M&R projects resume operations in fight-back after ‘perfect storm’ impacts on profits

MURRAY & Roberts’ (M&R) global portfolio of engineering and mining contracting projects experienced significant Covid-19-related profit impact in the year to June 30, but most of its projects have since resumed operations.

However, a R622 million direct profit impact of the pandemic on projects, as well as a range of impairments created a “perfect storm” and the headline loss per share was likely to be 86 cents to 74c per share, compared with headline earnings of 80c per share in 2019, the group said in a trading statement yesterday.

“Few projects continued with little or no disruption, some were suspended and others were placed on care and maintenance during the reporting period,” the group said.

The share price, nevertheless, increased 2.93 percent to R5.97 by yesterday afternoon, at a time when the JSE All Share Index was down 0.92 percent. The share closed at R5.92.

M&R entered the Covid-19 period with a strong balance sheet and took early action to preserve its financial position, and cash and working capital management initiatives were implemented. No client defaulted on payments as a result of the pandemic.

The group had been tracking well to meet its guidance of an improved performance in its 2020 financial year, relative to 2019.

Impairments included an R80m vendor loan relating to the sale of Genrec, now in business rescue, a R63m impairment from goodwill on two group companies due to market uncertainty, and a R46m impairment of uncertified revenue on a claim.

Execution challenges on a few projects also disappointed. The group said it had a significant order book of R54.2 billion and near orders of

R11.4bn. The project opportunity pipeline included a significant value of near orders and four projects that were being negotiated on a sole-source basis, with a combined value of R40bn.

“The group’s financial position is robust and sufficient to fund its growth plans and debt is within its targeted range,” the directors said.

The focus now would be on maintaining the order book at current levels, if not growing it, improving project execution, reducing working capital, progressing digitalisation, and exiting the Middle East – which the board believes will support a return to profitability in the 2021 financial year.