Engineering and construction group Murray & Roberts (M&R) says it is “on the cusp of a multiyear period of strong earnings growth”, a claim underpinned by an order book that has grown to an all-time high of R60.7-billion, from R54.2-billion in 2020, as well as a strong project pipeline.
The JSE-listed group, which earned 81% of its R21.9-billion in revenue outside of South Africa last year, expects revenue to climb to R30-billion this current financial year and to remain elevated in the 2023 financial year, owing to the multiyear profile it its backlog.
In addition, it has near orders of R11.1-billion and a project pipeline of R84.1-billion, R30-billion of which is on a sole-tender basis.
CEO Henry Laas argues that the group’s exposure to the natural resources, industrial, energy, water and infrastructure markets holds the potential for “meaningful earnings growth in financial year 2022 and in the medium term”.
M&R also expects that most of its revenue for the upcoming period will be derived from its two international business platforms, which no longer include the Middle East, where its protracted exit is finally ending as a result of the imminent sale of companies in Abu Dhabi and Dubai to an investment company in the United Arab Emirates and the deregistration of units in Qatar and Oman.
The exit also completes the group’s withdrawal from the general construction market, after its South African infrastructure and building unit was sold to Concor in 2017.
However, the discontinued businesses in the Middle East continued to inflict pain during the year to June 30, 2021, when losses from discontinued operations of R253-million more than offset the R88-million profit made from continuing operations, resulting in a R180-million attributable loss.
Laas says the impact of discontinued operations will fall in the coming year and will become negligible from 2023 onwards.
Shareholders, Laas avers, should take comfort from the order book and from the fact that its strategy has yielded strong orders, primarily in its Australia-focused energy, resources and infrastructure unit (R37-billion) and its underground mining business (R23.2-billion), where orders are split almost evenly between Southern Africa and the rest of the world.
The backlog for the South Africa-aligned power, industrial and water unit was a paltry R500-million, however.
M&R has decided to retain the business largely because of growing pent-up demand for water, renewable energy and transmission infrastructure that could materialise in the medium term.
Overall, 80% of its order book was located outside of Southern Africa and the underperforming South African market.
“The risk in the group today is project delivery, with your strategy having translated into a strong order book we now need to deliver this order book profitably,” Laas says, while indicating that the planets were finally aligning for M&R.
No dividend was declared for the past financial, primarily because the growth in the order book could increase potential working capital requirements.