Murray & Roberts — H1 FY2019 Earnings Presentation
66 slides from Murray & Roberts's earnings presentation, Mar 7, 2019
Slide 1: Report to Stakeholders: Six Months to 31 December 2018
REPORT TO STAKEHOLDERS SIX MONTHS TO 31 DECEMBER 2018 07 March 2019 ENGINEERED EXCELLENCE
Slide 2: Henry Laas Daniël Grobler Henry Laas
Henry Laas A New Strategic Future Slides 3-5 Accelerating the Group’s strategic growth Slide 6 Mandatory offer update by ATON GmbH Slide 7 Salient features Slide 8 Platform performance overview Slides 9-11 Order book per platform Slide 12 Order book geography and time distribution Slide 13 Order boo
Slide 3: A New Strategic Future
The Group has been transformed from being a predominantly South African civil and building contractor, to a multinational engineering and construction Group focused on the natural resources market sectors. The Group’s three business platforms provide portfolio diversification. Core market segments a
Slide 4: A Multinational Specialist Engineering and Construction Group
A MULTINATIONAL SPECIALIST ENGINEERING AND CONSTRUCTION GROUP FOCUSED ON THE NATURAL RESOURCES MARKET SECTOR STOP.THINK.ACT.24/7: SAFETY FIRST IN EVERYTHING WE DO BUSINESS PLATFORMS OIL & GAS UNDERGROUND MINING POWER & WATER PURPOSE VISION VALUES Enabling fixed capital To be a leading Integrity inve
Slide 5: Growth through diversification of the business model
3 4 2 Robust balance sheet to navigate through business Improved order book and cycles robust project pipeline 1 Clearly defined growth strategy & business Low gross gearing and model robust cash position is Diversified business model Growth through allowing Murray & Roberts has resulted in a better
Slide 6: Accelerating the Group's Acquisitive Growth
ACCELERATING THE GROUP’S ACQUISITIVE GROWTH Oil & Gas • Acquired a USA-based engineering, procurement and construction business (Saulsbury’s Gulf Coast downstream and chemical business unit) • Strong organisation, staffed by experienced people with full EPC capability for projects up to US$500 milli
Slide 7: Independent Board Update
INDEPENDENT BOARD UPDATE Regulatory • Implementation of ATON’s Mandatory Offer to acquire up to 100% of the issued ordinary shares of Approval Murray & Roberts, not already owned by ATON, remains subject to certain suspensive conditions, specifically receipt of the required regulatory approvals in r
Slide 8: Salient features: Six Months to December
SIX MONTHS TO DECEMBER FY2019 H1 FY2018 H1 Financial performance: Revenue R9,8 billion R11,8 billion • Underground Mining performing exceptionally well • Oil & Gas and Power & Water experiencing tough market conditions • No further project losses in the Middle Attributable profit R186 million R110
Slide 9: LNG Capex Recovery Expected Within the Next Two Years
LNG CAPEX RECOVERY EXPECTED WITHIN THE NEXT TWO YEARS • Platform experiencing significant pressure on revenue in FY2019 - Major oil and gas projects completed early FY2019 H2 - Ongoing new project delays • New opportunities in the Liquefied Natural Gas (“LNG”) market in Australia remain R9.8 billion
Slide 10: World's Leading Underground Mining Contractor
WORLD’S LEADING UNDERGROUND MINING CONTRACTOR • At the start of a gradual, but possibly extended mining capex upcycle • Excellent performance and platform will continue to make significant contribution to Group earnings - Exploration is at its highest level in many years and mining equipment deliver
Slide 11: Lack of Meaningful Project Opportunities
LACK OF MEANINGFUL PROJECT OPPORTUNITIES • The platform’s scope of work on the Medupi power station has been completed and its work on the Kusile power station will continue into FY2020 - The lack of meaningful work to replace Medupi and Kusile will result in reduced platform revenue and earnings -
Slide 12: Commodity Cycle Dependent
COMMODITY CYCLE DEPENDENT Underground Oil & Gas Power & Water Middle East Total Mining 30,1 31,7 25,7 22,1 22,1 15,3 6,4 4,4 3,8 2,7 1,5 1,6 0,3 0,1 0,0 Dec Jun Dec Dec Jun Dec Dec Jun Dec Dec Jun Dec Dec Jun Dec 17 18 18 17 18 18 17 18 18 17 18 18 17 18 18 1. Oil & Gas order book low due to tough m
Slide 13: Geography & Time Distribution
GEOGRAPHY & TIME DISTRIBUTION Order book Order book Order book Platform % split Rbn Rbn SADC Int. Dec 2018 Dec 2017 FY Time Distribution 2019 1,9 Oil & Gas 100 4,4 3,8 2020 2,1 >2020 0,4 2019 5,0 Underground 47 53 25,7 15,3 2020 10,3 Mining >2020 10,4 2019 0,9 Power & Water 100 1,6 2,7 2020 0,7 >202
Slide 14: Strong Pipeline but Timing Uncertain
STRONG PIPELINE BUT TIMING UNCERTAIN Pipeline Rbn Order book Near orders Category 1 Category 2 Category 3 Oil & Gas1 4,4 14,2 33,2 73,0 298,7 Underground Mining2 25,7 8,1 20,5 31,3 22,0 Power & Water 1,6 - 4,2 9,3 26,3 31 December 2018 totals 31,7 22,3 57,9 113,6 347,0 30 June 2018 totals
Slide 15: Together to Zero Harm
TOGETHER TO ZERO HARM “We remain firm in the belief that Zero Harm is possible, notwithstanding the risk conditions in which projects are being built.” 0.86 0.52 0.63 1 1 0 FY2017 FY2018 FY2018 H1 Fatalities L.T.I.F.R.* • Industry leading LTIFR at 0.63 (FY2018 H1: 1.19) • No fatal injuries occurred
Slide 16: Engineered Excellence
© Murray & Roberts 2019 | 16 ENGINEERED EXCELLENCE
Slide 17: FY2019 H1 vs. FY2018 H1 Result
FY2019 H1 VS. FY2018 H1 Result Comments Underground Mining Excellent performance with increased EBIT and order book compared to prior half year Oil & Gas Break-even EBIT due to low revenue in a challenging Oil & Gas market Power & Water Marginal EBIT contribution reflective of Power Programme co
Slide 18: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) EBITDA 600 589 11 EBIT 376 349 27 Continuing operations excluding Middle East 365 416 (51) Middle East 11 (67) 78 Net interest expense (8) (17) 9 Taxation (140) (126) (14) (Loss)/Income from equity accoun
Slide 19: Six Months to December: Oil & Gas
SIX MONTHS TO DECEMBER Oil & Gas Underground Mining Power & Water Bombela & Middle East Commissioning Corporate Rm Engineering Construction Global Marine & Maintenance & Other Total 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Revenue 430 536 1 049 118 - - 1 667 3 963 210 76 3 356 4 6
Slide 20: Six Months to December: Underground Mining
SIX MONTHS TO DECEMBER Oil & Gas Underground Mining Power & Water Bombela & Middle East Rm Africa Australasia The Americas Total 2018 2017 2018 2017 2018 2017 2018 2017 Revenue 1 340 1 874 1 378 926 2 231 1 325 4 949 4 125 Operating profit 107 101 77 70 162 68 346 239 Operating margin (%) 8% 5% 6% 8
Slide 21: Six Months to December: Power & Water
SIX MONTHS TO DECEMBER Oil & Gas Underground Mining Power & Water Bombela & Middle East Electrical & Corporate Rm Power1 Water Oil & Gas Instrumentation & Other Total 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Revenue 1 143 2 358 14 26 231 178 20 81 - - 1 408 2 643 Operating profit
Slide 22: Six Months to December: Bombela & Middle East
SIX MONTHS TO DECEMBER Oil & Gas Underground Mining Power & Water Bombela & Middle East Rm Bombela Investments Middle East Total 2018 2017 2018 2017 2018 2017 Revenue - - 66 347 66 347 Operating profit / (loss) 114 139 11 (67) 125 72 Operating margin (%) - - 17% (19%) 189% 21% Order book - - 46 267
Slide 23: New Revenue Recognition Standard
NEW REVENUE RECOGNITION STANDARD Application of IFRS 15 IAS 11 – Construction Contracts 1. Effective date: Periods beginning on or after 01 January 1995 2. “Contract revenue shall comprise: a. the initial amount of revenue agreed in the contract; and Probable is defined as “more likely than not” b.
Slide 24: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 Jun 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Other non-current assets 2 910 3 257 (347) Current assets 6 305 6 518 (213) Cash and cash equivalents 2 240 2 464 (224) Assets classified as held for sale 51 5
Slide 25: Engineered Excellence
© Murray & Roberts 2019 | 25 ENGINEERED EXCELLENCE
Slide 26: Key Presentation Takeaways
Murray & Roberts is committed to drive sustainable growth and remains confident that its growth plans over the medium term are achievable, factoring in constraints of current market dynamics Strong balance sheet and cash position allowed Murray & Roberts to pursue its growth plans. Two recent acquis
Slide 27: Forward-looking statements
1. This presentation includes certain various “forward-looking statements” within the meaning of Section 27A of the US Securities Act 10 1933 and Section 21E of the Securities Exchange Act of 1934 that reflect the current views or expectations of the Board with respect to future events and financial
Slide 28: Report to Stakeholders
REPORT TO STAKEHOLDERS SIX MONTHS TO 31 DECEMBER 2018 ENGINEERED EXCELLENCE
Slide 29: Appendix
REPORT TO STAKEHOLDERS SIX MONTHS TO 31 DECEMBER 2018 APPENDIX ENGINEERED EXCELLENCE
Slide 30: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) EBITDA 600 589 11 EBIT 376 349 27 Continuing operations excluding Middle East 365 416 (51) Middle East 11 (67) 78 Net interest expense (8) (17) 9 Taxation (140) (126) (14) (Loss)/Income from equity accoun
Slide 31: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) Revenue decreased by 17% EBITDA 962 1 774 (812) 1. Decrease in revenue mainly due to the lower contributions from Power & Water and Oil & Gas EBIT 487 1 275 (788) 2. Decrease was partly offset by a strong
Slide 32: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) EBITDA 600 589 11 EBIT EBITDA is reflected before: 487 1 275 (788) Continuing operations 1. Depreciation excluding charge of R204m (FY2018 H1: R218m) 1 055 1 343 (288) 2. Amortisation Middle East of intan
Slide 33: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) EBITDA 600 589 11 EBIT 376 349 27 Continuing operations excluding Middle East 365 416 (51) Middle East 11 (67) 78 Decrease in EBIT Net interest is mainly due to: expense (42) (71) 29 1. Taxation Lower con
Slide 34: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) EBITDA 600 589 11 EBIT 376 349 27 Continuing operations excluding Middle East 365 416 (51) Middle East 11 (67) 78 Net interest expense (8) (17) 9 Decrease Taxation in net interest expense (161) (296) 135
Slide 35: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) EBITDA 600 589 11 EBIT 376 349 27 Continuing operations excluding Middle East 365 416 (51) Middle East 11 (67) 78 Net interest expense (8) (17) 9 Taxation (140) (126) (14) Effective Incometax rate from of
Slide 36: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) EBITDA 600 589 11 EBIT 376 349 27 Continuing operations excluding Middle East 365 416 (51) Middle East 11 (67) 78 Net interest expense (8) (17) 9 Taxation (140) (126) (14) (Loss)/Income from equity accoun
Slide 37: Statement of Financial Performance
STATEMENT OF FINANCIAL PERFORMANCE Rm FY2019 H1 FY2018 H1 Variance Revenue 9 782 11 809 (2 027) EBITDA 600 589 11 EBIT 376 349 27 Continuing operations excluding Middle East 365 416 (51) Middle East 11 (67) 78 Net interest expense (8) (17) 9 Taxation (140) (126) (14) Income from equity accounted inv
Slide 38: Continuing Revenue and EBIT
CONTINUING REVENUE AND EBIT Revenue EBIT • Outstanding contribution (excluding Corporate, Middle East (excluding Corporate Cost, Middle East from Underground Mining and Bombela Civils Joint Venture) and Bombela Civils Joint Venture) platform • Investments relate to 1% Bombela Concession 35% 14% 25%
Slide 39: Continuing Revenue and EBIT
CONTINUING REVENUE AND EBIT Geographic Revenue Geographic EBIT • A multinational business (excluding Corporate, Middle East (excluding Corporate Cost, Middle East with 76% of revenue and and Bombela Civils Joint Venture) and Bombela Civils Joint Venture) 69% of EBIT generated 2% (5%) outside of Sout
Slide 40: Continuing Revenue and EBIT
CONTINUING REVENUE AND EBIT Life Cycle Revenue Life Cycle EBIT • Contribution from (excluding Corporate, Middle East (excluding Corporate Cost, Middle East construction activities - and Bombela Civils Joint Venture) and Bombela Civils Joint Venture) revenue (63%) and EBIT (24%) 6% 3% 7% ( 4%) • Mean
Slide 41: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 June 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Other non-current assets 2 910 3 257 (347) Current assets 6 305 6 518 (213) Cash and cash equivalents 2 240 2 464 (224) Assets classified as held for sale 51
Slide 42: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 June 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Increase in property,assets Other non-current plant and equipment 3 904 4 622 (718) 1. Current Capex assets (R357m) being offset by depreciation (-R204m), dis
Slide 43: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 June 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Other non-current assets 2 910 3 257 (347) Non-current assets comprise of: Current assets 6 722 8 185 1. Cash Deferred taxation and cash assets (R315m) equiva
Slide 44: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 June 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Other non-current assets 2 910 3 257 (347) Current assets 6 305 6 518 (213) Current assets Cash and cashcomprise of: equivalents 2 813 2 891 (78) 1. Assets Co
Slide 45: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 June 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Other non-current assets 2 910 3 257 (347) Current assets 6 305 6 518 (213) Cash and cash equivalents 2 240 2 464 (224) Cash consists Assets mainly classified
Slide 46: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 June 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Other non-current assets 2 910 3 257 (347) Current assets 6 305 6 518 (213) Cash and cash equivalents 2 240 2 464 (224) Assets classified as held for sale 51
Slide 47: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 June 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Other non-current assets 2 910 3 257 (347) Current assets 6 305 6 518 (213) Cash and cash equivalents 2 240 2 464 (224) Assets classified as held for sale 51
Slide 48: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm Dec 2018 June 2018 Variance Total assets 13 645 14 286 (641) Property, plant and equipment 2 139 1 996 143 Other non-current assets 2 910 3 257 (347) Current assets 6 305 6 518 (213) Cash and cash equivalents 2 240 2 464 (224) Assets classified as held for sale 51
Slide 49: Net Cash Reconciliation
NET CASH RECONCILIATION 4 000 3 500 3 000 314 153 20 736 2 500 R millions 1 972 2 000 65 264 1 500 357 1 037 1 000 500 0 30 June EBITDA – Dividends Proceeds Working Other Interest, Capex 31 December 2018 cash on sale capital movements tax & 2018 received dividends items of fixed paid assets 1. Divid
Slide 50: Discontinued Operations
SIX MONTHS TO DECEMBER Discontinued Operations I&B Businesses Genrec Rm & other* Clough Properties Engineering Total 2018 2017 2018 2017 2018 2017 2018 2017 Revenue - 145 - 3 45 189 45 337 Operating loss** (24) (43) (1) (1) (12) (90) (37) (134) Discontinued operations loss relates primarily to: 1. M
Slide 51: Corporate & Properties
SIX MONTHS TO DECEMBER Corporate & Properties Rm Total 2018 2017 Operating loss (98) (112) Corporate overheads (84) (82) Forex profit/(loss) 13 (6) Share-based payments (15) (11) Properties (12) (13) 1. Movement in forex profit/(loss) relates to intercompany loans © Murray & Roberts 2019 | 51 ENGINE
Slide 52: Engineered Excellence
© Murray & Roberts 2019 | 52 ENGINEERED EXCELLENCE
Slide 53: Essence of the New Strategic Future Plan
ESSENCE OF THE NEW STRATEGIC FUTURE PLAN To be a multinational specialised engineering and construction Group focused on the natural resources sector (oil & gas, metals & minerals, power & water) To provide services across the project lifecycle To achieve Engineered Excellence in all aspects of the
Slide 54: Business Model: Service Offering Across Project Life Cycle
BUSINESS MODEL: COMPREHENSIVE SERVICE OFFERING ACROSS PROJECT LIFE CYCLE IN SELECTED NATURAL RESOURCES MARKETS Geography Business Platform Capabilities(Project Life Cycle) Project Life Cycle (Multinational) • Detailed engineering • Americas Design and • Procurement • Asia Engineering / Oil & Gas • C
Slide 55: International Diversification into Core Geographic Markets
INTERNATIONAL DIVERSIFICATION INTO CORE GEOGRAPHIC MARKETS • International diversification approach - Permanent presence (offices) in regions with Vancouver major opportunity in Calgary North Bay Ayrshire Ulaanbaatar selected natural resources Salt Lake City Rouyn-Noranda market segments Sudbury Bus
Slide 56: Focus on Value Creation
FOCUS ON VALUE CREATION FY FY FY Value drivers Corporate action Key considerations & next steps 19 20 21 Strategy Strategic focus Focus on strategic framework (project lifecycle, natural resources sector) x x x execution International expansion strategy x x x and delivery Close out Middle East and s
Slide 57: Commodity Order Book Breakdown
COMMODITY ORDER BOOK BREAKDOWN % Total Platform Total Platform The Americas Australasia Africa R15.3bn R25.7bn R8.9bn R4.6bn R12.2bn December 2017 December 2018 12% 10% 54% Copper 23% Gold 42% 16% Copper-Gold 5% 44% Diamonds Silver 18% 23% Platinum 11% 100% 2% Nickel 3% 2% 21% Zinc 14% 5% 14% Mangan
Slide 58: Oil & Gas Platform
The Oil & Gas platforms’ extensive service offering spans the full asset life cycle, including specialist engineering, construction & EPC, commissioning, and operations & maintenance. Services are provided on new build facilities (greenfields) and operating facilities (brownfields) In response to ch
Slide 59: Oil & Gas Businesses: Clough
Clough works with some of the world’s largest companies to engineer, construct, commission and maintain a comprehensive range of facilities for oil and gas, metals and minerals, and infrastructure projects. The company’s full project lifecycle delivery model reduces risk and optimises safety, produc
Slide 60: Underground Mining Platform
The Underground Mining platform’s geographic footprint covers six continents and its service offering spans the project life cycle, including feasibility studies, specialist engineering, vertical and decline shaft construction, mine development, specialist mining services such as raise boring and gr
Slide 61: Underground Mining Businesses
Cementation Canada & USA is a leading provider of underground mining contracting and engineering services throughout North and South America. The company specialises in the design and construction of underground facilities including shaft, ramp accesses, mine development and raises, as well as large
Slide 62: Power & Water Platform
The Power & Water platform operates predominantly in Southern Africa and sub-Saharan Africa. Its service offering includes feasibility studies, detailed engineering, procurement, construction, commissioning and repairs and maintenance work. The platform has a primary focus on the power sector and ex
Slide 63: Power & Water Businesses
Murray & Roberts Power & Energy is the platform’s engineering, procurement and construction ("EPC") projects implementer, adding unique value to the constructability, integration and ultimate performance of the projects it undertakes. Murray & Roberts Power & Energy offers the full spectrum of multi
Slide 64: Sponsored Level 1 ADR Programme
Murray & Roberts has a sponsored Level 1 ADR programme (Since 2009) Bloomberg ticker: MURZY CUSIP: 626805204 Ratio: 1 ADR: 1 Ordinary Share Exchange Traded: Over-the-counter (OTC) market Depositary bank: Deutsche Bank Trust Company Americas Depositary bank contact: Begonia Roberts (begonia.roberts@d
Slide 65: Forward-looking statements
1. This presentation includes certain various “forward-looking statements” within the meaning of Section 27A of the US Securities Act 10 1933 and Section 21E of the Securities Exchange Act of 1934 that reflect the current views or expectations of the Board with respect to future events and financial
Slide 66: Report to Stakeholders
REPORT TO STAKEHOLDERS SIX MONTHS TO 31 DECEMBER 2018 ENGINEERED EXCELLENCE
Murray & Roberts Holdings — H1 FY2019 Earnings Presentation on 6ix