- Murray & Roberts exited South Africa’s construction sector in 2016.
- South Africa’s construction industry has been struggling since the end of the 2010 FIFA World Cup.
- The group’s CEO, Henry Laas, says if it didn’t broaden its market focus, it would have been ‘dead in the water’.
Engineering and construction group Murray & Robert’s says its exit from the South African construction sector has kept it going as its competitors struggle for survival.
Over the past 10 years, South Africa’s once thriving construction sector which was fuelled by demand for property like shopping malls and office buildings has witnessed a spectacular crash, which began roughly after the 2010 FIFA World Cup. Companies like Basil Read, Group Five and Liviero Group going into business rescue in the past year. The JSE’s construction and materials index shows that the construction sector has fallen by more than 13% in the past four years.
Murray & Roberts says its exit from the country’s construction sector in 2016 saved it.
“Over the past number of years, as we were implementing our new strategic future, we’ve sold off non-core assets and we have exited the South African construction sector and we have merged the business with three business platforms,” Henry Laas, CEO of M&R, told Fin24.
After its decision to sell its construction business, M&R moved to focus on energy, resources and infrastructure, mining, power, and more.
“If we didn’t broaden our market focus, we would have been dead in the water,” Laas said.
Today, M&R is sitting on a R54 billion order book – up from R46.8 billion last year – for projects in North America, Europe the Middle East and Africa, as well as Asia Pacific. It also had “near orders” of R11.4 billion, which Laas said are likely to be finalised at the end of this year.
“The fact that we have the R54 billion order book and the fact that we have such a good position in new orders and category 1 pipeline (submitted tenders or tenders the group is working on), gives us a lot of confidence [moving] into the new financial year,” he said during the presentation of the M&R’s results for the year ended June 30.
However, M&R is not out of the woods yet. This week the group published its results which showed that it had been hit hard by Covid-19. It estimated the impact of the pandemic to be R622 million so far, adding to its the challenges and impairments of R189 million. It saw its revenue increase marginally to R20.8 billion from R20.1 billion.
Laas says the strategic gains it has achieved in the past few years have positioned it well for the future.
“From a strategy point of view, I think we have done what we had to do and we don’t see that there is any reason to deviate from the course that we put the group on,” he said.
The best thing to do is to stay on course and grow through acquisition, said Laas, especially in its mining business and by turning its energy and resources infrastructure platform from loss making to profit making.
Wayne McCurrie, portfolio manager at FNB Wealth and Investments, said M&R’s move to diversify was a good strategy.
“For construction companies going forward, the next five years are going to be tough, because even if the government does everything right, it’s going to take three to five years for the economy to really pick up steam. So M&R were right,” he said.
McCurrie said, after a difficult 10 years, South Africa’s construction sector would get better, simply because it couldn’t get worse.