| Mon 10 Mar 2003, 15:22 | | AVENG MOVES TO KEEP ITS PROMISES |
|
Aveng Limited, the construction-related group, reported an excellent set of
interim results today for the six months to December 2002. Revenues
increased by 18 % to R6 968.9 million while headline earnings were up 23% to
R189.7 million. In line with its forecasts made at the June 2002 year end,
Aveng's diluted headline earnings per share growth was 23% to 48.7 cents per
share.
Borrowings, another area of focus for the group, came down marginally, with
the net debt to equity ratio improving to 42.4% from 46.0%. This slight
improvement was affected by a high level of capital expenditure during the
period (some R298 million was spent) as well as extraordinary steel
purchases of R100 million at year-end ahead of the January price increases.
In addition, the weakness of the dollar resulted in a foreign currency
translation loss of some R215 million, which also affected the debt to
equity position. The company remains committed to its target of a 35% net
debt to equity ratio and expects a further improvement in this ratio by the
year end.
The construction division grew revenues by 11% to R4 895 million. This was
despite the decrease in the value of the dollar. The construction division
generates the majority of its revenue outside South Africa, principally in
US Dollars. Operating profit declined by 12% to R142.6 million, largely due
to higher Rand based costs and diluted dollar revenue. The order book for
the next two years is currently R8.2 billion, compared with R8.8 billion a
year ago, reflecting the weaker dollar and ongoing drive for quality work.
Some project highlights include the Kruger Mpumalanga Airport, the Temane to
Secunda gas pipeline and the new port development at Durban.
The steel and allied division consisting of Trident Steel and Grinaker-LTA’s
very significant Infrastructure & Mining Services business unit, benefited
from the greater economic activity in both the steel based construction and
manufacturing
sectors. Turnover increased by 36% to R2 074 million, while operating
profit was up substantially to R128.7 million. Drivers in this sector have
been several major steel based projects, including the Nelson Mandela bridge
(in which 1 000 tonnes of steel were used), platinum expansion projects as
well as motor vehicle exports.
The 46% held Alpha continues to provide good returns. The industry
benefited from an active local market where volumes for the six months were
almost 10% up on the same period in the previous year.
Carl Grim, Chief Executive, said that he was pleased with the results. "We
have had a volatile six months trying to cope with rising interest rates,
the strengthening Rand and slowing world markets. The results are a credit
to all members of the team. We are proud of our achievements over this
period."
Commenting on the next six months, Grim says, "The South African economy
looks buoyant and we expect growth from this region for the rest of the
year. However, with a war in the wings, it is impossible to predict what
will happen on the international front. In light of the current political
and economic difficulties and uncertainty of the rand/dollar exchange rate,
it is unlikely that the group will be able to maintain the same growth in
earnings for the next six months.”
ENDS
CONTACTS
Aveng
Carl Grim Chief Executive Officer 011
779 2801
TriLogy Communications
Douglas Taylor 011 726 1841
082
455 3577
Full Results are available on the Aveng Web Site: http://www.aveng.co.za
ADDITIONAL - FOR YOUR INFORMATION
AVENG RESULTS COMMENTARY AS PER SENS NOTICE
Financial review
Aveng traded well over the six-month period with revenues and headline
earnings increasing 18% and 23% respectively. In line with the group"s
stated objectives, diluted headline earnings per share increased by 21%,
exceeding the targeted 20% growth rate. The average return on equity for the
half year was 14,1% compared to 13,4% at December 2001.
The appreciation of the rand to the US dollar, from R10,37 at June 2002 to
R8,66 at December 2002 resulted in an unrealised foreign currency
translation loss of R215 million on net assets. The operating income was
negatively impacted by an R18 million foreign exchange loss for the six
months to 31 December 2002, compared to an R86 million foreign exchange gain
for the year ended 30 June 2002. The secondary effects of the strengthening
Rand have been firstly that 59% (53%) of the half year"s revenue was
generated in the Rand area and secondly that construction contributed 53%
(67%) of the group"s operating income.
Net debt levels have reduced marginally to R1 160 million over the period.
However, the net debt to equity ratio has improved to 42,4% compared to
46,0% at December 2001. This was achieved despite a high level of capital
expenditure of R298 million in the past six months and R835 million in the
twelve months since December 2001. In addition, R100 million was expended
on extraordinary steel purchases ahead of the January 2003 price increases.
If the foreign currency translation charge is excluded, the group"s net debt
to equity ratio would have been 39%, halfway to our 35% target.
Operational review
Construction revenue for the six months grew by 11% while operating income
declined by 12%. This division generates the major portion of its revenue
outside South Africa, principally in US dollars. The strengthening rand
negatively affected earnings for the period while having a limited positive
impact on input costs. In the longer term, this trend is expected to
reverse. The order book for the next two years of R8,2 billion compares to
R8,8 billion at December 2001, a reflection of the 19,8% weaker dollar as
well as the ongoing drive for quality work.
Steel & Allied, comprising Trident Steel, Grinaker-LTA Infrastructure and
Mining Services as well as the Aveng corporate office, benefited
significantly from higher activity levels in the steel based construction
and manufacturing sectors. While overall activity in the sector is being
retarded by the significant steel price increases and by the strengthening
rand, the division should continue to show growth for the remainder of the
financial year. The new factory at Roodekop is on programme for
commissioning in June 2003. Cement has benefited from an active local
market. Industry volumes for the six months were 9,9% higher than the
comparable prior period. Alpha"s non-core 34% interest in Omnia Limited and
33% interest in Natal Portland Cement (Pty) Limited were sold. The R280
million expansion at Dudfield"s No 3 Kiln remains on track for completion by
December 2003.
Dividend
It is the group"s policy to declare dividends once a year, after its
financial year-end at 30 June.
Prospects
The board continues to believe that in order to best balance business risk,
it is in the long-term interest of the group to retain its objective of
generating 50% of its revenues in "hard currencies". This will naturally
impact on earnings and asset values, as currencies fluctuate but will
provide the best long-term stability.
Trading conditions within South Africa have been buoyant. However, in the
face of the current international political and economic difficulties and
the uncertainty of the rand/dollar exchange rate, it is unlikely that the
group will manage to maintain the same growth in earnings for the next six
months.
NOTES
Aveng is a South African based group, listed on the JSE Securities Exchange
in the Basic Industries - Construction and Building Materials sector. The
company aims to become a globally competitive construction-related group,
focused principally on the developing world.
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 generate 50% of group revenues in hard currencies
* To have a debt:equity ratio of 35%
