial year will be fully utilised, its Electric Resistance Welding pipe mill utilisation remains low. UCW remains well positioned to benefit from Transnet`s and PRASA`s capital renewal programmes, whilst Rocla continues to face tough trading conditions due to a lack of Government infrastructure spend and little activity in the residential building market. Recovery & Growth Plan Update The Group`s Recovery & Growth Plan was communicated to Shareholders on 31 August 2011, with improvement in liquidity as the main objective for the recovery year to 30 June 2012. The initiatives identified to improve liquidity were the restructuring of debt facilities, disposal of non-core assets and settlement of major claims: - Debt Restructuring - In order to improve the Group`s liquidity, Murray & Roberts successfully restructured its South African term debt and bank facilities in November 2011. The new circa R4.3 billion debt package (previously R3.4 billion) includes facilities ranging from on-demand to four- year facilities, achieving the objective of extending the average tenure of the Group`s debt structure. This better aligns the debt repayment tenure with the timing of anticipated proceeds to be derived from the settlement of the Group`s major claims. The Group`s net debt position at 31 December 2011 was circa R100 million. Debt levels in South Africa remain high, with significant amounts of restricted cash held offshore and in joint ventures. - Disposals - The disposals of previously identified non-core assets including Johnson Arabia, two divisions of the Steel Business and various properties have all been successfully concluded, other than the remaining Steel Business in respect of which negotiations are ongoing. It remains the Group`s objective to dispose of this business at fair value. - Major Claims - Processes to settle the Group`s major claims are progressing. Based on current information, there is no expectation to impair the claims taken to book as uncertified revenues valued at circa R2 billion. At GPMOF, the first arbitration hearing took place towards the end of calendar year 2011 and the arbitrator`s ruling is awaited. It is not anticipated that any significant part of the claims will be settled before the end of the current financial year. The Gautrain arbitration will be a protracted process and settlement is now expected by 2014 (previously 2013). Bombela Concession Company submitted its Statement of Case in August 2011. Gauteng Province has received an extension to March 2012 to submit its Statement of Defence. The Dubai International Airport claims process has been delayed by a dispute between the parties as to the identity of the contracting entities following a name change effected by the client. The arbitration hearing on this matter took place in December 2011, and a ruling is awaited. As previously reported, it is not expected that the claim arbitration will be heard before the end of the current financial year. The Board has given due consideration to the continued implementation of the Group`s 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. The Board is of the view that it is prudent to raise additional equity capital from Shareholders and intends to propose a rights offer to raise circa R2 billion. Competition Commission The Competition Commission (the "Commission") engaged the construction industry on applications submitted through the April 2011 Fast-Track process. As previously reported, the Fast-Track process might highlight further transgressions, unknown to the Board. The Commission has subsequently presented unreported projects allegedly falling into this category for the Group to investigate. Based on current information, the Board is of the view that an increase in the penalty provision raised in the previous financial year is not necessary. Bedfordview 31 January 2012 Sponsor Deutsche Securities (SA) (Proprietary) Limited This announcement includes certain various "forward-looking statements" 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 Group`s strategy; the economic outlook for the industry; use of the proceeds of the rights offer; and the Group`s liquidity and capital resources and expenditure. These forward-looking statements are not based on historical facts, but rather reflect the Group`s 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. Date: 31/01/2012 07:15:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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