chairman’s STATEMENT

DEAR STAKEHOLDER

ROY ANDERSEN GROUP CHAIRMAN

A year ago we committed ourselves to a far-reaching recovery process to lead the Group to a new path of sustainable growth. The past year has not been without its challenges and disappointments, but I can confirm that the recovery is well under way and that Murray & Roberts is far more solidly positioned to achieve the profitability and returns expected by our shareholders.

Challenges this year included our widening exposure on the Gorgon Pioneer Materials Offloading Facility (“GPMOF”), a worse than expected performance from our Middle East construction operation and a flat South African construction market.

HIGHLIGHTS

However, there was no shortage of highlights. The work we were contracted to do on GPMOF and various large projects in the Middle East has been completed successfully, and the final phase of the Gautrain Rapid Rail Link was opened to the public. Also, new contractual arrangements reached in the year mean that the Medupi
civils project will proceed with greater predictability and returns.

The Board is satisfied that the restructuring of the Group’s operating platforms, implemented towards the end of the 2011 financial year, has progressed well and that these are now appropriately positioned to source opportunities in their target sectors. Similarly, the Board is heartened by management’s progress in improving the Group’s risk-management model and procedures across both the project portfolio and the various operations.

Whereas the Group suffered 12 fatalities in the previous year, this reduced to four in the 2012 financial year. Obviously this is four deaths too many. We deeply regret the loss of life but take heart from the fact that decisive safety interventions are bearing fruit, especially when measured in terms of lost time injuries.

The health of our workforce enjoyed particular attention this year as various initiatives to combat HIV/Aids, tuberculosis and noiseinduced hearing loss were implemented.

The Group’s term debt was successfully restructured, extending the average repayment tenure. The success of the rights issue was another highlight. Its proceeds have been used to reduce the Group’s debt and improve financial flexibility, while providing adequate funding for a robust order book.

CREATING SHAREHOLDER VALUE

At the heart of Murray & Roberts’ Recovery & Growth strategy is the desire of both the Board and management to swiftly restore shareholder value. While the various restructuring initiatives implemented in the past year point to the likelihood of this key objective being achieved soon, regrettably the Board does not consider it advisable at this stage of the Group’s recovery to declare a dividend. Shareholders will be updated on the prospects of a dividend being declared for the next financial year at the time that interim results are announced in February 2013.

The process of extracting value from our various contract claims, which represent a total of some R2 billion in uncertified revenue, is ongoing. By the very nature of the complex processes involved, however, the successful resolution of significant portions of the amounts being claimed is unlikely in the short term.

Further to the applications lodged in terms of the Competition Commission’s (“Commission”) Fast-Track process in April 2011, the Commission presented unreported projects where previously unknown transgressions may have occurred. The Group has not yet reached finality with the Commission regarding these transgressions and potential penalty relating to historical anti-competitive practices. The Board continues to set the vision for and commitment to a morally and ethically sound culture within Murray & Roberts.

While an improvement in the return we deliver to our shareholders is of paramount importance, we are equally aware that being responsive to the needs and expectations of all stakeholders is the bedrock of sustainable value. Murray & Roberts’ contribution to society is not limited to paying wages, suppliers and taxes. The infrastructure we apply our skills to building is of lasting benefit to the communities in which we operate, and our investments in skills development and training improve the lives and employment prospects of thousands. In South Africa, R115 million was spent this year on training and development, 74% of that amount on black employees. The training and development spend includes funding for bursars and graduates, as well as technical and leadership development.

While Murray & Roberts becomes an increasingly significant contender in some of the world’s construction and engineering markets, we remain a proudly South African company. Beyond the tangible assets we build and the value we seek to create for shareholders, employees and suppliers, we take great pride in the contributions we make to society.

BOARD OF DIRECTORS

Having previously decided that the time had come for me to make way for a fresh perspective at the helm, I agreed to remain as chairman to oversee the transition to a new executive leadership team. This I did gladly, believing that continuity was of the greatest importance at the time. The transition has now been successfully concluded with an executive team that enjoys the Board’s full trust and support. As such, I am preparing to vacate the chair and retire from the Board in March 2013.

The Board has unanimously endorsed Mahlape Sello as my successor. Mahlape has served on the Board and as a member of the audit & sustainability committee for three and a half years. She knows the business intimately, including having a specialist’s insight into the legal aspects of the claims process. She has consistently proven herself to be a director of rare dedication and insight, and she has my full confidence and support during the handover process.

Non-executive director Tony Routledge has indicated his intention to retire from the Board at the Annual General Meeting in October 2012 after serving for nearly 19 years. Namane Magau, who is approaching nine years as a non-executive director of Murray & Roberts, also plans to retire from the Board, as will Sibusiso Sibisi, who wishes to limit his non-executive directorships to institutions focused on science and technology. During the year, Alan Knott-Craig resigned to take up the role of new chief executive of Cell C. My sincere thanks are extended to all of these directors for their outstanding commitment and valuable expertise. In June 2012, Thenjiwe Chikane joined the Board as a non-executive director, member of the audit & sustainability committee and risk management committee.

Shareholders are reminded that the Annual General Meeting of the Company will be held on 31 October 2012. The order of business is set out in the Notice of annual general meeting of this report.

OUTLOOK

The Group embarks on the new financial year with a generally buoyant order book, improved liquidity and a management team that has a well-defined focus on managing risk and on creating long term value for all of our stakeholders.

As mentioned, our involvement in Eskom’s power build programme has been put on a firmer footing and will account for a significant proportion of both the Construction Africa and Middle East and the Engineering Africa platforms’ income for at least the next three years.

Across the world, economic expectations remain uncertain and circumstances, particularly in Europe, continue to impact emerging markets including South Africa. The outlook for commodities is largely tied to the weakening ability of China and India – as well as some of the more resilient emerging economies – to maintain growth rates at least approximating the impressive gains of recent years.

At the time of writing, all indications were that commodity prices in general were holding up well, and that demand for minerals and oil & gas would underpin investment in their extraction. In this regard, the Group’s Construction Global Underground Mining platform, as well as its oil and gas investments in Australia and the Far East, are expected to continue contributing meaningfully to revenues and profits over at least the medium term.

Today, not only does the Group enjoy a wide geographic spread, it is also succeeding in diversifying into commodities and sectors to which it and its clients are exposed. All of these factors contribute, I believe, to a growing confidence in Murray & Roberts’ ability to resume robust and sustained growth.

Within South Africa, many hopes are now pinned on government plans, as stated in the Medium Term Expenditure Framework, to spend some R845 billion on infrastructural development. That this expenditure is inevitable and much needed is acknowledged by all, but it remains unclear how and when such a programme will be rolled out. Whatever the timing and extent of public-sector investment, Murray & Roberts is well placed and equipped to contribute positively and significantly to create infrastructure that will hold lasting value for all South Africans.

I believe the effective implementation of any infrastructural investment programme and the avoidance of delays, unforeseen over-runs and fruitless litigation requires a new compact between both the awarding and contracting partners to design projects that can be delivered on time, on budget and to maximum benefit. I have no doubt Murray & Roberts would eagerly participate in any dialogue between the public sector and the construction and engineering industry leading to such mutually beneficial outcomes.

While continuing to invest in capacity – most especially in our human resources – so that we are well positioned for any upturn in demand, our businesses focused primarily on southern Africa will be tasked with growing profitable businesses both in their traditional markets and elsewhere in Africa. The Group continues to pursue opportunities in the rest of Africa, outside of SADC, with some progress during the year.

Finally, I will take my leave of Murray & Roberts with many fond memories of outstanding people and an exceptional organisation that has added value to individuals and communities in South Africa and, increasingly, to many parts of the world. I have no doubt that the return to more acceptable financial returns and the sustainable success of the Group into the future are assured.

ROY ANDERSEN GROUP CHAIRMAN