Wrap Text
Reviewed condensed consolidated results for the 12 months ended 28 February 2022
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 RESULTS
FOR THE 12 MONTHS ENDED 28 FEBRUARY 2022
FINANCIAL RESULTS
REVIEWED RESTATED
28 FEBRUARY 28 FEBRUARY %
2022 2021 CHANGE
Contract revenue - Continuing operations (R'000) 5 968 484 4 691 759 27
Operating loss before investment income - Continuing operations (R'000) (98 906) (54 853) (80)
Loss for the period - Continuing operations (R'000) (263 742) (236 422) (12)
Loss for the period - Discontinued operations (R'000) (151 466) (53 760) (182)
Loss for the period - Total operations (R'000) (415 208) (290 182) (43)
Earnings per share - Total operations (cents) (248.27) (171.62) (45)
Headline earnings per share - Total operations (cents) (97.07) (155.13) 37
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed condensed consolidated results for the year ended 28 February 2022 (results and/or reporting period)have been prepared in accordance with framework concepts and the
measurement and recognition requirements of International Financial Reporting Standard (IFRS), the SAICA Financial Reporting Guides, as issued by the
Accounting Practices Committee and the Financial Reporting Pronouncements issued by the Financial Reporting Standards Council. The report contains the
information required by International Accounting Standard IAS 34: Interim Financial Reporting and is in compliance with the Listings Requirements of the
JSE Limited and the requirements of the South African Companies Act 71 of 2008. The accounting policies as well as the methods of computation used in
the preparation of the results for the period ended 28 February 2022 are in terms of IFRS and are consistent with those applied in the audited annual
financial statements for the year ended 28 February 2021.
There is no significant difference between the carrying amounts of financial assets and liabilities and their fair values. The fair value measurement for
land and buildings are categorised as a level 3, based on the valuation method of income capitalisation using unobservable inputs such as market
capitalisation rates and income/expenditure ratio. Plant and equipment and transport and motor vehicles included within non-current assets
held for sale have been categorised as a Level 3 fair value based on significant unobservable inputs to the valuation
technique used. These assets are measured using the comparable sales method. This entails the use of quoted prices for identical or similar
assets in the market. The results are presented in Rand, which is Stefanutti Stocks' functional currency.
The company's directors are responsible for the preparation and fair presentation of the results which have been compiled under the
supervision of the Chief Financial Officer, Y du Plessis, CA(SA).
AUDITORS' REVIEW
These reviewed condensed consolidated results for the year ended 28 February 2022 have been reviewed by the group's auditors, Mazars. Their unmodified
review conclusion is available for inspection at the company's registered office. The auditor's conclusion contained the following emphases of
matter: We draw attention to the disclosure included in this announcement, which indicates that the group incurred a net loss of R415 million
for the year ended 28 February 2022 and, as of that date, the group's current liabilities exceeded its current assets by R1 462 million, and
as of that date, the group's total liabilities exceed its total assets by R90 million. The group had an accumulated loss of R1 225 million.
As disclosed, these events and conditions, along with other matters as noted, including uncertainties surrounding the contingent liabilities, indicate
that a material uncertainty exists that may cast significant doubt with respect to the group's ability to continue as a going concern. In order to
address these issues, the group has implemented a restructuring plan of which further details regarding its implementation are disclosed in
the "Restructuring Plan Update" section. Based on the successful implementation of the restructuring plan, the directors consider it appropriate
that the group's condensed consolidated results be prepared on the going-concern basis. Therefore, our opinion is not modified in respect of this matter.
COVID-19, JULY 2021 CIVIL UNREST, RUSSIAN AND UKRAINE CONFLICT
Stefanutti Stocks' priority continues to be the health and safety of its employees. The management of the group remains committed to supporting the
initiatives that the governments have implemented with respect to the COVID-19 pandemic in the various countries in which the group operates.
Importantly, Stefanutti Stocks continues to adhere to the required protocols and maintains a close working relationship with clients and key
stakeholders to mitigate the impact of COVID-19 and reduce the long-term effects on its business.
The July 2021 civil unrest in Gauteng and KwaZulu-Natal negatively impacted the Inland and Coastal Regions, resulting in some property damage and time
delays on 17 projects where work had to be stopped. The total value amounted to R22 million, of which 70% was recovered from the group's insurers and
11% from clients.
The impact the Russian and Ukraine conflict will have on global growth and investor confidence, indirectly impacting the group's operations, will be closely
monitored. The direct impact of the conflict on the group is deemed immaterial as its projects and clients are based within South Africa and Southern Africa.
RESTRUCTURING PLAN UPDATE
The group hereby provides shareholders with an update on the Restructuring Plan as reported in the Unaudited Condensed Consolidated Results of Stefanutti
Stocks for the six months ended 31 August 2021 issued on 25 November 2021 and the SENS announcement issued on 1 March 2022.
As previously reported, the Restructuring Plan has been approved by both the company's board of directors and the Lenders and envisages, inter alia:
- the sale of non-core assets;
- the sale of underutilised plant and equipment;
- the sale of certain operations;
- internal restructuring initiatives required to restore optimal operational and financial performance;
- the securing of additional short-term funding of R430 million, of which R270 million related to the negative effects of the national lockdown in
March/April 2020;
- a favourable outcome from the processes relating to the contractual claims and compensation events on the Kusile power project;
- the restructuring of the short-term funding received to date from the Lenders into a loan; and
- evaluation of an optimal business model going forward and associated capital structure analysis including the potential of raising new equity.
In accordance with the Restructuring Plan, the Lenders had provided the requisite funding and converted the short-term funding agreement into a short-term
loan on 1 July 2020. The group, on 21 February 2022, reached an agreement with the Lenders to extend the current capital repayment profile of the loan as
well as its duration to 28 February 2023.
The loan bears interest at prime plus 5,4%, including arranging and facility fees, and is secured by special and general notarial bonds over movable assets,
continuous covering mortgage bonds over immovable assets and various cessions. The short-term and funding loans do not contain any financial covenants
but rather impose certain information and general undertakings.
Following the receipt of the initial purchase consideration of R92 million relating to the disposal of Al Tayer Stocks LLC, a capital repayment of
R45 million was made on 15 November 2021.
The slower than anticipated sale of certain operations, the non-implementation of the Material Handling and Tailings Management sub-divisions transaction
and further delays in resolving contractual claims and compensation events on certain projects, resulted in capital loan repayments envisaged to commence
from April 2022 not materialising. The group is currently in negotiations with the Lenders to extend the capital repayments of the loan to January and
February 2023, with the residual loan balance remaining at approximately R420 million.
The Lenders have agreed to provide continued guarantee support for current and future projects being undertaken by the group. Management has made
considerable progress in reconfiguring the group's organisational structure to improve operational performance and decrease overhead costs, including the
reduction of the group's overall headcount. This is an ongoing process which continues as the various aspects of the Restructuring Plan are being implemented.
The purpose of the Restructuring Plan is to put in place an optimal capital structure and access to liquidity to position the group for long-term growth.
The Restructuring Plan is anticipated to be implemented over the financial year ending February 2023 and, to the extent required, shareholder approval
will be sought for certain aspects of the Restructuring Plan. The group will continue to update shareholders on the progress of the various aspects of
the Restructuring Plan.
The directors consider it appropriate that the group's results for the reporting period be prepared on the going-concern basis, taking into consideration:
- the current order book;
- imminent project awards;
- continuing operations executing the group's order book profitably;
- the availability of short- and mid-term projects;
- reaching a favourable outcome on contractual claims and compensation events on certain projects;
- having converted the short-term funding agreement with the Lenders to a loan terminating on 28 February 2023;
- the assumption of a successful completion of current negotiations with the Lenders relating to the extension of capital repayments of the loan to
January and February 2023;
- continued support from the Lenders; and
- successfully implementing the Restructuring Plan.
The funding provided by the Lenders has assisted with the group's liquidity, even though total liabilities continue to exceed total assets at 28 February 2022.
The group believes it remains commercially solvent based on the cashflow projections included in the Restructuring Plan. However, uncertainties surrounding
the contingent liabilities as noted in note 26 of the group's Consolidated Annual Financial Statements for the year ended 28 February 2021, continue to
indicate that a material uncertainty exists that may cast doubt on the group's ability to continue as a going concern in the short term.
OVERVIEW OF RESULTS
As previously highlighted to shareholders in numerous announcements and updates since late 2018, the group continues to pursue a number of contractual
claims and compensation events on the Kusile power project. Due to the complexity of the claims, the processes remain ongoing. No further details of the
claims have been disclosed on the basis that it may prejudice the group's position in defending the claims brought against it and in pursuing those claims
brought against Eskom by the group.
A number of non-core assets, underutilised plant and equipment and identified operations earmarked for sale have been reclassified in terms of IFRS 5:
Non-current Assets Held for Sale and Discontinued Operations. Current market conditions, impacted by COVID-19, resulted in the delay of these disposals.
The group remains committed to the sale processes as envisaged in the Restructuring Plan.
Contract revenue from continuing operations increased to R6,0 billion (restated Feb 2021: R4,7 billion) with an operating loss of
R99 million (restated Feb 2021: R55 million operating loss).
The after tax loss for continuing operations is R264 million (restated Feb 2021: R236 million loss). Earnings and headline earnings per share for
total operations are reported as a loss of 248,27 cents (Feb 2021: 171,62 cents) and a loss of 97,07 cents (Feb 2021: 155,13 cents) respectively.
The group's order book is currently R5,3 billion of which R1,7 billion arises from work beyond South Africa's borders.
Safety
Management and staff remain committed to the group's health and safety policies and procedures, and together strive to constantly improve the group's safety
performance. The group's Lost Time Injury Frequency Rate (LTIFR) at February 2022 was 0,03 (Feb 2021: 0,03) and the
Recordable Case Rate (RCR) was 0,28 (Feb 2021: 0,35).
Broad-Based Black Economic Empowerment (B-BBEE)
The group is a level 1 B-BBEE contributor measured in terms of the Construction Sector scorecard with a Black Economic Interest score of 64,28%.
Industry related matters
The group continues to be negatively affected through disruptive and unlawful activities by certain communities and informal business forums in
several areas of South Africa.
Dividend declaration
Notice is hereby given that no dividend will be declared (Feb 2021: Nil).
Subsequent events
With respect to the civil claim received from the City of Cape Town (Green Point Stadium), the parties to the civil claim being the City of Cape Town
and WBHO Construction (Pty) Ltd, Aveng Africa (Pty) Ltd and Stefanutti Stocks ("the Contractors") remain confident of their respective legal positions.
However, the parties have mutually agreed that it is in the best interests of all to amicably settle the matter rather than prolong an extended and
costly arbitration and court process. This will allow for future positive engagements between the City of Cape Town and the Contractors.
The settlement includes an annual payment of R10,5 million by each Contractor over the next three years, and a commitment to Corporate Social Investment
projects in the Cape Town district by WBHO Construction (Pty) Ltd and Stefanutti Stocks.
Subsequent to year-end, the group received a non-binding offer of USD13,5 million to purchase a foreign entity. Negotiations are ongoing and no terms have
been agreed. The foreign entity is classified as held for sale, and the fair value of its assets and liabilities is based on an orderly transaction between
market participants at the reporting date under current market conditions.
The recent flooding in KwaZulu-Natal impacted one project in the Coastal Region. An insurance claim will be submitted for damages incurred of approximately
R20 million.
Other than the matters noted herein, there were no other material reportable events which occurred between the reporting date and the date of this
announcement.
Further information
These results have been compiled under the supervision of the Chief Financial Officer, Y du Plessis, CA(SA).
This announcement is an extract of the full unaudited condensed consolidated announcement. This extract has not been reviewed by the auditors. This extract,
which is the responsibility of the directors, does not contain full or complete details and any investment decision by investors and/or shareholders should be based on
the consideration of the full announcement, the webcast together with the investor presentation which is available on the company's website at www.stefstocks.com.
The full announcement is available for inspection, at no charge at the registered office of the company and at the office of Bridge Capital Advisors (Pty) Ltd, during
normal business hours. Copies of the full announcement may also be requested by contacting the company secretary, William Somerville at w.somerville@mweb.co.za.
The full announcement is also available at https://senspdf.jse.co.za/documents/2022/jse/isse/ssk/FY2022.pdf
Published on 26 May 2022
Corporate advisor and sponsor
Bridge Capital Advisors Proprietary Limited
10 Eastwood Road, Dunkeld, 2196
(PO Box 651010, Benmore, 2010)
www.stefanuttistocks.com
Date: 26-05-2022 07:05:00
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