Annual Integrated Report




Underground Mining + Oil & Gas + Power & Water



Taking Engineered Excellence from a slogan to a philosophy that pervades decisions and actions throughout the Group, depends largely on the calibre and commitment of Group leadership.


The reclassification in March 2017 from the heavy construction to the diversified industrial subsector of the JSE, marked the beginning of a new development trajectory for the Murray & Roberts Group as a multinational provider of specialised engineering and construction services, primarily in the metals and minerals, oil and gas and power and water market sectors.

This strategic definition is an effective response to market cyclicality, and the plan on which the Group’s resilience and growth depends. It is gratifying to reflect on the progress made in the last year to further diversify the Group’s international presence and to enhance its core market segments positioning, as well as the progress made to achieve strategic positions in selected high-growth complementary market sectors. Most pleasing has been the Group’s outstanding safety performance, with no fatal incidents and a world-class lost-time injury frequency rate. This was achieved with a project portfolio of more than 100 projects around the world and is a remarkable outcome.

The Independent Board has been at the forefront of the engagement with ATON, shareholders and regulators, in respect of ATON’s mandatory offer to acquire up to 100% of the issued ordinary shares of Murray & Roberts it does not already own. Developments in the year were mostly related to the regulatory approval processes. It is worth mentioning that the Independent Board has enjoyed a more positive rapport with ATON as a 44% shareholder in the Group, since the appointment of its new chief executive officer, Georg Denoke, in July last year. Following the recommendation by the Competition Commission that the merger involving ATON and Murray & Roberts be prohibited, the parties settled a timetable for contested proceedings to be conducted before the Competition Tribunal. The hearing of the matter will take place in December 2019 and January 2020.

The Independent Board has, through the appointed independent expert, BDO Corporate Finance Proprietary Limited, refreshed the Group’s valuation twice since the Group’s interim results in March 2019, taking into account the latest market developments. The Independent Board maintains its view that a fair value price range for control of Murray & Roberts is between ZAR20.00 and ZAR22.00 per ordinary share. Further detail on the Independent Board and its duties is disclosed in the governance report.

The Group’s financial performance in the year was in line with expectations. A record performance from the Underground Mining platform was offset by disappointing financial results from the Oil & Gas and Power & Water platforms, which continued to experience weak market conditions and suffered substantial losses on a few projects in highly competitive markets.

With the building blocks of the New Strategic Future plan firmly in place and a generally more positive medium-term outlook across the Group’s market sectors, reflected in a much-improved order book, the Board expects an improvement in shareholder value creation in the coming years.

Engineered Excellence

The Group’s philosophy of Engineered Excellence underpins its competitiveness and reputation as a well-governed, values-driven and ethical organisation. This approach, not only to project delivery, but across all activities – including how the Board discharges its fiduciary responsibilities – is achieved through continual improvement of the standards, systems, practices and reporting that brings this philosophy to life.

Taking Engineered Excellence from a slogan to a philosophy that pervades decisions and actions throughout the Group, depends largely on the calibre and commitment of its leadership. Culture, whether it pertains to specific aspects such as health and safety or more broadly to ethical conduct, must be exemplified by leaders. The Group’s high standards, evident in all businesses and projects, demonstrate that the Group’s value system is reflective of the attraction, appointment and succession of quality leaders who are responsible for implementing Group strategy.

The philosophy is best displayed by the extent to which the Group’s health and safety culture has matured. A confluence of initiatives contributed to this progress, including the formulation of a Group HSE Framework that defines policies, minimum standards, reporting and assurance processes, personal commitment and accountability, and the sharing and implementation of lessons learnt across the Group. An important initiative in the year was to review the effectiveness of this framework, which included a culture survey on a sample of projects across the business platforms. We are encouraged by the outcome of this review, which indicates that the Group’s safety culture continues to mature. Our strength is leadership commitment to safety, with employees feeling there is genuine care for their safety and that they are empowered to stop work in unsafe circumstances. Opportunities to improve include further streamlining of the operating standards, change management, training, contractor safety performance and recognising safety achievements. Furthermore, innovative approaches are considered and applied to drive continual improvement. A recent example is the Neuroleadership programme, which applies neuroscience to safety leadership, aimed at improving leadership engagement skills and employee involvement in health and safety practices.

Engineered Excellence also requires effective risk management that responds to changes in the Group’s risk profile. Stronger oversight processes have been put in place to mitigate the risk associated with an increasing proportion of fixed-price commercial arrangements in the Group’s order book. With an emerging trend of clients shifting more risk towards contractors, in certain instances also by requiring project funding solutions and possible equity participation, the Board is comfortable that the necessary oversight is in place to assess all opportunities.

The fourth industrial revolution is a multi-faceted concept that impacts every company differently depending on its business model. The Board is cognisant of the profound opportunities that digitalisation heralds for operational excellence, based on the pockets of technological advancement that already exist within the Group as well as developments in other sectors. To develop an understanding of the likely impact on the Group, the Board has commissioned a digital maturity assessment, which will provide insight and establish a baseline for the development and measurement of a consolidated digital strategy. Engineered Excellence will inform our approach – carefully researched assumptions, detailed planning and systematic execution to ensure that the intended outcomes are achieved.


The Group has a wide international footprint and its reputation is in effect determined by regional businesses executing local projects. Legitimacy at national and community levels is critical, not only in managing the impact of local dynamics on project delivery but also on the Group’s credibility as an ethical and responsible multinational organisation. This extends to ensuring that local contracting partners align to the Group’s standards in terms of project delivery imperatives such as managing health and safety risks, as well as those pertaining to compliance, conduct and reputation.

The Group’s diversity policy, introduced last year, formalises our belief that diversity of race, gender, skills and perspectives can improve performance. It guides the Group’s businesses in their responses to the specific diversity priorities in the countries where they operate. Board targets for gender and race diversity were met last year, with Board composition at 50% black and 30% female directors. For businesses in South Africa, succession planning has been aligned to employment equity objectives.

The emphasis on Board succession planning over several years has resulted in a well-constituted and diverse Board, with collective expertise relevant to the Group’s strategy and the macroeconomic and socioeconomic realities within its markets. No directors were appointed to, or resigned from, the Board in the year due to the ATON mandatory offer and resulting restrictions to director changes. Self-assessments on Board and committee effectiveness in the year were positive overall. The committees are working well and in an integrated way to ensure that all relevant considerations are brought to bear on our deliberations and decisions.

Ethical leadership is inculcated in the Group through policies, procedures and a Code of Conduct. Mechanisms to ensure adherence with the code include a declaration that all executives involved in preparing and authorising project tenders must sign. They declare that they have not committed and are unaware of anyone else affiliated with the tender having directly or indirectly committed any unethical, unlawful or uncompetitive practice in the preparation and submission of the tender. The declaration is binding throughout the project life cycle. Similarly, all Group executives make written declarations twice a year, also in relation to competition law compliance.

The Group is recognised for its ability to recruit employees from local communities in line with localisation requirements, in many countries with different cultures, and to train them to meet the Group’s high expectations for safety and productivity. It is worth recording the extensive training and development provided to employees from local communities during the construction of the Medupi and Kusile power station projects in South Africa, with approximately 1 900 artisans trained to date. It is concerning that due to the weak local economic environment only a few of these artisans are likely to find employment on completion of these projects, despite their skills and experience. During the year, as a result of the South African Government’s commitment to provide free higher education, it was decided to shift the focus of the South African bursary programme from providing support for tertiary study to technical skills training.

Retrenchments are an unfortunate reality in a project business. However, the process of right-sizing for lower future revenue potential in the Power & Water platform has been carefully considered to ensure that the platform remains capacitated to pursue its strategy. Retrenchments have been dealt with in a fair and responsible manner.

By way of an update on the Department of Labour’s public inquiry to determine the cause of the tragic incident that occurred in October 2015 at our Grayston temporary works project in Sandton, Johannesburg; the inquiry was concluded in September 2018 and we await the findings. It is our sincere hope that this matter will be resolved soon to bring some closure to everyone affected.

Expectations and appreciation

The IMF has revised its forecast for global economic growth in 2020 to 3.5%, marginally down from its earlier forecast of 3.6%. Downside risks to the global economy and therefore also to growth prospects in the Group’s markets include escalation in trade and technology tensions between the USA and China, a no-deal Brexit and geopolitical volatility specifically in the Middle East. These factors could weaken confidence, discourage investment and dislocate global supply chains, slowing global growth.

The strategic maturity of the Underground Mining platform, with its leading regional positions and exposure to a diverse range of commodity types, should enable it to maintain its earnings at current high levels. The Oil & Gas platform’s tactical shift into high-growth infrastructure and mining markets in Australasia, and its newly established presence in the USA, should support a return to profitability in the coming year. With the upswing in capital expenditure in its core markets still envisioned from 2022, the platform is expected to accelerate earnings recovery in the medium term, especially given the buoyant USA petrochemicals market. The sustainability of the Power & Water platform is predominantly dependant on investment in its core market sectors in South Africa, although it is also focused on expanding in sub-Saharan Africa. Strategically, the platform has taken all the right steps to position itself in market segments with growth potential, such as the power transmission and distribution sector. The South African Government’s intention to unbundle the national power utility, Eskom, into three divisions focused on generation, transmission and distribution, combined with the much-needed investment in South Africa’s water infrastructure, should open up opportunities for this platform.

As a multinational Group headquartered in South Africa, and with businesses that depend on investment in the South African economy, the Board welcomes the intentions of the newly elected administration to revitalise an ailing local economy. However, we are under no illusions about the difficulties that lie ahead, especially given the unpopular policy choices needed to achieve economic growth in excess of population growth. In particular, real progress must be made in the fight against corruption, given its profound implications for the country’s credibility as an investment destination. Besides the staggering cost of governance failure and the pressure it places on government spending, impunity for wrongdoers poses a wider threat to political, economic and social stability. Whereas the Board welcomes the transparency of the commissions of inquiry instituted by the President, a step-change in accountability depends on rebuilding the key institutions that spearhead the fight against corruption and the successful prosecution of those in the public and private sectors found to be corrupt. These complicated imperatives will take time and the commitment of appropriate resources.

The Group’s strategy is well defined and implementation is gathering momentum. The outlook for an improvement in the Group’s performance is encouraging. With an order book nearing record levels, gearing at a comfortable level and a robust cash position, the Group is well positioned to pursue its growth plans. Engineered Excellence, underpinned by continuous improvement and innovative approaches, will drive the Group’s competitiveness, resilience and reputation – the cornerstones of sustainable value creation.

On behalf of the Board, I convey our thanks to all our stakeholders, specifically our shareholders for their support, and to the Group’s executive teams and employees for their extraordinary commitment to delivering excellence.


Group chairman