South Africa

M&R hopes record order book brings profitability

Specialist engineering group Murray & Roberts (M&R) saw its order book achieve a record high of R60.5bn in the six months to December, after it won tenders for large projects in Australia’s energy sector.

The company also clinched near orders of R19.9bn, and CEO Henry Laas said in an interview with Business Day that this meant M&R was well positioned for a return to profitability in the full financial year to June 2021. 

Near orders refer to projects which M&R has successfully tendered for but not yet signed contracts for.

M&R has spent the past four years changing its business to focus on engineering and energy.

The company, whose share price fell 3.01% to R8.05 on Wednesday, has diversified its operations to mitigate exposure to cyclical natural resources contracts.

Its oil and gas business recently started taking on hydroelectric projects, or gas to power projects, after being exclusively focused on liquefied natural gas in Australia.

Up to  80% of M&Rs total order book at the end of December 2002 was located offshore.

“This is the highest our order book has ever been. Our energy resources and infrastructure business which is based in Perth, Australia, has been contracting and doing engineering work for the oil and gas sector in that country,” Laas said. 

“In 2020, we were awarded large projects including hydroelectric power work, power lines and power stations,” he said.

M&R exited SA’s construction industry in 2016. Its local business which builds waste water treatment facilities has struggled tremendously in recent years because of a lack of available work. 

“There has been a complete lack of opportunity. We would like to develop water and waste related infrastructure but nobody is investing in it. Its very sad,” Laas said.

Nevertheless, the remaining 20% of the order book includes mining work in SA and abroad. This was hard hit by Covid-19 restrictions in the reporting period.

Revenue from continuing operations in the six months was , slightly up on  R10.8bn in the previous comparable period.

The group reported earnings before interest and tax for continuing operations of R117m, compared with R419m for the first half of its 2020 financial year and similarly, an attributable loss of R167m compared with a profit of R163m.

The loss was ascribed to the effect of prolonged Covid-19 restrictions, especially in the company’s mining platform, a disappointing result by its power, industrial and water platform, as well as a lower fair value adjustment profit from its investment in the Bombela Concession Company.

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