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Tuesday, May 18, 2010 |
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Stefanutti Stocks builds on good profits
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JSE black empowered civil engineering and construction group Stefanutti Stocks has maintained its strong track record since listing with double-digit top and bottom line growth for the year to 28 February 2010 (“the year”) despite tough market conditions. The group’s broad range of services, a wide South African and Southern African footprint and strong management were the leading drivers of the resilient performance.
Revenue grew 18% to R7,5 billion. Operating profit was up 28% to R500,7 million while net profit after tax increased by 22% to R389,2 million. Headline earnings of R392,1 million translated into headline earnings per share (“HEPS”) of 224,3 cents, 21% higher than the previous year.
The group maintained its dividend cover of 3 times (normalised) headline earnings with a final dividend of 45 cents, taking the total dividend for the year to 70 cents compared to 58 cents last year.
CEO Willie Meyburgh is pleased with the group’s performance, particularly in light of the drop in government infrastructure contracts out to tender and reducing profit margins.
Geotechnical, civils and marine projects within business unit Structures remained the key contributors to group operating profit. In South Africa these included grouting for the Gautrain and the interchange at the new King Shaka Airport in Durban. In Africa Structures concluded work on two platinum mines and other contracts in Zimbabwe and Mozambique. Meyburgh says that while a number of large-scale infrastructure and marine projects are still available in South Africa, the business unit will look to cross-border markets for higher margin projects to counter intensifying local competition.
Building performed well during the year. The business unit compensated for market contraction by targeting growth regions including Gauteng, KwaZulu-Natal and Mozambique to offset the collapse in the Western Cape and Botswana. “Building successfully and timeously delivered on all our 2010 World Cup Soccer-related projects, in specific the major undertaking of the upgrade at Cape Town International Airport. Further, great strides were made with operations outside South Africa,” says Meyburgh of the healthy showing.
Roads & Earthworks opened a new Asphalt division during the year to facilitate securing large road rehabilitation contracts. Meyburgh says that although the market will undoubtedly be more competitive going forward, it remains a growth avenue for the group. “There are good ongoing opportunities in the local market and we will also target road contracts in Africa to sustain momentum,” he says.
Mechanical, Electrical & Power (“MEP”) delivered a satisfactory performance with the Mechanical operation capitalising on increasing demand for its water treatment plant capability. Meyburgh says the new Power business is successfully positioned to participate in Eskom’s capital expansion programme going forward. “The early success in MEP vindicates our prior investment in the business unit,” he adds.
Mining Services and Concessions have both made good progress in the group’s strategy of stronger horizontal integration to grow revenue streams. Current work in hand and potential contracts where Stefanutti Stocks is the ‘preferred bidder’ should benefit these and the other business units in time. “Mining Services has successfully shifted focus to mining sectors in recovery such as coal.” He points out that Concessions is disappointed with the number of PPP projects actually coming to market in South Africa. “In contrast toll road opportunities in African countries reflect a widespread inclination towards using PPPs to upgrade infrastructure, which bodes well for growth.”
The recent decimation of the Middle Eastern market has led to a more conservative outlook for operations there, although Meyburgh does not discount future growth potential in the region. “For now we will retain a small presence through smaller-scale contracts.”
In line with its ownership policy the group continued to buy-out its minority partners in subsidiaries during the year. He says this forms part of the wider strategy to continue building a fully-integrated civil engineering and construction group.
Looking ahead he is realistic about the 2011 financial year in view of continuing margin pressure. “The 2012 financial year looks more positive with a promise of recovery based on the expected acceleration in private sector development, a continued commitment by SANRAL and a number of Africa initiatives.” Meyburgh concludes that the group remains well-placed in the top tier of the market relative to peers. “We have in hand an order book of R6,2 billion at the start of the new financial year and a strong fiscal base to pull us through 2011.”
Stefanutti Stocks’ share closed yesterday at R11,70.
Ends.
Issued by: Nicole Katz/Michèle Mackey
(011) 325 5944
On behalf of: Stefanutti Stocks Holdings Limited
Willie Meyburgh, CEO
011 571 4300
Share Code: SSK
Issue date: 18 May 2010
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