Key message: The business should be able to earn HEPS of approx. 50c in FY25 with the current assets and reduced costs.

  • Murray & Roberts released 1H FY24 results. Continuing HEPS remained negative at 16c as revenue and EBIT increased by 11% and 16% respectively. A significant rationalisation has occurred to align the cost base to the reduced operational footprint including a 40% reduction in headcount and office space in the corporate office.
  • Following an agreement on new commercial terms with Venetia in the Mining division and the sale of the stake in Aarden Solar (and other smaller initiatives), debt was reduced to R770m (term debt R120m) in November 2023. Debt was further reduced to R400m (term debt repaid) as a dividend of R400m was paid from Cementation Canada after renewing banking facilities with a Canadian Bank (C$35m, 8% interest) which allows the payment of dividends to South Africa. Another C$10m will be transferred in June 2024. A dividend of approx. R150m per annum is supported by Cementation Canada’s cashflows.
  • A refinancing of remaining SA debt is underway, with the existing consortium wanting to exit. A refinancing of R450 is being sought (preferably senior debt) and four financial institutions are interested. A working capital facility of R350m is also required. This should be concluded by 30 June 2024.
  • The order book for continuing operations fell to R14.7bn (from R16.1bn), of which Mining constitutes R13.5bn (R9.5bn of near orders). The PIW division has secured two wind projects (awaiting financial close), and the order book is R1.2bn (near orders of R0.7bn).
  • Mining: Operating profit flat at R181m. New contract terms on the Venetia contract should boost 2H profits in Africa, with the Arnot business rescue negatively impacting the period. Profit in the Americas was down as the prior period had high margin projects. Overall, the Mining division tendering success is being impacted by uncertainty over the Group. The order book declined marginally.
  • PIW: Marginally profitable, the EBIT target is R50m under the slimmed down OptiPower structure. The order book declined with delays in the financial close of renewable projects.
  • With debt restructuring risk still present, Murray & Roberts will continue to trade at a significant discount to NAV (R4.25). Our valuation comes out at R2.80 at present. The group should be able to earn HEPS of approx. 50c in FY25 with the current assets and reduced costs.

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