Investors are fleeing Murray & Roberts (M&R), sending the company’s share price down nearly 50% over the past three days, as the group’s cash crunch places its future increasingly in the hands of lenders.
The engineering company, which hasn’t paid a dividend since 2019, spooked the market with a dire trading update on Tuesday in which it warned of a plunge in earnings and “liquidity constraints” in the SA business that are delaying much-needed cash-generating projects.
The share price plunged 38% on Tuesday and Wednesday, extending losses a further 8% on Thursday. That slashed M&R’s market value to about R622m — far cry from the years leading up the 2010 Fifa World Cup, which SA hosted and saw construction companies’ shares reach dizzy heights.
As recently as December 2021 the group was valued at about R6.5bn. M&R, which counts Aton and Excelsia Capital among its largest investors, has until January 2026 to repay R409m, having reduced the outstanding amount from a peak of R2bn last year.
The board resolved to sell noncore assets to meet its obligations to banks and restore liquidity.
“Efforts are continuing to refinance the group’s debt [with a consortium of SA banks] and to raise a working capital facility for its SA businesses,” it said in Tuesday’s statement
M&R is also bracing for a huge hit as diamond miner De Beers cuts back on a R2.6bn underground expansion at its Venetia mine in Limpopo. M&R was selected as preferred contractor, but De Beers has since faced its own headwinds with industry structural changes.
This year, parent Anglo American wrote down the value of De Beers by $1.6bn. It may sell the company in its restructuring after itself being the subject of BHP’s failed $49bn bid.
M&R has already halved its headquarter space in Johannesburg. It said it expected renegotiating its lease to lead to corporate cost savings of R80m-R100m a year, starting in financial 2025. M&R left SA’s construction sector in 2016 as projects dried up after the spending frenzy before the 2010 world football tournament. It has focused on the resources, industrial, energy and water sectors.
The strategic change, with more than 80% of M&R revenue coming from projects undertaken by its mining unit, was led by its main CEO, Henry Laas, in the role since 2011.
Last month, the company said it expected to eliminate certain costs by selling or liquidating its remaining companies in the United Arab Emirates in financial 2025, four years after its Middle East operations were discontinued. Those operations were categorised as discontinued in the 2020 financial year, though a sale agreement signed in August 2021 experienced a string of delays and ultimately fell through.
At the end of June, the firm entered into a new sale and purchase agreement for M&R Contractors Middle East and M&R Contractors Abu Dhabi, which is subject to several conditions.
After the loss of its Australian subsidiaries, Clough and RUC Cementation Mining Contractors, in the prior year, M&R was left with a highly geared balance sheet in SA, and opted to undertake extensive restructuring.
Correction, November 8 2024:
This article was corrected to reflect that Aton and Excelsia Capital are among the company's largest investors
With Michelle Gumede
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