Not if, but when

Finweek English Edition - - COMPANIES&MARKETS - LEANI WES­SELS leaniw@fin­

TAKE THE PAIN and ac­knowl­edge im­pair­ments for un­re­alised prof­its. Tick. Sell off the dis­con­tin­ued op­er­a­tions. Tick. Mur­ray & Roberts has started on its long to-do list, with a rights is­sue pos­si­bly the next item as it be­gins the long, slow clam­ber back on to that pedestal it top­pled from ear­lier this year. Henry Laas – the new man tasked with restor­ing the group to its for­mer glory (as was the case with Brian Bruce when he took the helm of a much shab­bier look­ing ship 11 years ago) – says he’ll make the im­prove­ment of group liq­uid­ity his im­me­di­ate pri­or­ity. He’ll start with ne­go­ti­at­ing set­tle­ments for al­most R1,25bn in claims for work com­pleted on the Gau­train, Dubai air­port and, most re­cently, Eskom’s Medupi power sta­tion.

The share is al­ready pric­ing in a rights is­sue, ac­cord­ing to an an­a­lyst. At 2654c it’s at a five-year low, the level reached pre-build­ing boom ex­cite­ment. Fi­nally, an­a­lysts are eyeing it again.

Laas’s suc­cess at ne­go­ti­at­ing a happy and timely end­ing to the group’s claims will be the de­cid­ing fac­tor whether a rights is­sue is needed. The group in­sists it still has R1bn in head­room for cur­rent projects in South Africa. How­ever, over the six months to end-De­cem­ber 2010 M&R burned through more than R900m in cash.

Laas’s big­gest headache will be to re­cover the R600m in claims for work done on the Gau­train. M&R owns an equity stake in the rail link and is still con­struct­ing the last few wa­ter­logged legs of the pro­ject. So far the ar­du­ous process of ar­bi­tra­tion would be the best out­come.

Then there’s the work be­ing done on the Medupi pro­ject. M&R has al­ready ex­hausted its bud­get and only half of the pro­ject has been com­pleted. So it makes sense M&R pre­pares it­self for the long fight ahead with some ex­tra cash to keep op­er­a­tions run­ning and new ones com­ing on board. Black­outs this win­ter will prob­a­bly serve to set­tle some out­stand­ing pay­ments, how­ever, and Laas is also fa­mil­iar with the boys at Medupi through his pre­vi­ous post of busi­nesses. This bodes well for the con­ti­nu­ity of the ne­go­ti­a­tions.


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