M&R’s shares dive on bridge crash
Shares slide 7.32% on news
MURRAY & Roberts’ (M&R) share price plunged after a scaffolding support structure for a pedestrian bridge over the N1 highway near the Grayston Road off-ramp in Johannesburg collapsed, killing two and injuring 23 others.
The listed construction and engineering group’s shares yesterday fell as much as 7.32 percent to close at R11.15, valuing the company at R5 billion. The company’s share price was trading above R12 before the collapse.
Ed Jardim, the group investor and media executive at M&R, attributed the drop in the group’s share price to the reaction to news about the collapse of the structure. He said M&R would need to understand the facts about the cause of the collapse before reaching any conclusions about the impact on the group’s reputation.
Reuters quoted financial consultancy Lehumo Capital managing director Martin Lentsoane as saying shares in the construction sector had been under pressure but the accident had contributed to the sharp drop in M&R’s stock.
Bloomberg said M&R shares had declined 47 percent this year, making the company the eighth worst performer on the all share index.
Challenges
The construction sector has been severely knocked in the past year or more by a shortage of major contracts, particularly government infrastructure projects; fierce tender competition; and dwindling profit margins.
The sector has also been affected by the fallout from the Competition Commission’s investigation into collusion and bid-rigging in the industry, which has resulted in 15 firms collectively agreeing to pay R1.46 billion in fines.
M&R agreed in 2013 to pay a fine of R309 million for 17 prohibited practices or contraventions of the Competition Act.
The group in August reported a 1.9 percent decline in diluted headline earnings a share from continuing operations to 201c in the year to June, with revenue from continuing operations decreasing by 15 percent to R30.6bn.
Jardim said the group had been informed that there were two fatalities and at about 6pm three people were still trapped.
“Murray & Roberts offers its condolences to the families of the deceased and sympathy to those injured. Emergency services are in control of the rescue operations, supported by senior Murray & Roberts personnel and equipment,” he said.
Jardim said M&R was unable to comment yet on the cause of the collapse.
“The emergency services are still running the site. There are still people trapped and we have not had access to the site,” he said.
Contractual issues
Jardim confirmed M&R had insurance cover for such incidents, but the group was focussing on the injured and deceased and “not even thinking about contractual issues”, such as whether the group could lose the contract.
He said the contract for the construction of the bridge was awarded earlier this year, but M&R had just commenced construction on the site and stressed that a bridge support structure, and not a bridge, had collapsed.
He was unable to confirm the value of the contract or when the project was scheduled to be completed.
The City of Joburg’s Rea Vaya website said the new bridge would cost R130m and cross the M1 highway alongside the existing Grayston interchange, opening up a “Corridor of Freedom” between Alexandra and Sandton.
It said construction, which was being facilitated by the Johannesburg Development Agency (JDA), began on March 1 and was due to be complete by October 2016.
The webpage said the bridge was designed by Royal Haskoning DHV and was being built by M&R “with safety a top priority” and would incorporate 3 metre-wide pedestrian and cycling pathways separated by barriers from vehicles once it reached the road.