International rating agency, Global Credit Rating Co maintained Murray & Roberts Holdings's short and long term domestic ZAR currency rating of A+ (single A plus) and A1 (A one) respectively.

The agency noted that the rating was supported by Murray & Roberts' position as the second largest building and construction group in South Africa, by turnover, and its strong operating performance relative to its peers.

In addition, the group's management team, which has successfully delivered on rebuilding Murray & Roberts, was also favourably viewed, although its ability to grow the business still needs to be demonstrated.

While the inherently cyclical market in which Murray & Roberts operates, together with its exposure to the strengthening rand, exacerbates the risk profile of the group, this is ameliorated by the ungeared balance sheet and relatively strong cash flows, the rating agency pointed out.

The rating agency added that in this regard, the group has maintained a net cash position over the review period, although this has deteriorated over the past two years, decreasing to R682 million in F04, from R1.3 billion in F02.

Total borrowings declined by R138 million to R422 million in F04, of which 67% was of a short term nature (F03: 65%).

Liquidity risk is negated by the fact that cash covered short term debt 3.9x in F04 (F03: 4.3x). However, whilst discretionary cash generation has historically been strong, the group has reported significant reductions over
the past two years, from R641 million in F02, to R196 million in F03 and R133 million in F04.

Gross gearing levels declined from 23% in F03 to 16% in F04. The acquisition of Cementation and Clough, cumulatively amounting to almost R600 million, will be funded from internal cash resources.

As at July 2004, this reduced the group's net cash position to R97 million, although after including the proceeds from the sale of Unitrans, this increases to around R1 billion.

Following the group's rebuilding over the last four years, the rating agency said that the company's performance is now closely linked to the fortunes of both the domestic and global economy, and more specifically, levels of gross fixed capital expenditure.

Furthermore, the agency noted that while the group's operations are geographically diverse (approximately 50% of the group's order book relates to work in the rest of Africa and the Middle East), difficulties and challenges operating in these markets, including unfavourable contract terms and project delays, have exacerbated business risk.