Buoyed by strong organic growth and the contribution from acquisitions to date, JSE civil engineering construction group Stefanutti Stocks Holdings (“Stefanutti Stocks”) reported interim results for the six months to August 2008 reflecting increases in all key performance indicators. Government’s ongoing investment in infrastructure and expansion in the mining sector were key drivers of the group’s performance which saw revenue more than double to R2,6 billion from this time last year.

The merger with international construction group Stocks Limited (“Stocks”), which became effective on 31 July 2008, positions the enlarged group as a major competitor among first-tier construction groups. Stocks’ results for one month were included in the consolidated interim results.

CEO Willie Meyburgh says the inclusion of Stocks for the full six months to February 2009 will considerably bolster performance by year-end. “The integration of the two groups is progressing well. Significant synergies already existed between the two companies and these are reflecting now in economies of scale and other benefits for the group.” The expanded management team and resources have provided Stefanutti Stocks with added advantages given the industry-wide skills shortage.

He adds that the Stocks acquisition has given the group an established presence in the Gulf as a springboard for expansion across the Middle East.

For the interim period the 131% increase in revenue generated operating profit of R176,3 million, up 126% compared to the same period in 2007. Net profit after tax grew 149% to R142,7 million. Headline earnings of R132,0 million translated into headline earnings per share of 90,42 cents, compared to 41,86 cents at August 2007. Cash on hand increased to R867,4 million.

Meyburgh attributes the strong performance to the group’s alignment with high growth sectors including industrial, infrastructure, mining and petrochemical. He says the Concrete Structures division continues to be the major contributor to top line growth and the piling and geotechnical operations included in this division also delivered healthy results.

Increasing demand for road rehabilitation services in light of South Africa’s aged road network led to a good performance from the Roads & Earthworks division and helped it achieve healthy margins.

The Mining Services division is currently involved in a number of major mine infrastructure projects which are further entrenching the group’s presence in this market. Meyburgh adds that the acquisitions of Environmental, Civil and Mining Projects (ECMP) pre-listing and Skelton & Plummer in September 2007 produced solid results for the division.

The Building division performed as expected especially in the commercial and leisure sectors. Focus on public-sector buildings such as hospitals, schools and prisons, as well as activities in the Gulf region should compensate for the slowdown in private sector spend in South Africa going forward. Meyburgh points out that the shrinking local residential sector is of little consequence as Building has negligible exposure to this market. “In future we will be exploiting our expertise in the Public-Private-Partnership (PPP) market, which is the stated preferred procurement method for government for large projects.”

He remains confident about the group’s prospects to year-end. “We are well-placed to continue benefiting from committed government infrastructure spend with a good pipeline in municipal and national road projects. Both Sasol and Eskom have also committed to development spend beyond 2010.” In addition Stefanutti Stocks is set to benefit from increased investment in power generation across Africa. “Through ongoing relationships with mining, petrochemical and private clients in neighbouring countries, the group expects to capitalise on a number of promising opportunities on the continent,” he says.

However he is cautious as to the potential impact on the sector of uncertainty in the global financial markets. “We will continue to monitor the effects of the global financial crisis on our clients’ expenditure programmes.” Nonetheless Meyburgh concludes that with the current order book at R6,6 billion the outlook for the group remains positive. Stefanutti Stocks’ share closed yesterday at R11,80.

Ends.

Issued by: Nicole Katz/Michèle Mackey
(011) 325 5944/082 497 9827

On behalf of: Stefanutti Stocks Holdings Limited
Willie Meyburgh, CEO
011 571 4300

Share Code: SSK

Issue date: 11 November 2008