Building And Power Prevent Stefanutti Stocks Posting A Good Recovery

22nd May 2014

  

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Stefanutti Stocks, a leading construction company, operating throughout South Africa, sub-Saharan Africa and the Middle East with multi-disciplinary expertise in the construction industry, reported their results for the year ended 28 February 2014 today.

Willie Meyburgh, CEO of Stefanutti Stocks, commented that all of the Group’s businesses, with the exception of the Building and Power business units, performed to management’s expectations. “The economic climate over the past few years has placed tremendous pressure on the construction industry, including Stefanutti Stocks, and we expect these conditions to prevail at least until the end of the current financial year. Contract revenue increased by 5% to R9,4 billion (Feb 2013: R9,0 billion).  Our order book continues to strengthen and currently stands at R12,8 billion compared to the R8,5 billion at 28 February 2013” stated Meyburgh. Both the Structures and Roads, Pipelines and Mining business units continued to perform well and made positive contributions towards operating profit, whilst the Mechanical & Electrical business unit showed significant improvement when compared to the previous year. The Building business unit however delivered disappointing results. The former Power business unit also delivered a poor set of results and has now been incorporated as a division into the M & E business unit effective 1 March 2014.

Operating profit declined by 19% to R177 million (Feb 2013: R219 million before the Competition Commission penalty) and the operating margin decreased from 2,4% to 1,9%. Finance costs for the year decreased as a result of interest-bearing liabilities having decreased by 30% to R659 million (Feb 2013: R935 million). The group posted an after-tax profit of R119 million (Feb 2013: after-tax loss of R162 million after the Competition Commission penalty).

Earnings per share of 67,8 cents (Feb 2013: loss per share of 93,2 cents) and diluted headline earnings per share of 59,2 cents (Feb 2013: loss per share of 89,2 cents) increased by 173% and 166%, respectively from the comparative year. Excluding the Competition Commission penalty, normalised year-on-year headline earnings per share declined by 28% to 67,3 cents. A decision was taken not to declare a dividend for the financial year.
Meyburgh said that he is pleased with the improved cash position of the Group, which has increased to R1,0 billion (Feb 2013: R836 million). Cash on hand continued to exceed net debt, resulting in a nil net gearing position being maintained by the Group at year end. The Structures business unit performed well given the current market conditions with a slight decrease in revenue to R2,6 billion (Feb 2013: R2,7 billion), with an operating profit of R128 million (Feb 2013: R141 million). The operating profit margin declined to 4,9% from 5,2% (Feb 2013) due to the difficult market conditions. The order book strengthened to R2,0 billion at the end of February 2014 (Feb 2013: R1,8 billion). The RPM business unit produced a commendable performance with contract revenue improving to R2,4 billion (Feb 2013: R2,3 billion), with an operating profit of R189 million (Feb 2013: R177 million). The operating profit margin increased from 7,7% to 7,8%. The order book at the end of February 2014 was R5,0 billion (Feb 2013: R3,1 billion).
The Building business unit delivered disappointing results reporting contract revenue of R3,1 billion (Feb 2013: R3,2 billion) and an operating loss of R151 million (Feb 2013: operating loss of R55 million).

Most of these losses occurred in the Inland and Mozambique divisions and arose as a result of inadequate project execution and commercial matters relating to the closing out of certain loss-making historical contracts. Management action has been taken to address these matters. The order book for Building business unit at the end of February 2014 was R4,0 billion (Feb 2013: R3,1 billion). The M & E business unit’s performance showed a significant improvement. Contract revenue of R1,2 billion (Feb 2013: R710 million) with an operating profit of R1,3 million (Feb 2013: operating loss of R51 million). The Mechanical & Oil and Gas divisions performed well, with the Electrical and Instrumentation division stabilising.  M & E’s order book at 28 February 2014 was R643 million (Feb 2013: R473 million).

Meyburgh concluded: “Despite the prevailing competitive market and tough economic conditions, there are still short and medium term opportunities in various sectors of the market to grow a quality order book.  With the historical problem contracts having been addressed in the respective business units, Stefanutti Stocks is now well placed to manage the current economic and market challenges.  The group will continue to pursue opportunities for its multi-disciplinary services locally and in sub-Saharan Africa. “

Edited by Creamer Media Reporter

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