M&R not planning capital raise to address urgent need for cash


JSE-listed multinational engineering and contracting company Murray & Roberts (M&R) is continuing to review several strategic options to address the ongoing and urgent cash flow needs of its energy, resources and infrastructure (ERI) platform, but at this stage is not contemplating raising new capital.

The sale of M&R’s 50% non-strategic shareholding in the Bombela Concession Company (BCC), which operates the Gautrain, is one option the group is considering to increase the working capital required to execute its R57.9 billion order book.

M&R reported last week the process for the potential disposal of its BBC shareholding is progressing well and several parties have expressed interest in acquiring the asset.

M&R has valued its shareholding in the BCC at more than R1.4 billion.


The group is however keeping mum about reports that its Australia subsidiary Clough, the brand name for its ERI platform, is for sale.

Recent reports in the Australian media have speculated about the possible sale of Clough and possible losses on the Snowy 2.0 hydroelectric power project in Australia; it has been suggested the estimated overruns on the project currently amount to AU$2.1 billion (R24.15 billion)*.

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Clough, which has a 35% shareholding in a joint venture with Italian company Salini Impregilo, was awarded the estimated AU$4 billion (R46.01 billion) civil works packages for the Snowy project in April 2019.

M&R group investor and media executive Ed Jardim told Moneyweb the group is trading under a cautionary and could not comment on any issues other than what it has disclosed in its announcements.

However, Jardim highlighted that the announcement mentioned margin deterioration on the Traveler project in the US and Waitsia project in Australia, “not project losses”.

“Adjusting previous profit recognition on a project for new information, which leads to margin deterioration, does not automatically imply the project will be in a loss position,” said Jardim.

Responding to the speculation about possible losses on the Snowy project, Jardim said: “Presently we are only aware of margin deterioration on the two projects we disclosed in the announcement.”

Shares in M&R plummeted 36.5% to R4.20 per share on 17 October after the company issued a trading statement, reporting that its financial results for the six months to end-December 2022 will be at least 100% down on the previous corresponding reporting period.

M&R at the time attributed this bleak forecast to a disruption to the delivery of its Traveler and Waitsia projects, resulting in a significant margin deterioration and contributing to the pressure on the group’s working capital.

Shares in M&R closed 2.35% higher at R4.35 on Friday.

In a business update published on Sens last week, M&R said engagements with clients on the Traveler and Waitsia projects continue to be constructive, with the objective of improving their commercial positions.

But it said it does not yet have certainty regarding the precise impact on earnings per share for the financial results for the six months to end-December.

Both projects are expected to be near completion by end-June 2023.

M&R said all other projects within the ERI platform are progressing according to expectations.

It expects to provide a further update to shareholders and the market as soon as possible, about its plans to address the group’s cash flow needs and its earnings per share guidance “once there is more certainty on these ranges”.


The group has some more positive news about its sub Saharan-focused power, industrial and water platform (PIW), which has been facing challenging market conditions.

It said the PIW business continued to face challenging market conditions in the year, but is actively engaging with independent power producers (IPPs) that have been shortlisted for projects in the South African renewable energy sector and is confident that several work packages will be secured in the near term.

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M&R said its OptiPower Projects business is in final negotiations with a developer on three significant contracts, as part of Round 5 of the Renewable Energy Independent Power Producer Procurement (Reippp) programme.

“These three contracts make up a significant portion of the platform’s R1.9 billion near order pipeline and an imminent award is expected,” it said.

“The group believes the current emphasis on increasing investment in utility scale renewable energy projects is expected to enable the platform to return to profitability in the near term,” it added.

Analyst’s view

Rowan Goeller, an analyst at Chronux Research, said the good news is that the first update to the problems M&R is experiencing with the Traveler and Waitsia projects “is not more bad news”.

“There has been no deterioration in the initial assessment of those projects, which in the construction world one has to read as a good thing, because quite often the first news you hear about loss-making projects is by far the best news.”

Importantly, added Goeller, M&R said it does not see the need for a capital raise and, for the time being, these problems can be contained in-house.

This is positive, particularly as it’s the second time M&R has mentioned this in announcements, he said.

Goeller is surprised at the speculation about the possible sale of Clough.

He said Clough is integral to M&R and the core part of the business, because it is where significant portions of the order books sit and where M&R’s focus has been for the past few years.

“It sounds like a bit of a rumour not based on a huge amount of facts,” he said.

“From a M&R point of view, it doesn’t make sense and they are not in a position where they need to sell it either – and whoever is going to buy it is going to buy it with two loss-making projects.”

*AU$1 = R11.50

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