M&R sacrifices 3 900 employees to downturn even as profit climbs: Free article on February 09 handy DIY tips and advice

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M&R sacrifices 3 900 employees to downturn even as profit climbs
Topic: Current Affairs » February 09 Author: Business Report

It was regrettable but inevitable that the slowdown would result in job losses, construction giant Murray & Roberts (M&R) said on Wednesday.

A total of 3 900 employees had been retrenched since October 2008, of which 3 385 were in South Africa, 400 in Canada, 75 in the Middle East and 40 in Australia, the JSE-listed company said in its interim results.

"The group has been able to reassign about 950 employees impacted by the cancellation and suspension of contracts to date," it added.

M&R said it had continued to secure key project awards and had maintained its performance momentum.

Diluted headline earnings a share increased 40 percent to R3.02 for the six months to December 2008 as revenue from continuing operations climbed 44 percent to R17.6 billion.

"In line with expectations, working capital turned negative to fund growth and major project activities. More recently, some clients have extended contracted payment terms or engaged strategies to frustrate the group's contracted payment rights," it said.

As far as its South African operations were concerned, M&R said the construction cycle was in a long-term upward trend, supported by a renewed commitment to public investment in infrastructure.

While it was certain that gross domestic product growth would slow, indications were that gross fixed capital formation, in particular construction spend, would result in nominal growth of between 10 and 15 percent. This was assuming inflation at the top end of the Reserve Bank range and interest rates maintained relatively high levels.

M&R said first-half net profit rose by 27 percent to R1.09 billion, or R3.06 a share, after it charged more for its services and won contracts to build 2010 soccer World Cup stadiums.

Operating profit leapt 54 percent to R1.5 billion, delivering an 8.3 percent operating margin.

An operating cash inflow of R1 billion kept cash in hand constant at about R4.4 billion.

"Despite the loss of some order book in the second fiscal quarter, the group has continued to secure key projects," M&R said. "The second quarter of the first half-year was characterised by increased uncertainty in all the group's markets, as the global economic crisis forced clients to review capital programmes and, in some instances, cancel or suspend committed contracts."

M&R lost contracts worth $900 million (about R9 billion) in the Middle East while other projects have been delayed or suspended by the recession.

The South African government plans to spend R787 billion over the next three years on roads, rail, ports and other infrastructure, helping to mitigate the recession fallout.

M&R rose 2.4 percent to close at R37.39 on the JSE yesterday, giving it a R12.4 billion market value. It has declined 60 percent in the past six months.