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PERFORMANCE
The Murray & Roberts share stabilised at around 900 cents prior
to release of our results for the year. The subsequent increase to around
1 050 cents is up 350% on the base price of 300 cents in the two years
to date of Rebuilding Murray & Roberts.
The financial result for the year under review exceeds the best nominal
performance in the history of Murray & Roberts, better than headline
earnings in 1995 of 126 cents per share and total earnings in 1998 of
150 cents per share.
With a balance sheet that includes cash of R2,0 billion (equivalent to
600 cents per share), we can now believe that the Rebuilding Murray &
Roberts performance profile is sustainable through the full implementation
period to 30 June 2005.
However, we remain vulnerable in the short to medium term in respect of
certain legacy problems that have continued to erode value in our group.
Starting with property headleases, we have raised further provisions totalling
R58,0 million in the year to cover our regularly updated assessment of
projected liabilities. We are confident that our conservative treatment
of this challenge will minimise any significant risk in the period to
2007. We believe that in the remaining period to 2015, the realisation
of the bare dominium asset will offset ongoing liabilities. More importantly,
we have reduced our exposure post-2007 by half.
Finally, we have engaged rigorous resolutions for the following few operational
legacies in the group. These companies and their management teams now
reflect the values and integrity embodied in Rebuilding Murray & Roberts.
The Genrec group has been unbundled with effect from 30 June 2002 following
many years as a marginal high-risk performer. The structural steel and
the mechanical, electrical and instrumentation (MEI) contracting units
offer promising business potential and have been absorbed elsewhere within
Murray & Roberts. The remainder of the business will be disposed or
closed.
Murray & Roberts Foundries Group has been impacted by more than a
decade of under-investment and inadequate management. A new leadership
team has been appointed and a focused investment plan, supported by the
Motor Industry Development Programme (MIDP), offers a new value proposition
into the future.
This year, Murray & Roberts Civils realised the consequences of poor
commercial and management decisions going back over the past five years.
Long-term road contracts in Benin, Uganda and Mozambique have disappointed
at completion. The N3 Toll Road faces a complex challenge to overcome
the financial consequences of vehicle overloading on the various contracted
parties. All current problems are now fully understood and provided for
and a comprehensive recovery plan has been agreed. A good order book and
focused intervention under new leadership will return this company to
an acceptable value proposition.
Serving the developing world markets of Africa and Southeast Asia presents
a challenging business environment. We have experienced payment difficulties
in Kenya and Indonesia during the year, notwithstanding that we have met
all our contracted obligations. Our investments in public companies listed
in Harare and Nairobi have underperformed and we are proceeding cautiously
with work in Nigeria.
The remainder of our operations have performed well. In particular, the
merged building and civil engineering operations in South Africa delivered
an improved performance in the year, assisted by completion of the Bloemfontein
Prison contract. The Kwazulu-Natal operation has been scaled down following
years of marginal performance.
International construction activities throughout SADC and in the Middle
East also improved on last year, with increased levels of activity evident
in the order book. We refocused our management team in the Middle East
and placed a stronger leadership team into Nigeria where commencement
of our first major project awaits receipt of the contracted advance payment.
In general, our road building activities delivered an improved result
in the year. In particular, the N4 Platinum Highway concession project
is proceeding ahead of schedule and within budget. This is the largest
road contract yet undertaken in South Africa.
Overall, we are confident that the work done this year in the sector will
lead to an enhanced performance for the 2003 financial year.
Increased levels of fixed investment into major industry and natural resources
projects throughout the SADC region underpinned another solid performance
from the operations serving the industry and mining sector. Aluminium
smelter, gold mine and fertilizer plant expansions, new manufacturing
capacity, as well as platinum and energy-related developments have provided
the opportunity landscape.
The incorporation of MEI capability into our engineering offering has
further enhanced our potential for delivery of integrated design and build
solutions into this market. We are confident of further performance improvements
in the 2003 financial year.
The Ford RoCam project advanced to 75% full production in the year, placing
some stress on our older foundry assets. The capital expenditure programme
supporting the project has proceeded well, giving increased performance
levels. We have tested all systems at full target production of 1 000
units per day.
The domestic and international demand for safety-critical transport systems
serving both trade and commuter markets, has strengthened in recent times.
In South Africa, there is strong commitment to refurbish the aging and
often vandalised rolling stock asset, although the consistent allocation
of
funding remains a challenge. The global demand for ISO tank containers
has improved in the year.
Following the closure of AWI Canada in 2001, the sale of AWI in the United
Kingdom brings finality to this globalisation misadventure. The AWI facility
in Port Elizabeth delivered a good result this year and we expect a maiden
performance at acceptable returns on investment in the year ahead.
The companies consolidated within supplies and services have shown a further
meaningful improvement on last year’s turnaround. A focus on working
capital management has unlocked significant cash flow in the year. Improved
activity in the domestic and regional construction sector has increased
demand, with most operations delivering excellent results.
During the year, we have consolidated those operations involved in the
conversion of primary steel to finished products into a single business
unit which processed almost 800 000 tons in the year.
We plan further consolidation action in the year ahead, underpinning a
further improvement in performance.
The disposal of Johnson Crane was completed in the year. Although a constant
performer over many years, the company did not match the Murray &
Roberts strategic value proposition
HUMAN CAPITAL
Murray & Roberts has a formidable team of executive leadership, supported
by a management depth and supervisory competence that ensures our capability
to meet the performance targets that define world class fulfilment. I
am privileged to lead such capacity.
The key members of our leadership team are highlighted on the following
pages, including their specific areas of performance responsibility.
Perfomance
review - 2002 continued >>>
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