Considering engineering and construction services firm Murray & Roberts’ (M&R’s) “all time high” order book of R60.5-billion, and near orders of R19.9-billion, CEO Henry Laas says the group is “well positioned” for a return to profitability in the 2022 financial year.
He adds that the firm is also expected to achieve meaningful earnings growth in the short- to medium term.
Laas attributed the growth in order book to M&R having broadened its market focus to mitigate the cyclicality of the natural resource markets.
Overall, for the six months ended December 31, 2020, the group largely recovered from the initial and major Covid-19 restrictions impact, and now has a “robust cash position”, with R2-billion of unrestricted cash and R2.2-billion of unused cash facilities.
The energy, resources and infrastructure (ERI) platform's order book increased significantly and is now expected to make a significant contribution to earnings in the 2022 financial year.
In addition to multibillion-dollar infrastructure and resources spend forecast in Australia over the next ten years, M&R expects to benefit from several partnerships currently under consideration in the US that will make Clough US a “strong contender” for engineering, procurement and construction (EPC) projects in the region.
The Clough brand is well established and associated with providing project delivery for more than 100 years on large and technically challenging projects in the ERI industries, Laas says.
The demand for liquefied natural gas (LNG) is expected to recover in the medium term as the global transition to a carbon-neutral economy gathers momentum, presenting further opportunity for growth for M&R.
The ERI platform has near orders of R5-billion and pipeline opportunities of R43.9-billion.
Near orders are tenders where the group is the preferred bidder and final award is subject to financial or commercial close, and there is “more than a 95% chance” that these orders will be secured, M&R’s presentation shows.
In terms of M&R's mining platform, which declined marginally owing to Covid-19-related delays, Goldman Sachs and JPMorgan are forecasting a recovery in commodity prices, as well as the start of a new supercycle and a much longer structural bull market for commodities.
Capital investment in the mining sector continues, Laas notes, adding that this is mainly in brownfield expansions, “although it is expected that new investment in new mines will return from mid-2021 onwards”.
Laas further anticipates increased demand for vertical shaft work in Australia and several projects are expected to be awarded during the second half of the 2021 financial year.
In sub-Saharan Africa, the awards and start of new projects has been delayed, but is expected to materialise within the 2021 calendar year.
The platform holds the leading position in most major regional underground mining markets in the western world.
M&R’s mining platform has near orders of R14.7-billion and pipeline opportunities of R44.2-billion.
M&R’s “weakest” platform − power, industrial and water − meanwhile secured no projects of any significant value during the period, and the opportunity for new project awards within the next six-month period is limited, Laas laments.
However, he is encouraged by the recently announced infrastructure plan by the South African government to stimulate the economy, which he says “should present an opportunity in the medium term”.
Several transmission tenders invited by State-owned power utility Eskom are currently under adjudication.
The LNG investments in Mozambique are also unlikely to present an opportunity in the short- to medium term, despite there being “significant regional security risks to the project”, Laas says.
Investment in the South African water sector also continues to be limited.
The power, industrial and water platform for M&R has near orders of R200 000 and pipeline opportunities of R6.6-billion.
In terms of financial results for the interim period, M&R incurred an attributable loss of R167-million for the six months ended December 31, 2020, mainly as a result of the impact of prolonged Covid-19 restrictions, especially in the mining platform.
Revenue from continuing operations was maintained at R10.8-billion, but earnings before interest and taxes decreased to R117-million, from the R419-million recorded in the six months ended December 31, 2019.
M&R recorded a headline loss a share of 8c.