M&R order book could hit R80bn
CEO: ANTICIPATES STRONG RETURN TO PROFITABILITY
Growth will largely come from group’s energy, resources and infrastructure and mining platforms.
JSE-listed engineering and construction group Murray & Roberts (M&R) believes its record order book of R60.5 billion at end-December 2020 could grow by about 32% to about R80 billion by end-June 2021.
M&R CEO Henry Laas said on Thursday the group believes it is well positioned for a strong return to profitability in its 2022 financial year and expects further growth in earnings thereafter.
Growth in earnings will largely come from the group’s energy, resources and infrastructure (ERI) and mining platforms, he said.
Laas said M&R had revenue of R10.8 billion in the six months to end-December 2020 and expects revenue to be slightly higher in the second half of its financial year.
“If you take that off the R60.5 billion, it will leave us with about R45 billion. There is R19 billion in near orders that must still find their way into the order book and all these [are] sole-source opportunities.
“So if the stars line up correctly, we could be finding ourselves in the position that we have an order book of around R80 billion by the end of June,” he said.
However, Laas said this is subject to the final investment decision on these sole-source opportunities and being able to close out all the near orders and move them into the order book before the end of June.
Laas said near orders are projects that have been secured and are only subject to the contract between M&R and the client being concluded, with these orders normally moving into the order book over a very short period.
Marc Ter Mors, global head of equity research at SBG Securities, said it is quite excited about M&R’s prospects.
“Assuming there aren’t any hiccups in all the large contracts in the energy, resources and infrastructure division, the growth recovery could be quite exciting.”
Ter Mors said the mining capital expenditure cycle is turning positive and SBG sees investments in the expansion of existing mines as another growth contributor.
However, he said there are also some risks related specifically to the fair value of M&R’s investment in the Bombela concession for the Gautrain.
“I wouldn’t be surprised that if we are going to see delays in the vaccine rollout, limitations of international flights and people not going back to the office yet fully, that a valuation adjustment may be necessary.
“But in the bigger scheme of things, that is more than compensated [for] in the mining and energy platforms,” he said.
Laas said M&R has largely recovered from the quite serious impact Covid-19 on the group in the second half of its 2020 financial year.
Earnings before interest and tax for continuing operations improved to R117 million in the six months to end-December from the R436 million loss in the second half of the 2020 financial year.
M&R reported a diluted continuing headline loss per share of eight cents in the six months to December, compared with the 49 cents profit in the previous corresponding period.