Trying to get back on track
DOUBLE WHAMMY: POOR RESULTS AND ESKOM EXPOSÉ
Group reports an operating loss of R973 million for the six months to August.
Shares in Stefanutti stocks plunged 58%, from 12c to 5c a share early on Thursday. This was after the JSE-listed construction group released wretched interim results and a media investigation unit published details of how the group allegedly, along with other companies, made payments to what it claimed was a slush fund to enrich top Eskom officials.
The group has launched a restructuring plan that will entail assessing the sale of non-core assets, including divisions/subsidiaries; capital structure analysis, including the possibility of raising new equity; and internal restructuring initiatives required to restore optimal operational and financial performance.
The group’s share price recovered later on Thursday to close unchanged at 12c a share.
The exposé of the alleged slush fund payment was published by Scorpio, a sister publication of the Daily Maverick. It alleges that
R75 million was paid by Stefanutti and three other companies, including the local subsidiary of multinational Tenova Takraf, to Babinatlou Business Services.
Senior executives in Stefanutti declined via the group’s communication company to grant any media interviews despite the group hosting a teleconference on its financial results early on Thursday.
Contractual issues
Contractual disputes – relating to what Stefanutti refers to as a “public sector power project” and unnamed loss-making contracts in each of its oil and gas and mechanical divisions – contributed to the group reporting an operating loss of R973 million for the six months to August, from a R124.8 million profit in the previous corresponding period.
The building, mechanical and electrical, and construction and mining business units all reported operating losses.
Russell Crawford, who took over as chief executive from Willie Meyburgh in August this year, attributed the operating loss to the continuing adverse market conditions, combined with the impact of the public sector power project. These factors reduced contract revenue from operations by 13% to R4.4 billion from R5.1 billion, he said.
Stefanutti reported a headline loss per share of 607.72c, compared with a profit of 60.30c in
the prior period. Crawford said the operating loss was impacted by:
A R462 million provision for future costs for the public sector power project
A R331 million provision for slow-paying trade receivables
R260 million in specific project losses
R22 million for impairment of goodwill, and
A R43 million provision for a tax liability in Kenya.
“Contributing to the adverse market conditions are the well-documented delays in payments from clients, which had a significant impact on the group’s trade and other receivables, as well as payments to suppliers and sub-contractors,” he said.
Stefanutti did not name the public power sector project for which it has made the provision for future costs, but it is believed to be the Kusile Power Station, where it has geotechnical piling and civil works contracts.
Crawford said that in terms of the funding plan, the first tranche of R120 million was received in July and the second additional tranche of R391 million was received earlier this month from a lender grouping.
Stefanutti said this allows more time for the group to resolve its contractual claims on the public sector power project and to simultaneously explore and evaluate longer-term cost-effective funding solutions.