Stefanutti initiates disposal programme to conclude by early 2022

Construction group, Stefanutti Stocks has announced its interim results for the six months ended on the 31st of August 2020.

The continued adverse market conditions and the substantial impact of the pandemic reduced contract revenue from continuing operations to R1.7 billion (August 2019: R2,9 billion [restated]), with the group experiencing an operating loss of R101 million (August 2019: R865 million [restated]). The United Arab Emirates operation contributed R6 million (August 2019: R15 million) towards the share of profits of equity-accounted investees for continuing operations.

CEO Russell Crawford said that in line with the group’s restructuring plan, the group has initiated a disposal programme to sell certain operations which is expected to be concluded by February 2022. He notes that the difficulties facing the construction industry, the impact of the pandemic and the well documented and ongoing delays in payments from clients has impacted on cash consumed from operations which amounted to R179 million (August 2019: R503 million). However, the total cash position improved slightly to R756 million.

The company’s order book for continuing operations is
currently R7.4 billion of which R3.3 billion arises from work beyond South Africa’s

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.

No dividend was declared.

Crawford highlighted that as previously disclosed, the group continues to pursue a few contractual claims and compensation events on the Kusile power projects. “Due to the complexity of the claims, these processes remain ongoing, but no further details can be disclosed on the basis that this may prejudice our position in defending the claims brought against the group and in pursuing those claims brought against Eskom by the group.”

He said that Stefanutti Stocks’ priority continues to be the health and safety of its employees. “Management remains committed to supporting the initiatives that the governments have implemented in the various countries in which the group operates. Importantly, we continue to adhere to the required protocols and maintain 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.”

further updated shareholders in respect of the restructuring plan, the purpose
of which he reiterated 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. The plan 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
  • 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 projects.
  • 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.

In accordance with the restructuring plan, the lenders have provided the requisite funding and converted the short-term funding agreement into a term loan on 1 July 2020, which terminates on 28 February 2022. In addition, they have agreed to provide continued guarantee support for current and future projects being undertaken by the group,” said Crawford, adding that management had 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, an ongoing process which continues as the fluctuating aspects of the plan are being implemented.

He also reminded the market that the 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 and that the group would continue to update shareholders on the progress of the various aspects of the plan.

Review of

& Mining’s contract revenue from continuing operations decreased to R1,3
billion (restated August 2019: R1,8 billion) with an operating profit of R30
million (restated August 2019: operating loss of R348 million).

exist for this business unit in port upgrades in Durban and Cape Town, water
and wastewater treatment plants, mine infrastructure, transport infrastructure
and in the energy sector,”
Crawford said, adding that the government’s
proposed National Development Plan (NDP) would also offer potential opportunities.

Construction & Mining’s total order book in August 2020 was R5,2 billion (Aug 2019: R7,5 billion).


Due to the national lockdown and the safety requirements of Covid-19, the Building business unit was unable to work for three months during the reporting period, resulting in contract revenue from continuing operations reducing to R345 million (August 2019: R1,0 billion [restated]). The operating loss decreased to R80 million (August 2019: R497 million [restated]), with the profit from the equity-accounted United Arab Emirates operation excluded from this result.

Crawford went on to say that the business
unit should also potentially benefit from the NDP, together with commercial,
retail, industrial, warehouse and factory opportunities in the private sector,
in Gauteng, KwaZulu-Natal and Western Cape

He added that the Mozambique division’s order book is currently under pressure, impacted by the delay in the northern province gas fields expansion projects. “The division is, however, pursuing opportunities in the office, residential, factory and surface mine infrastructure in the private sector.”

Building’s total order book at August 2020 was R2,0 billion (August 2019: R2,5 billion) excluding the United Arab Emirates order book of R276 million (August 2019: R974 million).

Mechanical & Electrical

Mechanical & Electrical’s contract revenue from
total operations decreased to R179 million (August 2019: R516 million [restated]),
with an operating loss of R32 million (August 2019: R33 million [restated]),
being severely impacted by the effects of Covid-19.

Opportunities in the traditional petrochemical
sector for the Oil & Gas division have substantially reduced due to the
current global uncertainties negatively impacting on the oil price

Mechanical & Electrical’s total order book in
August 2020 was R182 million (August 2019: R716 million).

In summary, Crawford said Stefanutti Stocks’ focus is
the successful implementation of the restructuring plan and to achieve favourable
outcomes relating to the group’s contractual rights and compensation events on
the Kusile power projects.

In addition, we will continue to drive the
collection of the slow-paying receivables, focus on reducing loss-making
projects and returning the group to profitability

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