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| GROUP CHIEF EXECUTIVE REPORT TO SHAREHOLDERS CONTINUED |
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| CLOUGH LIMITED |
Murray & Roberts consolidated Clough into its balance
sheet from 1 July 2007 at an impaired NAV of
A$67 million (A$0,14 cents per share). This caused a
major challenge finalising our year end accounts, as we
required the company to provide adequately against the
future completion of the G1 project in India and final
settlement of the BassGas dispute in Australia.
A provision of A$131million (R780 million) contributed to
an attributable loss in Clough of A$105,3 million and an
associate loss of R114 million in Murray & Roberts.
As a direct consequence of Murray & Roberts'
involvement in Clough, the appointment of Mike Harding
and John Cooper has crystallised the way forward for the
company. John Cooper was appointed deputy chairman
in August 2006 and chief executive in January 2007,
supported by the appointment of Mike Harding to the
board in April 2006 and as independent chairman in
November 2006.
Agreement has been reached between Murray & Roberts
and Clough, and the Clough Family (McRae), on a
comprehensive recapitalisation plan, including support
for its strategic vessel acquisition program. |
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| 1. |
The agreed price for the total transaction is
A$36,8 cents per share; |
| 2. |
McRae will sell to Murray & Roberts 3% of issued
shares (15,3 million shares) in September 2007; |
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Murray & Roberts will underwrite a Rights Issue to
raise about A$40 million; |
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McRae agrees to cede its Rights Issue rights in the
A$40 million raising to Murray & Roberts; |
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Murray & Roberts will be issued new shares in Clough
Placement) equal in volume to the McRae sale to
Murray & Roberts (15,3 million shares); |
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Murray & Roberts will convert its 2005 A$15 million
loan into 30 million shares in terms of the agreement
covering that loan; |
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McRae will sell its convertible notes to Murray &
Roberts including the outstanding coupons for
A$10,2 million; |
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Murray & Roberts will convert all its notes into ordinary
Clough shares to suit its strategy. |
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| The consequence of this agreement (subject to Clough
shareholder approval) is that: |
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Murray & Roberts reaches more than 60% ownership
in Clough, within two years; |
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at an average investment of A$46 cents per share; |
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John Cooper resumes his non-executive directorship; |
| 4. |
Post-recapitalisation, the NAV of Clough will be
23 cents per share at 30 June 2008. |
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Following three years of significant value destruction,
performance in the coming year will provide the first real
test of Clough's capacity to deliver acceptable value to
all stakeholders. I am confident that with the support of
Murray & Roberts as control shareholder and under the
leadership of new chief executive John Smith, the
company will meet its expectations.
I wish to take this opportunity to express my appreciation
to independent chairman Mike Harding and interim chief
executive John Cooper for the leadership and
commitment they have given to the company through the
difficult second half of the past year.
Full details of Clough and its financial results for the year
to 30 June 2007 are available on www.clough.com.au |
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| ORDER BOOK |
| During the year the Group became a key participant in
some high profile major projects including: |
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the R24 billion Gautrain Rapid Rail Link |
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the R3 billion Greenpoint Stadium for the 2010 Soccer
World Cup |
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the R21 billion Coega Aluminium Smelter for Alcan |
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In addition, the group secured a partnership with Sama
Dubai for implementation management of a significant
part of its planned AED60 billion investment program in
Dubai. Sama is a subsidiary of Dubai Holdings.
A number of group companies have combined their
strengths and capabilities and together with selected
international and local partners as appropriate, are
ready to pursue the significant power station build
program developing in Southern Africa. Murray &
Roberts is well positioned to play a key role in the long
term implementation of this program.
Apart from Murray & Roberts itself, various companies
acquired over the past two decades such as Genrec,
Gillis Mason and Concor, all played a key role in the
previous power station build program.
The Group's project order book stood at R22,5 billion at
1 July 2007, an increase of 125% in the year and up from
R15,4 billion at half year. This amount includes R5,0 billion
(A$810 million) acquired through the consolidation
of Clough.
Activity levels in the Group's construction materials &
services companies have remained high throughout the
year. This supports a positive outlook for performance
delivery in the year ahead. The inclusion of Concor
Technicrete has enhanced the Group's market presence
in this sector.
Two contracts to build and supply more than 150
locomotives to Spoornet in South Africa will start to
deliver value in the coming year and there are plans for
further significant new build programs and rolling stock
upgrades in the region. The Union Carriage & Wagon
order book stood at R2,6 billion at year end.
The Dubai International Airport project has been
a significant factor within the Group over the past two years,
with handover of the facility proceeding to schedule for
substantial completion by December 2007. This large,
complex and demanding project, characterised by
information delays, long and arduous working hours and
conditions, resource constraints and late payment
authorisations has placed a great deal of strain on our
people, partners and cash flow. Its unfolding success is
testimony to the quality of our project staff under the
leadership of Bruce Neave, and strong corporate support. |
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| CORPORATE ACTIVITY |
Murray & Roberts has entered its most significant period
of market opportunity in more than 40 years. The work
we have done preparing the Group over the past seven
years has built a significant performance platform under
the leadership of a team of high-level executives, with
more than 33 000 direct employees and thousands more
indirect participants within our many subcontractor and
supplier partnerships.
The primary role of corporate office has been to design
the strategic architecture of the Group to suit our
strategy; to support operating companies in specific fields
common across the Group; and importantly, to partner in
the leadership of market engagement and performance.
To this end a high level of capacity has been developed
to engage the strategic initiatives necessary to ensure
world class fulfillment in everything we do.
The Group is structured along federal lines, as a network
of independent business operations clustered in compatible groups and we have sought over the years
to establish strong and capable leadership teams in these
operations, each with the capacity to engage and deliver
value from their designated markets.
Like any federal structure, it is important to decide what
initiatives require central as opposed to decentralised
leadership, taking into consideration a number of
factors, including: |
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the scale that has developed in the Group and in many
of our operations |
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the increased complexity of our business model |
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growth of the international dimension of the Group |
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growth in new areas of market opportunity, such as
power, oil & gas |
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the demands of employment equity and empowerment
in South Africa |
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increased succession frequency across all levels and
dimensions of the Group |
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Throughout this annual report are details of the various
initiatives undertaken by corporate office to enhance
sustainable performance in the Group. These are:
Black Economic Empowerment where we have
continued to build our broad-based black economic
empowerment (BBBEE) capability, adopting formal
measures and regular reporting to ensure consistency
across the Group.
An independent audit of the Group's BBBEE status
was conducted in the year, confirming an effective
empowerment ownership of 25,83%.
Letsema Empowerment Trusts where total
economic value created for an estimated 20 000 plus
participants through the various share-based ownership
schemes has exceeded R1,7 billion in just 18 months.
Enterprise Risk Management where more than
R60 billion of potential projects have been processed
through the opportunity management system (OMS) over
the past 18 months and a comprehensive internal audit
structure has been developed to support the OMS.
Health Safety & Environment where the Stop.Think
intervention has crystallised a significant reduction in lost
time injury frequency, highlighted disabling injury and
fatality non-conformance, and brought health and
environmental risks onto the agenda.
Succession & Leadership Pipeline which
introduces a formal process for the evaluation of
individual capacity and promotion potential to support
executive development and succession across all
dimensions and levels of the Group. |
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Leadership reports