Stefanutti Stocks Holdings Limited FY 2014 financial results

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Stefanutti Stocks Holdings Limited Listed on the Johannesburg Stock Exchange has released its Full Year Results. Check out
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Stefanutti Stocks Holdings Limited FY 2014 financial results

  1. 1. STEFANUTTI STOCKS HOLDINGS LIMITED (“Stefanutti Stocks” or “the company” or “the group”) (Registration number 1996/003767/06) Share code: SSK ISIN: ZAE000123766 • Revenue R9,5 billion • Operating profit R177 million • Cash generated from operations R600 million • Current order book R12,8 billion REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE 12 MONTHS ENDED 28 FEBRUARY 2014 bridging your expectations www.stefanuttistocks.com STATEMENT OF COMPREHENSIVE INCOME Reviewed Restated 12 months 12 months ended ended Increase/ 28 February 28 February (Decrease) 2014 2013 % R’000 R’000 Revenue 5 9 498 432 9 057 386 Contract revenue 5 9 423 623 8 981 903 Earnings before interest, taxation, depreciation and amortisation (EBITDA) (21) 335 588 424 259 Depreciation (150 442) (195 029) Amortisation of intangible assets (8 405) (10 226) Operating profit before investment income and non-operational item (operating profit) (19) 176 741 219 004 Competition Commission penalty – (323 000) Operating profit/(loss) before investment income 270 176 741 (103 996) Investment income 32 984 36 892 Share of profits of equity-accounted investees 14 229 17 223 Operating profit/(loss) before finance costs 223 954 (49 881) Finance costs (49 447) (60 596) Profit/(loss) before taxation 174 507 (110 477) Taxation (55 683) (51 584) Profit/(loss) for the year 118 824 (162 061) Other comprehensive income 77 889 57 010 Exchange differences on translation of foreign operations (may be reclassified to profit/(loss)) 77 889 57 010 Total comprehensive income/(loss) for the year 196 713 (105 051) Profit/(loss) for the year attributable as follows: Equity holders of the company 118 304 (162 061) Non-controlling interest 520 – 118 824 (162 061) Total comprehensive income/(loss) attributable to: Equity holders of the company 196 165 (105 051) Non-controlling interest 548 – 196 713 (105 051) Earnings/(loss) per share (cents) 67,76 (93,17) Diluted earnings/(loss) per share (cents) 62,90 (86,17) Commentary to the statement of comprehensive income Headline earnings/(loss) reconciliation: Profit/(loss) after taxation attributable to equity holders of the company 118 304 (162 061) Adjusted for: Profit on disposal of associate – (296) Profit on disposal of plant and equipment (9 720) (7 545) Tax effect of adjustments 2 680 2 177 Headline earnings/(loss) 166 111 264 (167 725) Normalised headline earnings reconciliation: Headline earnings/(loss) 111 264 (167 725) Adjusted for: Amortisation of intangibles 8 405 10 226 Tax effect of adjustments (2 217) (2 856) Competition Commission penalty – 323 000 Normalised headline earnings (28) 117 452 162 645 Number of weighted average shares in issue 174 584 799 173 941 097 Number of diluted weighted average shares in issue 188 080 746 188 080 746 Earnings/(loss) per share (cents) 173 67,76 (93,17) Diluted earnings/(loss) per share (cents) 173 62,90 (86,17) Headline earnings/(loss) per share (cents) 166 63,73 (96,43) Diluted headline earnings/(loss) per share (cents) 166 59,16 (89,18) Normalised headline earnings per share (cents) (28) 67,28 93,51 Diluted normalised headline earnings per share (cents) (28) 62,45 86,48 STATEMENT OF CHANGES IN EQUITY Share Share- Foreign capital based currency Revaluation Equity holders Non- and payments translation surplus Retained of the controlling Total R’000 premium reserve reserve reserve earnings company interest equity Balance at 1 March 2012 restated 1 019 843 44 332 (9 707) 27 649 1 031 579 2 113 696 – 2 113 696 Treasury shares disposed 9 066 – – – (405) 8 661 – 8 661 Realisation of share-based payment reserve – (11 220) – – 11 220 – – – Total comprehensive income – – 57 010 – (162 061) (105 051) – (105 051) Loss for the year – – – – (162 061) (162 061) – (162 061) Exchange differences on translation of foreign operations – – 57 010 – – 57 010 – 57 010 Dividends paid – – – – (20 998) (20 998) – (20 998) Balance at 28 February 2013 restated 1 028 909 33 112 47 303 27 649 859 335 1 996 308 – 1 996 308 Treasury shares disposed 2 100 (2 570) – – 2 570 2 100 – 2 100 Realisation of share-based payment reserve – (1 296) – – 1 296 – – – Total comprehensive income – – 77 861 (41) 118 345 196 165 548 196 713 Profit for the year – – – – 118 304 118 304 520 118 824 Realisation of revaluation reserve – – – (50) 50 – – – Tax on realisation of revaluation reserve – – – 9 (9) – – – Exchange differences on translation of foreign operations – – 77 861 – – 77 861 28 77 889 Balance at 28 February 2014 reviewed 1 031 009 29 246 125 164 27 608 981 546 2 194 573 548 2 195 121 BASIS OF PREPARATION AND ACCOUNTING POLICIES The reviewed condensed consolidated results for the year ended 28 February 2014 (results and/or the year) have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), and containing information required by International Accounting Standard (IAS) 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by theAccounting Practices Committee, and in compliance with the Listings Requirements of the JSE Limited. The accounting policies as well as the methods of computation used in the preparation of the results for the year ended 28 February 2014 are in terms of IFRS and are consistent with those applied in the audited annual financial statements for the year ended 28 February 2013, except for the standards and amendments to standards that became effective on 1 January 2013: IFRS 10: Consolidated Financial Statements, IFRS 11: Joint Arrangements, IFRS 12: Disclosure of Interests in Other Entities, IFRS 13: Fair Value Measurement, IAS 19: Employee Benefits, IAS 27: Separate Financial Statements, IAS 28: Investments in Associates and Joint Ventures. With the exception of IFRS 11 and IFRS 13, which have been commented on below, the impact of the other Standards have been assessed and are not considered material. The results are presented in Rand, which is Stefanutti Stocks’ presentation currency. The adoption of IFRS 11 requires restatement of the comparative information, as two entities in the Middle East which were previously proportionately consolidated are now equity accounted in terms of the Standard. The profit from the joint ventures for the year amounted to R10,9 million (Feb 2013: profit of R14,4 million). On 1 March 2012 an investment in joint ventures of R126 million was recognised reflecting the net asset value of the reclassified joint arrangements and cash of R69 million was derecognised. However, these adjustments have not had an impact on the statement of changes in equity. The movement in the investment in joint ventures is mainly as a result of profits or losses and currency fluctuations. In determining the classification of joint arrangements, management considered the following: (a) Contractual agreements with respect to sharing of control; and (b) Whether parties are jointly and severally liable for the joint arrangement’s rights and obligations. The determinants of the fair values in the statement of financial position were considered for the hierarchy disclosure requirements in terms of IFRS 13. Investment property and business combinations are considered to be a Level 3. These results have been compiled under the supervision of the Chief Financial Officer, D Quinn, CA (SA), B.Sc.Econ. Auditors’ review The results have been reviewed by the group’s auditors, Mazars. Their unqualified review opinion is available for inspection at the company’s registered office. Their review was conducted in accordance with ISRE 2410 “Review of interim financial information performed by the independent auditor of the entity.” STATEMENT OF FINANCIAL POSITION Reviewed at Restated at Restated at 28 February 28 February 1 March 2014 2013 2012 R’000 R’000 R’000 ASSETS Non-current assets 2 701 695 2 658 306 2 351 934 Property, plant and equipment 1 147 443 1 136 347 1 018 782 Investment property 68 302 60 794 57 673 Equity-accounted investees 207 312 178 070 142 088 Goodwill and intangible assets 1 266 556 1 273 718 1 124 455 Deferred taxation 12 082 9 377 8 936 Current assets 3 596 602 3 427 547 3 462 896 Other current assets 2 555 325 2 573 190 2 603 283 Taxation 17 240 11 810 5 579 Cash and cash equivalents 1 024 037 842 547 854 034 Total assets 6 298 297 6 085 853 5 814 830 EQUITY AND LIABILITIES Equity 2 195 121 1 996 308 2 113 696 Equity holders of the company 2 194 573 1 996 308 2 113 696 Non-controlling interest 548 – – Non-current liabilities 433 088 664 059 281 770 Other financial liabilities – Interest-bearing 348 951 574 415 213 073 Other financial liabilities – Non-interest-bearing 3 799 3 784 7 493 Deferred tax liabilities 80 338 85 860 61 204 Current liabilities 3 670 088 3 425 486 3 419 364 Other current liabilities* 1 923 718 1 939 740 1 844 541 Provisions 1 676 039 1 431 910 1 496 106 Taxation 49 704 47 522 46 199 Bank overdrafts 20 627 6 314 32 518 Total equity and liabilities 6 298 297 6 085 853 5 814 830 * including interest-bearing liabilities of 309 929 360 951 146 737 STATEMENT OF CASH FLOWS Reviewed Restated 12 months 12 months ended ended 28 February 28 February 2014 2013 R’000 R’000 Cash generated from operations 600 280 298 538 Interest received 32 984 36 829 Finance costs (49 447) (60 596) Dividends paid – (20 991) Dividends received 18 043 2 167 Taxation paid (71 520) (66 621) Cash flows from operating activities 530 340 189 326 Expenditure to maintain operating capacity (9 203) (67 824) Expenditure for expansion (128 865) (386 525) Cash flows from investing activities (138 068) (454 349) Cash flows from financing activities (276 186) 240 217 Net increase/(decrease) in cash for the year 116 086 (24 806) Effect of exchange rate changes on cash and cash equivalents 51 091 39 523 Cash at beginning of period 836 233 821 516 Cash and cash equivalents at the end of the year 1 003 410 836 233 SEGMENT INFORMATION Roads, Pipelines Recon- & Mining ciling R’000 Structures Services Building M&E segments Total 28 February 2014 reviewed Contract revenue 2 637 106 2 428 473 3 147 678 1 210 366 – 9 423 623 Inter-segment contract revenues 36 054 23 690 – 38 319 – 98 063 Reportable segment profit/(loss) 98 164 133 519 (102 122) 692 (11 429) 118 824 Reportable segment assets 1 455 911 1 239 823 1 784 986 501 747 1 315 830 6 298 297 28 February 2013 restated Contract revenue 2 737 738 2 301 647 3 232 565 709 953 – 8 981 903 Inter-segment contract revenues 41 708 43 734 1 239 58 134 – 144 815 Reportable segment profit/(loss) 112 608 128 770 (22 948) (34 624) (345 867) (162 061) Reportable segment assets 1 542 513 1 276 940 1 525 285 478 277 1 262 838 6 085 853 Group profile Stefanutti Stocks, a leading construction company, operates throughout South Africa, sub-Saharan Africa and the Middle East with multi-disciplinary expertise including concrete structures, marine construction, piling and geotechnical services, roads and earthworks, bulk pipelines, mine residue disposal facilities (mainly tailings dams), open pit contract mining, all forms of building works including affordable housing, mechanical and electrical installation and construction, as well as power line transmission and distribution construction. COMMENTARY All business units, with the exception of Building, have performed to management’s expectation. The Stefanutti Stocks board of directors, together with management, continues to review each business unit and its respective divisions and has taken the necessary action to ensure sustainable profitability. This process is ongoing and will remain the group’s top priority. Overview of results Contract revenue of R9,4 billion increased marginally (Feb 2013: R9,0 billion). Operating profit declined to R177 million (Feb 2013: R219 million before Competition Commission penalty). The operating margin reduced from 2,4% (before Competition Commission penalty) to 1,9%. The group’s order book has strengthened and currently stands at R12,8 billion. The group posted an after-tax profit of R118 million (Feb 2013: R162 million loss after Competition Commission penalty). Interest-bearing liabilities have decreased by 30% to R659 million (Feb 2013: R935 million) as a result of the repayment of a portion of the loan required for the acquisition of Cycad Pipelines Proprietary Limited, repayment of the first instalment under the Competition Commission penalty agreement and continuing instalment sales finance repayments, mainly in the RPM business unit. This has resulted in a decrease in finance costs for the year. The increase in provisions arose from increased contract activities and the terms of certain contracts. Earnings per share of 67,8 cents (Feb 2013: 93,2 cents loss) and diluted headline earnings per share of 59,2 cents (Feb 2013: 89,2 cents loss) increased by 173% and 166% respectively year-on-year. However, after excluding the effect of the Competition Commission penalty in the previous year, normalised year-on- year headline earnings per share decreased by 28% from 93,5 cents to 67,3 cents. Capital expenditure for the year was R195 million (Feb 2013: R237 million), resulting in a reduced depreciation charge. The non-controlling interest represents the minority interest in the recently formed Nigerian company. The group improved its cash position to R1 billion (Feb 2013: R836 million) at year-end. This cash on hand exceeded total interest-bearing debt, resulting in a nil net gearing position. Furthermore, the group generated cash from operations of R600 million (Feb 2013: R299 million), of which R35 million was contributed by an inflow of working capital (Feb 2013: R69 million consumed by working capital). Dividends of R18 million (Feb 2013: R2 million) were received from equity-accounted investees. Goodwill and intangible assets decreased slightly after the amortisation charge of R8 million (Feb 2013: R10 million) to R1,3 billion (Feb 2013: R1,3 billion). The decrease in the amortisation charge is due to contract related intangibles having been fully amortised in the prior year. As a result of a decrease in interest rates, combined with a change in the mix between local and foreign cash balances, investment income reduced to R33 million from R37 million. The devaluation of the Rand during the year has had a positive effect on the translation of foreign operations, cash balances, equity accounted investees and investment property at year-end. Review of operations Structures Structures performed well in the current market. It ended the financial year with a marginal year-on-year decrease in revenue of R2,6 billion (Feb 2013 R2,7 billion), with an operating profit of R128 million being lower than the comparative period (Feb 2013: R141 million). Profit margins declined to 4,9% from 5,2% due to difficult market conditions. Large government infrastructure projects and mining surface infrastructure work remain scarce. A number of medium-sized tenders have come to market during the year but in highly competitive conditions. Within this environment, the Marine, Civils and Civils KwaZulu-Natal divisions performed well. At year-end Structures’ order book was R2,0 billion (Feb 2013: R1,8 billion). Two marine tenders to the value of R700 million were secured subsequent to year-end. Cross-border marine and other infrastructure projects offer short-term prospects, while medium-term local and cross-border opportunities exist in the oil and gas sector. Roads, Pipelines & Mining Services (RPM) RPM produced a commendable performance with contract revenue improving to R2,4 billion (Feb 2013: R2,3 billion), with an operating profit of R189 million (Feb 2013: R177 million). Its operating profit margin increased from 7,7% to 7,8%. The Roads and Earthworks and Swaziland divisions results were pleasing and performed according to expectations. The Mining Services division has performed well. The order book is currently under pressure, but this situation should be resolved once anticipated contract awards are made. These awards are dependent upon receipt of approved integrated water usage licences by certain clients. The Pipeline division ended the year with a loss due to unprofitable projects, and lack of deal flow. Prior to year end it was awarded contracts to the value of R460 million, thereby significantly increasing its order book for the coming year. Various medium-sized contracts that fall within this Business Unit’s scope of operations continue to come to the marketplace. Focus will be maintained on securing larger cross-border road projects. RPM’s order book at year-end improved year-on-year to R5,0 billion (Feb 2013: R3,1 billion). In addition to expected contract awards in Zambia to the value of R1,2 billion, local contract awards to the value of R350 million are anticipated in the short term. Building The Building business unit delivered disappointing results and ended the financial year with revenue of R3,1 billion (Feb 2013: R3,2 billion), with an operating loss of R151 million (Feb 2013: operating loss R55 million). Of these losses, R90 million occurred in the Mozambique and Inland divisions, and arose as a result of inadequate project execution and the closing out of certain loss making historical contracts. Management action has been taken to address these matters. Labour unrest has contributed to setbacks to the Cecilia Makiwane Hospital project in East London. Trading conditions for the Inland and Coastal divisions remain competitive. The business unit is also attending to significant contractual claims on two large projects. The Housing and KwaZulu-Natal divisions produced commendable results. Projects in Namibia, Botswana and Malawi have all operated profitably. However, lack of deal flow in Botswana and Malawi has required the businesses in these regions to scale down operations. Although the Middle East operation generated a small loss in the current year, the upturn in the Dubai market will allow the group to retain its presence and expand its current offering over the medium to long term. Whilst the infrastructure market in Qatar has improved, this has not extended to the building sector in which we are currently operating. Building’s order book at year-end was R4,0 billion (Feb 2013: R3,1 billion). Good growth is expected in the Housing, KwaZulu-Natal and Mozambique divisions, which have strong order books for the coming year. All current Mozambique contracts are profitable and performing well. The Namibian business is now well established and has good short- to medium-term prospects. The Inland division will be focusing on a number of large commercial and industrial projects. Mechanical & Electrical (M&E) This business unit’s performance showed a significant improvement when compared to the prior year. Contract revenue was R1,2 billion (Feb 2013: R710 million), reporting an operating profit of R1,3 million (Feb 2013: R51 million operating loss). The Mechanical and Oil and Gas divisions performed well during the year despite difficult market conditions. The latter division is now fully established and is expected to grow its business in the coming year. The Electrical and Instrumentation division (E&I) has stabilised. All historical unprofitable projects have been completed which has resulted in a significant reduction in year-on-year losses. With its capacity strengthened by the recent acquisition of Energotec, this division is well positioned to deliver positive results in financial year 2015. The former Power Business Unit, which has suffered loss-making projects and an ongoing lack of deal flow from the national energy provider has been scaled down and incorporated as a division of M&E with effect from 1 March 2014. M&E’s order book at year-end was R643 million (Feb 2013: R473 million). Safety During the year, the group improved its safety performance once again achieving a disabling injury frequency rate (DIFR) of 0,16 (Feb 2013: 0,18) its best ever safety performance since the group commenced recording statistics. The group remains committed to providing a safe and healthy work environment for all employees, contractors and stakeholders with the ultimate aim of “Zero Harm” and the DIFR for 2015 remains benchmarked at 0,1. Acquisitions With effect from 1 August 2013, the group acquired plant and equipment, intangible assets and liabilities relating to Energotec, the electrical and instrumentation business of First Strut (RF) Limited, at a cost of R1 million. Energotec is an installer of electrical and instrumentation solutions and operates primarily within the petro-chemical industry. This business complements the group’s existing electrical and instrumentation activities. Energotec Acquisition date 1 August 2013 Fair value At acquisition values R’000 Non-current assets 3 141 Plant and equipment 3 041 Intangible assets 100 Current liabilities – accruals (3 284) Net asset value (143) Cost of acquisition – cash paid 1 000 Goodwill arising on acquisition 1 143 Acquisition-related costs 796 It is impractical to report any revenue, profit or loss for Energotec as only certain fixed assets, payroll liabilities and human capital expertise were acquired and integrated into the group’s existing electrical and instrumentation operation. The goodwill arises from the acquisition of a well-established and reputable operation with its associated skilled workforce. This allows the group to strengthen its position in the electrical and instrumentation market, specifically within the petro-chemical sector. Subsequent events No material reportable events have occurred between the reporting date and the date of this announcement. Outlook and strategy Despite the fact that the prevailing subdued conditions in the infrastructure market are expected to continue for the next twelve months, PRASA has just released its first two rail station upgrade tenders to the market, with more expected to follow. Road projects locally and cross-border will continue to offer opportunities. The group’s order book will be supported by medium-sized projects that continue to come to the marketplace. With the historical problem contracts having been addressed in the respective business units, Stefanutti Stocks is now well placed to manage the current economic and market challenges. The group will continue to pursue opportunities for its multi-disciplinary services locally and in sub-Saharan Africa. It will maintain its focus on existing operations, but will explore new ventures and markets that arise on the back of existing client relationships. Dividend declaration Notice is hereby given that no final dividend will be declared. Appreciation We would like to thank the board, the management team and all of our employees for their dedication and valued contributions during the year. We also thank our shareholders, business partners and other stakeholders for their ongoing support of the group. On behalf of the board Gino Stefanutti Willie Meyburgh Chairman Chief Executive Officer 16 May 2014 Directors: Non-executive directors: B Stefanutti (Chairman), NJM Canca# , KR Eborall# , ZJ Matlala# , T Eboka# , V Cuba# , LB Sithole# JWLM Fizelleˆ# (alternate to LB Sithole) Executive directors: W Meyburgh (Chief Executive Officer), DG Quinnˆ (Chief Financial Officer) # Independent ˆIrish Registered office: Protec Park, Corner Zuurfontein Avenue and Oranjerivier Drive, Kempton Park, 1619 (PO Box 12394, Aston Manor, 1630) Corporate advisor and sponsor: Bridge Capital Advisors Proprietary Limited 2nd Floor, 27 Fricker Road, Illovo Boulevard, Illovo, 2196 (PO Box 651010, Benmore, 2010) Transfer secretaries: Computershare Investor Services Proprietary Limited 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) Auditors: Mazars Mazars House, 5 St David’s Place, Parktown, 2193 (PO Box 6697, Johannesburg, 2000) Company secretary: W Somerville 20 Lurgan Road Parkview, 2193

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