| Mon 8 Sep 2008, 7:05 | | AEG - Aveng Limited - Audited Group Results For The Year Ended 30 June 2008 |
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AEG
AEG
AEG - Aveng Limited - Audited Group Results For The Year Ended 30 June 2008
and dividend declaration
AVENG LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER: 1944/018119/06)
ISIN: ZAE000111829
SHARE CODE: AEG
Audited group results for the year ended 30 June 2008
34% increase in group revenue to R29,6 billion
87%* increase in operating profit to R2,4 billion
*before non-trading items
Total dividend of 290 cents per share (2007: 85 cents per share)
CONSOLIDATED BALANCE SHEET
at 30 June 2008 2008 2007
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 3 513 2 533
Goodwill and other intangibles 823 780
Investments 108 173
Deferred tax 680 477
5 124 3 963
Current assets
Inventories 2 047 1 719
Trade and other receivables 5 346 3 941
Cash and cash equivalents 9 491 9 886
16 884 15 546
TOTAL ASSETS 22 008 19 509
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` funds 10 516 10 983
Minority interests 13 6
Total shareholders` funds 10 529 10 989
Non-current liabilities
Interest-bearing borrowings 243 1 128
Deferred tax 324 291
567 1 419
Current liabilities
Trade and other payables 9 772 6 421
Interest-bearing borrowings 360 476
Taxation payable 780 204
10 912 7 101
TOTAL EQUITY AND LIABILITIES 22 008 19 509
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2008 2008 2007
Rm Rm
Cash retained from operating activities
Cash retained from operations 2 435 7 441
Depreciation 653 459
Non-cash items (19) (6 240)
Cash generated by operations 3 069 1 660
Income from investments 946 241
Decrease in working capital 1 619 1 026
Cash generated by operating activities 5 634 2 927
Interest paid (80) (155)
Taxation paid (584) (378)
Cash available from operating 4 970 2 394
activities
Dividend paid (331) (148)
4 639 2 246
Investing activities
Property, plant and equipment purchased (924) (435)
- expansion
- replacement (865) (556)
Investments in associate companies 84 6 956
Proceeds on disposal of - property, 293 93
plant and equipment
- investments 12
(1 412) 6 070
Financing activities
Long-term borrowings - repaid (67) (150)
Shares repurchased (3 611)
(3 678) (150)
Net (decrease)/increase in cash and (451) 8 166
cash equivalents
Cash and cash equivalents at beginning 9 479 1 246
of year
Foreign currency translation reserve 179 67
movement
Cash and cash equivalents at beginning 9 658 1 313
of year
Cash and cash equivalents at end of 9 207 9 479
year
OTHER GROUP INFORMATION
2008 2007
Rm Rm
Determination of headline earnings
Net surplus on disposal of property, (1) (5)
plant and equipment
Net surplus on disposal of investments (10) (6 141)
Net adjustment for non-trading items (11) (6 146)
Number of shares (millions)
In issue 398 396
Weighted average 387 389
Diluted weighted average 428 481
Goodwill and trademarks
At beginning of year 780 761
Foreign exchange movements 43 19
823 780
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2008 2008 2007 %
Rm Rm change
Revenue 29 622 22 093 34
Operating profit before 3 077 1 754
depreciation
Depreciation 653 459
Operating profit before non- 2 424 1 295 87
trading items
Non-trading items 11 6 146
Operating profit 2 435 7 441
Share of profits and losses 19 426
from associates and joint
ventures
Income from investments 946 241
Operating income 3 400 8 108
Interest paid 80 155
Profit before taxation 3 320 7 953
Taxation 1 011 468
Profit for the period 2 309 7 485
Attributable to
Equity holders of Aveng Limited 2 301 7 483
Minorities 8 2
Profit for the period 2 309 7 485
Determination of headline
earnings
Profit attributable to equity 2 301 7 483
holders of Aveng
Net adjustment for non-trading (11) (6 146)
items
Headline earnings 2 290 1 337 71
EARNINGS PER SHARE (cents)
Earnings* 594,2 344,7 72
Headline earnings 591,4 343,5 72
Diluted earnings* 538,3 290,6 85
Diluted headline earnings 535,7 289,6 85
DIVIDEND PER SHARE (cents)
- Number 9 145,0 85,0 71
- Number 10 (special) 145,0
*Excluding Holcim.
SEGMENTAL INFORMATION
for the year ended 30 June 2008 2007
2008
Rm % Rm %
Revenue
Construction and 9 259 31 7 435 34
Engineering - South Africa
and Africa
Construction and 9 458 32 5 782 26
Engineering - Australasia
and Pacific
Total Construction and 18 717 63 13 217 60
Engineering
Opencast Mining 2 397 8 1 765 8
Manufacturing and 8 503 29 7 068 32
Processing
Administration 5 43
29 622 100 22 093 100
Operating profit
Construction and 318 3,4 103 1,4
Engineering - South Africa
and Africa
Construction and 646 6,8 327 5,7
Engineering - Australasia
and Pacific
Total Construction and 964 5,2 430 3,3
Engineering
Opencast Mining 190 7,9 92 5,2
Manufacturing and 1 409 16,6 1 001 14,2
Processing
Administration (128) (228)
2 435 8,2 1 295 5,9
Holcim sale 6 146
2 435 8,2 7 441 33,7
Geographic revenue
Republic of South Africa 16 748 57 13 206 60
Rest of Africa and 3 397 11 3 090 14
Mauritius
Australasia and Pacific 7 677 26 4 646 21
islands
South East Asia 1 782 6 1 139 5
Middle East and Other 18 12
29 622 100 22 093 100
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2008
Attributable to equity holders of the parent
Equity
portion of Equity Foreign
Share Share compound accounted currency
capital premium instrument investments translation
Rm Rm Rm Rm Rm
Balance 1 July 20 930 140 (12) (392)
2006
Profit for the
year
Dividends paid
Revaluation
reserve
Equity account 12
reserve movements
Foreign currency 135
translation
Transfers
Balance at 1 July 20 930 140 (257)
2007
Profit for the
year
Dividends paid
Foreign currency 334
translation
Corporate bond 129 (129)
equity transfer
Corporate bond 3 832
conversion
Movement in 5
treasury shares
Share repurchase (3)
programme
Transfers
Balance at 30 20 1 896 11 77
June 2008
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
for the year ended 30 June 2008
Other non-
distributable Retained Minority Total
reserves income Total interest equity
Rm Rm Rm Rm Rm
Balance 1 July 47 2 788 3 521 4 3 525
2006
Profit for the 7 483 7 483 2 7 485
year
Dividends paid (148) (148) (148)
Revaluation (20) (20) (20)
reserve
Equity account 12 12
reserve movements
Foreign currency 135 135
translation
Transfers 5 (5)
Balance at 1 July 32 10 118 10 983 6 10 989
2007
Profit for the 2 301 2 301 8 2 309
year
Dividends paid (331) (331) (331)
Foreign currency 334 (1) 333
translation
Corporate bond
equity transfer
Corporate bond 835 835
conversion
Movement in 5 5
treasury shares
Share repurchase (3 608) (3 611) (3 611)
programme
Transfers 11 (11)
Balance at 30 43 8 469 10 516 13 10 529
June 2008
NOTES
Accounting policies
These results have been compiled in accordance with IAS 34 (Interim
financial reporting).
The presentation of these results also conforms to the Listing Requirements
of the JSE Limited and Schedule 4 of the South African Companies Act. The
accounting policies used in the preparation of the results are consistent in
all material respects with the prior year, apart from a change in the
presentation of segment information and the adoption of IFRS7 (Financial
instruments: presentation and disclosure) and the amendments to IAS 1
(Capital disclosures).
The results have been audited by Ernst & Young Inc. and the unqualified
audit opinion is available on request from the company secretary at the
company`s registered office.
The Group`s annual financial report will be available by the end of
September 2008.
COMMENTARY
"The Aveng Group is on track to deliver material earnings growth as our
order book is strong and our operations are well tuned."
Building a proud legacy
FINANCIAL REVIEW
In buoyant trading conditions the Aveng Group delivered a strong performance
for the year ended 30 June 2008, underpinned by improved results from each
of the operating groups. The 2008 financial year represents the first full
reporting period since the disposal of the investment in Holcim.
The Group was able to extract operating leverage from the 34% increase in
revenue to R29,6 billion, with overheads escalating by only 9%. Operating
profit (excluding the profit on the Holcim sale) increased by 87% to R2,4
billion. The operating profit margin improved from 5,9% to 8,2% which
exceeds the medium term target of 8% that was set two years ago.
The Group received net interest of R853 million, compared to R74 million in
the previous year. This was due to higher average cash balances and higher
effective interest rates over the period.
Diluted headline earnings per share rose by 85% to 535,7 cents.
Cash generated by operating activities of R5,6 billion shows a R2,7 billion
improvement over 2007. Cash flow earnings per share of 1 414 cents reflected
an increase of 91% compared to the 739 cents at June 2007. The Group closed
the year with a net cash position of R8,9 billion, compared to R8,3 billion
in 2007.
The Aveng Group maintained its intensive capital expenditure programme
during the year to ensure sufficient capacity to deliver on its commitments
and participate in the growth of the industry. Total capital expenditure
amounted to R1,8 billion, of which R0,9 billion related to expansion capital
expenditure and R0,9 billion to replacement capital expenditure.
During 2008, the company repurchased approximately 12,3% of its shares for a
total consideration of R3,6 billion. A total of 59 494 871 shares were
repurchased and subsequently cancelled.
The fully diluted number of shares includes 35,5 million Aveng shares to
meet the Group`s potential obligation to the BEE grouping in Aveng (Africa)
and Trident Steel.
In February 2008, holders of R808 million of the R1 billion outstanding
6,125% Guaranteed Convertible Bonds due in 2012, gave notice to convert the
principal amount of each bond into ordinary shares in the ordinary share
capital of the company at a conversion price of R14.88 per share, in
accordance with the terms and conditions of the bonds. As a result, Aveng
issued 54 301 071 ordinary shares to the relevant bondholders to fulfil its
obligations. In April 2008, holders of a further R112 million convertible
bonds gave notice to convert on the same basis, giving rise to a further
issue of 7 526 881 ordinary shares to the relevant bondholders.
The close-out date for the conversion of the remaining R80-million
Guaranteed Convertible Bonds (seven year 6,125% convertible bond) into
equity is 17 March 2012. The weighted average number of shares includes
approximately 5,4 million shares in anticipation of the conversion of
Aveng`s convertible bond on or after 17 March 2009.
BUSINESS ENVIRONMENT
Despite weakening global economic growth, demand in the construction and
engineering environment remained strong in the economies where Aveng
primarily operates namely Southern Africa, Australasia and the Pacific. This
activity has largely been driven by the ongoing infrastructure investment
programmes by the public sector as well as the demand for commodities, which
is driving material new investment in the mining sector. In our view these
conditions are likely to continue for some years as there is a general need
to deal with the infrastructure spending backlog in many of the countries in
which the Group operates. In addition the demand for commodities such as
coal and iron ore seems to be stable at these high levels, driven largely by
the growth of China and India.
While the demand side fundamentals are in place for the industry, shortages
of some raw materials are resulting in inflationary cost pressures. In
addition, increasing raw material prices and, in some instances, the
necessity of turning to more expensive imports to ensure reliable supply, is
putting pressure on project costs. A further concern is that the global
scarcity of experienced and qualified people is driving salaries and wages
ever higher, thereby placing additional strain on project budgets and on
capacity.
OPERATIONAL REVIEW
The Construction and Engineering cluster comprising Grinaker-LTA, E+PC and
McConnell Dowell, lifted revenue by 42% to R18,7 billion. Profitability
improved by 124%, with an operating profit of R964 million, reflecting an
operating margin 5,2% up from 3,3% last year.
Grinaker-LTA showed solid growth underpinned by favourable trading
conditions and better internal project selection processes. The company`s
operating profit more than doubled, supported by strong cash flow. Grinaker-
LTA continued to invest heavily in plant and equipment to ensure that it has
adequate capacity to deliver on its order book .
E+PC reported excellent revenue growth with a commensurate increase in
profit and is managing projects with a value of more than R6,0 billion.
McConnell Dowell maintained its strong performance with the Civils,
Tunnelling and Pipeline business units delivering an excellent performance
but results from the Mechanical and Electrical, Electrix and DMDME in the
Middle East (50% owned) were below expectations. Operating profit was up 98%
and the operating cash flow was excellent.
Moolmans traded well with a 36% increase in revenue to R2,4 billion. Despite
pressure on operating expenses, the company increased operating
profitability by 105% to R189,5 million. It continued its recapitalisation
programme, which will be completed in 2009 and is on track to meet its
return on capital targets.
The infrastructure investment boom benefited the Manufacturing and
Processing cluster, consisting of Trident Steel and Aveng Manufacturing with
revenue increasing by 20% to R8,5 billion and operating profit 39% to R1,4
million.
Trident Steel delivered an excellent performance despite modest volume
growth. Tight cost control together with the impact of higher global steel
prices contributed to improved profitability. The company benefited from the
material increase in the steel price since the beginning of 2008 as well as
increasing its mix of sales in favour of more added value processing.
Aveng Manufacturing delivered strong volume growth in all operations as
higher volumes were supported by limited increases in overhead costs.
Investments were made to modernise equipment across all the factories to
drive further cost efficiencies. More stringent application of safety
regulations in the mining industry fed into demand for Duraset`s products
while Steeledale was ideally placed to participate in the large
infrastructure projects. Lennings Rail Services focused on diversification
into the private sector to broaden its client base. Infraset, which has some
exposure to consumer-related spending, maintained its competitive edge in
the market.
SAFETY
During the year, ten people were unfortunately fatally injured in separate
incidents at our African operations. We believe every single fatality is
unacceptable and avoidable and therefore investigate each incident
thoroughly and implement improvements to our operating procedures where
necessary.
Safety awareness has been prioritised and Aveng has strengthened its safety
management structure with heightened focus on its safety slogan, "Home
without Harm, Everyone Everyday". The Group`s disabling frequency rate
(DIFR) remained constant at 0,67. McConnell Dowell and E+PC recorded
excellent DIFRs of 0,19 and 0,20 respectively.
STRATEGIC MATTERS
During the year management evaluated a number of acquisition targets and
completed two small but strategically important acquisitions after the year
end:
- Subject to final regulatory approval, E+PC will acquire Keyplan (Pty)
Limited, a specialist water management and handling solutions company in
South Africa which will broaden its value proposition.
- With effect from 1 July 2008, McConnell Dowell acquired the Built Environs
Group, a commercial construction and engineering company based in South
Australia. The acquisition brings new capabilities in the commercial
construction sector as well as increased capability in the active South
Australian construction market.
In support of our strategy to be an employer of choice, we consolidated our
efforts with long term interventions to ensure a strong pipeline of future
leaders. We are acutely aware that inadequate skills are a real constraint
to growth for the Group. In January 2008, the Aveng Leadership Development
Programme was launched to provide our managers with the appropriate
leadership and behavioural skills. Approximately 11 000 employees attended
training at a direct cost of about R30 million during the year.
Aveng (Africa)`s BBBEE rating improved to a Level 5 and the Group continued
to attract highly talented black executives with successful appointments at
all levels. We also increased our focus on training and development. The
Group is committed to further improving its rating going forward.
CORPORATE GOVERNANCE
The Competition Commission has turned its attention to addressing issues of
anti-competitive behaviour in the broader construction industry. During
their investigations, the Commission identified issues in the building
materials operations of the Group. Aveng is supportive of these initiatives
and will cooperate with the Commission wherever relevant.
BOARD MATTERS
Carl Grim retired on 31 March 2008 after his ten-year tenure as Chief
Executive Officer of Aveng Limited. Roger Jardine joined the board as Chief
Executive Officer with effect from 7 July 2008. Juba Mashaba joined the
Aveng Group board as the Human Resources Director with effect from 1 October
2007.
Richard Savage and Brian Steele reached the mandatory retirement age for non-
executive directors of 65 and retired from the board on 11 July 2008 and 20
June 2008 respectively. Leah Gcabashe stepped down as a non-executive
director of the board on 24 January 2008.
Angus Band returned to his role as non-executive Chairman on 11 July 2008
following Roger Jardine`s appointment.
PROSPECTS
The infrastructure investment landscape remains positive, with opportunities
extending beyond 2010 in all our markets. Higher commodity prices should
continue to fuel demand for mining infrastructure in particular.
The Aveng Group, in consortium with Areva NP, Alstom, Bouygues and EDF, was
one of two parties which submitted bids for Eskom`s Nuclear-1 project, the
results of which are imminent. Notwithstanding the successful bidder, these
projects will fuel substantial opportunities for the entire industry.
The Aveng Group`s growth prospects are confirmed by the 36% increase in the
two year order book to R25,8 billion. Grinaker-LTA`s two year pipeline is
valued at R9,5 billion, McConnell Dowell`s R11,5 billion and E+PC`s R0,5
billion. Moolmans has a two year order book of R4,3 billion and still has
capacity. These operations have all made significant investments to ensure
that adequate capacity exists to deliver on these opportunities.
Steel prices are expected to stabilise and demand should remain strong. As a
result, Trident Steel should continue to perform well while Aveng
Manufacturing is positioned to benefit from the general infrastructure
surge.
The Group will utilise its cash resources to fund organic growth, while
continuing to evaluate earnings enhancing acquisitions, especially given the
more realistic valuations which have resulted from the tighter economic
environment. The return of R3,6 billion to shareholders completed in May
2008 will have a material effect on the interest income in the 2009
financial year. Notwithstanding this, the Aveng Group is on track to deliver
material earnings growth as our order book is strong and our operations are
well tuned.
DECLARATION OF ORDINARY AND SPECIAL DIVIDEND 2008
Notice is hereby given that the following dividends have been declared
payable to shareholders recorded in the share register at the close of
business on Friday, 17 October 2008, in respect of the year ended 30 June
2008:
- Number 9 of 145 cents per share (2007: 85 cents per share)
- Number 10 (special) of 145 cents per share.
The salient dates are:
Last date to trade shares cum dividend Friday, 10 October 2008
Shares trade ex dividend on Monday, 13 October 2008
Record date to receive dividend Friday, 17 October 2008
Payment date Friday, 24 October 2008
No dematerialisation or rematerialisation of shares may take place for the
period from 13 October 2008 to 17 October 2008, both dates inclusive.
On Friday, 24 October 2008 the dividend will be electronically transferred
to the bank accounts of all certificated shareholders unless this has not
been requested by, or is not available to them. If electronic funds transfer
is not applicable, cheques dated 24 October 2008 will be posted on or about
that date. Transfers will be made to the dematerialised shareholder accounts
at their CSDP or broker on 24 October 2008.
By order of the board
AWB Band WR Jardine DR Gammie
(Chairman) (Chief Executive Officer) (Director: Finance)
Sandton
8 September 2008
DIRECTORS: AWB Band* (Chairman), WR Jardine (Chief Executive Officer),
DR Gammie, JR Hersov*, RL Hogben*, JJA Mashaba,VZ Mntambo*,
DG Robinson (Australian), MJD Ruck*, NL Sowazi*,
PK Ward* (*non-executive).
COMPANY SECRETARY: GJ Baxter
REGISTERED OFFICE: 204 Rivonia Road, Morningside, Sandton, 2057
REGISTRARS: Computershare Investor Services (Pty) Limited
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001.
PO Box 61051, Marshalltown, 2107.
Telephone (011) 379 5000
Telefax (011) 688 7717.
www.aveng.co.za
Date: 08/09/2008 07:05:01 Produced by the JSE SENS Department.
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