Stefanutti Stocks announces interim results

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Johannesburg 28 November 2019 – Stefanutti Stocks (JSE code: SSK) – a level 1 B-BBEE contributor with a Black Economic Interest score of 58,1% operating throughout South Africa, sub-Saharan Africa and the United Arab Emirates – today announced results for the six months ended 31 August 2019.


Russell Crawford, who took over as CEO from Willie Meyburgh in August this year, said “the continuing adverse market conditions, combined with the impact of the public sector power project reduced contract revenue from operations to R4,4 billion, with the group reporting an operating loss of R973 million”.


The operating loss was impacted by the following:


Provision for future costs – public sector power project R462 million
Provision for slow-paying trade receivables R331 million
Specific project losses R260 million
Impairment of goodwill R22 million
Provision for Kenya tax liability R43 million


The client’s intractable approach on the public sector power project with respect to certification of applications for work done, has led to an additional provision of R462 million being raised for potential unrecoverable measured works to completion. This is in addition to the provision of R263 million raised in February 2019. “We have recently engaged with this client’s top management and since then constructive and encouraging meetings have been taking place continuously with the client’s site management teams.”


“This project has placed an additional burden on the group, increasing the initial funding requirement of R400 million to approximately R986 million. In terms of the funding plan, detailed in our results announcement, R120 million – the ‘first tranche’ – was received in July this year and an additional R391 million – the ‘second tranche’ – was received in early November from a lender grouping.’’ This allows more time for the group to resolve its contractual claims on the public sector power project, and to simultaneously explore and evaluate longer-term cost-effective funding solutions.


Stefanutti Stocks remains in discussions with its lenders to secure additional tranches of funding, with funds from the first and second tranches having been used to meet the group’s short-term liquidity requirements.


Earnings and headline earnings per share are reported as a loss of 622,35 cents (Aug 2018: profit of 61,76 cents) and of 607,72 cents (Aug 2018: profit of 60,30 cents) respectively.


The group’s order book is currently R11,2 billion of which R3,3 billion arises from work beyond South Africa’s borders.


“Contributing to the adverse market conditions are the well-documented delays in payments from clients, which had a significant impact on the group’s trade and other receivables as well as payments to suppliers and sub-contractors.”


This resulted in an increase in working capital to R379 million (Aug 2018: R103 million) negatively impacting on cash consumed from operations of R503 million (Aug 2018: R218 million cash generated). The group’s overall cash position has decreased to R396 million (Feb 2019: R881 million).


Construction & Mining’s contract revenue decreased to R2,6 billion (Aug 2018: R2,8 billion), with an operating loss of R421 million (Aug 2018: operating profit of R111 million), which includes provisions raised for slow-paying trade receivables and losses incurred on projects in the Road & Earthworks, Civils and Mining Services divisions. The material loss-making project in each of the Roads & Earthworks and Civils divisions are complete.


“SANRAL has released a number of tender enquiries for road rehabilitation in KwaZulu-Natal and the Eastern Cape. In addition, the upgrading of the Cape Town- and Oliver Tambo International Airports will offer opportunities for the Roads & Earthworks and Civils divisions.”


Crawford said port upgrades in Durban and Cape Town will offer opportunities for the Marine and Civils divisions, whilst opportunities exist in water and transport infrastructure in South Africa, Swaziland and Botswana. “Mining infrastructure opportunities continue to present themselves to the benefit of this business.”


Due to funding constraints in country, fewer opportunities exist for the Zambian operation placing pressure on this division’s order book. 


The Building business unit’s contract revenue decreased to R1,4 billion (Aug 2018: R1,7 billion), with the operating loss increasing to R494 million (Aug 2018: operating profit of R6 million). This includes the provision raised for future costs on the public sector power project, and a project loss in the Gauteng division, which is now complete. The profit of the equity-accounted United Arab Emirates operation is excluded from this result.


The Mozambique and Coastal divisions continue to deliver positive results.


“In South Africa, the building sector has recently experienced an increase in tender activity, offering a number of opportunities for this business unit in the public and social housing sectors in Gauteng and Western Cape. There are also opportunities in the private sector for commercial, leisure, warehouse and factory developments in KwaZulu-Natal and Western Cape, along with the upgrades planned for the Cape Town- and Oliver Tambo International Airports.” The Mozambique division is pursuing opportunities in the office, residential, factory and surface mine infrastructure in the private sector.


Mechanical & Electricals’ contract revenue decreased to R516 million (Aug 2018: R581 million), with an operating loss of R33 million (Aug 2018: operating profit of R8 million). The operating loss was impacted by project losses incurred on a project in each of the Oil & Gas and Mechanical divisions. Both loss-making projects were completed during the period.


“Opportunities in the traditional petrochemical sector have improved with the release of a number of tender enquiries in preparation for clean fuels projects, which are anticipated to come to market next year. The previously delayed tank farm projects are expected to come to market in the medium term, with ongoing plant maintenance offering opportunities for the Oil & Gas and Electrical & Instrumentation divisions.”


Currently there is a shortage of work of surface mining plant infrastructure projects, which is negatively affecting the Mechanical division’s order book, both locally and cross-border.


The group’s Lost Time Injury Frequency Rate (LTIFR) at August 2019 was 0,01 (Feb 2019: 0,02) and the Recordable Case Rate (RCR) was 0,31 (Feb 2019: 0,36).


In summary, Crawford said the focus would be on resolving the liquidity pressure, developing a restructuring plan and returning the group to profitability. This will include potential asset disposals.


“In terms of the public sector power project, we will continue with the current positive engagements with the client to pursue our contractual rights with the aim of resolving this matter as soon as possible. From an operations perspective, we will maintain our focus on collecting slow-paying receivables and drive the reduction of loss-making contracts.”


– Ends –



Contact:Stefanutti Stocks Holdings Limited

Russell Crawford (CEO)

011 552 4215


Issued and released by: Keyter Rech Investor Solutions

Deborah Chapman 

087 351 3816 / 076 650 4155

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