On 6 April 2009 Stefanutti Stocks released a strong trading update underpinning the Group’s current developments and strategy as outlined in this newsletter. Continuing the Group’s growth trend earnings and headline earnings per share are expected to increase between 70% and 90% year-on-year for the year ended 28 February 2009.

This performance is underscored by the strong fundamentals of net asset value per share of 790 cents and cash on hand of R867,4 million as reported for the six months ended 31 August 2008.

According to the stated Group policy set out in the pre-listing prospectus, it is anticipated that a maiden dividend will be proposed on finalisation of results for the year ended 28 February 2009.

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Following the successful merger with Stocks, Stefanutti Stocks is now a fully integrated major player within the heavy construction sector. Significant synergies between the two companies facilitated a smooth and efficient integration which has yielded economies of scale and other operational and financial benefits for the Group. The expanded management team and resources also provide Stefanutti Stocks with added advantage in the sector.

Remaining firmly aligned to infrastructure development, to which government has reiterated its commitment with a proposed R787 billion investment over the next three years, the Group is confident of being able to exploit the opportunities presented within the current macro-economic environment.

Late last year the main civil works contract for the construction of the new Kusile Power Station was awarded to Stefanutti Stocks in joint venture with Basil Read, Group Five and WBHO. The site works have commenced and the construction of site facilities, piled foundations and excavations for the main structure components for the first unit are underway.

Although certain of the markets in which the Group is active are contracting at present, the order book remains strong. Notwithstanding that a number of projects in the residential, non-residential, industrial and mining sectors are being put on hold and in certain instances, cancelled, to date all projects already secured by the Group remain on track.

The current economic climate has resulted in increased competition and therefore pressure on margins. Nonetheless the Group’s reputation of successful project delivery has allowed it to counter the lowering of tender prices in some instances.

Internationally, while a large number of proposed projects in the Dubai market have been cancelled the Group is continuing expansion into the Middle East, specifically into Qatar, Bahrain, Abu Dhabi and Oman, which should enable Stefanutti Stocks to exploit ongoing opportunities driven primarily by the oil and gas sector.

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Subsequent to the rapid growth experienced by the Group over recent years, Stefanutti Stocks also intends to take advantage of the current slowdown in the industry to consolidate its position and create the necessary platform to facilitate significant growth once market conditions improve.

The Group will focus primarily on organic growth, aiming to further develop higher-margin businesses such as Roads & Earthworks. Geographical expansion will move away from major nodes to mitigate the more damaging project cancellations and delays, and see a transition to areas where infrastructure development is more certain and ongoing.

Acquisitions will continue to be considered where the targets present opportunities in niche high-growth markets in which the Group is already active. Consistent with its current policy Stefanutti Stocks will continue to acquire full ownership of all underlying subsidiaries.

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Stefanutti Stocks was recently ranked as the top empowered company in the ‘Basic Industries’ sector (which encompasses the construction industry) by the Financial Mail/EmpowerDex Top Empowerment Companies Survey 2009. The ranking reflects the group’s 18,89% BEE equity participation at group level. With a total BEE score of 65,36% Stefanutti Stocks ranked 31st overall amongst all listed companies.

Its solid BEE platform and ongoing investment in skills training and in corporate social initiatives have contributed to this achievement.

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Stefanutti Stocks remains confident that despite a shrinking market there are still opportunities to exploit. A number of large projects in the pipeline are set to proceed and the Group continues to negotiate work, albeit less so than previously.

The sectors with strong prospects include government and quasi-government infrastructure as well as electrical power generation, which encompass renewable energy, power lines, and ancillary work at the two new coal-fired power stations. Upgrading of neglected water and effluent treatment plants and increasing demand for road rehabilitation are also expected to provide further opportunities.

Furthermore, as government embarks on more Public Private Partnership (“PPP”) projects Stefanutti Stocks’ experience in this market will generate significant opportunities.

Although market conditions indicate that there are challenges ahead the Group’s depth of management and solid team, multi-disciplinary approach, capability and strong client relationships should enable Stefanutti Stocks to take advantage of any new opportunities these conditions present.

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