Interim Results Six months ended 31 ust 2015 Bridging y expectations Agenda Period overview Operational Overview Financial Results Conclusion Bridging y expectations 2 1
Six month overview Satisfactory financial performance in current market All Business Units were profitable and performed to management expectations with exception of the Middle East operations Challenging trading environment Continuously align and structure businesses to adapt to market conditions Continued delayed payments negatively impacts our working capital Current order book R12,5bn 3 3 Key indicators Operating profit R176m Operating profit margin 3,4% Cash on hand R967m Debt : Equity 22% Health and safety LTIFR RCR 0,13 0,89 Capex R52m B-BBEE Level 3 4 4 2
Industry matters Competition Commission As previously reported, the company has received legal notification for two matters, where Stefanutti Stocks has been cited as one of the: 1. Respondents into an alleged World Cup Stadia Meeting referred to the Competition Tribunal for adjudication 2. Defendants relating to a civil claim initiated by the city of Cape Town in respect of the Green Point Stadium No provision has been made as the Group is confident to successfully defend the matters Construction Industry Development Board (CIDB) CIDB intends to launch a formal inquiry into contractors due to their conduct that gave rise to the penalties imposed by the Competition Commission This process is currently being challenged Construction Sector Charter No agreement reached as yet on the new industry codes 5 5 Operational Overview Bridging y expectations 6 6 3
Market overview Depressed global and local economic environment Shortage of major public and private infrastructure projects Inconsistency of adjudication and delay in awards of projects Available projects in public sector are broken down into smaller packages There are still specific areas in the market that continue to offer good opportunities for the Group (mainly private sector and cross-border) We continue to maintain the order book on the back of medium-sized projects (<R350m) 7 7 The tender market we participate in Project size range R million % of projects tendered on Awarded projects (9% of tendered) 50 100 34% 56% 101 350 40% 27% 351 750 16% 10% 751 1 000 4% 2% >1 000 7% 5% Total 100% 100% 8 8 4
Key Operations & Order Book Structures RPM Building Middle East Mechanical & Electrical Gauteng Roads & Earthworks Inland Al Tayer Stocks * Mechanical (Industrial) KZN Pipelines Coastal Zener Steward * Mechanical (Oil & Gas) Marine Mining Services Housing Construction Electrical & Instrumentation Geotechnical Africa (sub Sahara) Africa (SADC) R2 200m R5 100m R1 900m R5 000m R1 200m R1 100m R4 200m R4 000m Order book: 28 Feb 2015: R12,7 bn Order book: 31 2015: R12,0 bn Current order book: R12,5 bn * Equity Accounted Associates 9 9 Key Operations Excluding Middle East Structures RPM Building M&E 2 500 2 000 1 500 1 000 500 0 Contribution to turnover (Rm) 1 093 1 528 2 069 Outside South Africa: 30% * Excludes head office and fair value adjustment on investment property held for sale 560 Structures RPM Building M&E 120 100 80 60 40 20 0 Contribution to operating profit* (Rm) 25 100 Outside South Africa: 38% 10 33 Structures RPM Building M&E 10 10 5
Structures % turnover by sector 31 ust 2015 Projected 22% 5% 9% 28% Mining Infrastructure Transport Infrastructure 26% Bulk Earthworks & Geotechnical Water, Sanitation & Pipelines 9% 6% 36% 20% 16% Energy generation Industrial Plants, Oil & Gas 17% 6% Total work outside South Africa: 14% Public sector work in SA: 54% Public sector work outside SA: 4% Total work outside South Africa: 14% Public sector work in SA: 71% Public sector work outside SA: 4% 11 11 Structures overview Structures continue to go through a challenging period in tough market conditions and is expected to continue in the medium term On-going pressure on order book and operating profit margin Few large private and public infrastructure projects Fewer mining surface infrastructure projects due to lower commodity prices We continuously right size the divisions within Structures to accommodate short to medium prospects 12 12 6
Structures work prospects Over the medium term there are still opportunities, for example in: Water treatment plants throughout South Africa Sporadic Marine works in South Africa and sub-saharan Africa Bridge construction throughout South Africa Mining surface infrastructure opportunities mainly in the coal sector Various Geotechnical projects predominantly in Gauteng and Namibia Concrete works for process plants in the petrochemical sector In the short term there are potential awards to the value of ±R1,7 billion 13 13 Roads, Pipeline & Mining Services (RPM) % turnover by sector 31 ust 2015 Projected 13% 15% 31% 10% 7% Mining & Mining Infrastructure Transport Infrastructure 12% Bulk Earthworks & Industrial 35% 7% Water, Sanitation & Pipelines Energy generation 34% 36% Total work outside South Africa: 29% Public sector work in SA: 27% Public sector work outside SA: 17% Total work outside South Africa: 40% Public sector work in SA: 9% Public sector work outside SA: 56% 14 14 7
RPM overview In a competitive market RPM performed to expectations and again made a good contribution towards operating profit Strong performance in neighbouring countries Challenging conditions in the current SA Road construction and Pipeline sectors Delay in awards of open pit contract mining and road contracts already priced The sudden weakening of the Zambian Kwacha against the Rand may have a negative impact on year end results 15 15 RPM work prospects There are still opportunities locally: SANRAL and Provincial roads Bulk pipelines Open-pit mining Infrastructure developments in neighbouring countries: Agricultural infrastructure Roads Dams We expect work outside SA to increase to 40%. Most of this will come from Swaziland, Zambia and possibly Mozambique In the short term there are potential awards to the value of ±R2,5 billion 16 16 8
Building % turnover by sector 31 ust 2015 Non-residential Projected Office & Commercial 5% 13% 13% Shopping & Retail Hospitals & Medical Education 15% 14% 17% Factories & Warehouses Energy Generation 11% 3% 15% 7% 10% Tourism & Leisure 9% 24% 12% Other 10% Residential 10% 4% 8% Total work outside South Africa: 40% Public sector work in SA: 22% Public sector work outside SA: 6% Total work outside South Africa: 40% Public sector work in SA: 46% Public sector work outside SA: 14% 17 17 Building overview Building continues to improve its financial performance Good performance from Mozambique, Housing and Coastal regions Delayed contract awards impacting results in Inland Negative outcome of arbitration ruling on a contract dating back to 2003-2007 impacted the Botswana results by R16 million Need to resolve outstanding contractual claims / commercial settlements Long-term low margin projects still make up a large percentage of the order book Zener Steward s non-performance continued (Equity Accounted Associate in Middle East) 18 18 9
Building work prospects Although the market is competitive, there are still opportunities in office space, commercial buildings, shopping centres and healthcare, for example: High rise mixed-use buildings in Gauteng, Namibia and Mozambique University and community residential units throughout SA and SADC Shopping centres and hotels remain an opportunity in all areas of operation New - and hospital upgrades Warehousing in the retail market In the short term there are potential awards to the value of ±R3,1 billion 19 19 Mechanical & Electrical (M&E) % turnover by sector 31 ust 2015 Projected 19% 4% Mining Infrastructure Energy Generation Oil & Gas 20% 3% 77% 77% Total work outside South Africa: 0% Public sector work in SA: 0% Public sector work outside SA: 0% Total work outside South Africa: 0% Public sector work in SA: 0% Public sector work outside SA: 0% 20 20 10
M&E overview Mechanical & Electrical has produced a sound performance Majority of work from the local Oil & Gas market: New plants Plant upgrades Shut-downs Significant maintenance work Mining surface infrastructure environment has been specifically challenging 21 21 M&E work prospects Over the short to medium term there are still opportunities, for example: Various medium sized projects, including shut downs, in the Petrochemical sector for our Oil & Gas and Electrical divisions New fuel storage tank farms Electrical & Instrumentation EPC contracts Brown field projects for the Mechanical division in the coal and platinum markets In the short term there are potential awards to the value of ±R600m 22 22 11
Group % turnover by sector 31 ust 2015 13% Mining & Mining Infrastructure Transport Infrastructure Bulk Earthworks & Geotechnical Projected 16% 40% 16% Industrial Plants, Oil & Gas Energy generation 36% 20% 8% 9% 5% 9% Water, Sanitation & Pipelines Building 7% 7% 8% 6% Total work outside South Africa: 34%* Public sector work in SA: 28% Public sector work outside SA: 8% Total work outside South Africa: 41%* Public sector work in SA: 32% Public sector work outside SA: 28% * Includes Middle East 23 23 Challenges Conversion of work in progress into cash Secure debtor payments on existing government projects in some sub-sahara African countries Manage the effects of currency volatility Resolve outstanding contractual claims Employment equity targets particularly at middle management level Strategic B-BBEE partnerships / ownership structure 24 24 12
Operating Segments: 2014 As at 31 2014 Exclude R 000s Building Structures RPM including M&E M. East Head Office Operations Middle East* Group as reported Contract revenue 1 332 537 1 455 392 2 563 282 336 139-5 687 350 447 043 5 240 307 % Contribution 25.4% 27.8% 48.9% 6.4% - - (8.5%) 100% Operating profit/ (loss) 41 022 118 252 (17 185) 22 750 1 673 166 512 3 768 162 744 % Contribution 25.2% 72.7% (10.6%) 14.0% 1.0% - (2.3%) 100% Operating margin (%) 3.1% 8.1% (0.7%) 6.8% N/A 2.9% 0.8% 3.1% * Excluded from contract revenue and operating profit as Middle East is an equity accounted investees 25 25 Operating Segments: 2015 As at 31 2015 Exclude Include R 000s Building Structures RPM including M&E M. East Head Office Operations Middle East* Invest. Property Group as reported Contract revenue 1 093 330 1 527 779 2 535 539 559 544-5 716 192 466 465-5 249 727 % Contribution 20.8% 29,1% 48.3% 10.7% - - (8.9%) - 100% Operating profit/ (loss) 24 806 99 760 1 399 32 500 3 426 161 891 (8 187) 6 066 176 144 % Contribution 14,1% 56,7% 0.8% 18,5% 1.9% - 4,6% 3,4% 100% Operating margin (%) 2,3% 6,5% 0.1% 5.8% N/A 2.8% (1.8%) N/A 3,4% * Exclude from contract revenue and operating loss as Middle East is an equity accounted investees ** Include in operating profit fair value adjustment on investment property held for sale 26 26 13
Financial Overview Bridging y expectations 27 27 Financial highlights Results for the 6 months ended 31 2015 % Change on prior period Contract revenue R5,3 bn Operating profit* R176,1 m 8,2% Operating margin 3,4% Net profit after tax (total ops) R95,9m 8,2% Earnings per share (total ops) 54,1 c 8,0% Net profit after tax (continuing ops) R104,7 m (4,8%) Headline earnings per share (continuing ops) 53,2 c (11,2%) Cash on hand R967 m Cash generated from operations R142 m * Including R6m fair value adjustment of the investment property held for sale 28 28 14
Statement of Comprehensive Income R'000 6 months ended 31 2015 % Change 6 months ended 31 2014 Contract Revenue 5 249 727 0,2% 5 240 307 EBITDA 259 954 9,1% 238 217 EBITDA % 5,0% 4,5% Depreciation & amortisation of intangibles (83 810) (75 473) Operating Profit 176 144 8,2% 162 744 Operating margin % 3,4% 3,1% Equity accounted investees (8 640) 5 144 Net investment income (11 059) (3 528) Profit before tax 156 445 164 360 Taxation (51 740) (54 431) Profit for the period, continuing operations 104 705 (4,8%) 109 929 Net margin % 2,0% 2,1% Loss after tax for the period from discontinued operation (8 822) (21 329) Profit for the period total operations 95 883 8,2% 88 600 Earnings attributable to ordinary shareholders 103 444 108 886 Headline earnings, continuing operations 93 121 (11,1%) 104 740 Diluted weighted average shares in issue 188 080 746 188 080 746 HEPS (cents), continuing operations 53,23 (11,2%) 59,92 Diluted HEPS (cents), continuing operations 49,51 (11,1%) 55,69 29 29 Extracts from Statement of Comprehensive Income R'000 6 months ended 31 2015 % Change 6 months ended 31 2014 Contract Revenue 5 249 727 0,2% 5 240 307 EBITDA 259 954 9,1% 238 217 EBITDA % 5,0% 4,5% Depreciation & amortisation of intangibles (83 810) (75 473) Operating Profit 176 144 8,2% 162 744 Operating margin % 3,4% 3,1% Slight improvement in contract revenue EBITDA excluding fair value adjustment of R6m, up 6,6% mainly due to improved contribution from Building and M&E business units Operating profit excluding fair value adjustment increased by 4,5% at a 3,2% margin 30 30 15
Extracts from Statement of Comprehensive Income R'000 6 months ended 31 2015 % Change 6 months ended 31 2014 Operating Profit 176 144 8,2% 162 744 Equity accounted investees (8 640) 5 144 Net investment income (11 059) (3 528) Profit before tax 156 445 164 360 Taxation (51 740) (54 431) Profit for the period, continuing operations 104 705 (4,8%) 109 929 Middle East operations posted a loss due to holding costs and closing out a loss making contract in Zener Steward Increase in net finance costs due to increased borrowings and deemed interest on the Competition Commission penalty* of R6,6m (Deemed interest: FY2016 R13m, FY2017 R19m) Tax rate of 33,1% affected by: Non-deductible expenditure such as deemed interest, Middle East loss Other jurisdictions taxed at higher tax rates * Accounted for in terms of IAS39 as disclosed in Annual Financial Statements Feb 2013 31 31 Extracts from Statement of Comprehensive Income R'000 6 months ended 31 2015 % Change 6 months ended 31 2014 Profit for the period, continuing operations 104 705 (4,8%) 109 929 Net margin % 2,0% 2,1% Loss after tax for the period from discontinued operation (8 822) (21 329) Profit for the period total operations 95 883 8,2% 88 600 Earnings attributable to ordinary shareholders 103 444 108 886 Headline earnings, continuing operations 93 121 (11,1%) 104 740 Diluted weighted average shares in issue 188 080 746 188 080 746 HEPS (cents), continuing operations 53,23 (11,2%) 59,92 Diluted HEPS (cents), continuing operations 49,51 (11,1%) 55,69 4,8% net decrease in profit for the year from continuing operations Discontinued operation (Power division) Negative mediation ruling and legal fees HEPS from continuing operations decrease of 11,1% 32 32 16
Contribution to operating profit Structures RPM Building (Excl. M. East) * M&E Rm 200 150 100 50 0-50 -100 74 2013 41 2014 25 2015 95 2013 118 2014 100 2015-43 2013-21 2014 10 2015 14 2013 23 2014 33 2015 * Excluding fair value adjustment on investment property held for sale 33 33 Considerations Structures Reduced infrastructure spend on: Private, Public and Mining surface projects Reduced trading activity and margin RPM Reducing margin due to increased competitive environment Weakening of the Zambian Kwacha against the Rand from September 2015 may have a negative impact on year end results Building Improvement in profitability continues Zener Steward on the watch list - considering our options to possibly exit this business M&E Opportunities in the Petrochemical sector 34 34 17
Statement of Financial Position Unaudited 31 2015 Audited 28 Feb 2015 ASSETS Non-current assets Property, plant and equipment 1 067 874 (3,8%) 1 109 652 Investment property - 61 507 Goodwill and intangible assets 1 252 489 1 256 449 Equity accounted investees 238 326 232 255 Current Assets Bank balances 967 190 18,6% 815 235 Other current assets 2 907 863 2 866 395 Assets held for sale 144 856 108 444 TOTAL ASSETS 6 578 598 6 449 937 EQUITY AND LIABILITIES Capital and reserves Ordinary shareholders interest 2 517 697 5,0% 2 396 925 Non-controlling interest 4 041 2 409 Non-current liabilities Interest-bearing liabilities 264 041 243 883 Non-interest-bearing liabilities 4 685 4 229 Deferred tax 10 067 32 160 Current Liabilities Other current liabilities 2 307 089 2 179 104 Provisions and payments in advance 1 406 543 (8,6%) 1 539 683 Taxation 30 604 5 904 Liabilities discontinued operation 33 831 45 640 TOTAL EQUITY AND LIABILITIES 6 578 598 6 449 937 Current interest bearing liabilities 201 916 171 338 35 35 Extracts from Statement of Financial Position Unaudited 31 2015 Audited 28 Feb 2015 ASSETS Non-current assets Property, plant and equipment 1 067 874 (3,8%) 1 109 652 Current Assets Other current assets 2 907 863 2 866 395 Capex spend of R52m ( 2014: R134m) maintaining R44m and expansion R8m Other current assets Slight decrease in work in progress 31 2015 28 Feb 2015 Inventories & contracts in progress 854 228 (5,1%) 900 136 Trade accounts receivable 1 562 275 4,9% 1 488 638 Other receivables 491 360 2,9% 477 621 2 907 863 1,4% 2 866 395 5% increase in trade accounts receivable debtors days (excluding retentions) increased to 54 days from 51 days 36 36 18
Extracts from Statement of Financial Position Unaudited 31 2015 Audited 28 Feb 2015 ASSETS Current Assets Bank balances 967 190 18,6% 815 235 Assets held for sale 144 856 108 444 Net cash on hand is R967m 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 to debtors remains a priority Non-current assets held for sale include: 2 unutilised properties being sold Investment property to be sold Assets from discontinued operation 37 37 Extracts from Statement of Financial Position Unaudited 31 2015 Audited 28 Feb 2015 EQUITY AND LIABILITIES Non-current liabilities Interest-bearing liabilities 264 041 243 883 Current Liabilities Other current liabilities 2 307 089 2 179 103 Total interest bearing debt R560m (Feb 2015: R449m) Including two remaining instalments due to the Competition Commission (R210m) Interest bearing debt : equity ratio increased to 22,3% (Feb 2015: 18,8%) Other current liabilities 31 2015 28 Feb 2015 Short term loans 223 830 19,2% 187 838 Trade accounts payable 937 264 (8,4%) 1 023 674 Accruals & other current liabilities 1 145 995 18,4% 967 592 2 307 089 5,9% 2 179 104 Short term loans includes interest bearing liabilities of R202m (Feb 2015: R171m) 38 38 19
Extracts from Statement of Financial Position Other current liabilities 31 2015 28 Feb 2015 Short term loans 223 830 19,2% 187 838 Trade accounts payable 937 264 (8,4%) 1 023 674 Accruals & other current liabilities 1 145 995 18,4% 967 592 2 307 089 5,9% 2 179 104 Provisions 1 406 543 (8,6%) 1 539 683 Reduction in trade accounts payable offset by an increase in accruals and other payables Creditors days reduced to 37 (Feb 2015: 40) Reduced level of advances received during the period of R185m evidenced by the reduction in the provisions balance negatively affecting cash Contracting provisions increased by R52m from FYE15 39 39 Abridged statement of cash flows -133-1 31 2015 (Rm) 108 34 241 815 Opening cash balance Adjusted cash generated from operations Effects of advances received and contract provisions Cash generated from operations Working capital changes Net investment and dividend income -34-3 31 2014 (Rm) 218 126 344 1 003-49 -14 Taxation paid Investing activities -51-111 42 Financing activities -108 32 967 Exchange rate effects and other Closing balance 4 1 044 No dividend has been declared 40 40 20
Summary & Conclusion Bridging y expectations 41 Work prospects for the next 18 months Sectors Value R billion Mining & Mining Infrastructure 7 Transport Infrastructure (Rail & Road) 18 Industrial Plants 4 Oil & Gas 15 Energy generation 10 Water, Sanitation & Pipelines 9 Building 18 Total R81 billion* * 40% cross-border 42 42 21
Focus areas going forward Identify projects locally and in select African countries where we can offer our multi-disciplinary offering Ongoing alignment of operations to accommodate market changes Form strategic partnerships with local B-BBEE companies in public sector market in SA Continue with expansion into the rest of Africa Increase footprint in countries where we already have a presence In select African countries with known clients 43 43 Conclusion Expanding order book in key focus areas Strong focus to improve free cash position Ensure all Businesses contribute positively to bottom line 44 22
Stefanutti Stocks City A multi-disciplinary construction group www.stefanuttistocks.com Q & A 45 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 expectations 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 expectations 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. 46 23