Wrap Text
Unaudited Condensed Consolidated Results for the Six Months Ended 31 August 2017
STEFANUTTI STOCKS HOLDINGS LIMITED
("Stefanutti Stocks" or "the company" or "the group")
(Registration number 1996/003767/06)
Share code: SSK ISIN: ZAE000123766
- Revenue R5,2 billion
- Operating profit R119 million
- Cash at end of year R1,3 billion
- Current order book R13,9 billion
UNAUDITED CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2017
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six 12 months
ended months ended ended
% increase/ 31 August 31 August 28 February
R'000 (decrease) 2017 2016 2017
Revenue 18 5 196 311 4 417 281 9 149 604
Contract revenue 18 5 160 256 4 362 165 9 058 576
Earnings before interest, taxation,
depreciation and amortisation
(EBITDA) 21 208 989 172 033 209 046
Depreciation and amortisation (90 363) (71 688) (145 882)
Impairment of assets – – (169 560)
Operating profit/(loss) before
investment income 18 118 626 100 345 (106 396)
Investment income 23 004 15 024 44 864
Share of profits of
equity-accounted investees 12 338 21 715 40 893
Operating profit/(loss) before
finance costs 153 968 137 084 (20 639)
Finance costs (36 010) (36 862) (85 597)
Profit/(loss) before taxation 117 958 100 222 (106 236)
Taxation (38 679) (15 069) (43 554)
Profit/(loss) 79 279 85 153 (149 790)
Other comprehensive income 23 748 (77 706) (10 998)
Exchange differences on translation of
foreign operations (may be reclassified
to profit/(loss)) 23 748 (77 706) (118 328)
Reclassification from foreign currency
translation reserve – – 2 468
Revaluation of land and buildings – – 104 862
Total comprehensive income 103 027 7 447 (160 788)
Profit/(loss) attributable to:
Equity holders of the company 80 664 96 125 (137 068)
Non-controlling interest (1 385) (10 972) (12 722)
79 279 85 153 (149 790)
Total comprehensive income
attributable to:
Equity holders of the company 100 315 10 701 (157 099)
Non-controlling interest 2 712 (3 254) (3 689)
103 027 7 447 (160 788)
Earnings per share (cents) (15) 47,06 55,57 (79,34)
Diluted earnings per share (cents) (16) 42,89 51,11 (72,88)
Commentary to the statement of profit or loss and other comprehensive income
Headline earnings reconciliation Aug 2017 Aug 2016 Feb 2017
Profit/(loss) after taxation attributable to
equity holders of the company 80 664 96 125 (137 068)
Adjusted for:
Profit on disposal of plant and equipment (5 398) (6 815) (13 377)
Tax effect 1 550 1 909 3 743
Impairment of assets – – 169 560
Tax effect – – (3 966)
Headline earnings 76 816 91 219 18 892
Number of weighted average shares in issue 171 413 490 172 977 624 172 750 427
Number of diluted weighted average shares
in issue 188 080 746 188 080 746 188 080 746
Headline earnings per share (cents) (15) 44,81 52,73 10,94
Diluted headline earnings per share (cents) (16) 40,84 48,50 10,05
STATEMENT OF FINANCIAL POSITION
Unaudited at Audited at
31 August 28 February
R'000 2017 2017
ASSETS
Non-current assets 2 752 457 2 548 043
Property, plant and equipment 1 395 991 1 212 248
Equity-accounted investees 211 810 189 860
Goodwill and intangible assets 1 082 351 1 087 133
Deferred tax assets 62 305 58 802
Current assets 4 692 257 4 019 055
Other current assets 3 397 341 2 816 126
Taxation 31 938 44 496
Bank balances 1 262 978 1 158 433
Total assets 7 444 714 6 567 098
EQUITY AND LIABILITIES
Capital and reserves 2 540 177 2 442 378
Share capital and premium 1 016 509 1 021 737
Other reserves 173 021 181 515
Retained earnings 1 343 809 1 235 000
Equity holders of the company 2 533 339 2 438 252
Non-controlling interest 6 838 4 126
Non-current liabilities 446 868 370 912
Financial liabilities – interest bearing 405 154 346 460
Deferred tax liabilities 41 714 24 452
Current liabilities 4 457 669 3 753 808
Other current liabilities* 2 534 236 2 079 542
Excess billings over work done 1 360 089 1 197 743
Provisions 514 818 420 400
Taxation 48 526 56 121
Bank balances – 2
Total equity and liabilities 7 444 714 6 567 098
* Including interest-bearing liabilities of 408 289 328 794
Commentary to the financial position
Total number of net shares in issue 170 685 471 172 241 569
Net asset value per share (cents) 1 484,21 1 415,60
Net tangible asset value per share (cents) 850,09 784,43
STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
R'000 2017 2016 2017
Cash generated from operations 266 663 273 875 616 297
Interest received 21 513 15 023 44 862
Finance costs (24 597) (19 935) (30 906)
Dividends received 2 436 1 21 138
Taxation paid (20 005) (31 582) (102 580)
Cash flows from operating activities 246 010 237 382 548 811
Expenditure to maintain operating capacity (17 468) (32 395) (29 921)
Proceeds from non-current assets held for sale – 53 975 87 334
Expenditure for expansion (47 354) (29 208) (54 562)
Cash flows from investing activities (64 822) (7 628) 2 851
Treasury shares acquired (5 228) (3 504) (5 366)
Movements on long- and short-term financing (67 219) (9 519) (159 336)
Cash flows from financing activities (72 447) (13 023) (164 702)
Net increase in cash 108 741 216 731 386 960
Effect of exchange rate changes on cash and
cash equivalents (4 194) (54 922) (79 535)
Cash and cash equivalents at beginning of year 1 158 431 850 940 850 940
Cash at the beginning of the year –
discontinued operation – 66 66
Cash and cash equivalents at the end of the
period 1 262 978 1 012 815 1 158 431
Roads,
Pipelines
and
Segment information Mining Other
31 August 2017 Services Building Structures M&E segments** Total
Contract revenue 1 433 029 2 261 739 924 425 541 063 – 5 160 256
Intersegment
contract revenues 25 321 – 8 135 23 659 – 57 115
Reportable
segment profit/(loss) 56 837 28 198 9 094 2 332 (17 182) 79 279
Reportable
segment assets 2 630 632 1 929 045 1 228 580 630 985 1 025 472 7 444 714
28 February 2017
Contract revenue 2 192 243 3 959 633 1 771 934 1 134 766 – 9 058 576
Intersegment
contract revenues 86 172 – 91 112 33 872 – 211 156
Reportable
segment profit/(loss) 99 421 55 263 31 225 34 357 (370 056) (149 790)
Reportable
segment assets 2 055 357 1 701 128 1 148 732 593 344 1 068 537 6 567 098
31 August 2016
Contract revenue 1 030 482 1 820 901 954 108 556 674 – 4 362 165
Intersegment contract
revenues 35 875 – 51 291 19 662 – 106 828
Reportable
segment profit/(loss) 54 230 35 944 8 769 18 367 (32 157) 85 153
Reportable
segment assets 1 673 457 2 030 829 1 219 742 593 475 1 295 457 6 812 960
** Other segments comprise segments that are primarily centralised in nature i.e the group's headquarters,
excellence in execution
STATEMENT OF CHANGES IN EQUITY
Foreign Attributable
Share-based currency Revaluation to equity Non-
Share capital payments translation surplus Retained holders of controlling
R'000 and premium reserve reserve reserve earnings the company interest Total equity
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)
Realisation of revaluation reserve – – – (1 062) 781 (281) – (281)
Total comprehensive income – – (85 424) – 96 125 10 701 (3 254) 7 447
Profit – – – – 96 125 96 125 (10 972) 85 153
Other comprehensive income – – (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
Treasury shares acquired (1 862) – – – – (1 862) – (1 862)
Realisation of revaluation reserve – – – (787) 1 068 281 – 281
Total comprehensive income – – (39 469) 104 862 (233 193) (167 800) (435) (168 235)
Loss – – – – (233 193) (233 193) (1 750) (234 943)
Other comprehensive income – – (39 469) 104 862 – 65 393 1 315 66 708
Balance at 28 February 2017 audited 1 021 737 28 145 33 176 120 194 1 235 000 2 438 252 4 126 2 442 378
Treasury shares acquired (5 228) – – – – (5 228) – (5 228)
Realisation of share-based payment reserve – (28 145) – – 28 145 – – –
Total comprehensive income – – 19 651 – 80 664 100 315 2 712 103 027
Profit – – – – 80 664 80 664 (1 385) 79 279
Other comprehensive income – – 19 651 – – 19 651 4 097 23 748
Balance at 31 August 2017 unaudited 1 016 509 – 52 827 120 194 1 343 809 2 533 339 6 838 2 540 177
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated results for the period ended 31 August 2017 (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 2017 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 2017. There is no significant difference between the
carrying amounts of financial assets and liabilities and their fair values. The fair value measurement for
land and buildings are categorised as a level 3, based on the valuation method of income capitalisation
using unobservable inputs i.e. market capitalisation rates and income/expenditure ratio. The results are
presented in Rand, which is Stefanutti Stocks' reporting currency.
The company's directors are responsible for the preparation and fair presentation of the unaudited
condensed consolidated results. 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 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 although there is an improvement in the group's operating profit, the
trading environment remains challenging.
Contract revenue from operations increased to R5,2 billion compared to the prior period (Aug 2016:
R4,4 billion). Operating profit increased from R100 million in the previous year to R119 million for the
period, whilst the operating profit margin remained consistent at 2,3%.
Investment income improved by R8 million from the R15 million reported in the comparative period due
to the improved cash position, however, finance costs remained relatively constant at R36 million
(Aug 2016: R37 million).
Share of profits of equity-accounted investees decreased to R12 million from R22 million. In line with
expectations, the United Arab Emirates operation contributed R16 million (Aug 2016: R21 million) and is
on track to meet its full year target.
The increase in operating profit was off-set by an increase in the effective tax rate, and minority
shareholders interest, resulting in a decrease in earnings and headline earnings per share of 15% from
the comparative period to 47,06 cents (Aug 2016: 55,57 cents) and 44,81 cents (Aug 2016: 52,73 cents)
respectively.
Capital expenditure for the period amounted to R255 million (Aug 2016: R78 million) of which
R203 million relates to the RPM business unit. Of the total capital expenditure, R219 million
(Aug 2016: R29 million) was incurred to expand capacity.
Increased capital expenditure in prior periods has resulted in an increase in depreciation to R86 million
for the period (Aug 2016: R68 million).
The increase in trading activities during the reporting period resulted in a similar increase in other
current assets, trade payables and provisions as compared to the balances at February 2017. Together
with the increase in excess billings over work done to R1,3 billion (Aug 2016: R1,2 billion) contributed to
cash generated from operations of R267 million (Aug 2016: R274 million). This includes an investment
in working capital of R43 million (Aug 2016: R91 million inflow). As a consequence of the above, the
group's overall cash position improved to R1,3 billion (Feb 2017: R1,2 billion).
Total interest-bearing borrowings have increased to R813 million (Feb 2017: R675 million) mainly
from capital expenditure incurred during the period.
During the year, the company, through a subsidiary, repurchased 1 556 098 of its own shares at an
average price of R3,36 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 foreign currency fluctuations against the Rand resulted in a R24 million profit being
recognised in other comprehensive income on the translation of foreign operations.
The group's order book is currently R13,9 billion of which 35% arises from work beyond South
Africa's borders.
Review of operations
Roads, Pipelines & Mining Services (RPM)
Contract revenue increased to R1,4 billion (Aug 2016: R1 billion), with an increase in operating profit
to R92 million (Aug 2016: R81 million). The operating profit margin decreased from 7,9% to 6,4%.
On the back of a solid order book Mining Services has delivered good results, whilst the Roads &
Earthworks division also produced a strong performance.
Although all the RPM divisions continue to receive a steady flow of tender enquiries, operating margins
remain under pressure due to the competitive trading environment.
Discussions with the Zambian Roads Development Agency are ongoing and periodic payments are
being received. Once the outstanding amounts are collected, work will recommence on these contracts.
Limited work has resumed on the road projects in Nigeria which 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.
These outstanding amounts are not in dispute.
RPM's order book at August 2017 was R6,0 billion (Aug 2016: R4,8 billion).
Building
The Building business unit's contract revenue increased to R2,3 billion (Aug 2016: R1,8 billion) with
an improvement in operating profit to R22 million (Aug 2016: R2 million). The operating profit margin
increased to 1,0% from 0,1%. The profit of the equity accounted United Arab Emirates operation is
excluded from the operating profit.
The Mozambique division once again delivered good results.
Building's order book at August 2017 was R3,7 billion (Aug 2016: R4,1 billion) excluding the United
Arab Emirates order book of R1,1 billion (Aug 2016: R600 million).
Structures
The continued reduction of available infrastructure work from both the government and private
sectors coupled with ongoing delayed contract awards, has seen Structures' contract revenue decline
to R924 million (Aug 2016: R954 million) with an operating profit of R9 million (Aug 2016: R3 million) at
a margin of 1,0% (Aug 2016: 0,3%).
The number of large projects coming to the market remains constrained with work being
secured predominantly from medium-sized projects. Although the number of tender enquiries received
from the mining sector has increased, the environment within which Structures operates remains
competitive with both order book and profit margins under pressure.
Structures' order book at August 2017 was R1,9 billion (Aug 2016: R1,9 billion).
Mechanical & Electrical (M&E)
As a result of the shortage of work and the termination of a contract in the Oil & Gas division,
M&E's turnover and operating profit reduced to R541 million (Aug 2016: R556 million) and R1 million
(Aug 2016: R24 million) respectively.
A recent contract cancellation by a client in the Oil & Gas division is being contractually challenged.
At this stage, the financial impact thereof cannot be quantified.
Increased contract awards from the mining sector, improving the Mechanical division's order book, has
off-set the reduction in the available work in the traditional petrochemical market.
Crossborder and local work in the mining surface infrastructure environment is gradually improving for
both the Mechanical and Electrical and Instrumentation divisions. The reduction in opportunities in the
petrochemical sector will put pressure on M&E's combined order book and operating margins.
M&E's order book at August 2017 was R600 million (Aug 2016: R900 million).
Safety
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 August 2017 was 0,11 (Aug 2016: 0,12) and the Recordable Case
Rate (RCR) was 0,67 (Aug 2016: 0,70).
Outlook and strategy
As highlighted in previous reporting periods, the South African construction market remains extremely
competitive due to an ongoing lack of infrastructure spend coupled with low business confidence
levels. Consequently, construction activities and margins are expected to remain under pressure.
Over the past two years the group's order book has remained relatively constant between R13 billion
and R14 billion. In the short term there are potential pockets of growth which include mining surface
infrastructure, marine, water and sanitation treatment plants, and residential and mixed use building
projects. In addition in the medium term there are potential opportunities in petrochemical tank farms,
roads and bridges and selected open pit contract mining work. These will provide opportunities for all
our business units, both locally and cross border.
Our multi-disciplinary and geographically diversified business structure continues to provide a stable
platform upon which the group remains a strong competitor in the Southern African construction
market. The group also continues to seek opportunities both in Southern Africa and, on a more selective
basis, further afield in sub-Saharan Africa. 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.
Industry related matters
The legal process relating to the civil claim received from the City of Cape Town (Green Point Stadium)
is ongoing, which the group is confident it can defend.
Dividend declaration
Notice is hereby given that no dividend will be declared (Aug 2016: Nil).
Subsequent events
Other than the matters noted above, there were no other material reportable events which occurred
between the reporting date and the date of this announcement.
Changes to the board of directors
Ms Tina Eboka resigned as a director of the company with effect from 31 July 2017. Ms Nomhle Canca
and Mr Bridgman Sithole and his alternate Mr Joseph Fizelle, retired by rotation at the company's Annual
General Meeting held on 1 September 2017 and did not offer themselves for re-election. Ms Canca,
Mr Sithole and Mr Fizelle served on the Board since their original appointment in July 2007.
The Chairman and the Board express their appreciation to these directors for their valued contributions
and guidance over the past years, and wish them all the best for the future.
Mr John Poluta has been appointed as an alternate director to Mr Mafika Mkwanazi with effect from
1 September 2017.
Appreciation
We would like to thank the board, the management team and all of our employees for their continuous
commitment and dedication in this challenging environment. 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 9 November 2017
Directors
Non-executive directors
KR Eborall(#) (Chairman), HJ Craig(#), ZJ Matlala(#), ME Mkwanazi(#), J Poluta(#) (alternate to ME Mkwanazi),
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: 09/11/2017 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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