Underground Mining + Oil & Gas + Power & Water
FOR THE YEAR ENDED 30 JUNE 2019
This report presented by the directors is a constituent of the consolidated and separate annual financial statements at 30 June 2019, except where otherwise stated. All monetary amounts set out in tabular form are expressed in millions of Rands, except where otherwise stated.
Murray & Roberts Holdings Limited is an investment holding company with interests in the underground mining, oil & gas and power & water markets.
The Company does not trade and its activities are undertaken through subsidiaries, joint arrangements and associates. Information regarding the Group’s major subsidiaries and associate companies appears in Annexure 1 of the consolidated financial statements.
At 30 June 2019 the Group recorded attributable earnings of R337 million (FY2018: R267 million), representing diluted earnings per share of 83 cents (FY2018: 66 cents). Diluted headline earnings per share was 78 cents (FY2018: 46 cents).
Full details of the financial position and results of the Group are set out in these consolidated and separate financial statements. The consolidated and separate financial statements have been prepared in accordance with IFRS. The accounting policies have been applied consistently compared to the prior year, except for the adoption of new or revised accounting standards as set out in note 46 of the consolidated financial statements.
The Board is satisfied that the consolidated and separate financial statements comply with IFRS on a going concern basis following an assessment of solvency and liquidity requirements.
The directors are of the opinion that the Company and the Group have adequate resources to continue in operation for the foreseeable future based on forecasts and available cash resources and accordingly the annual financial statements have been prepared on a going concern basis.
The Group’s uncertified revenue is included in amounts due from and to contract customers in the statement of financial position. The uncertified revenue has been recognised through the statement of financial performance in current and prior periods in respect of claims and variation orders on projects (refer to note 9 of the consolidated financial statements), relating mainly to claims on projects in the Middle East and in Power & Water.
A cumulative total revenue of R0,7 billion being amounts due from contract customers (net of payments received on account of R290 million (FY2018: R288 million)) has been recognised in the statement of financial position at 30 June 2019 (FY2018: R1,3 billion) as the Group’s uncertified revenue in respect of claims and variation instructions on the Group’s projects. Recognition of these assets is in accordance with IFRS 15: Revenue from Contracts with Customers.
In FY2016 the Board decided to close the business in the Middle East. The final four projects have been completed during the year and the business recorded an operating loss of R56 million (FY2018: R34 million operating loss), primarily due to ongoing legal costs and a small overhead cost. Going forward, the business in the Middle East is expected to be accounted for as a discontinued operation.
Resolution of these extremely complex legal and financial claims and variation instructions is yet to be finalised, and may be subject to arbitration and/or negotiation. This could result in a materially higher or lower amount being awarded finally, compared to that recognised in the statement of financial position at 30 June 2019.
Implementation of IFRS 15 (Revenue from Contracts with Customers)
The Group has applied IFRS 15 for the first time in the current financial year. IFRS 15 superseded all previous revenue requirements in IFRS (IAS 11: Construction Contracts, IAS 18: Revenue, IFRIC 13: Customer Loyalty Programmes, IFRIC 15: Agreements for the Construction of Real Estate, IFRIC 18: Transfers of Assets from Customers and SIC 31: Revenue – Barter Transactions Involving Advertising Services) and applies to all revenue arising from contracts with customers.
The cumulative effect of initially applying IFRS 15 was concluded at an amount of R1,1 billion at 1 July 2018. The IFRS 15 adjustment relates mainly to amounts in the Power & Water platform and the Middle East. The Group remains confident that all revenue recorded as uncertified will be certified and paid once attendant commercial matters have been resolved.
Refer to note 46 (New standards and interpretations) of the consolidated financial statements for more detail.
Implementation of IFRS 16 (Leases)
In the 2020 financial year IFRS 16 will be implemented, as the standard is applicable to financial years commencing on or after 1 January 2019.
The Group has decided that it will apply this standard to its leases retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application. Therefore comparatives will not be restated.
The cumulative effect of initially applying IFRS 16 is currently estimated to be between R0,7 billion and R1,1 billion as at 1 July 2019. This will result in both the recognition of a right-of-use asset and a lease liability in terms of the standard.
Refer to note 46 (New standards and interpretations) of the consolidated financial statements for more detail.
The Group operated under three strategic platforms in financial year 2019. An analysis of the Group’s results reflects the results and financial position of each platform (refer to Annexure 3 of the consolidated financial statements).
Full details of the authorised and issued capital of the Company at 30 June 2019 are contained in note 12 of the consolidated financial statements.
Particulars relating to the Vulindlela Trust are set out in note 13 of the consolidated financial statements.
At 30 June 2019 the Vulindlela Trust held 10 624 366 (FY2018: 10 624 366) shares against the commitment of shares granted by the Vulindlela Trust totalling 5 452 905 (FY2018: 5 759 573) ordinary shares. The shares held by the Vulindlela Trust were purchased in the market and have not been issued by the Company.
The total number of ordinary shares that may be utilised for purposes of the Murray & Roberts Holdings Limited Employee Share Incentive Scheme (“Scheme”) is limited to 5,0% (FY2018: 5,0%) of the total issued ordinary shares of the Company, currently 22 236 806 (FY2018: 22 236 806) ordinary shares. As no shares have been issued to date in connection with the Scheme, this limit remains unutilised.
In terms of the Forfeitable Share Plan (“FSP”), employees were allocated shares during the year by the remuneration committee totalling 5 092 328 shares (FY2018: 4 696 591). The shares held in escrow by the FSP on behalf of the beneficiaries were purchased on the market and have not been issued by the Company.
The Board reconsidered the Company’s dividend policy and decided to maintain a stable annual dividend. This annual dividend will be subject to the Group’s financial position and market circumstances and may be supplemented from time-to-time with a special dividend. Considering the Group’s strong cash position, the Board resolved to increase the gross annual dividend to 55 cents (FY2018: 50 cents) per ordinary share for the year ended 30 June 2019. The dividend will be subject to the dividend tax rate of 20%, which will result in a net dividend of 44 cents per share to those shareholders who are not exempt from paying dividend tax. The dividend has been declared from income reserves.
The number of shares in issue as at the date of this declaration is 444 736 118 and the Company’s tax reference number is 9000203712.
|The relevant dates are:|
|Last day to trade (cum-dividend)||Tuesday, 1 October 2019|
|Shares to commence trading (ex-dividend)||Wednesday, 2 October 2019|
|Record date (date shareholders recorded in books)||Friday, 4 October 2019|
|Payment date||Monday, 7 October 2019|
No share certificates may be dematerialised or rematerialised between Wednesday, 2 October 2019 and Friday, 4 October 2019, both dates inclusive.
On Monday, 7 October 2019, the dividend will be electronically transferred to the bank accounts of all certificated shareholders where this facility is available. No dividend will be paid to shareholders who have not provided their banking details to the transfer secretary (Link Market Services South Africa Proprietary Limited). Accordingly, for non-compliant shareholders, their cash dividend will remain unpaid until such time as they have provided relevant banking details to the transfer secretary. No interest will be paid for unpaid dividends.
Shareholders who hold their shares in dematerialised form will have their accounts held by the Central Securities Depository Participant or broker credited with their dividend on Monday, 7 October 2019.
Acquisition of Gulf Coast Division
On 15 February 2019, Clough USA Inc., which forms part of the Oil & Gas platform, acquired the business of Saulsbury Industries Inc., Gulf Coast division for a consideration of R79 million.
In accordance with the asset purchase agreement an additional consideration of up to approximately R42,3 million may be payable to Saulsbury Industries Inc., subject to the successful award of a significant contract within the US to Clough USA Inc. R38,6 million of this amount has been recognised as contingent consideration at statement of financial position date.
With respect to the above mentioned contingent consideration, in August 2019, Clough US Inc. was awarded a petrochemical engineering, procurement and construction contract (EPC) in the US, valued at $620 million. Clough US Inc. expects to receive full notice to proceed on the project by October.
The acquisition of the Gulf Coast division was structured through an acquisition of assets.
The Gulf Coast division’s capabilities includes engineering services, a construction operation, equipment hire, a project controls organisation and a supply chain organisation. The acquisition aligned with Clough’s strategy to extend the Oil & Gas platform’s EPC service offering to the growing oil and gas and petrochemical sectors in North America.
The net cash outflow arising from the acquisition was R79 million.
Acquisition of Terra Nova Technologies (“TNT”)
On 1 May 2019, Cementation Americas, which forms part of the Underground Mining platform, acquired 100% of TNT for a total consideration of R635 million.
The acquisition of the TNT business was structured through an acquisition of assets of TNT USA Inc. and a 100% share purchase of TNT Chile Limitada.
TNT provides services to the global mining industry (both surface and underground) and design, supply and commission overland conveyors, crushing/conveying systems, mobile stacking systems, including dry stack tailings and heap leach systems, crushing and screening plants and in-pit crushing and conveying systems. TNT also provides process equipment for mining projects. The acquisition of TNT complements the engineering and construction services of Cementation Americas and the Underground Mining platform.
The net cash outflow arising from the acquisition was R585,6 million.
Refer to note 35 of the consolidated financial statements for more details on the above acquisitions.
Discontinued operations include the close out of retained assets and liabilities, following the sale of Genrec operations and the Southern African Infrastructure & Building businesses in prior financial years. These operations meet the requirements in terms of IFRS 5: Discontinued Operations and have been presented as discontinued operations in the Group’s statement of financial performance.
During the year under review the following special resolutions were passed by shareholders:
The directors are not aware of any other matter or circumstance arising since the end of the financial year not otherwise dealt with in the Group and Company annual financial statements which significantly affects the financial position at 30 June 2019 or the results of its operations or cash flows for the year then ended. Events that occurred after the reporting period were indicative of conditions that arose after the reporting period. Such events include, but are not limited to the receipt of the vendor loan receivable outstanding at year end as well as the acquisition of OptiPower Projects by the Power & Water platform, effective 1 July 2019. The above mentioned events were non-adjusting events and hence had no impact on the Group’s results for the year ended 30 June 2019.
The directors of the Company held direct beneficial interests in 1 059 813 ordinary shares of the Company’s issued ordinary shares (FY2018: 724 256). Details of the ordinary shares held per individual director are listed below and also set out in note 42 of the consolidated financial statements.
|30 June 2019|
|DF Grobler||108 296||1 088 242|
|HJ Laas||951 517||1 923 326|
|30 June 2018|
|DF Grobler||41 569||836 567|
|HJ Laas||682 687||1 862 390|
At the date of this report, these interests remain unchanged.
At the date of this report, the directors of the Company were:
SP Kana (chairman); R Havenstein; NB Langa-Royds; XH Mkhwanazi; KW Spence; AK Maditsi; TE Mashilwane and DC Radley.
HJ Laas (Group chief executive) and DF Grobler (Group financial director).
The company secretary’s business and postal addresses are:
PO Box 1000, Bedfordview, 2008
Douglas Roberts Centre, 22 Skeen Boulevard Bedfordview, 2007
The appointment of PwC as external auditor will be for the financial year ending 30 June 2020 and the current auditors, Deloitte, will complete the audit of the financial results for the financial year ending 30 June 2019. PwC will be appointed post the finalisation of the current year audit by Deloitte.
Shareholders will be asked to approve the appointment of PwC as external auditors for Murray & Roberts at the Company’s 2019 Annual General Meeting, scheduled on 28 November 2019.