DEFINING THE 'RESHAPED' MURRAY & ROBERTS IN THE CONTEXT OF OUR NEW STRATEGIC FUTURE
The outcome of the implementation of the New Strategic Future, which the Board approved in 2014, has been a significant change in Murray & Roberts, from a predominantly South African civil and building contractor, to a multinational engineering and construction Group focused on the natural resources market sectors.
The strategy was designed with two phases in mind:
• optimise the Group’s portfolio of businesses; and
• position the Group for sustainable growth and value creation, based on the positive long-term demand drivers for natural resources.
These drivers include:
• global population growth;
• global economic growth; and
• ever increasing urbanisation.
Other factors are becoming more and more relevant, such as environmental concerns that are stimulating investment in water security and cleaner energy sources such as gas and renewables.
"SO WHO, OR WHAT ARE WE TODAY – ESPECIALLY AFTER BEING KNOWN AS A CIVIL AND BUILDING CONTRACTOR FOR MORE THAN A CENTURY?
Today, Murray & Roberts is a multinational engineering and construction group, with a focused portfolio of businesses in the natural resources market sectors of metals & minerals, oil & gas, and power & water.
The significant reshaping of the organisation is the most evident feature of the progress we have made over the past six years to change the strategic direction and reposition the Group for sustainable growth and profitability.
To be a specialist contractor in our chosen market sectors requires our business platforms to have a permanent presence in the geographies with the most compelling growth potential for our clients, along with the ability to support them in other territories. It also requires that our service offerings provide coverage of clients’ requirements across the full project life cycle. This provides diversification benefits both in relation to geographic risk and the spread of volume and margins across the segments or phases
of the project life cycle.
Our organic and acquisitive growth plans are therefore focused on positioning our businesses in key growth markets, specifically developed markets that present lower socio-political and regulatory risks, and higher-margin segments of the project life cycle. In tandem with the implementation of the Group strategy, concerted effort to resolve claims on legacy projects has continued. The significant uncertified revenue historically carried on our balance sheet, associated with these claims, created investor uncertainty
and placed a drag on the Group’s market value. We are working steadily to remove this detraction, both in terms of the call on management’s time and the cost of lengthy legal proceedings.
DELIVERING ENGINEERED EXCELLENCE
Engineered Excellence is not negotiable! Adopting this mantra means we carefully plan and always deliver on our promises to achieve excellence in all that we do, irrespective if you are on one of our many project sites across the world, or in an office – we have to strengthen our focus on improving our performance every year.
While the excellence we strive for in every aspect of the business is fundamental to our competitiveness and reputation, it also supports the quality of the Group’s earnings, and ultimately investment returns.
Two major indicators of the progress we have made in Engineered Excellence, specifically in the quality of risk management and project delivery, are the Group’s safety performance and the reduction in number of loss-making projects.
The significant improvement in the safety performance of our business platforms is a key competitive advantage and underpins their efforts to be recognised as employers of choice in their markets. The Group has introduced and embedded several key initiatives, including a focus on lead indicators and improved incident reporting and analysis. The Group-wide implementation over the last year of the Major Accident Prevention (“MAP”) programme, which empowers supervisors and the workforce to plan and take ownership of safety outcomes, has delivered excellent results and supported a record-low LTIFR for the Group.
In relation to loss-making projects, the improvement trend has been equally laudable. The number of loss-making projects has reduced over the past five years from more than 10, to only one in the year under review. This is a significant achievement considering the Group’s current volume of projects globally.
This improvement is a good indicator of the quality of management within the business platforms, and the frameworks the Group has put in place to govern and assure operational excellence. The Group’s risk tolerance is well defined and it has implemented specific parameters for risk and opportunity management at tender stage, contracting principles (which include a register of lessons learnt across the platforms), as well as clear limits of authority.
That the governance framework for operational excellence is entrenched and working well is especially gratifying given the pressure on our business platforms to accept often onerous commercial demands from clients in tough economic and highly competitive environments.
A RESOLUTE FOCUS ON GROWTH AND VALUE CREATION
With the extensive progress made in de-risking the Group, clarifying the business model and strategy, and devolving greater strategic responsibility to platform leadership to deliver on their medium-term business plans, the focus has shifted to optimising the Group’s businesses and growing shareholder value.
Operationally, each of the platforms are at different stages in their strategic development, with clear plans to deepen their specialist service offerings and achieve their growth aspirations through geographic and project life cycle diversification in their respective natural resources market sectors.
The Group’s strong statement of financial position and improving performance expectations places it well to fund its organic and acquisitive growth plans.
CONCLUSION AND APPRECIATION
Our strategy continues to evolve, but the financial year to June 2018 will essentially be the first year as a fundamentally reshaped Murray & Roberts, with a resolute focus on value creation.
We have travelled a long and challenging road the past few years as we had to deal with a prolonged weakness in the commodity cycle, but we have proven time and again that we are a resilient organisation.
I want to thank each and every one of our employees for all your hard work over the past financial year, for continuing to live our values and your contribution in pursuit of Engineered Excellence and our New Strategic Future.