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Aveng Limited - Audited group results for the year ended 30 June 2004
Aveng Limited
Registration number 1944/018119/06
Share code: AEG
ISIN code: ZAE000018081
`Targeting consistent long-term value`
Audited group results
for the year ended 30 June 2004
Consolidated balance sheet
2004 2003
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 1 851,0 1 922,9
Goodwill 718,5 959,2
Investments 554,8 526,1
Deferred tax 65,8 29,8
3 190,1 3 438,0
Current assets
Inventories 1 017,7 1 121,4
Trade and other receivables 2 496,1 3 122,5
Cash and cash equivalents 746,1 673,8
4 259,9 4 917,7
TOTAL ASSETS 7 450,0 8 355,7
EQUITY AND LIABILITIES
Capital and reserves
Total ordinary shareholders` funds 2 519,1 2 823,2
Minority interests 5,1 173,9
Total shareholders` funds 2 524,2 2 997,1
Non-current liabilities
Interest-bearing borrowings 643,4 732,1
Deferred tax 27,8 53,2
671,2 785,3
Current liabilities
Trade and other payables 2 848,9 3 242,7
Short-term interest-bearing 1 405,7 1 256,2
borrowings
Taxation payable 74,4
4 254,6 4 573,3
TOTAL EQUITY AND LIABILITIES 7 450,0 8 355,7
Cash flow statement
2004 2003
Rm Rm
Cash retained from operating 344,8 190,9
activities
Net fixed assets purchased (298,3) (551,7)
Minorities acquired (136,3)
Investments - other 135,4 238,5
Net long-term borrowings (88,9) 152,9
Net increase/(decrease) in cash and (43,3) 30,6
cash equivalents
Cash and cash equivalents at (400,3) (430,9)
beginning of the year
Cash and cash equivalents at end of (443,6) (400,3)
the year
Other group information
2004 2003 %
Rm Rm change
Determination of headline
and diluted
headline earnings:
Adjustment for 46,4 59,9
amortisation of goodwill
(Surplus) on disposal of (4,2) (0,7)
properties
(Surplus) on disposal of (15,4) (191,7)
investments
Taxation 6,9
26,8 (125,6)
Earnings 193,2 587,3 (67,1)
Headline earnings 220,0 461,7 (52,4)
Net debt to equity ratio 51,6% 43,9%
Capital expenditure
Expansion 244,6 403,8 (39,4)
Maintenance 168,5 423,8 (60,2)
413,1 827,6 (50,1)
Goodwill (net) and
amortisation
At beginning of year 959,2 1 075,7
Acquisition of (33,3)
subsidiaries
Disposal of business (4,8)
Foreign exchange (161,0) (51,8)
movements
Current year change (46,4) (59,9)
At end of year 718,5 959,2 (25,1)
Number of shares
(millions)
In issue 396,1 396,1
Weighted average 389,2 389,3
Diluted weighted average 389,2 389,3
Consolidated income statement
2004 2003 %
Rm Rm change
Revenue 11 739,7 13 244,2 (11,4)
Operating income before 617,5 1 047,1
depreciation
Depreciation 392,5 375,4
Operating income 225,0 671,7 (66,5)
Income from associates 184,4 155,1
and joint ventures
Income from investments 65,7 53,9
Income before interest 475,1 880,7 (46,1)
paid
Interest paid 274,6 315,4
Income before goodwill 200,5 565,3 (64,5)
and non-trading items
Amortisation of goodwill (46,4) (59,9)
Non-trading items 19,6 192,4
Income before taxation 173,7 697,8 (75,1)
Taxation (18,7) 100,6
Income after taxation 192,4 597,2 (67,8)
Minority interests (0,8) 9,9
Earnings 193,2 587,3 (67,1)
Determination of headline
earnings
Earnings 193,2 587,3
Net adjustment for
amortisation of goodwill
and non-trading items 26,8 (125,6)
Headline earnings 220,0 461,7 (52,4)
EARNINGS PER SHARE
(Cents)
Earnings 49,6 150,9 (67,1)
Diluted headline 56,5 118,9 (52,4)
NET ASSET VALUE PER SHARE 635,9 712,7 (10,8)
(Cents)
Dividend per share 14,0 30,0 (100,0)
Segmental information
2004 2003
Rm % Rm %
Turnover
Construction 7 585,1 64,6 9 832,4 74,2
Steel and Allied 4 154,6 35,4 3 411,8 25,8
11 739,7 100,0 13 244,2 100,0
Operating income
Construction (179,4) (79,7) 342,9 51,0
Steel and Allied 404,4 179,7 328,8 49,0
225,0 100,0 671,7 100,0
Geographical revenue
Republic of South 7 547,4 64,3 7 871,5 59,4
Africa (CMA)
Africa and Middle 2 414,5 20,6 3 398,3 25,7
East
Australasia and South 1 777,8 15,1 1 974,4 14,9
East Asia
11 739,7 100,0 13 244,2 100,0
NOTES
These results have been compiled in accordance with the South African Statements
of Generally Accepted Accounting Practice (`GAAP`) and International Financial
Reporting Standards (`IFRS`). The presentation of these results also conform to
the Listings Requirements of the JSE Securities Exchange South Africa and
Schedule 4 of the South African Companies Act. The accounting policies used in
the preparation of the results are consistent in all material respects with
those adopted in the annual financial statements for the year ended 30 June
2003. The annual financial statements have been prepared on a going-concern
basis.
The results have been audited by Ernst & Young and the unqualified audit opinion
is available on request from the company secretary at the company`s registered
office.
The group`s annual financial report will be available by the end of September
2004.
Statement of changes in equity
Non
distri-
Share Share butable Retained
for the year capital premium reserves income Total
ended
30 June 2004 Rm Rm Rm Rm Rm
Balance at 1 19,5 932,0 111,7 1 491,8 2 555,0
July 2002
Dividends (105,2) (105,2)
paid
Earnings for 587,3 587,3
the year
Equity (42,6) (42,6)
accounted
reserve
movements
Foreign (169,2) (169,2)
currency
translation
Repurchase of
shares
by share (2,1) (2,1)
trust
Balance at 30 19,5 929,9 (100,1) 1 973,9 2 823,2
June 2003
Dividends (124,4) (124,4)
paid
Earnings for 193,2 193,2
the year
Equity (14,7) (14,7)
accounted
reserve
movements
Foreign (358,1) (358,1)
currency
translation
Repurchase of
shares
by share (0,1) (0,1)
trust
Balance at 30 19,5 929,8 (472,9) 2 042,7 2 519,1
June 2004
Commentary
Financial overview
The past year has been the most difficult in Aveng`s five-year history. In
February the board informed the market that the combination of a strong Rand and
problems with three road contracts in Africa would significantly affect Aveng`s
headline earnings for the year. At R7 to the US Dollar it was anticipated that
headline earnings would be 50% lower than the past year.
Against this background and a stronger rand than anticipated in the trading
statement, the directors are pleased to be able to report that the headline
earnings decline has been restricted to 52% for the year, delivering R220
million (R462 million) and headline earnings per share of 57 cents (119 cents).
Revenue and shareholder funds declined by 11%, overhead costs declined by 10%
and net debt remained static.
Construction
The biggest disappointment of the past year was the R179 million operating loss
in the construction cluster consisting of Grinaker-LTA (excluding Grinaker-LTA
Manufacturing) and the now 100% held McConnell Dowell Corporation based in
Australia. Revenue declined by 23%, partially as a result of the 24%
deterioration in the average Rand/US$ exchange rate directly impacting 50% of
the cluster`s revenue which was generated outside South Africa. McConnell Dowell
made a small loss of AUS$1,9 million, and together with the three loss making
African road contracts was the major reason for the non-currency component of
the reported loss.
A critical review of all business units, including the off-shore operations has
been completed. The resulting management action included a substantial reduction
in overhead costs which unfortunately led to the loss of 2 500 jobs, spread
across all employee grades. The Roads and Earthworks business unit has been
downsized to half its 2002 size and reorganised to ensure that the necessary
management skills exist at all levels.
Steel and Allied
Against the background of a highly volatile steel industry, the Steel and Allied
businesses did well to return 22% growth in revenue and a 23% growth in
operating income.
Trident Steel continues to be tightly managed with low cost structures and as a
diversified supplier and processor of steel was fortunate to benefit from higher
volume requirements in some of the market segments it serves.
Grinaker-LTA Manufacturing`s market was less active but management responded
quickly by restructuring their business, reducing overhead costs by 23% and
delivering budgeted profits.
Cement
Aveng`s cement interests reside in its 46% held associate company Holcim (South
Africa) (Pty) Limited (previously Alpha).
Cement industry volumes grew by 6,6% in the first half of the Aveng financial
year compared to the comparable prior period and by 17,3% in the second half.
Regional cement consumption for the twelve months ending June 2004 rose to 11
million tons, the highest demand ever. This high level of market activity is
reflected in excellent profits and cash flows.
Volumes are likely to level off soon, largely as a result of growing shortages
in complementary building materials.
Black economic empowerment
Aveng`s proposed BEE transaction will ensure that group companies are given the
opportunity to benefit from their fair share of local construction work in the
years ahead. The transaction with the TisoGroup led BEE consortium is more than
just a shareholding deal. There will be active board involvement in Grinaker LTA
and Trident Steel. The parties involved intend to seek ways to leverage this
transaction for the benefit of all stakeholders.
Prospects
The Rand/US$ exchange rate has had a direct impact on one third of group
earnings and an indirect impact, through its South African clients, on a second
third of earnings. We have structured our businesses to be able to successfully
win work internationally at R7/US$ and believe that most of our local clients
will be able to do the same.
The final third of our earnings base comes from government infrastructure
investment. Here we are particularly well placed to benefit from what would seem
to be a renewed commitment to infrastructure expenditure. Grinaker-LTA is a
member of one of the two consortia bidding for the Gautrain project. It is also
well positioned to contribute towards the building of stadia and the other
infrastructure required for the 2010 Soccer World Cup.
While the markets for the next six months will continue to be tough, the second
half of the financial year looks more promising.
Dividend declaration 2004
Dividend No 5 of 14,0 cents per share, being the total dividend in respect of
the financial year ended 30 June 2004 (2003: 30,0 cents per share) has been
declared payable to shareholders recorded in the share register at close of
business on Friday, 22 October 2004
Last date to trade shares cum Friday, 15 October 2004
dividend
Shares trade ex dividend from Monday, 18 October 2004
Record date Friday, 22 October 2004
Payment date Monday, 25 October 2004
No dematerialisation or rematerialisation of shares may take place for the
period from 18 October 2004 to 22 October 2004, both days inclusive.
On Monday, 25 October 2004, the dividend will be electronically transferred to
the bank accounts of all certificated shareholders unless this has not been
requested by or is not available to them. If electronic funds transfer is not
applicable, cheques dated 25 October 2004 will be posted on that date. Transfers
will be made to the dematerialised shareholder accounts at their CSDP or broker
on 25 October 2004.
By order of the board
Richard Savage (Chairman), Carl Grim (Chief Executive), Dennis Gammie (Financial
Director)
Morningside, 10 September 2004
Targeting construction in the developing world supported locally by steel and
cement
Directors: R B Savage* (Chairman), P L Erasmus* (Deputy Chairman), C Grim (Chief
Executive), D R Gammie (Financial Director), C V Campbell*, P F Crowley, B P J
Fourie, L Gcabashe*, J R Hersov*, H D K Jones, K W Meissner-Roloff*, V Z
Mntambo*, A R Mpungwe*, B P Steele*, M Taback* *Non-executive director
Company secretary: C M Bishop
Registrars: Computershare Investor Services 2004 (Pty) Limited (Registration
number 2004/003647/07), 70 Marshall Street, Johannesburg, 2001; PO Box 61051,
Marshalltown, 2107
Telephone (011) 370-5000, Telefax (011) 688-7717
Registered office: Block B, 204 Rivonia Road, Morningside 2057
For more information visit www.aveng.co.za
(LOGO)
McConnell Dowell
Grinaker LTD
Trident
Holcim
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