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Tuesday, May 24, 2011 |
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Stefanutti Stocks Holds Strong in Tough Market
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STEFANUTTI STOCKS HOLDS STRONG IN TOUGH MARKET
JSE civil engineering and construction group – Stefanutti Stocks – announced commendable results for the year to February 2011 that saw a slight reduction in top and bottom line reflecting the challenging construction sector. Revenue declined marginally year-on-year by 6,3% to R7 billion and after tax profit reduced by 14,4% to R333 million. The group’s order book held steady at R6,4 billion, slightly up on the R6,2 billion at the previous year-end. New large-scale contracts are reflected in the current order book of R8,2 billion.
Lower earnings translated into earnings per share of 193,6 cents and headline earnings per share of 192,5 cents, down 12,1% and 14,2%, respectively, from the previous year. The group’s cash position remains sound with R1,1 billion in hand and no net gearing. Capital expenditure as well as extensions to the head office during the year increased interest-bearing debt by R25 million.
The group declared a 25 cents a share final dividend, taking the total dividend payout for the year to 45 cents a share. This compares to a 70 cents total dividend for FY2010.
CEO Willie Meyburgh says Stefanutti Stocks felt the impact of competitive trading conditions as well as delays and postponements on existing contracts. However, he points out that certain business units nonetheless performed well and a number of sizable new contracts have been awarded recently,” he adds.
Structures maintained a good performance, with revenue at R2,1 billion and upping its operating margin to 8,5% from 7,9%. Cash flow also remained positive. Meyburgh says some project highlights include work for Kumba at the Sishen Iron Ore Mine, surface infrastructure for Exxaro on the Grootgeluk Medupi Expansion Project and water pipeline projects for Trans Caledonian Tunnel Authority (“TCTA”). Expansion into Sierra Leone also added to progress. “An order book of R2,4 billion stands Structures in good stead for the year ahead, which is still expected to see a difficult civils market.”
Building delivered a good performance under current trading conditions and held the year-on-year drop in revenue to R400 million to return R3,3 billion in total. Operating margins were reduced slightly to 3,5% compared to 3,9% in the previous year. “Government has started to become a contributor to Building’s R2,7 billion order book. In addition to select hospital projects for certain provinces, the business unit is actively pursuing commercial, industrial and mass housing projects for the private sector and looking cross-border,” says Meyburgh.
He comments that Roads & Earthworks “did not do too badly” with consistently high profit margins despite a fall in revenue from R1,1 billion to R846 million. “The margin compares well to the sector average.” New road upgrade projects, work for Kumba at Sishen and optic fibre infrastructure roll-out make up the R700 million order book. “Work which must inevitably flow from the need to upgrade our aging roads network should help boost the order book in the medium to long-term,” says Meyburgh.
Mining Services was the hardest hit of the group’s business units despite raising revenue from R474 million to R702 million. It holds the smallest order book at R600 million. Margins dropped into single digits with a number of problem contracts impacting on the generally competitive market scenario.
Meyburgh says the mechanical, electrical, instrumentation and powerline operations should bolster prospects. “The mechanical operations have a good order book capitalising on an increasingly active minerals sector, and the hope is that the electrical division will follow suit in time. The power market is a growth node and we have built capacity to accommodate future work.”
In the short- to medium-term he is cautious. “Margin squeeze should continue for some time with competition remaining tight. Further, government bottlenecks have historically stopped the trillion Rand commitment to infrastructure from translating into work and would need to be overcome for this to become a growth driver.” He adds that the group has recently been awarded work from TCTA, Kusile Power Station and the Eastern Cape provincial government. He says the private sector looks better than the public sector in the immediate future with the resources sector in particular showing some signs of recovery.
Looking to the longer-term the group sees infrastructure development being the key to prospects. Meyburgh says that according to World Bank forecasts at least $93 billion is required in sub-Saharan Africa to meet conservative targets for infrastructure development by 2015. He concludes that Stefanutti Stocks is well positioned to secure work from these projects with the competitive advantage of its diversified business model, comprehensive services and well spread target markets, footprint and client-base.
Stefanutti Stock’s share closed yesterday at R12,20.
Ends.
Issued by: Envisage Communications
Nicole Katz/Michèle Mackey
(011) 325 5944/082 497 9827
On behalf of: Stefanutti Stocks Holdings Limited
Willie Meyburgh, CEO
011 571 4300/083 269 1478
Share Code: SSK
Issue date: 24 May 2010
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