South Africa-based construction companies have been struggling due to a lack of infrastructure spending and a weak economy, but M&R, still the target of a take-over attempt by German family owned group Aton, is fast transforming into a multinational engineering and construction group.
The order book includes several multi-year contracts. Four new businesses were acquired (one post the June 30 year-end), and a joint venture established, for R800million in total, the group said at the release of its annual result.
Gearing was “prudent” and the financial position, even after a number of years of subdued profits, was “robust and sufficient to fund organic and acquisitive growth plans,” the management said.
In addition, the longer-term outlook for the natural resources markets remained encouraging.
M&R’s share price increased 2.71percent to close at R11.35 on the JSE yesterday.
In the Oil & Gas platform, strong growth was recorded in the order book. There were opportunities for both the Oil & Gas and Underground Mining platforms to further grow their order books.
The lower and declining order book in the Power & Water platform reflected the Medupi and Kusile projects nearing completion, and market conditions in South Africa.
Revenue for Oil & Gas platform decreased to R6.7bn from R8.5bn as projects were completed during the year and securing replacement work was delayed. The platform made an operating loss of R98m versus a R209m operating profit in 2018.
This was primarily due to a delay in the progressing and awarding of new projects resulting in insufficient project earnings to cover overhead costs, and losses incurred on two, now largely completed projects.
The Oil & Gas order book increased significantly to R23.1bn from R6.4bn.
The Underground Mining platform increased operating profit substantially to R814m from R471m. The order book increased marginally to R22.8bn.
Revenue and order book for the Power & Water platform fell to R2.5bn from R4.8bn, and to R900m from R1.5bn, respectively. It reported an operating loss of R32m versus a R134m operating profit previously.
Revenue declined due to limited new project opportunities in South Africa, as well as a loss incurred on a project for Sasol, which was in dispute.
The platform was targeting maintenance contracts from Eskom for its ageing fleet of power stations. Furthermore, investment in renewable energy and in new fuel storage terminals should also provide complementary market opportunities, management said.
The platform had also extended its services to complementary markets, including petrochemicals, metals and minerals, and paper and pulp.