Multidisciplinary construction group Stefanutti Stocks says it is still commercially solvent despite its current liabilities exceeding its current assets by more than R1.2-billion and its total liabilities exceeding total assets by R94-million, as at August 31.

This is worse than at the end of February, when the company’s current liabilities exceeded its current assets by a little more than R1.1-billion and its total liabilities exceeded its total assets by R52-million.

The company said on November 26 that its claim of commercial solvency is based on cash flow projections included in its restructuring plan and the continued support of lenders, which have provided the company with some liquidity.

In the company’s interim results for the six months ended August 31, it reported revenue of R3.6-billion, up 2% from the R3.5-billion reported for the six months ended August 31, 2023, with an operating profit before investment outcome of R131.8-million, a significant 113% improvement over the R61.9-million of the prior comparable period.

Earnings before interest, taxes, depreciation and amortisation improved to R166-million from R90-million in the prior period owing to an improved operating performance.

The company’s cash position at the end of the period was R784-million, against an order book of R8.9-billion.

Ultimately, the company declared earnings a share of 1.71c, a 241% improvement on the 1.21c loss a share reported for the prior comparable period. Similarly, headline earnings a share were up 159% to 13.23c from a loss of 22.41c in the prior period.

Stefanutti said elements of its restructuring plan remain outstanding, including the conclusion of the disposal of its SS-Construções (Moçambique) and Stefanutti Stocks Construction businesses.

The company is also still trying to reach a favourable outcome from the processes relating to several contractual claims and compensation events related to its involvement in the Kusile power project.

Stefanutti further mentioned that a resolution of the arbitral award relating to the Kalabo-Sikongo-Angola border gate road, in Zambia, is still outstanding and that an evaluation of the company’s capital structure, including the potential of raising new equity, remains incomplete.

The group on March 27 reached an agreement with its lenders to extend the capital repayment profile and duration of its loan to June 30, 2025.

Capital repayments of R13-million and R37-million were made in March and July, respectively, reducing the outstanding loan amount to R947-million.

The loan bears interest at prime plus 3.7%, 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 company said the loan does not contain any financial covenants but rather imposes certain information and general undertakings.

Stefanutti said its lenders have pledged continued guaranteed support for current and future projects being undertaken by the company.

The company’s restructuring plan is expected to be implemented over the coming months to June next year. Shareholder approval will be sought for the remaining aspects of the plan.

However, Stefanutti warned that, despite its efforts to right the ship, material uncertainty existed that may cast doubt on the group’s ability to continue as a going concern. This could, as a consequence, impact on the group’s ability to realise its assets and discharge its liabilities in the ordinary course of business.