Struggling Stefanutti works on restructuring plan
Construction company battles to stay afloat as funding requirements dwarf its market capitalisation
Stefanutti Stocks, whose funding requirements jumped to almost R1bn earlier this year mainly due to non-payment by clients, has appointed a team to develop a restructuring plan as the group battles to stay afloat.
The team will also be tasked with trying to secure additional cash.
Like several other companies in the struggling construction sector, Stefanutti, which has a presence in SA, Sub-Saharan Africa and the United Arab Emirates, is in urgent need of funds to ease its liquidity problems, which threaten its survival amid lack of infrastructure spending.
“Contributing to the adverse market conditions are the well-documented delays in payments from clients, which had a significant effect on the group’s trade and other receivables as well as payments to suppliers and subcontractors,” Stefanutti CEO Russell Crawford said.
The restructuring plan would include an assessment of the sale of noncore assets, including divisions and subsidiaries, and a capital structure analysis, including the possibility of raising new equity, the company said.
“Once finalised, the restructuring plan will be considered by the board of directors for approval. Thereafter, shareholders will be updated as to the restructuring plan and the anticipated timing of the implementation thereof.”
The plan would be completed in the next few months.
In July the company said it had received R120m in ring-fenced project financing as the first tranche of its funding plan. On November 21 it said it had received additional funding of R391m, which reduced the company’s funding needs to R595m. Stefanutti has a market capitalisation of R22.6m.
Before the second tranche of funding, Stefanutti’s funding requirements had reached R986m.
The group said it was in discussions with funders for more project funding.
“The funds received from the first and second tranches have been used to meet the group’s short-term liquidity requirements, which allows more time for the group to resolve its contractual claims on the public sector power project, and to simultaneously explore and evaluate longer-term, cost-effective funding solutions,” Stefanutti said.
In the financial results for the six months ended August 31, Stefanutti said it was still experiencing liquidity problems despite the two payments from funders.
In the six months to end-August, the company’s cash on hand fell by more than double from R880.7m to R396.3m. It partly attributed the drop to delayed payments from customers.
Stefanutti’s working capital increased from R103m to R379m, while its total debt increased from R637m to R774m.
The group has an order book of R11.2bn, of which R3.3bn arose from work outside SA.
Crawford, who took over as CEO from Willie Meyburgh in August, said: “The continuing adverse market conditions, combined with the effect of the public sector power project, reduced contract revenue from operations to R4.4bn, with the group reporting an operating loss of R973m.”
Stefanutti has persistently refused to name “the public sector power project”, but the company has long-standing disputes in relation to Eskom’s Kusile power station.
“We have recently engaged with this client’s top management and since then constructive and encouraging meetings have been taking place continuously with the client’s site management teams,” Crawford said.
“This project has placed an additional burden on the group, increasing the initial funding requirement of R400m to approximately R986m.”
Stefanutti was this week named in a Daily Maverick article among the companies that paid Eskom executives R75m to secure contracts at Kusile power station in Mpumalanga.