To view the PDF file, sign up for a MySharenet subscription.

STEFANUTTI STOCKS HOLDINGS LIMITED - Reviewed Condensed Consolidated Results for the 12 Months Ended 28 February 2017

Release Date: 18/05/2017 07:05
Code(s): SSK     PDF:  
Wrap Text
Reviewed Condensed Consolidated Results
for the 12 Months Ended 28 February 2017

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 2017

- Revenue R9,1 billion
- Operating loss R106 million
- Cash at end of year R1,1 billion
- Current order book R14 billion

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
                                                                                      Reviewed        Audited
                                                                                     12 months      12 months
                                                                                         ended          ended
                                                                             %     28 February    29 February
R'000                                                                 decrease            2017           2016
Revenue                                                                    (6)       9 149 604      9 737 386
Contract revenue                                                           (6)       9 058 576      9 669 473
Earnings before interest, taxation, depreciation and
amortisation (EBITDA)                                                     (62)         209 046        551 238
Depreciation and amortisation                                                        (145 882)      (159 273)
Impairment of assets                                                                 (169 560)              -
Operating (loss)/profit before investment income                         (127)       (106 396)        391 965
Investment income                                                                       44 864         34 049
Share of profits of equity-accounted investees                                          40 893         19 040
Operating (loss)/profit before finance costs                                          (20 639)        445 054
Finance costs                                                                         (85 597)       (60 422)
(Loss)/profit before taxation                                                        (106 236)        384 632
Taxation                                                                              (43 554)      (120 114)
(Loss)/profit for the year from continuing operations                                (149 790)        264 518
Loss after tax for the year from discontinued operations                                     -       (78 637)
(Loss)/profit for the year                                                           (149 790)        185 881
Other comprehensive (loss)/income                                                     (10 998)         34 107
Exchange differences on translation of foreign operations
(may be reclassified to profit/(loss))                                               (118 328)         84 980
Reclassification from foreign currency translation reserve                               2 468       (50 873)
Revaluation of land and buildings                                                      104 862              -

Total comprehensive (loss)/income for the year                                       (160 788)        219 988
(Loss)/profit for the year attributable as follows:
Equity holders of the company                                                        (137 068)        182 317
Non-controlling interest                                                              (12 722)          3 564
                                                                                     (149 790)        185 881
Total comprehensive (loss)/income attributable to:
Equity holders of the company                                                        (157 099)        214 582
Non-controlling interest                                                               (3 689)          5 406
                                                                                     (160 788)        219 988
(Loss)/earnings per share (cents)                                        (176)         (79,34)         104,31
Diluted (loss)/earnings per share (cents)                                (175)         (72,88)          96,94

Commentary to the statement of profit or loss and other comprehensive income
Headline earnings reconciliation
                                                                                         Total operations
                                                                             %
                                                                      decrease        Feb 2017       Feb 2016
(Loss)/profit after taxation attributable to equity holders
of the company                                                                       (137 068)        182 317
Adjusted for:
Profit on disposal of plant and equipment                                             (13 377)        (6 416)
Tax effect                                                                               3 743          1 801
Impairment of assets                                                                   169 560              -
Tax effect                                                                             (3 966)              -
Profit on disposal of Investment Property                                                    -       (16 158)
Fair value adjustment on Investment Property                                                 -        (6 066)
Tax effect                                                                                   -          7 924
Net gain on disposal of foreign investment                                                   -        (6 768)
Headline earnings                                                                       18 892        156 634
Settlement agreement charge                                                            138 764              -
Tax effect                                                                             (2 426)              -
Adjusted Headline earnings                                                             155 230        156 634
Number of weighted average shares in issue                                         172 750 427    174 779 842
Number of diluted weighted average shares in issue                                 188 080 746    188 080 746
(Loss)/earnings per share (cents)                                        (176)         (79,34)         104,31
Diluted (loss)/earnings per share (cents)                                (175)         (72,88)          96,94
Headline earnings per share (cents)                                       (88)           10,94          89,62
Diluted headline earnings per share (cents)                               (88)           10,05          83,28
Adjusted headline earnings per share                                         -           89,86          89,62
                                                                                         
STATEMENT OF FINANCIAL POSITION
                                                                                      Reviewed        Audited
                                                                                            at             at
                                                                                   28 February    29 February
R'000                                                                                     2017           2016
ASSETS
Non-current assets                                                                   2 548 043      2 565 762
Property, plant and equipment                                                        1 212 248      1 099 712
Equity-accounted investees                                                             189 860        189 458
Goodwill and intangible assets                                                       1 087 133      1 248 529
Deferred tax assets                                                                     58 802         28 063
Current assets                                                                       4 019 055      3 946 516
Other current assets                                                                 2 816 126      2 877 227
Taxation                                                                                44 496         52 392
Bank balances                                                                        1 158 433        985 128
                                                                                     4 019 055      3 914 747
Assets of discontinued operation and non-current assets held for sale                        -         31 769
Total assets                                                                         6 567 098      6 512 278
EQUITY AND LIABILITIES
Capital and reserves                                                                 2 442 378      2 608 532
Share capital and premium                                                            1 021 737      1 027 103
Other reserves                                                                         181 515        203 395
Retained earnings                                                                    1 235 000      1 370 219
Equity holders of the company                                                        2 438 252      2 600 717
Non-controlling interest                                                                 4 126          7 815
Non-current liabilities                                                                370 912        231 709
Other financial liabilities                                                            346 460        174 629
Deferred tax liabilities                                                                24 452         57 080
Current liabilities                                                                  3 753 808      3 672 037
Other current liabilities*                                                           2 079 542      2 232 473
Excess billings over work done                                                       1 197 743        740 216
Provisions                                                                             420 400        488 996
Taxation                                                                                56 121         46 666
Bank balances                                                                                2        134 188
                                                                                     3 753 808      3 642 539
Liabilities directly associated with the discontinued operation                              -         29 498
Total equity and liabilities                                                         6 567 098      6 512 278
* Including interest-bearing liabilities of                                            328 794        327 552

Commentary to the statement of financial position
Total number of net shares in issue                                                172 241 569    173 556 487
Net asset value per share (cents)                                                     1 415,60       1 498,48
Net tangible asset value per share (cents)                                              784,43         779,11

STATEMENT OF CASH FLOWS
                                                                                      Reviewed        Audited
                                                                                     12 months      12 months
                                                                                         ended          ended
                                                                                   28 February    29 February
R'000                                                                                     2017           2016
Cash generated from operations                                                         616 297         30 010
Interest received                                                                       44 862         33 144
Finance costs                                                                         (30 906)       (42 555)
Dividends received                                                                      21 138         25 392
Taxation paid                                                                        (102 580)      (133 447)
Cash flows from operating activities                                                   548 811       (87 456)
Expenditure to maintain operating capacity                                            (29 921)       (50 429)
Proceeds from non-current assets held for sale                                          87 334        118 899
Expenditure for expansion                                                             (54 562)       (75 105)
Cash flows from investing activities                                                     2 851        (6 635)
Cash flows from financing activities                                                 (164 702)         54 935
Net increase/(decrease) in cash for the year                                           386 960       (39 156)
Effect of exchange rate changes on cash and cash equivalents                          (79 535)         74 893
Cash and cash equivalents at the beginning of the year                                 850 940        815 235
Cash at the end of the year - Discontinued operation                                         -           (66)
Cash at the beginning of the year - Discontinued operation                                  66             34
Cash and cash equivalents at the end of the year                                     1 158 431        850 940

Segment information - R'000
                                          RPM                                        Reconciling
28 February 2017                     Services       M & E   Structures    Building      segments        Total
Contract revenue                    2 192 243   1 134 766    1 771 934   3 959 633             -    9 058 576
Intersegment contract
revenues                               86 172      33 872       91 112           -             -      211 156
Reportable segment
profit/(loss)                          99 421      34 357       31 225      55 263     (370 056)    (149 790)
Reportable segment assets           2 256 555     593 344    1 148 732   1 701 128       867 339    6 567 098
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      19 830       34 421      11 448      (25 685)      185 881
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
                                                                     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 2015 audited       1 031 909      28 145      125 804       27 608  1 183 459     2 396 925        2 409  2 399 334
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                        -           -       32 265            -    182 317       214 582        5 406    219 988
Profit for the year                               -           -            -            -    182 317       182 317        3 564    185 881
Other comprehensive income                        -           -       32 265            -          -        32 265        1 842     34 107
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                    (5 366)           -            -            -          -       (5 366)            -    (5 366)
Realisation of revaluation reserve                -           -            -      (1 849)      1 849             -            -          -
Total comprehensive loss                          -           -    (124 893)      104 862  (137 068)     (157 099)      (3 689)  (160 788)
Loss for the year                                 -           -            -            -  (137 068)     (137 068)     (12 722)  (149 790)
Other comprehensive loss                          -           -    (124 893)      104 862          -      (20 031)        9 033   (10 998)
Balance at 28 February 2017 reviewed      1 021 737      28 145       33 176      120 194  1 235 000     2 438 252        4 126  2 442 378

BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed condensed consolidated results for the year ended 28 February 2017 (results for the year)
have been prepared in accordance with the framework concepts and the measurement and requirements
of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee. The report contains the information required by International
Accounting Standard (IAS) 34: Interim Financial Reporting 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 2017 are in terms of 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. 

The company's directors are responsible for the preparation and fair presentation of the reviewed
condensed consolidated results. These results have been compiled under the supervision of the Chief
Financial Officer, AV Cocciante, CA(SA).

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 United Arab Emirates with multi-disciplinary expertise including concrete structures, marine
construction, piling and geotechnical services, roads and earthworks, bulk pipelines, open pit contract
mining and surface mining related services, all forms of building works, including affordable housing, and
mechanical and electrical installation and construction.

OVERVIEW OF RESULTS
The Board of Directors report that the group's performance reflects the extremely challenging trading
environment and includes certain one off events.

Contract revenue from operations of R9,1 billion decreased by R611 million compared to the previous year
(Feb 2016: R9,7 billion). Operating profit decreased from R392 million in the previous year to an operating
loss of R106 million in the current year.

The key aspects contributing to the above decrease in earnings can be summarised as follows:

- The recording of a one-off present value charge of R139 million relating to the Settlement Agreement
  concluded with the South African Government, as disclosed in the SENS announcement released on
  11 October 2016.
- The group is required to test goodwill for impairment at each reporting period or when there is an indicator
  of impairment. At 28 February 2017, based on tests performed relating to the goodwill attributable to
  the Cycad Pipelines Proprietary Limited acquisition, R155 million of goodwill has been impaired in the
  current financial year.
- In line with group policy, land and buildings are independently valued every five years. Based upon
  these latest valuations certain properties have decreased in value resulting in an impairment charge
  of R15 million which has been recognised in the statement of profit and loss. Correspondingly certain
  properties have increased in value resulting in R105 million (net of tax effects) having been recognised
  in the statement of changes in equity.
- The strengthening of the Rand during this reporting period and the weakening of currencies in the
  African regions in which Stefanutti Stocks operates has resulted in a negative effect on the group's
  results for the year of R81 million.

Investment income for the year has improved by R11 million from the R34 million reported in the comparative
period due to the improved cash position. However, the interest charge for the year has increased to
R86 million (Feb 2016: R60 million) due to the additional interest payable on the final instalment of the
Competition Commission penalty. 

Share of profits of equity-accounted investees increased to R41 million from R19 million due to an improved
contribution from the United Arab Emirates operation.

The discontinued operations reported in the prior year had no impact on the results for this year (Feb 2016:
R79 million loss).

As a result of the factors mentioned above, earnings per share are reported as a loss of 79,3 cents
(Feb 2016: earnings per share 104,31 cents). With the reversal of the impairment charges relating to
assets, headline earnings per share are reported as a profit of 10,94 cents (Feb 2016: 89,62 cents). Had
the one-off Settlement Agreement charge not been taken into account, the adjusted headline earnings per
share would be 89,86 cents.

The group's order book is currently R14 billion of which R4,4 billion arises from work beyond South Africa's
borders.

Capital expenditure for the year amounted to R272 million (Feb 2016: R157 million) of which R156 million
relates to the Mining Services operation. Of the total capital expenditure, R186 million (Feb 2016:
R82 million) was incurred in 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 (Feb 2016: R740 million) resulted in cash generated from
operations increasing to R616 million (Feb 2016: R30 million). This includes an inflow from working capital
of R274 million (Feb 2016: R440 million consumed by working capital). The balance of the proceeds from
the sale of the investment property and Zener Steward LLC, in the prior year, resulted in an inflow of
R87 million (Feb 2016: R75 million). As a consequence of the above, in the group's overall cash position
has increased to R1,158 billion (Feb 2016: R851 million).

Total interest-bearing borrowings have increased to R675 million (Feb 2016: R636 million) mainly due to
the recognition of R139 million relating to the Settlement Agreement.

During the year, the company, through a subsidiary, repurchased 1 314 918 of its own shares at an average
price of R4,08 per share in terms of a resolution passed at the company's Annual General Meeting. These
shares will not be cancelled and will be accounted for as treasury shares.

The effect of the strengthening of the Rand on the translation of foreign operations, during the year, has
resulted in R118 million loss being recognised in other comprehensive income.

Review of operations
Roads, Pipelines & Mining Services (RPM)
Owing to a reduction in infrastructure projects and delays in the awarding of contracts during the year,
contract revenue reduced to R2,2 billion (Feb 2016: R2,6 billion), with a reduction in operating profit to
R162 million (Feb 2016: R213 million). The operating profit margin decreased from 8,1% to 7,4%.

The Roads & Earthworks and Swaziland divisions have delivered good results. Although these divisions
continue to receive a steady flow of tender enquiries, operating margins will continue to remain under
pressure due to the competitive trading environment. A severe shortage of projects has resulted in the
Pipelines operation being incorporated into the Roads & Earthworks division.

Mining Services has also performed well. Recently awarded contracts have improved this division's
medium-term order book, and some promising contract awards are 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. Once resolved, work will recommence on these contracts.

Limited work has resumed on the road projects in Nigeria that had previously been stopped due to non-
payment. Payments are being received and we remain in continuous discussions with the relevant states
to resolve the outstanding debt.

RPM's order book at February 2017 was R5,0 billion (Feb 2016: R4,9 billion).

Mechanical & Electrical (M&E) 
Whilst the Mechanical division was negatively affected by the shortage of work in the traditional mining
infrastructure environment, the remainder of the business unit performed to expectation on the back of
petrochemical projects. Consequently, contract revenue has declined slightly to R1,1 billion (Feb 2016:
R1,2 billion). Operating profit reduced to R40 million (Feb 2016: R66 million) with a reduction in operating
profit margin to 3,6% (Feb 2016: 5,4%).

Although there is concern regarding the reduction of M&E's order book, there are opportunities in the
petrochemical sector with the planned construction of fuel storage tanks. In addition, cross border work in
the mining surface infrastructure environment could generate work for all the divisions in this business unit.

M&E's order book at Feb 2017 was R780 million (Feb 2016: R1,2 billion).

Structures
Due to the continued decline in infrastructure projects emanating from both the government and private
sectors, Structures ended the year with a reduction in both contract revenue and operating profit to
R1,8 billion (Feb 2016: R2,1 billion) and R26 million (Feb 2016: R47 million) respectively. An operating
profit margin of 1,5% compared to the 2,2% for the comparative year, bears testament to the decline in the
infrastructure market available to this business unit. During the year, the business unit was further scaled
down and restructured to align itself to market conditions.

The number of large projects coming to the market remains constrained with work being secured
predominantly from medium-sized projects. Relative to the comparative period the turnover in the water
and sanitation treatment sector has increased and has the potential to grow further. The Marine operation
has secured some cross border projects and has a satisfactory order book. However, the environment
within which Structures operates continues to be competitive with profit margins and order book remaining
under pressure.

At February 2017, Structures' order book was R2,3 billion (Feb 2016: R2,0 billion).

Building
The Building business unit's contract revenue increased slightly to R4,0 billion (Feb 2016: R3,7 billion).
The completion and finalisation of loss making projects together with certain unrecovered holding costs,
contributed to an operating loss of R2 million (Feb 2016: R45 million profit excluding the profit on sale of
investment property and fair value adjustment). The profit of the equity accounted United Arab Emirates
operation amounting to R41 million (Feb 2016: R19 million) is excluded from the operating loss. During
the year the business was scaled down and certain divisions were combined in order to further improve
efficiency and reduce costs.

The loss making projects in Namibia, Qatar and Eastern Cape were completed by year-end and therefore
will have no further impact on this business unit's results going forward.

The Mozambique division made a positive contribution to the business unit's performance with some
further contracts expected to be awarded in the short term.

Building's order book at February 2017 was R4,7 billion (Feb 2016: R3,7 billion) excluding the United Arab
Emirates of R1,0 billion (Feb 2016: R500 million).

Safety
Unfortunately the group recorded a fatality on 18 March 2017 and it is with sadness that we express our
condolences to Mr Andile Dlomo's family, friends and colleagues.

Management and staff remain committed to enhanced health and safety policies and procedures, and
together strive to constantly improve the group's safety performance. The group's Lost Time Injury
Frequency Rate (LTIFR) at February 2017 was 0,10 (Feb 2016: 0,10) and the Recordable Case Rate
(RCR) was 0,70 (Feb 2016: 0,59).

Outlook and strategy
Notwithstanding that the South African construction market continues to be extremely challenging, there
remains potential growth in certain sectors of the market. These include mining surface infrastructure,
marine, petrochemical tank farms, water and sanitation treatment plants, and residential and mixed use
building projects. These will provide opportunities for all our business units, both locally and cross border.
Subject to the fulfilment of certain conditions there is a potential award of a large open pit contract for the
Mining Services division.

Our multi-disciplinary and geographically diversified business structure continues to provide a robust
platform upon which the group remains as a strong competitor in the Southern African construction market.

The group continues to seek opportunities both in Southern Africa and on a more selective basis further
afield in sub-Saharan Africa. Management also 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.

Industry related matters
In terms of the Settlement Agreement entered into with the South African Government 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 (Feb 2016: Nil).

Subsequent events
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 also express our gratitude to 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 18 May 2017

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
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
(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: 18/05/2017 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.

Share This Story