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AEG
AEG
Aveng - Unaudited Results 31 December 2005
AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1944/018119/06)
Share code: AEG
ISIN: ZAE000018081
("Aveng")
"Building sustainable value"
Targeting construction in the developing world supported locally by steel and
cement
Unaudited Interim Results for the six months ended 31 December 2005
Consolidated balance sheet
Six months ended
31 December 31 December 30 June
Rm 2005 2004 2005
ASSETS
Non-current assets
Property, plant and 1 852 1 818 1 858
equipment
Goodwill and other 763 708 763
intangibles
Investments 651 624 691
Deferred taxation 164 66 143
Current assets
Inventories 1 326 1 306 1 345
Trade and other receivables 2 676 2 302 3 293
Cash and cash equivalents 1 197 592 857
TOTAL ASSETS 8 629 7 416 8 950
EQUITY AND LIABILITIES
Ordinary shareholders" funds 3 180 2 566 2 921
Minority interests 5 5 9
Non-current liabilities
Interest-bearing borrowings 1 206 587 1 418
- long-term
Deferred taxation 28 17 28
Current liabilities
Trade and other payables 3 500 2 731 3 900
Interest-bearing borrowings 659 1 507 605
- short-term
Taxation 51 3 69
Total equity and liabilities 8 629 7 416 8 950
Net debt to equity ratio (%) 21 58 40
Net asset value per ordinary 803 648 737
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 ended Year
ended
31 31 30 June
December December
Rm 2005 2004 2005
Shareholders" funds at the 2 921 2 519 2 495
beginning of the period
Dividends paid (90) (55) (55)
Profit attributable to Aveng 198 133 387
equity holders
Equity portion of convertible 140
bond
Equity accounted reserve (6)
movements
Foreign currency translation 11 (31) 42
Adjustment in respect of IFRS 25
3
Revaluation reserve 33
Shareholders" funds at the 3 180 2 566 2 921
end of the period
Consolidated cash flow statement
Six Year
months ended
ended
31 31 30 June
December December
Rm 2005 2004 2005
Cash retained from operating
activities
Cash retained from operations 356 310 650
Working capital movements 236 (218) (73)
Cash generated by operations 592 92 577
Interest paid (105) (132) (240)
Income from investments 34 48 82
Taxation paid (85) (24) (76)
Cash available from 436 (16) 343
operations
Dividends paid (90) (55) (55)
346 (71) 288
Investing activities
Net fixed assets purchased (181) (146) (313)
Investments 192 34 162
11 (112) (151)
Financing activities
Net long-term borrowings (111) (76) 861
Net (decrease)/increase in 246 (259) 998
cash and cash equivalents
Cash and cash equivalents at 554 (444) (444)
the beginning of the period
Cash and cash equivalents at 800 (703) 554
the end of the period
Capital expenditure
Six months ended Year
ended
31 31 30 June
December December
Rm 2005 2004 2005
Expansion 82 124 262
Maintenance 157 56 207
239 180 469
Commitments for future
capital expenditure
Contracted 114 43 19
Authorised, but not 66 203 170
contracted for
180 246 189
Contingent liabilities
Moolmans, an operating group within Grinaker-LTA Limited, is currently engaged
in a dispute with Aquarius Platinum (South Africa) (Proprietary) Limited in
respect of contractual claims and early termination of contract.
Consolidated income statement
Six Year
months ended
ended
31 31 Percentage 30 June
December December
Rm 2005 2004 change 2005
Revenue 7 625 6 664 14 13 535
Operating profit 351 306 15 711
before depreciation
Depreciation (181) (185) (384)
Operating profit 170 121 40 327
before amortisation
and non-trading
Amortisation of (24) (2)
goodwill and
intangibles
Non-trading items (5) 11 23
Operating profit 165 108 53 348
Share of profits and 147 123 270
losses from
associates and joint
ventures
Income from 34 48 82
investments
Operating income 346 279 24 700
Interest paid 105 132 240
Profit before 241 147 64 460
taxation
Taxation 43 11 72
Profit for the 198 136 45 388
period
Attributable to
Equity holders of 198 133 387
Aveng Limited
Minorities 3 1
Profit for the 198 136 45 388
period
Determination of
headline earnings
Profit attributable 198 133 387
to Aveng equity
holders
Amortisation of 24
trademarks
Disposal of (24)
properties and
equipment (surplus)
Disposal of 4 (25) 2
investments
loss/(surplus)
Headline earnings 202 132 52 364
EARNINGS PER SHARE
(CENTS)
Headline 51,8 34,0 52 93,5
Diluted headline 50,4
Earnings 51,0 34,2 49 99,3
Diluted earnings 49,5
NUMBER OF SHARES
(MILLIONS)
In issue 396,1 396,1 396,1
Weighted average 389,2 389,3 389,2
Diluted weighted 454,7
average
DIVIDEND PER SHARE Nil Nil 23
(CENTS)
Segmental analysis
BUSINESS SEGMENTATION
Revenue
Six months Six months Year
ended ended ended
31 December 31 December 30 June
Rm 2005 2004 2005
Construction
Grinaker-LTA 3 606 3 444 6 765
McConnell Dowell 1 200 887 1 796
Steel and Allied 2 819 2 333 4 974
7 625 6 664 13 535
Operating profit
Six months Six months Year
ended ended ended
31 December 31 December 30 June
Rm 2005 2004 2005
Construction
Grinaker-LTA (93) (12) 3
McConnell Dowell 29 (6) (117)
Steel and Allied 229 126 462
165 108 348
GEOGRAPHICAL SEGMENTATION
Revenue
Six months Six months Year
ended ended ended
31 December 31 30 June
December
Rm 2005 2004 2005
South Africa 5 042 4 649 8 825
Africa and
Middle East 1 383 1 140 2 855
Australasia and
South East Asia 1 200 875 1 855
7 625 6 664 13 535
GEOGRAPHICAL SEGMENTATION
Assets
Six months Six months Year
ended ended ended
31 December 31 30 June
December
Rm 2005 2004 2005
South Africa 4 742 3 389 5 481
Africa and
Middle East 1 116 1 791 1 008
Australasia and
South East Asia 759 954 770
6 617 6 134 7 259
Holcim (South Africa) Limited - (100%)
Six months ended Year
ended
31 31 Percentage 30 June
December December
Rm 2005 2004 change 2005
Revenue 2 293 1 988 15 3 967
Operating profit 603 542 11 1 099
Assets 2 020 1 711 1 881
Liabilities 1 443 1 187 502
Capital expenditure 222 47 145
Depreciation 60 62 118
Net debt to equity 13 4 2
ratio (%)
NOTES
Accounting policies
The interim financial statements have been prepared in accordance with IAS 34:
Interim Financial Statements, and the listing requirements of the JSE Limited.
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 2005.
As Aveng has prepared its financial statements in compliance with IFRS since
June 2004, the only effects on accounting policies were as a result of adopting
the IFRS improvement project statements:
- In terms of IAS 16: Property, Plant and Equipment where separate component
parts of an item of property, plant and equipment have different useful lives,
they are accounted for and amortised separately. Residual values and useful
lives of all assets are reassessed annually. Depreciation ceases when the
carrying value of an asset equals its residual value. These changes have
resulted in a reduction in the depreciation charge to December of R10,8 million.
- Under the previous version of IAS 21: The Effects of Changes in Foreign
Exchange Rates, certain entities in the group were classified as integrated
foreign operations and translated accordingly. In accordance with IAS 21
revised, these entities have now been classified as foreign operations. Foreign
exchange differences arising on translation of all foreign operations are
recognised directly in a separate component of equity - foreign currency
translation reserve.
- Aveng Limited and its subsidiaries operate a cash settled share-based
compensation plan. The fair value of share-based payment transactions has always
been recognised in the financial statements and the cost accounted for against
net income and headline earnings. The liability is revalued to fair value using
an option pricing model annually. This treatment is consistent with IFRS 2:
Share-based Payments.
Commentary
Financial review
Revenue grew by 14% to R7,6 billion compared to a 12% growth in the comparable
period. Operating profit increased by 53%, profit before tax by 64% and headline
earnings by 52% to R202 million or 52 cents per share. The depreciation charge
was reduced by R11 million during this period due to the reassessment of the
useful lives of property, plant and equipment. The expense for outstanding Aveng
share options was R25 million for the six month period.
At December 2005, the effect of exchanging the convertible bond into Aveng
ordinary shares results in reducing headline earnings per share by 1,4 cents
per share.
In the SENS announcement of 20 December 2005, Aveng provided an update on the
Marikana Platinum Mine dispute between Moolmans and Aquarius Platinum (South
Africa) (Proprietary) Limited. Based on the work done by independent auditors,
KPMG, the underpayment to Moolmans at December 2005 was R219 million made up of
R51 million in escalation claims with the balance of R168 million being
deductions from certificates. In addition, substantial claims relating to
standing time and other matters have been lodged and continue to be lodged
following what Aveng believes to be the unlawful repudiation of the contract.
Moolmans has withdrawn from site. The group has provided for all costs relating
to the closure of this operation and the underpayment, referred to above, which
monies the company will seek to recover from Aquarius Platinum (South Africa)
(Proprietary) Limited.
Net asset value per share is 24% up on the corresponding reporting period. Cash
generated by operations of R592 million has improved by R500 million compared to
December 2004. Net capital expenditure, after disposals, of R181 million is
equal to depreciation and within the group"s target of restricting net capex
spend to 130% of depreciation.
The group"s balance sheet continues to strengthen with net debt down to R668
million from R1,2 billion six months back and R1,5 billion at December 2004. The
net debt to equity ratio of 21% is below the group target of 35% and compares
favourably to the 58% of a year ago.
Operational review
Grinaker-LTA Construction, including Moolmans, the opencast mining contracting
business and E+PC, the engineering and projects company, increased revenue to
R3,6 billion for the period. Its profitability was negatively affected by the
decision to provide for the Marikana escalation claim. Before providing for this
claim Grinaker-LTA Construction, Moolmans and E+PC together made an operating
profit of R12 million compared to the prior period loss of R12 million.
McConnell Dowell increased its revenue by 35% to R1,2 billion during the six-
month period, a reflection of the buoyant Australasian and South East Asian
markets. The group has returned to profitability with an operating profit of R29
million compared to the R6 million loss in the prior comparible period.
The Steel and Allied cluster, consisting of Trident Steel, Grinaker-LTA
Manufacturing and the Aveng corporate office, grew revenue by 21% to R2,8
billion and operating profit to R229 million, reflecting encouraging levels of
activity in the housing infrastructure, civil engineering and motor sectors.
Cement continued to benefit from a very active housing market although capacity
constraints muted profitability growth. Holcim (South Africa), 46% held by
Aveng, grew revenue by 15% to R2,3 billion and operating income by 11% to R603
million for the period.
Prospects
The South African building and civil engineering markets will continue to
perform well. Grinaker-LTA Construction margins are expected to improve.
The remainder of the businesses will continue to perform well for the balance of
the year.
Dividend
The group policy is to consider paying a single annual dividend after its 30
June year end.
For and on behalf of the board
RB Savage Chairman
C Grim Chief executive
DR Gammie Director Finance
6 March 2006
Directors: RB Savage* (Chairman), WE Lucas-Bull* (Deputy chairman), C Grim
(Chief executive), BPJ Fourie, DR Gammie, L Gcabashe*, JR Hersov*, HDK Jones,
KW Meissner-Roloff**, VZ Mntambo*, DG Robinson, BP Steele* *Independent non-
executive **Non-executive
Company secretary: GJ Baxter
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:
J.P.Morgan Equities Limited
Date: 06/03/2006 08:13:04 AM Produced by the JSE SENS Department
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