Wrap Text
Interim Results for the six months ended 31 December 2016
Murray & Roberts Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 1948/029826/06
JSE Share Code: MUR
ADR Code: MURZY
ISIN: ZAE000073441
("Murray & Roberts" or "Group" or "Company")
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
SALIENT FEATURES^
Compared to the previous reporting period, FY2017 H1 results were negatively impacted by:
- Decline in earnings from the Oil & Gas platform (R172 million);
- Cost increase to close out projects and the business in the Middle East (R130 million);
- Forex movements (R244 million); and
- Net present value charge of Voluntary Rebuild Programme (“VRP”) with South African Government (R170 million).
Financial Results:
- Revenue from continuing operations of R10,7 billion (December 2015: R13,0 billion);
- Diluted continuing HEPS of 27 cents (December 2015: 93 cents);
- Attributable loss of R60 million (December 2015: R376 million profit);
- Cash net of debt of R1,1 billion (December 2015: R1,0 billion);
- Order book for continuing operations of R24,5 billion (December 2015: R35,2 billion);
- NAV of R14 per share (December 2015: R16 per share); and
- In line with the approved dividend policy, the board of directors will only consider paying an annual dividend
(December 2015: no interim dividend).
- Settlement of all Gautrain development period disputes.
- Sale of Southern African Infrastructure & Building businesses and Genrec should be completed within the second half of the current
financial year.
- Record-low lost time injury frequency rate of 0.56 (December 2015: 0.78). Regrettably one fatal incident was suffered.
- Approval to transfer the Company’s sub-sector listing on the JSE from Heavy Construction to Diversified Industrial received
in February 2017.
ATTRIBUTABLE EARNINGS AND DILUTED CONTINUING HEPS
2015 2016 2017
HY11 HY21 HY11 HY2 HY1
Total attributable earnings (Rm) 359 522 376 377 (60)
Continuing attributable earnings (Rm) 302 508 378 499 119
Discontinued attributable earnings (Rm) 57 14 (2) (122) (179)
Diluted continuing HEPS (cents) 73 122 93 82 27
1 Restated for discontinued operations.
STAKEHOLDER REPORT – SIX MONTHS TO DECEMBER 2016
Murray & Roberts has a long and proud heritage of more than a century and is a multinational engineering and construction project
lifecycle group, which delivers its capabilities into three global market sectors: oil & gas; metals & minerals and power & water.
Murray & Roberts is a group of world-class companies and brands aligned to the same purpose and vision, and guided by the same set of
values. More information is available at www.murrob.com.
FINANCIAL REPORT
Murray & Roberts is largely exposed to the cyclical global natural resources sector which has still not recovered from a period of
prolonged weakness. This is reflected in the financial results recorded for the period under review.
The Group regularly reviews and adjusts its cost structures in line with the decline in revenue in a market which is likely to remain
tough for the short to medium term, whilst it continues to focus on commercial and project management excellence.
Revenue and profit from continuing operations were R10,7 billion (December 2015: R13,0 billion) and R119 million
(December 2015: R389 million) respectively. After a loss from discontinued operations of R179 million, the attributable loss was
R60 million (December 2015: R376 million profit). Diluted continuing headline earnings per share (“HEPS”) decreased to 27 cents
(December 2015: 93 cents). This result reflects a reduction in earnings from the Oil & Gas platform of R172 million, a cost increase
to close out projects and the business in the Middle East (R130 million), a negative exchange rate movement of R244 million and a
once-off charge of R170 million for the agreement entered into between all listed construction companies and the South African
Government.
Capital expenditure for the six months was R371 million (December 2015: R190 million) of which R136 million
(December 2015: R86 million) was for replacement and R235 million (December 2015: R104 million) for expansion, mainly in the
Underground Mining platform, which is an encouraging sign of a possible recovery in the mining sector. The Group recorded cash net
of debt of R1,1 billion (December 2015: R1,0 billion).
The order book for continuing operations decreased to R24,5 billion (December 2015: R35,2 billion).
ORDER BOOK, NEAR ORDERS AND PROJECT PIPELINE
The Group’s order book and project pipeline is outlined below.
R billions Order book Near orders Category 1 Category 2 Category 3
Power & Water 5,8 0,3 3,1 10,3 18,9
Underground Mining 12,9 8,2 14,1 21,9 28,7
Oil & Gas 4,9 0,5 22,4 12,7 250,1
Middle East* 0,9 - - - -
Continuing Operations Totals 24,5 9,0 39,6 44,9 297,7
Discontinued Operations Totals 3,9 0,9 9,4 35,3 52,5
31 December 2016 Totals** 28,4 9,9 49,0 80,2 350,2
30 June 2016 Totals** 33,4 10,6 40,0 101,2 505,5
* Bombela not included in the current year order book (investment – not consolidated)
** Including continuing and discontinued operations
- Near orders: Tenders where the Group is the preferred bidder and final award is subject to financial/commercial close – there is more than a
95% chance that these orders will be secured.
- Category 1: Tenders the Group is currently working on (excluding Near orders) – projects developed by clients to the stage where firm bids are
being obtained – chance of being secured as firm orders a function of final client approval as well as bid strike rate.
- Category 2: Budgets, feasibilities and prequalification the Group is currently working on – project planning underway, not at a stage yet where
projects are ready for tender.
- Category 3: Opportunities which are being tracked and are expected to come to the market in the next 36 months – identified opportunities that
are likely to be implemented, but still in pre-feasibility stage.
DIVIDEND UPDATE
In terms of the Group’s dividend policy communicated at the release of the Group’s FY2015 results on 26 August 2015, the board of
directors of the Company (“Board”) will consider paying an annual dividend of between three and four times earnings cover.
OPERATIONAL REPORT#
OIL & GAS
Commissioning
& Corporate
R millions Engineering Construction Global Marine Brownfields and Other Total
December (Reviewed) 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Revenue 733 1 612 116 - 258 612 1 790 3 486 134 347 3 031 6 057
Operating
profit/(loss) 45 158 (23) - 22 (49) 229 353 (170) (187) 103 275
Margin (%) 6% 10% (20%) - 9% (8%) 13% 10% - - 3% 5%
Order Book 1 011 1 508 952 - 151 555 2 820 7 064 - - 4 934 9 127
Segment assets 2 540 4 206
Segment liabilities 1 677 3 130
LTIFR (Fatalities) 0.0(0) 0.30(0)
The Oil & Gas platform works with some of the largest energy and resources companies to engineer, construct, commission and maintain
a comprehensive range of infrastructure for energy, chemical, mining and mineral projects.
The most material factor impacting the Group’s profitability is the substantial decline in earnings from the Oil & Gas platform
following the significant drop in the oil price during the second half of calendar year 2014. Since then, few new capital projects
came to market and the large energy companies are still delaying or deferring expenditure to preserve cash. In Australasia the
decade long major investment in new Liquefied Natural Gas (“LNG”) projects came to an end and the platform will be very active in
the commissioning market for the next 12 to 18 months. Brownfields operations and maintenance opportunities are expected to be the
main source of earnings from this region until at least 2021.
Revenue reduced to R3 billion (December 2015: R6,1 billion) and operating profit to R103 million (December 2015: R275 million)
reflecting lower margins on a smaller revenue base. The order book decreased to R4,9 billion (December 2015: R9,1 billion) as all
large construction orders have been delivered and the order book now largely comprises smaller value and shorter duration orders.
The composition of earnings has changed over time and currently excludes large contributions from construction work, with income from
commissioning work dominating. The Wheatstone hook-up and commissioning project for Chevron was a major contributor to earnings
during the first six months of the year. The recently acquired businesses, Booth Welsh (Scotland) and CH-IV (USA) are small, but
profitable. The business is focusing on securing a prominent share of the commissioning and emerging Brownfields and asset support
market on LNG facilities in Australasia and new re-gas opportunities associated with the gas-to-power programme in Indonesia.
Meaningful earnings growth from this low base is expected only when global energy producers again start to invest in new projects,
which is envisaged to be in the short to medium term. The tendering department is very busy and a number of key prospects are
awaiting adjudication, as evident in the category 1 pipeline prospects. The first new major Greenfields opportunities are expected to
be in Papua New Guinea, as energy producers are progressing work associated with new LNG facilities, to be ready for production by
2022 and 2023.
UNDERGROUND MINING
R millions Africa Australasia The Americas Total
December (Reviewed) 2016 2015 2016 2015 2016 2015 2016 2015
Revenue 1 718 1 729 901 570 1 483 1 899 4 102 4 198
Operating profit 41 16 99 43 58 160 198 219
Margin (%) 2% 1% 11% 8% 4% 8% 5% 5%
Order Book 9 162 10 328 1 212 1 878 2 544 4 051 12 918 16 257
Segment assets 1 129 987 906 809 1 725 2 087 3 760 3 883
Segment liabilities 931 810 328 191 608 743 1 867 1 744
LTIFR (Fatalities) 1.09(0) 2.65(1) 0.92(0) 0.0(0) 2.83(0) 1.59(0) 1.31(0) 2.18(1)
The Underground Mining platform continues to perform well in a soft global commodities market. The platform’s geographic footprint is
extensive and its service offering spans the project lifecycle from specialist engineering, shaft construction, mine development,
other specialist mining services such as raise boring, to contract mining. Contract mining projects are being undertaken in all main
geographic regions, providing a more stable long-term baseload of work.
Revenues reduced marginally to R4,1 billion (December 2015: R4,2 billion) and operating profit to R198 million
(December 2015: R219 million). The order book was R12,9 billion (December 2015: R16,3 billion).
The Australian business is experiencing increased demand, although the businesses in the USA and Canada are under pressure as new
project awards are being delayed. The African business continued to achieve good results in Zambia. The tender validity on the
Kalagadi project was extended and the commencement date of the project is still uncertain.
There are significant tenders awaiting adjudication in South Africa, including the new Platreef mine and scope growth at Venetia and
Booysendal. There are few new major category 1 prospects in the Americas and Australia, although several smaller opportunities are
awaiting adjudication.
The platform is well positioned in the world’s main mining regions; Africa, Australasia and the Americas and is a contractor of
choice to blue chip clients. It is expected that the backlog in mining investments will support commodity prices in the medium term
and that new Greenfields projects will bolster the current Brownfields opportunities available in the market.
POWER & WATER
R millions Power Programme 2 Water & MEI3 Total
December (Reviewed) 2016 20151 2016 20151 2016 20151
Revenue 2 298 1 915 663 (24) 2 961 1 891
Operating profit/(loss) 126 116 (60) (144) 66 (28)
Margin (%) 5% 6% (9%) 600% 2% (1%)
Order Book 5 330 6 950 437 685 5 767 7 635
Segment assets 1 455 1 005 428 623 1 883 1 628
Segment liabilities 1 031 760 371 411 1 402 1 171
LTIFR (Fatalities) 0.68(0) 1.04(0) 0.44(0) 1.86(0) 1.05(0) 1.27(0)
1 Restated for discontinued operations.
2 Power programme contracts.
3 Includes Water and Mechanical, Electrical Instrumentation ("MEI").
The Power & Water platform’s service offering spans the full project lifecycle, from project development to engineering, procurement
and construction, with a focus on traditional mechanical, electrical and instrumentation services, as well as operations and
maintenance services.
The Medupi and Kusile power station projects remain the main source of income for this platform. The current scope of work on these
projects is expected to be largely completed by June 2018. Construction work post hydro-testing, albeit at a smaller scale, will
continue over a longer period. Maintenance opportunities will come to market thereafter. Although the projects are progressing well,
final commercial close out is likely to be complicated and challenging.
Revenues increased to R3 billion (December 2015: R1,9 billion) mainly from acceleration on Medupi and Kusile and an operating profit
of R66 million (December 2015: R28 million operating loss) was recorded. The order book decreased to R5,8 billion (December 2015:
R7,6 billion). The operating profit is net of a loss of R116 million on the Wet Flue Gas Desulphurisation project at Kusile. Claims
on this project are not sufficiently advanced and hence have not been accounted for in the current reporting period.
The prospects for new power projects in South Africa are positive, and the platform is well positioned for opportunities in the coal,
solar and future gas-to-power sectors. The announcement towards the end of the 2016 calendar year of two new IPP coal-fired power
stations (Khanyisa – 306MW and Thabametsi – 557MW), as well as the gas-to-power programme (LNG Power Producer Procurement Program:
Coega – 1 000MW, and Richards Bay – 2 000MW), present significant replacement work opportunity for Medupi and Kusile. This market
remains very competitive as more companies are targeting this sector. Near-term opportunities include the George Biomass project, as
well as the Duvha boiler rebuild for Eskom.
The platform also services complementary markets, such as the petrochemical sector. Construction and shutdown opportunities for Sasol
Limited at Secunda and Sasolburg are key focus areas. Efforts are continuing to establish a meaningful water business, with a focus
on desalination, innovative municipal wastewater treatment technologies, industrial modular water treatment plants and acid mine
drainage. A recently established partnership with RMB offers industrial users a water security and re-use solution at a predetermined
cost for treated water. The partnership will design, own, operate, maintain and fund the water plants and a keen interest has been
expressed by potential clients.
BOMBELA AND MIDDLE EAST ENTITIES
(Retained post the discontinuation of the Southern African Infrastructure & Building businesses)
R millions Bombela Investments Middle East Total
December (Reviewed) 2016 2015 2016 2015 2016 2015
Revenue 120 52 439 774 559 826
Operating profit/(loss) 171 15 (173) (43) (2) (28)
Margin (%) 143% 29% (39%) (6%) (0%) (3%)
Order Book - 72 906 2 069 906 2 141
Segment assets 2 120 2 244 1 770 3 353 3 890 5 597
Segment liabilities 1 712 1 466 1 556 2 927 3 268 4 393
LTIFR (Fatalities) 0.0(0) 0.53(1) 0.0(0) 0.0(0) 0.0(0) 0.22(1)
The Group’s Gautrain-related businesses include its investments in the Bombela Concession Company, Bombela Civils Joint Venture and
the Bombela Operating Company. The Bombela Concession Company continues to perform well and delivers great value.
All Gautrain development period claims have been settled with the Gauteng Provincial Government. This was an all-inclusive settlement
and the settlement value achieved supported the uncertified revenue previously taken against claims, net of the provision for
potential future Gautrain tunnel water ingress work. In terms of this agreement no further work is required to be undertaken in the
tunnel.
In the Middle East current projects are expected to be completed by December 2017 and no new projects are being pursued. Close-out of
the business in the Middle East continues to present major risk, as reflected by the loss incurred of R173 million in this first half
of the year.
DISCONTINUED OPERATIONS
Tolcon and
Construction Clough I & B Genrec
R millions Products(4) Properties Businesses Engineering Total
December (Reviewed) 2016 2015 2016 2015 2016 20151 2016 20151 2016 20151
Revenue - 6 6 - 2 411 2 149 135 195 2 552 2 350
Operating
profit/(loss) - 3 (2) - (139) 45 (23) (52) (164) (4)
Trading (loss)/profit
and other - (3) (2) - 37 45 (23) (52) 12 (10)
VRP settlement charge - - - - (170) - - - (170) -
IFRS 2 charge - - - - (6) - - - (6) -
Net profit on sale of
businesses - 6 - - - - - - - 6
Margin (%) - 50% (33%) - (6%) 2% (17%) (27%) (6%) 0%
Order Book - - - - 3 707 5 292 201 45 3 908 5 337
Net assets classified
as held-for-sale - - - - 314 - 185 - 499 -
LTIFR (Fatalities) 0.0(0) 0.0(0) 0.0(0) 0.0(0) 0.46(1) 0.0(0) 1.56(0) 0.0(0) 0.0(1) 0.0(0)
1 Restated for discontinued operations.
4 Includes Tolcon, Construction Products Africa and Steel Reinforcing Products.
The Southern African Infrastructure & Building businesses and Genrec were reclassified to discontinued operations as at
30 June 2016 and the comparative financial results have been restated. The R170 million net present value charge of participating
in the Voluntary Rebuild Programme between the listed construction companies and the South African Government, as previously
announced on the Stock Exchange News Service of the JSE Limited (“SENS”), was recorded under discontinued operations.
CORPORATE OFFICE
Direct Corporate Office costs in the Group have reduced from R256 million in 2011 to circa R130 million. The Corporate Office sets
the strategic direction and provides support to our local and international businesses.
STRATEGIC INITIATIVES
The Group accomplished three significant strategic initiatives in the first six months of the 2017 financial year:
Settlement of all Gautrain development period disputes – In November 2016, the Bombela Concession Company (on behalf of the Bombela
Civils Joint Venture of which Murray & Roberts is a 45% shareholder) and the Gauteng Provincial Government agreed to a comprehensive
settlement of all disputes relating to the development period (construction period) of the Gautrain Rapid Rail Link Project, bringing
an end to multi-year protracted legal processes. In terms of the agreement, the Gauteng Provincial Government paid an upfront amount
of R980 million and a further payment to be received over a two-year period of a capped amount of R294 million – these values are
inclusive of Value Added Tax and the Group’s share in the settlement value is 50 percent. This is a final settlement of all
construction-related disputes and in the best interest of all stakeholders.
Sale of the Southern African Infrastructure & Building businesses – On 1 November 2016, Murray & Roberts announced on SENS the
purchase of its Southern African Infrastructure & Building businesses by a consortium led by the Southern Palace Group of Companies
Proprietary Limited. The fully-funded transaction consideration is R314 million. The sale remains conditional, and Competition
Commission approval is the only material condition precedent still to be met. This transaction should be completed before the end of
the current financial year.
Voluntary Rebuild Programme agreement with the South African Government – In October 2016 Murray & Roberts, and six other South
African engineering and construction companies, reached an agreement with the South African Government, mitigating the companies’
risk to claims for damages from identified public entities, arising primarily from the fast track settlement process launched by the
South African Competition Authorities in February 2011.
HEALTH AND SAFETY
The Board deeply regrets the death of Ditebogo Phuduhudu (27), who sustained fatal injuries whilst on duty on the Infrastructure &
Building platform’s Noupoort Wind Farm Project in the Northern Cape.
The Group’s overall lost time injury frequency rate reduced to a record-low level of 0.56 (December 2015: 0.78). Our goal is zero
harm to our employees, service providers and communities where we operate. Good safety performance is not only a moral obligation but
also a differentiating factor for all our business platforms.
UPDATE ON THE GROUP’S CLAIMS PROCESSES
As at the end of December 2016, the Group’s uncertified revenue totalled R1 billion (December 2015: R2 billion), and is primarily
represented by the Group’s claims on projects in the Middle East. All claims are diligently pursued and stakeholders will be kept
informed as to their progress.
The arbitration regarding the Dubai International Airport claim is progressing with hearing dates scheduled for April to May 2017 and
October to November 2017. Subject to a change in hearing dates, an award is expected by February 2018.
GRAYSTON PEDESTRIAN BRIDGE TEMPORARY WORKS COLLAPSE – UPDATE
In November 2015, the Department of Labour instituted a Section 32 Inquiry (“the Inquiry”) into the incident to determine the cause
or causes for the collapse of the temporary works structure. This is a formal inquiry conducted under the provisions of the
Occupational Health and Safety Act, 1993. The Inquiry is due to resume on 27 March 2017.
Approval was obtained in January 2017 from the Department of Labour to commence construction over the M1 highway.
All costs incurred to date have been expensed. The direct financial impact of this incident on the Group is not expected to be
material considering its comprehensive insurance cover.
CHANGES TO THE BOARD
On 30 November 2016, Murray & Roberts announced on SENS that Cobus Bester has decided to retire after five and a half years as Group
Financial Director, but will continue in his current role until his successor is appointed, which is expected to be before June 2017.
Michael McMahon and Royden Vice retired from the Board effective from 30 September 2016 and 30 November 2016 respectively, having
reached the mandatory retirement age for Board members. The Group thanks Michael and Royden for their contribution to the Board since
2004 and 2005 respectively.
STRATEGIC DIRECTION
It is the Group’s vision to be a leading multinational group that applies its project lifecycle capabilities to optimise fixed
capital investment.
Post the sale of the Southern African Infrastructure & Building businesses and Genrec, the Group’s strategic direction is firmly
focused on selected global oil & gas, metals & minerals and power & water market sectors. The three key drivers supporting long-term
sustainable growth in these natural resources market sectors are: global economic growth, global population growth and continued
urbanisation.
The Company has received approval to transfer its sub-sector listing on the JSE from Heavy Construction to
Diversified Industrial. The Diversified Industrial sub-sector most closely describes the nature of the Company’s current businesses
and the change in sector will be effective from Monday, 20 March 2017.
PROSPECTS STATEMENT
The global markets in which the Group operates have been depressed for the last few years and the Board expects difficult trading
conditions to continue in the short to medium term. As shared in updates to the market in November and December 2016, the current
financial year is turning out to be even more challenging than the past year.
The natural resources market sectors are cyclical and the Group is well positioned for the upcycle. The outlook for metals and
minerals is improving and it is expected that the Underground Mining platform will in the short term benefit from new investment in
the mining sector. A recovery in the Oil & Gas platform will take longer as the LNG market is expected to remain well supplied until
2022.
The Group’s businesses are respected for their capabilities and services and all platforms continue to focus on operational
excellence, cost reduction and efficiency in order to trade through this difficult period.
The information on which this prospects statement is based has not been reviewed or reported on by the Group’s external auditors.
MARKET ACTIVITY IN MURRAY & ROBERTS’ ORDINARY SHARES
Shareholders are referred to the SENS announcement released by the Company on 22 February 2017, relating to the acquisition by ATM
Holding GmbH, Munich, a company registered in accordance with the laws of Germany, of a material beneficial interest in
Murray & Roberts.
On behalf of the directors:
Mahlape Sello Henry Laas Cobus Bester
Chairman of the Board Group Chief Executive Group Financial Director
Bedfordview
22 February 2017
^ The Southern African Infrastructure & Building businesses and Genrec were reclassified to discontinued operations as at
30 June 2016 and the comparative financial results have been restated.
# The operating performance information disclosed has been extracted from the Group’s operational reporting systems.
The Corporate & Properties segment is excluded from the operational analysis. Unless otherwise noted, all comparisons are to the
Group’s performance as at and for the six months ended 31 December 2015.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
for the six months ended 31 December 2016
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2016 20151 2016
Continuing operations
Revenue 10 653 12 972 26 148
Profit before interest, depreciation and amortisation 498 816 1 774
Depreciation (224) (211) (448)
Amortisation of intangible assets (22) (26) (51)
Profit before interest and taxation (note 2) 252 579 1 275
Net interest expense (27) (52) (71)
Profit before taxation 225 527 1 204
Taxation (112) (144) (298)
Profit after taxation 113 383 906
Income from equity accounted investments 6 6 8
Profit from continuing operations 119 389 914
Loss from discontinued operations (note 3) (179) (2) (124)
(Loss)/profit for the period (60) 387 790
Attributable to:
- Owners of Murray & Roberts Holdings Limited (60) 376 753
- Non-controlling interests* - 11 37
(60) 387 790
(Loss)/earnings per share from continuing and
discontinued operations (cents)
- Diluted (15) 91 182
- Basic (15) 94 189
Earnings per share from continuing operations (cents)
- Diluted 29 91 212
- Basic 30 95 220
Supplementary statement of financial performance information
Net asset value per share (Rands) 14 16 16
Dividends per share (cents) - - 45
Number of ordinary shares in issue ('000) 444 736 444 736 444 736
Reconciliation of weighted average number of shares
in issue ('000)
Weighted average number of ordinary shares in issue 444 736 444 736 444 736
Less: Weighted average number of shares held by
The Murray & Roberts Trust (30) (30) (30)
Less: Weighted average number of shares held by the
Letsema BBBEE trusts (31 697) (31 703) (31 711)
Less: Weighted average number of shares held by the
subsidiary companies (15 912) (14 826) (14 341)
Weighted average number of shares used for basic
per share calculation 397 097 398 177 398 654
Add: Dilutive adjustment 19 615 15 287 13 865
Weighted average number of shares used for diluted
per share calculation 416 712 413 464 412 519
Headline (loss)/earnings per share from continuing
and discontinued operations (cents) (note 4)
- Diluted (4) 86 153
- Basic (4) 89 158
Headline earnings per share from continuing
operations (cents) (note 4)
- Diluted 27 93 175
- Basic 28 96 181
1 Restated for discontinued operations.
*Amount is less than R1 million.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 December 2016
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2016 2015 2016
(Loss)/profit for the period (60) 387 790
Items that will not be reclassified subsequently to
profit or loss:
Effects of remeasurements on retirement benefit obligations - - (3)
Items that will be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations and realisation of reserve (423) 564 226
Total comprehensive (loss)/income for the period (483) 951 1 013
Attributable to:
- Owners of Murray & Roberts Holdings Limited (524) 939 975
- Non-controlling interests 41 12 38
(483) 951 1 013
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2016
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2016 2015 2016
ASSETS
Non-current assets 4 939 8 306 6 095
Property, plant and equipment 2 105 3 142 2 189
Investment property - 23 -
Goodwill (note 5) 607 698 642
Deferred taxation assets 540 649 604
Investments in associate companies 15 15 18
Investment in joint venture - 46 -
Amounts due from contract customers (note 6) 586 2 661 1 514
Other non-current assets 1 086 1 072 1 128
Current assets 8 792 11 175 9 535
Inventories 288 285 241
Trade and other receivables 1 209 1 557 1 490
Amounts due from contract customers (note 6) 5 118 6 298 4 965
Current taxation assets 9 120 26
Cash and cash equivalents 2 168 2 915 2 813
Assets classified as held-for-sale 2 190 79 2 335
TOTAL ASSETS 15 921 19 560 17 965
EQUITY AND LIABILITIES
Total equity 6 556 7 165 7 264
Attributable to owners of Murray & Roberts Holdings
Limited 6 414 7 128 7 201
Non-controlling interests 142 37 63
Non-current liabilities 1 258 3 060 1 117
Long-term liabilities5 697 1 436 650
Long-term provisions 157 145 187
Deferred taxation liabilities 183 245 179
Other non-current liabilities 221 1 234 101
Current liabilities 6 448 9 334 7 694
Amounts due to contract customers (note 6) 1 435 2 046 1 522
Accounts and other payables 4 647 6 767 5 723
Current taxation liabilities 14 30 60
Bank overdrafts5 64 140 76
Short-term loans5 288 351 313
Liabilities classified as held-for-sale 1 659 1 1 890
TOTAL EQUITY AND LIABILITIES 15 921 19 560 17 965
5 Interest bearing borrowings.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2016
Attributable
to owners of
Murray &
Roberts Non-
Stated Other Retained Holdings controlling Total
R millions capital reserves earnings Limited interests equity
Balance at 30 June 2015 (Audited) 2 586 1 343 2 569 6 498 25 6 523
Total comprehensive income for the period - 563 376 939 12 951
Treasury shares acquired (net) (92) - - (92) - (92)
Shares vested on employee share
incentive schemes 31 (31) - - - -
Reversal of previously
recognised share-based payment6 - (8) - (8) - (8)
Dividends declared and paid to owners of
Murray & Roberts Holdings Limited - - (209) (209) - (209)
Balance at 31 December 2015 (Reviewed) 2 525 1 867 2 736 7 128 37 7 165
Total comprehensive (loss)/income
for the period - (339) 375 36 26 62
Treasury shares disposed (net) 27 - - 27 - 27
Recognition of share-based payment - 44 - 44 - 44
Utilisation of share-based
payment reserve - (32) - (32) - (32)
Transfer to retained earnings - (2) 2 - - -
Dividends declared and paid7 - - (2) (2) - (2)
Balance at 30 June 2016 (Audited) 2 552 1 538 3 111 7 201 63 7 264
Total comprehensive
(loss)/income for the period - (464) (60) (524) 41 (483)
Treasury shares acquired (net) (14) - - (14) - (14)
Recognition of share-based payment - 26 - 26 - 26
Utilisation of share-based
payment reserve - (50) - (50) - (50)
Transfer from retained earnings - 2 (2) - - -
Realisation of non-controlling
interests - (24) (14) (38) 38 -
Dividends declared and paid to owners of
Murray & Roberts Holdings Limited - - (187) (187) - (187)
Balance at 31 December 2016 (Reviewed) 2 538 1 028 2 848 6 414 142 6 556
6 Specific non-market conditions have not been met in the current financial year resulting in a reversal.
7 Dividends relate to distributions made by entities that hold treasury shares.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 December 2016
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2016 2015 2016
Cash generated/(utilised) by operations 279 (50) 1 089
Interest received 52 29 77
Interest paid (79) (79) (148)
Taxation paid (111) (151) (256)
Operating cash flow 141 (251) 762
Dividends paid to owners of Murray & Roberts Holdings Limited (187) (209) (211)
Net cash (out)/in flow from operating activities (46) (460) 551
Acquisition of businesses - (22) (22)
Dividends received from joint ventures classified as
held-for-sale - 2 2
Dividends received from associate companies 9 18 18
Investment in joint venture classified as held-for-sale (1) - (24)
Purchase of intangible assets other than goodwill (11) (21) (62)
Purchase of property, plant and equipment (371) (190) (431)
-Replacements (136) (86) (99)
-Additions (235) (104) (332)
Proceeds on disposal of property, plant and equipment 23 78 160
Proceeds on disposal of intangible assets other than goodwill 14 - -
Proceeds on disposal of businesses - 13 15
Proceeds on disposal of assets held-for-sale 8 - -
Proceeds from realisation of investment 122 54 54
Cash related to assets held-for-sale (303) (2) (257)
Other (net) (1) (1) (3)
Net cash outflow from investing activities (511) (71) (550)
Movement in borrowings 233 137 (374)
Treasury shares acquired (net) (64) (92) (78)
Cash in/(out) flow from financing activities 169 45 (452)
Net decrease in cash and cash equivalents (388) (486) (451)
Net cash and cash equivalents at beginning of period 2 737 2 847 2 847
Effect of foreign exchange rates (245) 414 341
Net cash and cash equivalents at end of period 2 104 2 775 2 737
Net cash and cash equivalents comprises of:
Cash and cash equivalents 2 168 2 915 2 813
Bank overdrafts (64) (140) (76)
Net cash and cash equivalents at end of period 2 104 2 775 2 737
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
for the six months ended 31 December 2016
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2016 20151 2016
Revenue8
Bombela & Middle East 559 826 1 872
Power & Water 2 961 1 891 4 276
Underground Mining 4 102 4 198 8 788
Oil & Gas 3 031 6 057 11 212
Continuing operations 10 653 12 972 26 148
Discontinued operations 2 552 2 350 4 658
13 205 15 322 30 806
Continuing operations
Profit/(loss) before interest and taxation9
Bombela & Middle East (2) (28) 6
Power & Water 66 (28) 27
Underground Mining 198 219 506
Oil & Gas 103 275 525
Corporate & Properties (113) 141 211
Profit before interest and taxation 252 579 1 275
Net interest expense (27) (52) (71)
Profit before taxation 225 527 1 204
Discontinued operations
Loss before interest and taxation8 (164) (4) (118)
Net interest income - 2 -
Loss before taxation (164) (2) (118)
1 Restated for discontinued operations.
8 Revenue is disclosed net of inter-segmental revenue. Inter-segmental revenue for the Group is R39 million
(2015: R18 million and June 2016: R98 million).
9 The chief operating decision maker utilises profit before interest and taxation in the assessment of a segment’s performance.
SEGMENTAL ASSETS (CONTINUING AND DISCONTINUED)
at 31 December 2016
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2016 2015 2016
Bombela & Middle East 3 890 5 597 5 454
Power & Water 1 883 1 628 1 702
Construction Products Africa 11 41 19
Underground Mining 3 760 3 883 3 631
Oil & Gas 2 540 4 206 2 919
Corporate & Properties 1 120 521 797
13 204 15 876 14 522
Reconciliation of segmental assets
Total assets 15 921 19 560 17 965
Deferred taxation assets (540) (649) (604)
Current taxation assets (9) (120) (26)
Cash and cash equivalents (2 168) (2 915) (2 813)
13 204 15 876 14 522
SEGMENTAL LIABILITIES (CONTINUING AND DISCONTINUED)
at 31 December 2016
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2016 2015 2016
Bombela & Middle East 3 268 4 393 4 195
Power & Water 1 402 1 171 1 346
Construction Products Africa - 15 2
Underground Mining 1 867 1 744 1 873
Oil & Gas 1 677 3 130 2 072
Corporate & Properties 890 1 527 898
9 104 11 980 10 386
Reconciliation of segmental liabilities
Total liabilities 9 365 12 395 10 701
Deferred taxation liabilities (183) (245) (179)
Current taxation liabilities (14) (30) (60)
Bank overdrafts (64) (140) (76)
9 104 11 980 10 386
NOTES
1. BASIS OF PREPARATION
The Group operates in the oil & gas, mining, engineering and construction 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 interim financial statements for the period ended 31 December 2016 have been prepared in accordance with
International Financial Reporting Standard (IAS) 34, Interim Financial Reporting, the SAICA Financial Reporting Guides, as issued by
the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and the
requirements of the Companies Act of South Africa. The condensed consolidated financial information was compiled under the
supervision of AJ Bester (CA)SA, Group Financial Director.
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 consolidated financial statements for the year ended 30 June 2016. There have been no new
Standards and Interpretations applied in the current financial period.
The review has been conducted in accordance with International Standards on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor, Deloitte & Touche and their unmodified review report is available for inspection at
the Company’s registered office. Any reference to future financial performance included in this announcement has not been reviewed or
reported on by the Group’s external auditors. The auditor’s report does not necessarily report on all of the information contained in
this announcement/financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of
the auditor’s engagement they should obtain a copy of the auditor’s report together with the accompanying financial information from
the registered office.
The information presented in the notes below represents audited results for 30 June 2016 and reviewed results for 31 December 2016
and 31 December 2015.
2. PROFIT BEFORE INTEREST AND TAXATION
R millions 31 December 2016 31 December 20151 30 June 2016
Items by nature
Cost of sales (9 392) (11 845) (23 199)
Distribution and marketing expenses (2) (3) (9)
Administration expenses (1 257) (1 118) (2 461)
Other operating income 250 573 796
(10 401) (12 393) (24 873)
1 Restated for discontinued operations.
3. LOSS FROM DISCONTINUED OPERATIONS
The Board has taken the decision that the Southern African operations within the Infrastructure & Building platform and the
Genrec operations within the Power & Water platform are no longer part of the strategic future of the Group. These operations have
met the requirements in terms of IFRS 5: Non-current Assets Held for Sale and Discontinued Operations and have been presented as
discontinued operations in the Group's statement of financial performance, including the restatement of prior year comparatives as
required by the accounting standards. All assets and liabilities related to the sales have been transferred to held-for-sale in the
statement of financial position.
3.1 Loss from discontinued operations
R millions 31 December 2016 31 December 20151 30 June 2016
Revenue 2 552 2 350 4 658
(Loss)/profit before interest, depreciation and
amortisation (162) 57 (8)
Depreciation and amortisation (2) (61) (110)
Loss before interest and taxation (note 3.2) (164) (4) (118)
Net interest income - 2 -
Loss before taxation (164) (2) (118)
Taxation expense (14) - (16)
Loss after taxation (178) (2) (134)
(Loss)/income from equity accounted investments (1) - 10
Loss from discontinued operations (179) (2) (124)
Attributable to:
- Owners of Murray & Roberts Holdings Limited (179) (2) (124)
- Non-controlling interests - - -
(179) (2) (124)
3.2 Loss before interest and taxation
Loss before interest and taxation includes the following
significant items:
Profit on disposal of businesses
(net of transaction and other costs) - 6 6
Fair value adjustment on disposal group held-for-sale - - (44)
Fair value loss on assets and liabilities held-for-sale (79) - -
Voluntary Rebuild Programme charge (170) - -
Impairment of property, plant and equipment (net) - - (36)
3.3 Cash flows from discontinued operations include
the following:
Cash flow from operating activities 199 (180) (71)
Cash flow from investing activities (20) 61 (121)
Cash flow from financing activities 32 (66) 25
Net increase/(decrease) in cash and cash equivalents 211 (185) (167)
4. RECONCILIATION OF HEADLINE EARNINGS
R millions 31 December 2016 31 December 20151 30 June 2016
Profit attributable to owners of
Murray & Roberts Holdings Limited (60) 376 753
Profit on disposal of businesses (net) - (6) (6)
Profit on disposal of assets (net) (18) (54) (63)
Impairment of assets (net) - 46 49
Reversal on impairment of property, plant and
equipment (net) (1) - -
Fair value adjustment on disposal group classified
as held-for-sale - - 44
Fair value adjustments and net loss on disposal of
assets held-for-sale 79 - 26
Fair value adjustments on investment property - (3) (5)
Fair value adjustments on investment property
(equity accounted investments) - - (13)
Realisation of foreign currency translation reserve - - (223)
Taxation effects on adjustments (17) (3) 69
Headline earnings (17) 356 631
Adjustments for discontinued operations:
Loss from discontinued operations 179 2 124
Profit on disposal of businesses (net) - 6 6
Profit on disposal of property, plant and equipment
classified as held-for-sale (net) 10 48 57
Fair value adjustment on disposal group classified
as held-for-sale - - (44)
Fair value adjustments and net loss on disposal of
assets held-for-sale (79) - (26)
Fair value adjustments on investment property - 3 5
Fair value adjustments on investment property
(equity accounted investments) - - 13
Impairment of property, plant and equipment (net) - (36) (36)
Taxation effects on adjustments 19 5 (7)
Headline earnings from continuing operations 112 384 723
1 Restated for discontinued operations.
5. GOODWILL
R millions 31 December 2016 31 December 2015 30 June 2016
At the beginning of the year 642 636 636
Additions through business combinations - 21 21
Foreign exchange movements (35) 41 29
Transfer to assets classified as held-for-sale - - (44)
607 698 642
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
Based on the assessment performed as at 31 December 2016, no impairment was recorded.
6. CONTRACTS-IN-PROGRESS AND CONTRACT RECEIVABLES
R millions 31 December 2016 31 December 2015 30 June 2016
Contracts-in-progress (cost incurred plus
recognised profits, less recognised losses) 2 184 3 194 1 943
Uncertified claims and variations (recognised in
terms of IAS 11: Construction Contracts) 945 2 090 2 020
Amounts receivable on contracts (net of impairment
provisions) 2 215 3 307 2 241
Retentions receivable (net of impairment provisions) 360 368 275
5 704 8 959 6 479
Amounts received in excess of work completed (1 435) (2 046) (1 522)
4 269 6 913 4 957
Disclosed as:
Amounts due from contract customers- non-current10 586 2 661 1 514
Amounts due from contract customers- current 5 118 6 298 4 965
Amounts due to contract customers- current (1 435) (2 046) (1 522)
4 269 6 913 4 957
10 The non-current amounts are considered by management to be recoverable.
7. FINANCIAL INSTRUMENTS
The Group's financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments,
derivatives, accounts receivable and payable and interest bearing borrowings.
R millions 31 December 2016 31 December 2015 30 June 2016
Categories of financial instruments
Financial assets
Financial assets designated as fair value through
profit or loss (level 3) 806 718 811
Loans and receivables 6 105 7 842 6 720
Available-for-sale financial assets carried at fair
value (level 1) - - -
Financial liabilities
Loans and payables 5 563 9 379 6 447
Derivative financial instruments (level 2)11 - - -
11 The derivative financial instruments' value has been determined by using forward-looking market rates until the realisation
date of the relevant instruments obtained from the relevant financial institutions.
7.1 Financial assets designated as fair value
through profit or loss
Investment in infrastructure service concession
(level 3)12
At the beginning of the year 811 709 709
Realisation of investment (122) (54) (54)
Fair value adjustment recognised in the statement
of financial performance 117 63 156
806 718 811
12 The fair value of the Bombela Concession Company Proprietary Limited is calculated using discounted cash flow models and a
market discount rate of 18,5% (2015: 18,5%). The discounted cash flow models are based on forecast patronage, operating costs,
inflation and other economic fundamentals, taking into consideration the operating conditions experienced in the current financial
year. The future profits from the concession are governed by a contractual agreement and are principally based on inflationary
increases in the patronage revenue and operating costs of the current financial year. Revenue based on patronage is underpinned by
the Gauteng Province. The Patronage Guarantee is the difference between the Minimum Required Total Revenue and the Actual Total
Revenue in each month. A decrease of 1% in the discount rate would result in an increase in the value of the concession investment
of approximately R34 million.
8. CONTINGENT LIABILITIES
Contingent liabilities relate 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.
R millions 31 December 2016 31 December 2015 30 June 2016
Operating lease commitments 1 463 1 913 1 703
Contingent liabilities 2 034 2 226 2 734
Financial institution guarantees 6 410 9 286 8 199
Grayston Pedestrian Bridge Temporary Works Collapse
In November 2015, the Department of Labour instituted a Section 32 Inquiry ("the Inquiry") into the incident to determine the cause
or causes for the collapse of the temporary works structure. This is a formal inquiry conducted under the provisions of the
Occupational Health and Safety Act, 1993. The Inquiry is due to resume on 27 March 2017.
All costs incurred to date have been expensed. The direct financial impact of this incident on the Group is not expected to be
material considering its comprehensive insurance cover.
Gautrain Water Ingress Dispute
During November 2013, in the dispute between Gauteng Province ("Province") and Bombela Concession Company ("BCC"), the arbitration
panel ruled in favour of Province. The Group raised a provision in the 2014 financial year for its share of potential construction
costs to be incurred by the Bombela Civils Joint Venture ("BCJV") (Murray & Roberts has a 45% shareholding). The dispute related to the
specifications not met by BCJV in the tunnel between Park and Rosebank stations.
In November 2016, BCC (on behalf of BCJV) and Province agreed to a comprehensive settlement of all disputes relating to the
development period (construction period) of the Gautrain Rapid Rail Link Project, bringing an end to multi-year protracted legal
processes. Due to the extended time, significant costs and uncertain outcomes involved in these legal processes, both parties
agreed to conclude an amicable settlement of all development period disputes. In terms of the agreement, Province agreed to pay an
upfront amount of R980 million and a further payment over a two-year period of a capped amount of R294 million - these values are
inclusive of Value Added Tax and the Group's share in the settlement value is 50 percent. This is a final settlement of all
construction-related disputes and in the best interest of all stakeholders.
The settlement includes the following disputes:
- Sandton Station cavern;
- John Vorster and Jean Avenues cantilever bridges in Centurion;
- Delay and Disruption; and
- Water Ingress in the tunnel section between Park Station and Emergency shaft E2.
SANRAL Claims
SANRAL served summons on Murray & Roberts Limited during April 2016 for alleged additional cost and damages incurred given collusive
conduct in the period 2005 to 2006 on four road contracts. An amount of R591 million was included in contingent liabilities at June 2016.
Following the signing of the Voluntary Rebuild Programme ("VRP") in October 2016, SANRAL has withdrawn its claims of R591 million.
9. DIVIDEND
A gross annual dividend, relating to the 30 June 2016 financial year, of 45 cents per share was declared in August 2016 and paid
during the period.
In line with the approved dividend policy communicated at the release of the Group’s FY2015 results on 26 August 2015, the Board will
only consider paying an annual dividend.
10. RELATED PARTY TRANSACTIONS
There have been no significant changes to the nature of related party transactions since 30 June 2016 or any transactions outside
the normal course of business.
11. EVENTS AFTER REPORTING DATE
The directors are not aware of any matter or circumstance arising after the period ended 31 December 2016, not otherwise dealt with
in the Group's interim results, which significantly affects the financial position at 31 December 2016 or the results of its
operations or cash flows for the period then ended.
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
Directors:
M Sello* (Chairman) HJ Laas (Managing and Chief Executive)
DD Barber* AJ Bester R Havenstein* SP Kana* NB Langa-Royds* XH Mkhwanazi* KW Spence1*
Secretary:
L Kok
1Australian *Independent non-executive
Disclaimer: This announcement includes certain various "forward-looking statements" within the meaning of Section 27A of the US
Securities Act 10 1933 and Section 21E 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 Group's strategy;
the economic outlook for the industry; and the Group's 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 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. 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 Group's website, nor any website accessible by hyperlinks on the Group's website is incorporated in, or forms
part of, this announcement.
Date: 22/02/2017 03:53:00 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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