REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE 12 MONTHS ENDED 28 FEBRUARY 2023 STEFANUTTI STOCKS HOLDINGS LIMITED (“Stefanutti Stocks” or “the company” or “the group”) (Registration number 1996/003767/06) (Share code: SSK ISIN: ZAE000123766) FINANCIAL RESULTS REVIEWED RESTATED 28 FEBRUARY 28 FEBRUARY % 2023 2022 CHANGE Contract revenue – Continuing operations (R’000) 5 979 555 5 968 484 – Operating profit/(loss) before investment income – Continuing operations (R’000) 100 689 (106 605) 194 Loss for the period – Continuing operations (R’000) (37 499) (271 432) 86 Profit/(loss) for the period – Discontinued operations (R’000) 52 086 (143 776) 136 Profit/(loss) for the period – Total operations (R’000) 14 587 (415 208) 104 Earnings per share – Total operations (cents) 8.72 (248.27) 104 Headline earnings per share – Total operations (cents) (38.73) (97.07) 60 BASIS OF PREPARATION AND ACCOUNTING POLICIES The funding provided by the Lenders has assisted with the group’s The reviewed condensed consolidated results for the year ended 28 February liquidity, even though total liabilities continue to exceed total assets at 2023 (“results and/or reporting period”) have been prepared in accordance 28 February 2023. The group believes it remains commercially solvent based on the cash flow projections included in the Restructuring Plan. with framework concepts and the measurement and recognition requirements However, the matters as noted above including uncertainties surrounding of International Financial Reporting Standards (IFRS), the SAICA Financial the contingent liabilities as stated in note 26 of the group’s Consolidated Reporting Guides, as issued by the Accounting Practices Committee and Annual Financial Statements for the year ended 28 February 2022, continue the Financial Reporting Pronouncements issued by the Financial Reporting to indicate that a material uncertainty exists that may cast doubt on the Standards Council. The report contains the information required by International group’s ability to continue as a going concern, and as a consequence could Accounting Standard IAS 34: Interim Financial Reporting and is in compliance impact on the group’s ability to realise its assets and discharge its liabilities with the Listings Requirements of the JSE Limited and the requirements of the in the ordinary course of business. South African Companies Act, 71 of 2008. The accounting policies as well as the KUSILE POWER PROJECT UPDATE methods of computation used in the preparation of the results for the year ended As previously highlighted to shareholders in numerous announcements and 28 February 2023 are in terms of IFRS and are consistent with those applied in updates since late 2018, the group continues to pursue a number of contractual the audited annual financial statements for the year ended 28 February 2022. claims and compensation events on the Kusile power project. There is no significant difference between the carrying amounts of financial Since August 2021, the group has secured payment of a combined total of assets and liabilities and their fair values. The fair value measurement for land R110 million for measured work and the Dispute Adjudication Board (“DAB”) and buildings are categorised as a level 3, based on the valuation method of rulings. Substantial variations are still being agreed with Eskom. The outcome income capitalisation or direct comparable sales using unobservable inputs thereof will determine whether further certification will be secured for measured such as market capitalisation rates and income/expenditure ratio. Plant and works or whether the variations will be referred to the DAB. equipment and transport and motor vehicles included within non-current assets Stefanutti Stocks and Eskom (“the parties”) have entered into an “Interim held for sale have been categorised as a level 3 fair value based on significant Arrangement for the Purposes of Agreeing or Determining the Contractor’s Claims and Facilitating the Dispute Resolution Process” in February 2020, for unobservable inputs to the valuation technique used. These assets are all delay events up to the end of December 2019. This process involves the measured using the comparable sales method. This entails the use of quoted appointment of independent experts (“the experts”) to evaluate the causes, prices for identical or similar assets in the market. The results are presented in duration and quantification of delays. Rand, which is Stefanutti Stocks’ functional currency. Further to the above, the parties and the DAB have signed a memorandum of The company’s directors are responsible for the preparation and fair understanding (“MOU”) as set out below: presentation of the results which have been compiled under the supervision of – The DAB will issue decisions confirming entitlements, which entitlements the Chief Financial Officer, Y du Plessis, CA(SA). the experts have agreed to, which will then be binding on the parties; AUDITOR’S REVIEW – The DAB will rely on the experts for the narrowing of the issues and information to be considered in its assessments; These reviewed condensed consolidated results for the year ended 28 February 2023 have been reviewed by the group’s auditors, Mazars. Their unmodified – The DAB will continue to make interim decisions on the narrowed issues and information, in a progressive manner which will be binding on the parties; review conclusion is available for inspection at the company’s registered office. The auditor’s conclusion contained the following emphasis of the matter – The DAB will issue such interim decisions for duration and quantification; and pertaining to a material uncertainty related to going concern: – At the end of the process the DAB will issue a final binding decision in terms We draw attention to the disclosure included in this announcement, of the contract with respect to duration and quantification, at which point which indicates that at 28 February 2023 the group’s current liabilities exceeded either party may issue a notice of dissatisfaction and refer the dispute to its current assets by R1 141 million, and as of that date, the group’s total arbitration. liabilities exceed its total assets by R66 million. The group had an accumulated The group has submitted the following provisional claims to the experts after loss of R1 209 million. As disclosed, these events and conditions, along taking into account all payments received to date on the project: with other matters as noted in the “Restructuring plan update” section of the 1. an overarching preliminary and general cost claim of R337 million; Announcement, indicate that a material uncertainty exists that may cast 2. a subcontractor overarching preliminary and general cost claim of significant doubt with respect to the group’s ability to continue as a going R194 million; concern. Our conclusion is not qualified in respect of this matter. 3. a construction cost claim of R438 million; and RESTRUCTURING PLAN UPDATE 4. a finance cost claim of R171 million. The group hereby provides shareholders with an update on the Restructuring Therefore, the total of all provisional claims submitted to the experts is Plan as reported in the Unaudited Condensed Consolidated Results for the R1,140 billion. In terms of the process as outlined above the experts will review six months ended 31 August 2022, issued on 24 November 2022 and the all claims, draft agreements and narrow issues of difference for referral to the SENS announcements issued on 30 November 2022, 21 December 2022 and DAB for a decision. The ongoing process will address the final phase of the delay analysis in the coming months. Once this is concluded, the group will 1 March 2023. submit its final consolidated claims, which will include the commissioning and As previously reported, the Restructuring Plan has been approved by both the interest costs soon thereafter. company’s board of directors and the Lenders and envisages, inter alia: The group envisages that the DAB will issue its binding decision before the • the sale of non-core assets; end of the February 2024 financial year, at which point either party may issue a • the sale of underutilised plant and equipment; notice of dissatisfaction and refer the dispute to arbitration. • the sale of identified operations; At this stage, the group’s claims team is unable to quantify the value of the potential awards nor the exact timing thereof, as the claims must follow due • a favourable outcome from the processes relating to the contractual claims process. Therefore, these provisional claims have not been recognised in the and compensation events on certain projects; and financial statements as the outcome of the process remains uncertain. • evaluation of the capital structure including the potential of raising new equity. OVERVIEW OF RESULTS The group, on 28 February 2023, reached agreement with the Lenders to A number of non-core assets, underutilised plant and equipment and identified extend the current capital repayment profile of the loan as well as its duration operations earmarked for sale have been reclassified in terms of IFRS 5: to 29 February 2024. Non-current Assets Held for Sale and Discontinued Operations. Current market conditions resulted in the delay of these disposals. The group remains With respect to the final award of R90,7 million with regards to the Mechanical committed to the sale processes as envisaged in the Restructuring Plan. project termination, a capital repayment of R51 million will be made towards Contract revenue from continuing operations is R6,0 billion (restated Feb 2022: the loan. R6,0 billion) with an improved operating profit of R101 million (restated Feb 2022: operating loss of R107 million). The loan bears interest at prime plus 3,9%, including arranging and facility fees, The after tax profit for total operations is R15 million (restated Feb 2022: and is secured by special and general notarial bonds over movable assets, R415 million after tax loss). Earnings and headline earnings per share for total continuous covering mortgage bonds over immovable assets and various operations is 8,72 cents earnings per share (Feb 2022: 248,27 cents loss cessions. The loan does not contain any financial covenants but rather imposes per share) and 38,73 cents loss per share (Feb 2022: 97,07 cents loss per certain information and general undertakings. share) respectively. The group’s order book is currently R6,8 billion of which R1,1 billion arises from The Lenders continue to provide guarantee support for current and future work beyond South Africa’s borders. projects being undertaken by the group. The purpose of the Restructuring Plan is to put in place an optimal capital structure and access to liquidity to position Safety the group for long-term growth. Management and staff remain committed to the group’s health and safety policies and procedures, and together strive to constantly improve the group’s The Restructuring Plan is anticipated to be implemented over the financial safety performance. The group’s Lost Time Injury Frequency Rate (LTIFR) year ending February 2024 and, to the extent required, shareholder approval at February 2023 was 0,05 (Feb 2022: 0,03) and the Recordable Case Rate will be sought for certain aspects of the Restructuring Plan. The group will (RCR) was 0,44 (Feb 2022: 0,28). continue to update shareholders on the progress of the various aspects of the Broad-Based Black Economic Empowerment (B-BBEE) Restructuring Plan. The group is a level 1 B-BBEE contributor measured in terms of the Construction Sector scorecard with a Black Economic Interest score of 72,76%. The directors consider it appropriate that the group’s results for the year be prepared on the going-concern basis, taking into consideration: Industry related matters The group continues to be negatively affected through disruptive and unlawful • the current order book; activities by certain communities and informal business forums in several areas • imminent project awards; of South Africa. • continuing operations executing the group’s order book profitably; Dividend declaration • the availability of short- and mid-term projects; Notice is hereby given that no dividend will be declared (Feb 2022: Nil). • reaching a favourable outcome on contractual claims and compensation Subsequent events events on certain projects; Other than the matters noted herein, there were no other material reportable • continued support from the Lenders; and events which occurred between the reporting date and the date of • successfully implementing the Restructuring Plan. this announcement. Further information These results have been compiled under the supervision of the Chief Financial Officer, Y du Plessis, CA(SA). This announcement is an extract of the full unaudited condensed consolidated announcement. This extract has not been reviewed by the auditors. This extract, which is the responsibility of the directors, does not contain full or complete details and any investment decision by investors and/or shareholders should be based on the consideration of the full announcement, the webcast together with the investor presentation which is available on the company’s website at www.stefstocks.com. The full announcement is available for inspection, at no charge at the registered office of the company and at the office of Bridge Capital Advisors (Proprietary) Limited, during normal business hours. Copies of the full announcement may also be requested by contacting the company secretary, William Somerville at w.somerville@mweb.co.za. The full announcement is also available at https://senspdf.jse.co.za/documents/2023/jse/isse/ssk/FY2023.pdf Published on 25 May 2023 Corporate advisor and sponsor Bridge Capital Advisors Proprietary Limited 10 Eastwood Road, Dunkeld, 2196 (PO Box 651010, Benmore, 2010) www.stefanuttistocks.com