NOMPU SIZIBA: Construction company Murray & Roberts came out with their interim results today [Wednesday]. For the six months ended December 2018 the company reported revenue from continuing operations declining by 17% to R9.8 billion. Diluted headline earnings per share were down 2% at 54 cents. The company says at the end of December it was sitting with a net cash balance of R1 billion. On a more positive note the company’s order book for continuing operations rose to R31.7 billion; that’s up from R22.1 billion in the prior year.
I’m joined on the line by Henry Laas, the CEO of Murray & Roberts. Thanks very much for joining us, Mr Laas. Give us a flavour of what’s behind the metrics that I’ve just read out.
HENRY LAAS: Well, essentially the mining business had a very good result in the first half of the year. The revenue was down in oil & gas, as well as the power & water business, which resulted in reduced earnings from those two platforms. But we were able to maintain profit from continuing operations and spend for the group as a whole, the headline earnings per share, was at about 54 cents per share. It was actually a good performance from the mining business.
NOMPU SIZIBA: Yes, indeed. The mining business – just tell us, is that more international or it is at home or a mixture of the two?
HENRY LAAS: No, it’s a fully global business. We’ve got operations other than in South Africa and into Africa. We’ve got operations in North America, in Europe and in Canada specifically. We have operations in Mongolia, in Australia, in Indonesia. So it is a global business. Those jurisdictions are performing very well.
NOMPU SIZIBA: You’ve been working to move away from being a domestic, civil and building contractor, moving towards becoming a more global player in the area of engineering and construction. Of course, you’ve just outlined some of the regions that you are working in. What has that process entailed – and I see that you’ve made acquisitions in the area of oil & gas, power & water, for example.
HENRY LAAS: Yes, essentially the process started with the divestment of the construction business, the civil engineering and the building business in South Africa. Our focus then shifted to the oil & gas market sector, the underground mining market sector and power & water. The underground mining and the oil & gas are two global businesses and the opportunities that we see for those businesses are more in the international space. The power & water focuses more on South Africa and sub-Saharan Africa. Unfortunately the opportunity is not that great in this market at this point in time.
NOMPU SIZIBA: How did you fund your acquisitions and what is your debt picture looking like?
HENRY LAAS: That’s one of the strong points of Murray & Roberts. We’ve been able to maintain a very good balance sheet position throughout the down cycle we have experienced over the last couple of years. That has enabled us to pursue our growth plans, even though we are not yet in a position, but the oil & gas business and the mining business are doing exceptionally well and that is because of the strong balance sheet position and the strong cash position. Both of these acquisitions will be funded from their own cash.
NOMPU SIZIBA: For much of last year you guys were in the news around the issue of a German family company, ATON, wanting to buy up all the company’s shares, and the Murray & Roberts board resisted this. In the meantime ATON bought more and more of the equity on the open market and, as I recall, the situation has been quite tense. Where is that story today?
HENRY LAAS: ATON currently has a 44% shareholding in Murray & Roberts and the mandatory offer is still in the market. The long-stop date is March 31. Currently they are in the regulatory approval processes and should they be able to obtain the necessary approvals, the offer will become unconditional. If that happens before the long-top date, which is a date that ATON may elect to extend. Now, in the event of the transaction becoming unconditional, our stakeholders or shareholders will still have 10 business days from that date to elect whether they want to accept the offer at R17/share.
NOMPU SIZIBA: Right.
HENRY LAAS: The independent board’s view all along has been that the share value for the control of Murray & Roberts is between R20 and R22/share. Their offer is not in that range, and for that reason the independent board has advised shareholders the offer was below what it considered to be a fair price range for control. The share has not been trading at R17 in the most recent past, and for that reason it might be attractive to some of the shareholders to sign out at R17 should the offer become unconditional. But that is purely the choice the shareholders would have to make.
NOMPU SIZIBA: And then year-in, year-out, National Treasury has publicly announced that so many funds are going towards infrastructure investment. But so often people in your industry have complained over the past 10 years or so that there’s been limited business coming from government, and I suppose that’s in part the reason why you’ve chosen to become a more multinational type of company. What are your thoughts about government’s current commitments to infrastructure spending, and do you see that beginning to help turn the fortunes of the sector around?
HENRY LAAS: Well, we are no longer part of the heavy construction sector, the sector that we used to be part of historically, but we would welcome expenditure by government in the infrastructure space, specifically water infrastructure and then the power market. Those are the areas which would be of interest to us should the infrastructure plan be rolled out. But yes, promises have been made for a long period of time and we haven’t seen any real investment coming to market, and that has been problematic that our previous period.
NOMPU SIZIBA: Thank you, Mr Lass, very much for your time in giving us a background on what’s happening at Murray & Roberts.