Interim Results. Six months ended 31 August 2016

Transcription

1 Interim Results Six months ended 31 August 2016

2 Stefanutti Stocks City A multi-disciplinary construction group (Vision) (Mission) 2 y 2

3 Agenda Six month overview Operational Overview Financial Results Conclusion 3

4 Six month overview Group s performance reflects challenging trading environment Delayed contract awards Delayed contract startups Negative impact of currency fluctuations Poor liquidity in the market Continuously align and structure businesses to reduce cost and adapt to market conditions The order book has improved by 20% since Aug

5 Key indicators Operating profit R100m Operating profit margin 2,3% Debt : Equity 19,7% Cash on hand R1,013bn Capex R78m Health and safety LTIFR RCR 0,12 0,70 B-BBEE Level 4 Generic score card 5 5

6 Industry matters Competition Commission Settlement Agreement with Government as per SENS announcement, dated 11 October 2016 All matters previously noted, settled and/or withdrawn other than the civil claim received from the City of Cape Town. No provision has been made as the Group is confident to successfully defend the matter. 6 6

7 Operational Overview International Convention Centre - Swaziland

8 Market overview Trading conditions remain challenging Majority of projects are <R350m Certain sectors of the economy still provide opportunities that allow order book growth Current order book R14,1 billion Converting debtors (including scope changes and variations) into cash remains challenging 8 8

9 Key operations & order book RPM Mechanical & Electrical Structures Building Middle East Roads & Earthworks Mechanical (Industrial) Civils Inland & Housing Al Tayer Stocks * Pipelines Mechanical (Oil & Gas) Coastal Coastal Construction Mining Services Electrical & Instrumentation Geotechnical Africa (SADC) Africa (sub Sahara) R1 200m R900m R2 000m R1 900m 2 Year order book R10,6 bn R4 900m R4 800m Year 3 R2,1 bn Beyond R1,4 bn R4 200m R4 100m Order book: 29 Feb 2016: R12,3 bn Order book: 31 Aug 2016: R11,7 bn Current order book: R14,1bn * Equity Accounted Associates 9 9

10 Key Operations Excluding Middle East RPM M&E Structures Building Contribution to turnover (Rm) RPM M&E Structures Building Contribution to operating profit* (Rm) RPM M&E Structures Building Outside South Africa: 26% Outside South Africa: 40% * Excludes head office 10 10

11 Roads, Pipeline & Mining Services (RPM) % turnover by sector 31 Aug 2016 Projected 14% 8% 6% 33% Mining & Mining Infrastructure Transport Infrastructure 13% 6% 5% 42% Bulk Earthworks & Industrial Water, Sanitation & Pipelines 39% Energy Generation 34% Total work outside South Africa: 38% Public sector work in SA: 27% Public sector work outside SA: 26% Total work outside South Africa: 36% Public sector work in SA: 28% Public sector work outside SA: 27% 11 11

12 RPM overview Notwithstanding reduced turnover and forex fluctuations RPM delivered solid results Decline in public spend in South Africa affects available work and increased competition Outstanding debtor payments in Zambia and Nigeria: Puts tremendous pressure on working capital Affected projects have been stopped In discussions with clients to agree payment terms Recent open pit mining contract awards have improved the order book Good performance from Mining Services, Roads & Earthworks and Swaziland divisions 12 12

13 RPM work prospects In South Africa there are opportunities with: 13 Roads Open-pit mining - Coal Much needed water infrastructure pipeline projects Mining surface infrastructure Infrastructure development opportunities in neighbouring countries: Roads Good progress in sourcing cross-border opportunities (assisted by third party funding) In the short term there are potential awards to SSK to the value of ±R1,4 billion For the next 12 months, projects to the value of ±R8 billion have been identified 13

14 Mechanical & Electrical (M&E) % turnover by sector 31 Aug 2016 Projected 10% 6% Mining Infrastructure Energy Generation 20% Oil & Gas 5% 84% 75% Total work outside South Africa: 0% Public sector work in SA: 6% Public sector work outside SA: 0% Total work outside South Africa: 12% Public sector work in SA: 5% Public sector work outside SA: 0% 14 14

15 Mechanical & Electrical overview Oil & Gas and Electrical & Instrumentation divisions have performed to on the back of available Petrochemical projects The Mechanical division results were negatively affected due to a shortage of work in the traditional mining surface infrastructure market The majority of work from the local Oil & Gas market stems from plant upgrades and plant maintenance 15 15

16 Mechanical & Electrical work prospects Over the short to medium term there are opportunities for the: Oil & Gas and Electrical & Instrumentation divisions: Various medium sized Petrochemical projects on existing plants (upgrades, shut downs and maintenance) New fuel storage tank farms throughout South Africa Mechanical division (Industrial): Cross-border opportunities Plant upgrades in coal, platinum and copper sectors In the short term there are potential awards to SSK to the value of ±R300m For the next 12 months, projects to the value of ±R4 billion have been identified 16 16

17 Structures % turnover by sector 31 Aug 2016 Projected 26% 2% 4% 37% Mining Infrastructure Transport Infrastructure Bulk Earthworks & Geotechnical Water & Sanitation 31% 1% 5% 27% 22% 9% Energy Generation Industrial Plants, Oil & Gas 31% 5% Total work outside South Africa: 9% Public sector work in SA: 76% Public sector work outside SA: 4% Total work outside South Africa: 2% Public sector work in SA: 82% Public sector work outside SA: 0% 17 17

18 Structures overview Due to challenging and tough market conditions, Structures produced a poor performance The delay in tenders, awarding of projects and commencement of awarded projects adds pressure to an already competitive market Unsatisfactory order book with on-going pressure on operating profit margin Combined and right sized divisions to enhance efficiency and reduce costs Loss-making Marine project completed Secured projects in targeted renewable energy and rail sectors 18 18

19 Structures work prospects Over the medium term there are opportunities in: Water treatment plants throughout South Africa Marine works in South Africa and along the east coast of Africa Bridge construction throughout South Africa Mining surface infrastructure opportunities In the short term there are potential awards to SSK to the value of ±R1,1 billion For the next 12 months, projects to the value of ±R10 billion have been identified 19 19

20 Building % turnover by sector 31 Aug 2016 Non-residential Projected 23% 3% 6% 15% Office & Commercial Shopping & Retail Hospitals & Medical 21% 5% 18% 18% 23% 3% 9% Education Factories & Warehouses Energy Generation Residential Tourism & Leisure 19% 16% 4% 17% Total work outside South Africa: 37% Public sector work in SA: 35% Public sector work outside SA: 9% Total work outside South Africa: 42% Public sector work in SA: 35% Public sector work outside SA: 11% 20 20

21 Building overview Competitive trading conditions combined with holding costs and contract losses resulted in a poor performance Available work in private sector has slowed down Forex fluctuations impacted results negatively Losses incurred on Namibian projects (projects now complete) Projects still in the system not contributing towards operating profit Delayed debtor payments continue to affect working capital Combined divisions to enhance efficiency and reduce costs Good performance from Mozambique and Housing divisions 21 21

22 Building work prospects In an ongoing competitive trading environment there are opportunities in: High rise mixed-use buildings in Gauteng and Mozambique University and community residential units throughout SA and SADC Warehousing and distribution centres In the short term there are potential awards to SSK to the value of ±R1,6 billion For the next 12 months, projects to the value of ±R13 billion have been identified 22 22

23 Group % turnover by sector 31 Aug % Mining & Mining Infrastructure Transport Infrastructure Projected 18% Bulk Earthworks & Geotechnical 38% 19% Industrial Plants, Oil & Gas Energy Generation 39% 18% 7% 10% 11% 5% Water, Sanitation & Pipelines Building 6% 8% 6% 5% Total work outside South Africa: 35%* Public sector work in SA: 30% Public sector work outside SA: 10% Total work outside South Africa: 33%* Public sector work in SA: 36% Public sector work outside SA: 14% * Includes Middle East 23 23

24 Challenges Maintaining quality order book in a challenging market Continue to align operations to accommodate market conditions Conversion of work in progress into cash Securing debtor payments on existing government projects - South Africa, Mozambique, Nigeria and Zambia Foreign exchange fluctuations 24 24

25 Operating Segments: 2015 Restated as at 31 Aug 2015 Exclude Include R 000s RPM M&E Structures Building (incl. M. East) Head Office Operations Middle East* Invest. Property** Group as reported Contract revenue ( ) % Contribution 29.1% 10.7% 20.8% 46.6% - - (7.2%) - 100% Operating profit/ (loss) (8 810) % Contribution 56.7% 18.5% 14.1% 10.4% 1.9% - (5.0%) 3.4% 100% Operating margin (%) 6.5% 5.8% 2.3% 0.7% N/A 3.2% (2.3%) N/A 3.4% * Exclude from contract revenue and operating profit as Middle East is an equity accounted investee ** Include in operating profit fair value adjustment on investment property held for sale 25 25

26 Operating Segments: 2016 As at 31 August 2016 Exclude R 000s RPM M&E Structures Building (incl. M. East) Head Office Operations Middle East * Group as reported Contract revenue ( ) % Contribution 23,6% 12,8% 21,9% 55,8% - - (14,1%) 100% Operating profit/ (loss) (10 161) (21 419) % Contribution 81,1 % 23,6% 3,0% 23,7% (10,1%) - (21,3%) 100% Operating margin (%) 7,9% 4,3% 0,3% 1,0% N/A 2,4% 3,5% 2,3% * Excluded from reported contract revenue and operating profit as Middle East is an equity accounted investee 26 26

27 Financial Overview Eastgate Mall upgrade 27 27

28 Financial indicators Results for the six months ended 31 Aug 2016 Contract revenue % Change on prior period R4,4 bn Operating profit R100,4 m (43,0%) Operating margin 2,3% Net profit after tax (continuing ops) R85,2 m (30,2%) Headline earnings per share (continuing ops) 52,73 c (16,5%) Headline earnings per share (total ops) 52,73 c 8,8% Cash on hand R1,013bn 19,0% 28 28

29 Statement of Comprehensive Income 29 R' Aug 2016 % Change Restated 31 Aug 2015 Contract Revenue (16,9%) EBITDA (33,8%) EBITDA % 3,9% 5,0% Depreciation & amortisation of intangibles (71 688) (83 810) Operating Profit (43,0%) Operating margin % 2,3% 3,4% Equity accounted investees Net finance costs (21 838) (11 059) Profit before tax Taxation (15 069) (51 740) Profit for the period (continuing operations) (30,2%) Net margin % 2,0% 2,3% Loss after tax for the period from discontinued operations - (26 121) Profit for the period (total operations) Earnings attributable to ordinary shareholders (continuing operations) Headline earnings (continuing operations) (17,4%) Weighted average shares in issue Diluted weighted average shares in issue HEPS (cents), (continuing operations) 52,73 (16,5%) 63,12 HEPS (cents), (total operations) 52,73 8,8% 48,46 29

30 Extracts from Statement of Comprehensive Income R' Aug 2016 % Change Restated 31 Aug 2015 Contract Revenue (16,9%) EBITDA (33,8%) EBITDA % 3,9% 5,0% Depreciation & amortisation of intangibles (71 688) (83 810) Operating Profit (43,0%) Operating margin % 2,3% 3,4% Reduction in contract revenue EBITDA and operating profit has also been negatively affected by the strengthening of the Rand and weakening of African currencies in which the group operates during the period (R50m forex loss) Operating margin reduced to 2,3% 30 30

31 Extracts from Statement of Comprehensive Income R' Aug 2016 % Change Restated 31 Aug 2015 Operating Profit (43,0%) Equity accounted investees Net finance costs (21 838) (11 059) Profit before tax Taxation (15 069) (51 740) Profit for the period (continuing operations) (30,2%) Increased contribution from Al Tayer Stocks Increase in net finance costs predominantly due to interest payable on the Competition Commission penalty* of R16,2m (Aug 2015: R6,6m) (FY2017 Deemed interest: R19m and actual interest: R18m) Tax rate of 15,0% positively affected by contributions from operations in lower tax jurisdictions * Accounted for in terms of IAS39 as disclosed in Annual Financial Statements Feb

32 Extracts from Statement of Comprehensive Income R' Aug 2016 % Change Restated 31 Aug 2015 Profit for the period (continuing operations) (30,2%) Net margin % 2,0% 2,3% Loss after tax for the period from discontinued operations - (26 121) Profit for the period (total operations) Earnings attributable to ordinary shareholders (continuing operations) Headline earnings (continuing operations) (17,4%) Weighted average shares in issue Diluted weighted average shares in issue HEPS (cents), (continuing operations) 52,73 (16,5%) 63,12 HEPS (cents), (total operations) 52,73 8,8% 48,46 Reduced profit for the period compared to continued operations of the prior period No impact for the period from discontinued operations HEPS from continuing operations a decrease of 16,5% HEPS from total operations an increase of 8,8% 32 32

33 Contribution to operating profit RPM M&E Structures Building * Rm Aug Aug Aug * Excluding Middle East Aug 2014 Aug 2015 Aug 2016 Aug 2014 Aug 2015 Aug Aug 2014 Aug 2015 Aug

34 Statement of Financial Position Unaudited 31 Aug 2016 Audited 29 Feb 2016 ASSETS Non-current assets Property, plant and equipment (8,5%) Goodwill and intangible assets Equity accounted investees Current Assets Bank balances ,0% Other current assets Assets held for sale TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Ordinary shareholders interest ,3% Non-controlling interest Non-current liabilities Interest-bearing liabilities Non-interest-bearing liabilities Deferred tax (12 910) Current Liabilities Other current liabilities Excess billings over work done ,7% Provisions (6,5%) Taxation (5 726) Liabilities discontinued operation TOTAL EQUITY AND LIABILITIES Current interest bearing liabilities

35 Extracts from Statement of Financial Position Unaudited 31 Aug 2016 Audited 29 Feb 2016 ASSETS Non-current assets Property, plant and equipment (8,5%) Goodwill and intangible assets Equity accounted investees Current Assets Other current assets Capex spend of R78m (Aug 2015: R52m) maintaining R49m and expansion R29m Other current assets Decrease in work in progress of 9,8% 31 Aug Feb 2016 Inventories & contracts in progress (10,1%) Trade accounts receivable ,2% Other receivables (5,7%) ,5% ,2% increase in trade accounts receivable debtors days (excluding retentions) increased to 86 days from 59 days 35 35

36 Extracts from Statement of Financial Position Unaudited 31 Aug 2016 Audited 29 Feb 2016 ASSETS Current Assets Bank balances ,0% Assets held for sale Net cash on hand is R1 013m Clients continue to delay: certification of work approval of variation orders approval of scope changes Pressure on working capital Cash conversion of work in progress and collecting amounts due by debtors remains a priority 36 36

37 Extracts from Statement of Financial Position Unaudited 31 Aug 2016 Audited 29 Feb 2016 EQUITY AND LIABILITIES Non-current liabilities Interest-bearing liabilities Current Liabilities Other current liabilities Total interest bearing debt R515m (Feb 2016: R636m) Including last instalment due to the Competition Commission (R138m*) Interest bearing debt : equity ratio decreased to 19,7% (Feb 2016: 24,5%) 31 Aug Feb 2016 Other current liabilities Short term loans (2,1%) Trade accounts payable (14,5%) Accruals & other current liabilities ,8% ,2% Short term loans includes interest bearing liabilities of R322m (Feb 2016: R328m) 37 * Including interest 37

38 Extracts from Statement of Financial Position Other current liabilities 31 Aug Feb 2016 Short term loans (2,1%) Trade accounts payable (14,5%) Accruals & other current liabilities ,8% ,2% Excess billings over work done ,7% Provisions (6,5%) Reduction in trade accounts payable Creditors days reduced slightly to 35 (Feb 2016: 37) Increased level of advances received during the period of R471m positively affecting cash Contracting provisions decreased by R32m from Feb

39 Abridged statement of cash flows 31 Aug 2016 (Rm) 851 Opening cash balance Restated 31 Aug 2015 (Rm) Cash generated from operations Working capital changes Net investment and dividend income Taxation paid Investing activities Proceeds from assets held for sale Financing activities Exchange rate effects and other Closing balance No dividend has been declared 39

40 Summary & Conclusion 40 40

41 Work prospects for the next 24 months Sectors Value R billion Mining & Mining Infrastructure 10 Transport Infrastructure (Rail, Road & Marine) 12 Industrial Plants 3 Oil & Gas 9 Energy generation 9 Water, Sanitation & Pipelines 10 Building 17 Total R70 billion* * 40% cross-border 41 41

42 Conclusion Secure at least one previously identified turnkey project where a funding solution is offered as part of the project Intensify discussions with African governments to resolve outstanding payments Maintain quality of order book through selective tendering Continue with expansion into the rest of Africa Increase footprint in countries where we already have a presence - maintaining a blend between public and private sector 42 42

43 Stefanutti Stocks City A multi-disciplinary construction group (Vision) (Mission) 43 Q & A 43

44 Disclaimer This presentation may contain forward-looking statements, which include all statements other than statements of historical facts, which have not been reviewed or reported on by the group s auditors, and may reflect the current views or of the group with respect to, among other things, future events, strategy, the economic outlook for the industry, the group s liquidity, capital resources, expenses and financial and operational performance. Words, including but not limited to, "aim", believe, anticipate, expect, intend, "could", "would", should, estimates, project, plan, may, potential, "targets" or similar words and phrases or the negative thereof are used to identify such statements. Forward-looking statements, by their very nature, contain known and unknown risks, uncertainties, assumptions and other important factors, because they relate to events and depend on circumstances that may occur in the future, whether or not outside the control of the company. Such factors may cause the company's actual results, performance or achievements to be materially different from future results, performance, developments or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the company's present and future business strategies and the environment in which it will operate in the future. No assurance can be given that forward-looking statements will prove to be correct. These forward-looking statements speak only as at the date of this presentation. In addition, no obligation is undertaken by the group to update or revise any forward-looking statements contained within this presentation to reflect any change in its with regard thereto or any change in events, conditions or circumstances on which any of such statements are based, and investors are cautioned not to place any reliance thereon