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MURRAY & ROBERTS ANNOUNCES FULL YEAR FINANCIAL RESULTS
Johannesburg, 11 September 2024 – Murray & Roberts today announced its annual results for the year ended 30 June 2024.
SALIENT FEATURES
· Revenue from continuing operations R13,5 billion (FY2023: R12,5 billion)
· Earnings before interest and tax from continuing operations R170 million (FY2023: R91 million)
· Attributable loss of R138 million (FY2023: R3 181 million loss, after losing control of MRPL and its subsidiaries in Australia)
· Diluted continuing headline loss per share 24 cents (FY2023: 71 cents loss)
· Order book of R17,2 billion (FY2023: R15,4 billion)
· Near orders of R10 billion (FY2023: R9,1 billion)
· Net cash of R0,4 billion, including advance payments and working capital improvements (FY2023: R0,3 billion net debt)
FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2024
Notwithstanding an improved financial performance in its core operations, the impact of the voluntary administration of the Group’s Australian businesses in December 2022 flowed through into FY2024, the most notable being the challenge of servicing corporate debt in South Africa without dividend flows from the Australian operations.
Rightsizing the Group’s cost and management structures
We navigated extreme liquidity constraints at a corporate level, and considerable effort went into rightsizing our cost structures towards creating financial stability. We redesigned the Group’s operating model and management structure, and appropriately reduced overhead costs across the Group, including in the corporate office. The business platform operating model was discontinued as it was no longer appropriate in a truncated Group, thereby removing a layer of executive management and associated costs. The redesigned structure incorporates four operating companies, each under the leadership of a managing director reporting directly to the Group CEO who are also members of the Group’s executive committee.
Besides the direct cost savings from this rightsizing, the Group entered into a new lease agreement for its office in Johannesburg, with effect from September 2024. The Company now occupies only 50% of the floor space previously rented, which has given rise to a 33% saving in the annual lease cost. It is expected that a saving in corporate costs of circa R80 million to R100 million per annum, when compared to FY2023, will be realised from FY2025.
Implementation of the Group’s deleveraging plan
Immediately after the loss of Clough and RUC in Australia, which were both strong cash contributors, the Group was left with a highly geared balance sheet and high cost structures in South Africa, relative to the reduced size of the Group.
The board of directors of the Company (“the Board”) agreed to a deleveraging plan with the Group’s consortium of South African banks (“Banking Consortium”), which entailed several measures to repay all debt due to the Banking Consortium, which peaked at approximately R2 billion in April 2023. Interventions included the disposal of the Group’s stake in the Bombela Concession Company in April 2023, the sale of Aarden Solar, a non-core asset in the renewables sector, settlement of long outstanding commercial matters on some of the larger projects and receipt of a special dividend from the cash-strong mining business in the Americas. Our international operations generate most of the Group’s cash and this imbalance between South African debt and international cash is being addressed as part of the deleveraging plan. Through the implementation of the deleveraging plan, debt with the Banking Consortium reduced to R409 million as at 30 June 2024.
The Board has further resolved to commence a process of disposing of non-core assets to meet the Group’s obligations to its Banking Consortium. These assets have been independently valued and significantly exceeds the outstanding debt. If required, shareholder approval will be sought at the appropriate time.
The Board remains committed to refinance its South African debt to the Banking Consortium and negotiations with potential funders are continuing. Should the refinancing be successful, it will obviate the need for the disposal of assets.
Financial Results
The Group delivered an improved financial performance for FY2024, not only for continuing operations, but also at an attributable earnings level, with the prior year’s result reflective of the losses associated with the loss and deconsolidation of the businesses in Australia. The Group moved from a net debt position to a net cash position and grew earnings whilst experiencing liquidity pressure in South Africa. The year’s financial result was impacted by a loss incurred in OptiPower, largely resulting from liquidity constraints giving rise to delays in procurement and project progress.
Revenue and earnings before interest and tax for continuing operations increased to R13,5 billion (FY2023: R12,5 billion) and R170 million (FY2023: R91 million) respectively. The Group significantly reduced its attributable loss to R138 million (FY2023: R3 181 million loss) and recorded a reduced diluted continuing headline loss per share of 21 cents (FY2023: 71 cents), with the prior year loss inclusive of the financial impact of the Group having lost control of Murray & Roberts (Pty) Ltd (“MRPL”) and its subsidiaries, Clough and RUC, all in Australia.
Net cash was R0,4 billion (FY2023: R0,3 billion net debt), and includes advance payments and working capital improvements of circa R475 million, which are expected to unwind during the first half of the new financial year.
Net interest for the reporting period decreased to R130 million (FY2023: R267 million) and the tax charge was R124 million (FY2023: R106 million).
Net asset value per share is R3,50 (FY2023: R4,07).
The Group’s gearing level, expressed as total debt to equity, was 81% (FY2023: 83%). Although the balance sheet is still under pressure, it does not present a barrier for the Group to successfully respond to tenders and to secure new work as the Group aspires to price its tenders on a cash positive basis, supported by advance payments when required. The Group grew its order book, indicative of the quality of its operations and enduring trust of its clients.
DIVIDEND
The Board considers a dividend on an annual basis post year end. The Board resolved not to declare a dividend this year, as it is committed to growing shareholder equity and reducing debt.
ORDER BOOK, NEAR ORDERS AND PROJECT PIPELINE
The Group reported an order book of R17,2 billion (FY2023: R15,4 billion). The Mining businesses represent R16,7 billion (FY2023: R13,6 billion) of the Group’s total order book, and OptiPower R0,5 billion (FY2023: R1,8 billion). Mining holds R7,9 billion and OptiPower R2,1 billion in near orders, presenting good prospects for the Group’s order book.
OPERATIONAL REPORT
Mining Platform
The Group’s Mining brands in Africa and the Americas are highly regarded. The mining businesses enjoy trusted client relationships and reputations for excellence, with quality order books and strong project pipelines.
Revenue increased to R11,8 billion (FY2023: 11,1 billion) and operating profit increased to R448 million (FY2023: R313 million). The order book increased to R16,7 billion (FY2023: R13,6 billion) and near orders came to R7,9 billion (FY2023: R9,1 billion). Category 1 opportunities amounted to R30,1 billion (FY2023: R19,9 billion). Planned mining revenue for FY2025 is 62% secured by orders. The mining business delivered an operating margin of 4%.
Cementation Americas increased its order book, mainly by securing a large project in Mexico, a region forming part of the business in the United States. This project is one of the few greenfield projects currently available in this market. Securing additional scopes of work from clients on existing projects is key to achieving the business’ revenue growth ambitions for FY2025. Mexico and Canada will provide good earnings opportunities in the coming years, while the business rebuilds its order book in the United States. All projects in this business are performing well.
TNT’s recent project award in Chile has been a welcome win, considering the business had to rebuild its order book after the impact of COVID, as limited materials handling opportunities came to market during that period. Prospects are improving, with new opportunities emerging on copper and gold projects in Chile, the United States and Argentina. All projects in this business are performing to expectation.
Cementation Asia-Pacific (“APAC”), based in Perth, was established recently and the office is serving as a business development agency for the Group’s existing mining companies to pursue opportunities in the APAC region. The business is also targeting opportunities in Indonesia, a country which previously contributed significantly to RUC’s earnings.
Murray & Roberts Cementation (“MRC”) is pursuing increasing opportunities elsewhere in Africa. Buoyant copper prices are unlocking potential in the Zambian market, which has served MRC well in the past, and the business is considering opportunities in Botswana, Ghana and Côte d'Ivoire. The Arnot coal mine, an MRC client, was placed into business rescue in Q2 FY2023 by the client and efforts to exit the project extended into FY2024, which negatively impacted earnings for the year. MRC is engaging with the business rescue practitioner regarding a payment plan for outstanding payments due to MRC.
As previously reported, the tragic loss of a number of our colleagues in a bus accident on a public road in the Limpopo province, significantly impacted morale at the Venetia mine project, which coupled with operational challenges, resulted in a less-than-optimal project delivery programme during the year at the mine. The business is committed to achieving an improvement in productivity in the new financial year. All other projects in this business are performing in line with expectation.
It is expected that the mining businesses will generate most of the Group’s future revenue and earnings, diversified across geography and commodity type.
OptiPower
This business provides engineering, procurement and construction (“EPC”) project services mainly to the renewable energy and power infrastructure market sectors in Sub-Saharan Africa.
Revenue increased to R1,7 billion (FY2023: R1,3 billion) and the business recorded an operating loss of R98 million (FY2023: loss R47 million). The loss largely resulted from liquidity constraints experienced by the Group, giving rise to delays in procurement and resultant increased costs to achieving project completions. The order book decreased to R0,5 billion (FY2023: R1,8 billion), but near orders increased to R2,1 billion (FY2023: Zero). We expect the business to report a profit in FY2025. Category 1 opportunities amounted to R4,7 billion (FY2023: R9,0 billion). Planned revenue for FY2025 is 23% secured by orders, and R0,6 billion from the reported near orders was secured post year end. OptiPower is certified to engineer, procure and/or construct EPC high voltage overhead power lines, a certification held by very few accredited South African contractors. Eskom’s procurement process entails a panel approach to invite tenders for various scopes of work, with Panel A as full-scope EPC; panel B as procure and construct; and Panel C as construct only. As per Eskom’s announcement on 20 August 2024, OptiPower individually qualified for both Panel B (one of nine companies) and C (one of 17 companies) scopes of work and has an established relationship with a Spanish energy firm, Coxabengoa Energia, to pursue work in joint-venture on utility photovoltaic installations and this joint-venture has also qualified for Panel A (one of five companies) work. The focus for the year ahead is to complete all existing projects without any further loss, to deliver new projects profitably and to secure new projects in the renewable energy and power transmission and distribution sectors. OptiPower is well positioned to secure work as soon as Eskom starts awarding projects in the market.
OUTLOOK
We are looking forward to FY2025, as the first year of a re-engineered, revitalised and refocused Murray & Roberts. We are satisfied that we have appropriately rightsized our business and that the size and quality of the Group’s order book is creating the potential for further improved financial results in FY2025. We will continue working towards finding the best solution for settling our debt with the Banking Consortium and establishing an optimal capital structure for the Group for the future.Our mining businesses are well established and are expected to continue doing well over the short- to medium-term. OptiPower is expected to deliver a modest earnings contribution as from FY2025, by capitalising on Eskom’s transmission build-out plans.
The Group is positioned to pursue opportunities for growth, mostly through its international mining businesses and our expectation is to see the Group returning to pre-pandemic earnings levels from FY2027.
Any forward-looking information contained in this announcement has not been reviewed and reported on by the Group’s external auditors.
Ends
*Please note that this media statement contains extracts from the full annual financial results for the year ended 30 June 2024 and should be read in conjunction with the full annual financial results available on www.murrob.com.
For further information contact:
Ed Jardim
Group Investor and Media Executive
E-mail: ed.jardim@murrob.com
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.
About Murray & Roberts
Murray & Roberts is a leading engineering and contracting group of companies and focuses its expertise and capacity on delivering sustainable project engineering, procurement, construction, commissioning, operations and maintenance solutions.
The Group delivers its capabilities into the resources (metals & minerals), industrial, energy and water sectors.
The Group disposed of its infrastructure businesses in April 2017 and no longer delivers any civil and building construction projects.
Murray & Roberts is headquartered in Johannesburg, South Africa, and is listed on the JSE Limited. It has offices in:
1. Africa:
a. South Africa, Zambia and Ghana2. Australasia:
a. Australia3. North America:
a. USA and CanadaMurray & 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.
For more information about Murray & Roberts, please visit www.murrob.com
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