Wrap Text
Unaudited Condensed Consolidated Results
for the six months ended 31 August 2014
STEFANUTTI STOCKS HOLDINGS LIMITED
("Stefanutti Stocks" or "the company" or "the group")
(Registration number 1996/003767/06)
Share code: SSK ISIN: ZAE000123766
UNAUDITED CONDENSED
CONSOLIDATED RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2014
- Revenue R5,3 billion
- Operating profit R132 million
- Cash generated from operations R310 million
- Current order book R12,7 billion
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
% 2014 2013 2014
Increase R'000 R'000 R'000
Revenue 10 5 349 496 4 864 363 9 498 432
Contract revenue 10 5 321 933 4 832 263 9 423 623
Earnings before interest, taxation,
depreciation and amortisation
(EBITDA) 9 212 377 195 386 335 588
Depreciation (75 999) (77 584) (150 442)
Amortisation of intangible assets (3 960) (3 971) (8 405)
Operating profit before investment income
(operating profit) 16 132 418 113 831 176 741
Investment income 17 365 17 614 32 984
Share of profits/(losses) of equity-accounted
investees 5 144 (161) 14 229
Operating profit before finance costs 154 927 131 284 223 954
Finance costs (21 084) (24 931) (49 447)
Profit before taxation 133 843 106 353 174 507
Taxation (45 243) (39 207) (55 683)
Profit for the period 88 600 67 146 118 824
Other comprehensive income 13 686 90 942 77 889
Exchange differences on translation of
foreign operations (may be reclassified to
profit/(loss)) 13 686 90 942 77 889
Total comprehensive income for
the period 102 286 158 088 196 713
Profit for the period attributable
as follows:
Equity holders of the company 30 87 557 67 146 118 304
Non-controlling interest 1 043 – 520
88 600 67 146 118 824
Total comprehensive income
attributable to:
Equity holders of the company 101 266 158 088 196 165
Non-controlling interest 1 020 – 548
102 286 158 088 196 713
Earnings per share (cents) 50,09 38,47 67,76
Diluted earnings per share (cents) 46,55 35,70 62,90
Commentary to the statement of
comprehensive income
Headline earnings reconciliation:
Profit after taxation attributable to
equity holders of the company 87 557 67 146 118 304
Adjusted for:
Profit on disposal of plant and equipment (5 600) (3 897) (9 720)
Tax effect of adjustments 1 568 1 094 2 680
Headline earnings 30 83 525 64 343 111 264
Normalised headline earnings
reconciliation:
Headline earnings 83 525 64 343 111 264
Adjusted for:
Amortisation of intangibles 3 960 3 971 8 405
Tax effect of adjustments (1 109) (1 109) (2 217)
Normalised headline earnings 29 86 376 67 205 117 452
Number of weighted average shares in issue 174 795 170 174 523 431 174 584 799
Number of diluted weighted average shares
in issue 188 080 746 188 080 746 188 080 746
Earnings per share (cents) 30 50,09 38,47 67,76
Diluted earnings per share (cents) 30 46,55 35,70 62,90
Headline earnings per share (cents) 30 47,78 36,87 63,73
Diluted headline earnings per share (cents) 30 44,41 34,21 59,16
Normalised headline earnings
per share (cents) 28 49,42 38,51 67,28
Diluted normalised headline earnings
per share (cents) 29 45,93 35,73 62,45
STATEMENT OF FINANCIAL POSITION
Unaudited Audited
at at
31 August 28 February
2014 2014
R'000 R'000
ASSETS
Non-current assets 2 745 924 2 701 695
Property, plant and equipment 1 197 594 1 147 443
Investment property 65 548 68 302
Equity-accounted investees 209 004 207 312
Goodwill and intangible assets 1 262 596 1 266 556
Deferred taxation 11 182 12 082
Current assets 4 027 798 3 596 602
Other current assets 2 965 978 2 555 325
Taxation 8 517 17 240
Cash and cash equivalents 1 053 303 1 024 037
Total assets 6 773 722 6 298 297
EQUITY AND LIABILITIES
Equity 2 298 307 2 195 121
Equity holders of the company 2 296 739 2 194 573
Non-controlling interest 1 568 548
Non-current liabilities 326 247 433 088
Other financial liabilities – Interest-bearing 286 223 348 951
Other financial liabilities – Non-interest-bearing 3 754 3 799
Deferred tax liabilities 36 270 80 338
Current liabilities 4 149 168 3 670 088
Other current liabilities* 2 259 651 1 923 718
Provisions 1 802 182 1 676 039
Taxation 78 362 49 704
Bank overdrafts 8 973 20 627
Total equity and liabilities 6 773 722 6 298 297
* including interest-bearing liabilities of 264 753 309 929
STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2014 2013 2014
R'000 R'000 R'000
Cash generated from operations 310 412 325 908 600 280
Interest received 17 365 17 614 32 984
Finance costs (21 084) (24 931) (49 447)
Dividends received 445 10 560 18 043
Taxation paid (50 659) (29 534) (71 520)
Cash flows from operating activities 256 479 299 617 530 340
Expenditure to maintain operating capacity (24 416) (4 625) (9 203)
Expenditure for expansion (87 281) (44 651) (128 865)
Cash flows from investing activities (111 697) (49 276) (138 068)
Cash flows from financing activities (108 099) (152 599) (276 186)
Net increase in cash for period 36 683 97 742 116 086
Effect of exchange rate changes on cash and cash equivalents 4 237 35 635 51 091
Cash at beginning of period 1 003 410 836 233 836 233
Cash and cash equivalents at the end of the period 1 044 330 969 610 1 003 410
SEGMENT INFORMATION
Roads,
Pipelines Reconcil-
& Mining ing
R'000 Structures Services Building M&E segments Total
31 August 2014
Contract revenue 1 332 537 1 455 392 2 116 239 417 765 – 5 321 933
Intersegment contract
revenues 38 322 11 223 – 12 232 – 61 777
Reportable segment
profit/(loss) 30 971 85 131 (13 223) (4 604) (9 675) 88 600
Reportable segment assets 1 463 173 1 526 941 1 911 529 470 225 1 401 854 6 773 722
28 February 2014
Contract revenue 2 637 106 2 428 473 3 147 678 1 210 366 – 9 423 623
Intersegment contract
revenues 36 054 23 690 – 38 319 – 98 063
Reportable segment
profit/(loss) 98 164 133 519 (102 122) 692 (11 429) 118 824
Reportable segment assets 1 455 911 1 239 823 1 784 986 501 747 1 315 830 6 298 297
31 August 2013
Contract revenue 1 408 301 1 156 580 1 617 938 649 444 – 4 832 263
Intersegment contract
revenues 18 889 166 267 24 720 8 480 – 218 356
Reportable segment
profit/(loss) 51 961 64 645 (31 168) (11 689) (6 603) 67 146
Reportable segment assets 1 539 911 1 421 546 1 808 513 567 435 1 233 780 6 571 185
STATEMENT OF CHANGES IN EQUITY
Foreign Attributable
Share-based currency Revaluation to equity Non-
Share capital payments translation surplus Retained holders of controlling Total
R'000 and premium reserve reserve reserve earnings the company interest equity
Balance at 1 March 2013 1 028 909 33 112 47 303 27 649 859 335 1 996 308 – 1 996 308
Treasury shares disposed 900 (1 101) – – 1 101 900 – 900
Total comprehensive income – – 90 942 (41) 67 187 158 088 – 158 088
Profit for the period – – – – 67 146 67 146 – 67 146
Exchange differences on translation of foreign operations – – 90 942 – – 90 942 – 90 942
Realisation of revaluation reserve – – – (50) 50 – – –
Tax on realisation of revaluation reserve – – – 9 (9) – – –
Balance at 31 August 2013 unaudited 1 029 809 32 011 138 245 27 608 927 623 2 155 296 – 2 155 296
Treasury shares disposed 1 200 (1 469) – – 1 469 1 200 – 1 200
Realisation of share-based payment reserve – (1 296) – – 1 296 – – –
Total comprehensive income – – (13 081) – 51 158 38 077 548 38 625
Profit for the period – – – – 51 158 51 158 520 51 678
Exchange differences on translation of foreign operations – – (13 081) – – (13 081) 28 (13 053)
Balance at 28 February 2014 audited 1 031 009 29 246 125 164 27 608 981 546 2 194 573 548 2 195 121
Treasury shares disposed 900 (1 101) – – 1 101 900 – 900
Total comprehensive income – – 13 709 – 87 557 101 266 1 020 102 286
Profit for the period – – – – 87 557 87 557 1 043 88 600
Exchange differences on translation of foreign operations – – 13 709 – – 13 709 (23) 13 686
Balance at 31 August 2014 unaudited 1 031 909 28 145 138 873 27 608 1 070 204 2 296 739 1 568 2 298 307
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated results for the period ended 31 August 2014 (results and/
or the period) have been prepared in accordance with and containing the information required
by International Accounting Standard (IAS) 34: Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, and are in compliance with
the Listings Requirements of the JSE Limited. The accounting policies as well as the methods
of computation used in the preparation of the results for the period ended 31 August 2014 are
in terms of International Financial Reporting Standards (IFRS) and are consistent with those
applied in the audited annual financial statements for the year ended 28 February 2014, except
for the standards and amendments to standards that became effective on 1 January 2014: IAS 32:
Financial Instruments: Presentation, IAS 36: Impairment of Assets, IAS 39: Financial Instruments:
Recognition and Measurement. The impact of these amendments are not considered material. The
results are presented in Rands, which is Stefanutti Stocks' presentation currency.
These results have been compiled under the supervision of the Chief Financial Officer, D Quinn,
CA(SA), BSc Econ.
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, roads and earthworks, bulk pipelines, mine residue
disposal facilities (mainly tailings dams), open pit contract mining, all forms of building works
including affordable housing, mechanical and electrical installation and construction.
COMMENTARY
Overview of results
The group has produced a satisfactory performance for the first six months in line with management's
expectations. We have made good progress on our stated recovery plan and the results therefrom
are expected to continue improving the group's performance. Although the legacy loss-making
projects in the Building Inland division are now behind us, the effects of finalising the unprofitable
projects are still being felt.
The group's order book is currently R12,7 billion of which R5,1 billion stems from work beyond
South Africa's borders.
Contract revenue rose to R5,3 billion from R4,8 billion for the comparative period. Operating profit
increased by 16% to R132 million (Aug 2013: R114 million). The operating margin improved from
1,9% as at year-end to 2,5%.
The group posted an increased after-tax profit of R89 million (Aug 2013: R67 million).
Interest-bearing liabilities have decreased to R551 million (Feb 2014: R659 million) due to the
continuing repayment of the loan required for the acquisition of Cycad Pipelines Proprietary Limited
and payment of the second instalment under the Competition Commission penalty agreement. This
has resulted in a decrease in finance costs for the period.
Earnings per share of 50,1 cents (Aug 2013: 38,5 cents) and diluted headline earnings per share of
44,4 cents (Aug 2013: 34,2 cents) increased by 30% from the comparative period.
Capital expenditure for the period of R134 million (Aug 2013: R66 million) includes own infrastructure
spend to increase capacity as well as additional investment in plant and equipment.
The improvement in the Middle East operations predominantly resulted in the share of profits from
equity-accounted investments increasing to R5 million (Aug 2013: R161 000 loss).
The group generated cash of R310 million (Aug 2013: R326 million) from operations during the
period. An increase in receivables, work in progress and payables contributed to a net working
capital outflow of R34 million (Aug 2013: R30 million). Cash flows from investing activities increased
from R49 million to R112 million mainly as a result of increased capital expenditure. Dividends of
R445 000 (Aug 2013: R11 million) were received from equity-accounted investees. Cash on hand
of R1 044 million (Feb 2014: R1 003 million) exceeded total interest-bearing debt, resulting in a nil
net gearing position being maintained.
During the period the Rand remained relatively stable and has therefore not had a significant effect
on the translation of foreign operations, cash balances, equity-accounted investees and investment
property.
Review of operations
Structures
This business unit saw a slight decrease in revenue year-on-year to R1,3 billion (Aug 2013:
R1,4 billion) with the anticipated decrease in operating profit to R41 million (Aug 2013: R74 million).
Operating profit margins decreased to 3,1% (Aug 2013: 5,2%).
The continued decline in Structures' operating margin, which has been experienced over the last
number of years, is mainly as a result of the depressed and competitive market conditions for
infrastructure projects due to the lack of civil and concrete work coming from public and private
infrastructure spend. While we have been awarded some marine projects, this market has also
been under pressure.
Structures' order book at the end of August 2014 was R2,3 billion (Feb 2014: R2,0 billion).
Roads, Pipelines & Mining Services (RPM)
RPM continues to perform well. Contract revenue improved by 26% to R1,5 billion (Aug 2013:
R1,2 billion), with operating profit increasing by 24% to R118 million (Aug 2013: R95 million) on
the back of projects awarded mainly in Zambia and Swaziland. Operating profit margin was 8,1%
(Aug 2013: 8,2%).
The Roads and Earthworks and Swaziland divisions produced good results which were according
to expectations. Management still has concerns regarding the order book growth in both the Mining
Services and Pipeline divisions. However, over the past few months tender activity has increased
in both these divisions.
A recent noteworthy award, not in the August 2014 order book, was the Bottom Road project in
Zambia to the value of R1,1 billion allowing the business unit to enter the New Year with a well-
established order book. While RPM is still active with roads projects within South Africa, the majority
of work is increasingly emanating from beyond our borders.
The order book of RPM at the end of August 2014 was R5,0 billion (Feb 2014: R5,0 billion).
Additional local contract awards of R400 million are expected in the short term.
Building
Even though the Building business unit delivered negative results the overall recovery plan remains
on track and management's expectations are being achieved. The business unit produced contract
revenue for the first six months of R2,1 billion (Aug 2013: R1,6 billion) and an operating loss of
R21 million (Aug 2013: operating loss of R43 million), excluding equity-accounted Middle East
operations.
As mentioned above, the effects of finalising the historically unprofitable projects in the Building
Inland division have had a negative impact on the business unit's results. Given a gradually
improving order book and having dealt with the impact of the legacy projects, management is
expecting this division's performance to show continuing improvement.
All other local and cross-border divisions within Building are profitable and produced commendable
results in line with expectations.
Market conditions in the Middle East are gradually improving, and for the first time in a number of
years these operations have started to positively contribute towards the group's results.
The order book for Building at the end of August 2014 was R4,3 billion (Feb 2014: R4,0 billion).
Mechanical and Electrical (M&E)
Contract revenue for the half-year in the business unit declined to R418 million (Aug 2013: R650 million),
reporting an operating loss of R8 million (Aug 2013: operating loss of R16 million).
The Oil and Gas and Electrical divisions are both performing very well with their order books
experiencing steady growth from projects in the local petrochemical market. The Mechanical
division is currently under pressure due to lack of work resulting from the reduction in mining sector
spend. Some recent awards will alleviate this pressure in the short term, however management
remains concerned about the amount of work coming to this market.
As mentioned at year-end, a strategy was adopted to help the Power business recover and
it was scaled down from a separate business unit and incorporated as a division of M&E as of
1 March 2014. Notwithstanding concerted efforts to turn the Power business around, the division
again produced a loss for the six months ended August 2014. Furthermore, due to the ongoing lack
of work in the current power line transmission and distribution market compounded by Eskom's
recent announcement to delay the awarding of power line projects, it has been decided to withdraw
from this market.
M&E's order book at 31 August 2014 was R897 million (Feb 2014: R643 million). The outlook is
positive with signs of improving market conditions in the petrochemical sector.
Safety
We remain committed to enhancing our health and safety processes, policies, procedures and we
strive to constantly improve our safety performance. The group's LTIFR as at 31 August 2014 was
0,14 (Aug 2013: 0,17). Unfortunately the group recorded a fatality during the period. The passing
of Mr Joel Moremi is viewed as a serious incident and it is with great sadness that we express our
condolences to his family, friends and colleagues.
Subsequent events
No material reportable events have occurred between the reporting date and the date of this
announcement.
Outlook and strategy
Markets, especially those within which Structures operate, are still under pressure and will
remain so for the short to medium term. Although there are opportunities for Building, its margins
continue to remain under pressure. M&E continues to be presented with good opportunities in the
petrochemical market whilst in RPM there are a number of opportunities for roads and earthworks in
South Africa and cross-border. A number of bulk pipeline and open pit mining projects are expected
to come to the market in the short to medium term.
With the lack of current large infrastructure projects, Stefanutti Stocks will continue to maintain its
order book on the back of medium-sized projects and will continue to manage the current economic
and market challenges.
With management's continued commitment to its stated recovery plan, the group is confident that
it is well placed to pursue opportunities for its multi-disciplinary services locally and in sub-Saharan
Africa. Strategically, the group intends to focus on expanding its sub-Saharan Africa business beyond
its currently 40% order book.
Dividend declaration
Notice is hereby given that no interim dividend will be declared (Aug 2013: Nil).
Appreciation
We would like to extend our appreciation to the board, management and staff for their continuous
commitment and dedication. We would also like to express our gratitude to all our customers,
suppliers, service providers and shareholders for their ongoing support.
Mr Vuli Cuba resigned as Chairman and director of the company with effect from 28 August 2014.
The board would like to thank Vuli for his contributions as a director since his appointment to the
board in August 2013. The board appointed Mr Kevin Eborall as Chairman on an interim basis
with effect from 28 August 2014. Kevin has been on the board since the company listed in 2007.
Mr Bridgman Sithole was appointed as chairman of the Remuneration Committee replacing Kevin
Eborall. Bridgman has also been on the board since the company listed in 2007 as well.
On behalf of the board
Kevin Eborall Willie Meyburgh
Chairman Chief Executive Officer
13 November 2014
Directors:
Non-executive directors:
KR Eborall# (Chairman), NJM Canca#, ZJ Matlala#,
T Eboka#, LB Sithole#, JWLM Fizelleˆ# (alternate to LB Sithole)
Executive directors:
W Meyburgh (Chief Executive Officer),
DG Quinnˆ (Chief Financial Officer)
#Independent ˆIrish
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 David's Place, Parktown, 2193
(PO Box 6697, Johannesburg, 2000)
Company secretary:
W Somerville
20 Lurgan Road
Parkview, 2193
www.stefanuttistocks.com
Date: 13/11/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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