Tenders were taking far too long to come to market and this was making it more difficult for businesses to plan their cash flows, Stefanutti Stocks CEO Willie Meyburgh said on the release of the company’s half-year financial results last Tuesday.

In addition to a tough trading environment, there was not a large selection of projects in the market to choose from.

“We are building up a pipeline, but us and many construction companies are finding that the market could be much more exciting. It is still not uncommon for the waiting periods on public and sometimes private projects to double suddenly. This can make planning cash spend more difficult and then losses become more common,” Meyburgh said.

In the six months to August, the construction group’s headline earnings per share dropped 62% from 65.3c to 25.1c.

Meyburgh said the results were dampened by “an incredibly tough trading environment”.

“In this last set of interim results, we reported an unusually high number of loss-making projects as well as the write-off of some accounts receivable and work in progress considered to be noncollectable,” he said.

He was “optimistic about the future” and believed Stefanutti’s results would improve slowly in the short term, but that energy-related projects in South Africa and Mozambique would pay off in the long run.

“The past few years have seen the Stefanutti Stocks group focus on building resource and capability, in readiness for the anticipated upturn in the economy. This swing is largely dependent on government’s infrastructure roll-out plan; the proposed development of the large natural gas deposits in Mozambique; and the clean fuels project in South Africa,” he said.

The group maintained its order book at nearly R9.5 billion. The book was at R9.4 billion at the end of August this year, and was R9.3 billion at the end of February.

Stefanutti has been on an acquisition and inhouse capital expenditure drive, which saw its interest-bearing borrowings increase to R649m from R360m in the six months to August.

Additional funding was required for the acquisition of Cycad Pipelines, which was bought last year. Funding was also sought for its own infrastructure spend and capital expenditure, mainly by the roads, pipelines and mining services business unit.

Nevertheless, CFO Dermot Quinn was happy with the company’s cash flow.

“Cash flow from operations was R377 million, of which R89 million was generated from a much better working capital cycle than I anticipated,” he said.

Stefanutti decided not to declare a dividend as it looked to hold on to retained earnings for growth purposes.

Source: BDLive