The contracting environment continues to be competitive with profit margins remaining under pressure. This is self-evident from our results for the financial year ended 28 February 2017, where our contract revenue decreased by R611 million to R9,1 billion compared to the previous period (Feb 2016: R9,7 billion) and the group’s operating profit decreased from R392 million in the previous year to a loss of R106 million in the current year.
However, certain key aspects contributing to the decrease in earnings can be summarised as follows:
- The recording of a once-off charge of R139 million relating to the Voluntary Rebuild Programme (VRP) concluded with the South African Government late last year;
- The goodwill, relating to the Cycad Pipelines Proprietary Limited acquisition, of R155 million being written off; and
- In line with Group policy, land and buildings are independently valued every five years. Based upon these latest valuations, R15 million has been written off during the period.
If the effects of these extraordinary items are excluded, the operating profit for the year would have been R202 million. Our order book is currently R14,0 billion, with approximately 32 per cent thereof stemming from beyond South Africa’s borders.
Our cross-border operations are participating in a number of high-profile projects including the construction of an 85-km stretch of road (including a 95-metre span bridge) for the Zambian Road Development Agency in the Western Province of Zambia (p 30); the construction of the multi-purpose Kitwe Freedom Park development (p44), also in Zambia; as well as the construction of the Matola Mall in Mozambique (p 43) and the new Swaziland Revenue Authority (SRA) Headquarters in Ezulwini, Swaziland (p 45). In addition, Stefanutti Stocks Coastal has secured some cross-border marine projects in Kenya and Guinea (pp 32-33).
A number of divisions across the group are participating in mining infrastructure construction projects, including the Roads & Earthworks and the Civils division, working together on the Foskor Selati Tailings Dam’s decant tower and pipeline project (p 11). We are also for the first time participating in the civil construction of renewable energy projects, including constructing concrete wind towers for a wind farm in the Eastern Cape (p20).
The Oil & Gas division is constructing the world’s largest Air Separation Unit (ASU) for its client Air Liquide at Sasol in Secunda (p 15). At the end of April 2017 more than 1 000 000 man-hours had been worked without any lost-time incidents.
Our Civils division’s concrete rehabilitation team is undertaking a number of complex repair projects (pp 17-18), including the repair of cooling towers for Sasol Group Technologies. It also boasts an exceptional safety record. It is interesting to note that this rehabilitation project has approximately the same contract value as the greenfield contract the group undertook in 1996 for the construction of the three cooling towers at the Majuba Power Station (p 19).
Our Coastal Building division continues to do well within the industrial facilities arena and is currently constructing a new logistics building for Mercedes Benz South Africa in East London (p 48). The recently merged Building Division’s housing market portfolio includes the Flamwood Social Housing Development, located in Klerksdorp, which is currently South Africa’s largest Community Residential Unit (CRU) Development under construction (p46).
Regretfully we recorded a fatality on 17 March 2017, and on behalf of the group I would like to express our deep condolences to the family, friends and colleagues of Mr Mapolanka Joel Moremi.
Management and staff across the group remain committed to enhancing our health and safety policies and procedures. We strive to create a workplace environment where we are constantly improving our safety performance.
The group’s Lost Time Injury Frequency Rate (LTIFR) at February 2017 was 0,10 (Feb 2016: 0,10) and the Recordable Case Rate (RCR) was 0,70 (Feb 2016: 0,59).
Voluntary Rebuild Programme (VRP)
One of the VRP’s main objectives is to transform the South African construction industry by developing black-owned emerging enterprises into meaningful competitors, over a period of seven years. We have thus far identified two emerging enterprises - TN Molefe Construction (Pty) Ltd and Axsys Projects (Pty) Ltd, with whom we will partner, under this programme, and they are introduced on pages 4 and 5. We are looking forward to strengthening our relationships and playing our part in their future growth and sustainability.
Last year marked two decades of my working for the company, and I remain as passionate about this group as on the first day I reported to work.
This year, a number of employees celebrated long service milestones with us, including some with forty years of service! Having energised and engaged employees is fundamental to our success as a company, and we appreciate the commitment and dedication of every single employee of Stefanutti Stocks.
I would also like to extend my appreciation to the board and our management for their continued commitment, as well as our gratitude to our all-important customers, suppliers, service providers and shareholders for their ongoing support.