Wrap Text
Reviewed Condensed Consolidated Results for the 12 months ended 28 February 2023
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 2023
FINANCIAL RESULTS
REVIEWED RESTATED
28 FEBRUARY 28 FEBRUARY %
2023 2022 CHANGE
Contract revenue - Continuing operations (R'000) 5 979 555 5 968 484 -
Operating profit/(loss) before investment income - Continuing operations (R'000) 100 689 (106 605) 194
Loss for the period - Continuing operations (R'000) (37 499) (271 432) 86
Profit/(loss) for the period - Discontinued operations (R'000) 52 086 (143 776) 136
Profit/(loss) for the period - Total operations (R'000) 14 587 (415 208) 104
Earnings per share - Total operations (cents) 8.72 (248.27) 104
Headline earnings per share - Total operations (cents) (38.73) (97.07) 60
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed condensed consolidated results for the year ended 28 February 2023 ("results and/or reporting period") have been prepared in accordance
with framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (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 year ended 28 February 2023 are in terms of IFRS and are consistent with those applied in
the audited annual financial statements for the year ended 28 February 2022.
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 or direct comparable sales 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).
AUDITOR'S REVIEW
These reviewed condensed consolidated results for the year ended 28 February 2023 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 emphasis of the matter
pertaining to a material uncertainty related to going concern:
We draw attention to the disclosure included in this announcement, which indicates that at 28 February 2023 the group's current liabilities exceeded
its current assets by R1 141 million, and as of that date, the group's total liabilities exceed its total assets by R66 million. The group had an accumulated
loss of R1 209 million. As disclosed, these events and conditions, along with other matters as noted in the "Restructuring plan update" section of the
Announcement, indicate that a material uncertainty exists that may cast significant doubt with respect to the group's ability to continue as a going
concern. Our conclusion is not qualified in respect of this matter.
RESTRUCTURING PLAN UPDATE
The group hereby provides shareholders with an update on the Restructuring Plan as reported in the Unaudited Condensed Consolidated Results for the
six months ended 31 August 2022, issued on 24 November 2022 and the SENS announcements issued on 30 November 2022, 21 December 2022 and 1 March 2023.
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 identified operations;
- a favourable outcome from the processes relating to the contractual claims and compensation events on certain projects; and
- evaluation of the capital structure including the potential of raising new equity.
The group, on 28 February 2023, reached agreement with the Lenders to extend the current capital repayment profile of the loan as well as its duration
to 29 February 2024.
With respect to the final award of R90,7 million with regards to the Mechanical project termination, a capital repayment of R51 million will be
made towards the loan.
The loan bears interest at prime plus 3,9%, 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 loan does not contain any financial covenants but rather imposes
certain information and general undertakings.
The Lenders continue to provide guarantee support for current and future projects being undertaken by the group. 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 2024 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 year 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;
- 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 2023. The group believes it remains commercially solvent based on the cash flow projections included in the Restructuring Plan.
However, the matters as noted above including uncertainties surrounding the contingent liabilities as stated in note 26 of the group's Consolidated
Annual Financial Statements for the year ended 28 February 2022, continue to indicate that a material uncertainty exists that may cast doubt on the
group's ability to continue as a going concern, and as a consequence could impact on the group's ability to realise its assets and discharge its liabilities
in the ordinary course of business.
KUSILE POWER PROJECT UPDATE
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.
Since August 2021, the group has secured payment of a combined total of R110 million for measured work and the Dispute Adjudication Board ("DAB")
rulings. Substantial variations are still being agreed with Eskom. The outcome thereof will determine whether further certification will be secured for measured
works or whether the variations will be referred to the DAB.
Stefanutti Stocks and Eskom ("the parties") have entered into an "Interim Arrangement for the Purposes of Agreeing or Determining the Contractor's
Claims and Facilitating the Dispute Resolution Process" in February 2020, for all delay events up to the end of December 2019. This process involves the
appointment of independent experts ("the experts") to evaluate the causes, duration and quantification of delays.
Further to the above, the parties and the DAB have signed a memorandum of understanding ("MOU") as set out below:
- The DAB will issue decisions confirming entitlements, which entitlements the experts have agreed to, which will then be binding on the parties;
- The DAB will rely on the experts for the narrowing of the issues and information to be considered in its assessments;
- The DAB will continue to make interim decisions on the narrowed issues and information, in a progressive manner which will be binding on the parties;
- The DAB will issue such interim decisions for duration and quantification; and
- At the end of the process the DAB will issue a final binding decision in terms of the contract with respect to duration and quantification, at which point
either party may issue a notice of dissatisfaction and refer the dispute to arbitration.
The group has submitted the following provisional claims to the experts after taking into account all payments received to date on the project:
1. an overarching preliminary and general cost claim of R337 million;
2. a subcontractor overarching preliminary and general cost claim of R194 million;
3. a construction cost claim of R438 million; and
4. a finance cost claim of R171 million.
Therefore, the total of all provisional claims submitted to the experts is R1,140 billion. In terms of the process as outlined above the experts will review
all claims, draft agreements and narrow issues of difference for referral to the DAB for a decision. The ongoing process will address the final phase of the
delay analysis in the coming months. Once this is concluded, the group will submit its final consolidated claims, which will include the commissioning and
interest costs soon thereafter.
The group envisages that the DAB will issue its binding decision before the end of the February 2024 financial year, at which point either party may issue a
notice of dissatisfaction and refer the dispute to arbitration.
At this stage, the group's claims team is unable to quantify the value of the potential awards nor the exact timing thereof, as the claims must follow due
process. Therefore, these provisional claims have not been recognised in the financial statements as the outcome of the process remains uncertain.
OVERVIEW OF RESULTS
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 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 is R6,0 billion (restated Feb 2022: R6,0 billion) with an improved operating profit of R101 million (restated Feb 2022:
operating loss of R107 million).
The after tax profit for total operations is R15 million (restated Feb 2022: R415 million after tax loss). Earnings and headline earnings per share for total
operations is 8,72 cents earnings per share (Feb 2022: 248,27 cents loss per share) and 38,73 cents loss per share (Feb 2022: 97,07 cents loss per
share) respectively.
The group's order book is currently R6,8 billion of which R1,1 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 2023 was 0,05 (Feb 2022: 0,03) and the Recordable Case Rate
(RCR) was 0,44 (Feb 2022: 0,28).
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 72,76%.
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 2022: Nil).
Subsequent events
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 (Proprietary)
Limited, 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/2023/jse/isse/ssk/FY2023.pdf
Published on 25 May 2023
Corporate advisor and sponsor
Bridge Capital Advisors Proprietary Limited
10 Eastwood Road, Dunkeld, 2196
(PO Box 651010, Benmore, 2010)
www.stefanuttistocks.com
Date: 25-05-2023 07:05:00
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