M&R bets on going global

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Johannesburg - International markets are set to become an increasingly dominant part of the business and operations of Murray & Roberts (M&R).

Henry Laas, the chief executive of the listed construction and engineering group, said last week that the group’s international business was very attractive and a big part of its new strategic future.

Laas said 70 percent of the group’s total revenue of R19 billion and 80 percent of its total earnings before interest and tax of R669 million in the six months to December last year was generated by the group’s international business platforms, with 50 percent of total revenue and 66 percent of earnings interest and tax generated by Clough.

Clough, based in Australia, became a wholly owned subsidiary of M&R in December when M&R acquired the remaining 38.4 percent minority shareholding it did not already own for R4.4bn.

Laas said M&R’s construction Australasia oil and gas and minerals business platform “for now” comprised only the Clough business, but stressed that the group would like to see more than one business in this platform.

He confirmed that M&R had already identified a few targets and was now in the process of assessing which of them were the more attractive options.

Laas said that the group’s three-year recovery and growth plan would come to an end in June and its new strategic future was a work in progress but involved redefining the market sectors in which the group was active.

Natural resources, particularly oil and gas, were looking increasingly important to M&R and the group would definitely grow its international platforms, he said.

Laas said one of the most significant factors in M&R wanting to redefine its future was that the group had a market capitalisation of R11.5bn last month, which included 100 percent of Clough.

He said Clough had a market capitalisation of about R10bn shortly before its delisting in December, which implied the market valued the rest of M&R at only R1.5bn.

Laas said about 80 percent of M&R’s current business was in the construction space where it was very difficult for a company to differentiate itself because construction work was like a commodity and, for that reason, very competitive with very low margins.

M&R believed it could enhance its value if it increased its participation in other segments of the value chain, such as engineering and operations and maintenance.

Laas said the group was not in a hurry to have a new plan by June, but would have finalised its new strategic future by June next year.

“It’s is more important at this stage to get the right plan for M&R. The way in which the business is structured now with four operating platforms, we believe is a solid foundation.

“We can grow off this foundation for the next year or two without even implementing the new strategic vision for the group. But we are very keen to take the group on a new path,” he said.

Laas said one of the major objectives of the recovery and growth plan that had not yet been achieved was the resolution of the group’s three major claims totalling about R2bn involving the Gautrain, Gorgon Pioneer offloading facility in Australia and the Dubai International Airport.

These were largely out of M&R’s control but remained a significant obstacle in the way of implementing a new strategic direction. “Our legal position on all three claims is strengthening as time moves on. However, we are hoping to expedite settlement of the two international claims by attempting resolution outside of the legal process.”


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