Labour strife gives recovering Murray & Roberts a R200m bill

28th February 2013

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Strike action in South Africa cost JSE-listed construction group Murray & Roberts an estimated R200-million in the six months ended December 31, said CE Henry Laas on Thursday as he announced the company’s interim financial results.

A nationwide transport strike, for example, impacted on the delivery of the group’s construction products to clients. Violent strikes also halted work at mines, as well as delayed or postponed a number of capital expenditure projects.

The new calendar year had not brought respite either, with Murray & Roberts currently embroiled in a seven-week-long strike at the Medupi power station construction site, which Eskom had since shut down. (The impact on Murray & Roberts' bottom line would be minimal here, indicated Laas, however, as Eskom, as the client, had decided to close the site.)

Laas said the group was “very unhappy” with the current violent labour unrest in South Africa, which was “not easy to manage”.

“I support the idea of labour unions, but what is currently happening is unacceptable. There are procedures and processes in place to resolve disputes, but it seems as if these are not being followed.”

Laas said it was important that all parties adhered to existing labour legislation in South Africa, as well as the wage agreements that had been put in place.

Murray & Roberts on Thursday reported a return to profitability following two consecutive years in the red.

The group generated revenue of R16.3-billion for the six months ended December 31, 2012, up from R15-billion for the six months ended December 31, 2011.

Murray & Roberts reported an attributable profit of R262-million, compared with a loss of R528-million in the comparable period.

At December 2012, the group's net cash position was R1.1-billion, as opposed to the R21-million net debt recorded at the end of December 2011.

Much of the group’s improved performance, especially in the group’s Construction Africa and Middle East division, could be attributed to the completion of some significant loss-making projects, such as in the Middle East, noted Murray & Roberts FD Cobus Bester.

This division went from a loss of R779-million at the end of December 2011, to a small operating profit of R33-million for the six months under review.

“The challenge for us in the next six months is to turn this business around,” said Bester.

Laas added that the group was able “to do more” to improve the efficiency with which it executed projects.

While Murray & Roberts had “cut back dramatically”  on its presence in the Middle East, Bester said, it would re-enter when the time was right.

The focus was also on expanding the group’s footprint into Africa, with Murray & Roberts currently only active in Namibia and Botswana.

Laas said the Ghana office that had recently opened its doors would be followed by an office in Zambia, in June, as well as possibly an office in Kenya by the end of the year.

Murray & Roberts’ Construction Australasia Oil & Gas and Minerals division proved the jewel in the group’s crown, increasing its operating profit from R82-million to R334-million, at an operating margin of 5%, up from 2%. Its revenue contribution to the group had also almost doubled to R6.3-billion.

This division also held R22-billion of the group’s R48.3-billion order book at the end of December 2012.

Around 60% of the Murray & Roberts’ order book was international work, with 40% of that work in the Southern African region.

Laas added that the group was continuing with its disposal of noncore assets, such as the businesses of Rocla and Hall Longmore. These businesses had now been classified as discontinued operations.

As for the Competition Commission investigation into collusion in the construction industry, Laas said the group had made what it believed to be “adequate provision” for any fines that might flow from the process.

He added that Murray & Roberts "was not at risk” from its current practices, with all competition law transgressions it was aware of taking place in 2005 and 2006, or prior to these dates.

Edited by Creamer Media Reporter

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