| Mon 11 Mar 2002, 0:00 | | AVENG CONSTRUCTS GOOD FIRST HALF |
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Johannesburg - Monday March 11, 2002
Aveng Limited, the country's largest construction group which is rapidly geographically diversifying its revenue stream, has reported another set of excellent results for the six months to December. The improvement in the group's operating margin from 3,2% to 4,1% flowing from Aveng's increased focus on niche sectors within the developing world is seen as particularly encouraging.
Revenue grew by 20% to R5 930-million and operating income at R243-million is 54% ahead of the same period a year ago. Largely as a result of the LTA acquisition, net financing costs increased by R79-million, restricting headline earnings growth to 17% or R154-million. Following the conversion of 40-million debentures in November, diluted earnings per share rose by 18% to 32,7 cents and diluted headline earnings per share by 13% to 40,1 cents.
It is Aveng's policy to consider the payment of a dividend at year-end.
Commenting on the results, chief executive Carl Grim said that the group's rand-hedge qualities are becoming increasingly evident as Aveng companies secure more hard currency denominated international contracts. Some 47% of the group's revenue (35% in the previous year) and 53% of the group's assets are now derived from outside the Rand Common Monetary Area (CMA) of the RSA, Namibia, Swaziland and Lesotho. "The growth in our international businesses, together with the company's rapidly increasing order book, which has risen by 34% to R8,7-billion, is reflected in the group's higher working capital."
In December 2000 the value of contracts held by Aveng with a two-year time horizon totalled R6,5-billion which means that the group has added R2,2-billion of work in a 12-month period.
Mr Grim went on to say that the effect of the growth in hard currency earnings offset the negative impact of the declining rand on the interest incurred on Aveng's offshore borrowings. "The weaker rand will reflect positively on future earnings as contracts are executed."
At the end of December Aveng had R1 514-million in interest bearing debt (not too different from the R1 571-million reflected a year earlier) and the balance sheet shows Aveng held R361,1-million in cash and cash equivalents at the period end.
According to finance director Dennis Gammie the decline in the group's debt to equity ratio from 55% six months ago to 46% at December 31 2001 was in line with management's expectations and it remained a priority within the group to reduce debt levels.
"We have rearranged some of our debt to bring it more into line with the medium to long term nature of our business and, whereas a year ago all our long term debt was floating rate debt, we now have 68% fixed and only 32% floating. We are also looking at various other funding alternatives so that our borrowings better match the profile of our assets."
Mr Grim noted that the construction businesses, which constitute 74% of the group's revenue and 67% of its operating income, continued their determined drive into other developing markets. The balance of Aveng's operations are locally based steel and cement companies which are stable, cash-generating profit earners, able to support construction's drive into international markets.
"This is in line with Aveng's strategy of generating hard currency earnings by becoming globally competitive in targeted developing world markets. Underpinning this strategy is the excellent work done by the Grinaker-LTA team in streamlining and repositioning their company.
"The second stage restructuring announced recently will conclude a successful two-year rationalisation programme. The growth in operating income reflects this success and confirms that we now have a construction organisation that is able to contribute materially to the achievement of Aveng's longer term strategic agenda."
Aveng's steel and allied businesses grew revenue by 23% and operating income by 45% in a relatively buoyant market environment. Greater levels of activity in the concrete and structural steel market have boosted activity in Amalgamated Steele. The infrastructure and mining products business unit benefited from an active mining sector. A new R105-million press feed line to service the automotive export market will be operational by June 2003.
Although cement volume for the six months to December 2001 declined by 2,6% compared to 2000, improved efficiencies and some growth in achieved prices resulted in an improvement in operating income of 45%.
Looking ahead Mr Grim says that the board is confident that the company will be able to deliver diluted headline earnings growth for the full year similar to that reported at the half year. "The confidence boosting budget and the State's commitment to developing infrastructure augur well for the group's local performance. Equally important, Aveng is well positioned to benefit from the considerable expenditure planned within the group's target markets internationally."
The group's two-year construction order book at R8,7-billion, mostly in hard currency contracts, excluded the R1,7-billion Sasol pipeline project which Aveng won in a joint venture subsequent to the end of the reporting period. Mr Grim says that the steel business will benefit from the increasing level of export activity and that cement will continue to deliver good results.
"Adopting a longer-term perspective, management continues to believe that Aveng's robust strategy and unique strategic positioning within the international energy and mining construction services markets provide exciting opportunities for growth."
Please note:
Aveng Limited is a South African based group. It was listed on the JSE Securities Exchange SA in July 1999 and is aiming to be a globally competitive construction-related group focused principally on the developing world.
Its major businesses are
Construction :
Grinaker-LTA (100% held) is South Africa's largest construction company with particular expertise in providing construction services to the mining industry. Its operations extend throughout Africa and into the Middle East. McConnell Dowell (63% interest) is listed on the Australian and New Zealand stock exchanges and provides specialised construction services to the energy sector. Its operations extend throughout Australia/New Zealand and into South East Asia.
Steel and Allied :
A cluster of steel centres and light manufacturing businesses which together make Aveng South Africa's largest domestic steel beneficiator/merchant. The two largest businesses are Trident Steel and Amalgamated Steele, both of which are 100% held by Aveng. Activity is strategically balanced around servicing the construction, engineering and automotive sectors.
Cement :
Alpha is South Africa's second largest cement producer and its largest concrete manufacturer and aggregate producer. Aveng holds 46% of Alpha and the Swiss group Holcim, one of the world's leading suppliers of cement, aggregates and concrete, holds 54%. Operations extend into southern Africa where Alpha operates a number of cement terminals. It has a controlling interest in Tanzania's largest cement manufacturer.
Aveng's objectives are to achieve:
PE rating in the top three of the BCE sector
Long-term real ROE of 10%
Minimum 25% of earnings in hard currencies
Visit our website - www.aveng.co.za
ends
ISSUED BY: PENELOPE GRACIE INVESTOR RELATIONS
ON BEHALF OF: AVENG LIMITED
FURTHER INFORMATION: PENELOPE GRACIE
CONTACT: OFFICE +27 (11) 447-3301
MOBILE 082-55-77-444
Kind regards
PENELOPE
Penelope Gracie Investor Relations
Tel: +27 (11) 447-3301
Fax: +27 (11) 447-3319
Mobile: 082-55-77-444
e-mail: penelope@pgir.co.za
