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MURRAY & ROBERTS HOLDINGS LIMITED - Seventy-Third Annual General Meeting: Business Update

Release Date: 02/12/2021 14:15
Code(s): MUR     PDF:  
Wrap Text
Seventy-Third Annual General Meeting: Business Update

(Incorporated in the Republic of South Africa)
Registration number 1948/029826/06
JSE Share Code: MUR
ISIN: ZAE000073441
(“Murray & Roberts” or “Group” or “Company”)


The Group released its FY2021 annual financial results on 1 September 2021 and Annual
Integrated Report to stakeholders on 30 September 2021. Full details of the Group’s financial
results and Annual Integrated Report have been published on the website at

Murray & Roberts is a multinational engineering and construction group, targeting the natural
resources, industrial, energy, water, and specialised infrastructure market sectors. These are
market sectors with robust fixed capital investment fundamentals, which are expected to
benefit from extensive investment earmarked for a post-pandemic infrastructure-led economic
recovery, and which will underpin the global shift towards clean energy and a reduction in
carbon emissions.

Operationally, the Group is structured into three business platforms and its target markets
present the best growth potential for these business platforms.

The Group’s exposure to the natural resources, industrial, energy, water and infrastructure
markets, and its strong order book, holds the potential for meaningful earnings growth in
FY2022 and in the medium term thereafter.


The Group reported a large, quality order book of R60,7 billion at the end of the previous
financial year, being 30 June 2021. The order book includes several multi-year projects.

The Group currently generates revenue from its order book of between R2,0 billion and R2,5
billion per month and is maintaining the order book value at about R60 billion through the
systematic addition of new project awards.

The project pipeline is robust and includes projects which are being negotiated on a sole-
source basis. It is anticipated that the largest of these projects, with a Group order book
contribution of circa R20 billion, will be awarded to the Energy, Resources & Infrastructure
platform during the current financial year.


Energy, Resources & Infrastructure – This multinational business is mainly focused on the
Asia-Pacific region and the Americas. After several years of strategic repositioning to diversify
away from its dependence on a single-cyclical market in Australian LNG, the platform strongly
returned to profitability in the prior financial year.
At the end of October 2021, Clough North America Holding Incorporated, a wholly owned
subsidiary of Murray & Roberts Limited, concluded the acquisition of J.J. White Inc. (“JJ
White”), headquartered in Philadelphia, Pennsylvania, United States. JJ White specializes in
industrial maintenance and related construction services that cover a full range of mechanical
and electrical disciplines. The acquisition is part of the Group’s strategy to diversify and expand
the service offering of its Energy, Resources & Infrastructure business platform in North
America, similar to its recent market sector diversification in the Asia-Pacific region, which
translated into significant order book growth. This strategic investment presents potential for
market share expansion and is forecast to provide good returns in the medium term.

The order book is stable at R37,2 billion as at 30 September 2021 (June 2021: R37,0 billion).
The platform’s target markets are prospering, with Australian public and private sectors
continuing to invest heavily in economic and resources infrastructure.

Significant levels of revenue for FY2022 and FY2023 have been secured, underpinning the
expectation of strong earnings growth from this platform over the next three years. Project
delivery is progressing according to expectation and there are no underperforming projects in
the portfolio.

Mining – This multinational business comprises three regional businesses in Africa, the
Americas and Australasia, and is the business platform that has been the most severely
impacted by the COVID-19 pandemic. The platform has done well to grow its order book during
the previous financial year and to protect its book from declining through the period of the
pandemic, especially in the Americas.

Recovery of the world economy has resulted in a significantly increased demand for
commodities. The start of a much longer structural bull market has been foreshadowed in the
global forecasts of several investment banks, which point to a super cycle of commodities that
supports the increased efforts to decarbonise the economies of the world. These market
conditions bode well for mining investment and increasing demand for this platform’s services.

The platform is anticipating order book growth, especially from the Americas, mainly during the
second half of the current financial year, thus the current financial year is not expected to
record much earnings growth relative to the prior year. The Group is anticipating accelerated
growth in the medium term, given its high share of the regional markets in which it operates.

The order book is strong and the near-term project pipeline is expanding. The order book
decreased to R20,8 billion as at 30 September 2021 (June 2021: R23,2 billion) due to an
agreement reached with Kalagadi Manganese, which agreement is subject to lenders’
approval, for the consensual termination of the mining contract as at 28 February 2022, 16
months earlier than the contractual completion date. This termination is expected to have a
marginal impact on platform earnings for the current financial year.

Power, Industrial & Water – This sub-Saharan focused business continues to face challenges
due to a lack of infrastructure investment in this region.

The platform continues to perform routine, relatively small maintenance and outage works at
Medupi and Kusile respectively. Several transmission tenders invited by Eskom are under
adjudication and it is anticipated that some of these projects will be secured in the short term.
In addition, the imminent investment in the South African renewable energy sector, together
with the urgent expansion required of Eskom’s transmission network, should provide potential
for this business to return to profitability in the medium term.

The platform recently established a solar business to pursue industrial photovoltaic
opportunities up to 10MW in scale and has secured its first projects, albeit on a small scale.
With the increase in the unlicensed self-generation limit from 1MW to 100MW, this business is
likely to see more prospects in the medium term. As a result, several cooperation
arrangements have been concluded with technology owners to pursue these opportunities.
Investment in the South African water sector continues to be fragmented, notwithstanding the
urgent need for investment in the wastewater sector. The platform holds the licence for the
Organica wastewater technology in Africa and is relocating its Organica demonstration plant
from eThekwini to the V&A Waterfront in Cape Town to supply water under a 10-year contract.
This is a significant breakthrough as it will be the first commercialised application of the
Organica wastewater technology in South Africa.

The order book was R0,6 billion as at 30 September 2021 (June 2021: R0,5 billion). It is
anticipated that new orders will be secured with Eskom for transmission lines and with
independent power producers in the renewable energy sector, during the second half of the
current financial year.

Bombela Concession Company

The Bombela Concession Company operates the Gautrain system, which is experiencing low
passenger demand and resultant low ridership levels. Passenger demand is anticipated to
remain subdued until infection rates from the COVID pandemic are curtailed.

Current ridership is circa 16 000 passengers per day, compared to circa 55 000 passengers
per day prior to the pandemic. Currently, no impairment of this investment is being expected,
and it is anticipated that the annual fair value profit adjustment of about R200 million will be

Closure of business in the Middle East

The Group’s exit from the Middle East is progressing and as previously announced, a sale and
purchase agreement was concluded with a UAE-based investment company for the sale of the
Group’s Abu Dhabi and Dubai companies. Regulatory approval is a pre-requisite for the shares
to be transferred to the purchaser and has not yet been obtained.

Although the Group will retain certain potential contingent liabilities post the sale of these two
companies - which will be appropriately managed - the conclusion of the proposed transaction
will reduce the outflow of ongoing legal fees and costs of maintaining an office in the UAE.


Continuing operations returned to profitability in FY2021, and it is expected that the Group has
entered a multi-year period of strong earnings growth. This view is supported by the growing
demand for the Group’s services as evidenced by its current order book of about R60 billion,
which is anticipated to grow even further.

Over the next three years, the Group expects most of its revenue to be generated by its two
international business platforms, being the Mining and the Energy, Resources & Infrastructure
platforms. Both platforms have established credible positions in regions and sectors with
sustainable growth prospects.

The information contained in this Business Update has not been reviewed and reported on by
the Group’s external auditors.

2 December 2021

The Standard Bank of South Africa Limited

Date: 02-12-2021 02:15:00
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