The shares of Murray & Roberts (M&R) gained the most in more than eight months on Friday after it said “meaningful progress” was being made to reduce the group’s debt with a consortium of SA banks.
The Johannesburg-based engineering and construction group said its Cementation Canada business had recently secured a renewed banking facility with a Canadian bank that would allow it to pay C$40m (R557.4m) in dividends to M&R over the six months to June 2024.
M&R said this will enable it to further reduce its SA debt to R350m over the period.
“The group has made meaningful progress towards implementing a sustainable capital structure,” M&R said in a statement.
The market welcomed the news with the company’s share price gaining 13.56% to 67c, its biggest jump since March 29, albeit off a very low base.
M&R, like its peers in the construction and engineering sector, has been struggling for the better part of the past decade amid a dearth of significant infrastructure projects in SA.
In 2020 and 2021, the company was implementing a large portfolio of projects before the pandemic and subsequent lockdowns struck, throwing its recovery plans off course as global supply chains were disrupted and the movement of people was restricted. That restriction in turn slowed progress and extended project timelines.
Subsequently, its working capital requirements rose, resulting in its Australian businesses being put under administration in October 2022.
From December 5, the group’s Australian holding company MRPL and Clough were removed from the books, which affected the group’s control over RUC Cementation Mining Contractors, a subsidiary of MRPL.
The group swung into an attributable loss of R3.18bn for the year to end-June from a R135m profit after accounting for the losses in Australia, which saw its equity plunge to R1.8bn from R5.7bn.
However, a combination of measures including the April sale of its 50% shareholding in the Bombela Concession Company, new commercial terms on a large mining project, and the sale of a non-strategic investment in Aarden Solar have helped it reduce its debt from R2bn in the 2022 financial year to R770m.
Due to increasing liquidity pressure, M&R concluded a debt refinancing and restructuring process with four SA banks in November 2022 in terms of which its overdraft facility and term loan were restructured into a combined facility of R2bn.
On Friday, M&R said it had also significantly reduced overhead costs and would continue to focus on operational efficiencies and liquidity management.
It emphasised that the board was not considering a rights issue for purposes of debt reduction in SA.
M&R’s shares have fallen almost 80% so far this year.
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