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SSK
SSK
SSK - Stefanutti Stocks - Reviewed Condensed Consolidated Interim Results For
The Six Months Ended 31 August 2009
STEFANUTTI STOCKS HOLDINGS LIMITED
("Stefanutti Stocks" or "the company" or "the group")
(Registration number 1996/003767/06)
Share code: SSK & ISIN: ZAE000123766
REVIEWED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED
31 AUGUST 2009
* Revenue up 56%
* Operating profit up 46%
* Headline earnings up 48%
* Diluted HEPS up 22%
* Cash on hand R1,3 billion
* Interim dividend of 25 cents per share
STATEMENT OF COMPREHENSIVE INCOME
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
% 2009 2008 2009
increase R`000 R`000 R`000
Revenue 56 4 000 106 2 570 080 6 316 570
Contract revenue 55 3 936 682 2 536 374 6 212 899
Contract costs (3 396 778) (2 145 486) (5 266 004)
Contract gross
profit 539 904 390 888 946 895
Other income 21 580 1 998 20 784
Operating costs (240 698) (172 932) (435 841)
Earnings before
interest,
taxation,
depreciation and
amortisation
(EBITDA) 46 320 786 219 954 531 838
Depreciation (56 485) (40 905) (100 896)
Amortisation of
intangible assets (7 175) (2 770) (38 751)
Operating profit 46 257 126 176 279 392 191
Investment income 44 695 34 309 74 879
Finance costs (16 574) (11 905) (30 535)
Share of profits/
(losses) from
associate company 138 729 (703)
Profit before
taxation 285 385 199 412 435 832
Taxation (87 306) (56 750) (116 414)
Profit for the
period 198 079 142 662 319 418
Other
comprehensive
income (44 446) 1 702 44 724
Exchange
differences on
translating
foreign operations (44 446) 1 702 42 743
Gains on property
revaluation - - 1 981
Income tax
relating to
components of
other
comprehensive
income - - (555)
Total
comprehensive
income
for the period 153 633 144 364 363 587
Profit
attributable to:
Equity holders of
the company 50 196 304 131 043 297 525
Minority
shareholders 1 775 11 619 21 893
39 198 079 142 662 319 418
Total
comprehensive
income
attributable to:
Equity holders of
the company 151 858 132 745 341 694
Minority
shareholders 1 775 11 619 21 893
153 633 144 364 363 587
Earnings per share
(cents) 111,94 89,77 184,27
Diluted earnings
per share (cents) 104,37 84,46 173,56
Commentary to the
statement of
comprehensive
income
Headline earnings
reconciliation
Profit after
taxation
attributable to
equity
holders of the
company 196 304 131 043 297 525
Adjusted for:
Gain on bargain
purchase (1 154) - -
(Profit)/loss on
disposal of plant
and equipment (273) 1 292 2 423
Tax effect of
adjustments 76 (362) (678)
Total minority
interest of
adjustments 4 29 (3)
Headline earnings 48 194 957 132 002 299 267
Normalised
headline earnings
reconciliation
Headline earnings 194 957 132 002 299 267
Adjusted for:
Amortisation of
intangibles 7 175 2 770 38 751
Tax effect of
adjustments (1 933) (775) (10 849)
Total minority
interest of
adjustments (81) (257) -
Normalised
headline earnings 50 200 118 133 740 327 169
Number of weighted
average
shares in issue 175 369 440 145 980 140 161 464 960
Number of diluted
weighted average
shares in issue 188 080 746 155 159 576 171 428 947
Earnings per share
(cents) 25 111,94 89,77 184,27
Diluted earnings
per share (cents) 24 104,37 84,46 173,56
Headline earnings
per share (cents) 23 111,17 90,42 185,35
Diluted headline
earnings per
share (cents) 22 103,66 85,08 174,57
Normalised
headline earnings
per share (cents) 25 114,11 91,62 202,63
Diluted normalised
headline
earnings per share
(cents) 23 106,40 86,20 190,85
STATEMENT OF FINANCIAL POSITION
Reviewed Reviewed Audited
at at at
31 August 31 August 28 February
2009 2008 2009
R`000 R`000 R`000
ASSETS
Non-current assets 2 034 170 1 926 956 2 000 566
Property, plant and equipment 800 013 703 926 763 246
Goodwill and intangible assets 1 157 426 1 183 115 1 161 544
Investment in associates 17 451 15 097 15 795
Long-term loan receivable - 964 -
Deferred taxation 59 280 23 854 59 981
Current assets 3 127 775 2 444 951 3 023 474
Bank balances 1 330 068 873 418 1 381 314
Other current assets 1 791 708 1 570 431 1 639 654
Taxation 5 999 1 102 2 506
Total assets 5 161 945 4 371 907 5 024 040
EQUITY AND LIABILITIES
Capital and reserves 1 584 756 1 441 185 1 613 258
Ordinary shareholders`
interest 1 565 818 1 405 012 1 574 049
Minority shareholders`
interest 18 938 36 173 39 209
Non-current liabilities 205 376 223 836 227 107
Interest-bearing liabilities 126 976 187 940 160 953
Deferred taxation 78 400 35 896 66 154
Current liabilities 3 371 813 2 706 886 3 183 675
Bank overdraft 1 270 6 018 47 437
Other current liabilities 1 949 104 1 824 179 1 870 555
Provisions 1 308 706 770 647 1 172 207
Taxation 112 733 106 042 93 476
Total equity and liabilities 5 161 945 4 371 907 5 024 040
Commentary to the financial
position
Total number of net shares in
issue 174 558 683 177 912 105 175 859 983
Total number of shares in
issue 188 080 746 188 080 746 188 080 746
Net asset value per ordinary
share (cents) 897,01 789,72 895,06
Net tangible asset value per
ordinary share (cents) 233,96 124,72 234,56
Diluted net asset value per
ordinary share (cents) 832,52 747,03 836,90
Diluted net tangible asset
value per ordinary share
(cents) 217,14 117,98 219,32
STATEMENT OF CASH FLOWS
Reviewed Reviewed Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2009 2008 2009
R`000 R`000 R`000
Cash generated from operations 386 146 425 932 1 142 717
Interest received 44 695 34 309 74 879
Finance costs (16 574) (11 905) (30 535)
Dividends (paid)/received (116 445) (1 487) 23
Taxation paid (46 605) (45 604) (152 980)
Secondary tax on companies paid (11 987) (64) (1 064)
Cash flows from operating
activities 239 230 401 181 1 033 040
Expenditure to maintain operating
capacity (55 278) (233 575) (343 187)
Expenditure for expansion (110 784) (87 577) (121 564)
Cash flows from investing
activities (166 062) (321 152) (464 751)
Cash flows from financing
activities (33 032) 124 388 65 995
Net increase in cash for period 40 136 204 417 634 284
Effect of exchange rate changes on
cash and cash equivalents (45 215) - 36 610
Cash at beginning of period 1 333 877 662 983 662 983
Net cash at end of period 1 328 798 867 400 1 333 877
SEGMENT INFORMATION
Roads
R`000 &
31 August 2009 Structures Building Earthworks
Revenue 1 262 598 1 887 529 576 481
Intersegment contract
revenues 23 379 - 24 011
Reportable segment profit 77 502 66 778 52 071
31 August 2008
Revenue 1 028 775 824 184 341 435
Intersegment contract
revenues 23 679 3 196 51 741
Reportable segment profit 61 727 20 018 40 088
28 February 2009
Revenue 2 108 313 2 783 972 764 258
Intersegment contract
revenues 75 023 3 303 84 297
Reportable segment profit 118 800 103 217 85 329
R`000 Reconciling
31 August 2009 segments Total
Revenue 273 498 4 000 106
Intersegment contract
revenues 33 682 81 072
Reportable segment profit 1 728 198 079
31 August 2008
Revenue 375 686 2 570 080
Intersegment contract
revenues - 78 616
Reportable segment profit 20 829 142 662
28 February 2009
Revenue 660 027 6 316 570
Intersegment contract
revenues 14 130 176 753
Reportable segment profit 12 072 319 418
STATEMENT OF CHANGES IN EQUITY
Issued Foreign
capital Share- currency
and based translation Revaluation
R`000 premium payments reserve surplus
Balance at 1 March
2008 audited 424 365 10 905 (113) 3 571
Premium on issue of
ordinary shares 675 323 - - -
Employee share
options - 10 217 - -
Total comprehensive
income - - 1 702 -
Dividends paid by
subsidiary to
outside shareholders - - - -
Minority interest
acquired - - - -
Adjustment resulting
from PPA
finalisation - - - -
Balance at 31 August
2008 reviewed 1 099 688 21 122 1 589 3 571
Effect of
consolidating the
trusts
and treasury shares (19 839) - - -
Employee share
options - 10 901 - -
Total comprehensive
income - - 41 041 1 426
Realisation of
share-based payment
reserve - (446) - -
Redemption of shares - - - -
Settlement of Share
Trust investments - - - -
Minority interest
acquired - - - -
Effect of
consolidating the
Stocks and
Housing Share
Incentive Trust (23 852) - - -
Balance at
28 February 2009
audited 1 055 997 31 577 42 630 4 997
Effect of
consolidating the
trusts
and treasury shares (14 077) - - -
Employee share
options - 9 457 - -
Total comprehensive
income - - (44 446) -
Minority interest
acquired - - - -
Dividends paid - - - -
Balance at 31 August
2009 reviewed 1 041 920 41 034 (1 816) 4 997
Ordinary Minority Capital
Retained shareholders` shareholders` and
R`000 earnings interest interest reserves
Balance at
1 March 2008
audited 151 954 590 682 25 091 615 773
Premium on
issue of
ordinary shares - 675 323 - 675 323
Employee share
options - 10 217 - 10 217
Total
comprehensive
income 131 043 132 745 11 619 144 364
Dividends paid
by subsidiary to
outside
shareholders (1 487) (1 487) - (1 487)
Minority
interest
acquired (2 468) (2 468) (3 529) (5 997)
Adjustment
resulting from
PPA
finalisation - - 2 992 2 992
Balance at
31 August 2008
reviewed 279 042 1 405 012 36 173 1 441 185
Effect of
consolidating
the trusts
and treasury
shares - (19 839) - (19 839)
Employee share
options - 10 901 - 10 901
Total
comprehensive
income 166 482 208 949 10 274 219 223
Realisation of
share-based
payment reserve 446 - - -
Redemption of
shares (12 163) (12 163) - (12 163)
Settlement of
Share Trust
investments 13 815 13 815 - 13 815
Minority
interest
acquired (8 774) (8 774) (7 238) (16 012)
Effect of
consolidating
the Stocks and
Housing Share
Incentive Trust - (23 852) - (23 852)
Balance at 28
February 2009
audited 438 848 1 574 049 39 209 1 613 258
Effect of
consolidating
the trusts
and treasury
shares - (14 077) - (14 077)
Employee share
options - 9 457 - 9 457
Total
comprehensive
income 196 304 151 858 1 775 153 633
Minority
interest
acquired (39 017) (39 017) (21 865) (60 882)
Dividends paid (116 452) (116 452) (181) (116 633)
Balance at
31 August 2009
reviewed 479 683 1 565 818 18 938 1 584 756
COMMENTARY
Introduction
The directors are pleased to present the reviewed condensed consolidated
interim results for the six months ended 31 August 2009 ("the period") which
reflect the group`s sustained strong growth. The integration of recent
acquisitions is progressing well and synergies are beginning to reflect in
economies of scale, thereby entrenching the group as a major competitor in the
first-tier construction sector. Further, Stefanutti Stocks` comprehensive
rebranding strategy initiated in 2008 continues to be rolled-out to ensure a
single, cohesive brand for the group.
Basis of preparation
The reviewed condensed consolidated interim results for the period ("the
reviewed results") have been accounted for in accordance with IAS 34: Interim
Financial Reporting and in compliance with the South African Companies Act,
1973 as amended. The reviewed results are prepared on the historical cost
basis, with the exception of certain financial instruments and properties which
are measured at fair value. The accounting policies and methods of measurement
and recognition applied in preparation of the reviewed results are consistent
with those applied in the group`s audited annual financial statements for the
year ended 28 February 2009, except for the application of IFRS 8: Operating
Segments and IAS 1: Presentation of Financial Statements - Revised.
IFRS 8 replaces IAS 14: Segment Reporting and requires an entity to adopt a
"management approach" to reporting the financial performance of its segments.
In accordance with the requirements of IFRS 8 the segmental reporting is now
prepared based on the business units as reported internally by management. The
group has complied with the revised naming conventions as required by IAS 1 and
reports one Statement of Comprehensive Income. In terms of IAS 1 certain items
reported in the Statement of Changes in Equity are now disclosed in the
Statement of Comprehensive Income.
The preparation of the reviewed results required the use of estimates and
assumptions that affect the values of assets and liabilities at the reporting
date, as well as the determination of revenue and expenses during the reporting
periods. Although these estimates are based on management`s best knowledge of
current events and actions that the group may undertake in the future, actual
results may differ from those estimates.
Auditor`s review
The reviewed condensed consolidated interim results for the period have been
reviewed by the group`s auditors, Mazars Moores Rowland. Their unqualified
review opinion is available for inspection at the company`s registered office.
Group profile
Stefanutti Stocks operates throughout South Africa, Southern Africa and the
Middle East with expertise spanning concrete structures, rehabilitation and
marine construction, piling and geotechnical services, roads and earthworks,
mine residue disposal facilities (mainly tailings dams), open-pit contract
mining, building works and mechanical, electrical and powerline transmission
and distribution construction. In addition the group has established skills to
participate in projects on a Public-Private-Partnership ("PPP") basis.
Review of operations
Structures
The Structures Business Unit encompasses the group`s civil structures,
geotechnical and marine capabilities.
Structures delivered a strong performance for the period, putting the Business
Unit on track to achieve full year targets despite a substantial reduction in
the number of available tenders and consequent pressure on margins. This is
expected to prove a challenge in the year ahead.
The incrementally launched R21 bridge project near Pretoria was successfully
completed. After initial delays, the Kusile Power Station project is
progressing well. To offset generally declining demand in the local
construction market Structures is assessing cross-border opportunities and has
already further expanded its geotechnical operations in Mozambique, Botswana
and Angola. During the period the Business Unit was awarded a contract for the
next phase of the Ben Schoeman dock in joint venture, and has seen a promising
upswing in tenders in the marine sector.
Building
The Building Business Unit operates throughout South Africa and Southern Africa
servicing the full scope of building construction from commercial and
industrial through to residential and leisure.
Market conditions remained tough during the period with approved building plans
in all regions showing decline. In general the issue of fewer tenders resulted
in intensified competition and reduced margins. Notwithstanding these factors,
the Business Unit performed well during the period and is on target to achieve
budget for the full year to February 2010. The strategy to expand
geographically added impetus to growth and helped maintain order book levels.
The Housing operation is successfully weathering a difficult climate with the
slow award of projects and the credit crunch preventing the roll-out of new
housing developments. The operation has almost secured its targeted February
2011 order book and is well-positioned to service major clients who are
indicating new projects in the year ahead.
Roads & Earthworks
Roads & Earthworks operates in the construction of roads, bulk earthworks,
landfill sites, golf course developments, terraces for new developments and
municipal services throughout South Africa as well as in Mozambique and
Swaziland.
The Business Unit is confident of meeting growth targets for the year ending
February 2010. The strategy to secure SANRAL projects is proving successful
with a further two new projects awarded during the period. Other major projects
recently concluded or nearing completion include the Optimum water reclamation
project, the Rea Vaya Bus Rapid Transport contract and the Sikhupe Joint
Venture for the Swaziland Airport.
Mechanical, Electrical & Power ("MEP")
This Business Unit provides mechanical, electrical and instrumentation
construction work across the industrial, mining, manufacturing and
petrochemical sectors throughout Southern Africa.
Contracts within MEP are generally proceeding well with new markets being
actively pursued. However, a number of contract cancellations have been
experienced as a result of the global financial crisis, mainly in the mining
industry, which have adversely impacted the Business Unit. This has led to a
more aggressive diversification and expansion of the client base. Two new
divisions - Power Transmission and Distribution - are in the process of being
established to focus on high voltage overhead line, substation and
electrification infrastructure construction in South Africa and cross-border
markets.
Mining Services
The Business Unit specialises in mine residue disposal facilities (mainly
tailings dams) and open-pit contract mining across South Africa.
The fall in commodities pricing and curtailing of mine expansion plans has led
the Business Unit to seek alternative markets for growth. Mining Services is
currently engaged in a number of Design and Construction projects in the gold,
uranium, iron ore and coal sectors, and has recently been awarded a number of
new contracts. The Business Unit has also successfully extended tenure on
existing projects, for instance on the Nkomati Mine nickel contract. During the
period Mining Services acquired Waste Energy Recovery and Management (Pty)
Limited ("WERM") to increase its capacity in the coal mining sector (see
`Acquisitions` below). The Business Unit also plans to secure additional
resources to exploit open-pit mining opportunities.
Concessions
This Business Unit procures contracts by facilitating property development and
partnerships with government for the provision of facilities or services
through concession contracts (PPPs). Services available within the Business
Unit include facilities management, maintenance and project funding assistance.
During the period Concessions completed the new offices for the Southern
African Development Community in Gaborone.
An increasing number of PPP opportunities have been identified and the Business
Unit is exploring partnerships for toll roads and municipal infrastructure
projects. Concessions` capabilities are being leveraged throughout the group,
which is expected to offer positive medium-term prospects particularly in the
mining and MEP sectors.
International
With the continued downturn in economically hard-hit Dubai, the group has
established itself in Abu Dhabi and Bahrain and intends expanding into Qatar
and Oman. During the period the decision was taken to establish general
construction operations in the region to prepare for an upturn in the market.
Medium-term prospects indicate a sustainable performance, although no
significant growth is forecast until after February 2011.
Acquisitions
With effect from 3 August 2009, the company acquired 100% of the business
operations of WERM. In terms of IFRS 3:
Business Combinations the Purchase Price Allocation (PPA) has been completed.
WERM
Acquisition date 3 August 2009
Voting equity % 100
Number of shares issued -
At acquisition values R`000
Non-current assets acquired 30 890
Current assets -
Non-current liabilities assumed (26 845)
Current liabilities assumed (4 045)
Net asset value -
Cost of acquisition -
Intangibles arising on acquisition -
Goodwill arising on acquisition -
Cash paid -
Revenue for the period 3 August 2009 to 31 August 2009 2 606
Loss after taxation for the period 3 August 2009 to 31 August
2009 (678)
Loss after taxation since acquisition (678)
Revenue and losses of WERM are reported from the date of acquisition. It is
impracticable to report from 1 March 2009 as not all the business operations
were then acquired.
In line with current strategy the group acquired the remaining minority
interests in Stefanutti Stocks Building W Cape (Pty) Limited (formerly
Stefanutti & Bressan Building Western Cape (Pty) Limited) and Civil & Coastal
Construction (Pty) Limited.
Further acquisitions of minority interests in subsidiaries are being considered.
Prior year acquisitions were disclosed in the most recent audited annual
financial statements.
Financial results
Revenue for the period rose 56% to R4,0 billion (2008: R2,6 billion). Operating
profit was up 46% to R257,1 million (2008: R176,3 million) while net profit
after tax increased by 39% to R198,1 million (2008: R142,7 million). Earnings
per share grew by 25% to 111,94 cents (2008: 89,77 cents). Headline earnings of
R195,0 million for the period translated into headline earnings per share
("HEPS") of 111,17 cents (2008: 90,42 cents). A share-based incentive scheme
expense of R9,5 million (2008: R10,2 million) as required by IFRS 2:
Share-based Payments and amortisation costs of R7,2 million (2008: R2,8
million) are included in earnings for the period. Normalised HEPS, which
excludes amortisation costs, equates to 114,11 cents (2008: 91,62 cents).
Prospects
The next six months are expected to remain challenging due to continued project
funding constraints and lower tender margins. Securing new contracts in the
2011 financial year is projected to be far tougher than previously. However,
Stefanutti Stocks is strongly positioned to benefit from infrastructure spend
and anticipated growth in the power generation and mining sectors.
The group sees particular opportunities within the municipal services
environment including waste management, sanitation and water purification as
well as in the pipeline, rail construction and renewable energy arena. The next
phase of the R23 billion Gauteng Freeway Improvement Project is due to commence
in 2012 and the group expects to participate.
PPPs should present an avenue for further growth. Stefanutti Stocks will also
seek to expand the new Power Transmission and Distribution divisions.
Geographic expansion remains a focus with an emphasis on bolstering the group`s
construction operations throughout Africa as well as in the Middle East.
In general, all Business Units have adopted a policy of aggressive marketing
and are alert to possible acquisitions.
Stefanutti Stocks` order book stood at R6,6 billion at the end of the period.
Dividend declaration
Notice is hereby given that, in line with the company`s dividend policy, an
interim dividend of 25,0 cents per share (2008: Nil) in respect of the period
was declared on 10 November 2009, payable to all shareholders recorded in the
register on Friday, 11 December 2009, the record date. The last day to trade
cum dividend will be Friday, 4 December 2009 and the shares will trade ex
dividend on Monday, 7 December 2009. Payment will be made on Monday, 14
December 2009. Share certificates may not be dematerialised or rematerialised
between Monday, 7 December 2009 and Friday, 11 December 2009, both dates
inclusive. Secondary Taxation on Companies is expected to amount to R4,7
million.
Appreciation
We appreciate that the group`s ongoing success is largely attributable to our
management and employees and we thank them. We also welcome the new employees
that have joined the group and look forward to working together. Finally we
extend our gratitude to our fellow directors for their wise counsel and thank
our business partners, advisors and stakeholders for their loyal support.
On behalf of the board
Gino Stefanutti Willie Meyburgh
Executive Chairman Chief Executive Officer
11 November 2009
www.stefanuttistocks.com
Directors: B Stefanutti (Executive Chairman);
W Meyburgh (Chief Executive Officer); D Quinn^ (Financial Director);
S Pell; N Canca*; K Eborall*; H Mashaba*; M Mkwanazi*; B Sithole*;
J Fizelle*^ (alternate to B Sithole)
*Non-executive director ^Irish
Registered office: Protec Park, Cnr Zuurfontein & Oranjerivier Drives,
Kempton Park, 1619 (PO Box 12394, Aston Manor, 1630)
Auditors: Mazars Moores Rowland, 5 St Davids Place, Parktown, 2193
(PO Box 6697, Johannesburg, 2000)
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: W Somerville, 20 Lurgan Road, Parkview, 2193
Date: 11/11/2009 07:05:03 Produced by the JSE SENS Department.
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