Murray & Roberts Holdings Limited (MUR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Murray & Roberts Annual Results presentation for the Year ended June 30, 2020. And this is a virtual presentation only. So we have our stakeholders on the phone call as well as on the webcast. [Operator Instructions] With that, I would like to hand over to our CEO, Henry Laas. Thank you, Henry.

Thank you very much, Ed, and good afternoon, ladies and gentlemen. Welcome to our 2020 results presentation. And a special word of welcome to our Chairman, Dr. Suresh Kana, who is also on the call as well as other members of the Murray & Roberts Board. We've got a full agenda for this presentation, and I will be assisted by our Group Financial Director, Daniël Grobler, who will explain the financial results in a bit more detail. Murray & Robert is a multinational engineering and construction group. And over the past number of years, we've established 3 very competitive business platforms with unique capabilities, and we have also gone a long way in establishing our culture of Engineered Excellence. Now for those of you who are not familiar with the concept of Engineered Excellence, as a group, we set ourselves a standard of excellence in everything that we embark on. Whether it is the way in which we engage with our people, the way in which we deliver our projects, the way we engage with stakeholders, we set the standard of excellence. And Engineered Excellence means that, that outcome is an engineered outcome. We plan how we will achieve that standard that we've set ourselves, and we go about it in a very systematic way to achieve our goals. So that is Engineered Excellence. During this reporting period, we've encountered a lot of very extraordinary circumstances in the market, but we were not alone. This impact was felt by businesses across the globe. But notwithstanding that, the strategic gains that we've achieved over the past number of years have really positioned us well for the future. And we have exited this period of COVID-19, the initial impact with a strong balance sheet and with a very good order book. Our future growth will not only come from organic -- by organic means but certainly also through acquisition. Over the past number of years, as we were implementing our new strategic future, we've sold off noncore assets, and we have exited the South African construction sector, and we emerged with the business with 3 business platforms: Oil & Gas, Underground Mining and Power & Water. The Oil & Gas platform, when the platforms were established in the group, that platform was predominantly focused on the LNG expansion that were happening in Australia at the time. The Underground Mining business was working globally. And the Power & Water platform was essentially focused on completing our scope of work at Medupi and Kusile. So at this time, our focus was predominantly on the natural resources market sectors, but markets are changing, and the natural resources markets are cyclical. So we had to find a way to combat this market cyclicality and to deal with the changes that were incurring in our markets. And we introduced the concept of complementary markets. These complementary markets was part of a broader focus, market focus that we've developed, and this has now become a permanent feature of our strategy. When you define the target markets for the group, it is a little bit broader than purely natural resources, and it's all part of your way -- part of your plan to mitigate market cyclicality. As a consequence of this, we have progressed to a point that it became really necessary for us to change the naming convention of our platforms. And what we've decided to do is to change the Oil & Gas platform to change its name to Energy, Resources & Infrastructure. It is better describing the market sector, which is served by this platform. And we never were in the oil sector. The platform was called Oil & Gas predominantly because of the big position that we had in the Australian LNG market. But now we've dropped Oil & Gas, and we refer to energy, which still includes LNG, but it's a broader definition than what we had before. Resources is really the metals and minerals space in Australia. And here, we are not in conflict with what we're doing in the mining platform, which is also in the metals and minerals space, but in Energy, Resources & Infrastructure, it is predominantly surface infrastructure on large mines and then also infrastructure, essentially transport infrastructure. Underground Mining has changed to the Mining platform. And you need to read into this name that we are no longer purely focused on Underground Mining. We've established a leading position in all our geographic markets where we are operating as an Underground Mining contractor. And further growth will be very hard in the market given the leading position that we've already established. So we've decided to spread our wings and to include open pit mining as part of our target markets, and we've dropped the underground from our name, and it's purely now the Mining platform. And we are extending our services to open pit mining as well. Power, Industrial & Water, with Medupi and Kusile coming to an end, which was really the core activity in this platform for many, many years, we have broadened the market focus. We include industrial and the new name is Power, Industrial & Water. So we think with the market -- by having changed these names, the market will have a better appreciation of where Murray & Roberts intends to undertake its project work. So if I start off on the number side, by looking at the salient features for the past financial year, our revenue was marginally up to ZAR 20.8 billion, marginally up on last year, but we have reported a loss, and it is a substantial loss at an attributable level, ZAR 352 million. But Daniël will unpack that a bit more when he gets into the financial detail. But just at this stage, I want to emphasize that the impact or the profit for this year was really impacted by a number of items. First of all, COVID, a ZAR 622 million impact on our earnings before interest and tax. About 1/3 of that ZAR 622 million relates to our investment that we have in the Bombela Concession Company. As you know, we are a 50% shareholder in that concession, and that is a concession that operates the Gautrain in South Africa. Due to COVID, the ridership has declined significantly, and it is the client go below the level -- below the threshold level above which the government subsidy applies. So as long as the ridership is below that threshold, that shortfall is really impacting the value of the investment in the Bombela Concession Company, and we are currently in that scenario. We are not -- the ridership levels are not meeting that threshold where the government subsidy kicks in. And for that reason, we had to take a knock on our investment in the Bombela Concession Company, and as I said, it's about 1/3 of the ZAR 622 million. The balance of the 622 million is profit impact on our projects. And it's got 2 elements to it, 2 components. First of all, as we were not able to progress the work due to the lockdown restrictions and the regulations that we imposed and the travel restrictions. We lost the profit that were planned to be earned -- that was planned to be earned as we were -- during that period that we couldn't progress our works. But over and above that, we have also incurred cost to hold on to the resources and the cost of the idle assets that we had on these projects. By and large, our clients have agreed to extend the completion dates of our projects. So an extension of time was granted. But it's by -- it's a rare exception where clients were prepared to contribute towards the cost, the holding cost that we've incurred during the time that we could not progress the works. And that is where this impact of ZAR 622 million comes from. You will recall that we've sold a few years back, a company called Genrec, a company that we sold in the South African market. And on that business, there was an outstanding vendor loan of ZAR 80 million. Unfortunately, that business has gone into business rescue. And as a consequence of that, we had to impair the vendor loan. That also had an impact on our profitability. Because of the COVID market uncertainty, we were not able to support the goodwill that we were carrying on 2 companies within the group, and there's a goodwill impairment of ZAR 63 million that has gone through the books. And then we reassessed the recoverability on 1 of our claims, and we decided to impair ZAR 46 million of the uncertified revenue. Now all of these matters coming to -- items coming together at the same time created the perfect storm for us, and that has resulted in the loss that we've reported for the year. The Mining platform has done remarkably well, notwithstanding the COVID impact. However, Energy, Resources & Infrastructure, Power, Industrial & Water, both of those platforms reported a loss for financial year to June 2020. I think the highlight of this result is the order book and the balance sheet position. The order book is ZAR 54.2 billion, and we haven't seen an order book this high in Murray & Roberts for the past 15 years. And we are proud and confident that, that ZAR 54.2 billion is a quality order book. And if it wasn't for the strategy that we've adopted or the decision a few years ago to broaden the market focus and to include other markets into our definition of target markets, it would not have been possible for us to build the order book to ZAR 54.2 billion. So we're very proud of that achievement. Cash net of debt, ZAR 700 million. That is down on what it was last year, but it is more or less on par where we were at the end of December last year at the half year stage. That is before the IFRS 16 adjustment. And if you were to do that adjustment, we end up with a net debt position of ZAR 0.1 billion, but Daniël will unpack that as well in the financial part of the presentation. Notwithstanding the fact that we have a strong order book and that we've got a robust balance sheet, the Board has decided, due to the uncertainty that's still in the market, not to declare a dividend for the past financial year, and the focus is to preserve the company's financial position. From a safety point of view, we are very pleased with the fact that for 2 consecutive financial years, we have not had any fatal injuries in the group, and we're thankful for that. The last time injury frequency rate, although it has deteriorated marginally from 0.71 to 0.88, that's still a very, very good rate by any means. So yes, that's then the salient features for the financial year. Just a bit more about each of these platforms. Energy, Resources & Infrastructure, as you can see, it is a global business. It now comprise 3 regional businesses: 1 in the Australia Pacific region, APAC; then for EMEA, operating out of Scotland; and then in North America, another regional business. Three regional businesses, a similar model than what we've adopted in the Mining platform several years ago. The platform is headquartered in Perth. That's where the platform leadership is based. And what we have also done in the past year, the investments that we had in the U.S., in Canada, in America, CH-IV and also the recent acquisition of the EPC division of Saulsbury, we've consolidated that now under the Clough USA brand. Market focus. Our global focus in this platform is the energy sector. But in Australia, specifically, we also include transport infrastructure and resources. The COVID impact in the past year on this platform was ZAR 179 million. From a market perspective point of view, the energy market, we believe, in the U.S. is buoyant. But having said that, currently, there is uncertainty in the market. But in the medium to long term, we are confident that the market will bounce back and that there will be strong demand for our services. In Australia, transport infrastructure has been identified by the Australian government as a sector that they're going to use to accelerate economic growth post-COVID. And there's a lot of investment that are being accelerated in Australia in transport infrastructure, and we are well positioned for a number of opportunities that have been identified. And then as far as the resources sector is concerned, there's still a lot of investment happening in Australia, which is presenting opportunity to this platform. The order book at the end of June was ZAR 34.4 billion. That is a record order book, not only for this platform but for the Clough group, even prior to the time that it was acquired by Murray & Roberts. So it's a very good position that we're in. And if it was not for the decision to broaden our market focus, this platform would have been nowhere today because in that ZAR 34.4 billion is very little, if any, projects associated with the LNG market. So essentially, what we've done is to broaden the market focus. And through that decision, we were able to establish and to grow an order book of ZAR 34.4 billion. The platform prospects. I think it's fair to say that the order book position has put us in the position that we can expect this business to return to profitability in this new financial year and in the short to medium term to start making a meaningful contribution once again to group income. As I've mentioned, the transport infrastructure in Australia is a sector that is booming. And there's still major investment happening in Australia as far as the -- or by the mining majors. The pipeline, ZAR 66.4 billion. This is for Category 1. And definition for Category 1 is tenders that we are currently working on, tenders that are being -- will be submitted, ZAR 66.4 billion. So all in all, I think this platform is in a much better position relative to where it was a year ago or even 2 years ago, and we're pleased with the progress that we've made during this time. The Mining platform, it's also global, operates in 3 regions through 3 regional businesses, one in the APAC region based operating out of Perth. The platform is headquartered in South Africa. And this company in South Africa is focused on sub-Sahara Africa; and then in the Americas, we operate out of South Lake City in Utah, quite a strong business in the Americas as well. Market focus. I think important to note that this focus now includes open pit mining services, not purely an underground miner anymore. It does include open pit mining services. Market conditions. The COVID impact was just more than ZAR 200 million. It is a substantial impact. Having said that, if you look at the capital investment that is still occurring in the mining sector, we think it held up nicely, predominantly still in the brownfield expansion area. But we're very pleased with where we are in this Mining platform, notwithstanding the fact that the order book has come back a little bit, down to ZAR 19.4 billion, not much down on what it was at this stage last year. And we're not overly concerned because of the order book position, yes, there is sort of pressure in all the markets. But having said that, if you look at the new orders, which we will get to a bit later and also the Category 1 prospects, there's enough opportunity out in the market for us to maintain a very high level of performance through this platform. Market prospects. As I mentioned, our leading position in Underground Mining across the globe, everywhere that we work, we're really maintaining that position. We are very pleased about that, but we are now moving into the open pit mining space. Having said that, for us to do that in a meaningful way, we will have to consider acquisitions. And we do have a few options that we are looking at, at this moment in time. That's really the only way to establish a meaningful presence in open pit mining services, and that's on the cards. TNT, the business that we acquired last year, is operating out of Santee in California. This is a business that provides material logistical services. And at this stage, it is predominantly providing clients in the American market and a little bit into South America as well. And what is important for us is to make sure that we get the service offering and that we extend it into the sub-Sahara Africa region and into the APAC region with the rest of the Mining business has got a good position. The pipeline is ZAR 45.1 billion. Again, that's Category 1, and it is a significant pipeline for this business. Power, Industrial & Water. It's not a global business. It is focused on sub-Sahara Africa, and it is based here in Johannesburg, operates out of Johannesburg. And this is a business that has, over time, delivered quite a large scope of work on the Medupi and Kusile power stations. But that has now come to an end. It has come to an end, and we had to expand our market focus slightly. The impact of COVID on this platform was ZAR 43 million. And you will note in Daniël's slides a bit later on that the platform recorded a loss, and that loss is essentially the COVID impact that we've experienced in the year. But unfortunately, there's limited investment happening in South Africa as we speak. So we do expect that there will be a bit of a dry season maybe for the next 6 to 12 months due to a lack of project opportunity for this business, and that is restricted in the order book. The order book declined to ZAR 0.4 billion. And when you compare that with the order book of the other 2 platforms, it really is just a drop in the ocean. I've been asked by many shareholders and analysts, whether there's any rationale, strategic rationale, why are we still proceeding with this platform. And my standard answer is we will hold on to this business for as long as it doesn't cost us too much money, purely because of the opportunity that we believe that do exist in South Africa, if we can get to a point that there is investment happening in the water sector. We know the state of the water infrastructure, water sector infrastructure in South Africa. And there's billions of investments required in this sector to address this problem. And we are ideally suited through this Power, Industrial & Water platform to provide those services. So we are holding on to this business and waiting for that opportunity. In the power sector, there's still investment that needs to happen in quite a big way to sort out our power problems in South Africa. And for that reason, we're holding on to this platform. In the short to medium term, the only real opportunity that we see is in overland transmission and distribution, and you will recall, we've acquired in the past year, a company called OptiPower. And this is the company that is providing this type of services. There's quite a big value of work that's out on tender for Eskom. It hasn't been adjudicated yet, but we believe we are well positioned to secure a sizable portion of that work. But the larger opportunity is really the LNG developments in Mozambique. As you know, those developments have commenced. But the work that we are positioning ourselves for is not going to impact our business before financial year 2022. Pipeline opportunity is ZAR 9.8 billion. Again, that's Category 1. And compared to the other 2 platforms, you will see it is significantly less. But we are hopeful that the decision by government, the South African government to invest in infrastructure as a means of reigniting the South African economy that, that will materialize and that, that will present opportunity for Power, Industrial & Water. So the order book in a bit more detail. And when you look at this slide, you can clearly see the difference in value of the order books between Energy, Resources & Infrastructure and Mining and Power, Industrial & Water. So the growth in the order book is predominantly in the Energy, Resources & Infrastructure sector, and that value is largely driven by the Snowy project, which is a electro -- hydro-electro scheme in Australia; and then also the Next Wave project that we've secured in the U.S.A. But it is a strong pipeline for that platform. And as I said, really, there's a high expectation for that business to start making a meaningful contribution again to group profits as it has done a couple of years back. Mining business, marginal decline in the order book. But as I said, there is a strong pipeline, and we're not overly concerned about that drop to June 2020. This is an interesting slide. There's a lot of information, but in the first column under the heading order book, you essentially see the split between the value in the order book that's in the international market and in the SADC region. 24% is in the SADC region of the order book of ZAR 54 billion, and 76% is in the international market. And the SADC portion is predominantly made up of that 66% in the Mining platform, 66% of the ZAR 19.4 billion order book as of June 2020. On the right-hand side of the slide, there's a column that gives you the time distribution of this order book. And further down, you'll see 2021, 2022 and beyond financial year 2022. So that ZAR 54 billion is spread over time with ZAR 16.6 billion to be delivered in this current financial year to June 2021; ZAR 12.9 billion already secured for the financial year to June 2022; and then beyond that, there's ZAR 24.7 billion. So it's quite a nice position to be in because it gives you a feel for sort of the time distribution that we have. And it is a better position that we had compared to the previous 2 financial years. If you look at June 2018, what the distribution of that order book was, if you look at June 2019, what it was, you will realize that we are currently in a stronger position compared to where we were at this time June 2018 or June 2019. Just a bit more detail about the order book and the pipeline. So the order book is ZAR 54.2 million, and that is not part of the pipeline because that work has already been secured. Orders have been signed. It is in the order book. And we are executing those projects. And now post COVID-19, most of our operations have resumed again. There's only 2 projects that are still on hold, 1 in Canada and 1 in Mongolia, but we are working down this order book, and we are implementing and progressing works in all the geographic regions where we are working. In the pipeline, the first category is near orders. And near orders refers to projects which have been awarded to the company subject to financial and commercial close between ourselves and the client. So there's ZAR 11.4 billion as at the end of June 2020. We are in a process of closing this out commercially. And once the agreements have signed, that value will move into the order book. Category 1, ZAR 121.3 billion. As I mentioned earlier on the definition of Category 1, that represents tenders that we are currently working on, projects that are in the market, where our clients have asked for tenders and where we are competing in the market to win this work. But what is of significance is that in that ZAR 121 billion, there's 4 projects with a combined value of ZAR 40 billion, where we've been asked by clients to develop those projects for them. So we are not tendering in the open market in competition with other companies. This work has essentially been allocated by the clients to the Murray & Roberts Group, and they want us to execute the projects or to develop those projects for them. But those projects have not reached the final investment decision point yet. So we are working with the clients in that regard. And we are hopeful that by the end of December, the first 6 months of this new financial year, that it leaves at least half of that ZAR 40 billion, which we are negotiating on a sole-source basis that would have worked its way into the order book. I mentioned there's 4 projects. One is in the Mining platform, and 3 of them in Energy, Resources & Infrastructure. So all in all, notwithstanding the fact that there's market uncertainty and no one can deny that there is market uncertainty, the fact that we have this ZAR 54 billion order book and the fact that we have such a good position in near orders and Category 1 pipeline gives us a lot of confidence moving into the new financial year. So with that, I would like to hand over to Daniël Grobler who will talk to you in a bit more detail on the financials. Thanks, Daniël.

Thank you, Henry. So Henry has given me the interesting challenge to talk to you about very difficult financial results and do it as best I can. So I always accept the challenge. But what I've done is I've come up with a little hack to assist me in this process. So the first piece of advice was where this bright yellow tie, the audience will then have to make up on themselves to look at the time or the information. That effect, I'm told holds about 10 minutes. So in the first 10 minutes, I'm going to run through the income statement and earnings and then spend a lot of time on the balance sheet, which is where the real strength of the company relies on. If we start with the income statement, Henry made a brief comment that revenue has increased compared to prior year. But on almost all the other metrics, we're down. On EBITDA, we're down. On EBIT, we're down. And I'll unpack that in a little bit more detail. Net interest expense increased incrementally compared to the prior year. Tax is very difficult to give you an exact answer because we're in the loss this year versus next year. Discontinued operations, we made a profit, and I'll unpack that in a bit more detail later on. But ultimately, we made an attributable loss versus an attributable profit in the prior year. Now both myself and Henry, we hate losing. We're seeing whether or not we can hold a profit figure for the current year, but that was just not possible. If we go into the current year results, what we've seen is continuing EBIT shows a loss of ZAR 17 million. So what we did was we took a step back and we said, what were the once-off items that really messed up our results in the current year? Henry mentioned the COVID impact of ZAR 622 million, and we've given you a breakdown per platform, and I'll talk to that a bit later. We had goodwill impairments in 2 of our entities: and one was in Power & Water; one was in the ERI platform. And then we had uncertified revenue impairments. Now on the uncertified revenue impairments, we started negotiating with the clients. We've got more information from the client. And we realized that elements of our claim weren't that strong. So under IFRS 15 rules, you have to impair that amount that you're not certain about. But if you take the complete picture and you take a step back, instead of a loss of ZAR 17 million, we could have ended up with a normalized continuing EBIT profit of ZAR 714 million. If you look at the interest expense, I've had a lot of questions as to why the interest expense went up from ZAR 56 million to ZAR 221 million in the current year. IFRS 16, and I've explained it in a lot of detail on the previous 2 presentations, I'm not going to spend too much time with it, but IFRS 16 contributed ZAR 65 million of that. In this prior financial year, we acquired an additional 17% shares in the Bombela Concession Company. That's another ZAR 13 million. And we acquired TNT, which added ZAR 15 million to the additional interest charge. But then there's a line item that says working capital. And working capital has got 2 elements. So we've got working capital sitting in the South African operations, and we've got 2 working capital loans sitting in Mongolia. Now the Mongolia working capital facility attracts interest at 15%, which is significantly high. And we are aiming to have those loans repaid by the end of September. And hopefully, of that ZAR 72 million, ZAR 30 million that relates to Mongolia will come down significantly in the new financial year. If we move over to segmental reporting, Energy, Resource & Industrial (sic) [ Energy, Resources & Infrastructure ], I argued long with Ed that we should start with the worst, and the answer was yes. They made a total loss of ZAR 454 million, and there's reasons for those losses. So if we look at the 3 elements that are operating, engineering and construction, we can see an increase in revenue, and that's an increase as to where they are going with their type of work, but they still reflected a loss of ZAR 322 million. That loss has got 3 elements to it. One is they made a COVID loss across all these working businesses of ZAR 172 million. But specifically in this engineering and construction sector, they made 2 losses on 2 projects. Now on the biggest project where they made a loss of ZAR 134 million, they've taken 0 uncertified revenue. That doesn't mean that we've got no entitlement. It just means that on IFRS 15, we haven't met the high probable threshold that we're going to get back the money. And hence, we're allowed to take 0 uncertified revenue there. So I believe with COVID restarting with the likes of Snowy Hydro as well as the Next Wave project, that revenue sector is going to pick up significantly, and we should start seeing a profit coming through in the new financial year. Global marine, we can see has got an order book of ZAR 443 million and only revenue burn of ZAR 33 million. That's the LNG project in Canada that Henry referred to that's still on hold due to COVID. And hoping that in the next financial year, we can gain some traction on that. Commissioning and maintenance, we see it shows a very healthy margin in the current year. We've closed out the Ichthys project, and we have a number of risk contingencies, which we carried on this project and we managed to release once final negotiations have been done and concluded. If you look at corporate and other, in the current financial year, they took a bit of a different financial model where they took tendering costs, which were quite significant. And they allocated those to global marine, engineering, construction and commissioning. That reduced the corporate overhead cost significantly. However, that was offset by the additional goodwill taken or impaired on 1 of the entities within the group. But as Henry mentioned, the highlight of this slide is the order book that ended up with ZAR 34.461 billion. So hopefully, in the current year, we've accounted all the known project losses. That's a quality order book with some quality projects in it and significant upside based on the Cat 1 transactions sitting in that platform. Mining, we said, delivered a good performance. It has got 3 elements in it. And I would say Africa and the Americas did deliver good performance. In Africa, we can see a slight increase in turnover, and the operating margin remains at 8%. Order book dips slightly. But all in all, a very, very good performance. The COVID impact on Africa is about ZAR 55 million, so despite the COVID impact, they still managed to increase the prior year profit number. Australia, I was very disappointed in the result coming out of Australia, the COVID impact of ZAR 102 million. However, they lost money on a contract called Mt. Morgans. That contract has come to an end. And there were many lessons learned on that contract, which will be carried forward into new contracts that they're bidding for. But they also had a number of raised borrowing jobs. Now those jobs typically run at very high margins, and those jobs came in at very low margins. So Australia has got the ability to easily make an EBIT margin of 8%, 7%, ZAR 250 million on ZAR 3 billion of profit. And we need them to repeat that in the next financial year. I think all the bad elements are out of that platform. And hopefully, we see them turning in the new financial year. The Americas, we can see an increase in both turnover as well as in profit. We well know that, that includes the addition of TNT. And TNT performed well under the current year. And they still operate at a very good margin of 8% versus prior year margin of 7%. The only concern I've got with the U.S. business is that the order book went down from ZAR 5.6 billion to ZAR 3.5 billion. But they do have a strong pipeline of opportunities that they're working on. So overall for the Mining business, it was a good performance, but it could have been better had we had a better performance in Australia. If I move over to PIW. So in the power section, it appears that we've got a good result. We're showing 16% operating margin. We won a significant award against Mitsubishi Hitachi, which boosted profits in that element. Water shows a loss of ZAR 62 million, and that loss is mainly attributable to some of the goodwill write-down that we spoke about earlier. Transmission and distribution is the new OptiPower that we acquired. We can see them making a 7% profit. So good profit on those jobs. As Henry mentioned, they've got about ZAR 2.5 billion of work under tender with Eskom. There's not a lot of places in this market, but there's significant potential upside for this element within the Power, Industrial & Water platform to move forward. What we see under other are projects like SEPI and Polokwane and some smaller projects. And we see a small loss there of ZAR 55 million. Now it just so happens that the loss on the -- on one of these projects was about ZAR 65 million. But the COVID impact there was ZAR 30 million. So it's been a very difficult environment in the past 12 years to operate in. And Henry mentioned many reasons of keeping this platform going forward. And in the current year, they've got an order book of ZAR 0.4 billion. They've lost ZAR 44 million, of which about ZAR 40 million was due to COVID. So in these circumstances, we're just waiting for the upside in the market in order to move forward. If we move to the Bombela investment, we hold 50% investment in the Bombela Concession Company. As you know, with COVID, the riderships took a significant dip. Henry already explained that to you. We were forced to rebudget over the next 24 months onwards to see what the impact of COVID is going to be. So it's very difficult to say that on Stage 4, there's going to be 2,000 passengers, when are they going to open up the airport link. There's some high judgment calls that went into the reforecasting of BCC. But despite this reforecasting, we still took a COVID impact, our 50% share of ZAR 97 million on this project, which is significant. And going forward, this project is a contributor to dividends as well for the group. And we're hoping that they do have a significant insurance claim in that once the insurance claim starts kicking in, we can start generating some further dividends on this. I've got a slide on discontinued operations. Middle East is showing a profit of ZAR 120 million. And it's a first profit in a very long time and probably a loss/profit that we'll see in the Middle East. It's generated from a foreign exchange difference on an intercompany loan that they've got. And it's enough to offset any operational costs and legal costs that they've incurred in the Middle East. On the other, we've got an operating loss of ZAR 80 million -- ZAR 101 million. That includes a loss on Genrec of ZAR 80 million. And all in all, we made a small profit of ZAR 19 million in discontinued operations in the current year. So those were the 10 minutes where you can look away from my time, look back on to the balance sheet. We're back on to the balance sheet. If I start with the property, plant and equipment, that balance increased by ZAR 1.1 billion. So what was that increase made up? Yes, there were CapEx and depreciations, those almost offset each other. But with the new IFRS 16, we had to bring on to balance sheet ZAR 0.6 billion worth of a right-to-use asset on to my balance sheet. In addition to that, we had foreign exchange gains on this balance sheet of ZAR 400 million. So if at the start of last year, I bought a machine for $100, it was worth ZAR 1,000, a year later, that $100 is worth ZAR 1,200. That incremental ZAR 200 is shown as part of this foreign exchange benefit. The next line item that I'd like to highlight is current assets. Current assets went up by ZAR 1.2 billion. And the ZAR 1.2 billion are mainly debtors that we've been working with, and there's a number of them. Some of the debtors, we're on payment plans, especially in the U.S. Some of the debtors, we've got leans and bonds on. Some of the debtors, we have initiated legal action, but we have got performance bonds. But we are actioning those. But to date, we've taken 0 write-downs in terms of bad debt in terms of the group debtors. What you will see from cash, cash as of June '19 was ZAR 3.455 million. In the current year, it's ZAR 3.415 million. So we managed to retain quite a strong cash balance. If I move a few slides down to short-term lending. So short-term lending increased by about 1.8 -- ZAR 1.9 billion in the current year. So out of the ZAR 1.9 billion increase, again, under IFRS 16, ZAR 0.9 billion of that reflected to IFRS 16, and it's just one of those things that you have to bring on to balance sheet. However, the overdraft increased by another ZAR 1.1 billion. I've mentioned a number of initiatives we're currently busy with our debtors, and that overdraw facility should be working -- be making its way down during the course of the next financial year. But overall, we're sitting with a net cash position of ZAR 747 million. Henry mentioned that as of December, that was ZAR 758 million. So really moving through the COVID period with all the challenges and being line ball with what we were in December. I think it's a really good outcome for the group. I've got 1 slide left, and that just puts debt for the group into perspective. So again, I've divided that into self-servicing debt, corporate debt and IFRS 16. Self-servicing debt, I'm not going to spend too much time on. Those are projects, specific debts, which are delved and extinguish by those projects. Corporate debt span up of 2 elements. One is the TNT acquisition. The other one is the overdraft and loan facilities. TNT is sitting at ZAR 311 million. The overdraft is sitting at ZAR 1.2 billion. That's the one that the market focused on, and that's the one that I focus on and try and keep as little as possible. And the IFRS debt is very close to ZAR 900 million. So when you calculate your gearing ratio, the ratio that we really track is the gearing ratio for the corporate debt, and that's sitting at 27%. I'm still comfortable with that level. I know that's hugely dependent on the corporate overdraft facility. And the quicker that we get that off, the quicker that goes down. If I include self-servicing debt, that goes up to 47%. Now again, not too concerned about if that figure goes to 55% because we've secured contracts. Those contracts will service their own debt and generate a profit, so that type of increase does not concern me. And then Henry, it looks like all the challenging news has been dealt with, and it's time to hand back to you.

Thank you, Daniël. I just want to remind ladies and gentlemen, those of you on the call and on the web to please log your questions. So that at the end of the presentation, we can attend to that. Thank you very much. Focus area for financial year 2021. The order book growth is important for us. Our type of business, as an engineering and construction group, your order book is a leading indicator of the potential of this business going into the future. Given the uncertainty that we are still living under, market uncertainty, as I said, we already have ZAR 54 billion as an order book, but we have to make sure that all the new orders find its way into the order book. And at least ZAR 40 billion of that Category 1 pipeline of ZAR 121 billion that we can get that into the order book before June 2021. So a real focus on growing this order book. We've got good opportunities that are well advanced in an uncertain market, and those opportunities that are well advanced, we have to make sure that we land them and that we include them in the order book. Project execution. It's really an area that I think we could have done better in the past year, and we have to improve on that into the new year going forward. We have had challenges. It's not a function of that the quality was not on the order book. It was more a function of issues that happened during the execution phase of a project, and that is where we need to lift our game. Reduce working capital or improve the liquidity, another area that we will focus on, notwithstanding the fact that we have a robust financial position. There are debtors which are paying us on a payment plan. And especially in South Africa, unfortunately, we have a few debtors, which are very, very slow in paying us. And that we need to sort out -- focus and sort out in the new financial year. Digitalization is something of -- not only of the future but in the present already, and it is an area that we need to focus on. We've done some good work in the past financial year with the support of the Boston Consulting Group. We've put it on hold as we were distracted by COVID, but we need to get going again with that initiative. We've made fantastic progress in the Mining platform already. And there's areas that we've already achieved a lot in the other 2 platforms, but we need to have a structured and well-organized approach to the digitalization, and that is something that we will focus on in this new year. And then we have to exit the Middle East. We've been trying our best now for so long to get out of that region. And we've now completed all the projects. As you know, we don't have any construction activity ongoing in that market. But it is now about closing out all the financials. And that is a major task. In the Middle East, you fight tooth and nail for every cent. So it is a difficult process. But I think we are well in control of what we're doing there. Our Commercial Director, Ian Henstock, is actively involved in all the initiatives that we need to -- that we have going in the Middle East to successfully close out our commercial positions. But having said that, I don't want to create any concern with anybody that there's potential bad news coming out of the Middle East. We are confident that the accounting position that we have adopted in the Middle East, that, that has been a prudent position, and that we should be able to close it out within those positions that we've adopted. So these are then the focus areas for the new financial year. Just presentation takeaways. If I look at Murray & Roberts as a group, I think we had a stable base from which we can grow. The idea to broaden the market focus and to mitigate the cyclicality of natural resources, I think, was the right decision for the group. It has enabled us to establish this order book that we've been referring to. If it wasn't for the broader market focus, we would not have been sitting with a ZAR 54 billion order book. So that was good. I think the cash position, it's also good to know that we have a robust cash position in the group, lots of headroom on our facilities, a lot of unutilized credit facilities, ZAR 2.8 billion. I had a conversation with one of the CEOs of the local banks a couple of weeks back, and he said to me what they experienced as we moved into COVID sort of in March of this year, a lot of the companies were drawing down on their facilities, and they wanted to get the cash into the businesses. We didn't do that. It wasn't necessary for us to draw down on our facilities. And as you can see, we still have headroom of ZAR 2.8 billion on our facilities. The order book, we've spoken a lot about it, but it is a good presentation takeaway, ZAR 54 billion near orders of ZAR 11.4 billion. And ladies and gentlemen, then there's just a few comments on Energy, Resources & Infrastructure, Mining and Power, Industrial & Water. I think the takeaways from all of that is on Energy, Resources & Infrastructure, we really expect this business now given its order book of ZAR 34 billion to be profitable in the new financial year and to become a meaningful contributor again to group earnings. And then the Mining business, I think the focus has shifted there to now include open pit mining services is an important takeaway from this presentation. And then finally, from a group perspective, strong order book, robust financial position, sufficient funds to fund our growth plans and return to profitability in 2021 and then earnings growth beyond. Ladies and gentlemen, that brings me to the end of the presentation. I see from Ed that there's a couple of questions that have been logged. So let's attend to those. Thank you. Ed?

Thank you, Henry. Just a couple of questions. Quickly, a few on the webcast, and we've got 2 on the call. So perhaps, let's start with the call first. Dinay, are we ready to take questions on the call?

Of course. The first question we have is from [ Timello Morbida ] from Reuters.

I would just like to know, do you expect construction to pick up? Or have you seen a pickup in Oil & Gas market?

My apologies, I couldn't hear your question. Can you repeat, please?

All right. I would like to know, do you expect construction to pick up? Or have you seen pickup in the Oil & Gas market?

I am still not able to follow your question. Is there a different way can we perhaps -- it is distorted. The sound is distorted. Can we ask the people that manage the sound for us to take the question and maybe just bring a question through to us?

Yes. Sorry, [ Timello ], the line is quite bad. I think if we can perhaps move on to the next question, Dinay, and perhaps if we can help [ Timello ] with the question in the meantime?

The next question we have is from [ Douglas Wallish ] from [indiscernible] Capital.

Yes, please ask the question.

[ Douglas ], are you there?

It seems that [ Douglas' ] line is silent at the moment. So the next question we have is from [ Roy Hokkai ] from [indiscernible].

Can you hear me?

Yes, [ Roy ].

Just a question related to the Bombela Concession Company performance and then its effects on continuing EBIT [indiscernible]. In Mining, Gautrain Management Agency, they told me that Bombela lost about ZAR 171 million in revenue. Can you explain the difference between the revenue and continuing EBIT impact from COVID-19? And in addition, can you comment on the future prospects for this investment, particularly in line with the possibility of Bombela, including future losses because of a permanent change in the way people work and which will negatively impact ridership level?

Thank you, [ Roy ]. Yes, I can't comment on how to reconcile the information that you got from the GMA to what we've been disclosing this morning. So what we did from our end, we had to forecast, make certain assumptions and forecast what the ridership is going to be over the next year or so and towards -- leading up to the end of the concession period. And the way in which the financial model works, there is a threshold, and ridership needs to reach that threshold. And once you get to that threshold, only at that stage, the performance guarantee or the patronage guarantee by government starts to kick in. Below the threshold, the ridership does not reach that threshold level, the delta between the threshold level and the actual, that impact is for the concessioner's cost. And we haven't had that in the past, but with COVID, we found that the ridership has dropped below that threshold. Before COVID, we had about 55,000 passengers a day. Currently, we're doing about 7,000 passengers a day. And what we did, we forecast how we expect this ridership to increase over time and by when it will reach that threshold level again. And the impact of that delta between the actual ridership and the threshold ridership, that impact we had to take into consideration in doing the discounted cash flow valuation on the concession -- on the Bombela Concession. And that impact had to be accounted for 100% in the current financial year. And for us, I think the number is, what's it, ZAR 197 million?

ZAR 197 million. [ Roy ], just maybe the difference between accounting. So what they do is they account a normal profit and loss, and their profit and loss will never match our figures. What we get from them is forecast the dividend streams. And those dividend streams are then discounted at a rate to give us a fair value adjustment. So there's never going to be a direct link between the income statement that they record and whatever fair value adjustment that we record on our side.

[ Roy ], I hope that answers the question. But if not, you're welcome after the call to spend some time with Daniël, and he will explain that to you.

That's fine, Henry. Just with the future prospects and the dividend change in [indiscernible] work and [indiscernible] impacting on ridership levels and what is threshold?

I can't disclose that detail other than to say that we expect that by June of next year, we should be approaching ridership levels again that will be at the level of the threshold. So for the entire next 12-month period, to June 2021, in our model, we've assumed that we will be below the threshold level.

Thank you, [ Roy ]. I think let's move on to the webcast question. We've got a few here. The first one would be, can you please clarify whether you intend to operate open cast mining fleet or just perform the services to the segment?