Over the last four years, Murray & Roberts (M&R), the former civil and building construction company, has transformed itself into one of the most attractive rand hedge companies on the JSE.
All M&R earnings come from places like America, Canada, Australia, South Korea and Zambia. M&R does not trade as a company, but it delivers various projects through 100% owned companies.
And those companies have a M&R CEO and CFO to deal with pushing the project forward and keeping an eye on cash spent. Meanwhile the M&R board are watching their projects closely and no doubt their share price.
The company produced profits of R284 million, but that allows for loss of income from businesses now sold.
M&R profits for the current year are depressed by company closures and losses in the Middle East and the company is now forecasting a significant upturn for the future.
credit: Graph Provided by Sharenet Advanced Online Charts
The key management from all of these subsidiaries regularly meet the directors of M&R’s main board to keep them briefed on progress.
So M&R is not a trading company, but does have a fully functional board to scrutinise the development of projects and its cash objectives.
There is now a brilliant setup where projects can be watched closely by the resident M&R top management, while the main board in Johannesburg sit and watch the dividends flow in. On those dividends, the main board then determines the dividend paid to M&R shareholders.
It’s a great system and should serve M&R well in the years to come. But here’s another eye-opener about M&R. It recently announced that the company would spend R250m of its R1.8 billion mountain of cash to buy back M&R shares. They will be kept as treasury shares and used when needed.
Analysts love listed companies that think their company’s shares are so cheap that they buy them back. It also creates a relatively tight market in the shares concerned, which is normally good for the price.
More good news from the M&R media executive Ed Jardim: “We believe the commodity cycle has turned, as prices are improving and we are seeing the demand in our new and near orders.”
Typical of the new M&R investment philosophy is its recent intention to increase its 33% in the Gautrain concessionaire, the Bombela Concession Company, to 50%. A deal has been agreed in principle, but needs to be formally approved by the Gauteng provincial government.
Jeremy Woods trained for three years as a journalist on the Herts Advertiser, St Albans, in the U.K. Once qualified, he left England to work as a crime reporter on the Vancouver Sun in Canada. After three years, he worked for the Los Angeles Times as a trainee financial journalist, spending most of his time reading company accounts and finding publishable stories in them. He moved to South Africa and for the last five years in journalism worked for the Sunday Times, Business Times, as Investment Editor. He has also published a financial thriller called “Special Payments”, which was a best-seller on publication, and optioned three times for a film.