| Mon 19 May 2008, 7:00 | | SFB - Stefanutti & Bressan Holdings - Reviewed Con |
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SFB
SFB
SFB - Stefanutti & Bressan Holdings - Reviewed Condensed Consolidated Financial
Results For The Year Ended 29 February 2008
STEFANUTTI & BRESSAN HOLDINGS LIMITED
("Stefanutti & Bressan" or "the company" or "the group")
(Registration number 1996/003767/06)
Share code: SFB
ISIN: ZAE000101903
REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY
2008
- Revenue up 51%
- Operating profit up 162%
- Headline earnings up 272%
- EPS up 24% on forecast
- Cash on hand R662,9 million
- Profitability ahead of pre-listing forecasts
- Three acquisitions successfully concluded
- Post year-end acquisition of Stocks Limited
Condensed group income statement
Reviewed Audited
12 months to 12 months to
% 29 February 28 February
R`000 increase 2008 2007
Revenue 51 2 544 923 1 688 652
Earnings before interest, 217 316 84 483
taxation, depreciation and
amortisation (EBITDA)
Depreciation (30 925) (14 150)
Amortisation of intangible (2 087) -
assets
Operating profit 162 184 304 70 333
Investment income 41 130 12 779
Finance costs (18 476) (7 822)
Share of profits from associate 1 409 -
company
Profit before taxation 177 208 367 75 290
Taxation (63 949) (38 041)
Profit for the year 288 144 418 37 249
Attributable to:
Equity holders of the company 134 919 36 275
Minority shareholders 9 499 974
144 418 37 249
Headline earnings
reconciliation
Profit after taxation 134 919 36 275
attributable to equity holders
of the company
Adjusted for:
Plus IAS 16 impairment of land - 668
and buildings
Plus/(less) IAS 16 818 (665)
loss/(profit) on disposal of
plant and equipment
Tax effect of adjustment (237) 96
Total minority interest of (90) 15
adjustments
Headline earnings 272 135 410 36 389
Normalised headline earnings
reconciliation
Headline earnings 135 410 36 389
Adjusted for:
Cost of BEE credentials - 30 000
Plus IFRS 2 share-based 10 905 -
incentive scheme expense
Plus IFRS 3 amortisation of 2 087 -
intangibles
Tax effect of adjustments (584) -
Normalised headline earnings 147 818 66 389
Weighted average shares in 130 634 200 108 882 933
issue
Diluted weighted average shares 135 970 022 108 882 933
in issue
Earnings per share (cents) 210 103,28 33,32
Diluted earnings per share 99,23 33,32
(cents)
Headline earnings per share 210 103,65 33,42
(cents)
Diluted headline earnings per 99,59 33,42
share (cents)
Normalised headline earnings 113,15 60,97
per share (cents)
Diluted normalised headline 108,71 60,97
earnings per share (cents)
Condensed group balance sheet
Reviewed Audited
at at
29 February 28 February
R`000 2008 2007
ASSETS
Non-current assets
Property, plant and equipment 358 129 151 084
Intangible assets 155 950 59 091
Deferred taxation 31 649 2 961
Current assets 1 286 701 573 319
Bank balances 662 983 217 518
Other current assets 619 227 355 789
Taxation 4 491 12
Total assets 1 832 429 786 455
EQUITY AND LIABILITIES
Ordinary shareholders` interest 590 682 213 473
Minority shareholders` interest 25 091 2 210
Total equity 615 773 215 683
Non-current liabilities 136 719 55 674
Other financial liabilities 69 893 30 399
Vendors for acquisition 37 545 -
Deferred taxation 29 281 25 275
Current liabilities 1 079 937 515 098
Bank overdraft - 11 958
Other current liabilities 603 568 364 859
Provisions 390 561 112 268
Taxation 85 808 26 013
Total equity and liabilities 1 832 429 786 455
Net shares in issue 139 380 867 119 189 200
Total shares in issue 148 355 867 119 189 200
Net asset value per share (cents) 423,79 179,10
Net tangible asset value per share 311,90 129,53
(cents)
Diluted net asset value per share (cents) 398,15 179,10
Diluted net tangible asset value per 293,03 129,53
share (cents)
Group statement of changes in equity
Foreign
Issued currency
capital Share-based translation
R`000 and premium payments reserve
Balance at 1 March 121 234 - -
2006 Audited
Premium on issue of 5 022 - -
ordinary shares
Impairment of land - - -
and buildings
Acquisition of - - -
minority interest
Net profit for the - - -
year
Premium on issue of 60 000 - -
preference shares
Share buy-back (8 311) - -
Revaluation of land - - -
and buildings
Translation of - - (78)
foreign subsidiary
Dividends paid - - -
Balance at 1 March 177 945 - (78)
2007 Audited
Premium on issue of 350 000 - -
ordinary shares
Less listing (11 730) - -
expenses written
off against share
premium account
Less capital (30 000) - -
distribution from
share premium
account
Effect of (61 850) - -
consolidating the
S&B Share Incentive
Trust
Employee share - 10 905 -
options
Net profit for the - - -
year
Dividends paid - - -
Translation of - - (35)
foreign subsidiary
Minority interest - - -
acquired
Balance at 29 424 365 10 905 (113)
February 2008
Reviewed
Minority
Revaluation Retained shareholder
R`000 surplus earnings interest Total
Balance at 1 March 2 778 33 430 2 011 159 453
2006 Audited
Premium on issue of - - - 5 022
ordinary shares
Impairment of land (193) - - (193)
and buildings
Acquisition of - - (643) (643)
minority interest
Net profit for the - 36 275 974 37 249
year
Premium on issue of - - - 60 000
preference shares
Share buy-back - - - (8 311)
Revaluation of land 986 - 103 1 089
and buildings
Translation of - - (235) (313)
foreign subsidiary
Dividends paid - (37 670) - (37 670)
Balance at 1 March 3 571 32 035 2 210 215 683
2007 Audited
Premium on issue of - - - 350 000
ordinary shares
Less listing - - - (11 730)
expenses written off
against share
premium account
Less capital - - - (30 000)
distribution from
share premium
account
Effect of - - - (61 850)
consolidating the
S&B Share Incentive
Trust
Employee share - - - 10 905
options
Net profit for the - 134 919 9 499 144 418
year
Dividends paid - (15 000) - (15 000)
Translation of - - (40) (75)
foreign subsidiary
Minority interest - - 13 422 13 422
acquired
Balance at 29 3 571 151 954 25 091 615 773
February 2008
Reviewed
Condensed group cash flow statement
Reviewed Audited
12 months to 12 months to
29 February 28 February
R`000 2008 2007
Cash flows from operating activities 407 448 93 428
Expenditure to maintain operating (161 838) (63 290)
capacity
Expenditure for expansion (89 892) (5 022)
Cash flows from investing activities (251 730) (68 312)
Cash flows from financing activities 301 705 79 199
Net increase in cash for the year 457 423 104 315
Cash at beginning of year 205 560 101 245
Net cash at end of year 662 983 205 560
Segmental reporting
Primary segments
29 February 2008
KwaZulu Western Outside
R`000 Gauteng Natal Cape South Total
Africa
Total assets 1 334 245 222 424 127 031 148 729 1 832 429
Total 786 893 182 323 117 002 130 438 1 216 656
liabilities
Revenue 1 535 855 578 560 160 033 270 475 2 544 923
Profit for 88 440 32 271 8 623 15 084 144 418
the year
Secondary segments
29 February 2008
R`000 Revenue Total assets
Building and Piling 888 262 356 108
Civils, Earthworks & Mining 1 656 661 1 476 321
Services
Total 2 544 923 1 832 429
Commentary
Introduction
The directors are pleased to present the group`s maiden annual financial results
since listing for the year ended 29 February 2008 ("the year"). These results
reflect profitability 25% and operating margin 9% ahead of forecasts set out in
the company`s pre-listing prospectus.
Stefanutti & Bressan successfully debuted on the JSE Limited on 3 August 2007
and has since traded at a significant premium to the pre-listing private
placement price of R12 a share and posted good trading volumes.
During the year Stefanutti & Bressan further successfully concluded three
acquisitions in the disciplines of Mining Services and Concrete Structures,
which have been well integrated into the group`s operations. Subsequent to year-
end the company announced a proposed merger with construction group Stocks
Limited ("Stocks") to be effected through the acquisition of Stocks for R1,1
billion (see `Post balance sheet events` below).
Basis of preparation
The condensed consolidated annual financial statements for the year have been
prepared in compliance with International Financial Reporting Standards
("IFRS"), IAS 34 and the requirements of the South African Companies Act 1973.
The accounting policies and method of measurement and recognition applied in
preparation of the condensed consolidated annual financial statements are
consistent with those applied in the group`s most recent audited annual
financial statements for the year ended 28 February 2007 ("the previous year"),
which comply with IFRS.
Auditor`s review
The condensed consolidated annual financial statements for the year have been
reviewed by the company`s auditors, Mazars Moores Rowland. Their unqualified
review opinion is available for inspection at the company`s registered office.
Group profile
Stefanutti & Bressan operates throughout Southern Africa with expertise spanning
concrete structures and rehabilitation, roads and earthworks, piling and
geotechnical services, mine residue disposal facilities (tailings dams),
opencast contract mining, building works and mechanical, electrical and marine
construction. Its spectrum of projects ranges across industrial and
petrochemical plants, cooling towers for power stations, mine infrastructure,
dams, roads, bridges, water and effluent treatment plants, township
infrastructure and industrial, commercial and select residential buildings.
With the proposed acquisition of Stocks (see `Post balance sheet events` below)
the group will significantly increase its scale and critical mass, in particular
within its building discipline, enabling Stefanutti & Bressan to secure even
larger and more complex projects.
Review of operations
Concrete Structures
This division accounts for the largest contribution to group revenue and
performed strongly. The market for heavy civil engineering construction services
has seen significant improvement during the past 12 months with good growth
expected to continue.
Roads and Earthworks
Roads and Earthworks continued to perform well during the year. The outlook for
this division remains extremely positive, with revenue expected to escalate in
the year ahead as a result of ongoing demand.
Piling
The division reflected healthy profitability for the year, with healthy growth
expected to continue for the year ahead.
Mining Services
With the integration of Environmental, Civil and Mining Projects (Pty) Limited
("ECMP`) into the group`s operations (see `Acquisitions` below) Mining Services
is well positioned to benefit from robust growth in the mining and minerals
processing sectors on the back of global demand for commodities. Construction of
large mine infrastructure projects currently underway is progressing well, with
the expectation of further similar contracts in the future.
Building
This division achieved results in line with expectations, with the exception of
two residential apartment contracts which impacted negatively on margins. Both
contracts are now complete. For the year ahead Building is well positioned to
capitalise on new opportunities and projects.
Acquisitions
Prior to listing with effect from 3 April 2007, the company acquired 100% of the
shareholding in ECMP. The acquisition has been fully integrated into the group`s
Mining Services operations with ECMP being a civil engineering company
specialising in mine residue disposal facilities and open-cast contract mining
activities.
Further to the announcements of 19 September 2007 and 18 January 2008 regarding
the acquisition of majority stakes in mechanical and electrical construction
specialists Skelton & Plummer Investment Holding Company (Pty) Limited ("Skelton
& Plummer") and in Civil & Coastal Construction (Pty) Limited ("Civil &
Coastal") - marine construction experts, all conditions precedent have been met
and the transactions successfully concluded. The 80,3% stake in Skelton &
Plummer was acquired with effect from 2 January 2008 while the acquisition of a
51% stake in Civil & Coastal was effective from 1 November 2007.
In terms of IFRS 3: Business Combinations the initial accounting for the
acquisitions of Skelton & Plummer and Civil & Coastal has only been determined
provisionally, as the Purchase Price Allocation has not been completed.
ECMP Skelton & Civil &
Plummer Coastal
Acquisition date 3 April 2 January 1 November
2007 2008 2007
Voting equity (%) 100,0 80,3 51,0
Number of shares issued - - -
At acquisition values R`000 R`000 R`000
Non-current assets 55 624 12 279 16 538
Current assets 44 272 73 847 34 504
Non-current liabilities (19 042) (4 039) (2 863)
Current liabilities (69 430) (49 312) (39 987)
Net asset value acquired 11 424 32 775 8 192
Cost of acquisition 67 034 52 826 20 722
Minorities arising on acquisition - (6 457) (4 015)
Intangible arising on acquisition 6 261 - -
Goodwill arising on acquisition 49 349 26 508 16 545
Cash paid 29 489 44 796 20 722
Profit after taxation since 32 948 4 506 9 008
acquisition
During May 2008 a top-up payment of R8,0 million will be made to the vendors of
Skelton & Plummer. After 31 March 2009 a final payment for ECMP based on average
earnings after taxation of the previous three years will be made, equating to
R37,5 million.
Post balance sheet events
As previously announced on 11 March 2008 and 5 May 2008 Stefanutti & Bressan has
concluded binding agreements for the acquisition of the entire ordinary issued
share capital of Stocks, one of South Africa`s leading construction businesses
for 63 years with activities spread across Southern Africa and the Gulf region.
The acquisition will position the enlarged group as a major competitor in the
first-tier construction sector with almost R5 billion turnover and 8 000
employees, and will further expand Stefanutti & Bressan`s geographical footprint
to include the Gulf region in which Stocks has long-established niche businesses
in fit-out contracting and electromechanical services.
Stocks specialises in commercial buildings including airports, office parks,
shopping centres and hotels as well as affordable housing for major mining and
industrial clients.
Stefanutti & Bressan will settle the purchase consideration through a
combination of cash and shares. In total 39 724 880 Stefanutti & Bressan shares
will be issued at R18,60 a share to Stocks management and BEE shareholder
Leswikeng Building (Pty) Limited. Consequently BEE shareholding in Stefanutti &
Bressan will increase to 18,3%.
As the conclusion of the acquisition is subject to certain remaining conditions
precedent, it is impracticable to provide the disclosure requirements of IFRS 3:
Business Combinations - Post Balance Sheet at this stage.
Financial results
Results for the year exceed the pre-listing forecasts. Group revenue increased
by 51% to R2,5 billion (2007: R1,7 billion) while operating profit increased by
162% to R184,3 million (2007: R70,3 million). Net profit after tax was up to
R144,4 million from R37,2 million in the previous year, reflecting an increase
of 24,6% above the pre-listing forecast.
Headline earnings of R135,7 million for the year translated into headline
earnings per share of 103,65 cents (2007: 33,32 cents), 24,2% ahead of the pre-
listing forecast.
A share-based incentive scheme expense of R10,9 million as required by IFRS 2:
Share-based Payment and a customer related intangible amortisation cost of R2,1
million as required by IFRS 3: Business Combinations, are included in earnings
for the year.
Cash on hand increased to R662,9 million.
Prospects
In light of unprecedented sector growth and continued robust market conditions
the group remains confident of future growth. Stefanutti & Bressan is set to
benefit from government`s fast-tracking of infrastructure spend including on
electricity, roads, ports and railways. In addition the group expects to benefit
from investment backlogs in major municipal infrastructure such as water and
wastewater purification plants.
The group further expects to participate significantly in Eskom`s capital
expansion programme and is currently tendering on a number of power-related
projects. Additional opportunities include further coal-fired power stations and
the proposed Eskom nuclear programme roll-out. Stefanutti & Bressan also
anticipates continued private sector spending on capital projects in the
commodities, petrochemical and manufacturing industries, in which the group is
well-positioned to participate.
The acquisition of Stocks, once concluded, is set to significantly strengthen
Stefanutti & Bressan`s offering. The combined skills pool, particularly at
management level where an industry-wide skills shortage is set to continue, will
boost capacity and provide a clear competitive advantage. In addition Stocks`
strong focus on building will bolster Stefanutti & Bressan`s relatively smaller
operations in this field. Further Stocks` established US Dollar-revenue stream
from the Gulf operations will act as a rand hedge for the group, with its
foothold in the high-growth region providing an opportunity for the group to
penetrate other niche markets in the Gulf region, and leverage its full services
offering.
Notwithstanding the prospects for strong future growth management is conscious
of the constraints which factors such as the skills shortage, electricity supply
and rising interest rates may have on future growth.
The order book currently stands at R3,8 billion.
Dividend policy
In line with group policy set out in the pre-listing prospectus, an annual
dividend will not be declared before conclusion of the current financial year
ending February 2009.
Company secretary
A Cocciante was appointed as company secretary with effect from 12 May 2008
following the resignation of MRM Financial Services (Pty) Limited.
Appreciation
We welcome the new employees that have joined Stefanutti & Bressan following the
acquisitions during the year and thank all our employees whose hard work and
dedication have been integral to the achievement of these results. We also thank
our business partners and advisors for their ongoing support and our fellow
directors for their wise counsel.
On behalf of the board
Gino Stefanutti Willie Meyburgh
Executive Chairman Chief Executive Officer
19 May 2008
Directors:
B Stefanutti (Executive Chairman); W Meyburgh (Chief Executive Officer); D
Quinn> (Financial Director); N Canca*; K Eborall*;
M Mkwanazi*; LB Sithole*
*Non-executive director > Irish
Registered office:
MRM Financial Services (Pty) Limited, MRM Office Park, 10 Village Road, Kloof,
3610 (PO Box 12394, Aston Manor, 1630)
Sponsor:
Bridge Capital Advisors (Pty) Limited, 2nd Floor, 27 Fricker Road, Illovo
Boulevard, Illovo, 2196
(PO Box 651010, Benmore, 2010)
Transfer secretaries:
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg,
2001
(PO Box 61051, Marshalltown, 2107)
Company secretary:
A Cocciante, Protec Park, Cnr Zuurfontein & Oranjerivier Drive, Kempton Park,
1619
(PO Box 12394, Aston Manor, 1630)
Investor relations:
Envisage Investor & Corporate Relations
www.stefanutti.co.za
Date: 19/05/2008 07:00:02 Produced by the JSE SENS Department.
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