Stefanutti wants R100bn in projects

Stefanutti Stocks was cautiously optimistic about the future prospects for the construction market, the engineering group said yesterday.

It would target projects worth more than R100 billion in the next six to 18 months.

Willie Meyburgh, the chief executive of Stefanutti Stocks, said these projects did not represent the full market, but its established growth areas, and it largely excluded government projects. This was apart from some projects for parastatals such as Eskom, the SA National Roads Agency and the Trans Caledon Tunnel Authority.

Meyburgh stressed that the group had an appetite to grow, particularly in Africa where the profit margins were higher. It was neither totally negative nor totally optimistic about the future construction market and saw “some light at the end of the tunnel”.

The group’s order book had grown to R6.8bn in the six months to August from R6.2bn in February and Meyburgh said he was expecting some “nice awards” soon.

He said the Stefanutti Stocks brand was making inroads in the construction market not because of its name but because of the way it worked with its clients, adding it was being awarded projects where it was not the lowest tenderer, which was encouraging.

“We believe we are gradually gaining market share,” he said.

Meyburgh said the firm had a strong project pipeline from the private sector but had seen very little government work.

The group was buying equipment and employing people and it now had a total workforce of just more than 11 000 staff.

Stefanutti Stocks yesterday reported headline earnings a share of 95.95c in the six months to August, a 14 percent decline from the previous corresponding period.

Revenue fell 9 percent to R3.6bn. Operating profit was 14 percent lower at R221.8m, but the group’s operating margin was stable at 6.2 percent compared with 6.5 percent in the previous period.

An interim dividend of 20c a share was declared, 25 percent lower than the previous period.

Cash generated from operations dropped by 70 percent to R115.2m, but the group ended the period with R1.1bn cash in hand and no significant borrowings on the balance sheet.

Meyburgh said the group’s financial performance was commendable in difficult trading conditions and attributed this to its multidisciplinary capability, widespread geographic footprint and well-balanced client base.

“Diversification is a key risk avoidance tool, enabling the group to weather regional, market and sector specific downturns,” he said.

However, Meyburgh said the effect of delayed contract awards, contract cancellations and intensified competition was inevitable and reflected in the group’s results.

He added that despite the National Treasury’s intention to spend R27.5bn on infrastructure public-private partnerships (PPPs) over the next three years, very little had found its way into the market.

“We have geared up for PPPs but scaled down a bit by using these resources elsewhere. Consequently the group is exploring possible expansion into the rest of Africa and participation in toll road projects.

“Should the (PPP) opportunity arise again, we’ll gear up again,” he said.

Steve Meintjes, an analyst at Imara SP Reid, said the financial results were in line with the guidance provided to the market and the group was “safe and solid”.

Meintjes said the group was generally more optimistic than some of its listed construction company peers, although it was only expecting a recovery after its 2012 financial year.