Troubles mount at Stefanutti Stocks


Troubles mount at Stefanutti Stocks

Published Date: 2019-11-29 | Source: Stephen Gunnion | Author: Stephen Gunnion

Troubles mount at Stefanutti Stocks

The construction group has raised funding requirements as it battles to get payment from some clients.

Stefanutti Stocks continued its precipitous decline yesterday after releasing interim results that revealed a large loss due to provisions and project losses. The construction group has also raised its funding requirements as it battles to get payments from clients.

Its shares sank 58% to 5c, before recovering to their opening levels. Still, following a 40% dive on Wednesday, they're down 80% this month and 97% this year as its troubles mount. Most recently, a report by investigative journalism unit Scorpio alleged that it was one of a number of companies that contributed to a slush fund for top officials at Eskom, including at its Kusile power station where they had contracts.

For the period under review, the group said a client had adopted a more "intractable approach to authorisation of certificates for work done on the large public sector power project", which has led to a substantial increase in internal funding required for this project". Although it initiated a dispute process with the client to pursue its contractual rights and recover money owing to it, this placed an additional burden on the group, forcing it to raise its funding requirements from an initial R400 million to around R986 million. It also raised provisions for potential unrecoverable monthly measured works to complete the project. In addition to a provision of R263 million raised in its last financial year, it's raised a further provision of R462 million.

Due to adverse market conditions, including the impact of the power project, contract revenue from operations declined by 14% to R4.4 billion in the six months to end-August. Provisions, impairments and specific project losses totalling R1.12 billion left it with an operating loss of R973 million for the period, down from an operating profit of R125 million last year. It reported a loss of 622.35c per share, from earnings of 61.76c, and a headline loss of 607.72c per share, from headline earnings of 60.3c previously. It's not paying an interim dividend.

The group said its order book was worth R11.2 billion at the end of August, including R3.3 billion of work outside SA. Its overall cash position decreased to R396 million from R881 million at the end of February.

The group secured an additional R391 million in short-term funding from lenders earlier this month, in addition to the R120 million it got in July as specific ring-fenced project funding. It said the funds received in the first two tranches were used to meet its short-term liquidity requirements, buying it time to resolve contractual claims on the power project. It's aiming for longer term cost-effective funding solutions.

As part of a restructuring of its operations, it may consider selling non-core assets and raising new equity to improve its capital structure.

Its shares closed unchanged at 12c yesterday.

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