Wrap Text
Reviewed Condensed Consolidated Results for the 12 months ended 28 February 2015
STEFANUTTI STOCKS HOLDINGS LIMITED
("Stefanutti Stocks" or "the company" or "the group")
(Registration number 1996/003767/06)
Share code: SSK ISIN: ZAE000123766
REVIEWED CONDENSED
CONSOLIDATED RESULTS
FOR THE 12 MONTHS ENDED 28 FEBRUARY 2015
- Revenue R10,6 billion
- Operating profit R335 million
- Cash generated from operations R301 million
- Current order book R12,4 billion
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Reviewed Restated
12 months 12 months
ended ended
28 February 28 February
Increase 2015 2014
% R'000 R'000
Revenue 15 10 648 379 9 225 584
Contract revenue 15 10 567 643 9 150 775
Earnings before interest, taxation, depreciation
and amortisation (EBITDA) 34 496 730 372 067
Depreciation (153 429) (140 576)
Amortisation of intangible assets (7 920) (8 020)
Operating profit before investment income 50 335 381 223 471
Investment income 41 544 32 984
Share of profits of equity-accounted investees 26 461 14 229
Operating profit before finance costs 403 386 270 684
Finance costs (41 664) (48 987)
Profit before taxation 361 722 221 697
Taxation (102 678) (69 253)
Profit for the year from continuing operations 259 044 152 444
Loss after tax for the year from discontinued
operation (55 883) (33 620)
Profit for the year 203 161 118 824
Other comprehensive income 152 77 889
Exchange differences on translation of foreign
operations (may be reclassified to profit/(loss)) 152 77 889
Total comprehensive income for the year 203 313 196 713
Profit for the year attributable as follows:
Equity holders of the company 200 812 118 304
Profit for the year from continuing operations 69 256 695 151 924
Loss for the year from discontinued operation (55 883) (33 620)
Non-controlling interest 2 349 520
Profit for the year from continuing operations 2 349 520
Loss for the year from discontinued operation – –
203 161 118 824
Total comprehensive income attributable to:
Equity holders of the company 201 452 196 165
Profit for the year from continuing operations 12 257 335 229 785
Loss for the year from discontinued operation (55 883) (33 620)
Non-controlling interest 1 861 548
Profit for the year from continuing operations 1 861 548
Loss for the year from discontinued operation – –
203 313 196 713
Earnings per share (cents)
Continuing operations 69 146,79 87,02
Total operations 69 114,84 67,76
Diluted earnings per share (cents
Continuing operations 69 136,48 80,78
Total operations 70 106,77 62,90
COMMENTARY TO THE STATEMENT OF COMPREHENSIVE INCOME
Continuing operations Total operations
2015 2014 2015 2014
Headline earnings reconciliation R'000 R'000 R'000 R'000
Profit after taxation attributable to
equity holders of the company 256 695 151 924 200 812 118 304
Adjusted for:
Profit on disposal of plant and
equipment (8 594) (9 512) (8 532) (9 720)
Tax effect of adjustments 2 403 2 622 2 386 2 680
Impairment of goodwill – – 2 187 –
Headline earnings 73 250 504 145 034 196 853 111 264
Normalised headline earnings
reconciliation:
Headline earnings 250 504 145 034 196 853 111 264
Adjusted for:
Amortisation of intangibles 7 920 8 020 7 920 8 405
Tax effect of adjustments (2 217) (2 217) (2 217) (2 217)
Normalised headline earnings 70 256 207 150 837 202 556 117 452
Number of weighted average shares
in issue 174 867 128 174 584 799 174 867 128 174 584 799
Number of diluted weighted average
shares in issue 188 080 746 188 080 746 188 080 746 188 080 746
Earnings per share (cents) 69 146,79 87,02 114,84 67,76
Diluted earnings per share (cents) 69 136,48 80,78 106,77 62,90
Headline earnings per share (cents) 72 143,25 83,07 112,57 63,73
Diluted headline earnings per share
(cents) 73 133,19 77,11 104,66 59,16
Normalised headline earnings per
share (cents) 70 146,52 86,40 115,83 67,28
Diluted normalised headline
earnings per share (cents) 70 136,22 80,20 107,70 62,45
STATEMENT OF FINANCIAL POSITION
Reviewed at Audited at
28 February 28 February
2015 2014
R'000 R'000
ASSETS
Non-current assets 2 678 885 2 701 695
Property, plant and equipment 1 109 652 1 147 443
Investment property 61 507 68 302
Equity-accounted investees 232 255 207 312
Goodwill and intangible assets 1 256 449 1 266 556
Deferred tax assets 19 022 12 082
Current assets 3 844 532 3 596 602
Other current assets 2 866 395 2 555 325
Taxation 21 028 17 240
Bank balances 848 665 1 024 037
3 736 088 3 596 602
Assets of discontinued operation and non-current assets
held for sale 108 444 –
Total assets 6 523 417 6 298 297
EQUITY AND LIABILITIES
Capital and reserves 2 399 334 2 195 121
Equity holders of the company 2 396 925 2 194 573
Non-controlling interest 2 409 548
Non-current liabilities 299 294 433 088
Other financial liabilities – Interest-bearing 243 883 348 951
Other financial liabilities – Non-interest-bearing 4 229 3 799
Deferred tax liabilities 51 182 80 338
Current liabilities 3 824 789 3 670 088
Other current liabilities* 2 179 104 1 923 718
Provisions 1 539 683 1 676 039
Taxation 26 932 49 704
Bank balances 33 430 20 627
3 779 149 3 670 088
Liabilities directly associated with the discontinued operation 45 640 –
Total equity and liabilities 6 523 417 6 298 297
* Including interest-bearing liabilities 171 338 309 929
STATEMENT OF CASH FLOWS
Reviewed Audited
12 months 12 months
ended ended
28 February 28 February
2 015 2014
R'000 R'000
Cash generated from operations 301 279 600 280
Interest received 41 346 32 984
Finance costs (47 062) (49 447)
Dividends received 14 611 18 043
Taxation paid (133 603) (71 520)
Cash flows from operating activities 176 571 530 340
Expenditure to maintain operating capacity (38 201) (9 203)
Expenditure for expansion (119 602) (128 865)
Cash flows from investing activities (157 803) (138 068)
Cash flows from financing activities (218 947) (276 186)
Net (decrease)/increase in cash for the year (200 179) 116 086
Effect of exchange rate changes on cash and cash equivalents 12 038 51 091
Cash and cash equivalents at beginning of year 1 003 410 836 233
Cash at the end of the year – discontinued operation (34) –
Cash and cash equivalents at the end of the year 815 235 1 003 410
SEGMENT INFORMATION
Roads,
Pipelines
and Mining Other
R'000 Structures Services Building M&E segments Total
Segment information
28 February 2015
Contract revenue 2 532 950 2 960 508 4 407 350 666 835 – 10 567 643
Intersegment contract
revenues 117 047 68 822 – 51 089 8 752 245 710
Reportable segment
profit/(loss) 64 285 154 149 35 733 24 265 (19 388) 259 044
Reportable segment assets 1 361 633 1 562 031 1 814 664 507 058 1 278 031 6 523 417
Segment information
28 February 2014
Contract revenue 2 637 106 2 428 473 3 147 678 937 518 – 9 150 775
Intersegment contract
revenues 36 054 23 690 – 38 319 – 98 063
Reportable segment
profit/(loss) 98 164 133 519 (102 122) 34 312 (11 429) 152 444
Reportable segment assets 1 455 911 1 239 823 1 784 986 501 747 1 315 830 6 298 297
The segment information, other than reportable segment assets excludes the discontinued operation.
bridging your expectations
STATEMENT OF CHANGES IN EQUITY
Share Foreign Attributable
capital Share-based currency Revaluation to equity Non-
and payments translation surplus Retained holders of controlling Total
premium reserve reserve reserve earnings the company interest equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 28 February 2013 1 028 909 33 112 47 303 27 649 859 335 1 996 308 – 1 996 308
Treasury shares disposed 2 100 (2 570) – – 2 570 2 100 – 2 100
Realisation of share-based payments reserve – (1 296) – – 1 296 – – –
Total comprehensive income – – 77 861 (41) 118 345 196 165 548 196 713
Profit for the year – – – – 118 304 118 304 520 118 824
Exchange differences on translation of foreign operations – – 77 861 – – 77 861 28 77 889
Realisation of revaluation reserve – – – (50) 50 – – –
Tax on realisation of revaluation reserve – – – 9 (9) – – –
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 – – 640 – 200 812 201 452 1 861 203 313
Profit for the year – – – – 200 812 200 812 2 349 203 161
Exchange differences on translation of foreign operations – – 640 – – 640 (488) 152
Balance at 28 February 2015 reviewed 1 031 909 28 145 125 804 27 608 1 183 459 2 396 925 2 409 2 399 334
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed condensed consolidated results for the year ended 28 February 2015 (results and/or the
period) have been prepared in accordance with the framework concepts and the measurement and
requirements of IFRS. The report contains 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 year ended 28 February 2015 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.
Auditors' review
The results have been reviewed by the group's auditors, Mazars. Their unqualified review opinion is
available for inspection at the company's registered office. Their review was conducted in accordance with
ISRE 2410 "Review of interim financial information performed by the independent auditor of the entity."
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
The Board of Directors is pleased to report that the group has achieved the targets set under its recovery
plan for 2015, resulting in a significant improvement in the group's financial performance compared to the
previous year. The effects of Building Inland's legacy loss-making contracts are behind us, and the Building
business unit has returned to profitability. The Power business, which was scaled down to a division within
Mechanical & Electrical Business Unit, did not perform as expected and it was decided to discontinue this
business. The financial impact of having withdrawn from the power market has now been determined with
a degree of certainty, and it has been reported in the statement of financial position as a discontinued
operation in terms of IFRS 5: Non-current Assets Held for Sale and Discontinued Operations with the
statement of profit or loss restated accordingly. The associated loss of R56 million has negatively affected
performance in the 2015 financial year.
The restructuring of both management and businesses has resulted in the enhanced performance
reported, and more importantly, the current business operations are better positioned to provide ongoing
future growth and improved financial performance.
The Stefanutti Stocks Board of Directors, together with management, continue to review each business
unit and its respective divisions in order to ensure sustainable profitability.
Overview of results
Contract revenue from continuing operations of R10,6 billion increased by 15% compared to the previous
year (Feb 2014 restated: R9,2 billion), whilst operating profit increased by 50% to R335 million (Feb 2014
restated: R223 million). The operating margin from continuing operations increased from 2,4% to 3,2%.
The group's order book has remained fairly constant at R12,4 billion (2014: R12,8 billion) consisting of
mainly medium-sized projects. The order book is being maintained with a number of short- and medium-
term prospects in Southern Africa especially in the transport infrastructure and oil and gas markets. The
order book relating to work outside South Africa is currently R4,2 billion.
The group generated a profit after tax from continuing operations of R259 million (Feb 2014 restated:
R152 million), an increase of 70% year-on-year.
Interest-bearing liabilities, excluding liabilities relating to the discontinued operation, have decreased by
37% to R415 million (Feb 2014: R659 million) as a result of the settlement of the loan for the acquisition
of Cycad Pipelines Proprietary Limited, payment of the second instalment of the Competition Commission
penalty, as well as continuing instalment sales finance repayments. This has resulted in a decrease in
finance costs for the year.
Earnings per share from continuing operations of 146,8 cents (Feb 2014 restated: 87,0 cents) and diluted
headline earnings per share from continuing operations of 133,2 cents (Feb 2014 restated: 77,1 cents)
increased by 69% and 73% respectively year-on-year.
Earnings per share from total operations of 114,8 cents (Feb 2014 restated: 67,8 cents) and diluted
headline earnings per share from total operations of 104,7 cents (Feb 2014 restated: 59,2 cents) increased
by 69% and 77% respectively year-on-year.
Capital expenditure for the year amounted to R186 million (Feb 2014: R195 million) including own
infrastructure spend to increase capacity as well as ongoing investment in plant and equipment.
A reduction in advance payments received during the current period resulted in, the group's cash position
declining to R815 million (Feb 2014: R1 billion) at year-end. This cash on hand exceeded total interest-
bearing debt, resulting in a nil net gearing position.
The group generated cash from operations of R301 million (Feb 2014: R600 million), of which R6 million
was consumed by working capital (Feb 2014: R35 million contribution from working capital).
Profits from equity accounted investees, mainly due to the improved Middle East operations, increased
from R14 million to R26 million. Dividends of R15 million (2014: R18 million) were received from these
investments.
Goodwill of R2 million (2014: Rnil) has been impaired due to the closing of the Power business. This has
been recognised as part of the discontinued operation.
In terms of the requirements of IFRS 5 the group has recognised assets and liabilities of the discontinued
operation as part of non-current assets held for sale, which also includes two unutilised properties that the
group intends disposing of within the next 12 months.
As a result of an increase in interest rates, combined with a change in the mix between local and foreign
cash balances, investment income improved year-on-year to R42 million from R33 million.
The devaluation of the Rand during the year has had a positive effect on the translation of the foreign cash
balances at year-end.
Review of operations
Structures
Structures ended the financial year with a slight reduction in contract revenue of R2,5 billion (Feb 2014:
R2,6 billion), and operating profit reduced to R79 million (Feb 2014: R128 million) due to the limited work in
the government and private sector. Operating profit margins declined to 3,1% from 4,9% as a result of an
extremely competitive market. Alternative means of procuring work and cost cutting measures are ongoing
as the business aligns to market conditions.
The Civils divisions have performed well within the constraints of limited government and private sector
infrastructure spend. While the number of large projects remains low, a relatively high tender success
rate has been achieved on medium sized projects (R50 million to R200 million) and this trend is expected
to continue in the medium term. The Geotechnical division met its financial targets on the back of small
projects but the medium-term order book remains under pressure.
The Marine division has established itself as a leading local contractor and is in the fortunate position of
having a full order book for the coming year. It is currently exploring cross-border opportunities along the
sub-Saharan coastline of Africa, in conjunction with other large international marine specialist contractors.
At year-end Structures' order book was R2,2 billion (Feb 2014: R2,0 billion).
Roads, Pipelines & Mining Services (RPM)
RPM produced another strong performance for this financial year with contract revenue improving to
R3,0 billion (Feb 2014: R2,4 billion), producing an operating profit of R221 million (Feb 2014: R189 million).
Operating profit margin reduced slightly to 7,5% compared to 7,8% for 2014.
The Roads and Earthworks and Swaziland divisions have delivered a solid financial performance and
these divisions continue to receive a steady flow of medium-sized tender enquiries, supporting a stable
order book. Additional future contract awards are anticipated in the short term.
Mining Services has performed in line with expectations despite persistently tough market conditions in the
mining industry. More stringent regulatory requirements, weaker commodity prices and uncertain labour
relations have continued to delay projects. Numerous open pit-mining projects were priced during the year
and awards are expected in the near future.
Pipelines met its targets despite a slow start to the year, but the order book remains of concern.
Further afield, projects have recently been awarded in Zambia and Swaziland whilst in Nigeria, the drop in
the oil price and the recent elections have seen projects slowing down there.
RPM's order book at year-end was R5,1 billion (Feb 2014: R5,0 billion).
Building
Although trading conditions in the building sector remain competitive, it is pleasing to report the Building
business unit's return to profitability. With an increased contract revenue of R4,4 billion (Feb 2014:
R3,1 billion), its operating profit of R5 million, although small, is a considerable improvement when
compared with the operating loss of R151 million for 2014.
These results exclude the results of the equity accounted Middle East operations.
Although the Inland division showed a loss for the year as a result of the closing out of historical loss-making
projects, the Housing, KwaZulu-Natal and South Divisions all produced sound operating performances.
Cross-border operations contributed positively to the business unit's performance. Mozambique in
particular had a successful year and achieved its 2015 financial targets, as did Botswana, which was
awarded the airport upgrades in Gaborone and Kasane. Namibia also received additional contract awards
during the year resulting in this regional business meeting its objectives.
After a number of years of breaking even, the Middle East has contributed positively to the group's results
generating a profit after tax of R25 million (Feb 2014: loss after tax R4 million), and an operating profit margin
of 2,4% Feb 2014: (1%). The businesses in this region have an acceptable order book going into the new
financial year.
Building's order book at year-end was R4,2 billion (Feb 2014: R4,0 billion).
Mechanical & Electrical (M&E)
The M&E business unit has met management's expectations. Contract revenue reduced to R667 million
(Feb 2014: R938 million) with a corresponding drop in operating profit to R35 million (Feb 2014: R48 million)
and a 5,3% operating margin (Feb 2014: 5,1%). This is as a result of delayed awards. These results
exclude the losses of the discontinued Power business.
Oil and Gas performed well and has recently been awarded additional pipe fabrication projects. Electrical
and Instrumentation continues to perform in line with expectations.
The persistent depressed mining infrastructure market has significantly reduced the available work to the
Mechanical division which reflected a break even mainly off small projects. A number of reasonably-sized
projects have recently been priced in this sector some of which are anticipated to result in orders.
The former Power Business Unit, which was incorporated as a division of M&E with effect from 1 March 2014,
continued to suffer from loss-making projects and an ongoing lack of deal flow. As a consequence, a
decision was made by management to discontinue this operation in the second half of this flnancial year.
M&E's order book at year-end was R1,2 billion (Feb 2014: R643 million).
Safety
During the year, the group's safety performance declined slightly achieving a lost time injury frequency
rate (LTIFR) of 0,20 (Feb 2014: 0,16). The group's recordable case rate (RCR) for this period was 1,49.
Stefanutti Stocks remains committed to providing a safe and healthy work environment for all employees,
contractors and stakeholders with the ultimate aim of "Zero Harm" and the LTIFR for 2015 remains
benchmarked at 0,1.
Discontinued operation
The former Power business continued to suffer from loss-making projects and a persistent lack of deal flow.
As a consequence, a decision was made to discontinue this operation in this flnancial year.
The comparative consolidated statement of profit or loss and other comprehensive income has been
restated to show the discontinued operation separately from continuing operations. The following is
disclosed with respect to the discontinued operation:
2015 2014
Statement of profit or loss and other comprehensive income R'000 R'000
Revenue 75 260 272 848
Other income 84 819
Expenses (154 971) (320 857)
Loss before tax (79 627) (47 190)
Tax 23 744 13 570
Loss after tax (55 883) (33 620)
Earnings per share (cents) (31,96) (19,26)
Diluted earnings per share (cents) (29,71) (17,88)
2015
Statement of financial position R'000
Non-current assets 22 066
Current assets 62 908
Total assets 84 974
Non-current liabilities 8 821
Current liabilities 36 819
Total liabilities 45 640
Included with the assets of the discontinued operation are two unutilised properties which the group intends
to dispose of within the next 12 months.
Outlook and strategy
Our multi-disciplinary and geographically diversified business structure continues to provide a robust
platform upon which the company is able to position itself as a strong competitor in the Southern African
construction market.
Notwithstanding the delay of petrochemical projects in Southern Africa these remain a key focus for
the group's long-term strategy. The group is well positioned to take advantage of the current medium-
sized projects that are continuously coming to the marketplace to maintain a quality order book. We are
anticipating a number of medium-sized project awards in the short term. Nonetheless, we remain well
positioned both financially and operationally to capitalise on potential large future opportunities.
The group continues to look for opportunities both in Southern Africa and on a more selective basis further
afield in sub-Saharan Africa.
Competition Commission matters
The company has received legal notification for two matters arising out of the Competition Commission
Fast Track Settlement Process in 2013.
The first matter relates to a complaint initiated by the Competition Commission into an alleged "World Cup
Stadia Meeting", which has been referred to the Competition Tribunal for adjudication. Stefanutti Stocks
has been cited as one of the respondents.
The second matter relates to a civil damages claim initiated by the city of Cape Town in respect of the Green
Point Stadium, following the findings and the imposition of administrative penalties by the competition
authorities. Stefanutti Stocks has been cited as one of the defendants.
Stefanutti Stocks is confident that on the facts currently available it will be able to successfully defend the
above two matters and it has accordingly not made any provision.
Dividend declaration
Notice is hereby given that no final dividend will be declared (Feb 2014: Rnil).
Changes to the board
The board is pleased to announce the appointment of Howard Craig and Mafika Mkwanazi as independent
non-executive directors with effect from 17 April 2015.
Dermot Quinn will be retiring from the group as an executive director and Chief Financial Officer (CFO)
on 31 May 2015. Dermot will continue to remain on the board as a non-executive director with effect from
1 June 2015. The board extends its appreciation to Dermot for his invaluable contribution to the group both
before and after the listing of the company, and looks forward to the benefit of his experience in his role as
a non-executive director.
The board is pleased to announce the appointment of Antonio Cocciante as CFO and executive director
with effect from 1 June 2015. Antonio has been with the group since August 2006.
Subsequent events
No material reportable events have occurred between the reporting date and the date of this announcement.
Appreciation
We would like to extend our appreciation to the board, management and staff, for their continued
commitment and dedication which have contributed to the group's recovery and commendable performance
for the year. We would also like to extend our gratitude to all our customers, suppliers, service providers
and shareholders for their ongoing support. We trust that this commitment and support will continue as we
strive to further enhance our business performance.
On behalf of the board
Kevin Eborall Willie Meyburgh
Chairman Chief Executive Officer
21 May 2015
Directors:
Non-executive directors:
KR Eborall# (Chairman), NJM Canca#, ZJ Matlala#, T Eboka#, LB Sithole#
JWLM Fizelleˆ# (alternate to LB Sithole), HJ Craig#, ME Mkwanazi#
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: 21/05/2015 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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