Mathabo Le Roux
28 August 2008
Johannesburg — WHILE many sectors of the economy are choking in a high inflation environment, construction companies are powering ahead, underpinned by the government's multibillion-rand infrastructure expansion programme.
A huge surge of 144% in the order book of SA's largest construction firm Murray & Roberts shows the good times are rolling for the notoriously cyclical sector.
Murray & Roberts' order book is now at a gargantuan R55bn as the group bagged a significant chunk of new government projects, notably R20bn worth of contracts on new power stations that will be built by Eskom.
But infrastructure development in other regions also bolstered the order book, with R11,5bn worth of new contracts signed in the Middle East (compared to R2,2bn last year) and further construction work to be undertaken in the rest of southern Africa increasing 30% to R12,4bn from a year earlier.
Murray & Roberts' share price yesterday rose more than 6% on the release of robust results, which reflected a 63% rise in operating profit to R2,4bn on revenue of R27,9bn, up 57%, from a year before. Headline earnings climbed almost 70% to 550c per share.
Despite the group maintaining an aggressive capital expenditure programme, spending R1,7bn in the year, operating cash flow of R3,1bn was up 61%, putting the group in a healthy year-end net cash position of R4,3bn, compared to last year's R2,6bn.
An operating margin of 8,6% was achieved, up from 8,2% last year, and the highest recorded by the group .
In another positive development for the group, advance payments on major projects and improved payments in the Middle East saw working capital decrease to R445m, compared to the previous year's R637m.
Reuben Beelders, an analyst with Gryphon asset managers, said the group had outperformed his expectations, singling out improved margins and strong cash flows, which he said were likely to improve further as Murray & Roberts tempers its capital expenditure in the year ahead.
Of some concern, however, was a drop in the operating margin of the group's materials and services division, which Beelders said was probably affected by the slowing housing market.
With gross fixed capital formation at its highest level in 25 years, Murray & Roberts was tapping into an unprecedented array of opportunities.
Its southern Africa regional construction activities saw revenue rise 16% to R5,8bn, delivering an operating profit of R421bn, at improved margins of 7,3%. It has also secured a strong position in the mechanical and civil works for Eskom's power stations .
International operations, where margins are high, now constitute 40% of its operations. Middle East construction increased revenues 19% to R2,83bn with operating profit of R234m at a margin of 8,3%.
Murray & Roberts expects its headline earnings to grow 30%-40% -- a forecast Beelders thought was on the conservative side.
A generous dividend of 119c per share was declared, bringing the final dividend for the year to 196c ( 116c).
Be the first to Write a Comment!
Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
