M&R hope for award in Dubai Airport claim
Almost R900m is at stake
MURRAY & Roberts (M&R), the listed multinational project life cycle group, expects an award to be made by the arbitrator in its almost R900 million Dubai Airport claim in May next year.
M&R chief executive Henry Laas reiterated yesterday that the close-out of the business in the Middle East continued to present a major risk, but all known project losses had been accounted for in the group’s 2017 financial year.
He said the board had decided to close the business in line with the group’s strategy to exit the civil engineering and buildings market and a substantial loss of R570m was recorded in its 2017 financial year.
These losses resulted largely from an unfavourable arbitration ruling on the Zayed University project that was completed in 2011, losses on the remaining four building projects and redundancy costs to be incurred as part of the business closure process.
Laas said yesterday that the remaining projects in the Middle East were scheduled to be completed by the end of the group’s 2018 financial year. He added that there was no evidence of any further material losses from this region and costs during M&R’s 2018 financial year should be limited to a significantly reduced overhead cost and ongoing legal fees on the Dubai Airport dispute.
M&R said in August this year, when it published its annual financial results for the year to June, that following the settlement of the Gautrain development period claims, the group’s uncertified revenue had reduced to R900m from R2bn in the previous year.
The group said current uncertified revenue was primarily represented by its claims on projects in the Middle East.
It highlighted the possibility of potential future losses from the group’s remaining non-core business, the business in the Middle East and Genrec, a steel fabrication and manufacturing business.
Genrec, which recorded a loss before taxation of R68m in M&R’s last financial year, was sold last month at book value to the black-owned Southern Palace Group, which in November agreed to acquire M&R’s infrastructure and building businesses for R314m, effective from April this year.
The closure of the Middle East business and sale of Genrec were the last remaining steps to achieve the business portfolio optimisation envisaged in the first phase of M&R’s New Strategic Future Plan.
Commenting on M&R’s prospects, Laas said that although market conditions remained challenging, especially for the Oil & Gas and Power & Water platforms, and subject to no further material losses in the Middle East, the group believed an improvement in its financial performance could be expected in its 2018 financial year.
He added that all platforms would continue to focus on cost reduction and operational excellence to preserve margins.
Near orders were robust in the Underground Mining platform and the group’s overall medium-term project pipeline remained strong, specifically encouraging for the Oil & Gas platform’s prospects.
The order book for the Underground Mining platform was at R16.8bn at end-September compared to R17.5bn in June, but near orders had increased to R11.9bn from R6.3bn in the same period.
M&R’s total group order book for continuing operations at end-September was at R25.8bn compared to R26.9bn in June.
Near orders from continuing operations had increased to R12.1bn from R7bn in the same period.
M&R shares dropped 0.63 percent on the JSE yesterday to close at R15.80.