Wrap Text
UNAUDITED CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2016
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 2016
- Revenue R4,4 billion
- Operating profit R100 million
- Cash at end of period R1 billion
- Current order book R14,1 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 29 February
R'000 (decrease)/increase 2016 2015 2016
Revenue (16) 4 417 281 5 282 505 9 737 386
Contract revenue (17) 4 362 165 5 249 727 9 669 473
Earnings before interest, taxation,
depreciation and amortisation
(EBITDA) (34) 172 033 259 954 551 238
Depreciation and amortisation (71 688) (83 810) (159 273)
Operating profit before
investment income (43) 100 345 176 144 391 965
Investment income 15 024 15 286 34 049
Share of profits of equity-accounted
investees 21 715 8 659 19 040
Operating profit before
finance costs 137 084 200 089 445 054
Finance costs (36 862) (26 345) (60 422)
Profit before taxation 100 222 173 744 384 632
Taxation (15 069) (51 740) (120 114)
Profit from continuing operations 85 153 122 004 264 518
Loss after tax from
discontinued operations - (26 121) (78 637)
Profit (11) 85 153 95 883 185 881
Other comprehensive (loss)/income (77 706) 26 521 34 107
Exchange differences on
translation of foreign operations
(may be reclassified
to profit/(loss)) (77 706) 26 521 84 980
Reclassification adjustments - - (50 873)
Total comprehensive income 7 447 122 404 219 988
Profit attributable to:
Equity holders of the company 96 125 94 622 182 317
Profit from continuing operations 96 125 120 743 260 954
Loss from discontinued operations - (26 121) (78 637)
Non-controlling interest - (loss)/profit
from continuing operations (10 972) 1 261 3 564
85 153 95 883 185 881
Total comprehensive income
attributable to:
Equity holders of the company 10 701 120 772 214 582
Total comprehensive income
from continuing operations 10 701 146 893 293 219
Total comprehensive loss
from discontinued operations - (26 121) (78 637)
Non-controlling interest - total
comprehensive (loss)/income
from continuing operations (3 254) 1 632 5 406
7 447 122 404 219 988
Earnings per share (cents)
From continuing operations (19) 55,57 69,02 149,30
From total operations 3 55,57 54,09 104,31
Diluted earnings per share (cents)
From continuing operations (20) 51,11 64,20 138,75
From total operations 2 51,11 50,31 96,94
Commentary to the statement of profit or loss and other comprehensive income
Headline earnings reconciliation
Continuing operations Total operations
Aug 2016 Aug 2015 Feb 2016 Aug 2016 Aug 2015 Feb 2016
Profit after taxation
attributable to
equity holders
of the company 96 125 120 743 260 954 96 125 94 622 182 317
Adjusted for:
Profit on disposal of
Investment Property - - (16 158) - - (16 158)
Fair value adjustment
on Investment Property - (6 066) (6 066) - (6 066) (6 066)
Profit on disposal of
plant and equipment (6 815) (5 921) (7 198) (6 815) (5 257) (6 416)
Tax effect of
adjustments 1 909 1 664 9 944 1 909 1 478 9 725
Net gain on disposal
of foreign investment - - - - - (6 768)
Headline earnings (17) 91 219 110 420 241 476 91 219 84 777 156 634
Number of weighted
average shares
in issue 172 977 624 174 940 279 174 779 842 172 977 624 174 940 279 174 779 842
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) (19) 55,57 69,02 149,30 55,57 54,09 104,31
Diluted earnings per
share (cents) (20) 51,11 64,20 138,75 51,11 50,31 96,94
Headline earnings per
share (cents) (16) 52,73 63,12 138,16 52,73 48,46 89,62
Diluted headline
earnings per share
(cents) (17) 48,50 58,71 128,39 48,50 45,07 83,28
STATEMENT OF FINANCIAL POSITION
Unaudited Audited
at at
31 August 29 February
R'000 2016 2016
ASSETS
Non-current assets 2 494 222 2 565 762
Property, plant and equipment 1 005 913 1 099 712
Equity-accounted investees 203 631 189 458
Goodwill and intangible assets 1 244 569 1 248 529
Deferred tax assets 40 109 28 063
Current assets 4 318 738 3 946 516
Other current assets 3 264 261 2 877 227
Taxation 37 325 52 392
Bank balances 1 016 077 985 128
4 317 663 3 914 747
Assets of discontinued operation and non-current assets held for sale 1 075 31 769
Total assets 6 812 960 6 512 278
EQUITY AND LIABILITIES
Capital and reserves 2 612 194 2 608 532
Share capital and premium 1 023 599 1 027 103
Other reserves 116 909 203 395
Retained earnings 1 467 125 1 370 219
Equity holders of the company 2 607 633 2 600 717
Non-controlling interest 4 561 7 815
Non-current liabilities 216 544 231 709
Other financial liabilities 189 345 174 629
Deferred tax liabilities 27 199 57 080
Current liabilities 3 984 222 3 672 037
Other current liabilities* 2 258 661 2 232 473
Excess billings over work done 1 211 373 740 216
Provisions 457 430 488 996
Taxation 53 496 46 666
Bank balances 3 262 134 188
3 984 222 3 642 539
Liabilities directly associated with the discontinued operation - 29 498
Total equity and liabilities 6 812 960 6 512 278
* Including interest-bearing liabilities of 322 256 327 552
STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 29 February
R'000 2016 2015 2016
Cash generated from operations 273 875 142 007 30 010
Interest received 15 023 15 271 33 144
Finance costs (19 935) (19 548) (42 555)
Dividends received 1 2 906 25 392
Taxation paid (31 582) (48 716) (133 447)
Cash flows from operating activities 237 382 91 920 (87 456)
Expenditure to maintain operating capacity (32 395) (24 840) (50 429)
Proceeds from non-current assets held for sale 53 975 19 002 118 899
Expenditure for expansion (29 208) (8 412) (75 105)
Cash flows from investing activities (7 628) (14 250) (6 635)
Cash flows from financing activities (13 023) 41 876 54 935
Net increase/(decrease) in cash 216 731 119 546 (39 156)
Effect of exchange rate changes on cash and
cash equivalents (54 922) 33 908 74 893
Cash and cash equivalents at beginning of year 850 940 815 235 815 235
Cash at end of the period - Discontinued operation - (1 533) (66)
Cash at the beginning of the year - Discontinued operation 66 34 34
Cash and cash equivalents at the end of the period 1 012 815 967 190 850 940
Segment information
Roads,
Pipelines Reconcil-
Segment information & Mining Mechanical ing
31 August 2016 Services & Electrical Structures Building segments Total
Contract revenue 1 030 482 556 674 954 108 1 820 901 - 4 362 165
Intersegment
contract revenues 35 875 19 662 51 291 - - 106 828
Reportable segment
profit/(loss) 54 230 18 367 8 769 35 944 (32 157) 85 153
Reportable segment
assets 1 673 457 593 475 1 219 742 2 030 829 1 295 457 6 812 960
Segment information
31 August 2015
Contract revenue 1 527 779 559 544 1 093 330 2 069 074 - 5 249 727
Intersegment contract
revenues 15 590 34 462 69 344 29 536 - 148 932
Reportable segment
profit/(loss) 68 082 24 244 10 606 28 319 (9 247) 122 004
Reportable segment
assets 1 563 377 545 920 1 348 650 1 860 617 1 401 537 6 720 101
Segment information
29 February 2016
Contract revenue 2 637 921 1 216 092 2 113 292 3 702 168 - 9 669 473
Intersegment contract
revenues 31 059 42 571 100 862 31 902 - 206 394
Reportable segment
profit/(loss) 145 867 49 594 34 421 60 321 (25 685) 264 518
Reportable segment
assets 1 576 826 513 170 1 210 575 1 978 701 1 233 006 6 512 278
STATEMENT OF CHANGES IN EQUITY
OTHER RESERVES
Foreign Attributable
Share-based currency Revaluation to equity Non-
Share capital payments translation surplus Retained holders of controlling Total
and 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 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 - - - - 94 622 94 622 1 261 95 883
Other comprehensive income - - 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
Treasury shares acquired (4 806) - - - - (4 806) - (4 806)
Realisation of revaluation reserve - - - (4 443) 4 443 - - -
Tax on revaluation of properties - - - (5 984) - (5 984) - (5 984)
Total comprehensive income - - 6 115 - 87 695 93 810 3 774 97 584
Profit - - - - 87 695 87 695 2 303 89 998
Other comprehensive income - - 6 115 - - 6 115 1 471 7 586
- -
Balance at 29 February 2016 audited 1 027 103 28 145 158 069 17 181 1 370 219 2 600 717 7 815 2 608 532
Treasury shares acquired (3 504) - - - - (3 504) - (3 504)
Impairment of properties - - - (281) - (281) - (281)
Realisation of revaluation reserve - - - (781) 781 - - -
Total comprehensive income - - (85 424) - 96 125 10 701 (3 254) 7 447
Profit - - - - 96 125 96 125 (10 972) 85 153
Other comprehensive loss - - (85 424) - - (85 424) 7 718 (77 706)
Balance at 31 August 2016 unaudited 1 023 599 28 145 72 645 16 119 1 467 125 2 607 633 4 561 2 612 194
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated results for the period ended 31 August 2016 (results for 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 2016 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
29 February 2016. 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).
The information in this report has not been audited or reviewed by Stefanutti Stock's auditor.
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
and mechanical and electrical installation and construction.
COMMENTARY
The Board of Directors report that the group's performance reflects the extremely challenging trading
environment which includes the negative impact of currency fluctuations in those African countries in which
we operate. Management constantly 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 discontinued operations reported in the prior year had no impact on the results for this period. The
results for the period ended 31 August 2015 have been restated to separate the results of the discontinued
operations from continuing operations to discontinued in accordance with IFRS 5: Non-current Assets Held
for Sale and Discontinued Operations.
With effect from 1 March 2016, the group acquired an effective 74% stake in the following two empowered
construction businesses active in the South African Petrochemical market:
- KLB Mkhize Electrical Projects Proprietary Limited, an electrical and instrumentation company for
a purchase consideration of R7 million; and
- Celik Engineering Proprietary Limited, a mechanical and structural piping engineering company for
a purchase consideration of R2 million.
Although the group has a 74% effective stake it does not have control over these entities and accounts
for these as associate investments instead of business combinations as previously reported.
Overview of results
Contract revenue from operations of R4,4 billion decreased by R888 million compared to the previous
period (Aug 2015: R5,3 billion) due to a reduction in revenue from RPM, Building and Structures. Operating
profit decreased from R176 million in the previous period to R100 million in the current period, with a
corresponding operating profit margin reduction from 3,4% to 2,3%. A combination of the strengthening
of the Rand and the weakening of currencies in African countries in which Stefanutti Stocks operates has
negatively affected the group's results for the period by R50 million.
The interest charge for the year has increased to R37 million (Aug 2015: R26 million) primarily due to the
total interest payable on the last instalment of the Competition Commission penalty.
Share of profits of equity-accounted investees increased to R22 million from R9 million due to an increased
contribution from the Middle East operation.
Earnings per share from total operations of 55,57 cents (Aug 2015: 54,09 cents) and diluted headline
earnings per share from total operations of 48,50 cents (Aug 2015: 45,07 cents) increased by 2,7% and
7,6%, respectively.
Excluding the discontinued operations from the comparative period, earnings per share of 55,57 cents
(Aug 2015 restated: 69,02 cents) and diluted headline earnings per share of 48,50 cents (Aug 2015
restated: 58,71 cents) decreased by 19,5% and 17,4% respectively.
The group's order book, consisting of mainly medium-sized projects, is currently R14,1 billion of which
R5,0 billion arises from work beyond South Africa's borders.
Capital expenditure for the period amounted to R78 million (Aug 2015: R52 million) of which R49 million
(Aug 2015: R44 million) was incurred for maintaining capacity.
The group continues to experience delayed payments from clients on contracts. However, the increase in
excess billings over work done to R1,2 billion (Aug 2015: R740 million) resulted in cash generated from
operations increasing to R274 million (Aug 2015: R142 million), which also includes an inflow from working
capital of R91 million (Aug 2015: R152 million consumed by working capital). The balance of the proceeds
from the sale of the investment property in the prior year resulted in an inflow of R54 million
(Feb 2016: R75 million). This has contributed to an increase in the group's overall cash position to R1 billion
(Feb 2016: R851 million). Total interest-bearing borrowings have reduced to R515 million (Feb 2016: R636 million).
During the year, the company, through a subsidiary, repurchased 906 923 of its own shares at an average
price of R3,86 per share in terms of a resolution passed at the company's most recent Annual General
Meeting. These shares will not be cancelled and will be accounted for as treasury shares.
The translation of foreign operations has resulted in R78 million loss being recognised in other comprehensive
income.
Review of operations
Roads, Pipelines & Mining Services (RPM)
As a result of the delay in the awarding of contracts during the period contract revenue of R1,0 billion
decreased by R497 million compared to the previous period (Aug 2015: R1,5 billion), with a reduction in
operating profit to R81 million (Aug 2015: R100 million). The operating profit margin increased from 6,5%
to 7,9%.
The Roads & Earthworks and Swaziland divisions have delivered good results and there are some
contracts anticipated to be awarded in the short term. However, due to the competitive environment
operating margins will continue to remain under pressure.
Mining Services has performed well. Recent contracts awarded have improved this division's medium-term
order book with some additional contracts anticipated in the short term.
The Zambian operation has performed to expectation on the back of private sector projects. Discussions
with the Zambian Roads Development Agency are ongoing in order to resolve outstanding payments on
their projects to enable work on the contracts to resume.
The road projects in Nigeria have been stopped due to outstanding payments. We are in discussion with
the relevant states to resolve this issue in order for the projects to resume.
RPM's order book at August 2016 was R4,8 billion (Aug 2015: R5,0 billion).
Mechanical & Electrical (M&E)
The M&E business unit has performed to expectation on the back of available petrochemical projects.
Contract revenue has remained consistent at R556 million (Aug 2015: R560 million). Operating profit
reduced to R24 million (Aug 2015: R33 million) with a corresponding reduction in operating profit margin
to 4,2% (Aug 2015: 5,8%).
Due to a shortage of work in the traditional mining infrastructure environment, the Mechanical division's
results were negatively affected and its order book continues to remain under pressure. Nevertheless,
there are some potential opportunities on existing mining plants, operating power stations and cross
border prospects.
M&E's order book at August 2016 was R900 million (Aug 2015: R1,1 billion).
Structures
Due to the continued decline in infrastructure projects emanating from both the government and private
sectors, Structures again ended the period with a reduction in contract revenue and operating profit to
R954 million (Aug 2015: R1,1 billion) and R3 million (Aug 2015: R25 million) respectively. An operating
profit margin of less than 1% compared to the 2,3% of the comparative period, bears testament to the
known decline in the infrastructure market available to this business unit. This business unit has been
restructured and cost cutting measures are ongoing as it aligns itself to market conditions.
The number of large projects coming to the market remains constrained and work is being secured
predominantly from medium-sized projects (R100 million to R350 million). The delay in award of contracts
continues to be of concern. In this competitive environment operating profit margins and the order book will
remain under pressure. This is expected to continue in the medium term.
At August 2016, Structures' order book was R1,9 billion (Aug 2015: R1,9 billion).
Building
As a consequence of ongoing competitive trading conditions combined with a more selective approach
to the projects being tendered for, the Building business unit's contract revenue reduced to R1,8 billion
from R2,1 billion with a corresponding reduction in operating profit to R2 million (Aug 2015: R10 million
excluding a R6 million fair value adjustment). The profit of the equity accounted Middle East operation
amounting to R21 million (Aug 2015: R9 million) is excluded from operating profit. During the period,
certain divisions within the business unit were combined in order to enhance efficiency and reduce costs.
Other than the Inland division, where a shortage of work resulted in holding costs not being recovered,
all divisions performed to expectation. The completion of a large hospital project and the resolution of
outstanding contractual matters on another project both of which do not contribute towards operating profit,
will be concluded by year-end. The Mozambique division once again positively contributed to the business
unit's performance with some further contracts expected to be awarded in the short term.
Building's order book at August 2016 was R4,1 billion (Aug 2015: R4,0 billion).
Safety
Management and staff remain committed to enhanced 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) at end August 2016 was 0,12 (Feb 2016: 0,10) and the Recordable Case Rate (RCR) was 0,70
(Feb 2016: 0,59).
Outlook and strategy
The South African construction market continues to be extremely challenging with escalating levels of
competition for the limited available work likely to further impact operating profit margins.
Notwithstanding the above, there remains potential growth in certain sectors of the economy which
provide opportunities for our Roads & Earthworks, Mechanical and Building operations, both locally and
cross border. In our Oil & Gas and Electrical & Instrumentation businesses there are opportunities in the
construction of petrochemical tank farms and in the markets in which they currently operate. Subject to the
fulfilment of certain conditions there is a potential award of a large open pit contract for the Mining Services
division. In other sectors the group is well positioned to take advantage of the medium-sized projects
coming to the local marketplace to maintain its order book.
The group is focussed on cash management across all its businesses.
Our multi-disciplinary and geographically diversified business structure continues to provide a robust
platform upon which it 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
Stefanutti Stocks entered into a Settlement Agreement with the South African Government as disclosed in
the SENS announcement released on 11 October 2016. The financial effects of the Settlement Agreement
are being assessed and once finalised will be included in the results for the year ending 28 February 2017.
In terms of the agreement all matters other than the civil claim received from the City of Cape Town
(Green Point Stadium) have been settled and/or withdrawn. The group is confident that on the facts
currently available, it will be able to successfully defend the City of Cape Town claim and has accordingly
not made any provision therefor.
Dividend declaration
Notice is hereby given that no dividend will be declared (Aug 2015: Nil).
Subsequent events
Other than the Competition Commission matters noted above, there were no other material reportable
events which 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 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.
On behalf of the board
Kevin Eborall Willie Meyburgh
Chairman Chief Executive Officer
Published on 10 November 2016
Directors
Non-executive directors
KR Eborall# (Chairman), NJM Canca#, HJ Craig#, T Eboka#, ZJ Matlala#, ME Mkwanazi#, LB Sithole#,
JWLM Fizelle# (alternate to LB Sithole), DG Quinn
# Independent
Executive directors
W Meyburgh (Chief Executive Officer), AV Cocciante (Chief Financial Officer)
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, 54 Glenhove Road, Melrose Estate, Johannesburg, 2196
(PO Box 6697, Johannesburg, 2000)
Company secretary
W Somerville
20 Lurgan Road, Parkview, 2193
This announcement together with the investor presentation is available on the company's website.
www.stefanuttistocks.com
Date: 10/11/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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