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M&R shares plunge on earnings report

Johannesburg - Shares in construction group Murray & Roberts Holdings [JSE:MUR] plunged by more than 11.75% or R4.66 to R34.99 in Friday afternoon trade on the JSE, after it said it expects a marked decline in half-year earnings.

Group CEO Brian Bruce earlier in the day pointed to a rapid drop-off in activity levels in South Africa, and bemoaned a payment dispute with power utility Eskom for its contractual work at Medupi and Kusile power stations.

M&R said it expects to report a first-half diluted headline loss due to an impairment charge.

In morning trade its shares were down 6.51%.

South Africa's second-largest construction company said it would record an impairment charge on outstanding final accounts in the Middle East and claims in South Africa.

"Trading conditions in both of the above markets have become tougher in recent months and cash collection relative to costs being incurred on public sector projects remains a concern," it said.

Excluding the impairment charge, diluted headline earnings per share for continuing operations for the six months to the end of December are expected to be 35% to 45% lower, compared with the same period the previous year.

"I and my colleagues are highly disappointed at the expected loss in the half-year, despite all our efforts to date in delivering the excellent work we have on our portfolio of major projects," Bruce said.

Bruce explained that ongoing difficulty and uncertain timing of payments at project level had triggered the decision to lower the future risk profile of outstanding payments.

The group said that Dubai Airport, Gautrain and the Medupi power station were public sector projects that had all suffered significant increases in their scope of work, over and above what had originally been designed and contracted.

This had resulted in significant delay and disruption, with additional costs against which the company's clients had certified only limited payment to date.

"I feel the resolution of these matters with our clients has been made more complex than necessary, especially as the cause of the increased scope in each case is no fault of Murray & Roberts or its partners," Bruce said.
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