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Stefanutti Stocks seeks loan extension as its financial recovery continues

Stefanutti Stocks seeks loan extension as its financial recovery continues

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Struggling Stefanutti Stocks Holdings’ operating profit soared 505% and its loss more than halved in the six months to August 30.

The positive news for the construction group that is being restructured to restore solvency may have spurred interest among investors, as the share price increased 6.2% to 103c by midday yesterday. The price has risen steadily, from 45c a share 12 months before.

The restructuring plan was being implemented over the years ending February 2023 and February 2024, the group said in a statement yesterday.

The loss for the interim period came to R33.5 million compared with a R97.91m loss at the same time last year. The operating profit increased to R54.3m from R8.93m. Contract revenue declined 9% to R2.87 billion.

Discontinued operations showed a R42.8m profit versus a R90.6m loss. Headline earnings a share improved 63% to a 25.02c loss, versus a loss of 67.12c previously.

The restructuring includes sales of non-core assets and underutilised plant, the sale of identified operations, a favourable outcome from contractual claims and compensation processes and the evaluation of an optimal business model going forward, including the potential of raising new equity.

The group said it was in negotiations with lenders to extend the capital repayment profile of its loan, as well as its duration to February 2024, due to delays beyond its control in resolving issues including contractual claims, the sale of identified operations being slower than expected, and non-implementation of the Materials Handling and Tailings Management sub-divisions.

“The benefit of the extended restructuring period provides a greater degree of confidence in anticipated cash flows, which will result in a reduction of the previously stated residual loan balance of R420m,” the group said.

“The lenders continue to provide guarantee support for current and future projects being undertaken.”

The group said funding from lenders had assisted with liquidity, even as total liabilities continued to exceed total assets at August 31, 2022.

“The group believes it remains commercially solvent based on cash flow projections included in the restructuring plan. However, uncertainties surrounding the contingent liabilities … continue to indicate a material uncertainty exists that may cast doubt on the group’s ability to continue as a going concern in the short term.”

Contractual claims and compensation events continued to be pursued on Eskom’s Kusile power project.

Since August 2021, Stefanutti had secured R110m for measured work and from Dispute Adjudication Board (DAB) rulings. Substantial variations were still being agreed with Eskom.

To date, the group had submitted an overarching preliminary and general cost claim of R337m, and a subcontractor overarching preliminary and general cost claim of R194m to experts for evaluation.

Remaining claims on construction costs, commissioning costs and interest and finance costs were expected to be submitted to the experts for evaluation by December.

The group’s claims team was unable to quantify the value of the potential awards at this stage.

The current order book was R6.3bn, of which R1.6bn was from work beyond South Africa’s borders.

BUSINESS REPORT

Original Article

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