| Wed 17 Mar 2010, 7:05 | | AEG - Aveng Limited - Unaudited Interim Results For The Six Months To 31 |
|
AEG
AEG
AEG - Aveng Limited - Unaudited Interim Results For The Six Months To 31
December 2009
THE AVENG GROUP
Leaders in infrastructure development
AVENG LIMITED: Incorporated in the Republic of South Africa Registration
number 1944/018119/06
Share code: AEG
ISIN code: ZAE000111829
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2009
Revenue down 5% to R16,8 bn
Operating profit before depreciation and amortisation down 14% to R1,2 bn
Operating profit down 29% to R686 m
Headline earnings down 33% to R638 m
Net cash up R255 m to R7,7 bn
Two year order book increased by 8% to R32,7 bn
Interim consolidated statement of financial position
31 December 31 December 30 June
2009 2008 2009
Rm (Unaudited) (Unaudited) (Audited)
ASSETS
Non-current assets
Property, plant and 5 114 4 660 5 062
equipment
Goodwill and other 1 103 1 049 1 093
intangibles
Investment in associates and 128 145 107
joint ventures
Available-for-sale 12 12 12
investments
Deferred tax 446 466 612
6 803 6 332 6 886
Current assets
Inventories 1 732 2 572 1 598
Trade and other receivables 4 931 4 642 6 321
Taxation receivable 30
Cash and cash equivalents 8 499 6 577 7 910
15 192 13 791 15 829
TOTAL ASSETS 21 995 20 123 22 715
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` funds 10 949 9 799 10 865
Non-controlling interests 6 88 21
Total shareholders` funds 10 955 9 887 10 886
Non-current liabilities
Interest-bearing borrowings 92 206 118
Deferred tax 133 122 240
225 328 358
Current liabilities
Trade and other payables 10 094 9 369 10 768
Interest-bearing borrowings 721 261 361
Taxation payable 278 342
10 815 9 908 11 471
TOTAL EQUITY AND LIABILITIES 21 995 20 123 22 715
Net debt to equity ratio (%) (70) (62) (68)
Net asset value per ordinary 2 765 2 505 2 744
share (cents)
Capital expenditure
Six months Six months Year
ended ended ended
31 December 31 December 30 June
Rm 2009 2008 2009
Expansion 94 1,097 1,695
Maintenance 474 694 1,018
568 1,791 2,713
Commitments for future
capital expenditure:
Contracted 36 104 319
Authorised, but not 12 182 226
contracted for
48 286 545
Interim consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2009 2008 % 2009
Rm (Unaudited) (Unaudited) change (Audited)
Revenue 16 832 17 753 (5) 33 772
Operating profit 1 219 1 425 (14) 3 032
before depreciation
and amortisation
Depreciation 527 458 936
Amortisation of 8 17
intangibles
Operating profit 684 967 (29) 2 079
before non-trading
items
Non-trading items 2 (1) 49
Operating profit 686 966 (29) 2 128
Share of profits and 22 9 67
losses from
associates and joint
ventures
Income from 242 462 757
investments
Operating income 950 1 437 (34) 2 952
Finance cost 12 46 42
Profit before 938 1 391 (33) 2 910
taxation
Taxation 301 435 809
Profit for the period 637 956 (33) 2 101
Other comprehensive
income/(loss) for the
period
Exchange differences 9 (127) (266)
on translation of
foreign operations
Total comprehensive 646 829 (22) 1 835
income for the period
Profit attributable
to:
Equity holders of 640 952 2 091
Aveng Limited
Non-controlling (3) 4 10
interests
Profit for the period 637 956 (33) 2 101
Total comprehensive
income attributable
to:
Equity holders of 649 825 1 827
Aveng Limited
Non-controlling (3) 4 8
interests
Total comprehensive 646 829 (22) 1 835
income for the period
Determination of
headline earnings
Profit for the year 640 952 2 091
attributable to
equity holders of
Aveng Limited
Non-trading items (1)
Surplus on disposal (2) (24)
of property, plant
and equipment
Surplus on disposal (25)
of investments
Tax effect of 9
headline earnings
adjustment
Headline earnings 638 951 (33) 2 051
EARNINGS PER SHARE
(cents)
Earnings 164,1 244,5 (33) 538,8
Earnings - Diluted 148,3 222,3 (33) 487,0
Headline 163,4 244,4 (33) 528,5
Headline - Diluted 147,7 222,1 (33) 477,6
NUMBER OF SHARES
(millions)
In issue 396,0 391,1 396,0
Weighted average 390,0 389,1 388,0
Diluted weighted 431,3 429,5 429,4
average
DIVIDEND PER SHARE Nil Nil 145,0
(cents)
Interim consolidated statement of changes in equity
for the six months ended 31 December 2009
Share Equity Foreign
capital portion currency
and share of compound translation
Rm premium instrument reserve
Six months ended 31
December 2008 (Unaudited)
Balance at 1 July 2008 1 916 11 76
Profit for the year
Other comprehensive (127)
income/(loss)
Total comprehensive income (127)
Dividends paid
Corporate bond equity 11 (1)
transfer
Share repurchase programme (1)
Acquisition during the year
Balance at 31 December 2008 1 926 10 (51)
Year ended 30 June 2009
(Audited)
Balance at 1 July 2008 1 916 11 76
Profit for the year
Other comprehensive (264)
income/(loss)
Total comprehensive income (264)
Dividends paid
Corporate bond equity 11 (11)
transfer
Corporate bond conversion 74
Share repurchase programme *
Movement in treasury shares *
Acquisition during the year
Transfers
Balance at 30 June 2009 2 001 (188)
Balance at 1 July 2009 2 001 (188)
Profit for the year
Other comprehensive 8
income/(loss)
Total comprehensive income 8
Dividends paid
Balance at 31 December 2009 2 001 (180)
Interim consolidated statement of changes in equity (continued)
for the six months ended 31 December 2009
Other non-
distributable Retained
Rm reserves income Total
Six months ended 31 December
2008 (Unaudited)
Balance at 1 July 2008 44 8 469 10 516
Profit for the year 952 952
Other comprehensive (127)
income/(loss)
Total comprehensive income 952 825
Dividends paid (1 138) (1 138)
Corporate bond equity transfer 10
Share repurchase programme (413) (414)
Acquisition during the year
Balance at 31 December 2008 44 7 870 9 799
Year ended 30 June 2009
(Audited)
Balance at 1 July 2008 44 8 469 10 516
Profit for the year 2 091 2 091
Other comprehensive (264)
income/(loss)
Total comprehensive income 2 091 1 827
Dividends paid (1 138) (1 138)
Corporate bond equity transfer
Corporate bond conversion 74
Share repurchase programme
Movement in treasury shares
Acquisition during the year (414) (414)
Transfers 18 (18)
Balance at 30 June 2009 62 8 990 10 865
Balance at 1 July 2009 62 8 990 10 865
Profit for the year 640 640
Other comprehensive 1 9
income/(loss)
Total comprehensive income 1 640 649
Dividends paid (565) (565)
Balance at 31 December 2009 63 9 065 10 949
Interim consolidated statement of changes in equity (continued)
for the six months ended 31 December 2009
Non- Total
controlling
Rm interests equity
Six months ended 31 December 2008
(Unaudited)
Balance at 1 July 2008 13 10 529
Profit for the year 4 956
Other comprehensive income/(loss) (127)
Total comprehensive income 4 829
Dividends paid (1 138)
Corporate bond equity transfer 10
Share repurchase programme (414)
Acquisition during the year 71 71
Balance at 31 December 2008 88 9 887
Year ended 30 June 2009 (Audited)
Balance at 1 July 2008 13 10 529
Profit for the year 10 2 101
Other comprehensive income/(loss) (2) (266)
Total comprehensive income 8 1 835
Dividends paid (1 138)
Corporate bond equity transfer
Corporate bond conversion 74
Share repurchase programme
Movement in treasury shares
Acquisition during the year (414)
Transfers
Balance at 30 June 2009 21 10 886
Balance at 1 July 2009 21 10 886
Profit for the year (3) 637
Other comprehensive income/(loss) 9
Total comprehensive income (3) 646
Dividends paid (12) (577)
Balance at 31 December 2009 6 10 955
*Amounts are less than R1 million.
Interim consolidated statement of cash flows
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2009 2008 2009
Rm (Unaudited) (Unaudited) (Audited)
Operating activities
Cash retained from operations 686 966 2 128
Depreciation and amortisation 535 458 952
Non-cash items (55) (43) (78)
Cash generated by operations 1 166 1 381 3 002
Income from investments 242 462 757
Decrease/(Increase) in working 582 (14) 204
capital
Cash generated by operating 1 990 1 829 3 963
activities
Interest paid (12) (46) (42)
Taxation paid (605) (936) (1 286)
Cash available from operating 1 373 847 2 635
activities
Dividends paid (577) (1 138) (1 138)
Net cash flows from/(utilised 796 (291) 1 497
in) operating activities
Investing activities
Property, plant and equipment
purchased
- expansion (94) (1 097) (1 695)
- replacement (474) (694) (1 018)
Proceeds on disposal of 13 136 199
property, plant and equipment
Purchase of subsidiaries (443) (59)
Investments in associate (6) (6) 83
companies
Net cash flows utilised in (561) (2 104) (2 490)
investing activities
Financing activities
Capital reduction scheme (415) (415)
Long term borrowings (112) (44) (67)
(repaid)/raised
Net cash flows utilised in (112) (459) (482)
financing activities
Net increase/(decrease) in 123 (2 854) (1 475)
cash and cash equivalents
Cash and cash equivalents at 7 601 9 206 9 206
beginning of year
Foreign currency translation 109 23 (130)
reserve movement
Cash and cash equivalents at 7 833 6 375 7 601
end of period
Cash and cash equivalents 8 499 6 577 7 910
Overdrafts disclosed under (666) (202) (309)
short term borrowings
Cash and cash equivalents at 7 833 6 375 7 601
end of period
Segmental analysis
Six months Six months Year
ended ended ended
BUSINESS SEGMENTATION 31 December 31 December 30 June
Revenue 2009 2008 2009
Rm (Unaudited) (Unaudited) (Audited)
Construction and Engineering
South Africa and Africa 5 398 5 217 10 601
Australasia and Pacific 6 453 6 263 12 081
Total Construction and 11 851 11 480 22 682
Engineering
Opencast Mining 1 559 1 290 3 016
Manufacturing and Processing 3 403 4 935 8 009
Administration 19 48 65
16 832 17 753 33 772
Operating profit
Rm
Construction and Engineering
South Africa and Africa 249 151 511
Australasia and Pacific 269 346 789
Total Construction and 518 497 1 300
Engineering
Opencast Mining 139 103 314
Manufacturing and Processing 122 515 654
Administration (93) (149) (140)
686 966 2 128
Notes to the interim condensed consolidated financial statements
1. Corporate information
The interim consolidated financial statements of the company and its
subsidiaries ("the Group") for the six months ended
31 December 2009 were authorised for issue in accordance with a
resolution of the directors on 15 March 2010. Aveng Limited is a public
company incorporated and domiciled in the Republic of South Africa whose
shares are publicly traded.
2. Basis of preparation and accounting policies
Basis of preparation
The interim consolidated financial statements for the six months ended
31 December 2009 have been prepared in accordance with IAS 34 Interim
Financial Reporting.
The interim condensed consolidated financial statements do not include
all the information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group`s annual
financial statements as at 30 June 2009.
Significant accounting policies
The interim financial statements have been prepared in accordance with
IAS 34 Interim Financial Statements and the listing requirements of the
JSE Securities Exchange South Africa. The accounting policies adopted
are consistent with those of the previous year, except for the adoption
of IFRS 3 Revised Business combinations, IFRS 8 Operating Segments, IAS
1 Presentation of financial statements and IAS 27 Consolidated and
Separate Financial Statements. In addition, the Group has prospectively
changed its accounting policy with regards to borrowing costs. Borrowing
costs incurred in respect of qualifying assets will in future be
capitalised to the asset. All other borrowing costs will still be
expensed. The external auditors have not reviewed the financial results
for the half-year ended 31 December 2009.
3. Segment Information
Revenue and expenses are attributed directly to the segments to which
they relate. Segment assets include all operating assets used by a
segment, and consist principally of property, plant and equipment, as
well as current assets. Segment liabilities include all operating
liabilities and consist principally of trade and other payables. These
assets and liabilities are all directly attributable to the segments.
Management monitors the operating results of its business units
separately for the purpose of making decisions about resource allocation
and performance assessment. Segment performance is evaluated based on
operating profit or loss which in certain respects is measured
differently from the operating profit or loss in the consolidated
financial statements.
Transfer prices between operating segments are on an arm`s length basis
in a manner similar to transactions with third parties.
4. Impairments
The carrying amounts of assets are reviewed at each statement of
financial position date to determine whether there is any indication of
impairment. If any such indication exists, or when annual impairment
testing of an asset is required, the recoverable amount is estimated as
the higher of the fair value less cost to sell and the value in use.
In determining fair value less costs to sell, an appropriate valuation
model is used. In assessing value in use, the expected future cash flows
are discounted to the present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the
risks specific to the asset. An impairment loss is recognised whenever
the carrying amount exceeds the recoverable amount. Impairment losses
and reversal of impairment losses are separately disclosed in the profit
or loss, above the income before tax subtotal.
For an asset that does not generate cash inflows that are largely
independent of those from other assets, the recoverable amount is
determined for the cash generating unit to which the asset belongs. An
impairment loss is recognised whenever the carrying amount of the cash
generating unit exceeds its recoverable amount.
A previously recognised impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount,
however, not to an amount higher than the carrying amount that would
have been determined (net of depreciation) had no impairment loss been
recognised in prior years.
Goodwill impairment losses are not reversed.
5. Income tax
The major components of income tax expense in the interim consolidated
statement of comprehensive income are:
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2009 2008 2009
Rm (Unaudited) (Unaudited) (Audited)
Current income tax
Current income tax charge 233 436 848
Deferred tax
Relating to origination 68 (1) (39)
and reversal of temporary
differences
Income tax expense 301 435 809
6. Property, plant and equipment
During the six months ended 31 December 2009, the Group acquired assets
with a cost of R568,3 million (December 2008: R1 791,5 million) not
including property and equipment acquired through a business
combination.
7. Cash and cash equivalents
For the purpose of the interim consolidated statement of cash flows, cash and
cash equivalents are comprised of the following:
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2009 2008 2009
Rm (Unaudited) (Unaudited) (Audited)
Deposits and cash 8 499 6 577 7 910
Bank overdraft (666) (201) (309)
7 833 6 376 7 601
8. Related party transactions
During the year the company and its subsidiaries, in the ordinary course
of business, entered into various sale and purchase transactions with
associates and joint ventures. Those transactions occurred under terms
that are no less favorable than those arranged with third parties.
There were no related party transactions with directors or entities in
which the directors have a material interest.
9. Significant contingent liabilities
Included in contingent liabilities are the following:
Grinaker-LTA Building, a division of Aveng (Africa) Limited, entered
into a contract in 2001 to build 100 houses in Gabon. The houses were
duly built by means of finance provided by a local financial institution
which is now seeking restitution in the amount of Euro15,5 million
(R142,1 million), due to an alleged default by the government of Gabon.
Proceedings are in progress.
Aquarius Platinum (South Africa) Limited has issued a summons for R963
million against Moolmans, an operating group of Aveng (Africa) Limited,
for alleged misrepresentation. Attorneys are currently of the opinion
that there is no financial exposure to Moolmans. The entire R963 million
has however been disclosed as a contingent liability. Proceedings are in
progress.
Commentary
Introduction
The Aveng Group`s consolidated performance for the six months ended 31
December 2009 reflects the tight operating conditions which prevailed during
the period. The Construction and Engineering segment delivered a solid
performance under the circumstances, while Opencast Mining maintained its
upward trajectory. Results from the Manufacturing and Processing segment were
disappointing but in line with industry trends as the economic slowdown and
the global steel price volatility has had a severe impact on these sectors.
The Group remains strongly cash generative and is well placed to take
advantage of market opportunities.
Financial review
The Aveng Group reported a 5% reduction in revenue to R16,8 billion (2008:
R17,8 billion) primarily as a result of the decline in the Manufacturing and
Processing segment, which reported a 31% decrease in revenue having come off
historically high steel prices and volumes in the comparative period. The
Opencast Mining segment showed continued strong revenue growth while the
Construction and Engineering segment delivered a marginal increase of 3%.
The strong operating profit growth delivered by Construction and Engineering:
South Africa and Africa as well as Opencast Mining was dampened by the
Manufacturing and Processing and the Construction and Engineering:
Australasia and Pacific segments` results which declined by 86% and 22%
respectively. Moolmans and McConnell Dowell`s results were affected by the
relative strength of the rand and the Australian dollar against other
currencies, leading to an adverse effect of R77 million on translation of
foreign earnings at an operating profit level. The Manufacturing and
Processing segment`s results were negatively impacted by the sharp reduction
in steel prices as well as reduced demand.
Given the very difficult conditions experienced in the Manufacturing and
Processing segment the Group`s operating performance was credible, with
operating profit before depreciation and amortisation of R1,2 billion which
was 14% below the prior period . The operating profit declined by 29% to R686
million (2008: R966 million), reflecting an operating margin of 4,1% (2008:
5,4%). Depreciation increased by R69 million as a result of the substantial
capital expenditure programme in the 2009 financial year, particularly in
Moolmans.
Net income from investments was R230 million (2008: R416 million) with the
decrease attributable to lower interest income due to the special dividend
paid to shareholders and the R412 million share buyback programme executed in
October 2008, as well as lower prevailing interest rates in the period.
Headline earnings decreased by 33% to R638 million (2008: R951 million), with
a commensurate reduction in both headline earnings per share to 163,4 cents
(2008: 244,4 cents) and earnings per share to 164,1 cents (2008: 244,5
cents). The number of shares in issue has remained constant at 396 million
since June 2009.
Judicious working capital management underpinned strong Group wide cash
generation which, after funding capital expenditure of R568 million, resulted
in the Group`s net cash on hand increasing to R7.7 billion (June 2009: R7,4
billion). The Group`s strong financial position is considered to be a
significant competitive advantage in the current restricted credit
environment.
Operational review
Construction and Engineering
This segment, which comprises Grinaker-LTA, E+PC, Engineering and Projects
Company, and McConnell Dowell, delivered a 3% increase in revenue to R11,9
billion with a 4% improvement in operating profit to R518 million.
Construction and Engineering: South Africa and Africa lifted operating profit
by 65% to R249 million, reflecting an operating margin of 4,6% (2008: 2,9%).
Grinaker-LTA reported a marginal increase in revenue of 1% to
R5,0 billion, but delivered a significant improvement in operating profit.
Earthworks Engineering and Mining showed double digit revenue growth. The
momentum of the turnaround at Earthworks Engineering was maintained despite
the impact of delays in commencing work on new contracts. Although Building
was affected by lower activity levels, operating profit improved
significantly. Current Civil Engineering projects were executed at improved
operating profit margins. Mechanical and Electrical delivered higher profits
following its recent restructuring. Grinaker-LTA is anticipating a tighter
margin environment on new contracts but is on a sound footing as a result of
its existing work on hand.
E+PC experienced a 9% decline in revenue to R388 million. Projects have been
delayed, which adversely affected operating profit. E+PC increased its market
share in the Power and Minerals Processing sectors. The Trekkopje
Desalination Plant in Namibia, the largest in Sub-Saharan Africa, was
completed. The market is showing signs of recovering with an increase in
feasibility study enquiries and the resumption of negotiations on previously
delayed projects.
McConnell Dowell, which operates in Australasia and the Pacific Rim,
performed well in a tough operating environment, reporting a revenue increase
of 3% to R6,5 billion. However, operating profit declined by 22% to R269
million as a result of tender development expenses of some R50 million
amounting to R56 million, adverse currency impacts and additional costs which
were incurred on a substantial pipeline contract. The Pipeline business unit
is addressing these issues and has recently won several new projects. Civil
Engineering continues to perform well, delivering further margin
improvements. Despite low activity levels in the building sector, Built
Environs` results were ahead of expectation and the building order book
remains strong, albeit at tighter margins. Mechanical and Electrical
delivered a strong performance with the new fabrication facility in Thailand
winning a number of contracts. McConnell Dowell will continue to focus on
growing and diversifying its capability to benefit from the market recovery.
Opencast Mining
Moolmans reported strong revenue growth of 21% to R1,6 billion despite the
negative impact of the strong rand. Moolmans lifted operating profit by 35%
to R139 million as the benefits of long term operational efficiency
programmes come to fruition.
A number of contracts were secured in South Africa and West Africa, including
a new contract at Sishen and the Sadiola Gold Mine in Mali. It was also
awarded two opportunities in Zambia resulting from Grinaker-LTA`s successful
delivery of a deep shaft sinking project for the same client.
Manufacturing and Processing
The Manufacturing and Processing segment, comprising Trident Steel and Aveng
Manufacturing, reflected a 31% decline in revenue to R3,4 billion (2008: R4,9
billion). Operating profit decreased by 76% to R122 million (2008: R515
million). Performance was negatively affected by materially lower steel
prices which impacted margins in both Steeledale and Trident Steel. In
addition, demand for steel and fabricated products was lower than the prior
period as several major infrastructure projects reached completion. Lower
cementitious product sales, particularly to the rail and domestic
construction markets, adversely impacted the operating performance. However,
the aggregate performance of these business segments for the six months to
December 2009 shows an improvement on the second half of the prior financial
year. Although steel prices have increased since June 2009, the outlook
remains uncertain.
Aveng Manufacturing maintained its lowest cost producer advantage, but muted
demand led to a 38% decline in revenue to R1,4 billion resulting in margin
pressure. Although steel prices were stable during the period under review,
Steeledale was affected by a reduction in volumes as it completed large
contracts and new project awards were delayed. The steel reinforcing market
deteriorated further during the period. Infraset delivered a sound
performance against the tight market backdrop which was facilitated by its
diverse product range. Duraset was affected by lower consumption of its
products both in the mining and infrastructure sectors while Lennings Rail
Services` performance was dampened by ongoing delays in the award of
maintenance and plate laying contracts.
Trident Steel`s revenue showed a 27% decline to R2,0 billion compared to
December 2008 when global steel prices had not yet been fully impacted by the
global economic crisis. However, its margins improved from the previous six
months driven by volumes which recovered by some 8% on the previous six
months, more stable steel prices and the results of operational efficiency
programmes which included the benefits of increasing its supplier pool.
Trident Steel continued its investments in automotive capacity to satisfy
higher export production demand.
Safety
Regrettably, The Aveng Group recorded one fatality across its operations
during the review period, compared to four in the six months from July to
December 2008. The Board extends its condolences to the family of the
deceased.
The lost time injury frequency rate (LTIFR) for the Group showed a
substantial 52% reduction for the six months ended 31 December 2009 to 0,27
(twelve months to December 2008: 0,56).
The "Aveng Safety Framework" which outlines The Aveng Group`s safety approach
is being successfully rolled out across all operations and the Group
continues to work hard to entrench a safety culture where "Home Without Harm,
Everyone Everyday" is a way of life.
Competition matters
On 30 September 2009, the Competition Commission referred a complaint against
the roof bolt division of Duraset to the Competition Tribunal with a further
referral on 2 December 2009 involving Steeledale Mesh, a division of
Steeledale. Stakeholders were informed of both complaints by means of SENS
announcements. Provision has been made for estimated administrative penalties
in terms of IAS 37.
In addition to other initiatives, The Aveng Group has conducted extensive
compliance reviews across all operations in order to root out these historic
anticompetitive practices completely. The Aveng Group notes the ongoing
investigations into the construction industry and continues to cooperate and
constructively engage with the Competition Commission. Shareholders will be
updated of developments.
Board of directors
The Aveng Group announced in January 2010 that Dennis Gammie, the executive
director responsible for business development and strategic projects, will be
retiring early with effect from
31 March 2010. The Board thanks Mr. Gammie for his contribution to the Group
over the past 12 years.
Outlook and prospects
Although trading conditions in the infrastructure sector are expected to
remain tight for the remainder of the calendar year, there are signs that the
impacts of the economic crisis are starting to work their way out of the
system.
Although it is encouraging that the South African government reconfirmed its
three year rolling infrastructure budget of
R846 billion in the recent budget, the rate of public sector contract awards
continues to be very slow and needs to be accelerated to provide real impetus
to the sector. Activity levels in the mining sector remain low, however there
are indications that demand is improving.
In Australasia and the Pacific Rim, the short to medium term outlook is more
positive although industry margins are declining. In Australia, construction
spend is underpinned by large-scale public infrastructure investments and
will be partially driven by a recovery in resource related infrastructure and
government investments in transport and utilities. The commercial building
market is showing signs of recovery. Market conditions in New Zealand and
Hong Kong are also improving with increased transport and utility spend in
the public sector. There appears to be a growing pipeline of opportunities in
the Gulf Region.
The Group`s confirmed two year order book has increased to R32,7 billion from
R31,9 billion in September 2009. Grinaker-LTA has two year`s work on hand
amounting to R9,9 billion (June 2009: R10,1 billion), McConnell Dowell`s two
year order book totals to R15,1 billion (June 2009: R13,1 billion) and
Moolmans` two year order book is R7,0 billion (June 2009: R6,4 billion). In
addition, the Group has identified its total project opportunity pipeline
based on projects being targeted which remains at approximately
R102 billion.
The price of steel is expected to be more stable in the second half of the
financial year, but the rate of recovery in demand is slow. Although major
South African infrastructure projects are nearing completion, there are
indications that projects put on hold during the slowdown are being
revisited. In the automotive sector, investments to accelerate export
capacity are being rolled out by vehicle manufacturers.
Based on the current market outlook, revenue for the second half of the
financial year is expected to improve marginally compared to the first six
months. In line with tightening margins in the construction markets that the
Group operates in, the Construction and Engineering segment`s operating
margin is expected to remain at similar levels to the first half of the
financial year. In the Manufacturing and Processing segment, a gradual
improvement in operating margin is anticipated although demand for steel to
the construction industry is still of concern to the Group.
The Aveng Group remains well positioned to take advantage of opportunities as
they arise and is continually identifying growth initiatives which match its
strategic objectives of strengthening its portfolio by extending its
positioning within the value chain, both domestically and regionally.
By order of the Board
AWB Band WR Jardine SJ Scott
Chairman Chief Executive Officer Financial Director
17 March 2010
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
DIRECTORS: AWB Band* (Chairman),WR Jardine (Chief Executive Officer), SJ
Scott (Financial Director), DR Gammie, JJA Mashaba, DG Robinson (Australian),
MA Hermanus*, RL Hogben*, VZ Mntambo*, MJD Ruck*, KC Rumble*, NL Sowazi*, PK
Ward* (*non-executive).
COMPANY SECRETARY:
GJ Baxter
www.aveng.co.za
Sponsor:
J.P.Morgan Equities Limited
Date: 17/03/2010 07:05:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
