JSE-listed construction and engineering group Stefanutti Stocks reported a loss a share of 640.35c and a headline loss a share of 622.48c for the financial year ended February 29.
While the group’s order book stands at R8.5-billion (R4.2-billion of which arises from work beyond South Africa’s borders), CEO Russell Crawford on July 30 lamented the adverse market conditions facing the industry, as well as ongoing delays in payments from clients.
“This has had a significant impact on the group’s trade and other receivables and, consequently, payments to suppliers and subcontractors,” he said, adding that this had resulted in an increase in working capital of R437-million and negatively impacted on cash consumed from operations by R751-million.
The group’s overall cash position decreased to R741-million.
During the reporting period, State-owned utility Eskom adopted an “adverse approach” to authorising certificates for work done on the Kusile building project, requiring a substantial increase of internal funding for this project.
Crawford said this increased the group’s total funding requirement from R400-million to about R986-million, excluding the impact of Covid-19.
Consequently, in addition to the provision of R263-million raised in February 2019 for potential unrecoverable preliminary and general costs, the company raised a further provision of R462-million for potential unrecoverable monthly measured works to complete the Kusile building project.
Crawford added that the continued adverse market conditions, as well as the substantial impact of the Kusile building project, had substantially reduced contract revenue.
Meanwhile, the group's funding and restructuring plan has now been fully developed and approved by the company’s board of directors and its lenders, including taking into account the potential impact of Covid-19 on the group and its business.
“The purpose of the plan is to put in place an optimal capital structure and access to liquidity to position the group for long-term growth in this dynamic environment,” said Crawford, noting that funding amounting to more than R1.2-billion had been received from the group’s lenders.
In line with the restructuring plan, he said management had started to reconfigure the group’s organisational structure to improve operational performance and decrease overhead costs, including a reduction of the overall headcount.
“The restructuring plan is anticipated to be implemented over the financial years ending February 2021 and February 2022 and, to the extent required, shareholder approval will be sought for relevant aspects of the plan.”
All of the group’s businesses are now operating under the revised Level 3 restrictions within the required protocols.
As part of its response to the virus, Crawford said a special task team had been constituted to monitor, provide guidance and immediately respond to the continuously changing environment, adding that the unknown future impact of the Covid-19 pandemic, together with the various protocols available to governments, has created an unpredictable business environment.
“It is, therefore, not possible to obtain an accurate assessment of the future impact this may have on the group and its markets going forward,” he said.
Stefanutti’s construction and mining contract revenue decreased to R5.1-billion and incurred an operating loss of R418-million.
“The operating loss includes provisions raised for slow paying trade receivables and losses incurred on projects in the road and earthworks, civils and mining services divisions, with the material loss-making projects in each of the road and earthworks and civils divisions now complete, and material loss-making projects in mining services terminated.”
Crawford said port upgrades in Durban and Cape Town offer opportunities for the Marine and Civils divisions, with additional opportunities in water and transport infrastructure in South Africa, Swaziland and Botswana.
“Mining infrastructure opportunities also continue to present themselves to the benefit of this business unit, and the government’s proposed National Development Plan (NDP) will offer potential opportunities.”
The construction and mining division’s order book was R4.6-billion as at February 29, the reduction of which is as a result of the termination of two loss-making contract mining projects.
The building business unit’s contract revenue decreased to R2.6-billion with the operating loss increasing to R490-million. This includes the provision raised for future costs on the Kusile building project, and a project loss in the Gauteng division, which is now complete.
The profit of the equity-accounted United Arab Emirates operation is excluded from this result.
This business unit should also potentially benefit from the NDP, together with commercial, leisure, warehouse and factory opportunities in the private sector, in KwaZulu-Natal and Western Cape.”
The Mozambique, KwaZulu-Natal and Western Cape divisions continue to deliver positive results, the company noted.
The Mozambique division’s order book is currently under pressure and is impacted by the delay in the northern province gasfields expansion projects, but Crawford said the division was pursuing opportunities in the office, residential, factory and surface mine infrastructure sectors in the private sector.
Building’s order book as at February 29 was R2.3-billion, excluding the United Arab Emirates order book of R658-million.
The mechanical and electrical division’s contract revenue decreased to R897-million with an operating loss of R25-million. The operating loss has been impacted by project losses incurred on a project in each of the oil and gas, and mechanical divisions.
Both loss-making projects were completed during the year, the company confirmed.
“Opportunities in the traditional petrochemical sector for the oil and gas division have substantially reduced owing to the current global uncertainties negatively impacting on the oil price,” Crawford explained, noting that the impact of the pandemic on economic growth is negatively affecting the demand for commodities, which has limited the investment into surface mining plant infrastructure projects.
In turn, this negatively affects the mechanical and electrical, and instrumentation divisions’ order books, both locally and cross border.
The mechanical and electrical division’s order book as at February 29 was R328-million.