Murray & Roberts records heavy annual loss as major projects weigh

Posted On Thursday, 01 September 2011 02:00 Published by Commercial Property News
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Construction group Murray & Roberts said on Wednesday that although it had made significant progress in resolving contractual claims, the estimated costs to complete, inclusive of penalties, on a number of major contracts increased significantly resulting in a loss for the year

Henry Laas Murray & RobertsThe group reported a full year diluted headline loss per share of 503 cents for the year ended June, from diluted headline earnings per share of 340 cents previously.

Revenues from continuing operations increased by 10% to 30.5 billion rand, from 27.9 billion rand earlier, while a loss for the year of 1.735 billion rand was recorded after accounting for significant charges and contract completion costs.

The group reported a healthy order book of 55 billion rand, from 44 billion rand in 2010.

Murray & Roberts stressed that it retained the capability and capacity to execute major complex projects, but would in future be subject to more effective risk management processes.

The group said it successfully renegotiated its contractual arrangements with Hitachi for the delivery of the mechanical erection of the Medupi and Kusile power stations. "The revised contract terms have significantly de-risked the commercial position on these projects and future profitability on the power projects is now probable," it said.

Murray & Roberts Construction, in a joint venture, was undertaking the majority of the civil works at Medupi Power Station. "The contract is progressing satisfactorily despite the significant scope growth on the contract.

"Negotiations are in progress with Eskom to resolve outstanding claims related thereto," it said.

And despite substantial completion of the Gautrain Rapid Rail Link project, the group made a material loss on its participation in construction activities on this project. During the year additional charges were taken on the construction contract relating to the impairment of contract receivables, estimated costs associated with water ingress rectification work, delay penalties as well as increased costs to complete the project by January 2012.

The group said it also encountered late site access, adverse weather conditions and material scope changes at its GPMOF project in Western Australia. "A significant charge was taken during the year in respect of the estimated costs to complete the project. The anticipated completion date of the project is January 2012," it said.

Murray & Roberts said that the value of still to be agreed group contract claims and variation orders included in the statement of financial position at June 30 was 1.968 billion rand, net of on-account payments of 334 million rand. The majority of this balance relates to claims in respect of Gautrain, Medupi Civils Works, GPMOF and Dubai Airport," it said.

Henry Laas, group chief executive, also pointed out that the group had set aside provisions for "potential penalties" relating to any potential anti-competitive behaviour within the construction industry.

"The group has committed to full co-operation with the Competition Commission to eradicate anti-competitive behaviour within the construction industry. Regrettably, and due mainly to late notifications by former subsidiary company executives, a limited number of projects were identified where possible transgressions may have occurred," Laas said.

As a consequence, the group lodged its applications for these projects in the Competition Commission's Fast Track settlement process, it said.

Last modified on Thursday, 27 June 2013 22:57

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