Wrap Text
Unaudited Interim Results for the Period Ended 31 August 2015
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 2015
• Revenue R5,3 billion
• Operating profit R176 million
• Cash at end of period R967 million
• Current order book R12,5 billion
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Restated Audited
six months six months 12 months
ended ended ended
% 31 August 31 August 28 February
Increase/ 2015 2014 2015
(decrease) R'000 R'000 R'000
Revenue 5 282 505 5 267 870 10 648 379
Contract revenue 5 249 727 5 240 307 10 567 643
Earnings before interest, taxation,
depreciation and amortisation (EBITDA) 9 259 954 238 217 496 730
Depreciation (79 850) (71 513) (153 429)
Amortisation of intangible assets (3 960) (3 960) (7 920)
Operating profit before investment income 8 176 144 162 744 335 381
Investment income 15 286 17 365 41 544
Share of (losses)/profits of equity-accounted
investees (8 640) 5 144 26 461
Operating profit before finance costs 182 790 185 253 403 386
Finance costs (26 345) (20 893) (41 664)
Profit before taxation 156 445 164 360 361 722
Taxation (51 740) (54 431) (102 678)
Profit for the period from continuing
operations 104 705 109 929 259 044
Loss after tax for the period from
discontinued operation (8 822) (21 329) (55 883)
Profit for the period from total operations 95 883 88 600 203 161
Other comprehensive income 26 521 13 686 152
Exchange differences on translation of
foreign operations (may be reclassified
to profit/(loss)) 26 521 13 686 152
Total comprehensive income for
the period 122 404 102 286 203 313
Profit for the period attributable as
follows:
Equity holders of the company 94 622 87 557 200 812
Profit for the period from
continuing operations (5) 103 444 108 886 256 695
Loss for the period from
discontinued operation (8 822) (21 329) (55 883)
Non-controlling interest 1 261 1 043 2 349
Profit for the period from
continuing operations 1 261 1 043 2 349
Loss for the period from
discontinued operation – – –
95 883 88 600 203 161
Total comprehensive income
attributable to:
Equity holders of the company 120 772 101 266 201 452
Profit for the period from
continuing operations 6 129 594 122 595 257 335
Loss for the period from
discontinued operation (8 822) (21 329) (55 883)
Non-controlling interest 1 632 1 020 1 861
Profit for the period from
continuing operations 1 632 1 020 1 861
Loss for the period from
discontinued operation – – –
122 404 102 286 203 313
Earnings per share (cents)
Continuing operations (5) 59,13 62,29 146,79
Total operations 8 54,09 50,09 114,84
Diluted earnings per share (cents)
Continuing operations (5) 55,00 57,89 136,48
Total operations 8 50,31 46,55 106,77
Commentary to the statement of profit or loss and other comprehensive income
Headline earnings reconciliation
Continuing operations Total operations
Aug 2015 Aug 2014 Feb 2015 Aug 2015 Aug 2014 Feb 2015
Profit after taxation
attributable to equity
holders of the
company 103 444 108 886 256 695 94 622 87 557 200 812
Adjusted for:
Fair value adjustments
– Investment Property (6 066) – – (6 066) – –
Profit on disposal of
plant and equipment (5 921) (5 758) (8 594) (5 257) (5 600) (8 532)
Tax effect of
adjustments 1 664 1 612 2 403 1 478 1 568 2 386
Impairment of
goodwill – – – – – 2 187
Headline earnings (11) 93 121 104 740 250 504 84 777 83 525 196 853
Number of weighted
average shares
in issue 174 940 279 174 795 170 174 867 128 174 940 279 174 795 170 174 867 128
Number of diluted
weighted average
shares in issue 188 080 746 188 080 746 188 080 746 188 080 746 188 080 746 188 080 746
Earnings per share
(cents) (5) 59,13 62,29 146,79 54,09 50,09 114,84
Diluted earnings
per share (cents) (5) 55,00 57,89 136,48 50,31 46,55 106,77
Headline earnings
per share (cents) (11) 53,23 59,92 143,25 48,46 47,78 112,57
Diluted headline
earnings per share
(cents) (11) 49,51 55,69 133,19 45,07 44,41 104,66
STATEMENT OF FINANCIAL POSITION
Unaudited Audited
at at
31 August 28 February
2015 2015
R'000 R'000
ASSETS
Non-current assets 2 586 686 2 678 885
Property, plant and equipment 1 067 874 1 109 652
Investment property – 61 507
Equity-accounted investees 238 326 232 255
Goodwill and intangible assets 1 252 489 1 256 449
Deferred tax assets 27 997 19 022
Current assets 4 133 415 3 844 532
Other current assets 2 907 863 2 866 395
Taxation 18 916 21 028
Bank balances 1 061 780 848 665
3 988 559 3 736 088
Assets of discontinued operation and non-current assets held for sale 144 856 108 444
Total assets 6 720 101 6 523 417
EQUITY AND LIABILITIES
Capital and reserves 2 521 738 2 399 334
Equity holders of the company 2 517 697 2 396 925
Non-controlling interest 4 041 2 409
Non-current liabilities 306 790 299 294
Other financial liabilities – Interest-bearing 264 041 243 883
Other financial liabilities – Non-interest-bearing 4 685 4 229
Deferred tax liabilities 38 064 51 182
Current liabilities 3 891 573 3 824 789
Other current liabilities* 2 307 089 2 179 104
Provisions 1 406 543 1 539 683
Taxation 49 520 26 932
Bank balances 94 590 33 430
3 857 742 3 779 149
Liabilities directly associated with the discontinued operation 33 831 45 640
Total equity and liabilities 6 720 101 6 523 417
* including interest-bearing liabilities. 201 916 171 338
STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
Cash generated from operations 142 007 310 412 301 279
Interest received 15 271 17 365 41 346
Finance costs (19 548) (21 084) (47 062)
Dividends received 2 906 445 14 611
Taxation paid (48 716) (50 659) (133 603)
Cash flows from operating activities 91 920 256 479 176 571
Expenditure to maintain operating capacity (5 838) (24 416) (38 201)
Expenditure for expansion (8 412) (87 281) (119 602)
Cash flows from investing activities (14 250) (111 697) (157 803)
Cash flows from financing activities 41 876 (108 099) (218 947)
Net increase/(decrease) in cash for the period 119 546 36 683 (200 179)
Effect of exchange rate changes on
cash and cash equivalents 33 908 4 237 12 038
Cash at beginning of period 815 235 1 003 410 1 003 410
Cash at end of period – Discontinued operation (1 533) – (34)
Cash at beginning of period – Discontinued operation 34 – –
Cash and cash equivalents at the end of the period 967 190 1 044 330 815 235
SEGMENT INFORMATION
Roads,
Pipelines Reconcil-
& Mining ing
R'000 Structures Services Building M&E segments Total
31 August 2015
Contract revenue 1 093 330 1 527 779 2 069 074 559 544 – 5 249 727
Intersegment contract
revenues 69 344 15 590 29 536 34 462 – 148 932
Reportable segment
profit/(loss) 10 606 68 082 11 020 24 244 (9 247) 104 705
Reportable segment
assets 1 348 650 1 563 377 1 860 617 545 920 1 401 537 6 720 101
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
31 August 2014
Contract revenue 1 332 537 1 455 392 2 116 239 336 139 – 5 240 307
Intersegment contract
revenues 38 322 11 223 – 12 232 – 61 777
Reportable segment
profit/(loss) 30 971 85 131 (13 223) 16 725 (9 675) 109 929
Reportable segment
assets 1 463 173 1 526 941 1 911 529 470 225 1 401 854 6 773 722
The segment information, other than reportable segment assets excludes the discontinued operation. The reportable
segment assets of the discontinued operation are included in the M&E segment.
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 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
Total comprehensive income – – (13 069) – 113 255 100 186 841 101 027
Profit for the period – – – – 113 255 113 255 1 306 114 561
Exchange differences on translation of foreign operations – – (13 069) – – (13 069) (465) (13 534)
Balance at 28 February 2015 audited 1 031 909 28 145 125 804 27 608 1 183 459 2 396 925 2 409 2 399 334
Total comprehensive income – – 26 150 – 94 622 120 772 1 632 122 404
Profit for the period – – – – 94 622 94 622 1 261 95 883
Exchange differences on translation of foreign operations – – 26 150 – – 26 150 371 26 521
Balance at 31 August 2015 unaudited 1 031 909 28 145 151 954 27 608 1 278 081 2 517 697 4 041 2 521 738
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated results for the period ended 31 August 2015 (results 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 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 2015. There is no significant difference between the carrying amounts of financial assets
and liabilities and their fair values due to the effective interest rate method. 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, AV Cocciante, CA(SA).
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 overall, the group has produced a satisfactory performance despite
the extremely challenging trading environment. Management regularly reviews and aligns each business unit and its
respective divisions with the changes being experienced in their particular markets, to ensure their ongoing sustainability.
The group continues to report the Power business 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 of the comparative period (Aug 2014 or
prior period) being restated accordingly. The loss attributable to this discontinued operation for the period amounted to
R9 million (Aug 2014: R21 million).
During the period the group decided to actively market its investment property, resulting in a re-classification of the
fair value of the asset to non-current assets held for sale. The increase in the fair value of the investment property of
R6 million is included in operating profit.
Overview of results
Contract revenue from continuing operations remained unchanged from that of the previous year at R5,3 billion
(Aug 2014: R5,3 billion), whilst operating profit, excluding the fair value adjustment of R6 million, increased by 5% to
R170 million (Aug 2014: R163 million). The operating profit margin from continuing operations improved slightly from
3,1% to 3,2%.
A market increasingly characterised by delayed payments and reductions in advance payments received from clients,
has necessitated an increase in interest bearing borrowings to R466 million (Feb 2015: R415 million), with an associated
increase in the interest charge for the period. This, together with the deemed interest on the third and fourth instalment
of the Competition Commission penalty, has negatively affected the group's finance costs for the period. When
compared with the prior period, it is the impact of the group's finance costs, combined with an equity accounted loss of
R9 million arising from the Middle East operations (Aug 2014: R4 million profit), that has adversely impacted a
consistent trading performance, resulting in the profit after tax reducing to R105 million from the R110 million reported
in the prior period.
Earnings per share from continuing operations of 59,1 cents (Aug 2014: 62,3 cents) and diluted headline earnings per
share from continuing operations of 49,5 cents (Aug 2014: 55,7 cents) decreased by 5,1% and 11,1%, respectively.
Earnings per share from total operations of 54,1 cents (Aug 2014: 50,1 cents) and diluted headline earnings per share
from total operations of 45,1 cents (Aug 2014: 44,4 cents) increased by 8,0% and 1,5%, respectively.
The group's order book, consisting of mainly medium sized projects, is currently R12,5 billion of which R4,2 billion arises
from work beyond South Africa's borders.
Capital expenditure for the period amounted to R52 million (Aug 2014: R134 million) of which R44 million was incurred for
maintaining capacity. Ongoing capital expenditure results in an increase in the depreciation charge.
A further reduction in advance payments received during the period resulted in cash generated from operations decreasing
to R142 million (Aug 2014: R310 million). Included in cash generated from operations is R34 million generated from
working capital (Aug 2014: R34 million consumed by working capital).
Dividends of R3 million (Aug 2014: R0,4 million) were received during the period from equity accounted investees.
Cash flows from investing activities decreased from R112 million to R14 million as a result of reduced capital expenditure
and increased proceeds from the disposal of plant and equipment, mainly relating to the discontinued Power operation.
Notwithstanding the above, the cash balance has improved by R152 million to R967 million (Feb 2015: R815 million).
The weakening of the Rand during the period has had a positive effect on the translation of the foreign cash balances as
well as equity accounted investees.
Review of operations
Structures
Structures ended the period with a reduction in contract revenue to R1,1 billion (Aug 2014: R1,3 billion), and operating
profit also reduced to R25 million (Aug 2014: R41 million) due to the significant reduction in infrastructure projects
emanating from both the government and private sectors. An operating profit margin of 2,3% from the 3,1% of the
previous period, bears testament to the declining infrastructure market available to this business unit. Cost cutting
measures are ongoing as the business aligns itself to market conditions.
The Civils divisions continue to perform as well as could be expected within the constraints of limited infrastructure spend.
The number of large projects available in the market remains limited and work is being secured predominantly from
medium sized projects (R100 million to R350 million). This trend is expected to continue in the medium term.
The Geotechnical division met its financial targets on the back of small projects. In conjunction with the overall structures
market, medium to larger anchor projects are also limited.
As a result of the specific lack of infrastructure spend in the local marine environment, this division's order book is also
now under pressure. Other than a few potential projects in South Africa, it is mainly cross-border opportunities along the
sub-Saharan coastline of Africa that are being pursued.
At August 2015 Structures' order book was R1,9 billion (Aug 2014: R2,3 billion).
Roads, Pipelines & Mining Services (RPM)
RPM continues to perform well but in an increasingly competitive market. This has resulted in contract revenue
remaining constant at R1,5 billion (Aug 2014: R1,5 billion) but operating profit reducing to R100 million (Aug 2014:
R118 million) with a consequent reduction in the operating profit margin from 8,1% to 6,5%. The business unit still
continues to experience delays in contract awards.
The Roads & Earthworks and Swaziland divisions have delivered good results. Although these divisions continue
to receive a steady flow of medium-sized tender enquiries, operating margins will remain under pressure due to the
increasingly competitive environment. Some encouraging contract awards are anticipated in the short term.
Mining Services has performed to expectation, despite the persistently tough and well documented market conditions
in its industry. The weaker commodity prices and negative investor sentiment obviously have an adverse impact on the
number of projects coming to market and this will affect the order book going forward.
Due to a shortage of projects in the market, the Pipelines division finds it difficult to secure sufficient work resulting in a
poor performance for the period. The business has been scaled down and the order book remains of concern.
The R1,0 billion Bottom Road project in Zambia, awarded almost a year ago, commenced in October 2015 after the
receipt of the advance payment. However, the recent major weakening of the Zambian Kwacha against other currencies,
may negatively affect this project's profitability.
RPM's order book at August 2015 was R5,0 billion (Aug 2014: R5,0 billion).
Building
Although trading conditions in the building sector remain competitive, the Building business unit reported an operating profit
of R10 million, excluding the R6 million fair value adjustment (Aug 2014: operating loss of R21 million). Contract revenue of
R2,1 billion is the same as that reported in the prior period.
These results exclude the results of the equity accounted Middle East operations.
All contracts within the Inland division were profitable. However, the delay in contract awards have resulted in holding costs
not being recovered. Potential awards are imminent which should improve the financial position for the following year.
The Housing, KwaZulu-Natal and South divisions continue to produce encouraging results.
Overall the cross-border operations contributed positively to the business unit's performance, with Mozambique
generating the majority of the returns.
As a result of the loss incurred by Zener Steward, the combined Middle East operation has posted an operating loss of
R8,5 million for the period (Aug 2014: profit R3,8 million). Corrective action is being taken with respect to Zener Steward.
Building's order book at August 2015 was R4,0 billion (Aug 2014: R4,3 billion).
Mechanical & Electrical (M&E)
The M&E business unit has delivered good results and continues to grow on the back of available petrochemical projects.
Contract revenue and operating profit increased to R560 million (Aug 2014: R336 million) and R33 million (Aug 2014:
R23 million), respectively.
Both the Oil & Gas and Electrical & Instrumentation divisions performed well and have identified good prospects in the
local petrochemical market.
The Mechanical division reflected a break-even position, which is due to the lack of work in the mining infrastructure
environment. There are, however, some potential opportunities on existing mining plants for this division to secure future
work.
M&E's order book at August 2015 was R1,1 billion (Aug 2014: R0,9 billion).
Safety
Management and staff remain committed to enhance health and safety policies, procedures and together strive to
constantly improve the group's safety performance. The group's Lost Time Injury Frequency Rate (LTIFR) as at end
August 2015 improved to 0,13 from 0,14 of the comparative period. The group's Recordable Case Rate (RCR) for this
period positively reduced to 0,89 as opposed to the 1,62 recorded at August 2014.
Discontinued operation
During the period under review the group continued with its exit strategy in the Power business. This involved the sale
of certain items of plant and equipment, settlement of financing arrangements and an ongoing focus on finalisation of
outstanding claims and contractual related matters. These processes will be ongoing and we are striving to have these
matters finalised in the medium term.
Statement of profit or loss and Aug 2015 Aug 2014 Feb 2015
other comprehensive income R'000 R'000 R'000
Revenue – 81 626 75 260
Other income – 73 84
Expenses (12 253) (112 216) (154 971)
Loss before tax (12 253) (30 517) (79 627)
Tax 3 431 9 189 23 744
Loss after tax (8 822) (21 328) (55 883)
Loss per share (cents) (5,04) (12,20) (31,96)
Diluted loss per share (cents) (4,69) (11,34) (29,71)
Aug 2015 Feb 2015
Statement of financial position R'000 R'000
Non-current assets 2 400 22 066
Current assets 56 116 62 908
Total assets 58 516 84 974
Non-current liabilities 5 609 8 821
Current liabilities 28 222 36 819
Total liabilities 33 831 45 640
Included with the non-current assets held for sale are two unutilised properties which are currently in the process of being
sold as well as the investment property re-classified during the course of the year.
Outlook and strategy
With the existing exceptionally low levels of business confidence in the private sector, and reduced capital expenditure in
the government sector, the South African construction market continues to be extremely challenging. The high levels of
competition for available work, may negatively impact operating profit margins going forward.
Notwithstanding the above, there remains potential growth in certain sectors of the economy, which provide opportunities
for our Roads & Earthworks, Building, Oil & Gas and Electrical & Instrumentation operations. In other sectors, the group
is well positioned to take advantage of the medium-sized projects coming to the marketplace to maintain the order book.
Our multi-disciplinary and geographically diversified business structure continues to provide a robust platform upon which
the group is able to position itself as a strong competitor in the Southern African construction market.
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
As previously reported, 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 for these.
In conjunction with 14 other contractors, Stefanutti Stocks received notice from the Construction Industry Development
Board of its intention to launch a formal inquiry regarding the contractor's conduct that gave rise to the penalties imposed
by the Competition Commission. This process is currently being challenged.
Dividend declaration
Notice is hereby given that no interim dividend will be declared (Aug 2014: Nil).
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 during these challenging times. 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
Published on 12 November 2015
Directors:
Non-executive directors:
KR Eborall# (Chairman), NJM Canca#, ZJ Matlala#, T Eboka#, LB Sithole#, JWLM Fizelle# (alternate to LB Sithole)
HJ Craig#, ME Mkwanazi#, DG Quinn
Executive directors:
W Meyburgh (Chief Executive Officer), AV Cocciante (Chief Financial Officer)
#Independent
Registered office:
Protec Park, Corner Zuurfontein Avenue and Oranjerivier Drive, Chloorkop, 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
Date: 12/11/2015 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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