Wrap Text
Reviewed interim results for the six months ended 31 December 2018
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")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018
SALIENT FEATURES
Revenue from continuing operations decreased by 17% to R9,8 billion
(FY2018 H1: R11,8 billion)
Diluted continuing HEPS decreased by 2% to 54 cents
(FY2018 H1: 55 cents)
Attributable earnings increased by 69% to R186 million
(FY2018 H1: R110 million)
Cash, net of debt, decreased to R1,0 billion
(FY2018 H1: R1,3 billion; FY2018: R2,0 billion)
Order book for continuing operations increased to R31,7 billion
(FY2018 H1: R22,1 billion; FY2018: R30,1 billion)
- Lower contributions from Oil & Gas and Power & Water platforms, partly offset by strong
Underground Mining performance. Underground Mining platform order book increased to
R25,7 billion (FY2018 H1: R15,3 billion).
- Strong balance sheet and cash position.
- Lost time injury frequency rate ("LTIFR") improved to 0.63 (FY2018 H1: 1.19). No fatal injuries occurred.
- Independent Board maintains its view that a fair value price range for control is between ZAR20.00 and
ZAR22.00 per ordinary share.
STAKEHOLDER REPORT - SIX MONTHS TO DECEMBER 2018#
The Group has been transformed from being a predominantly South African civil and building contractor, to
a multinational engineering and construction Group focused on the natural resources market sectors.
The Group's three business platforms (Underground Mining, Oil & Gas and Power & Water) provide portfolio
diversification. Core market segments and selected complementary market segments are of strategic importance
to each of the three platforms, as these segments collectively mitigate the impact of market cyclicality.
Strategic flexibility - accelerating the Group's acquisitive growth
Considering current expectations and changing conditions for the Group's target market sectors, organic growth
has to be supplemented by acquisitive growth. Since the start of the second half of the financial year, the
Group concluded an acquisition in each of the Oil & Gas and Power & Water platforms respectively:
Oil & Gas - acquired a USA-based engineering, procurement and construction ("EPC") business from Saulsbury
Industries. This is a strong organisation, staffed by experienced people with full EPC capability for
projects up to US$500 million. Although a small acquisition, valued at US$5,2 million, it is strategically
significant. This acquisition of an oil and gas EPC contractor based in Houston, gives the platform the
ability to deliver projects into a strongly growing market in the USA.
Power & Water - acquired South Africa-based Optipower for a purchase consideration of R37 million. This acquisition
takes the platform firmly into the transmission, distribution and substation sectors of the power market. Eskom requires
extensive transmission work in South Africa, with 300km of 400KV overhead line currently out on enquiry. Several other
transmission opportunities are being actively pursued in sub-Saharan Africa - specifically Mozambique, Kenya, Ghana,
Angola and Uganda.
Independent Board update on the Mandatory Offer by ATON GmbH ("ATON")
Implementation of ATON's mandatory offer ("Mandatory Offer") to acquire up to 100% of the issued ordinary shares of
Murray & Roberts, not already owned by ATON, remains subject to certain suspensive conditions, specifically receipt
of the required regulatory approvals in relevant jurisdictions. Conditional merger approval was obtained in Zambia
and unconditional approval in Namibia, whilst merger approval is still under consideration by the relevant authorities
in South Africa and Canada.
The long-stop date for the Mandatory Offer is 31 March 2019, a date which may be extended by ATON. In the event of
ATON announcing that the Mandatory Offer has become unconditional in all respects prior to the long-stop date,
Murray & Roberts' shareholders will have 10 business days from the date of such announcement to accept the Mandatory
Offer, should they choose to accept the offer. In the event that the Mandatory Offer does not become unconditional
prior to the long-stop date and ATON elect not to extend the long-stop date, the Mandatory Offer will terminate in
accordance with its terms.
Shareholders are reminded that ATON's cash offer price of ZAR17.00 per Murray & Roberts' ordinary share remains below
the view of the independent board ("Independent Board") that a fair value price range for control of Murray & Roberts
is between ZAR20.00 and ZAR22.00 per ordinary share. The Independent Board has refreshed its valuation of the Group,
taking into account the latest market developments, and maintains its view that a fair value price range for control
is between ZAR20.00 and ZAR22.00 per ordinary share.
The Independent Board accepts responsibility for the information contained in this update and certifies that, to the
best of the knowledge and belief of its members, the information contained in this announcement is true and nothing has
been omitted which is likely to affect the importance of the information.
The Independent Board will continue to update shareholders on all relevant matters pertaining to the Mandatory Offer.
FINANCIAL REPORT
Financial Results
Revenue from continuing operations decreased by 17% to R9,8 billion (FY2018 H1: R11,8 billion) and attributable earnings
increased by 69% to R186 million (FY2018 H1: R110 million). Diluted continuing headline earnings per share ("HEPS")
decreased by 2% to 54 cents (FY2018 H1: 55 cents). Cash, net of debt, decreased to R1,0 billion (FY2018 H1: R1,3 billion;
FY2018: R2,0 billion).
Capital expenditure for the six months under review was R357 million (FY2018 H1: R178 million), predominantly in the
Underground Mining platform, of which R340 million (FY2018 H1: R151 million) was for expansion and R17 million (FY2018
H1: R27 million) for replacement.
The order book for continuing operations increased to R31,7 billion (FY2018 H1: R22,1 billion; FY2018: R30,1 billion).
The effective taxation rate of 38% (FY2018 H1: 38%) is high, in the main due to withholding tax in foreign jurisdictions,
profits earned in high tax rate jurisdictions, losses incurred in low tax jurisdictions and tax losses not applied.
Dividend Update
In terms of the Group's dividend policy, the board of directors of the Company ("Board") will consider a full-year
dividend post year-end.
OPERATIONAL REPORT
Order Book, Near Orders and Project Pipeline
The Group's order book is of a high quality. Significant growth has been recorded in the Underground Mining platform
order book. The lower order book in the Oil & Gas and Power & Water platforms is reflective of current market conditions.
Based on near orders, a substantial increase in the Oil & Gas platform is expected during FY2019 H2.
Pipeline
R billions Order book Near orders Category 1 Category 2 Category 3
Oil & Gas 4,4 14,2 33,2 73,0 298,7
Underground Mining 25,7 8,1 20,5 31,3 22,0
Power & Water 1,6 - 4,2 9,3 26,3
31 December 2018 totals 31,7 22,3 57,9 113,6 347,0
30 June 2018 totals 30,1 7,9 63,8 125,9 417,4
- 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 submitted or 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 projects a
function of final client approval as well as bid win probability.
- 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 market in the next 36 months -
identified opportunities that are likely to be implemented, but still in pre-feasibility stage.
Oil & Gas Platform
Commissioning Corporate
R millions Engineering Construction Global Marine & Maintenance & Other Total
December 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
Revenue 430 536 1 049 118 - - 1 667 3 963 210 76 3 356 4 693
Operating profit/(loss) 23 48 (40) (44) (9) (21) 281 293 (255) (177) - 99
Margin(%) 5% 9% (4%) (37%) - - 17% 7% - - - 2%
Order book 507 283 2 747 992 - - 1 122 2 540 - - 4 376 3 815
Segment assets 2 525 2 656
Segment liabilities 2 019 2 411
LTIFR (fatalities) 0.24(0) 0.30(0)
Revenue decreased to R3,4 billion (FY2018 H1: R4,7 billion). In a competitive market with high pressure on margins,
the platform recorded a break-even in earnings before interest and tax for FY2019 H1 (FY2018 H1: R99 million operating
profit). The order book increased to R4,4 billion (FY2018 H1: R3,8 billion).
Large oil and gas projects under execution by this platform will be completed in FY2019 H2. The current financial year
has been characterised by the delay in the award of new projects. Tenders for several of these projects are expected to
be adjudicated mid to-late calendar 2019. This set of circumstances is expected to have a considerable negative impact
on FY2019 revenue and earnings of this platform.
New opportunities in the Liquefied Natural Gas ("LNG") market in Australia remain limited, although globally, new
supply capacity must be developed to meet LNG forecast demand as from 2021/22. The platform is targeting potential LNG
projects in the USA, Canada, Mozambique and Papua New Guinea.
Target opportunities are being pursued in complementary growth markets, such as the metal & minerals and
infrastructure sectors in Australia, in which this platform has experience and capability.
Recently, the Clough-Salini joint venture was selected as the preferred tenderer for the civil work packages on the
multi-billion dollar Snowy 2.0 project in Australia. Clough has a 35% share in the joint venture. Formal award of this
project is expected during FY2019 H2. The platform also secured the AU$130 million BHP Billiton Ore Handling Plant project
in Australia. The project scope includes structural, mechanical, piping, electrical and instrumentation work, as well as
interconnecting conveyors and transfer stations. These two projects are expected to contribute towards earnings in
FY2020.
Underground Mining Platform
R millions Africa Australasia The Americas Total
December 2018 2017 2018 2017 2018 2017 2018 2017
Revenue 1 340 1 874 1 378 926 2 231 1 325 4 949 4 125
Operating profit 107 101 77 70 162 68 346 239
Margin(%) 8% 5% 6% 8% 7% 5% 7% 6%
Order book 12 177 9 307 4 627 2 694 8 866 3 287 25 670 15 288
Segment assets 835 1 101 1 423 977 2 523 1 572 4 781 3 650
Segment liabilities 883 999 740 331 1 079 433 2 702 1 763
LTIFR (fatalities) 2.14(0) 2.47(0) 0.00(0) 3.29(1) 0.00(0) 1.89(0) 1.08(0) 2.51(1)
This global business is performing extremely well and continues to experience increasing demand for its services.
Commodity prices in general have increased and there is a positive change in sentiment towards investment in the
industry. Revenue and operating profit increased to R4,9 billion (FY2018 H1: R4,1 billion) and R346 million
(FY2018 H1: R239 million) respectively. The platform order book increased to R25,7 billion (FY2018 H1:
R15,3 billion), with project awards across all jurisdictions.
The platform is engaged in projects in Australia, Indonesia, Mongolia, the USA, Canada, Mexico, South Africa and Zambia.
Current projects include 18 vertical shaft sinking and equipping projects, 21 decline shaft and mine development projects,
8 contract mining projects and 13 support and construction services projects. The platform also has 37 raise drilling machines
deployed in various locations across the globe.
Its global reach, broad range of services and reputation for safe and successful project delivery, has positioned the
platform favourably to capitalise on the underground mining market's large project investment pipeline. It is expected
that the platform will continue to make a significant contribution to Group earnings.
Power & Water Platform
Electrical & Corporate
R millions Power1 Water Oil & Gas Instrumentation & Other Total
December 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
Revenue 1 143 2 358 14 26 231 178 20 81 - - 1 408 2 643
Operating profit/(loss) 131 150 1 7 (79) (19) 5 11 (55) (98) 3 51
Margin(%) 11% 6% 7% 27% (34%) (11%) 25% 14% - - - 2%
Order book 968 2 387 - - 21 287 4 23 592 - 1 585 2 697
Segment assets 775 1 438
Segment liabilities 873 1 039
LTIFR (fatalities) 0.24(0) 0.40(0)
1 All power sector projects, including Power Programme (Medupi & Kusile).
Revenue, operating profit and order book decreased to R1,4 billion (FY2018 H1: R2,6 billion), R3 million (FY2018 H1:
R51 million) and R1,6 billion (FY2018 H1: R2,7 billion) respectively. The platform has one loss making project which will
be completed in FY2019.
The platform's scope of work on the Medupi power station has been completed and its work on the Kusile power station
will continue into FY2020. For several years platform earnings were underpinned by the contribution from these two
projects. The lack of meaningful work to replace Medupi and Kusile will result in reduced platform revenue and earnings.
The Baseload Coal Independent Power Producer Procurement Programme in South Africa continues to be delayed. As a
result, the platform is targeting opportunities in other sectors of the power market, such as power plant repair and
maintenance work in South Africa, as well as high voltage transmission infrastructure projects in South Africa and
sub-Saharan Africa. Several tenders have been submitted, although adjudication is not expected imminently.
Investment in the local water sector continues to be limited and fragmented, notwithstanding increasing pressure to
upgrade dysfunctional municipal wastewater treatment plants.
Two projects were recently secured in complementary markets, at a combined value of R600 million; work on a sulphur
dioxide abatement facility for Anglo Platinum and the erection of a recovery boiler for Sappi. These were two of the
larger project opportunities available, which is indicative of current market conditions.
Investments
The Group's investment in the Bombela Concession Company yielded earnings of R114 million (FY2018 H1: R139 million).
FY2018 H1 included a one-off fair value gain of R25 million following an amendment in the operating company fee
structure, which resulted in a reduction in the fee payable to the operator.
BOMBELA & MIDDLE EAST
Bombela
R millions Investments Middle East Total
December 2018 2017 2018 2017 2018 2017
Revenue - - 66 347 66 347
Operating profit/(loss) 114 139 11 (67) 125 72
Margin(%) - - 17% (19%) 189% 21%
Order book - - 46 267 46 267
Segment assets 1 295 1 376 1 206 1 577 2 501 2 953
Segment liabilities 361 32 1 295 1 367 1 656 1 399
Middle East Business
In FY2016 the Board decided to close the business in the Middle East. Due to exchange rate movements, this business
recorded a half-year marginal operating profit of R11 million (FY2018 H1: R67 million operating loss). Takeover
certificates for the final four projects now completed should be received by end-April 2019. The Dubai Airport
arbitration panel is expected to make its award by 31 March 2019.
Discontinued Operations
I&B Businesses Clough Genrec
R millions & Other2 Properties Engineering Total
December 2018 2017 2018 2017 2018 2017 2018 2017
Revenue - 145 - 3 45 189 45 337
Operating loss (24) (43) (1) (1) (12) (90) (37) (134)
2 Includes Construction Products Africa.
Discontinued Operations
The operating loss from discontinued operations for the six months was R37 million (FY2018 H1: R134 million).
HEALTH AND SAFETY
The Group's LTIFR remains industry leading at 0.63 (FY2018 H1: 1.19). No fatal injuries occurred. We remain firm in
the belief that Zero Harm is possible, notwithstanding the risk conditions in which projects are being built.
NEW REVENUE RECOGNITION STANDARD - IFRS 15
Uncertified revenue decreased to R650 million (FY2018: R1,3 billion). This reduction includes an adjustment
following the implementation of the new revenue recognition standard, IFRS 15. In terms of IFRS 15, revenue can only
be recognised to the extent that it is "highly probable" that a significant reversal will not occur in future. This
new standard increases the threshold for revenue recognition, as the previous threshold was "probable". The total
adjustment to uncertified revenue and revenue previously recognised, reflected as an adjustment to equity, came to
R1,1 billion. The Group remains confident that all uncertified revenue and revenue previously recorded as such, will
be recognised once attendant commercial matters have been settled.
GRAYSTON TEMPORARY WORKS COLLAPSE - UPDATE
The Department of Labour instituted a Section 32 Inquiry ("Inquiry") in November 2015 into this incident to determine
the cause or causes of the collapse of the temporary works structure. The Inquiry has been concluded and it is expected
that the presiding officer will submit his report to the National Director of Public Prosecution, by April 2019.
PROSPECTS STATEMENT
The Underground Mining platform is operating in a buoyant market and is well positioned to achieve strong growth over
the next few years. The Oil & Gas and Power & Water platforms continue to face challenging market conditions, with
low levels of client investment and new projects experiencing delays and deferrals. Globally, the oil and gas market
is showing definite signs of recovery. Opportunities are being pursued in selected complementary market segments,
which mitigates the impact of down cycles in core market segments.
The Group is committed to drive sustainable growth and remains confident that its growth plans over the medium term
are achievable, factoring in the constraints of current market dynamics.
Any forward-looking information contained in this announcement has not been reviewed and reported on by the Group's
external auditors.
On behalf of the directors:
Suresh Kana Henry Laas Dani?l Grobler
Chairman of the Board Group Chief Executive Group Financial Director
Bedfordview
6 March 2019
Registered office: Registrar:
Douglas Roberts Centre, Link Market Services South Africa
22 Skeen Boulevard, Proprietary Limited
Bedfordview 2007 13th Floor, Rennie House,
19 Ameshoff Street, Braamfontein, 2001
PO Box 1000 PO Box 4844
Bedfordview 2008 Johannesburg 2000
Sponsor
The Standard Bank of South Africa Limited
Directors
SP Kana* (Chairman) HJ Laas (Managing & Chief Executive) DF Grobler R Havenstein* NB Langa-Royds* AK Maditsi*
E Mashilwane* XH Mkhwanazi* DC Radley* KW Spence^*
Secretary
L Kok
^ Australian
* Independent non-executive
# The operating performance information disclosed has been extracted from the Group's operational reporting systems.
The Corporate & Properties segment has been excluded from the operational narrative. Unless otherwise noted, all
comparisons are to the Group's performance as at and for the six months ended 31 December 2017.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
for the six months ended 31 December 2018
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2018 2017 2018
Continuing operations
Revenue 9 782 11 809 21 847
- Continuing operations excluding Middle East 9 716 11 462 21 379
- Middle East 66 347 468
Profit before interest, depreciation and amortisation 600 589 1 331
Depreciation (204) (218) (429)
Amortisation of intangible assets (20) (22) (38)
Profit before interest and taxation (note 2) 376 349 864
- Continuing operations excluding Middle East 365 416 898
- Middle East 11 (67) (34)
Net interest expense (8) (17) (41)
Profit before taxation 368 332 823
Taxation (140) (126) (298)
Profit after taxation 228 206 525
(Loss)/income from equity accounted investments (1) 15 21
Profit from continuing operations 227 221 546
Loss from discontinued operations (note 3) (39) (114) (278)
Profit for the period 188 107 268
Attributable to:
- Owners of Murray & Roberts Holdings Limited 186 110 267
- Non-controlling interests 2 (3) 1
188 107 268
Earnings per share from continuing and discontinued operations (cents)
- Diluted 46 27 66
- Basic 47 28 67
Earnings per share from continuing operations (cents)
- Diluted 55 55 134
- Basic 57 56 137
Supplementary information
Net asset value per share (Rands) 13 14 15
Dividends per share (cents) - - 50
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 - (10) (5)
Less: Weighted average number of shares held by the Letsema BBBEE trusts (31 696) (31 696) (31 696)
Less: Weighted average number of shares held by the subsidiary companies (15 386) (15 988) (14 893)
Weighted average number of shares used for basic per share calculation 397 654 397 042 398 142
Add: Dilutive adjustment 8 053 7 026 7 803
Weighted average number of shares used for diluted per share calculation 405 707 404 068 405 945
Earnings per share from continuing operations (cents)
- Diluted 55 55 134
- Adjusted diluted earnings per share excluding Middle East 52 72 142
- Diluted earnings per share contributed by Middle East 3 (17) (8)
- Basic 57 56 137
- Adjusted basic earnings per share excluding Middle East 54 74 145
- Basic earnings per share contributed by Middle East 3 (18) (8)
Headline earnings per share from continuing and discontinued
operations (cents) (note 4)
- Diluted 45 28 46
- Basic 46 28 47
Headline earnings per share from continuing operations (cents) (note 4)
- Diluted 54 55 112
- Adjusted diluted headline earnings per share excluding 51 72 120
Middle East
- Diluted headline earnings per share contributed by Middle East 3 (17) (8)
- Basic 56 56 114
- Adjusted basic headline earnings per share excluding Middle East 53 74 122
- Basic headline earnings per share contributed by Middle East 3 (18) (8)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 December 2018
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2018 2017 2018
Profit for the period 188 107 268
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 gains/(losses) on translating foreign operations
and realisation of reserve 14 (160) 96
Total comprehensive income/(loss) for the period 202 (53) 367
Attributable to:
- Owners of Murray & Roberts Holdings Limited 199 (50) 363
- Non-controlling interests 3 (3) 4
202 (53) 367
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2018
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2018 2017 2018
ASSETS
Non-current assets 5 049 5 168 5 253
Property, plant and equipment 2 139 1 877 1 996
Investment property - 19 -
Goodwill (note 5) 617 601 616
Deferred taxation assets 315 538 385
Investments in associate companies 3 23 3
Investment in joint venture 71 73 72
Amounts due from contract customers (note 6) 345 513 568
Other non-current assets 1 559 1 524 1 613
Current assets 8 545 8 770 8 982
Inventories 345 318 279
Trade and other receivables 1 147 939 1 076
Amounts due from contract customers (note 6) 4 791 5 223 5 089
Current taxation assets 22 26 74
Cash and cash equivalents 2 240 2 264 2 464
Assets classified as held for sale 51 351 51
TOTAL ASSETS 13 645 14 289 14 286
EQUITY AND LIABILITIES
Total equity 5 615 6 310 6 744
Attributable to owners of Murray & Roberts Holdings Limited 5 588 6 269 6 696
Non-controlling interests 27 41 48
Non-current liabilities 848 548 505
Long-term liabilities3 526 191 147
Long-term provisions 113 132 126
Deferred taxation liabilities 71 68 75
Other non-current liabilities 138 157 157
Current liabilities 7 182 7 313 7 037
Amounts due to contract customers (note 6) 1 782 1 625 1 527
Trade and other payables 4 684 4 882 5 102
Current taxation liabilities 39 58 63
Bank overdrafts3 102 523 111
Short-term liabilities3 575 225 234
Liabilities classified as held for sale - 118 -
TOTAL EQUITY AND LIABILITIES 13 645 14 289 14 286
3 Interest-bearing borrowings.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2018
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 2017 (Audited) 2 566 997 2 978 6 541 64 6 605
Total comprehensive
(loss)/income for the period - (160) 110 (50) (3) (53)
Treasury shares disposed (net) 10 - - 10 - 10
Recognition of share-based payment - 10 - 10 - 10
Utilisation of share-based
payment reserve - (48) - (48) - (48)
Dividends declared and paid - - (194) (194) - (194)
Repayment of equity loans
from non-controlling interests - - - - (20) (20)
Balance at 31 December 2017
(Reviewed) 2 576 799 2 894 6 269 41 6 310
Total comprehensive income
for the period - 256 157 413 7 420
Treasury shares disposed (net) 15 - - 15 - 15
Recognition of share-based payment - 12 - 12 - 12
Utilisation of share-based
payment reserve - (7) - (7) - (7)
Transfer to retained earnings - (1) 1 - - -
Dividends declared and paid - - (6) (6) - (6)
Balance at 30 June 2018 (Audited) 2 591 1 059 3 046 6 696 48 6 744
Impact of IFRS 9 adjustment - - (9) (9) - (9)
Impact of IFRS 15 adjustment - - (1 072) (1 072) (24) (1 096)
Balance at 1 July 2018 (Restated) 2 591 1 059 1 965 5 615 24 5 639
Total comprehensive income
for the period - 13 186 199 3 202
Treasury shares disposed (net) 2 - - 2 - 2
Recognition of share-based payment - 14 - 14 - 14
Utilisation of share-based
payment reserve - (31) - (31) - (31)
Dividends declared and paid - - (211) (211) - (211)
Balance at 31 December 2018
(Reviewed) 2 593 1 055 1 940 5 588 27 5 615
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 December 2018
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2018 2017 2018
Cash (utilised from)/generated by operations (422) 400 934
Interest received 41 31 66
Interest paid (51) (50) (112)
Taxation paid (43) (106) (174)
Operating cash flow (475) 275 714
Dividends paid (211) (194) (200)
Net cash (outflow)/inflow from operating activities (686) 81 514
Dividends received from associate companies - - 20
Purchase of intangible assets other than goodwill (28) (6) (13)
Purchase of property, plant and equipment by
entities classified as held for sale - (1) (1)
Purchase of property, plant and equipment (128) (82) (311)
- Replacements (17) (27) (78)
- Expansions (340) (151) (358)
- Capitalised finance leases raised (non-cash) 229 96 125
Proceeds on disposal of property, plant and equipment 20 76 116
Net inflow on disposal of business - - 40
Proceeds on disposal of investment in associate - - 87
Cash related to assets held for sale - (26) 2
Proceeds from realisation of investment 153 106 220
Purchase of additional investment - (357) (357)
Net realisation of other investments 1 - (1)
Other (net) 1 (2) (2)
Net cash inflow/(outflow) from investing activities 19 (292) (200)
Net movement in borrowings (note 8) 484 (163) (217)
Net acquisition of treasury shares (29) (37) (29)
Net cash inflow/(outflow) from financing activities 455 (200) (246)
Total (decrease)/increase in net cash and cash equivalents (212) (411) 68
Net cash and cash equivalents at beginning of period 2 353 2 253 2 253
Effect of foreign exchange rates (3) (101) 32
Net cash and cash equivalents at end of period 2 138 1 741 2 353
Net cash and cash equivalents comprises:
Cash and cash equivalents 2 240 2 264 2 464
Bank overdrafts (102) (523) (111)
Net cash and cash equivalents at end of period 2 138 1 741 2 353
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
for the six months ended 31 December 2018
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2018 2017 2018
Revenue4
Bombela & Middle East 66 347 468
Power & Water 1 408 2 643 4 829
Underground Mining 4 949 4 125 8 004
Oil & Gas 3 356 4 693 8 542
Corporate & Properties 3 1 4
Continuing operations 9 782 11 809 21 847
Discontinued operations 45 337 525
9 827 12 146 22 372
Continuing operations
Profit/(loss) before interest and taxation5
Bombela & Middle East 125 72 243
Power & Water 3 51 134
Underground Mining 346 239 471
Oil & Gas - 99 209
Corporate & Properties (98) (112) (193)
Profit before interest and taxation 376 349 864
Net interest expense (8) (17) (41)
Profit before taxation 368 332 823
Discontinued operations
Loss before interest and taxation5 (37) (134) (273)
Net interest expense (2) (2) (5)
Loss before taxation (39) (136) (278)
4 Revenue is disclosed net of inter-segmental revenue. Inter-segmental revenue for the Group is
R104 million (FY2018 H1: R70 million).
5 The chief operating decision maker utilises profit/(loss) before interest and taxation in the
assessment of a segment's performance.
SEGMENTAL ASSETS (CONTINUING & DISCONTINUED)
at 31 December 2018
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2018 2017 2018
Bombela & Middle East 2 501 2 953 3 061
Power & Water 775 1 438 1 292
Underground Mining 4 781 3 650 3 757
Oil & Gas 2 525 2 656 2 808
Corporate & Properties6 378 237 324
Continuing operations 10 960 10 934 11 242
Discontinued operations7 108 527 121
11 068 11 461 11 363
Reconciliation of segmental assets
Total assets 13 645 14 289 14 286
Deferred taxation assets (315) (538) (385)
Current taxation assets (22) (26) (74)
Cash and cash equivalents (2 240) (2 264) (2 464)
11 068 11 461 11 363
SEGMENTAL LIABILITIES (CONTINUING & DISCONTINUED)
at 31 December 2018
Reviewed Reviewed Audited
6 months to 6 months to Annual
31 December 31 December 30 June
R millions 2018 2017 2018
Bombela & Middle East 1 656 1 399 1 326
Power & Water 873 1 039 956
Underground Mining 2 702 1 763 1 995
Oil & Gas 2 019 2 411 2 334
Corporate & Properties6 355 381 460
Continuing operations 7 605 6 993 7 071
Discontinued operations7 213 337 222
7 818 7 330 7 293
Reconciliation of segmental liabilities
Total liabilities 8 030 7 979 7 542
Deferred taxation liabilities (71) (68) (75)
Current taxation liabilities (39) (58) (63)
Bank overdrafts (102) (523) (111)
7 818 7 330 7 293
6 Corporate segmental assets and liabilities include the inter-segment eliminations of group
balances and transactions.
7 Discontinued operations includes the close out of retained assets and liabilities, following
the sale of Genrec operations and the Southern African Infrastructure & Building businesses
in prior financial years.
NOTES
1. BASIS OF PREPARATION
The Group operates in the mining, oil & gas and power & water markets 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 2018 have been
prepared in accordance with and contain the information required by International Financial Reporting
Standard (IAS) 34: Interim Financial Reporting, the SAICA Financial Reporting Guides, as issued by the
Accounting Practices Committee and the Financial Pronouncements as issued by the 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 DF Grobler (CA)SA, Group financial director.
The accounting policies used in the preparation of these results are in accordance with International
Financial Reporting Standards (IFRS) and are consistent in all material respects with those used in the
audited consolidated financial statements for the year ended 30 June 2018. IFRS 9 (Financial Instruments)
and IFRS 15 (Revenue from Contracts with Customers) have been implemented in the current financial year,
refer to note 9 for further details.
The independent auditor's 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 2018 and reviewed results
for 31 December 2017 and 31 December 2018.
2. PROFIT BEFORE INTEREST AND TAXATION
31 December 31 December 30 June
R millions 2018 2017 2018
Items by function
Cost of sales (8 685) (10 695) (19 597)
Distribution and marketing expenses (3) (3) (13)
Administration costs (1 004) (990) (1 984)
Other operating income 286 228 611
3. LOSS FROM DISCONTINUED OPERATIONS
Discontinued operations includes the close out of retained assets and liabilities, following the sale of Genrec
operations and the Southern African Infrastructure & Building businesses in prior financial years. These operations
met the requirements in terms of IFRS 5 Discontinued Operations and have been presented as discontinued operations
in the Group's statement of financial performance.
3.1 LOSS FROM DISCONTINUED OPERATIONS
31 December 31 December 30 June
R millions 2018 2017 2018
Revenue 45 337 525
Loss before interest, depreciation and amortisation (37) (134) (273)
Depreciation and amortisation - - -
Loss before interest and taxation (note 3.2) (37) (134) (273)
Net interest expense (2) (2) (5)
Loss before taxation (39) (136) (278)
Taxation credit - 22 -
Loss after taxation (39) (114) (278)
Income from equity accounted investments - - -
Loss from discontinued operations (39) (114) (278)
Attributable to:
- Owners of Murray & Roberts Holdings Limited (39) (114) (278)
- Non-controlling interests - - -
(39) (114) (278)
3.2 LOSS BEFORE INTEREST AND TAXATION
31 December 31 December 30 June
R millions 2018 2017 2018
Loss before interest and taxation includes the
following significant items:
Fair value adjustment on disposal group - (8) (13)
held for sale
3.3 CASH FLOWS FROM DISCONTINUED OPERATIONS INCLUDE THE FOLLOWING:
31 December 31 December 30 June
R millions 2018 2017 2018
Cash flow from operating activities (27) (67) (172)
Cash flow from investing activities - (27) 40
Cash flow from financing activities - 49 (2)
Net decrease in cash and cash equivalents (27) (45) (134)
4. RECONCILIATION OF HEADLINE EARNINGS
31 December 31 December 30 June
R millions 2018 2017 2018
Profit attributable to owners of Murray & Roberts
Holdings Limited 186 110 267
Profit on disposal of property, plant and
equipment (net) (5) (2) (13)
Profit on disposal of investment in associate - - (80)
Reversal of impairment of property, plant and
equipment (net) - (2) (2)
Fair value adjustment on disposal group - 8 13
held for sale
Taxation effects on adjustments 1 (1) 3
Headline earnings 182 113 188
Adjustments for discontinued operations:
Loss from discontinued operations 39 114 278
Fair value adjustment on disposal group
held for sale - (8) (13)
Taxation effects on adjustments - 2 -
Headline earnings from continuing operations 221 221 453
5. GOODWILL
31 December 31 December 30 June
R millions 2018 2017 2018
At beginning of year 616 607 607
Foreign exchange movements 1 (6) 9
617 601 616
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 2018, no impairment was recorded.
6. CONTRACTS-IN-PROGRESS AND CONTRACT RECEIVABLES
31 December 31 December 30 June
R millions 2018 2017 2018
Contracts-in-progress (cost incurred plus recognised profits,
less recognised losses) 1 439 2 082 1 796
Uncertified claims and variations less payments received on
account of R298 million (FY2018: R288 million) 650 1 026 1 292
Amounts receivable on contracts (net of impairment provisions) 2 751 2 372 2 386
Retentions receivable (net of impairment provisions) 296 256 183
5 136 5 736 5 657
Amounts received in excess of work completed (1 782) (1 625) (1 527)
3 354 4 111 4 130
Disclosed as:
Amounts due from contract customers - non-current8 345 513 568
Amounts due from contract customers - current 4 791 5 223 5 089
Amounts due to contract customers - current (1 782) (1 625) (1 527)
3 354 4 111 4 130
8 The non-current amount is 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, accounts receivable and payable and interest-bearing borrowings.
31 December 31 December 30 June
R millions 2018 2017 2018
Categories of financial instruments
Financial assets
Financial assets designated as fair value through
profit or loss (level 3) 1 270 1 283 1 308
Amortised cost9 6 389 5 803 6 094
Financial liabilities
Amortised cost10 5 202 5 196 4 746
9 Measurement category under the current IFRS 9. Prior period amount reflects loans and receivables
as per IAS 39. Measurement basis has not changed.
10 Measurement category under the current IFRS 9. Prior period amount reflects loans and payables as
per IAS 39. Measurement basis has not changed.
7.1 FINANCIAL ASSETS DESIGNATED AS FAIR VALUE THROUGH PROFIT OR LOSS
31 December 31 December 30 June
R millions 2018 2017 2018
Investment in infrastructure service concession
(level 3)11
At beginning of year 1 308 893 893
Additions - 357 357
Realisation of investment (153) (106) (220)
Fair value adjustment recognised in the statement of
financial performance 115 139 278
1 270 1 283 1 308
11 The Bombela Concession Company (RF) Proprietary Limited ("BCC") is reflected at fair value through
profit or loss, as the investment meets the requirement of IAS 28.18 with regards to venture capital
organisations or similar entities. There has been no change to the classification or measurement
basis of the investment upon adoption of IFRS 9.
The fair value of BCC is calculated using discounted cash flow models and a market discount rate of 18.5%
(FY2018: 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 period.
In the prior year a one-off fair value gain of R50 million (FY2018 H1:R25 million) was recognised following
an amendment in the operating company fee structure which resulted in a reduction in the fees payable to the
operator. The reduction in the operator fee payable is a cost input in the fair value model and therefore
resulted in an increase in fair value of the investment.
Operating cost includes an operating fee that is payable to the Bombela Operating Company (Pty) Ltd
("BOC"), the company responsible for the operation and maintenance of Gautrain. The fee payable to BOC
is subject to annual inflationary increases. The contract is subject to review every 5th year where
increases of more than inflation are considered. An annual operating fee increase of 1% above inflation
will result in a decrease in the value of the concession investment of approximately R9,0 million
(FY2018: R9,0 million).
Operating cost also includes a Railway Usage Fee ("RUF") which constitutes a fee for the use of the
system owned by Gauteng Province. The fee is 50% of the concessionaires excess free cash flow above
an 18% real rate of return. The fee reduces to 35% should the concessionaire comply with certain Socio
Economic Development ("SED") obligations. Historically the SED obligations have been achieved and the
valuation is based on the SED obligations being achieved. If these obligations are not achieved, then
the result would be a decrease in the value of the concession investment of R301 million
(FY2018: R301 million).
Revenue based on patronage is underpinned by the Gauteng Province. The Patronage Guarantee is the
difference between the Minimum Required Total Revenue ("MRTR") and the Actual Total Revenue ("ATR") in
each month. Due to the predictable nature of revenue it is not considered to be a significant unobservable
input and therefore no quantitative information is provided.
A decrease of 1% in the discount rate would result in an increase in the value of the concession investment
of approximately R46,2 million (FY2018: R46,2 million).
The above investment is included in other non-current assets on the condensed consolidated statement of
financial position.
8. NET MOVEMENT IN BORROWINGS
31 December 31 December 30 June
R millions 2018 2017 2018
Loans raised 595 7 59
Loans repaid (40) (59) (109)
555 (52) (50)
Capitalised leases repaid (71) (111) (167)
484 (163) (217)
9. CONTINGENT LIABILITIES
The Group is from time to time involved in various disputes, claims and legal proceedings arising in the
ordinary course of business. The Group does not account for any potential contingent liabilities where a
back-to-back arrangement exists with the clients or subcontractors and there is a legal right to offset
(R2,4 billion). The Board does not believe that adverse decisions in any pending proceeding or claims
against the Group will have a material adverse effect on the financial condition or future of the Group.
31 December 31 December 30 June
R millions 2018 2017 2018
Operating lease commitments 1 173 1 159 1 215
Contingent liabilities 2 691 2 210 2 297
Financial institution and Murray & Roberts
guarantees granted to third parties 6 640 6 203 6 222
Update on the Group's claim processes
Uncertified revenue as at the end of the financial period decreased to R0,7 billion (FY2018: R1,3 billion)
largely due to the implementation of IFRS 15. It consists mainly of claims on projects in the Power &
Water platform and the Middle East.
Grayston Temporary Works Collapse - Update
The Department of Labour instituted a Section 32 Inquiry ("Inquiry") in November 2015 into this incident
to determine the cause or causes of the collapse of the temporary works structure. The Inquiry has been
concluded and it is expected that the presiding officer will submit his report to the National Director
of Public Prosecution, by April 2019.
10. IMPLEMENTATION OF IFRS 15 (REVENUE FROM CONTRACTS WITH CUSTOMERS) AND IFRS 9 (FINANCIAL INSTRUMENTS)
On 1 July 2018 the Group implemented IFRS 15 and IFRS 9, as these standards are applicable to financial
years commencing on or after 1 January 2018.
The Group decided to apply the modified retrospective approach to transition from existing IASs to IFRS 15
and IFRS 9.
Therefore comparatives were not restated. The cumulative effect of initially applying IFRS 15 and IFRS 9 was an
adjustment to the opening balance of retained earnings at the date of initial application, being 1 July 2018.
Due to the fact that the modified retrospective approach has been applied for both IFRS 15 and IFRS 9, there is
no resultant impact on IAS 33 (Earnings per Share).
10.1 IMPLEMENTATION OF IFRS 15 (REVENUE FROM CONTRACTS WITH CUSTOMERS)
IAS 11 (Construction Contracts) stated that contract revenue shall comprise variations in contract work,
claims and incentive payments to the extent that it is probable that they will result in revenue.
IFRS 15:56 states that variable consideration should only be included in the transaction price, when
recognising revenue, to the extent that it is highly probable that a significant reversal will not occur
when the uncertainty associated with the variable consideration is subsequently resolved.
IFRS 5 defines "highly probable" as "significantly more likely than probable", where "probable" means
"more likely than not" (IFRS 5: Appendix A).
Due to the higher threshold required for recognition and measurement purposes, IFRS 15 will result in the
delayed recognition of variable consideration until such time that it is highly probable that the revenue
will not be reversed when the uncertainty is resolved.
The cumulative effect of initially applying IFRS 15 was concluded at an amount of R1,1 billion at
1 July 2018. The IFRS 15 adjustment relates mainly to amounts in the Power & Water platform and the Middle
East. The Group remains confident that all uncertified revenue and revenue previously recorded as such, will
be recognised once attendant commercial matters have been settled.
R millions
Impact of adoption:
Retained earnings impact:
Retained earnings at 30 June 2018 (Audited) 3 046
IFRS 15 adjustment (1 072)
Retained earnings - before IFRS 9 adjustment 1 974
Total assets impact:
Non-current assets impact:
Amounts due from contract customers at 1 July 2018 568
IFRS 15 adjustment (239)
Restated amounts due from contract customers at 1 July 2018 329
Current assets impact:
Amounts due from contract customers at 1 July 2018 5 089
IFRS 15 adjustment (857)
Restated amounts due from contract customers at 1 July 2018 4 232
10.2 IMPLEMENTATION OF IFRS 9 (FINANCIAL INSTRUMENTS)
The impairment requirements under IFRS 9 are based on an expected credit loss ("ECL") model that replaces
the IAS 39 incurred loss model.
The cumulative effect of initially applying the ECL model to assess impairments of receivables in IFRS 9
was concluded at an amount of R9 million.
R millions
Impact of adoption:
Retained earnings impact:
Retained earnings - before IFRS 9 adjustment, after IFRS 15 adjustment 1 974
IFRS 9 adjustment (9)
Restated retained earnings 1 July 2018 - IFRS 15 and IFRS 9 1 965
The condensed consolidated statement of financial position impact of the above IFRS 9 adjustment of
R9 million is reflected under trade and other receivables.
Adoption of IFRS 9 has resulted in a change in measurement categories of financial instruments. For
change in relevant measurement categories applied, refer to note 7.
11. DIVIDEND
A gross annual dividend, relating to the 30 June 2018 financial year, of 50 cents per share was declared in
August 2018 and paid during the period. In line with the approved dividend policy, the board of directors will
only consider paying an annual dividend.
12. RELATED PARTY TRANSACTIONS
There have been no significant changes to the nature of related party transactions since 30 June 2018 or any
transactions outside the normal course of business.
13. EVENTS AFTER REPORTING DATE
The directors are not aware of any matter or circumstance arising after the period ended 31 December 2018, not
otherwise dealt with in the Group's interim results, which significantly affects the financial position as at
31 December 2018 or the results of its operations or cash flows for the period then ended.
DISCLAIMER
This announcement includes certain various "forward-looking statements" within the meaning of Section 27A of the
US Securities Act 10 1933 and Section 21 E 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.
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