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AEG
AEG
Aveng Limited - Audited Group Results for the year ended 30 June 2006
AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1944/018119/06)
Share code: AEG
ISIN: ZAE000018081
("Aveng")
Audited Group Results for the year ended 30 June 2006
Construction, steel and cement
Operating Profit up 111%
Operating Cash Flow R1,1 billion
Headline Earnings per Share up 87%
Construction order book R11,3 billion
Consolidated balance sheet as at 30 June 2006 Restated
2006 2005
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 2 083 1 858
Goodwill and other intangibles 761 755
Investments 471 691
Deferred tax 276 169
3 591 3 473
Current assets
Inventories 1 374 1 345
Trade and other receivables 3 464 3 293
Cash and cash equivalents 1 585 857
6 423 5 495
TOTAL ASSETS 10 014 8 968
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" funds 3 521 2 849
Minority interests 4 9
Total shareholders" funds 3 525 2 858
Non-current liabilities
Interest-bearing borrowings - long-term 1 253 1 418
Deferred tax 62 28
1 315 1 446
Current liabilities
Trade and other payables 4 573 3 990
Interest-bearing borrowings - short-term 467 605
Taxation payable 134 69
5 174 4 664
TOTAL EQUITY AND LIABILITIES 10 014 8 968
Statement of changes in equity
for the year ended 30 June 2006
Attributable to equity holders of the parent
Equity
portion
of com- Non-
pound distribu-
Share Share instru- table Retained
capital premium ment reserves income Total
Rm Rm Rm Rm Rm Rm
Balance at
1 July 2004
as previously
stated 20 930 (473) 2 019 2 496
Impairment
adjustment -
goodwill (8) (8)
Effect on
adoption
of IFRS 2 (23) (23)
Balance at
1 July 2004
as restated 20 930 (473) 1 988 2 465
Profit for the
Year 346 346
Dividends paid (55) (55)
Equity-accounted
reserve
movements (6) (6)
Foreign currency
translation 42 42
Effect on
adoption of
IFRS 3 25 25
Revaluation reserve 33 33
Transfers (1) 1
Balance at
30 June 2005 20 930 (405) 2 305 2 850
Profit for the
year 588 588
Dividends paid (90) (90)
Equity-accounted
reserve
movements 15 15
Foreign currency
translation 18 18
Convertible bond
conversion 140 140
Transfers 15 (15)
Balance at
30 June 2006 20 930 140 (357) 2 788 3 521
Statement of changes in equity (continued)
for the year ended 30 June 2006
Minority Total
interest equity
Rm Rm
Balance at 1 July 2004 as previously stated 5 2 501
Impairment adjustment - goodwill (8)
Effect on adoption of IFRS 2 (23)
Balance at 1 July 2004 as restated 5 2 470
Profit for the year 1 347
Dividends paid (55)
Equity-accounted reserve movements (6)
Foreign currency translation 3 45
Effect on adoption of IFRS 3 25
Revaluation reserve 33
Transfers
Balance at 30 June 2005 9 2 859
Profit for the year 2 590
Dividends paid (90)
Equity-accounted reserve movements 15
Foreign currency translation (7) 11
Convertible bond conversion 140
Transfers
Balance at 30 June 2006 4 3 525
Cash flow statement
for the year ended 30 June 2006
Restated
2006 2005
Rm Rm
Cash retained from operating activities 1 122 288
Purchase of plant and equipment (net) (556) (313)
Investments (net) 351 162
Net long-term borrowings (225) 861
Net increase in cash and cash equivalents 692 998
Cash and cash equivalents at beginning
of the year 554 (444)
Cash and cash equivalents at end of the year 1 246 554
Consolidated income statement
for the year ended 30 June 2006
Restated
2006 2005 %
Rm Rm change
Revenue 16 054 13 535 19
Operating profit before depreciation 966 654
Depreciation 338 384
Operating profit before amortisation
and non-trading 628 270 133
Amortisation of goodwill and other
intangibles (2)
Non-trading items (15) 23
Operating profit 613 291 111
Share of profits and losses from
associates and joint ventures 249 270
Income from investments 88 82
Operating income 950 643 48
Interest paid 162 241
Profit before taxation 788 402 96
Taxation 198 55
Profit for the period 590 347 70
Attributable to
Equity holders of Aveng Limited 588 346
Minorities 2 1
Profit for the period 590 347 70
Determination of headline earnings
Profit attributable to equity holders
of Aveng 588 346
Net adjustment for amortisation of
goodwill and non-trading items 15 (23)
Headline earnings 603 323 87
EARNINGS PER SHARE (cents)
Earnings 151,0 88,9 70
Headline 154,9 83,0 87
Diluted earnings 141,5 88,9 59
Diluted headline earnings 144,9 83,0 75
DIVIDEND PER SHARE 38,0 23,0 65
Segmental information
for the year ended 30 June 2006
Restated
2006 2005
Rm % Rm %
Revenue
Construction - South Africa and Africa 7 498 47 6 765 50
Construction - Australasia and Pacific 2 956 18 1 796 13
Steel & Allied 5 600 35 4 974 37
16 054 100 13 535 100
Operating profit
Construction - South Africa and Africa (125) (20) (65) (22)
Construction - Australasia and Pacific 68 11 (117) (40)
Steel & Allied 670 109 473 162
613 100 291 100
Geographical revenue
South Africa 10 383 65 8 825 65
Africa and elsewhere 2 715 17 2 855 21
Australasia and Pacific 2 956 18 1 855 14
16 054 100 13 535 100
Holcim (South Africa) (Pty) Limited - 2006 2005
(100%) Rm Rm
Revenue 4 535 3 967
Operating income 1 156 1 099
Assets 2 127 1 881
Liabilities 625 502
Capital expenditure 388 145
Depreciation 112 118
Net debt to equity ratio 34% 2%
Note: The financial information above relates to Holcim (South Africa)
(Proprietary) Limited (100%) and not the equity-accounted entity Altur (Pty)
Limited. Aveng Limited holds its 45,65% stake in Holcim (South Africa) through
Altur (Pty) Limited.
Other group information
for the year ended 30 June 2006
Restated
2006 2005 %
Rm Rm change
Determination of headline earnings:
Net loss/(surplus) on disposal of
properties and equipment 18 (24)
Net (surplus)/loss on disposal of
investments (2) 1
16 (23)
Number of shares (millions)
In issue 396 396
Weighted average 389 389
Diluted weighted average 455 389
Capital expenditure
Expansion 406 262 55
Maintenance 355 206 72
761 468 63
Goodwill, intangibles and
amortisation (net)
At beginning of the year 755 719
Adjustment to opening balance (8)
Restated opening balance 755 711
Charge for the year (1)
Effect on adoption of IFRS 3 25
Foreign exchange movements 6 20
761 755
NOTES
Accounting policies
These results have been compiled in accordance with International Financial
Reporting Standards (IAS 34).
The presentation of these results also conforms to the Listing Requirements of
the JSE Limited 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 2005, except for the the effect of the adoption of IFRS 2:
Share-based Payments.
RESTATEMENTS, CHANGES IN ACCOUNTING POLICY AND COMPARATIVES
IFRS 2: Share-based Payments
The group adopted IFRS 2: Share-based Payments during the current financial
reporting period. The adoption of this statement resulted in a change in the
accounting policy for share-based payments. An entity shall apply IFRS 2
retrospectively for all periods beginning on or after 1 January 2005.
The adoption of this accounting policy resulted in an increase in the liability
carried in respect of cash-settled share-based payments as reflected below.
GROUP 2006 2005
Effect Rm Rm
Balance sheet effect (cumulative)
Distributable reserves Decrease 76,6 63,4
Provision for share-based payment
liability Increase 107,9 89,4
Deferred tax asset Increase 31,3 25,9
Income statement
Operating expenses Increase 18,5 57,3
Taxation Decrease 5,4 16,6
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
2006.
Commentary
Financial review
The black economic empowerment transaction concluded in July 2005 is accounted
for in terms of IFRS 2, at 30 June 2006. An estimate of the number of Aveng
shares to be potentially issued at each reporting date will be calculated and
included in the diluted weighted average number of shares.
On 28 October 2005, shareowners approved the conversion of Aveng"s R1-billion
bond to equity at any time at a price of R15,27. This equates to 65,5 million
shares. Aveng has the option to redeem all the bonds on or after 17 March 2009
at a share price of R19,85. The close-out date for the conversion of the bond
and equity is 17 March 2012. The diluted weighted average number of shares has
increased by approximately 65,5 million as a result. At 30 June 2006, the
dilution effect is just below 7%.
Net asset value per share increased by 24% on the prior year. Cash generated by
operations of R1,1 billion was 76% above the R650 million generated to 30 June
2005. Capital expenditure at cost net of disposals was R388 million for the
year, which is 15% greater than depreciation and within the group"s target of
restricting net capital expenditure spend to 30% above depreciation.
Aveng"s balance sheet continues to strengthen with net debt down to R134 million
from R1,2 billion in the prior year. The net debt to equity ratio of 4% is
significantly below the group target of 35% and the 40% level of a year ago. The
operating margin (earnings before interest and tax) has improved from 2,0% a
year ago to 3,9% in the review period.
In the SENS announcement of 23 August 2006, Aveng updated the market on the
Marikana Platinum Mine dispute between Moolmans and Aquarius Platinum (South
Africa) (Pty) Limited. All amounts owing by Aquarius have ben provided for at 30
June 2006. Moolmans" entitlements in terms of the contract are being vigorously
pursued.
Grinaker-LTA is involved in a dispute with Nedbank in respect of a Euro15-
million construction contract completed for the government of Gabon.
A dispute exists with BHPBilliton over the Minerva project termination.
McConnell Dowell have taken action against BHPBilliton to recover costs
BHPBilliton have counterclaimed for damages against McConnell Dowell.
Operational review
Revenue grew by 19% to R16 billion, largely due to improved trading conditions
in domestic and international construction markets and buoyant conditions in the
steel and allied businesses. Operating profit increased by 111% and headline
earnings per share increased by 87% compared to restated 2005 numbers. Following
the adoption of IFRS 2: Share-based payments and assuming 2005 numbers remained
as published, operating profit would have increased by 76% and headline earnings
per share by 66%. The application of IAS 16 reduced the depreciation charge by
R20 million. Aveng posted headline earnings per share of 154,9 cents to June
2006 compared to a restated 83,0 cents (previously 93,5 cents) in the prior
year.
Aveng"s South African and African construction cluster (Grinaker-LTA
Construction, Moolmans and E+PC) recorded revenue of R7,5 billion for the
period. Its profitability was affected by the non-payment of certified work done
and an escalation claim in respect of the Marikana mine in the amount of R156
million this year. Adjustments required by the adoption of IFRS 2 and expenses
incurred on the encashment of share options as a result of the increase in the
Aveng share price contributed to the operating loss of R125 million compared to
the restated loss of R65 million in 2005.
McConnell Dowell, Aveng"s Australasian and Pacific construction business,
increased revenue to R3 billion during the review period, reflecting buoyant
markets. The group recorded an operating profit of R68 million compared to a
R117-million loss in the prior year.
The steel and allied cluster (Trident Steel, Manufacturing and the Aveng
corporate office) increased revenue by 13% to R5,6 billion and operating profit
to R671 million, reflecting higher activity levels in the housing,
infrastructure, civil engineering and motor sectors.
Holcim (South Africa), 46% held by Aveng, grew revenue 14% to R4,5 billion and
operating income by 5% to R1,2 billion adversely affected by the price war in
Namibia and the cost of imports. Aveng"s interest in Holcim (South Africa) is
equity accounted and therefore does not reflect in Aveng"s revenue or operating
profit.
Subsequent events
Subsequent to Aveng"s year-end, Holcim Limited announced that it wished to sell
85% of its share in the South African business to an empowerment consortium that
included management and staff, based on an enterprise value for Holcim (South
Africa) of R15,5 billion. In considering its response to this proposed
transaction, the board of Aveng will seek to diligently discharge its fiduciary
duty to shareowners, in the context of certain pre-emptive and other rights and
its commitment to sustainable black economic empowerment in the cement industry.
Shareowners are referred to the cautionary announcement released on 24 August
2006.
Prospects
With buoyant activity levels across all operational areas evident in the two
year construction order book of R11,3 billion, Aveng is well placed to continue
building sustainable value for all stakeholders. Ebit margins are moving up and
will move closer to our medium term target of 6% during the next year.
Dividend declaration 2006
Dividend No. 7 of 38,0 cents per share, being the total dividend in respect of
the financial year ended 30 June 2006 (2005: 23,0 cents per share) has been
declared payable to shareowners recorded in the share register at close of
business on Friday, 20 October 2006.
The salient dates are:
Last date to trade shares cum dividend Friday, 13 October 2006
Shares trade ex dividend from Monday, 16 October 2006
Record date Friday, 20 October 2006
Payment date Monday, 23 October 2006
No dematerialisation or rematerialisation of shares may take place for the
period from 16 October 2006 to 20 October 2006, both days inclusive.
On Monday, 23 October 2006, the dividend will be electronically transferred to
the bank accounts of all certificated shareowners unless this has not been
requested by or is not available to them. If electronic funds transfer is not
applicable, cheques dated 23 October 2006 will be posted on or about that date.
Transfers will be made to the dematerialised shareowner accounts at their CSDP
or broker on 23 October 2006.
By order of the board
Richard Savage (Chairman)
Carl Grim (Chief Executive)
Dennis Gammie (Director Finance)
Sandton
8 September 2006
Directors: R B Savage* (Chairman), C Grim (Chief Executive), D R Gammie
(Finance), A W B Band*, B P J Fourie, L Gcabashe*, J R Hersov*, V Z Mntambo*, D
G Robinson (Australian), M J D Ruck*, B P Steele* (*Non-executive)
Company secretary: G J Baxter
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
Aveng Limited: Registration number 1944/018119/06. Share code: AEG ISIN
code: ZAE 000018081. Registered office: Block B, 204 Rivonia Road,
Morningside, 2057
www.aveng.co.za
Sponsor
JPMorgan Equities Limited
Date: 11/09/2006 08:00:33 AM Produced by the JSE SENS Department
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