SSK
SSK - Stefanutti Stocks Holdings Limited - Reviewed condensed consolidated
results for the year ended 28 February 2011
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 YEAR ENDED 28 FEBRUARY 2011
- Revenue R7,0 billion
- Operating profit R442 million
- HEPS 192,5 cents
- Cash on hand R1,1 billion
- Current order book R8,2 billion
STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
12 months 12 months
ended ended
28 February 28 February
% 2011 2010
decrease R`000 R`000
Revenue (6) 6 998 207 7 471 412
Contract revenue (6) 6 896 418 7 365 023
Earnings before interest, taxation,
depreciation and amortisation
(EBITDA) (9) 598 185 657 337
Depreciation (147 654) (138 587)
Amortisation of intangible assets (8 202) (18 005)
Operating profit before investment
income (12) 442 329 500 745
Investment income 61 591 85 518
Share of profits from associate
companies 2 712 973
Operating profit before finance
costs 506 632 587 236
Finance costs (25 270) (25 288)
Profit before taxation 481 362 561 948
Taxation (148 351) (172 703)
Profit for the year 333 011 389 245
Other comprehensive income (37 372) (42 345)
Exchange differences on translating
foreign operations (37 372) (42 345)
Total comprehensive income for the
year 295 639 346 900
Profit attributable to:
Equity holders of the company (13) 333 011 384 774
Non-controlling interest - 4 471
(14) 333 011 389 245
Total comprehensive income
attributable to:
Equity holders of the company 295 639 342 429
Non-controlling interest - 4 471
295 639 346 900
Earnings per share (cents) 193,55 220,14
Diluted earnings per share (cents) 177,06 204,58
Commentary to the statement of
comprehensive income
Headline earnings reconciliation
Profit after taxation attributable
to equity holders of the company 333 011 384 774
Adjusted for:
Gain on bargain purchase option - (1 154)
Loss on disposal of subsidiary - 1 700
(Profit)/loss on disposal of plant
and equipment (2 646) 9 243
Goodwill impairment - 1 992
Tax effect of adjustments 741 (2 588)
Total minority interest of
adjustments - (1 852)
Headline earnings (16) 331 106 392 115
Normalised headline earnings
reconciliation
Headline earnings 331 106 392 115
Adjusted for:
Amortisation of intangibles 8 202 16 013
Tax effect of adjustments (2 291) (4 482)
Total minority interest of
adjustments - (577)
Normalised headline earnings (16) 337 017 403 069
Number of weighted average shares
in issue 172 051 492 174 787 507
Number of diluted weighted average
shares in issue 188 080 746 188 080 746
Earnings per share (cents) (12) 193,55 220,14
Diluted earnings per share (cents) (13) 177,06 204,58
Headline earnings per share (cents) (14) 192,45 224,34
Diluted headline earnings per share
(cents) (16) 176,04 208,48
Normalised headline earnings per
share (cents) (15) 195,88 230,61
Diluted normalised headline
earnings per share (cents) (16) 179,19 214,31
STATEMENT OF FINANCIAL POSITION
Reviewed at Audited at
28 February 28 February
2011 2010
R`000 R`000
ASSETS
Non-current assets 2 111 249 2 018 076
Property, plant and equipment 901 671 791 865
Investment property 55 422 34 337
Goodwill and intangible assets 1 132 044 1 126 547
Investment in associates 14 539 18 123
Other financial assets - 1 901
Deferred taxation 7 573 45 303
Current assets 2 960 137 3 009 707
Bank balances 1 082 471 1 351 998
Other current assets 1 857 651 1 635 943
Taxation 20 015 21 766
Total assets 5 071 386 5 027 783
EQUITY AND LIABILITIES
Capital and reserves 1 853 571 1 683 632
Ordinary shareholders` interest 1 853 571 1 681 457
Non-controlling interest - 2 175
Non-current liabilities 196 644 176 729
Interest-bearing liabilities 133 710 108 477
Non-interest bearing liabilities 9 173 -
Deferred taxation 53 761 68 252
Current liabilities 3 021 171 3 167 422
Bank overdraft 4 312 4 394
Other current liabilities 1 812 132 1 658 686
Provisions 1 154 475 1 449 735
Taxation 50 252 54 607
Total equity and liabilities 5 071 386 5 027 783
Total number of net shares in issue 171 700 649 172 476 565
Net asset value per share (cents) 1 079,54 974,89
STATEMENT OF CASH FLOWS
Reviewed Audited
12 months 12 months
ended ended
28 February 28 February
2011 2010
R`000 R`000
Cash generated from operations 265 416 792 052
Interest received 61 393 83 838
Finance costs (25 270) (25 288)
Dividends paid (111 856) (159 409)
Dividends received 3 024 1 680
Taxation paid (115 577) (192 930)
Secondary tax on companies paid (12 225) (18 936)
Cash flows from operating activities 64 905 481 007
Expenditure to maintain operating capacity (36 928) (16 226)
Expenditure for expansion (264 012) (310 447)
Cash flows from investing activities (300 940) (326 673)
Cash flows from financing activities 1 542 (92 611)
Net (decrease)/increase in cash for the year (234 493) 61 723
Effect of exchange rate changes on cash and
cash equivalents (34 952) (47 996)
Cash at beginning of period 1 347 604 1 333 877
Cash and cash equivalents at the end of the
year 1 078 159 1 347 604
SEGMENT INFORMATION
Roads and
Earth-
R`000 Structures Building works
28 February 2011
Contract revenue 2 072 757 3 276 132 845 556
Intersegment contract revenues 127 024 - 156 179
Reportable segment profit/(loss) 146 341 94 472 70 967
Reconcil-
Mining ing
R`000 Services segments Total
28 February 2011
Contract revenue 701 973 - 6 896 418
Intersegment contract revenues 72 133 32 112 387 448
Reportable segment profit/(loss) 22 811 (1 580) 333 011
Roads and
Earth-
R`000 Structures Building works
28 February 2010
Contract revenue 2 098 888 3 688 062 1 104 302
Intersegment contract revenues 63 720 - 46 508
Reportable segment profit/(loss) 135 390 136 359 104 713
Reconcil-
Mining ing
R`000 Services segments Total
28 February 2010
Contract revenue 473 771 - 7 365 023
Intersegment contract revenues 15 302 66 035 191 565
Reportable segment profit/(loss) 33 135 (20 352) 389 245
The segment information has been amended to reflect the information as presented
to the chief operating decision-makers, in compliance with the requirements of
IFRS 8: Operating Segments.
STATEMENT OF CHANGES IN EQUITY
Share Share- Foreign
capital based currency Revaluation
and payments translation surplus
R`000 premium reserve reserve reserve
Balance at 1 March
2009 audited 1 055 997 31 577 42 630 4 997
Treasury shares
acquired (35 379) - - -
Employee share
options - 16 240 - -
Realisation of
share-based payment
reserve - (87) - -
Total comprehensive
income - - (42 345) -
Profit for the year - - - -
Translation of
foreign subsidiary - - (42 345) -
Non-controlling
interests acquired - - - -
Dividends paid - - - -
Balance at 28
February 2010
audited 1 020 618 47 730 285 4 997
Treasury shares
acquired (9 423) - - -
Employee share
options - 8 689 - -
Realisation of
share-based payment
reserve - (113) - -
Total comprehensive
income - - (37 372) -
Profit for the year - - - -
Translation of
foreign subsidiary - - (37 372) -
Non-controlling
interests acquired - - - -
Dividends paid - - - -
Balance at 28
February 2011
reviewed 1 011 195 56 306 (37 087) 4 997
Ordinary Non-
Retained shareholders` controlling
R`000 earnings interest interest Total
Balance at 1 March
2009 audited 438 848 1 574 049 39 209 1 613 258
Treasury shares
acquired - (35 379) - (35 379)
Employee share
options - 16 240 - 16 240
Realisation of
share-based payment
reserve 87 - - -
Total comprehensive
income 384 774 342 429 4 471 346 900
Profit for the year 384 774 384 774 4 471 389 245
Translation of
foreign subsidiary - (42 345) - (42 345)
Non-controlling
interests acquired (56 464) (56 464) (41 324) (97 788)
Dividends paid (159 418) (159 418) (181) (159 599)
Balance at 28
February 2010
audited 607 827 1 681 457 2 175 1 683 632
Treasury shares
acquired - (9 423) - (9 423)
Employee share
options - 8 689 - 8 689
Realisation of
share-based payment
reserve 113 - - -
Total comprehensive
income 333 011 295 639 - 295 639
Profit for the year 333 011 333 011 - 333 011
Translation of
foreign subsidiary - (37 372) - (37 372)
Non-controlling
interests acquired (10 804) (10 804) (2 175) (12 979)
Dividends paid (111 987) (111 987) - (111 987)
Balance at 28
February 2011
reviewed 818 160 1 853 571 - 1 853 571
COMMENTARY
The directors are pleased to present the reviewed condensed consolidated results
("reviewed results") for the 12 months ended 28 February 2011 ("the year").
Given the prevailing market conditions the group has delivered a commendable
performance in line with the trading statement of 4 April 2011. Reduced top and
bottom line growth continues to reflect a market defined by competitive trading
conditions, delayed contract awards and contract cancellations. Nonetheless the
group`s order book currently stands at a robust R8,2 billion.
The group`s financial position remains sound having cash on hand of R1,1 billion
(Feb 2010: R1,3 billion) with nil net gearing.
Due to existing and future growth opportunities the board has adopted a prudent
dividend policy.
A final dividend of 25 cents (Feb 2010: 45 cents) has been declared, resulting
in a total dividend for the year of 45 cents (Feb 2010: 70 cents).
Basis of preparation
The reviewed condensed consolidated results have been prepared in accordance
with the Framework concepts and the measurement and recognition requirements of
the International Financial Reporting Standards and containing information
required by the 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 in the manner required by the Companies Act.
The reviewed results are prepared on the historical cost basis, with the
exception of certain financial instruments which are measured at fair value. The
accounting policies and method of measurement and recognition applied in
preparation of the reviewed results are consistent with those applied in the
group`s audited annual financial statements for the previous year ended 28
February 2010.
Auditor`s 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 operates throughout South Africa, Southern Africa and the
Middle East with multi-disciplinary expertise including concrete structures,
marine construction, piling and geotechnical services, all building works,
concessions (Public Private Partnerships) roads and earthworks, mine residue
disposal facilities (mainly tailings dams), open-pit contract mining, mechanical
and electrical installation and construction, as well as power line transmission
and distribution construction. These disciplines are formally structured into
the following business units: Structures; Building (incorporating International
and Concessions); Roads and Earthworks; and Mining Services (incorporating
Mechanical, Electrical, Power and Mining).
Overview of results
The directors present the reviewed results for the year ended 28 February 2011.
The group continues to adopt a principle of effective and informative reporting,
in line with reporting standards and industry norms.
Revenue of R7,0 billion declined by 6,3% from the previous year (R7,5 billion).
Operating profit before investment income decreased by 11,7% to R442 million
(Feb 2010: R501 million), while profit for the year after tax reduced by 14,4%
to R333 million (Feb 2010: R389 million).
Earnings per share of 193,6 cents (Feb 2010: 220,1 cents) and headline earnings
per share of 192,5 cents (Feb 2010: 224,3 cents) decreased by 12,1% and 14,2%,
respectively.
Stefanutti Stocks successfully maintained its order book, which at 28 February
2011 stood at R6,4 billion (Feb 2010: R6,2 billion).
The group`s interest-bearing non-current liabilities have increased to R133,7
million from R108,5 million due to additional funding required for the expansion
of the group`s offices and additional CAPEX mainly by the Roads and Earthworks and
Mining Services business units.
Review of operations
Structures
Structures remains the largest contributor to group operating profit with its
activities encompassing civil engineering, geotechnical and marine capabilities.
The business unit continued to perform well despite tough trading conditions,
with a number of sizeable new contract awards during the year.
Year-on-year revenue remained constant at R2,1 billion, while the operating
margin improved from 7,9% to 8,5%, mainly as a result of the successful
finalisation of certain contracts. The cash flow position remained positive and
will continue to be focussed on by management in the year ahead.
Some of the project highlights included work for Kumba at the Sishen Iron Ore
Mine, surface infrastructure for Exxaro on the Grootegeluk Medupi Expansion
Project and water pipeline projects including for Trans Caledonian Tunnel
Authority ("TCTA"). In Africa Structures expanded into Sierra Leone securing two
new projects.
Looking ahead the market is expected to remain competitive. However, over the
medium to long term, the resources industry is showing some promise of growth
with its associated opportunities.
Structures held an order book of R2,4 billion at year-end.
Building
Building services the full scope of building construction from commercial and
industrial through to residential and leisure. The business unit overcame a
challenging environment to maintain a solid performance, on par with the
previous year.
Revenue declined from R3,7 billion to R3,3 billion while the operating margin
declined only slightly from 3,9% to 3,5%.
The business unit`s traditional residential and commercial tender markets
remained competitive and although some municipal and national government
projects were released during the year, government has not yet become a
substantial contributor to the order book. Building continued to pursue cross-
border growth.
Although highly competitive conditions are expected to continue the business
unit is pro-actively marketing its well-developed skills and capacity, while
engaging with developers on an ongoing basis in anticipation of their bringing
to market large-scale projects in the latter part of 2011.
Building is also targeting a number of industrial and commercial projects as
well as mass housing for large institutions, and continues to source additional
cross-border projects. In addition the business unit is pursuing opportunities
on a number of hospital projects for various provincial governments.
At year-end Building had an order book of R2,7 billion in hand.
International
The business unit retains its presence in the Middle East with Stefanutti Stocks
continuing to view this region as important for future growth.
Concessions
The group remains well-positioned to pursue opportunities in the Concessions and
Public Private Partnership arena in the Southern African market. Stefanutti
Stocks anticipates that projects in the hospital and office accommodation
sectors may come to market in the coming year and is pursuing selected
opportunities in other sectors.
Roads and Earthworks
Roads and Earthworks operates in the construction of roads, bulk earthworks,
landfill sites, terraces for new developments and municipal services. Although
the overall performance for the year was subdued the business unit continued to
maintain consistently high profit margins.
Revenue decreased year-on-year to R846 million (from R1,1 billion) due to
excessive rain, project cancellations and protracted award periods in relation
to new projects. Margins remained at a satisfactory level of 12,9% compared to
13,8% in the previous year.
New projects secured during the period included road upgrades in the Northern
Cape, Mpumalanga and Zambia, work for Kumba at Sishen, and a number of projects
in optic fibre infrastructure roll-out.
Looking ahead, investment in road infrastructure across South Africa should
continue in light of the need for rehabilitation and expansion. SANRAL`s
expenditure on Phase II of the Gauteng Freeway Improvement Project ("GFIP") is
expected to commence in the next financial year.
Roads and Earthworks had already secured an order book of R700 million at year-
end.
Mining Services
This business unit includes:
- Mine residue disposal facilities and open pit contract mining across Southern
Africa ("Mining"); and
- Mechanical, electrical, instrumentation and powerline distribution operations
("MEP").
These businesses experienced a difficult year and performance was constrained by
competitive tendering as well as certain problem contracts.
Notwithstanding an increase in revenue from R474 million to R702 million, the
business unit suffered a reduction in operating margin from 11,8% to 6,1%.
There has been an increase in tenders and feasibility studies resulting in a
solid order book for mechanical work at the start of the current financial year.
Although opportunities for electrical work are currently limited, these are
expected to improve in line with developments in the mechanical sector. The
business unit has bolstered its capability to position itself on future tenders
in the growing power transmission and distribution market.
The order book at year-end stood at R600 million.
Health and safety
During the year the group achieved a Disabling Injury Frequency Rate ("DIFR") of
0,22 (Feb 2010: 0,32). Stefanutti Stocks remains committed to continuously
elevate 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) Limited ("Apollo").
The fair values of assets and liabilities approximates the carrying amounts of
assets and liabilities before acquisition.
RGF Apollo
Acquisition date 12 April 2010 1 June 2010
Voting equity % - 100
Fair value Fair value
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 - (46 655)
Net asset value 3 688 8 629
Cost of acquisition 5 875 19 691
Goodwill arising 2 187 11 062
Cash paid 5 875 19 691
Revenue for the year 1 March 2010 to 28
February 2011 - 165 068
(Loss) for the year 1 March 2010 to 28
February 2011 - (328)
Revenue since acquisition - 127 892
Profit since acquisition - 5 074
Acquisition related costs 115 442
The goodwill is attributable to the acquiring of existing relationships with
customers as well as the expertise of the workforce.
It is impracticable to report any revenue, profit or loss for RGF as its
operations were acquired and fully integrated into existing operations from the
acquisition date.
The acquisitions were concluded to expand the group`s capacity. The net asset
value of receivables acquired equals their fair value. Receivables acquired
amount to R30 million. All receivables will be recovered.
All acquisition related costs were recognised in the statement of comprehensive
income as an expense within operating expenses.
Other than the acquisition of minorities in SandB Construcoes (Moc) Lda, the group
made no other material related party transactions.
Directorate
Stephen Pell was appointed as Chief Operating Officer with effect from 1 August
2010.
Outlook
Stefanutti Stocks is well-equipped to successfully navigate the challenging
market conditions ahead, with its multi-disciplinary capability, wide
geographical spread and diversified client base.
The first signs of recovery are becoming evident. The South African economy is
forecast to grow by 3,5% in 2011, as predicted by the International Monetary
Fund, while general business confidence levels also appear to be gradually
improving.
However, competition remains tight and consequently profit margins are likely to
remain under pressure in the short to medium term.
Looking ahead government has committed R1 trillion to infrastructure spend over
the next few years. It remains to be seen how much and how soon this will
translate into the roll-out of projects to market. However, some fixed
investment has commenced and Stefanutti Stocks has secured sizeable projects for
TCTA and additional works for Kusile Power Station. Investment in roads, water
and sanitation provision and social infrastructure such as schools and hospitals
are urgently needed in order to address the overwhelming need for these
services.
Private sector fixed investment prospects are also expected to continue
improving in the short term.
The resources industry is starting to show some early signs of recovery.
However, the sector`s recovery is still largely dependent on the global economic
recovery as well as macro-environmental factors such as infrastructure delivery,
regulatory frameworks and political developments.
Sub-Saharan Africa offers considerable opportunities with an estimated annual
investment of US$93 billion (approximately 15% of the region`s GDP) required to
meet conservative development targets to 2015. Of this, approximately US$60
billion comprises capital expenditure on new infrastructure while the remainder
is required for maintenance and operation.
Competition Commission
The investigation by the Competition Commission into anti-competitive behaviour
by companies within the construction sector is currently ongoing. Stefanutti
Stocks is co-operating fully and has submitted the requisite documentation in
this regard, and awaits formal feedback from the Commissioner.
Subsequent events
No material events have occurred between the reporting date and the date of this
announcement.
Renewal of cautionary announcement
Further to the cautionary announcement published on 6 April 2011, shareholders
are advised that the company has entered into negotiations which if successfully
concluded may have a material effect on the price of the company`s securities.
Accordingly, shareholders are advised to exercise caution when dealing in the
company`s securities until a further announcement is released.
Dividend declaration
Notice is hereby given that a final dividend of 25,0 cents per share (full year:
45,0 cents); (Feb 2010: final dividend of 45,0 cents and a total dividend of
70,0 cents) has been declared.
Last day to trade cum dividend Friday, 24 June 2011
Shares trade ex dividend Monday, 27 June 2011
Record date Friday, 1 July 2011
Payment date Monday, 4 July 2011
Share certificates may not be dematerialised or rematerialised between Monday,
27 June 2011 and Friday,1 July 2011, both dates inclusive. Secondary Taxation on
Companies is expected to amount to R4,7 million.
Appreciation
We thank our management and staff for their unwavering commitment and hard work
in demanding conditions. We also extend our appreciation to all our customers,
suppliers, service providers and shareholders for their continued support.
On behalf of the board
Gino Stefanutti Willie Meyburgh
Chairman Chief Executive Officer
24 May 2011
Directors:
B Stefanutti (Chairman)*
W Meyburgh (Chief Executive Officer)
D Quinn (Chief Financial Officer)
S Pell (Chief Operating Officer)
S Ackerman
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: 24/05/2011 07:05:08
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