SSK
SSK - Stefanutti Stocks Holdings Limited - Reviewed condensed consolidated
interim results for the six months ended 31 August 2010
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 INTERIM RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2010
- Revenue down 9%
- HEPS down 14%
- Cash on hand R1,1 billion
- Interim dividend of 20 cents per share
- Order book of R6,8 billion
STATEMENT OF COMPREHENSIVE INCOME
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
% 2010 2009 2010
decrease R`000 R`000 R`000
Revenue (9) 3 631 933 4 000 106 7 471 412
Contract revenue (9) 3 581 030 3 936 682 7 365 023
Earnings before
interest, taxation,
depreciation and
amortisation (EBITDA) (8) 295 626 320 786 657 337
Depreciation (69 571) (56 485) (138 587)
Amortisation of
intangible assets (4 219) (7 175) (18 005)
Operating profit
before investment
income (14) 221 836 257 126 500 745
Investment income 34 111 44 695 85 518
Share of profits from
associate companies 267 138 973
Operating profit
before finance costs 256 214 301 959 587 236
Finance costs (12 447) (16 574) (25 288)
Profit before taxation 243 767 285 385 561 948
Taxation (77 876) (87 306) (172 703)
Profit for the period 165 891 198 079 389 245
Other comprehensive
income (22 958) (44 446) (42 345)
Exchange differences
on translating foreign
operations (22 958) (44 446) (42 345)
Total comprehensive
income for the period 142 933 153 633 346 900
Profit attributable
to:
Equity holders of the
company (15) 165 891 196 304 384 774
Non-controlling
interest - 1 775 4 471
(16) 165 891 198 079 389 245
Total comprehensive
income attributable
to:
Equity holders of the
company 142 933 151 858 342 429
Non-controlling
interest - 1 775 4 471
142 933 153 633 346 900
Earnings per share
(cents) 96,26 111,94 220,14
Diluted earnings per
share (cents) 88,20 104,37 204,58
Commentary to the
statement of
comprehensive income
Headline earnings
reconciliation
Profit after taxation
attributable to equity
holders of the company 165 891 196 304 384 774
Adjusted for:
Gain on bargain
purchase option - (1 154) (1 154)
Loss on disposal of
subsidiary - - 1 700
(Profit)/loss on
disposal of plant and
equipment (746) (273) 9 243
Goodwill impairment - - 1 992
Tax effect of
adjustments 209 76 (2 588)
Total non-controlling
interest of
adjustments - 4 (1 852)
Headline earnings (15) 165 354 194 957 392 115
Normalised headline
earnings
reconciliation
Headline earnings 165 354 194 957 392 115
Adjusted for:
Amortisation of
intangibles 4 219 7 175 16 013
Tax effect of
adjustments (1 179) (1 933) (4 482)
Total non-controlling
interest of
adjustments - (81) (577)
Normalised headline
earnings (16) 168 394 200 118 403 069
Number of weighted
average shares in
issue 172 335 918 175 369 440 174 787 507
Number of diluted
weighted average
shares in issue 188 080 746 188 080 746 188 080 746
Earnings per share
(cents) (14) 96,26 111,94 220,14
Diluted earnings per
share (cents) (15) 88,20 104,37 204,58
Headline earnings per
share (cents) (14) 95,95 111,17 224,34
Diluted headline
earnings per share
(cents) (15) 87,92 103,66 208,48
Normalised headline
earnings per share
(cents) (14) 97,71 114,11 230,61
Diluted normalised
headline earnings per
share (cents) (16) 89,53 106,40 214,31
STATEMENT OF FINANCIAL POSITION
Reviewed Reviewed Audited
at at at
31 August 31 August 28 February
2010 2009 2010
R`000 R`000 R`000
ASSETS
Non-current assets 2 069 122 2 034 170 2 018 076
Property, plant and equipment 855 266 800 013 791 865
Investment property 45 474 - 34 337
Goodwill and intangible assets 1 135 119 1 157 426 1 126 547
Investment in associates 18 598 17 451 18 123
Other investments 2 367 - 1 901
Deferred taxation 12 298 59 280 45 303
Current assets 2 908 341 3 127 775 3 009 707
Bank balances 1 150 918 1 330 068 1 351 998
Other current assets 1 741 710 1 791 708 1 635 943
Taxation 15 713 5 999 21 766
Total assets 4 977 463 5 161 945 5 027 783
EQUITY AND LIABILITIES
Capital and reserves 1 731 291 1 584 756 1 683 632
Ordinary shareholders` interest 1 731 291 1 565 818 1 681 457
Non-controlling interest - 18 938 2 175
Non-current liabilities 168 124 205 376 176 729
Interest-bearing liabilities 118 558 126 976 108 477
Non-interest bearing liabilities 4 762 - -
Deferred taxation 44 804 78 400 68 252
Current liabilities 3 078 048 3 371 813 3 167 422
Bank overdraft 25 533 1 270 4 394
Other current liabilities 1 696 526 1 949 104 1 658 686
Provisions 1 319 519 1 308 706 1 449 735
Taxation 36 470 112 733 54 607
Total equity and liabilities 4 977 463 5 161 945 5 027 783
Total number of net shares in
issue 171 500 010 174 558 683 172 476 565
Net asset value per share (cents) 1 009,50 897,01 974,89
STATEMENT OF CASH FLOWS
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2010 2009 2010
R`000 R`000 R`000
Cash generated from operations 115 159 386 146 792 052
Interest received 32 051 44 695 83 838
Finance costs (12 447) (16 574) (25 288)
Dividends paid (77 660) (116 445) (159 409)
Dividends received 2 060 - 1 680
Taxation paid (69 461) (46 605) (192 930)
Secondary tax on companies paid (8 463) (11 987) (18 936)
Cash flows from operating
activities (18 761) 239 230 481 007
Expenditure to maintain operating
capacity (65 519) (55 278) (16 226)
Expenditure for expansion (107 615) (110 784) (310 447)
Cash flows from investing
activities (173 134) (166 062) (326 673)
Cash flows from financing
activities (4 864) (33 032) (92 611)
Net (decrease)/increase in cash
for period (196 759) 40 136 61 723
Effect of exchange rate changes on
cash and cash equivalents (25 460) (45 215) (47 996)
Cash at beginning of period 1 347 604 1 333 877 1 333 877
Net cash at end of period 1 125 385 1 328 798 1 347 604
SEGMENT INFORMATION
R`000 Roads and Other
Structures Building Earthworks segments Total
31 August 2010
Contract revenue
966 840 1 729 279 518 295 366 616 3 581 030
Intersegment
contract
revenues 56 387 - 52 547 39 381 148 315
Reportable
segment profit 62 024 56 660 41 796 5 411 165 891
31 August 2009
Contract revenue
1 231 795 1 856 339 572 307 276 241 3 936 682
Intersegment
contract
revenues 23 379 - 24 011 33 682 81 072
Reportable
segment profit 77 502 66 778 52 071 1 728 198 079
28 February 2010
Contract revenue
2 098 888 3 688 062 1 104 302 473 771 7 365 023
Intersegment
contract
revenues 63 720 - 46 508 81 337 191 565
Reportable
segment profit 135 390 136 359 104 713 12 783 389 245
STATEMENT OF CHANGES IN EQUITY
Issued Foreign
capital Share- currency
and based translation Revaluation
R`000 premium payments reserve surplus
Balance at 1 March
2009 audited 1 055 997 31 577 42 630 4 997
Treasury shares
acquired (14 077) - - -
Employee share
options - 9 457 - -
Total comprehensive
income - - (44 446) -
Non-controlling
interests acquired - - - -
Dividends paid - - - -
Balance at 31 August
2009 reviewed 1 041 920 41 034 (1 816) 4 997
Treasury shares
acquired (21 302) - - -
Employee share
options - 6 783 - -
Realisation of share-
based payment
reserve - (87) - -
Total comprehensive
income - - 2 101 -
Non-controlling
interests acquired - - - -
Dividends paid - - - -
Balance at 28
February 2010
audited 1 020 618 47 730 285 4 997
Treasury shares
acquired (9 335) - - -
Employee share
options - 4 698 - -
Total comprehensive
income - - (22 958) -
Non-controlling
interests acquired - - - -
Dividends paid - - - -
Balance at 31 August
2010 reviewed 1 011 283 52 428 (22 673) 4 997
Ordinary Non- Capital
Retained shareholders` controlling and
R`000 earnings interest interest reserves
Balance at 1 March
2009 audited 438 848 1 574 049 39 209 1 613 258
Treasury shares
acquired - (14 077) - (14 077)
Employee share
options - 9 457 - 9 457
Total comprehensive
income 196 304 151 858 1 775 153 633
Non-controlling
interests acquired (39 017) (39 017) (21 865) (60 882)
Dividends paid (116 452) (116 452) (181) (116 633)
Balance at 31 August
2009 reviewed 479 683 1 565 818 18 938 1 584 756
Treasury shares
acquired - (21 302) - (21 302)
Employee share
options - 6 783 - 6 783
Realisation of share-
based payment
reserve 87 - - -
Total comprehensive
income 188 470 190 571 2 696 193 267
Non-controlling
interests acquired (17 447) (17 447) (19 459) (36 906)
Dividends paid (42 966) (42 966) - (42 966)
Balance at 28
February 2010
audited 607 827 1 681 457 2 175 1 683 632
Treasury shares
acquired - (9 335) - (9 335)
Employee share
options - 4 698 - 4 698
Total comprehensive
income 165 891 142 933 - 142 933
Non-controlling
interests acquired (10 804) (10 804) (2 175) (12 979)
Dividends paid (77 658) (77 658) - (77 658)
Balance at 31 August
2010 reviewed 685 256 1 731 291 - 1 731 291
Basis of preparation
The reviewed condensed consolidated interim financial statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS"), and in terms of IAS 34 - Interim Financial Reporting, the AC 500
standards as issued by the Accounting Practice Board and in compliance with
the Listings Requirements of the JSE Limited and the South African Companies
Act (1973). These accounting policies used in the preparation of these interim
results are consistent with those used in the annual financial statements for
the year ended 28 February 2010.
Auditor`s review
The condensed consolidated interim results have been reviewed by the company`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".
COMMENTARY
Overview of results
The directors present the reviewed results for the six months ended 31 August
2010 ("the period"). The group continues to adopt a principle of effective and
informative reporting, in line with reporting standards and industry norms.
Reduced top and bottom line growth reflect competitive trading conditions,
delayed contract awards and contract cancellations. Notwithstanding these
factors the group has delivered a commendable performance in the current
economic environment, in line with the trading statement dated 11 October
2010.
Earnings per share and diluted headline earnings per share reduced by 14% and
15%, respectively, from the comparative period. Revenue and EBITDA contracted
marginally by 9% and 8%, respectively. The group achieved an operating margin
of 6,2% (August 2009: 6,5%) equating to operating profit of R221,8 million
(August 2009: R257,1 million).
The group`s financial position has remained sound with R1,1 billion cash on
hand and nil net gearing.
An interim dividend of 20,0 cents (August 2009: 25,0 cents) has been declared,
which is consistent with the group`s current dividend policy.
Stefanutti Stocks` order book stands at R6,8 billion (February 2010: R6,2
billion).
Review of operations
Structures
This encompasses the group`s civil engineering, geotechnical and marine
capabilities. Contract revenue declined from R1,2 billion in the comparative
period to R0,9 billion, with an anticipated improvement in the next period.
The business unit improved its operating margin to 7,8% from 7,6%.
Looking to the longer term, the resources sector is showing signs of growth as
evidenced in increasing feasibility studies for mining houses. As a result a
number of long-lead projects are expected to come to tender. Structures
intends to continue its geographical expansion into Africa.
Large-scale projects underway include Kusile Power Station (Stefanutti Stocks
- Geotechnical and Civils combined portion - R658 million), with the potential
for future work. The Ben Schoeman Dock project (Stefanutti Stocks portion R253
million) is on track and completion is expected in 2012. Work on the R577
million Grootegeluk Coal Mine contract is in the initial phase.
Building
Building services the full scope of building construction. The business unit
reported a 7% drop in contract revenue to R1,7 billion, but improved operating
margins to 3,9% from 3,7% at August 2009, despite competitive trading
conditions in South Africa. These conditions were offset to an extent by
securing more profitable work in the rest of Africa. However increasing
competition in traditional tender markets, exacerbated by returning capacity
in the wake of the global economic downturn, will contribute to margin
squeeze.
During the period the Inland operations successfully completed, amongst other
projects, the R400 million I`Langa Shopping Mall in Nelspruit and the R300
million A-grade office block for FNB in Johannesburg. Construction is
currently underway on the Shoprite distribution centre in Centurion and
pharmaceutical facilities for Adcock Ingram in Midrand. In the Coastal
operations a 220-room Southern Sun Hotel was successfully concluded during the
period while work on the R220 million Unilever packaging plant and a R200
million Shoprite Distribution Centre is progressing well.
Building continues to leverage its existing footprint across Africa to achieve
growth. Recent contract awards in Malawi, Mozambique and Botswana are
successfully offsetting declining revenue in South Africa.
International
Market conditions in the Middle East remain difficult with limited activity
resulting in fewer new contracts and fierce competition.
Roads and Earthworks
Roads and Earthworks also saw contract revenue slow down to R518 million from
R572 million with a reduction in margin to 12,3% from 13,8%. The R220 million
Optimum Water reclamation project is nearing completion while work on the
Lusip Tertiary Distribution and the Kusile Power Station contract is
progressing well.
The ageing roads infrastructure countrywide will continue to demand
rehabilitation and expansion. SANRAL expenditure is, however, expected to dip
temporarily in 2011/12 before recovering. Roads and Earthworks will look to
counter increased competition in South Africa with expansion into Africa.
Mining Services
The business unit includes:
- mine residue disposal facilities and open pit contract mining across South
Africa ("Mining"); and
- mechanical, electrical, instrumentation and powerline distribution
operations ("MEIP").
Mining Services increased contract revenue to R366 million from R276 million.
Due to increasing competition in a contracting market, operating profit
reduced from R34 million to R24 million. Challenges in securing new contracts,
due mainly to client delays as well as inability to conclude firm contract
mining offtake agreements resulted in a negative impact on performance.
Major projects currently underway include the R150 million Khumani Iron Ore
Expansion contract for Assmang Limited and the R73 million Burstone Tailings
Storage contract for Great Basin Gold. MEIP is expected to benefit from
Eskom`s expansion, specifically related to power distribution.
Concessions
Despite National Treasury`s intention to spend R27,5 billion on infrastructure
PPPs over the next three years, very little has found its way into the market.
Consequently the group is exploring possible expansion into the rest of Africa
and participation in toll-road projects.
Health and safety
During the period the group achieved a Disabling Injury Frequency Rate
("DIFR") of 0,29. Stefanutti Stocks remains committed to higher safety
standards for all employees across all disciplines.
Acquisitions
In line with strategy the group acquired the remaining minority interests in
SandB Construcoes (Moc) Lda. In addition, the group acquired certain business
operations of RGF Power Projects CC ("RGF") and a 100% shareholding in Apollo
EandI Construction (Pty) Ltd ("Apollo EandI").
RGF Apollo EandI
Acquisition date 12 April 2010 1 June 2010
Voting equity % - 100
At acquisition values R`000 R`000
Non-current assets 3 688 10 407
Current assets - 47 069
Non-current liabilities - (2 192)
Current liabilities - (45 747)
Net asset value 3 688 9 537
Cost of acquisition 5 875 19 691
Goodwill arising 2 187 10 154
Cash paid 5 875 19 691
Revenue for the period 1 March 2010 to 31
August 2010 - 81 090
Loss for the period 1 March 2010 to 31
August 2010 - (5 601)
Revenue since acquisition - 43 914
Loss since acquisition - (199)
It is impractical to report any revenue, profit or loss for RGF as only fixed
assets and expertise were acquired and integrated into existing business
operations.
These acquisitions were conducted to expand the group`s capacity and the net
asset value of receivables acquired equals their fair value.
Other than the acquisition of non-controlling interests in SandB Construcoes
(Moc) Lda, the group had no other material related party transactions.
Future outlook
With its firm cash position, healthy order book and broad services offering
the group is well-positioned to withstand uncertainty in the current market
and capitalise on improving conditions.
Our short- to medium-term outlook (12-18 months) for the construction sector
remains conservative. However, current tender activity, enquiries and
interaction with clients indicate gradually improving confidence levels which
is encouraging for the sector. Growth opportunities will be driven by public
sector demand for infrastructure in water, electricity, roads, harbours, rail
and petrochemical in both South Africa and Africa, provided procurement and
payment bottlenecks can be overcome.
The group`s client base is widely spread over the public and private sector,
thereby avoiding over-dependence on any one segment. Further, Stefanutti
Stocks` multi-disciplinary services offering and geographic footprint position
the group to counter regional and sector specific downturns.
Dividend declaration
Notice is hereby given that an interim dividend of 20,0 cents per share (2009:
25,0 cents) has been declared.
Last day to trade cum dividend Friday, 3 December 2010
Shares trade ex dividend Monday, 6 December 2010
Record date Friday, 10 December 2010
Payment date Monday, 13 December 2010
Share certificates may not be dematerialised or rematerialised between Monday,
6 December 2010 and Friday, 10 December 2010, both dates inclusive.
Secondary Taxation on Companies is expected to amount to R3,8 million.
Appreciation
We thank our management and staff for their unwavering commitment during
challenging times. We also extend our appreciation to our business associates,
customers and shareholders for their ongoing support.
On behalf of the board
Gino Stefanutti Willie Meyburgh
Chairman Chief Executive Officer
10 November 2010
Directors:
B Stefanutti (Chairman)*
W Meyburgh (Chief Executive Officer)
D Quinn (Chief Financial Officer)
S Ackerman
S Pell
N Canca*#
K Eborall*#
H Mashaba*
M Mkwanazi*#
B Sithole*
J Fizelle* (alternate to B Sithole)
*Non-executive director
Irish
# Independent
Registered office:
Protec Park
Cnr Zuurfontein and Oranjerivier Drive
Kempton Park, 1619
(PO Box 12394, Aston Manor, 1630)
Corporate adviser and sponsor:
Bridge Capital Advisors (Pty) Limited
2nd Floor, 27 Fricker Road
Illovo Boulevard
Illovo, 2196
(PO Box 651010, Benmore, 2010)
Transfer secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Company secretary:
W Somerville
20 Lurgan Road
Parkview, 2193
www.stefanuttistocks.com
Date: 10/11/2010 07:05:02
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