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STEFANUTTI STOCKS HOLDINGS LIMITED - Unaudited condensed consolidated results for the 6 months ended 31 August 2020

Release Date: 26/11/2020 07:05
Code(s): SSK     PDF:  
Wrap Text
Unaudited condensed consolidated results for the 6 months ended 31 August 2020

STEFANUTTI STOCKS HOLDINGS LIMITED
(Registration number 1996/003767/06)
Share code: SSK   ISIN: ZAE000123766
("Stefanutti Stocks" or "the company" or "the group")


UNAUDITED CONDENSED CONSOLIDATED RESULTS
FOR THE 6 MONTHS ENDED 31 AUGUST 2020


FINANCIAL RESULTS
                                                                           UNAUDITED       RESTATED
                                                                           31 AUGUST      31 AUGUST          %
                                                                                2020           2019     CHANGE
Contract revenue - Continuing operations (R'000)                           1 662 230      2 910 718       (43)   
Operating loss before investment income - Continuing operations (R'000)    (101 150)      (864 925)         88   
Loss for the period - Continuing operations (R'000)                        (169 158)      (909 237)         81   
Loss for the period - Discontinued operations (R'000)                       (80 123)      (131 540)         39   
Loss for the period - Total operations (R'000)                             (249 281)    (1 040 777)         76   
Earnings per share  - Total operations (cents)                              (147.06)       (622.35)         76   
Headline earnings per share  - Total operations (cents)                     (128.42)       (607.72)         79   

BASIS OF PREPARATION AND ACCOUNTING POLICIES

The unaudited condensed consolidated results for the period ended
31 August 2020 (results for the 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 period ended 31 August 2020 are in terms of IFRS and are
consistent with those applied in the audited annual financial statements for
the year ended 29 February 2020.

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 i.e. market capitalisation
rates and income/expenditure ratio. 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 unaudited condensed consolidated results. These results
have been compiled under the supervision of the Chief Financial Officer,
AV Cocciante, CA(SA).

COVID-19

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 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 extensive impact
of COVID-19 and reduce the long-term effects on its business.

The reporting period was negatively affected by COVID-19, which details are
available in note 28 of the Consolidated Annual Financial Statements for the
year ended 29 February 2020, which was issued on 18 August 2020.

RESTRUCTURING PLAN UPDATE

The group hereby provides shareholders with an update on the Restructuring
Plan as reported in the Consolidated Annual Financial Statements of
Stefanutti Stocks for the year ended 29 February 2020 issued on 18 August 2020 
and subsequent disposal of properties announcement issued on 21 October 2020.

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 divisions/subsidiaries;
  -  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 relates to the negative effects of the national lockdown;
  -  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 term loan; and
  -  evaluation of an optimum business model going forward and associated
     capital structure analysis including the potential of raising new equity.

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 in
this uncertain environment.

In accordance with the Restructuring Plan, the Lenders have provided the
requisite funding and have converted the short-term funding agreement
into a term loan on 1 July 2020, which loan terminates on 28 February
2022. In addition, 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 fluctuating aspects of the
Restructuring Plan are being implemented.

The Restructuring Plan is anticipated to be implemented over the financial
years ending February 2021 and February 2022 and, to the extent required,
shareholder approval will be sought for this.

Stefanutti Stocks will continue to update shareholders on the progress of the
various aspects of the Restructuring Plan.

The funding provided by the Lenders has assisted in relieving the group's
liquidity pressures even though current liabilities exceed current assets
at 31  August 2020. In addition thereto, uncertainties surrounding the
COVID-19 pandemic and contingent liabilities as noted in note 25 of the
group's Consolidated Annual Financial Statements for the year ended
29 February 2020, 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. However, having converted the short-term funding agreement with
the Lenders to a term loan on 1 July 2020 and on the basis of successfully
implementing the Restructuring Plan, the directors consider it appropriate
that the group's results for the period be prepared on the going-concern basis.

OVERVIEW OF RESULTS

As previously highlighted to shareholders in various 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.

As a consequence of the implementation of the Restructuring Plan, 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.

Continuing operations

The continued adverse market conditions, as well as the substantial impact
of COVID-19, has reduced contract revenue from continuing operations
to R1,7 billion (restated Aug 2019: R2,9 billion) with an operating loss of
R101 million (restated Aug 2019: R865 million).
 
The United Arab Emirates operation contributed R6 million (Aug 2019: R15 million) 
towards the share of profits of equity-accounted investees.

This period's contribution has been negatively impacted by COVID-19.

The after tax loss for the period for continuing operations is R169 million
(restated Aug 2019: R909 million) and for discontinued operations is
R80 million (restated Aug 2019: R132 million).

Earnings and headline earnings per share for total operations are reported
as a loss of 147.06 cents (Aug 2019: 622.35 cents) and a loss of 128.42 cents
(Aug 2019: 607.72 cents) respectively.

The group's order book for continuing operations and inclusive of M&E is
currently R7,4 billion of which R3,1 billion arises from work beyond 
South Africa's borders.

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 81,3%.

Industry related matters

With respect to the civil claim received from the City of Cape Town (Green
Point Stadium), the arbitration date has been set for September 2021.
The group remains confident it can defend this claim.

The group continues to be negatively affected through disruptive and
unlawful activities by certain communities and informal business forums in
certain areas of South Africa.

Dividend declaration

Notice is hereby given that no dividend will be declared (Aug 2019: Nil).

Subsequent events

On 30  October 2020, the group ceased to market the Mechanical & Electrical 
operation, which was classified as discontinued on 31 August 2020. 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, 
AV Cocciante, 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/2020/jse/isse/ssk/FY2021H1.pdf

www.stefanuttistocks.com

Date: 26-11-2020 07:05:00
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