Stefanutti Stocks demonstrates resilience despite constrained construction market
▪ Revenue R5,2 billion
▪ Operating profit R119 million
▪ Cash at end of year R1,3 billion
▪ Current order book R13,9 billion
Johannesburg, 9 November 2017 – JSE-listed Stefanutti Stocks, the multi-disciplinary construction company operating in South Africa, sub-Saharan Africa and the Middle East, today announced its interim results for the six months ended 31 August 2017.
Although the South African trading environment remains challenging, Stefanutti Stocks improved its operating profit for the period. “The group’s multi-disciplinary and geographically diversified business structure continues to provide a stable platform in this challenging environment” says Willie Meyburgh, chief executive officer.
He added that the group would continue to seek opportunities both in the region and, on a more selective basis, further afield in sub-Saharan Africa. “Management constantly reviews and aligns each business unit and its respective divisions with the changes being experienced in their particular markets, to ensure their ongoing sustainability.”
Contract revenue from operations increased to R5,2 billion from the R4,4 billion reported for the same period last year. Operating profit increased from R100 million in the previous year to R119 million for the period, whilst the operating profit margin remained consistent at 2,3%.
The increase in operating profit was off-set by an increase in the effective tax rate and minority shareholders interest. As a result, there was a decrease in earnings and headline earnings per share of 15% from the comparative period to 47,06 cents and 44,81 cents respectively.
Capital expenditure amounted to R255 million, of which R203 million relates to the Roads, Pipelines & Mining Services (RPM) business unit. Of the total capital expenditure, R219 million was incurred to expand capacity.
The group’s order book is currently R13,9 billion, of which 35% comes from work beyond South Africa’s borders.
No dividend was declared for the interim period. 2
Contract revenue from the RPM business increased to R1,4 billion (Aug 2016: R1 billion), with an increase in operating profit to R92 million (Aug 2016: R81 million). The operating profit margin decreased from 7,9% to 6,4%.
On the back of a solid order book Mining Services delivered good results, whilst the Roads & Earthworks division also produced a strong performance. Although all the RPM divisions continue to receive a steady flow of tender enquiries, operating margins remain under pressure due to the competitive trading environment.
The Building business’ contract revenue increased to R2,3 billion (Aug 2016: R1,8 billion), with an improvement in operating profit to R22 million (Aug 2016: R2 million). The operating profit margin increased to 1,0% from 0,1%. The profit of the equity-accounted United Arab Emirates operation is excluded from the operating profit. The Mozambique division once again delivered good results.
The continued reduction of available infrastructure work from both the government and private sector, combined with ongoing delayed contract awards, saw the Structures business contract revenue decline to R924 million (Aug 2016: R954 million), with operating profit of R9 million (Aug 2016: R3 million) at a margin of 1,0% (Aug 2016: 0,3%).
As a result of the shortage of work and the termination of a contract in the Oil & Gas division, the Mechanical & Electrical business unit’s turnover and operating profit reduced to R541 million (Aug 2016: R556 million) and R1 million (Aug 2016: R24 million) respectively.
Prospects and strategy
“Given the current state of the South African construction market, construction activities and margins are expected to remain under pressure,” said Meyburgh, however, adding that over the past two years the group’s order book had remained relatively constant between R13 billion and R14 billion.
“In the short-term there are potential pockets of growth, which include mining surface infrastructure, marine, water and sanitation treatment plants, and residential and mixed-use building projects. In addition, in the medium-term there are potential opportunities in petrochemical tank farms, roads and bridges and selected open pit contract mining work. These will provide opportunities for all our business units, both locally and cross border.”
Contact: Stefanutti Stocks Holdings Limited
Willie Meyburgh (CEO) – (011) 571-4367
Issued and released by: Keyter Rech Investor Solutions
Lynne Bothma 087 351 3815 / 082 920 4395
Issue date: 9 November 2017
JSE code: SSK