Murray & Roberts cleans the slate
23 February 2011
South Africa's second largest construction and engineering group has effectively reset itself as the construction industry deals with one of its deepest recessions in recent times. An exceptional charge of R795 million has been recognised in its half-year accounts to 31 December 2010.
In addition, the company has recorded a loss of R326 million in respect of various assets which have either been closed or are held for disposal. This has resulted in a loss for the half-year of R636 million.
This follows a cautionary statement issued on 28 January 2011 wherein the company informed shareholders that it expected to impair its balance sheet in respect of revenues previously recognised on various major projects. The claims resolution processes on these major projects were reported as being slow and arduous.
Murray & Roberts has also announced that chief executive Brian Bruce and financial director Roger Rees will retire at the end of the current financial year, after 11 years at the helm. The company's executive succession plan is well advanced and a new leadership team is expected to be appointed before this time.
"Although this is a disappointing result for the half-year," says Brian Bruce, "the company has taken what action it deems appropriate to clean the slate in the context of current difficult market conditions in Middle East and South Africa." He adds "While the outcome of various arbitration proceedings relating to a range of complex claims on major projects is uncertain, the possibility exists of a material recovery in the future which at this stage is not confidently quantifiable."
"Murray & Roberts has a healthy order book of R50 billion, which is 20% up in the past six months." says Bruce. "While increases are recorded in Cementation Group and Clough, it is pleasing that all other operations have stabilised."
The future prospects of Murray & Roberts are underpinned by a project pipeline containing 239 opportunities conservatively valued at R59 billion. The company has informed the market that is has invested in the development of its strategy to re-engage the growing potential of new opportunity in Rest of Africa that it believes will flow from development of the continents resources and infrastructure markets.
"Despite this performance setback, Murray & Roberts remains a resilient and strong contractor with the world class capabilities needed to support the delivery of its order book into the future, to access the best opportunities in its current and new markets and to deliver on its commitment to sustainable earning growth and value creation," says Bruce.