Stefanutti Stocks Holdings Limited (JSE:SSK) News - Unaudited condensed consolidated results for the 6 months ended 31 August 2021

STEFANUTTI STOCKS HOLDINGS LIMITED
("Stefanutti Stocks" or "the company" or "the group")
(Registration number 1996/003767/06)
(Share code: SSK ISIN: ZAE000123766)

UNAUDITED CONDENSED CONSOLIDATED RESULTS
FOR THE 6 MONTHS ENDED 31 AUGUST 2021

FINANCIAL RESULTS

                                                                                           UNAUDITED         RESTATED           %
                                                                                      31 AUGUST 2021   31 AUGUST 2020      CHANGE
Contract revenue - Continuing operations                                     (R'000)       3 217 140        2 555 812          26
Operating profit/(loss) before investment income - Continuing operations     (R'000)           5 478         (161 228)        103
Loss for the period - Continuing operations                                  (R'000)        (103 388)        (253 461)         59
(Loss)/profit for the period - Discontinued operations                       (R'000)         (85 087)           4 180       (2136)
Loss for the period -Total operations                                        (R'000)        (188 475)        (249 281)         24
Earnings per share - Total operations                                        (cents)         (112.69)         (147.06)         23
Headline earnings per share - Total operations                               (cents)          (67.12)         (128.42)         48

BASIS OF PREPARATION AND ACCOUNTING POLICIES

The unaudited condensed consolidated results for the period ended
31 August 2021 (results for the period and/or the reporting period) have been
prepared in accordance with framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS),
the SAICA Financial Reporting Guides, as issued by the Accounting Practices
Committee and the Financial Reporting Pronouncements issued by the Financial
Reporting Standards Council. The report contains the information required by
International Accounting Standard IAS 34: Interim Financial Reporting and is in
compliance with the Listings Requirements of the JSE Limited and the requirements
of the South African Companies Act, 71 of 2008. The accounting policies as well
as the methods of computation used in the preparation of the results for the period
ended 31 August 2021 are in terms of IFRS and are consistent with those applied
in the audited annual financial statements for the year ended 28 February 2021.

There is no significant difference between the carrying amounts of financial
assets and liabilities and their fair values. The fair value measurement for land
and buildings are categorised as a level 3, based on the valuation method of
income capitalisation using unobservable inputs i.e. market capitalisation rates
and income/expenditure ratio. Plant and equipment and transport and motor
vehicles included within Non-current assets held for sale have been categorised
as a Level 3 fair value based on significant unobservable inputs to the valuation
technique used. These assets are measured using the comparable sales method.
This entails the use of quoted prices for identical or similar assets in the market.
The results are presented in Rand, which is Stefanutti Stocks' functional currency.

The company's directors are responsible for the preparation and fair presentation of
the unaudited condensed consolidated results. These results have been compiled
under the supervision of the Acting Chief Financial Officer, Y du Plessis, CA(SA).

COVID-19 AND JULY 2021 CIVIL UNREST

Stefanutti Stocks' priority continues to be the health and safety of its employees.
The management of the group remains committed to supporting the initiatives that
the governments have implemented with respect to the COVID-19 pandemic in
the various countries in which the group operates. Importantly, Stefanutti Stocks
continues to adhere to the required protocols and maintains a close working
relationship with clients and key stakeholders to mitigate the extensive impact of
COVID-19 and reduce the long-term effects on its business.

The July 2021 civil unrest in Gauteng and KwaZulu-Natal negatively impacted the
Inland and Coastal regions, resulting in time delays on 17 projects where work had
to stop and some damages to property. The financial impact was R8 million for
which the group is assessing possible claims. There was no impact on the other
regions within the group.

RESTRUCTURING PLAN UPDATE

The group hereby provides shareholders with an update on the Restructuring
Plan as reported in the Consolidated Annual Financial Statements of Stefanutti
Stocks for the year ended 28 February 2021 issued on 28 June 2021 and the
Circular to Shareholders relating to the disposal of 49 % of the entire issued share
capital of Al Tayer Stocks LLC issued on 3 August 2021, which transaction was
approved by shareholders on 31 August 2021. In accordance with the terms of this
transaction, the group received the initial purchase consideration of R92 million
on 8 November 2021.

As previously reported, the Restructuring Plan has been approved by both the
company's board of directors and the Lenders and envisages, inter alia:

- the sale of non-core assets;
- the sale of underutilised plant and equipment;
- the sale of certain operations;
- internal restructuring initiatives required to restore optimal operational and
  financial performance;
- the securing of additional short-term funding of R430 million, of which
  R270 million related to the negative effects of the national lockdown in
  March/April 2020;
- a favourable outcome from the processes relating to the contractual claims and
  compensation events on the Kusile power project;
- the restructuring of the short-term funding received to date from the Lenders
  into a term loan; and
- evaluation of an optimum business model going forward and associated capital
  structure analysis including the potential of raising new equity.

In accordance with the Restructuring Plan, the Lenders had provided the requisite
funding and converted the short-term funding agreement into a term loan on 1 July
2020, which loan terminates on 28 February 2022. The loan bears interest at prime
plus 5,4%, including arranging and facility fees, and is secured by special and
general notarial bonds over movable assets, continuous covering mortgage bonds
over immovable assets and various cessions. The term and funding loans do not
contain any financial covenants but rather impose certain information and general
undertakings. The group, on 25 May 2021, reached an agreement with the Lenders
to extend the current capital repayment profile of the loan. Due to the slower
than anticipated sale of certain operations, a delay in the regulatory processes
relating to the disposal of Al Tayer Stocks LLC and the non-implementation of
the Materials Handling and Tailings Management sub-divisions transaction as
noted further on in this announcement, the capital portion of the loan repayments
envisaged to commence in July 2021, had not materialised. Following the receipt
of the initial purchase consideration of the disposal of Al Tayer Stocks LLC, a
capital repayment of R45 million was made on 15 November 2021. The group is
currently in negotiations with the Lenders to extend the capital repayments and
duration of the loan to 28 February 2023.

The Lenders have agreed to provide continued guarantee support for current
and future projects being undertaken by the group. Management has made
considerable progress in reconfiguring the group's organisational structure to
improve operational performance and decrease overhead costs, including the
reduction of the group's overall headcount. This is an ongoing process which
continues as the aspects of the Restructuring Plan are being implemented in this
uncertain environment.

The purpose of the Restructuring Plan is to put in place an optimal capital structure
and access to liquidity to position the group for long-term growth.

The Restructuring Plan is anticipated to be implemented over the financial years
ending February 2022 and February 2023 and, to the extent required, shareholder
approval will be sought for certain aspects of the Restructuring Plan. The group
will continue to update shareholders on the progress of the various aspects of the
Restructuring Plan.

The directors consider it appropriate that the group's results for the reporting
period be prepared on the going-concern basis, based on:

- having converted the short-term funding agreement with the Lenders to a
  term loan;
- the assumption of a successful completion of current negotiations with the
  Lenders with regards to the extension of the capital repayments and loan
  duration to February 2023;
- ongoing support from the Lenders; and
- successfully implementing the Restructuring Plan.

The funding provided by the Lenders has assisted in relieving the group's liquidity
pressures even though current liabilities exceed current assets as at 31 August
2021. The group believes that it is still currently commercially solvent based on the
cashflow projections included in the Restructuring Plan. However, uncertainties
surrounding the COVID-19 pandemic and contingent liabilities as noted in
note 26 of the group's Consolidated Annual Financial Statements for the year
ended 28 February 2021, continue to indicate that a material uncertainty exists
that may cast doubt on the group's ability to continue as a going concern in the
short term.

OVERVIEW OF RESULTS

As previously highlighted to shareholders in numerous announcements and
updates since late 2018, the group continues to pursue a number of contractual
claims and compensation events on the Kusile power project. Due to the
complexity of the claims, the processes remain ongoing. No further details of the
claims have been disclosed on the basis that it may prejudice the group's position
in defending the claims brought against it and in pursuing those claims brought
against Eskom by the group.

Continuing operations
Contract revenue from continuing operations increased to R3,2 billion
(restated Aug 2020: R2,6 billion) with an operating profit of R5 million
(restated Aug 2020: R161 million operating loss). Included in operating profit are
restructuring costs and abnormal legal fees of R58 million (Aug 2020: 64 million).
Excluding these costs, the operating profit would have been R63 million
(Aug 2020: R97 million operating loss).

The after tax loss for continuing operations is R103 million
(restated Aug 2020: R253 million loss) which includes a fair value adjustment
of R17 million relating to a property and certain plant held for sale. Earnings
and headline earnings per share for total operations are reported as a
loss of 112,69 cents (Aug 2020: 147,06 cents) and a loss of 67,12 cents
(Aug 2020: 128,42 cents) respectively.

The group's order book for continuing operations is currently R4,6 billion of which
R1,6 billion arises from work beyond South Africa's borders.

Safety
Management and staff remain committed to the group's health and safety
policies and procedures, and together strive to constantly improve the group's
safety performance. The group's Lost Time Injury Frequency Rate (LTIFR) at
August 2021 was 0,03 (Feb 2021: 0,03) and the Recordable Case Rate (RCR)
was 0,30 (Feb 2021: 0,35).

Broad-Based Black Economic Empowerment (B-BBEE)
The group is a level 1 B-BBEE contributor measured in terms of the Construction
Sector scorecard with a Black Economic Interest score of 64,28%.

Industry related matters
With respect to the civil claim received from the City of Cape Town (Green Point
Stadium), the arbitration hearing commenced but was subsequently adjourned
and postponed to July 2022 at the request of the City of Cape Town. The group
remains confident it can defend this claim.

The group continues to be negatively affected through disruptive and unlawful
activities by certain communities and informal business forums in several areas
of South Africa.

Dividend declaration
Notice is hereby given that no dividend will be declared (Aug 2020: Nil).

Subsequent events
Other than the matters noted herein, there were no other material reportable events
which occurred between the reporting date and the date of this announcement.

Further information
These results have been compiled under the supervision of the Acting 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 (Pty) Ltd, 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/2021/jse/isse/ssk/FY2022H1.pdf

Published on 25 November 2021

Corporate advisor and sponsor
Bridge Capital Advisors Proprietary Limited
10 Eastwood Road, Dunkeld, 2196
(PO Box 651010, Benmore, 2010)

www.stefanuttistocks.com
Date: 25-11-2021 07:05:00
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