JSE civil engineering, construction and building group Stefanutti & Bressan (“S&B”) has exceeded its pre-listing forecasts to post strong maiden results for the year to February 2008. S&B listed on the JSE in August 2007. Robust organic growth and three successful acquisitions saw the group record net profit of R144,4 million, 24,6% higher than pre-listing
forecasts. Post year-end S&B is poised to enter the top tier of the construction sector with its proposed acquisition of Stocks Limited. This will significantly increase the group’s scale as well as boost top and bottom line growth and market capitalisation.
Revenue increased 51% to R2,5 billion from R1,7 billion in the previous year. Operating profits of R184,3 million represent an improvement of 162% year-on-year, and of 11% on pre-listing forecasts. Headline earnings per share (HEPS) of 103,7 cents exceeded forecasts by 24% and was up 210% compared to February 2007. Cash on hand increased to R662,9 million.
CEO Willie Meyburgh says: “High demand in the construction sector resulted in strong performances across the board.” S&B’s expertise spans concrete structures, roads and earthworks, piling, mining services and building. “Concrete Structures, the group’s core division, was the major contributor to revenue with excellent growth which we expect to continue.”
S&B’s Mining Services division was boosted by the pre-listing acquisition of Environmental, Civil and Mining Projects (ECMP), which positioned the group to exploit escalating growth in the mining industry. “Our intention was to expand our service offering by diversifying into complementary, high growth niche sectors. The ECMP acquisition has given impetus to our strategy.” says Meyburgh. “We are pleased with the integration of this acquisition and a number of large projects in the mining industry are currently underway.”
Other additions to the group included mechanical and electrical construction specialists Skelton & Plummer, and marine construction group Civil & Coastal Construction. Meyburgh says the two businesses bring specialised skills to S&B, further diversifying operations. Skelton and Plummer’s penetration of the mining, oil and gas and power generation industries will enhance S&B’s
exposure to these markets. “ Both acquisitions offer cross-selling opportunities and expand S&B’s regional footprint.”
The post year-end acquisition of Stocks, one of South Africa’s leading construction businesses, is well on track and will enable the enlarged group to secure larger and more complex projects than each company could have undertaken individually. Meyburgh says that Stocks’ specialist building
expertise, established over 60 years, will augment S&B’s Building division. He adds that although this division was negatively impacted by two non-profitable residential projects during the year, this had been anticipated and the division performed as expected. Both these projects are now complete.
He points out a further benefit of the Stocks acquisition - “in view of the industry-wide skills shortage, a key advantage is the pool of expertise Stocks will bring to the group especially at management level.” In addition to its Southern African operations, Stocks is an equal partner in established contracting and electro-mechanical businesses in the Gulf region. The US Dollar2 based revenue streams will provide a level of Rand hedge for the group and Stock’s foothold will give S&B access to new growth opportunities in this market.
Meyburgh is cautiously confident of S&B’s future prospects. He acknowledges that certain constraints will continue to affect the industry, including the ongoing skills shortage, restricted electricity supply and rising interest rates. “However, with government-led infrastructure investment expected to continue, S&B is set to benefit from expansion of municipal infrastructure and roads, ports and railways. Accelerated growth in the power-generation sector, and related mining and infrastructure projects, also bodes well for growth.” He further believes that private sector investment will continue in the petrochemical and manufacturing industries, in which S&B has an established presence.
He concludes that with the current order book at R3,8 billion S&B should report positive growth in earnings for the year to February 2009.
S&B’s share closed Friday at R17,39 putting the company on a trailing PE of 17,4 based on diluted HEPS.
Ends.
Issued by: Envisage Communications
Nicole Katz
(011) 325 5944/082 497 9827
On behalf of: Stefanutti & Bressan Holdings Limited
Willie Meyburgh, CEO
011 571 4300
Issue date: 19 May 2008