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Monday, November 14, 2011 |
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CREDIBLE SET OF INTERIM RESULTS GIVEN PREVAILING MARKET CONDITIONS
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Stefanutti Stocks, a JSE civil engineering and construction group with multi-disciplinary expertise and a wide geographical footprint spread across Africa and the Middle East, delivered a credible performance for the six months ended 31 August 2011, given the prevailing market conditions in this sector.
Willie Meyburgh, CEO of Stefanutti Stocks, stated: “Our results mirror the challenges faced by the group during the six months ended 31 August 2011 with turnover slightly up to R3,8 billion and operating profit reducing by 19% to R179 million. The results reflect the escalation in competitive trading conditions, plus the effect of some loss making projects and restructuring costs within one of the business units.”
As has been widely reported by various companies within the construction sector, the intensified competition currently being experienced in South Africa is negatively impacting on margins, hence the group’s operating profit margin is down to 4.7% from 6.2% for the comparative period. Stefanutti Stocks continues to take advantage of certain opportunities outside the borders of South Africa, increasing turnover from 22% to 26% over the comparable period.
Earnings per share and diluted headline earnings per share reduced by 25% and 26%, respectively.
Stefanutti Stocks reported a healthy order book of R8,2 billion (February 2011: R6,4 billion) as at 31 August 2011.
“We incurred capital expenditure of R217 million to support order book growth and entry into new markets and we have managed to retain a sound cash position. As at the end of August 2011, cash on hand was R1,0 billion with a nil net gearing position;” comments Meyburgh.
An interim dividend of 12.0 cents (August 2010: 20.0 cents) has been declared, which is in line with the group’s current dividend policy.
The Structures business unit, the largest contributor towards the group’s operating profit, performed well despite difficult trading conditions with contract revenue that increased from R0.9 billion in the comparative period to R1,2 billion. The operating margin reduced to 7.1% from 7.8%. The business unit has secured a number of reasonably sized projects and is on track to achieve full year targets albeit at lower operating margins. The order book for this division remains strong at R2,5 billion.
The Building division produced a commendable performance for the period, with operating margin having increased marginally from 3,9% to 4% over the comparative period. The turnover for this period was R1,7 billion which is a 4% decrease over the comparative period. Meyburgh says: “The margin increase is largely attributable to the closing out of old projects. However, throughout all geographical areas, we are securing projects at exceptionally competitive margins which will unfortunately have an adverse impact on margins going forward.” At the end of August 2011 the order book was R4,0 billion.
The Roads & Earthworks business unit also experienced tough market conditions with the environment remaining extremely competitive and challenging during the period. With the scaling back of SANRAL projects, a resource oversupply now exists in the local road market. Turnover is down from R518 million to R485 million when compared to the same period last year. Operating margins are also significantly down from 12,3% to 9,6%. Encouraging is the order book of R850 million as at 31 August 2011.
Mining Services experienced an unsatisfactory six months reflecting a loss of R11 million for the period. A competitive market was further exacerbated by restructuring costs and the completion of some problem contracts. Contract revenue increased from R367 million to R477 million over the comparative period. “We have instituted various actions to address the loss making projects and the restructuring of divisions within this business unit. We have further identified new opportunities in the mining infrastructure and power transmission and distribution markets and managed to secure an order book of R700 million as at the end of August 2011,” states Meyburgh.
A key focus of the group continues to be geographic expansion with an emphasis to increase the group’s footprint in Africa where it already has a strong presence. Further afield opportunities are also closely followed where the group has strong ties with existing clients. Meyburgh is expecting the Middle East, especially Qatar, over the medium to long term to offer growth opportunities.
On 20 June 2011 Stefanutti Stocks announced the acquisition of Cycad Pipelines (Pty) Limited and its related operations. The group has identified the bulk pipeline construction market to be a growth sector within the South African economy and hence its strategic decision to acquire Cycad. There are still outstanding conditions precedent before the deal can be finalised.
“The group’s strong financial position, healthy order book, diversified service offering and broad geographical footprint will enable it to withstand and counter some of the challenges faced in the current economic climate;” concludes Meyburgh.
Ends
Contact:
Stefanutti Stocks Holdings Limited
Willie Meyburgh (CEO) – (011) 571-4367
Issued and released by:
Keyter Rech Investor Solutions
Marlize Keyter (011) 447-5204 / 083 701 2021
Issue date: 15 November 2011
JSE code: SSK
Web-site: www.stefanuttistocks.com |
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