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Port Elizabeth - The Murray & Roberts Holdings [JSE:MUR] annual report published on Monday makes for interesting reading.
More interesting than management's efforts to rebuild the once-admired construction and manufacturing group is that the report immediately raises the question whether the share price is due for a rerating.
Since 2009, Murray & Roberts has performed badly. It fell from its 2009 high of 6 640c to a low of just above 2 000c earlier this year, while the market overall reached fresh highs every few months.
The company also fared worse than its peers, whose shares have increased significantly over the same period. Wilson Bayly Holmes Ovcon [JSE:WBO] (WBHO) increased from R120 during the same period to a new high of nearly R165 this week, increasing its market capitalisation to above R10bn compared to Murray & Roberts' R12.34bn.
The reasons for Murray & Roberts' misery are well known: a string of unprofitable contracts, several lengthy and costly court cases, disruptive labour unrest and a huge penalty for anti-competitive behaviour.
The Competition Commission fined the company R309m for prior offences, after management decided to take it on the chin and get the matter sorted out quickly throught the commission's Fast-Track Settlement Process.
The new management team, under leadership of chairperson Mahlape Sello and CEO Henry Laas, had the courage in 2012 to admit that the group was in bad shape.
With denial out of the way, they started a long-term recovery plan: one year of recovery by addressing and fixing the problems in the group, and two years of renewed growth to re-establish Murray & Roberts as a leader in its sector.
Results for the last financial year shows the success of the first "growth year". Revenue rose by 9% to R34.6bn and attributable profit lifted from a loss of R736m in 2012 to a profit of R1 004m. Headline earnings per share recovered to 186c from the previous loss of 246c.
It seems that the uncertainty of legal claims are slowly being sorted out, with Murray & Roberts having succeeded in important claims to date although cases will still take years to finalise.
Meanwhile, it seems that management is focusing on daily business and the report makes mention of several opportunities in SA, the rest of Africa and abroad. Strong growth in Australia has motivated the company to acquire 100% of Clough, of which it currenly owns 61.6%.
For now, the company's growth prospects seems to be enhanced by its international interests. It should provide comfort to shareholders while uncertainty plagues the local mining industry, and the economy as a whole is taking strain from labour disruptions.
Since its low of 2 000c, Murray & Roberts' share price has recovered to 2 775c which puts it on a historic PE ratio of 11.3 times.
- Fin24
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at Nelson Mandela Metropolitan University. Views expressed are his own.
More interesting than management's efforts to rebuild the once-admired construction and manufacturing group is that the report immediately raises the question whether the share price is due for a rerating.
Since 2009, Murray & Roberts has performed badly. It fell from its 2009 high of 6 640c to a low of just above 2 000c earlier this year, while the market overall reached fresh highs every few months.
The company also fared worse than its peers, whose shares have increased significantly over the same period. Wilson Bayly Holmes Ovcon [JSE:WBO] (WBHO) increased from R120 during the same period to a new high of nearly R165 this week, increasing its market capitalisation to above R10bn compared to Murray & Roberts' R12.34bn.
The reasons for Murray & Roberts' misery are well known: a string of unprofitable contracts, several lengthy and costly court cases, disruptive labour unrest and a huge penalty for anti-competitive behaviour.
The Competition Commission fined the company R309m for prior offences, after management decided to take it on the chin and get the matter sorted out quickly throught the commission's Fast-Track Settlement Process.
The new management team, under leadership of chairperson Mahlape Sello and CEO Henry Laas, had the courage in 2012 to admit that the group was in bad shape.
With denial out of the way, they started a long-term recovery plan: one year of recovery by addressing and fixing the problems in the group, and two years of renewed growth to re-establish Murray & Roberts as a leader in its sector.
Results for the last financial year shows the success of the first "growth year". Revenue rose by 9% to R34.6bn and attributable profit lifted from a loss of R736m in 2012 to a profit of R1 004m. Headline earnings per share recovered to 186c from the previous loss of 246c.
It seems that the uncertainty of legal claims are slowly being sorted out, with Murray & Roberts having succeeded in important claims to date although cases will still take years to finalise.
Meanwhile, it seems that management is focusing on daily business and the report makes mention of several opportunities in SA, the rest of Africa and abroad. Strong growth in Australia has motivated the company to acquire 100% of Clough, of which it currenly owns 61.6%.
For now, the company's growth prospects seems to be enhanced by its international interests. It should provide comfort to shareholders while uncertainty plagues the local mining industry, and the economy as a whole is taking strain from labour disruptions.
Since its low of 2 000c, Murray & Roberts' share price has recovered to 2 775c which puts it on a historic PE ratio of 11.3 times.
- Fin24
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at Nelson Mandela Metropolitan University. Views expressed are his own.
