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Abridged Audited Condensed Consolidated Results for Year Ended 28 February 2013 & Notice of Annual General Meeting
STEFANUTTI STOCKS HOLDINGS LIMITED
("Stefanutti Stocks" or "the company" or "the group")
(Registration number 1996/003767/06)
Share code: SSK ISIN: ZAE000123766
ABRIDGED AUDITED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2013
AND NOTICE OF ANNUAL GENERAL MEETING
- Revenue R9,4 billion
- Operating profit R234 million
- April 2013 order book R10,0 billion
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months 12 months
ended ended
Increase/ 28 February 29 February
(Decrease) 2013 2012
% R'000 R'000
Revenue 17 9 405 143 8 068 483
Contract revenue 17 9 329 660 7 990 718
Earnings before interest, taxation,
depreciation and amortisation
(EBITDA) (21) 439 585 554 831
Depreciation (195 797) (185 577)
Amortisation of intangible assets (10 226) (7 589)
Impairment of assets (2 652)
Operating profit before investment income
and non-operational item (operating profit) (35) 233 562 359 013
Competition Commission penalty (323 000)
Operating (loss)/profit before investment income (89 438) 359 013
Investment income 36 892 41 636
Share of profit from associate companies 2 797 1 768
Operating (loss)/profit before finance costs (49 749) 402 417
Finance costs (60 728) (37 919)
(Loss)/profit before taxation (110 477) 364 498
Taxation (51 584) (100 257)
(Loss)/profit for the year (162 061) 264 241
Other comprehensive income 57 010 50 032
Exchange differences on translation of
foreign operations 57 010 27 380
Gains on property revaluation 22 652
Total comprehensive (loss)/income
for the year (105 051) 314 273
(Loss)/profit attributable to:
Equity holders of the company (161) (162 061) 264 241
Total comprehensive (loss)/income
attributable to:
Equity holders of the company (105 051) 314 273
(Loss)/earnings per share (cents) (93,17) 153,23
Diluted (loss)/earnings per share (cents) (86,17) 140,49
Commentary to the statement of
comprehensive income
Headline (loss)/earnings reconciliation:
(Loss)/profit after taxation attributable to
equity holders of the company (162 061) 264 241
Adjusted for:
Profit on disposal of associate (296)
Profit on disposal of plant and equipment (7 545) (2 858)
Impairment of assets 2 652
Tax effect of adjustments 2 177 306
Headline (loss)/earnings (163) (167 725) 264 341
Normalised headline (loss)/earnings
reconciliation:
Headline (loss)/earnings (167 725) 264 341
Adjusted for:
Amortisation of intangibles 10 226 7 589
Tax effect of adjustments (2 856) (2 119)
Competition Commission penalty 323 000
Normalised headline earnings (40) 162 645 269 811
Number of weighted average
shares in issue 173 941 097 172 448 040
Number of diluted weighted average
shares in issue 188 080 746 188 080 746
(Loss)/earnings per share (cents) (161) (93,17) 153,23
Diluted (loss)/earnings per share (cents) (161) (86,17) 140,49
Headline (loss)/earnings per share (cents) (163) (96,43) 153,29
Diluted headline (loss)/earnings
per share (cents) (163) (89,18) 140,55
Normalised headline earnings
per share (cents) (40) 93,51 156,46
Diluted normalised headline earnings
per share (cents) (40) 86,48 143,45
STATEMENT OF FINANCIAL POSITION
Audited at Audited at
28 February 29 February
2013 2012
R'000 R'000
ASSETS
Non-current assets 2 497 379 2 226 970
Property, plant and equipment 1 139 012 1 019 910
Investment property 60 794 57 673
Investment in associates 14 478 15 996
Goodwill and intangible assets 1 273 718 1 124 455
Deferred tax assets 9 377 8 936
Current assets 3 701 924 3 684 062
Other current assets 2 754 658 2 755 139
Taxation 11 810 5 579
Cash and cash equivalents 935 456 923 344
Total assets 6 199 303 5 911 032
EQUITY AND LIABILITIES
Capital and reserves 1 996 308 2 113 696
Ordinary shareholders' interest 1 996 308 2 113 696
Non-current liabilities 664 059 281 770
Other financial liabilities Interest-bearing 574 415 213 073
Other financial liabilities Non-interest-bearing 3 784 7 493
Deferred tax liabilities 85 860 61 204
Current liabilities 3 538 936 3 515 566
Other current liabilities* 2 042 541 1 934 859
Provisions 1 442 559 1 501 990
Taxation 47 522 46 199
Bank overdrafts 6 314 32 518
Total equity and liabilities 6 199 303 5 911 032
* includes interest-bearing liabilities of 360 951 146 737
STATEMENT OF CASH FLOWS
Audited Audited
12 months 12 months
ended ended
28 February 29 February
2013 2012
R'000 R'000
Cash generated from operations 311 425 96 059
Interest received 36 829 41 486
Finance costs (60 728) (37 919)
Dividends paid (20 991) (63 798)
Dividends received 2 167 950
Taxation paid (66 621) (78 821)
Secondary Tax on Companies paid (6 960)
Cash flows from operating activities 202 081 (49 003)
Expenditure to maintain operating capacity (67 824) (67 664)
Expenditure for expansion* (388 240) (210 158)
Cash flows from investing activities (456 064) (277 822)
Cash flows from financing activities 240 217 124 696
Net decrease in cash for the year (13 766) (202 129)
Effect of exchange rate changes on cash and cash equivalents 52 082 14 796
Cash and cash equivalents at beginning of the year 890 826 1 078 159
Cash and cash equivalents at end of the year 929 142 890 826
* includes net cash utilised for acquisition of Cycad Pipelines of R238 million.
SEGMENT INFORMATION
Roads,
Pipelines Recon-
& Mining ciling
R'000 Structures Building Services MEP segments Total
28 February 2013
Contract revenue 2 737 738 3 580 322 2 301 647 709 953 9 329 660
Inter-segment
contract revenues 41 708 1 239 43 734 58 134 144 815
Reportable segment
profit/(loss) 112 608 (22 948) 128 770 (34 624) (345 867) (162 061)
Reportable segment
assets 1 542 513 1 638 735 1 276 940 478 277 1 262 838 6 199 303
29 February 2012
Contract revenue 2 530 908 3 640 922 1 380 472 438 416 7 990 718
Inter-segment
contract revenues 60 546 4 150 44 721 6 243 115 660
Reportable segment
profit/(loss) 144 326 91 813 72 256 (25 165) (18 989) 264 241
Reportable segment
assets 1 484 150 2 127 290 815 569 279 857 1 204 166 5 911 032
STATEMENT OF CHANGES IN EQUITY
Share Share- Foreign
capital based currency Revaluation Ordinary
and payments translation surplus Retained shareholders'
R'000 premium reserve reserve reserve earnings interest
Balance at 1 March 2011 audited 1 011 195 56 306 (37 087) 4 997 818 160 1 853 571
Treasury shares disposed 8 648 (1 779) 6 869
Employee share options 2 658 2 658
Realisation of share-based payment reserve (14 632) 14 632
Total comprehensive income 27 380 22 652 264 241 314 273
Profit for the year 264 241 264 241
Exchange differences on translation of foreign operations 27 380 27 380
Gains on property revaluation 22 652 22 652
Dividends paid (63 675) (63 675)
Balance at 29 February 2012 audited 1 019 843 44 332 (9 707) 27 649 1 031 579 2 113 696
Treasury shares disposed 9 066 (405) 8 661
Realisation of share-based payment reserve (11 220) 11 220
Total comprehensive loss 57 010 (162 061) (105 051)
Loss for the year (162 061) (162 061)
Exchange differences on translation of foreign operations 57 010 57 010
Dividends paid (20 998) (20 998)
Balance at 28 February 2013 audited 1 028 909 33 112 47 303 27 649 859 335 1 996 308
ABRIDGED AUDITED CONDENSED CONSOLIDATED RESULTS
These abridged audited condensed consolidated results (abridged results) must be read in conjunction with the
integrated report for the year ended 28 February 2013.
The integrated report, incorporating the group audited financial statements contains changes to the consolidated
statement of financial position released on SENS on 14 May 2013. As required by the Listings Requirements
of the JSE Limited we hereby present the abridged results reflecting these changes, together with the relevant
commentary.
Further to the investigation by the Competition Commission into anti-competitive behaviour by companies within
the construction industry, the company has reached a final settlement for all contracts included in the Fast Track
Settlement Process ("The Process"). The company has also agreed penalties with the Competition Commission
in respect of contracts falling outside The Process. The resolution of the above issues has necessitated a change
to The Statement of Financial Position. This change has only required a reclassification from provisions to long
and short-term liabilities.
Shareholders are advised that Stefanutti Stocks' integrated annual report, incorporating the group audited
financial statements for the year ended 28 February 2013 has been posted and emailed to shareholders today,
6 August 2013.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given to the shareholders of the company as at 29 July 2013, being the record date to receive
notice of the annual general meeting in terms of section 59(1)(a) of the Companies Act, No 71 of 2008, as
amended, that the annual general meeting of Stefanutti Stocks will be held at No 9 Palala Street, Protec Park,
corner Zuurfontein Avenue and Oranjerivier Drive, Kempton Park, on Friday, 6 September at 12h00.
The record date of 6 August 2013 reflected in the Notice of Annual General Meeting in the integrated report is
the posting date of the integrated report. The record date to receive notice of the annual general meeting is
29 July 2013.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The abridged results for the year ended 28 February 2013 have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards
(IFRS), the AC 500 Standards issued by the Accounting Practices Board, The Companies Act, No 71 of 2008,
in compliance with the Listings Requirements of the JSE Limited and containing the information required by
IAS 34: Interim Financial Reporting. The accounting policies as well as the methods of computation used in the
preparation of the abridged results for the year ended 28 February 2013, are in terms of the International Financial
Reporting Standards (IFRS) and are consistent with those applied in the audited annual financial statements for the
year ended 29 February 2012. The abridged results are presented in Rand, which is Stefanutti Stocks' presentation
currency.
These audited results have been compiled under the supervision of the Chief Financial Officer, D Quinn, CA(SA),
BSc Econ.
Audit opinion
These abridged audited consolidated results have been extracted from the audited annual financial statements upon
which Mazars have issued an unqualified report. The group annual financial statements are available for inspection
at the company's registered office.
Group profile
Stefanutti Stocks, a leading construction company, operates throughout South Africa, sub-Saharan Africa and
the Middle East with multi-disciplinary expertise including concrete structures, marine construction, piling and
geotechnical services, all building works including affordable housing, roads and earthworks, bulk pipelines,
mine residue disposal facilities (mainly tailings dams), open pit contract mining, mechanical and electrical
installation and construction, as well as power line transmission and distribution construction. Stefanutti Stocks
holds a Grade 9 rating from the South African Construction Industry Development Board ensuring unlimited tender
capability. The group is currently a Level 2 B-BBEE contributor.
COMMENTARY
Overview of results
The board of Stefanutti Stocks hereby presents the group's abridged results for the year ended 28 February 2013
(the year). The group's abridged results reflect an overall year-on-year decline in profitability which is largely
attributable to the depressed global and local economic conditions, combined with delayed awards of private and
public infrastructure investment projects, loss-making contracts, bad debts and protracted strike action in South
Africa's construction and transport sectors. Profitability across the group has remained depressed due to continued
aggressive competition among contractors, which has resulted in low-margin projects. In addition, late payment by
clients has adversely affected cash flows.
Despite the decline in profitability for the year, the group's business fundamentals remain sound. Management
actions have resulted in a much improved second half performance.
The goup's order book stood at R10,0 billion at the end of April 2013 (May 2012: R9,3 billion).
Contract revenue increased by 17% to R9,4 billion (Feb 2012: R8,0 billion). Due to the operational circumstances
discussed above, operating profit decreased by 35% to R234 million (Feb 2012: R359 million). The operating
margin reduced from 4,5% to 2,5%.
The group posted an after tax loss of R162 million (Feb 2012: profit after tax of R264 million) after having provided
for a penalty of R323 million. This penalty has been accounted for in terms of IAS 39: Financial Instruments:
Recognition and Measurement. The liability has been calculated based on the effective interest rate method which
discounts the agreed payments over the next four financial years using the group's current borrowing rate.
Interest-bearing liabilities have increased to R935 million (Feb 2012: R360 million) due to additional funding
required for the acquisition of Cycad Pipelines Proprietary Limited (Cycad Pipelines), the Competition Commission
penalty as well as property finance and capital expenditure mainly in the Roads, Pipelines & Mining Services
business unit. This has resulted in an increase in depreciation and finance costs for the year.
Loss per share of 93,2 cents (Feb 2012: earnings per share of 153,2 cents) and diluted headline loss per share
of 89,2 cents (Feb 2012: diluted headline earnings per share of 140,6 cents) decreased by 161% and 163%,
respectively, from the comparative period.
Capital expenditure, including own infrastructure spend, for the year was R239 million (Feb 2012: R296 million).
The group generated cash of R311 million (Feb 2012: R96 million) from operations during the year, of which
R76 million (Feb 2012: R804 million) was consumed by working capital. After taking cash of R935 million into
account the net gearing position at year-end is R6,2 million inclusive of the Competition Commission penalty.
Goodwill and intangible assets have increased to R1,3 billion from R1,1 billion mainly as a result of the Cycad
Pipelines acquisition, also causing the amortisation of intangible assets to increase.
As a result of generally lower cash balances during the year, coupled with lower interest rates, investment income
reduced from R42 million to R37 million.
Review of operations
Structures
Despite competitive market conditions, this business unit ended the financial year with an increase in revenue to
R2,7 billion (Feb 2012: R2,5 billion), with an operating profit of R141 million (Feb 2012: R181 million). Profit margins
declined from 7,1% to 5,2%. Tender margins remain below historically reported levels due to fierce competition,
and with the current lack of large concrete projects, this trend is expected to continue into the foreseeable future.
The medium-sized tenders that have come to market during the reporting period have been highly competitive.
Due to the scarcity of Government infrastructure projects and limited mining surface infrastructure work, confidence
levels in the South African civil engineering industry are low and are expected to remain so for the short to medium
term. Marine and rail infrastructure projects offer short-term opportunities in neighbouring countries. Medium-term
opportunities exist in oil and gas, both locally and in neighbouring countries.
During the year the Structures business unit has expanded its footprint into sub-Saharan Africa where larger
projects are still available. However, prices on these projects are becoming more competitive as more international
companies are now looking at construction opportunities in sub-Saharan Africa.
Structures' order book at year-end was R1,8 billion (Feb 2012: R2,3 billion). The potential award of several
medium-sized projects in the water treatment, transport and rail industries is expected to support the order book
over the short term.
Roads, Pipelines & Mining Services (RPM)
Following the successful restructuring of the RPM business unit with effect from 1 March 2012, this business
unit continues to produce a strong performance, and contract revenue for the RPM business unit was up by 67%
to R2,3 billion (Feb 2012: R1,4 billion), with the operating profit increasing by 66% to R177 million (Feb 2012:
R107 million).
The recent award of the R1,5 billion open pit mining contract from Universal Coal, provides the RPM business unit
with a strong base of future work.
Looking forward, the market will in all likelihood remain competitive in the short to medium term. Some projects in
the transport and water sectors are expected to be awarded during the new financial year. This business unit has
been successful in Zambia and is actively pursuing opportunities in sub-Saharan Africa.
The order book of RPM at the end of February 2013 was R3,1 billion (Feb 2012: R1,8 billion).
Building
The Building business unit delivered unsatisfactory results and ended the 2013 financial year with revenue
being flat at R3,6 billion (Feb 2012: R3,6 billion) and an operating loss of R40 million (Feb 2012: operating profit
R121 million).
The poor performance was mainly due to loss-making projects caused by overruns in the Inland and Mozambique
divisions and a bad debt provision in Mozambique. These projects are now complete and various actions have
been instituted to recover some of the costs.
Trading conditions remain difficult within a competitive market. However, the average tender margin on new
projects has improved.
The business unit has established a presence in Namibia where it has undertaken a number of projects. The group
will retain its presence in the Middle East and plans to expand its current offering over the medium to long term.
There are signs of an upturn in the Dubai market whilst the Qatar market is only expected to improve from 2014
onwards.
The order book for Building at year-end was R3,1 billion (Feb 2012: R4,1 billion).
Mechanical, Electrical & Power (MEP)
This business unit includes mechanical, electrical, instrumentation and power line transmission and distribution
operations.
Contract revenue for the full year in the business unit was R710 million (Feb 2012: R438 million), reporting an
operating loss of R51 million (Feb 2012: R37 million). This was as a result of historical non-profitable projects in
the Electrical & Instrumentation (E&I) division, the start-up costs for the newly formed Oil & Gas division and
holding costs in the Power division resulting from an ongoing lack of deal flow from the national energy provider.
The loss-making projects in E&I have now been largely completed and the newly formed Oil & Gas division was
awarded its first two projects from Sasol.
MEP's order book as at 28 February 2013 was R472,9 million (Feb 2012: R402,6 million). The outlook is positive
with signs of improving market conditions in the petrochemical and power generation sectors. The newly-established
Oil & Gas division has good prospects over the medium to long term.
Health and safety
The group strives to provide a safe and healthy work environment for all employees, contractors and stakeholders
in general with the ultimate aim of "Zero Harm". The group believes that all incidents are preventable and the
disabling injury frequency rate (DIFR) for 2014 remains benchmarked at 0,1.
During the year, the group achieved its best ever safety performance, with a DIFR of 0,18 at year-end (Feb 2012: 0,23),
the lowest rating since the group commenced recording statistics.
Acquisitions
With effect from 1 March 2012, the group acquired 100% of Cycad Pipelines, a specialised pipeline infrastructure
construction company and its related operations, at a cost of R261 million. This acquisition is in line with the group's
growth strategy to broaden its service offering in the construction sector.
In terms of IFRS 3: Business Combinations the Purchase Price Allocation has been completed. The table below
reflects the fair values of assets and liabilities acquired and the goodwill resulting therefrom:
Cycad Pipelines
Acquisition date 1 March 2012
Voting equity 100%
Fair value
At acquisition values R'000
Non-current assets 86 129
Current assets 88 223
Non-current liabilities (22 126)
Current liabilities (48 713)
Net asset value 103 513
Cost of acquisition 261 030
Cash paid 261 030
Goodwill arising on acquisition 152 446
Intangible assets arising on acquisition (net of deferred tax) 5 071
Revenue since acquisition included in results 256 017
Profit before tax since acquisition included in results 33 929
Acquisition-related costs 2 850
The goodwill arising from the acquisition is attributable to the ability to access the pipeline construction market,
in which the group did not previously have a presence, by the acquisition of a well-established and reputable
company with a skilled and specialised workforce.
The fair values of trade receivables at the acquisition date, amounts to R52 million, and the group is of the opinion
that the outstanding amounts are recoverable.
Acquisition-related costs were recognised in the statement of comprehensive income as an expense within
EBITDA.
Subsequent events
Ms Tina Eboka and Mr Vuli Cuba have been appointed as independent non-executive directors to the board on
17 May 2013 and 2 August 2013 respectively.
Mr Herman Mashaba resigned from the board with effect from 2 August 2013. The board expresses its sincere appreciation
to Herman for his valuable contributions.
Other than the above, there have been no events that are material which have occurred between the reporting date
and the date of this announcement.
Outlook and strategy
Market conditions in the South African construction market remain challenging and are expected to recover only
in the medium to long term. In addition, ongoing industrial action continues to pose a threat to the industry. In the
current market there is a reasonable amount of work available in medium-sized projects, which will maintain the
order book. Future growth will be dependent upon the general health of the global and local economy and future
Government capital expenditure.
The Building, MEP and RPM business units should benefit in the short term from project awards in the new financial
year.
The group will continue to pursue opportunities in sub-Saharan Africa, specifically in the roads, rail, marine and oil
and gas markets. Expanding the group's footprint in Africa remains part of the growth strategy. The group will focus
in areas where it already has an established presence and will venture into new markets where it has an existing
relationship with clients in the commercial, industrial or commodity sectors.
The group is well-placed to manage the short-term economic challenges and position itself to optimise opportunities
in the construction industry going forward.
Dividend declaration
Notice is hereby given that no final dividend will be declared.
Appreciation
We would like to acknowledge the contribution and extend our thanks to our board, management and staff for their
continuous dedication and service during these challenging times. We would also like to express our gratitude to all
our customers, suppliers, service providers and shareholders for their ongoing support.
On behalf of the board
Gino Stefanutti Willie Meyburgh
Chairman Chief Executive Officer
6 August 2013
Directors:
B Stefanutti (Chairman)*, W Meyburgh (Chief Executive Officer), DG Quinn (Chief Financial Officer)
SJ Ackerman, NJM Canca*#, KR Eborall*#, HSP Mashaba*# (resigned 2 August 2013), ZJ Matlala*#
ME Mkwanazi*#, T Eboka*#, V Cuba*#, LB Sithole*, JWLM Fizelle* (alternate to LB Sithole)
*Non-executive Irish#Independent
Registered office:
Protec Park, Corner Zuurfontein Avenue and Oranjerivier Drive, Kempton Park, 1619
(PO Box 12394, Aston Manor, 1630)
Corporate advisor and sponsor:
Bridge Capital Advisors Proprietary Limited
2nd Floor, 27 Fricker Road, Illovo Boulevard, Illovo, 2196
(PO Box 651010, Benmore, 2010)
Transfer secretaries:
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Auditors:
Mazars
Mazars House, 5 St Davids Place, Parktown, 2193
(PO Box 6697, Johannesburg, 2000)
Company secretary:
W Somerville
20 Lurgan Road
Parkview, 2193
www.stefanuttistocks.com
Date: 06/08/2013 01:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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