Overview
The directors have reviewed the position of the Group at the end of the third quarter in the light of flat business conditions in its markets, ongoing rationalisation in terms of the objective of Rebuilding Murray & Roberts by 30 June 2005, continued strength in the South African currency, and the dynamics and timing of targeted major projects.
The Group continues to experience mixed fortunes in its different markets, highlighted in the business update issued at the annual general meeting of the Group on 27 October 2003 and the Prospects Statement in the report on interim results for the six months ended 31 December 2003 published on 25 February 2004.

Based on the details and information below, shareholders are advised that headline earnings per share to 30 June 2004 are expected to be approximately 15% lower than the 175 cents per share recorded in the previous corresponding reporting period.

The information contained in this announcement has not been reviewed and reported on by the Group"s auditors and consequently holders of securities must exercise caution when dealing in their securities until publication of the financial results for the year ended 30 June 2004, which is planned for 25 August 2004.

Order Book
There is a material decline in the project order book to R3,4 billion at 31 March 2004. (R4,1 billion at 31 December 2003). This has had a negative impact on revenues which will be down approximately 15% in the year. In addition, the Group has declined to extend the validity of its preferred tender position on two major projects with a total value of R3,5 billion. In both instances (a Middle East airport and southern Africa road) the projects were tendered more than a year ago and potential profitability has been eroded through exchange rate volatility, non-recoverable price increases and changed market dynamics.

Work has continued on the preparation of revised proposals and pricing for the delayed Gautrain project, which has received additional impetus with the announcement of the Soccer 2010 World Cup.

There has been limited recovery of the forward loss provisions booked against certain projects in previous reporting periods. The decline in new revenues has increased the relative percentages of break-even work in the second half-year, which will have an impact on operating margin and return on equity.

In contrast, the long-term order book for Foundries has strengthened with work-in-hand extending at near current levels beyond 2010. The Group expects an announcement in due course on the locomotive replacement programme in South Africa, which could benefit the UCW Partnership.

Operations
International construction in the rest of Africa outside of the Southern Africa Development Community (SADC) has proved difficult, with projects in Egypt, Nigeria, Benin and Equatorial Guinea demanding high levels of management and cash resources to pursue completion or resolution. Where the collection of debts is uncertain the Group continues to adopt a conservative approach to revenue recognition and performance in the current year.

The Middle East has experienced a difficult year of consolidation, with a change in regional management that has brought into focus working capital management and the resolution of outstanding claims. Conservative revenue recognition will result in a marginal performance for the year.

The general construction economy (construction, engineering, materials and services) in South Africa and the rest of SADC has proved resilient throughout the year and is estimated to contribute approximately 70% of revenues and 90% of gross operating profits. More than 75% of the latter is in the domestic South African market.

Foundries and UCW are stable and remain well positioned in their respective markets, despite the fact that industrial manufacturing from South Africa is negatively impacted by currency volatility and reduced global demand. Rationalisation at Consani has been severe and will deliver an operating loss in the year. Fabrication and Manufacture is expected to contribute approximately 15% of revenues and gross operating profits.

Corporate
A deferred tax asset of approximately R32 million will be recognised in certain subsidiaries that have regained sustainable profitability. The accounting of property head leases will change to record capitalised assets and liabilities. No underlying deterioration of the head lease properties is expected in the current year.

The Group has continued to rationalise its activities and exit markets and sectors where an appropriate growth potential or return on investment is not evident. This is particularly the case in the rest of Africa. New investment and market opportunities have been identified, and the Cementation acquisition has received approval from the Competition Tribunal. The transaction is nearing completion following a cautious and thorough process of engagement.

The Group continues to source new levels of executive leadership and human capital, with a particular focus on building its international capacity. A high level empowerment strategy covering core regional operations and new strategic business partnerships in both the domestic and international markets are at an advanced stage of development.

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