| Mon 7 Mar 2005, 9:42 | | Aveng - Unaudited Interim Results |
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Aveng - Unaudited Interim Results
Release Date: 07/03/2005 08:00:18 Code(s): AEG
Aveng - Unaudited Interim Results
AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1944/018119/06)
ISIN: ZAE000018081 CODE: AEG
(`Aveng` or the `company`)
UNAUDITED INTERIM RESULTS for the six months ended 31 December 2004
`Targeting consistent long-term value`
Consolidated balance sheet
31 December 31 December 30 June
Rm 2004 2003 2004
ASSETS
Property, plant and 1 817,9 1 946,5 1 851,0
equipment
Goodwill 707,8 868,1 718,5
Investments 624,6 558,4 554,8
Deferred taxation 66,2 2,5 65,8
Inventories 1 305,6 898,0 1 017,7
Trade and other receivables 2 302,0 2 709,9 2 496,1
Cash and cash equivalents 592,1 566,6 746,1
Total assets 7 416,2 7 550,0 7 450,0
EQUITY AND LIABILITIES
Ordinary shareholders` funds 2 565,6 2 603,8 2 519,1
Minority interests 5,5 5,7 5,1
Interest-bearing borrowings 586,9 747,7 643,4
- long-term
Deferred taxation 17,4 27,8
Trade and other payables 2 730,8 3 026,0 2 848,9
Interest-bearing borrowings 1 507,2 1 126,2 1 405,7
- short-term
Taxation 2,8 40,6
Total equity and liabilities 7 416,2 7 550,0 7 450,0
Net debt to equity ratio (%) 58 50 52
Net asset value per ordinary 648 657 636
share (cents)
Included in investments are associated and joint venture companies comprising
unlisted investments valued by the directors at not less than their carrying
value.
Statement of changes in equity
Six months Six months Year
ended ended ended
31 December 31 December 30 June
Rm 2004 2003 2004
Shareholder`s funds at the 2 519,1 2 823,2 2 823,2
beginning of the period
Net movement in treasury (0,1)
shares
Dividends paid (54,5) (124,4) (124,4)
Earnings for the period 133,3 68,0 193,2
Equity accounted reserve (6,8) (14,7)
movements
Foreign currency translation (32,3) (156,2) (358,1)
2 565,6 2 603,8 2 519,1
Consolidated cash flow
Six months Six months Year
ended ended ended
31 December 31 December 30 June
Rm 2004 2003 2004
Cash generated by operations 309,6 265,3 614,5
Working capital movements (217,8) 419,5 142,3
Cash generated by operations 91,8 684,8 756,8
Net financing costs (83,5) (133,9) (208,9)
Taxation paid (24,9) (62,4) (112,7)
(16,6) 488,5 435,2
Dividends paid (54,5) (124,4) (124,4)
Cash retained from operating (71,1) 364,1 310,8
activities
Net fixed assets purchased (145,8) (195,1) (298,2)
Minorities acquired (136,3)
Investments 33,9 (159,2) 135,3
Net long-term borrowings (76,0) 26,4 (54,9)
Net (decrease)/increase in (259,0) 36,2 (43,3)
cash and cash equivalents
Cash and cash equivalents at (443,6) (400,3) (400,3)
beginning of period
Cash and cash equivalents at (702,6) (364,1) (443,6)
end of period
Consolidated income statement
Six months Six months Year
ended ended ended
31 December 31 December % 30 June
Rm 2004 2003 change 2004
Revenue 6 664,0 5 948,8 12 11 739,7
Operating income before 305,9 322,4 (5) 617,5
depreciation
Depreciation 184,6 195,4 392,5
Operating income 121,3 127,0 (4) 225,0
Income from associates
and joint ventures 122,7 89,1 184,4
Income from investments 48,1 34,7 65,7
Income before interest 292,1 250,8 475,1
paid
Interest paid 131,6 168,7 274,6
Income before 160,5 82,1 95 200,5
exceptional items
Amortisation of goodwill (24,5) (26,6) (46,4)
Non-trading items 10,7 10,0 19,6
Income before taxation 146,7 65,5 123 173,7
Taxation 10,8 (2,5) (18,7)
Income after taxation 135,9 68,0 100 192,4
Minority interests 2,6 (0,8)
Earnings 133,3 68,0 96 193,2
Determination of
headline earnings
Earnings 133,3 68,0 193,2
Amortisation of goodwill 24,5 26,6 46,4
Disposal of properties (4,2)
(surplus)
Disposal of investments (25,3) (10,0) (15,4)
(surplus)
Taxation 1,1
Headline earnings 132,5 85,7 55 220,0
EARNINGS PER SHARE
(CENTS)
Headline 34,0 22,0 55 56,5
Earnings 34,2 17,5 96 49,6
NUMBER OF SHARES
(MILLIONS)
In issue 396,1 396.1 396.1
Weighted average 389,2 389.3 389.2
DIVIDEND PER SHARE Nil Nil 14.0
(CENTS)
Capital expenditure
Six months Six months Year
ended ended ended
31 December 31 December 30 June
Rm 2004 2003 2004
Expansion 123,6 164,2 244,6
Maintenance 56,1 82,7 168,5
179,7 246,9 413,1
Commitments for future
capital expenditure:
Contracted 43,1 33,1 48,4
Authorised, but not 202,7 186,7 70,6
contracted for
245,8 219,8 119,0
Contingent liabilities
Claims which may result from guarantees issued amount to R63,0 million compared
to R38,0 million at 30 June 2004.
Notes
Accounting policies
The interim financial statements have been prepared in accordance with the South
African Statements of Generally Accepted Accounting Practice, International
Financial Reporting Standards and the listing requirements of the JSE Securities
Exchange South Africa. The accounting policies adopted are consistent with those
of the previous year. The external auditors have not reviewed the financial
results for the half-year ended 31 December 2004.
Segmental analysis
Six months ended Six months ended Year ended
31 December 31 December 30 June
2004 2003 2004
Rm Rm Rm
BUSINESS Revenue
SEGMENTATION
Construction 4 330,9 3 910,0 7 585,1
Steel and Allied 2 333,1 2 038,8 4 154,6
6 664,0 5 948,8 11 739,7
GEOGRAPHICAL Revenue
SEGMENTATION
South Africa 4 649,0 3 784,1 7 547,4
Africa and Middle 1 140,0 1 270,5 2 414,5
East
Australasia and 875,0 894,2 1 777,8
South East Asia
6 664,0 5 948,8 11 739,7
Segmental analysis
Six months ended Six months ended Year ended
31 December 31 December 30 June
2004 2003 2004
Rm Rm Rm
BUSINESS Operating income
SEGMENTATION
Construction (17,9) 6,9 (179,4)
Steel and Allied 139,2 120,1 404,4
121,3 127,0 225,0
GEOGRAPHICAL Assets
SEGMENTATION
South Africa 3 389,3 3 854,2 3 228,1
Africa and Middle 1 790,7 1 880,6 2 182,7
East
Australasia and 953,3 687,7 672,1
South East Asia
6 133,3 6 422,5 6 082,9
Commentary
Financial review
Headline earnings increased by 55% to R133 million and revenue by 12% to R6,7
billion for the six months to December 2004. During the same period the rand
appreciated by 10% on both the closing and average US dollar exchange rate. The
indirect impact on our mining and manufacturing customers has been more severe.
Since June 2004 working capital has increased by R218 million. The principal
reason for this was the R288 million spent on buying steel prior to price
increases. As a consequence, the group`s net debt levels increased by R199
million to R1 502 million resulting in a net debt to equity ratio of 58%, up
from 52% in June 2004.
Operational review
The Construction cluster comprising the engineering, construction and mining
operations of Grinaker-LTA (Africa and Middle East) and McConnell Dowell
Corporation (Australasia and Pacific) continued to experience difficult trading
conditions. Grinaker-LTA has had to deal with the tail end of work previously
priced at more competitive rand/dollar exchange rates but significant progress
has been made in resolving outstanding contract claims. McConnell Dowell
continues to have to dedicate significant financial and management resources to
resolving outstanding claims on completed contracts. The cluster has, however,
turned the corner, delivering an operating loss of R18 million for the period
compared to a loss of R186 million during the six months January to June 2004.
Losses of R17 million were made by the construction joint venture operations,
during this reporting period.
In the past, construction has earned more than half of its revenue, principally
in US and Australian dollars, with a large portion of its remaining business
directed at southern African customers in the mining, energy and export sectors.
These have been particularly hard hit by the strong rand, bringing into question
the economic viability of many new projects. A number of mining houses have
stated that capital expansion will be deferred. In addition, as marginal and
loss-making operations become threatened, maintenance is being curtailed.
In the context of Grinaker-LTA`s business its involvement in the South African
residential market has been relatively small.
The group has two road contracts remaining in the rest of Africa, one in
Tanzania and one in Zambia, both of which will return a profit. Some resources
are being diverted to South Africa in preparation for increased infrastructure
expenditure on both government and quasi-government projects. The Africa and
Middle East regional contribution to Aveng revenue has declined by 10% since
December 2003 and is set to decline further. The company`s order book for
secured contracts over the next two years has reduced to 86% of revenue,
compared to 100% in June 2004, further freeing up construction resources.
McConnell Dowell Corporation continues to make good progress in growing its
order book, having secured work for the next two years of AUD316 million which
is equal to 75% of annual revenue. A headline earnings loss of AUD1,4 million
was reported for the period.
The Steel & Allied cluster, comprising Trident Steel, Grinaker-LTA Manufacturing
and the Aveng corporate office performed well, registering a 14% growth in
revenue and a 16% increase in operating income for the six months. Higher levels
of activity in the housing and infrastructure markets has benefitted this
cluster of business. Recent well timed capital investment in both these
businesses have borne fruit, allowing Aveng to capitalise on current activity
levels. Demand for mining products continues to be poor.
Cement, Aveng`s 46% interest in Holcim (South Africa) (Pty) Limited, has
performed well, benefiting from the 13,9% industry growth on the prior six-month
period. However, while this is an excellent level of growth it is below the
17,3% growth experienced in the prior six month period, indicating a levelling
off in the market. An additional 500 000 tons of capacity resulting from the
recent upgrading of Dudfield Kiln No 3 has enabled Holcim (South Africa) to meet
customer requirements with some capacity still in hand. The buoyant market is
also reflected in a good performance by the quarrying and ready mixed concrete
businesses.
The disposal by Holcim (South Africa) of its 24,5% interest in Nova Cimangolo
gave rise to a capital profit of R14,6 million for Aveng.
Contractual disputes
As previously disclosed, Grinaker-LTA is involved in a dispute with Aquarius
Platinum South Africa (Proprietary) Limited, in respect of the Marikana opencast
mining contract. Aquarius disputes its obligation to pay certain amounts in
respect of the escalation of costs which Grinaker-LTA considers to be due and
payable. The amount in dispute at 31 December 2004 is R100 million and this
claim is expected to increase by approximately R6 million per month until
resolution. Arbitration is due to commence during April 2005.
Convertible bond
In January 2005 Aveng informed the market that it had provisionally secured a R1
billion, seven-year convertible bond with an interest rate coupon of 6,125% per
annum. The issue price of R15,27 was at a 22% premium to the group`s share price
prior to the announcement. When all outstanding issues have been resolved, final
documentation will be posted to subscribers.
BEE transaction
The final suspensive conditions relating to the BEE transaction with TisoGroup
and a number of broadly based empowerment partners were met early in February
2005. The structure of this transaction includes broad-based beneficiaries with
significant opportunities for partnership with the TisoGroup, women`s groups,
community groups and black business partners. Aveng`s South African
subsidiaries, Grinaker-LTA and Trident Steel, are now working with these groups
to generate maximum value from this transaction.
Dividend
It is group policy to consider paying a single annual dividend after its 30 June
year-end.
Corporate governance
The group, at all levels, subscribes to the values of good corporate governance
and is committed to applying the principles of the second King Report and
complying with the JSE requirements. It continues to ensure that business is
conducted with discipline, integrity, transparency and in a socially responsible
manner.
Prospects
The January 2005 trading update stated that headline earnings for the full year
to June 2005 were expected to be up by between 40% and 60%. This statement
assumed an exchange rate of R6 to the US dollar and no significant extraordinary
events. Subsequent to the half year-end publication of this statement, the
German construction company, Walter Bau AG, was placed in liquidation. At the
time McConnell Dowell Corporation was subcontracting to this group on two
contracts for Sydney Water Corporation. Initial estimates are that AUD8 million
(R35 million) will need to be written off in respect of services rendered, but
not paid for. Despite this event the group is confident of achieving this
target.
In accordance with the JSE Listings Requirements 3.4(b) (V1) (2) attention is
drawn to the fact that this estimate has not been reviewed or reported on by the
group`s external auditors.
Looking beyond June 2005, prospects are bullish. Aveng companies are
particularly well placed to benefit from the high levels of infrastructure spend
expected on 2010 World Cup projects (including Gautrain), capacity upgrading by
Eskom and Transnet as well as broader infrastructure investment by government.
For and on behalf of the board
RB Savage (Chairman), C Grim (Chief executive), DR Gammie (Director Finance)
7 March 2005
Targeting construction in the developing world supported locally by steel and
cement
Directors: RB Savage* (Chairman), PL Erasmus* (Deputy chairman), C Grim (Chief
executive), BPJ Fourie, DR Gammie, L Gcabashe*, JR Hersov*, HDK Jones, W Lucas-
Bull*, K Meissner-Roloff**, V Mntambo*, D Robinson, BP Steele*
*Independent non-executive **Non-executive
Company secretary: CM Bishop
Registrars:
Computershare Investor Services 2004 (Pty) Limited (Registration number
2000/006082/06), 70 Marshall Street, Johannesburg, 2001; PO Box 61051,
Marshalltown, 2107
Telephone 011 379 5000, Telefax 011 688 7717
Aveng Limited:
Registration number 1944/018119/06
Share code: AEG
ISIN code: ZAE 000018081
Registered office: Block B, 204 Rivonia Road, Morningside, Sandton, 2057
For more information visit www.aveng.co.za
Sponsor
JP Morgan
