JSE-listed Stefanutti Stocks’ operating loss widened to R451-million for the financial year ended February 28, compared with the R106-million loss incurred in the prior financial year.
The company on Thursday reported that goodwill and intangible assets of R667-million had been impaired, predominantly relating to the goodwill that arose from the Stocks Limited acquisition.
Excluding the impairment, Stefanutti’s operating profit is R216-million, which is an improvement on the R202-million adjusted operating profit reported in the prior year.
Contract revenue from operations of R10.4-billion increased by R1.3-billion year-on-year.
The United Arab Emirates (UAE) operation has contributed R48-million towards the share of profits of equity-accounted investees, which in total has remained consistent at R41-million as a result of losses incurred by other equity-accounted investees, the company noted.
As a result of these factors, the company incurred a loss a share of 294.94c. With the reversal of impairment charges relating to assets, headline earnings a share were 90.35c, a slight improvement on the adjusted headline earnings a share of 89.86c reported in the previous year.
The group's order book is currently R14.3-billion, of which R4.9-billion arises from work beyond South Africa's borders.
Capital expenditure for the year amounted to R500-million, up from R272-million in 2017.
Meanwhle, in line with the group's strategic intent to achieve greater synergy, optimise available resources and reduce costs, a decision was taken to combine the Roads, Pipelines & Mining Services with the Structures business units effective from January 1, 2018. The new business unit is called Construction & Mining.
The contract revenue of the newly combined business unit is R5-billion with an operating profit of R175-million at an operating profit margin of 3.5%.
While the Roads & Earthworks and Swaziland divisions delivered good results, the former Structures business unit continued to underperform, resulting in the reported reduction in operating profit for Construction & Mining compared with the previous year.
Supported by an increase in tender activity Mining Services returned good results for the year and secured a strong order book.
Meanwhile, work in Zambia will only restart once outstanding amounts have been received by the government of that country.
Limited work has resumed on road projects in Nigeria, despite amounts also being outstanding in that country.
Construction & Mining's order book at February 2018 was R9-billion.
Meanwhile, Stefanutti Stocks’ Building business unit's contract revenue increased to R4.4-billion with an improvement in operating profit to R41-million at an operating profit margin of 1%.
The profit of the equity accounted UAE operation is excluded from the operating profit.
Meanwhile, the Mozambique and Coastal divisions delivered good results.
Stefanutti Stocks further experienced unexpected losses on two social housing projects, combined with delayed payments in the public sector, which has put considerable strain on the business unit’s cash resources.
Despite good returns from cross-border operations and recently awarded surface mining related contracts in the Mechanical division, Mechanical & Electrical's turnover and operating profit reduced to R1-billion and R13-million, respectively.
The Oil & Gas and Electrical & Instrumentation divisions' performance was negatively impacted on by the cancellation of a significant contract in the petrochemicals sector.
Cross-border and local work in the surface mining related environment is gradually improving for both the Mechanical and Electrical & Instrumentation divisions, the group stated.
However, the reduction in opportunities in the petrochemicals sector will affect the Mechanical & Electricals’ combined order book and operating margins.
Stefanutti Stocks reported that the South African construction market remains extremely competitive owing to an ongoing lack of public infrastructure spend.
Even though business confidence levels seem to be improving in some sectors of the economy, construction activities and margins are expected to remain under pressure in the short to medium term.
With the increased local requirements relating to broad-based black economic empowerment, the group is assessing various options to improve its position in this regard.
The group's order book remains relatively constant at about R14-billion, with potential pockets of growth visible in the local market in the short term.
Cross-border opportunities exist in road and bridge construction, as well as marine and mixed-use building projects, the group said.
“Our multidisciplinary and geographically diversified business structure continues to enable the group to remain a strong competitor in the markets in which it operates.”