http://www.fin24.com/Companies/Gautr...nings-20100825

Never do business with the government.

Johannesburg Engineering and construction group Murray & Roberts Holdings [JSE:MUR] said on Wednesday unpaid claims relating largely to work done on the Gautrain has halved its annual earnings.

The group said on Wednesday it is owed R1.4bn in claims, of which R619m is a Gauteng-related cost overrun.
Earnings for the year to end-June were 340c, compared to 675c the previous year.

"On long duration major projects where significant costs might have been incurred, payment is subject to claims resolution over an extended period, said CEO Brian Bruce.

The group is known for completing major construction projects like the Cape Town stadium and the Sorbonne University in Abu Dhabi.

The group's order book, an indication of how much work a construction company expects to garner in the year, also showed a drastic decrease from R42bn over the last 15 months to R30bn in the last six months.

According to Bruce, the construction sector remains muted in South Africa and order book growth will depend heavily on the progress with the Eskom power programme's Medupi and Kusile power stations, which have been subject to delay.

The local construction industry has been plagued by shrinking margins and increased competition in the post-World Cup era as the timing of the government's planned infrastructure spend remains unclear.

About 60% of M&R's operating profit is derived from South Africa; the balance is from international operations.

Stockbrokerage Imara SP Reid earlier in the year reiterated its "hold" recommendation on Murray & Roberts, saying the order book is heavily weighted to major domestic long-term sector projects.

"The Eskom power programme has suffered significant start-up delay and disruption, reducing expected revenues against costs incurred in the year," the group said.

Revenue declined slightly in the year to R32bn, with operating profit down 36% to R1.8bn at an operating margin of 5.6%.

A final dividend of 53 cents per share has been declared.
That had to hurt.