| Mon 30 Sep 2002, 10:37 | | AVENG LOOKING FOR REPEAT OF EXCELLENT GROWTH |
|
Johannesburg - Monday September 30, 2002
Construction group, Aveng Limited expects to repeat the past year's 24%
growth in diluted headline earnings per share in the year ahead, providing
there is no substantial change to its operating environment.
The group will also move closer to achieving its 20% return on average
equity objective and aims to better its 35% net debt to equity target.
Writing in the group's annual report which was released today, chairman
Richard Savage says that Aveng embarks on the new financial period in a
strong position, with a full and well balanced construction order book,
strong demand for its steel products particularly from the rapidly expanding
motor manufacturing industry and an expectation that cement demand will
grow. He notes that the economic indicators in South Africa are looking
favourable even though the global economy is not yet showing clear signs of
recovery.
Aveng consists of the country's largest construction group, Grinaker-LTA; a
steel cluster made up of Trident Steel and certain infrastructure and mining
services and a 46% investment in Alpha Limited, South Africa's second
largest cement manufacturer.
For the year to June Aveng's revenue, bolstered by strong order books, grew
28% to R13,2 billion, with 45% deriving from outside of the Rand monetary
area. Mr Savage comments that operating income increased 50% from R431
million to R644 million and the group's operating margin improved from 4,2%
to 4,9%, reflecting the wisdom of the group's decision to focus on quality
work rather than quantity.
"Pre-tax income at R505 million was 40% ahead of the previous year. At the
attributable level, earnings were R363 million (2001: R268 million) and
after adjusting for amortisation of goodwill and non-trading items, headline
earnings amounted to R421 million (111 cents a share). The board is
proposing a cash dividend of 27 cents a share for the year, which is 20%
higher than the 22,5 cents declared for the prior year."
Looking ahead chief executive Carl Grim says that cement volumes are growing
by about 1% per annum, a growth that will probably be maintained in the year
ahead.
"South African cement-driven building and construction demand will grow at a
similar pace. Government departments are demonstrating a welcome
determination to spend their capital budgets, achieved for the first time
this year by the Department of Public Works. Road maintenance initiatives
are again being prioritised and the projected amounts to be spent are
substantial. Civil engineering work will probably experience reasonable
growth."
Looking further ahead, Mr Grim observes that it seems increasingly likely
that some of the mega projects such as the Gauteng Super-Highway System as
well as the Wild Coast freeway will go ahead. "The Gauteng Rapid Rail Link
could follow. While they will not impact the year ahead, their contribution
could be significant in future years."
Private expenditure, particularly on mining and energy projects, which is
driven by international commodity pricing, will remain substantial for some
years to come.
As far as the steel business is concerned, local steel sales grew by 19%
during the past financial year - buoyed by aluminium, platinum and mining
expansion as well as by export initiatives in the motor and manufacturing
industries. "The steel price increases of between 13% and 35% over the past
nine months will reduce growth to some extent, but are unlikely to inhibit
mega steel-based expansion projects," according to Mr Grim.
He adds that internationally, competition remains fierce. "Group companies
have however demonstrated their ability to win work and turn a profit in
those areas where they have specialised capability. We have been encouraged
by the successes in Africa where Grinaker-LTA is increasingly well
positioned. The Nepad initiative driven by our president is of pivotal
importance as its success could result in substantial spending on much
needed African infrastructure, something with which group companies are
particularly well positioned to assist.
"South East Asia's fortunes are directly linked to those of the USA but
McConnell Dowell (the Australian and New Zealand listed company in which
Aveng holds a 64% interest) is sufficiently well focussed and the market big
enough for the company win work under difficult circumstances."
Mr Grim expects that hard currency revenues should be around 50% in the year
ahead but the percentage will depend on the amount of profitable
construction work available locally.
The Aveng annual general meeting will be held at 12 noon on Wednesday,
October 23 at Aveng's head office in Sandton.
_____________________________________________________________________________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
