Cautious outlook for construction shares

Posted On Sunday, 10 March 2013 19:34 Published by Commercial Property News
Rate this item
(0 votes)

Murray & Roberts' return to profitability, after two years of losses, comes amid the completion of projects that have caused the company major pain.

Henry Laas Murray & RobertsProblem contracts have dogged firms across the construction sector in recent years, particularly on large, complicated projects. They precede the tenure of M&R CEO Henry Laas, who took over as CE in mid-2011.

Their completion also comes at a time of recovery for the industry. For M&R, however, substantial claims on three of its most problematic contracts are still outstanding: the Gautrain, the Dubai Airport and the Gorgon Pioneer material offloading facility in Australia.

A ruling on the water ingress problem that has affected the Gautrain is expected by June. But an arbitration hearing on delay and disruptions is set to commence only next year. Commercial close on the project is expected in December 2015. The Dubai Airport arbitration is expected to wrap up by the end of the year, while a resolution on the Australian project will be pushed to next year. A ruling favourable to M&R has gone to appeal.

For the six months to December, M&R reported headline EPS of 69c, from the previous year’s loss of 190c/share. Group revenue rose 9% to R16,3bn and operating profit rose to R400m, from a R328m loss in the previous period. The group’s order book is at R48,3bn, of which 60% is outside SA.

The company’s earnings recovery has been attributed largely to its Australian operations. For this reason, analysts remain cautious about investing in M&R’s shares. Its SA operations are still affected by low levels of fixed investment spend by both the public and private sectors.

In addition, the competition commission’s investigation into construction sector collusion is still outstanding. M&R has made provisions for a fine, which it believes is adequate, though the newer Hawks investigation prolongs the uncertainty. Laas says M&R expects leniency but has no guarantee that it will be applied to all its applications to the commission.

Source: FM

Last modified on Friday, 21 June 2013 19:56

Most Popular

Balwin Properties announces R9 billion Munyaka Crystal Lagoon development in Waterfall, Midrand

Feb 06, 2020
Munyaka Crystal Lagoon
JSE listed Balwin Properties, a developer that cares about environmentally responsible…

Atterbury develops new Cape Town showroom for WeBuyCars

Jan 30, 2020
Atterbury We Buy Cars exterior view
Leading property developer and investor Atterbury has handed over the innovative…

New fire safety global standard being developed for buildings and infrastructure

Jan 30, 2020
TC Chetty RICS SA Country Manager
The Royal Institution of Chartered Surveyors (RICS) is collaborating with a coalition of…

382 Jan Smuts avenue gets caffein boost

Jan 28, 2020
Seattle
382 Jan Smuts, which is situated in the heart of Craighall, one of the busiest and most…

Green Building Council SA to reduce physical footprint

Jan 29, 2020
Dora Modise CEO GBCSA
Green Building Council South Africa (GBCSA) will be reducing their physical office…

Please publish modules in offcanvas position.