| Mon 9 Sep 2002, 0:00 | | AVENG REPORTS ANOTHER EXCELLENT RESULT |
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Johannesburg - Monday September 9, 2002
Aveng Limited, the country's largest construction group that now earns 45% of its revenue outside of southern Africa, today reports another set of excellent results with diluted headline earnings per share 24% ahead of a year ago.
Reporting for the year to June 30 Aveng shows revenues of R13,2-billion, 28% ahead of the previous year's R10,3-billion and operating income of R644,1-million, a 50% improvement on the R430,8-million achieved a year ago.
Reflecting its growing track record of reporting consistently good results, Aveng's headline earnings rose by an impressive 29% to R420,9-million. Diluted headline earnings per share amounted to 107,3 cents compared with the 86,8 cents a share of the 2001 financial year. The company has declared an annual dividend of 27 cents a share, 20% higher than the 22,5 cents a share paid a year ago.
Commenting on the results, chief executive Carl Grim said that he was particularly pleased with the group's performance over the past year as significant growth was achieved against the background of considerable internal change. "The past two years were focused on positioning and growth. The next two years will reflect the fruits of that growth in the group's cash flow, the operating profit margins and other efficiently measures. Our emphasis will be on quality rather than quantity of work.
"We are pleased with our performance this year, but have raised the bar. We have devoted a considerable amount of time to reviewing our strategy with a view to increasing the returns we achieve and reducing the risk in our business. As part of that exercise, we revised our financial objectives. One of our targets is to increase annual diluted headline earnings per share by 20% and I am delighted that this year's increase is comfortably ahead of that benchmark.
"It is also pleasing that our return on average equity improved to 18,4% from 17,2%, the fifth consecutive year of growth in this important benchmark. We are now working towards our target of 20%."
Mr Grim added that another objective - that of earning 50% of group revenues in hard currencies - was within sight. "This year our non-southern African revenue contribution increased from 35% to 45% and we believe that we should also achieve 50% within a year or two."
Financial director Dennis Gammie noted that, in line with expectations, Aveng succeeded in reducing its debt to equity ratio from 55% to 43% in spite of the group's substantial revenue growth and capital expenditure exceeding depreciation by R339-million. "Of our R1,2-billion interest bearing debt, only R311-million is foreign debt and the bulk of our debt (59%) is fixed for a year or longer. We believe that this is the correct profile for a our group such as Aveng."
He went on to say that Aveng was aiming to achieve its target debt to equity ratio of 35% in the next financial year. The group generated cash of R216,8-million (2001: R315,6-million) from its operations during the year.
Commenting on the performance of the businesses, Mr Grim said that the construction cluster which generated 54% of operating income and 73% of revenue had an excellent period. Operating income grew by 36% and revenue by 27%.
"Grinaker-LTA has substantially completed its rationalisation process and is now a fully integrated business with seven large and well resourced business units. Successes during the year included adding major projects such as the Mozambique pipeline contract for Sasol and the fact that our Australian business, McConnell Dowell Corporation, returned to a more acceptable level of profitability and size of order book."
Mr Grim added that construction is strongly positioned having an order book, cut off at two years, with a value of R9,8-billion equivalent to 103% of construction revenue.
The steel and allied cluster, which consists of the steel trading and processing businesses of Trident and Grinaker-LTA Infrastructure and Mining Services, contributed 46% of operating income, an increase of 68% over the previous year. Revenue grew by 30% in response to rapidly growing local and export demand for steel products.
"Structural steel sales into mining and energy construction projects have been strong while the motor and steel-based manufacturing businesses have been particularly buoyant over the past year, largely the result of export driven demand."
Aveng equity accounts its 46% investment in Alpha, South Africa's second largest cement company. Here Mr Grim reports that volumes declined by 1% over the past year but this was compensated by improved efficiencies. "Alpha sold its non-core 34% interest in Omnia after the year end is reviewing its investments in Natal Portland Cement, Slagment and Ash Resources. Having successfully completed its first programme to improve operational efficiencies, Alpha has now embarked on a three year R270-million capital expenditure driven efficiency programme."
Looking ahead Mr Grim says that construction is strongly poised with its R9,8-billion two-year order book and is in the position of being able to be selective about the work it targets. "Steel and allied continued to trade well, fuelled by local construction demand and competitive Rand-induced exports in the motor and manufacturing sectors. Cement volumes are flat but efficiency continues to improve.
"So, unless there is a substantial change to our operating environment in the year ahead, Aveng should be able to repeat the past year's growth in diluted headline earnings per share. The group will move closer to achieving the 20% return on average equity objective and we aim to better the 35% net debt to equity target."
Please note:
Aveng Limited is a South African based group. It was listed on the JSE Securities Exchange SA in July 1999 with the stated objective of becoming a globally competitive construction-related group focused principally on the developing world. It aims to achieve consistent long-term value for all its stakeholders.
Its major businesses are
Construction
Steel and Allied
Cement (46% investment in Alpha Limited)
Aveng's objectives are:
To earn a return on average equity of 20%
To grow diluted headline earnings per share by 20%
To earn 50% of group revenues in hard currencies
To have a debt:equity ratio of 35%
Visit our website - www.aveng.co.za
