Stefanutti Stocks’ interim results reflect ongoing market pressure in construction sector

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  • Revenue: R4,4 billion
  • Operating profit: R100 million
  • Headline earnings per share up 8,8%
  • Cash at period-end: R1 billion
  • Current order book: R14,1 billion

Johannesburg, 10 November 2016 – The interim results for the six months ended 31 August announced today by Stefanutti Stocks, the multi-disciplinary construction company operating in South Africa, sub-Saharan Africa and the Middle East, reflects the challenging trading environment with the lack of both private and public infrastructure spend in Southern Africa.

Willie Meyburgh, chief executive officer, says “the South African construction market remains challenging with escalating levels of competition for the limited available work in the market. In addition the impact of currency fluctuations in the countries in which the group operates has also impacted on the group’s financial performance for the period.”

Financial review
Contract revenue decreased from R5,3 billion in the previous period to R4,4 billion with a decrease in operating profit from R176 million to R100 million, at a margin of 2,3%.

An increased contribution from the Middle East operation lifted the share of profits from equity-accounted investees to R22 million from R9 million in the corresponding period.

Capital expenditure amounted to R78 million, of which R49 million was incurred for maintaining capacity, whilst the finance costs increased to R37 million (from R26 million), primarily due to the total interest payable on the last instalment of the Competition Commission penalty.

The group recorded an increase of 2,7% in earnings per share from total operations to 55,57 cents (54,09 cents) and 8,8% in headline earnings per share to 52,73 cents (48,46 cents).

The current order book has increased to R14,1 billion (Feb 2016: R12,3 billion), comprising of mainly medium-sized projects, with 35% of this work stemming from beyond South Africa’s borders.

No dividend has been declared for the interim period.

Operational review
The contract revenue from the RPM business declined to R1 billion (Aug 2015: R1,5 billion) as a result of the delay in contract awards. Operating profit declined to R81 million from R100 million in the comparative period.

The Roads & Earthworks, Swaziland and Mining Services divisions have delivered good results with encouraging prospective contract awards in the short term. The group is in ongoing discussions with the Zambian Roads Development Agency and the Nigerian government regarding outstanding payments on projects impacting working capital.

The Mechanical and Electrical business unit performed to expectation on the back of petrochemical projects and contract revenue remained consistent at R556 million (Aug 2015: R560 million). Operating profit decreased to R24 million from R33 million in the prior period due to a lack of work in the traditional mining infrastructure environment affecting the Mechanical division.

The Structures business unit was negatively affected by the continued decline in infrastructure projects and ended the period with a reduction in contract revenue to R954 million (Aug 2015: R1,1 billion) and operating profit to R3 million (Aug 2015: R25 million).

The Building business unit’s contract revenue decreased to R1,8 billion (Aug 2015: R2,1 billion) due to the ongoing competitive trading conditions combined with a more selective approach to projects being tendered for. Operating profit reduced from R10 million to R2 million, excluding the Middle East operation.

The group is proud of safety milestones reached at a number of their sites over the past few months as management and staff remain committed to enhance health and safety policies and procedures.

Prospects and strategy
Meyburgh says “although trading conditions are expected to remain challenging in the short to medium term, the group has identified potential growth areas in certain sectors of the economy. These should provide opportunities for the Roads & Earthworks, Mechanical and Building operations, both locally and cross border. There are also opportunities in the construction of petrochemical tank farms and within existing markets for our Oil & Gas and Electrical & Instrumentation businesses.”

A few of the more notable projects that the group is participating in include the construction of a world-class production plant for BMW in Rosslyn, contract mining operations at the Silverlakes Thutsi Mine, and a number of water and sanitation projects involving joint venture enterprise development partners.

– Ends –

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