Set­tling nerves

Finweek English Edition - - COMPANIES & MARKETS - LEANI WES­SELS

MUR­RAY & ROBERTS at last re­ported some pos­i­tive news. It’s proof of how un­pop­u­lar the share was that a trad­ing up­date an­nounc­ing an earn­ings loss for the pe­riod can re­sult in the price jump­ing from 2750c to 2970c/share on the day. Of course, the state­ment also in­cluded some much-needed in­for­ma­tion about the group’s progress in set­tling those pesky pay­ment dis­putes, which re­late largely to con­tracts M&R hasn’t yet been paid for, but was marked to mar­ket a few years back.

It seems things are well on track, es­pe­cially the group’s Medupi pro­ject, which forms the bulk of the group’s R25bn or­der book and teetered on cash flow prob­lems be­fore any dis­putes could be set­tled. Those set­tle­ments didn’t hap­pen overnight, of course. How­ever, it’s still a con­fi­dence booster for the group that new CEO – vet­eran Henry Laas – had a smooth tran­si­tion into the top spot and could con­tinue ne­go­ti­a­tions with the likes of Eskom.

Those set­tle­ments will go a long way to fund its work­ing cap­i­tal, a sore point for any in­vestor who’s stuck with M&R, hence the uptick in its share price over re­cent weeks. The group’s lat­est re­sults for the six months to end-De­cem­ber 2010 show work­ing cap­i­tal sucked more than R600m out of the sys­tem over that pe­riod. It ex­pects that strain to be much re­lieved, thanks to the progress made on the dis­putes.

That was the good news. Un­for­tu­nately, the group’s for­tunes are still look­ing bleak. Pro­ject de­lays, changes in scope of work done and a gen­er­ally poor macroe­co­nomic re­al­ity all con­trib­ute to a wor­ry­ing out­look. Years from now the cy­cle will turn and in­vestors will be happy again. But will any last­ing dam­age be done by the group’s spec­tac­u­lar disgrace dur­ing this trough? Those with the in­sti­tu­tional mem­ory prob­a­bly won’t again get caught up by the hype. Ev­ery­body else? Well, just make sure that in­come stream has been re­alised.

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