JSE-listed construction company Stefanutti Stocks was confident that it would suffer no further financial exposure as a result of the Competition Commission’s case of collusive tendering that has now been referred to the Competition Tribunal, with CEO Willie Meyburgh stating on Thursday that the firm had settled all cases with the commission.

The commission on Wednesday said its investigations had found that construction majors WBHO Construction, Group Five Construction, Murray & Roberts, Stefanutti and Basil Read colluded when bidding for tenders for the construction of the 2010 FIFA World Cup stadia by, besides others, allocating tenders among themselves and agreeing on profit margins to be achieved from these tenders.

In its referral, the commission had asked the tribunal to confirm that the firms had contravened the Act, and to impose a maximum administrative penalty of 10% of their respective turnover.

Meyburgh said Stefanutti had been informed by the commission that the charge against it related to specific meetings that had taken place, explaining that Aveng, in its statement to the commission, had implicated Stefanutti as having been involved in these meetings.

He said that Stefanutti had, however, during a past process proved to the commissioner that the company had “no direct or indirect involvement in these meetings”, following which the commission dropped the charges.

The commission did, however, last year indicate in a statement that Stefanutti had been involved; however, the firm fought this and the commission apologised in the media, Meyburgh pointed out.

“We will go through the same process, wasting management time and legal costs, again.

“I can categorically say we have never been part of those meetings directly or indirectly, and the Competition Commission has already withdrawn that charge [once before],” Meyburgh said, stating the company was, therefore, “quite confident” going into the process.

FINANCIAL RESULTS
Meanwhile, Stefanutti improved its financial performance in line with expectations during the six months ended August 31, having increased its net profit after tax by 31.9% to R88.6-million.

This translated into a 29.5% improvement in headline earnings a share, which had risen to 47.8c.

“Even though the building business unit, specifically the inland business where we still have some issues, has lost money, and likewise, the powerlines division, we are pleased with the improvement in the operating profit of 16.3% year-on-year and also with the profit after tax,” Meyburgh said at a presentation of the company’s interim results.

He added that the company’s cash generation, at R310.4-million for the period under review, was still good, adding that Stefanutti’s businesses were still focusing on generating cash.

“The past year was a year of action. We have implemented an action plan, we have restructured the business, and we have replaced a lot of our managers. Where we were actually losing a lot of our business, we turned that around,” he noted.

During the period under review, revenue in the company’s Structures business declined to R1.3-billion, from R1.4-billion in the prior corresponding period, with the unit’s operating profit also having declined to R41-million, from R74-million previously.

Meyburgh highlighted that the company had not worked on large infrastructure projects in the public sector during the six months, which had a large impact on this business unit, as it was reliant on this type of work.

However, the company was maintaining its order book on the back of medium-sized projects that were profitable, and the division had applied for a number of sizeable future projects.

Meanwhile, Meyburgh also pointed out that, during the period under review, work outside of South African made up 33% of the group’s turnover; however, Stefanutti was aiming to increase this to 40% and above in future.

Meanwhile, the Roads, Pipelines & Mining Services business improved its contract revenue by 26% to R1.5-billion in the period under review, while its operating profit, at R118-million, was up 24% year-on-year.

“We have restored the pipeline business to be profitable again, and that is good because it is an acquisition that we made and it is starting to give good returns,” he said, stating that the company had advanced with settling the outstanding claims related to this business, with the process expected to be finalised by the financial year-end.

The building division delivered negative results, reporting an operating loss of R21-million. Meyburgh pointed out, however, that the division had narrowed its loss compared with prior periods, adding that Stefanutti expected the division’s performance to improve further going forward.

Further, the Mechanical and Electrical (M&E) division saw a decline in revenue for the interim period to R418-million, down from R650-million previously, with the division having posted an operating loss of R8-million.

Meyburgh said Stefanutti had also decided to withdraw from the power market, which formed a part of the M&E division.

“The market there is not looking good going forward because a number of months ago Eskom announced officially that their powerline market contracts award and tendering will be delayed until 2016.

“Having a business that is losing money and [where there is] no market, and basically having a single client to rely on, is not what Stefanutti wants, so we are in the process of closing that business,” he said, adding that this would unfortunately lead to some retrenchments.

Stefanutti did not declare a dividend for the interim period.