Economic performance

KEY INDICATORS	Performance
Performance dimension	2012		2011		Movement
Economic contribution
Value added to employees	14 148		9 824
Value added to providers of finance (net)	542		578
Value added to Government	245		196
Value added to maintain and expand the Group	(52)		(1 150)
Total value added	14 883		9 448

Value added is the measure of wealth the Group creates through its operations by adding value to the cost of raw materials, products and services purchased. The chart summarises total wealth created and how it was shared between the stakeholders.

Value added to employees through payroll payments increased by 44%, while operating covering lease costs and net interest expense paid to providers of finance decreased by 6%. Company tax paid to Governments increased by 25% due to profitability in tax paying jurisdictions. As a consequence of the losses incurred by the Group, value added to maintain and expand the Group reduced due to a decline in reserves available to ordinary shareholders.

The Group did not receive any significant financial assistance from Government during the reporting period.

Everything that is not the natural or agricultural environment is the built environment. This is where Murray & Roberts has played a significant role throughout its history, delivering the infrastructure and facilities required for sustainable growth of the economies in which it operates.

Some of the greatest challenges we face as humankind are to satisfy the growing global demand for transport and logistics, power and energy, water and sanitation, telecommunications, health and education, accommodation and facilities, and mineral extraction and beneficiation infrastructure. Our economic contribution centres on the delivery of this infrastructure, without which no economic and social development is possible.

Infrastructure owners rely on the various stakeholders within the built environment to develop, finance, design, engineer, construct, operate and supply inputs for delivery of infrastructure. We support infrastructure delivery through our core competency of engineering and construction, and through the provision of selected construction products and operations.

The quantifiable benefits of our contribution to society are not easily identified, but considering the positive impact of an adequate built environment on socioeconomic development and the scale required to make the difference measurable, the significance Murray & Roberts has attained in its market over more than 100 years, offers some testimony in this respect.

KEY INDICATORS	Performance
Performance dimension	2012		2011		Movement
Financial performance
Revenue	35 406		30 535
Operating costs	35 567		31 213
Cash and cash equivalents	3 388		3 101
Operating cash (outflow)/inflow (before dividends)	(2 290)		334
Order book relative to order book related revenues	1,4 times		2,0 times
Opportunities in the active pipeline (R billion)	74		86

FINANCIAL SUSTAINABILITY

The financial sustainability of engineering and construction businesses hinges on the following value drivers:

	Financial position strength which impacts the Group’s credit rating for performance bonds and working capital
	Sound cash flows to support investment and growth
	A formalised project procurement system which defines our risk appetite
	The project order book relative to revenues.

The Group’s year-end cash and cash equivalents position was R3,4 billion (2011: R3,1 billion) after the operating cash outflow of R2 290 million (2011: R334 million cash inflow) and proceeds received on the rights issue to shareholders of R1,9 billion net of transaction costs. The primary contributors to the operating cash outflow was GPMOF, with operating losses of R1,2 billion in the current year, as well as contractor costs relating to legacy contracts in the Middle East.

Procurement of projects is the primary source of risk for the Group. The Group risk appetite sets the operational parameters for risk. Prospects are filtered against criteria such as value, country, legal system and scope, and the level of authorisation required is specified. The opportunity management system (OMS) supports the evaluation and approval of project opportunities in the context of the risk appetite. At 30 June 2012, opportunities in the active pipeline amounted to R74 billion (2011: R86 billion).

The Group’s order book declined by 18% to R45 billion due to termination of the Aquarius contract and the de-scoping of work on the power programme by Hitachi. The order book for Australianbased entities has increased by R8,2 billion year on year. The average margin on the order book is within the Group’s strategic range of 5,0% to 7,5%. The order book is located in markets that have been determined to be sustainable going forward

SUMMARY OF ANNUAL FINANCIAL STATEMENTS

The following pages provide an overview of the Group’s financial performance, ahead of the audited annual financial statement.