Financial Director Report
Murray & Roberts has come through a difficult year impacted by both internal and external
factors. The income statement has been impacted by exchange rate volatility, reduced levels of
forward order book and project operating problems. However, the balance sheet remains strong
and has been enhanced with the recently announced disposal of the Group’s 44% shareholding in
Unitrans Limited for a cash consideration of approximately R950 million.
Income Statement
The Group completed the year with a 5% operating margin, which
represents our minimum target and compares to 6,3% in 2003.
Earnings before interest and taxation (EBIT) of R421 million,
compared to R633 million in the prior year, reflects the impact of
reduced revenue, a number of underperforming construction
contracts in the Middle East and Africa and a significant reversal
in Consani Engineering.
Revenue decreased by R1,69 billion or 17% to R8,4 billion. The average
exchange rate used in translating the income statement was 22%
lower than in the previous financial year.
In the future context of Globalising Murray & Roberts, the Group has
consolidated elements of its segmental reporting to correctly reflect
the changed structure of its operational framework.
Construction operations serving global building, infrastructure and
industrial markets delivered disappointing operating profits of
R83 million compared with a restated R176 million in the previous
year. Revenues of R3 billion were down from R3,6 billion and the
operating margin of 2,8% was substantially lower than last year’s
restated 5%.
Operating profit includes a R27 million realised profit on sale of a
building concession investment and a R7 million fair value increase
in concession investments.
South Africa and the SADC countries continue to offer favourable
business conditions and the construction operations achieved good
market access to deliver an operating profit of R39 million on
revenues of R1,9 billion.
Difficult business conditions, conservative revenue recognition and
poor operating performances in Equatorial Guinea, Benin, Nigeria and
Egypt resulted in an operating loss of R23 million on revenues of
R234 million in the rest of Africa. A period of consolidation in the
Middle East delivered a marginal operating profit on revenues of
R900 million.
Engineering contracting & services to the industrial and mining
markets delivered an operating profit of R81 million compared with
R113 million in 2003. Revenues were lower at R651 million and the
margin was steady at 12,4% compared with 12,2% for 2003.
Construction materials & services to the building, infrastructure,
mining and industrial markets delivered operating profits of
R247 million, slightly down from R288 million in 2003. Revenues
were down at R3 billion and the margin improved to 9,1%.
The manufacture and supply of automotive components to the
domestic and selected global markets generated operating profits of
R39 million. This was lower than the previous year following the sale
of AWI, which was also reflected in lower revenues of R501 million.
The fabrication and assembly of specialist products for the domestic
and global transport markets generated operating profits of
R28 million, reflecting the impact of problems at Consani. Revenues
were lower at R572 million from R818 million in 2003 and the
operating margin was lower at 4,9%.
Industrial services companies Booker Tate, Criterion, Johnson Arabia,
Improvair, Elgin and Pefco generated operating profits of R30 million
on revenues of R504 million.
Corporate overheads for the year amounted to R100 million
which was slightly up on the net R95 million expended in the
previous year. This reflected increased corporate activity in
preparation for the Group’s new globalisation strategy. Both domestic
and international leadership has been enhanced to ensure the
capacity for growth and risk management that will flow from pursuit
of this strategy.
Roger Rees
