M&R eager to return to profit, but risks remain
MURRAY & Roberts ( M&R) group chief executive Henry Laas would be disappointed if the listed construction and engineering group was still in a loss position in the second half of its financial year to June, he said yesterday.
However, Laas stressed he was unable to give any guarantees on this due to the risks that remained on several challenging projects, including the Gautrain and Gorgon Pioneer Materials Offloading Facility project in Australia.
M&R gained as much as 4.7 percent to R30.35, the highest intraday price in six months, but closed unchanged at R29.
On Wednesday M&R reported a 19 percent increase in its headline loss a share to R2.10 in the six months to December from a R1.77 loss in the previous corresponding period.
The group’s attributable loss improved by 17 percent to R528 million from a loss of R636m previously. M&R’S uncertified revenue on challenging projects increased to R2.2 billion in the six months to December. The processes to settle these claims are continuing.
M&R reported additional cost provisions of R600m for the completion of the Gorgon facility and R231m for Middle East contracts in the six months to December. Weather delays on the Gorgon project resulted in a further cost provision of R220m, which will be accounted for in the second half of its financial year.
Laas said yesterday the group remained exposed to potential additional costs until the completion of the Gorgon, Gautrain and Middle East contracts.
M&R was questioned on its ability to make a profit on major projects and the potential profits that would flow from its R57bn order book.
Laas said the group had a R57bn order book ahead of it, it saw significant medium- to long-term opportunities for the group and there would be value for its shareholders over the next few years.
Roy Anderson, M&R’S chairman, said the problem was that historically the group had been unable to extract value for shareholders throughout the Gautrain process.
“The real focus now is the risk management process and to say: ‘what is the use of having a R57bn order book if you can’t convert it into profit?’
“The serious challenge we have as a board is that we have uncertified revenue of R2.2bn. That is backed up by claims many multiples of that. The question is, what is the true value of the uncertified revenue? I’d like to think it’s a lot more than R2bn, but unfortunately we will only know in 2014,” he said.
Laas said the group would ensure there had been sufficient interrogation of all the risk opportunities before taking on another major project.
But Laas said the government’s planned nuclear power station programme was a big opportunity for the construction sector and an opportunity M&R would like to follow.
Laas said funds raised from a proposed R2bn rights offer would be used to reduce the group’s debt in South Africa and on its order book.
He said shareholder approval had been obtained for the rights offer but was unable to disclose the timing of it.
He said 30 percent of M&R’S shareholders were in the US and certain qualified institutional investors would participate in the rights offer.