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AEG
AEG
AEG -Aveng - Unaudited Interim Results for the six months ended 31 December 2006
Aveng Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000018081
Share Code: AEG
("Aveng")
THE AVENG GROUP
UNAUDITED INTERIM RESULTS
for the six months ended 31 December 2006
Operating Profit up 197%
Operating Cash Flow R712 million
Diluted Headline Earnings per Share up 114%
Order Book R15,6 billion
CONSOLIDATED BALANCE SHEET
31 December 31 December 30 June
2006 2005 2006
Rm Restated
ASSETS
Non-current assets
Property, plant and equipment 2 268 1 852 2 083
Goodwill and other intangibles 760 755 760
Investments 539 651 472
Deferred taxation 280 193 276
Current assets
Inventories 1 556 1 326 1 374
Trade and other receivables 2 637 2 676 3 464
Cash and cash equivalents 2 004 1 197 1 585
Total assets 10 044 8 650 10 014
EQUITY AND LIABILITIES
Ordinary shareholders` funds 3 900 3 102 3 521
Minority interests 5 5 4
Non-current liabilities
Long-term interest bearing 1 242 1 206 1 252
borrowings
Deferred taxation 92 28 63
Current liabilities
Trade and other payables 4 450 3 599 4 573
Short-term interest bearing 271 659 467
borrowings
Taxation 84 51 134
Total equity and liabilities 10 044 8 650 10 014
Net debt to equity ratio (%) (13) 22 4
Net asset value per ordinary 985 783 889
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
2006 2005 2006
Rm Restated
Share capital and share premium 949 949 949
Equity portion of compound 140 140 140
instrument
Balance at beginning of the period 140
Convertible bond conversion 140 140
Non-distributable reserves (281) (394) (357)
Balance at beginning of the period (357) (405) (405)
Foreign currency translation 76 11 18
Other 30
Retained income 3 092 2 407 2 789
Balance at beginning of the period 2 789 2 305 2 305
Profit for the period 451 192 588
Dividends paid (148) (90) (90)
Other transfers (14)
Attributable to equity holders of 3 900 3 102 3 521
the parent
Minority 5 5 4
Balance at beginning of the period 4 9 9
Profit for the period 1 2 2
Foreign currency translation (6) (7)
Shareholder`s funds at the end of 3 905 3 107 3 525
the period
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Rm Restated
Cash retained from operating
activities
Cash retained from operations 463 156 613
Depreciation 196 181 338
Non-cash items 53 11 163
Cash generated by operations 712 348 1 114
Income from investments 41 34 88
Decrease in working capital 522 244 379
Cash generated by operating 1 275 626 1 581
activities
Interest paid (85) (105) (162)
Taxation paid (217) (85) (206)
973 436 1 213
Dividends paid (148) (90) (90)
825 346 1 123
Investing activities
Fixed assets purchased - (235) (82) (406)
expansion
- replacement (177) (157) (355)
Proceeds on disposal - fixed 53 58 205
assets
- investments 10
Investments in associate 158 192 341
companies
(201) 11 (205)
Financing activities
Long-term borrowings repaid (50) (111) (225)
Net increase in cash and cash 574 246 693
equivalents
Cash and cash equivalents at 1 247 554 554
beginning of period
Cash and cash equivalents at end 1 821 800 1 247
of period
Cash and cash equivalents as per 2 004 1 197 1 585
balance sheet
Overdrafts disclosed under short- (183) (397) (338)
term borrowings
Cash and cash equivalents at the 1 821 800 1 247
end of the period
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December % 30 June
2006 2005 change 2006
Rm Restated
Revenue 10 631 7 625 39 16 054
Operating profit before 659 342 93 966
depreciation
Depreciation 196 181 338
Operating profit before
amortisation
and non-trading items 463 161 188 628
Non-trading items (5) (15)
Operating profit 463 156 197 613
Share of profits and
losses
from associates and 225 147 249
joint ventures
Income from investments 41 34 88
Operating Income 729 337 116 950
Interest paid 85 105 162
Profit before taxation 644 232 178 788
Taxation 192 40 198
Profit for the period 452 192 135 590
Attributable to:
Equity holders of Aveng 451 192 588
Limited
Minorities 1 2
Profit for the period 452 192 135 590
Determination of
headline earnings
Profit attributable to
Aveng
equity holders 451 192 588
Surplus on disposal of
properties
and equipment 17
Disposal of investments 4 (2)
loss/(surplus)
Headline earnings 451 196 130 603
EARNINGS PER SHARE
(CENTS)
Earnings 115,9 49,4 135 151,0
Headline 115,9 50,4 130 154,9
Diluted earnings 105,3 48,3 118 141,5
Diluted headline 105,3 49,2 114 144,9
NUMBER OF SHARES
(MILLIONS)
In issue 396,1 396,1 396,1
Weighted average 389,2 389,2 389,2
Diluted weighted average 454,7 454,7 454,7
DIVIDEND PER SHARE Nil Nil 38,0
(CENTS)
SEGMENTAL ANALYSIS
BUSINESS SEGMENTATION
Revenue
Six months Six months Year
ended ended ended
31 31 December 30 June
December
2006 2005 2006
Rm Restated
Construction - South 4 287 3 749 7 498
Africa and Africa
- Australasia and 2 821 1 057 2 956
Pacific
Steel and Allied 3 523 2 819 5 600
10 631 7 625 16 054
Operating
profit
Six months Six months Year
ended ended ended
31 31 December 30 June
December
2006 2005 2006
Rm Restated
Construction - South 33 (95) (125)
Africa and Africa
- Australasia and 114 29 67
Pacific
Steel and Allied 316 222 671
463 156 613
Holcim (South Africa) Six months Six months Year
(Pty) Ltd - (100%) ended ended ended
31 31 December % 30 June
December
Rm 2006 2005 change 2006
Revenue 2 689 2 293 17 4 535
Operating profit 799 605 32 1 156
Assets 2 747 2 020 2 127
Liabilities 999 1 443 625
Capital expenditure 274 222 388
Depreciation 57 60 112
Net Debt to equity ratio 20 13 34
(%)
CAPITAL EXPENDITURE
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Rm Restated
Expansion 235 82 406
Maintenance 177 157 355
412 239 761
Commitments for future capital
expenditure:
Contracted 104 114 157
Authorised, but not contracted for 19 66 110
123 180 267
Significant contingent liabilities
In December 2005 Aquarius Platinum (South Africa) (Pty) Ltd purported to rescind
the Marikana contract with Moolmans on the basis of an alleged
misrepresentation of the weightings in an escalation formula that was
tabled for discussion at the time of tender, late in 2001. It contends that
there was never a valid contract and has issued proceedings out of the High
Court for R963 million for damages. This is being defended, and substantial
counterclaims are being pursued.
Grinaker-LTA Building division entered into a contract in 2001 to build 100
houses in Gabon. The houses were duly built by means of finance provided by
a local financial institution which is now, together with Aveng (Africa)
Limited seeking restitution in the amount of Euro15,5 million (R142
million), due to an alleged default by the government of Gabon. Proceedings
are in progress.
A dispute exists with BHP Billiton over the Minerva project termination.
McConnell Dowell has taken action against BHP Billiton to recover costs.
BHP Billiton has counterclaimed for damages against McConnell Dowell.
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 2006.
31 December 2005 Restatements
IFRS 2 Share-based Payment
The group adopted IFRS 2: Share-based Payment during the 2005 financial
reporting period. The adoption of this statement resulted in a change in
the accounting policy for share-based payments adjusted retrospectively.
The 2005 interim results have been restated for the effect of IFRS 2 which was
processed in the 30 June 2006 audited financial statements.
31 December
2005
Effect Rm
Balance Sheet effect (cumulative)
Distributable reserves Decrease 70
Provision for share-based payment Increase 98
liability
Deferred tax asset Increase 28
Income Statement effect (current year)
Operating expenses Increase 9
Taxation Decrease 3
Impairment of Stockton goodwill within McConnell Dowell
The Stockton goodwill within McConnell Dowell was reviewed for impairment in
2006.
The goodwill was considered to be impaired as at 30 June 2004. The goodwill was,
however, not written down until 2006. This gave rise to a prior year
adjustment which resulted in the goodwill and opening retained income
figure being reduced by R8 million.
COMMENTARY
Financial Review
Revenue grew by 39% to R10,6 billion with all operations experiencing buoyant
trading conditions. Operating profit increased by 197%, profit before tax
by 177% and headline earnings by 130% to R451 million. The operating margin
improved from 2,1% to 4,4% with an annualised return on shareholders equity
of 24,4%.
Given the improved performance of Aveng (Africa) (formally Grinaker-LTA) and
Trident Steel, the empowerment transaction will accrue value which will be
recognised at the year end.
Net asset value per share rose by 26% over the prior year, while cash generated
by operations doubled to R712 million. Net capital expenditure, after
disposals, of R283 million is 144% of the depreciation charge, reflecting
the need to add additional capacity to meet market demand in a number of
our businesses.
The group`s balance sheet continues to strengthen with a December 2006 net cash
position of R491 million compared to net debt of R668 million in December
2005.
Construction
Total construction revenue grew by 48% to R7,1 billion and the operating margin
improved from 0,8% to 2,1% compared to the prior corresponding period.
South African construction, including Grinaker-LTA (construction), Moolmans
(opencast mining) and E+PC, (engineering and projects company), increased
revenue by 14% to R4,3 billion for the period. Operating profit of R33
million equates to an operating profit margin of 0,8%.
This compares to a loss of R95 million in the comparable prior period after
having provided an amount of R105 million in respect of the Marikana
dispute with Aquarius Platinum.
McConnell Dowell increased revenue by 167% to R2,8 billion during the six-month
period, a reflection of the strong Australasian and Pacific markets. The
operating profit was R114 million, well above the comparative R29 million,
with an operating profit margin of 4,0%.
Steel & Allied
The Steel & Allied cluster, consisting of Trident Steel, Aveng Manufacturing
(Steeledale, Infraset, Duraset and Lennings Rail) and the Aveng corporate
office, grew revenue by 25% to R3,5 billion and operating profit to R316
million, reflecting encouraging activity levels in the housing
infrastructure, civil engineering and automotive sectors. An operating
profit margin of 9% compares to 8% in the comparable period.
Cement
Cement continued to benefit from an active housing market, but capacity
constraints have resulted in the need to import. Holcim (South Africa)
(Pty) Ltd, 46% held by Aveng grew revenue by 17% to R2,7 billion and
operating income by 32% to R799 million for the period.
On 2 February 2007 Aveng renewed its cautionary announcement to shareholders
where it noted that the company continued to be involved in discussions
regarding the proposed black economic empowerment transaction in Holcim
(South Africa) (Pty) Ltd.
Prospects
The percentage improvement in the profitability for the first six months of the
year is high as a result of the provision for Marikana made in the previous
year. Consequently the improvement for the full year will not be of the
same magnitude as that achieved in the first half.
The two-year order book at December 2006 has grown substantially to R15,6
billion compared to R11,3 billion six months ago. Approximately two thirds
of this is scheduled for completion in the 12 months. The order book is
150% of the 2006 construction revenue.
Subsequent to this reporting period, the group has been awarded a number of
large contracts including the R1,5 billion Soccer City (Johannesburg) and
the R1,1 billion Nelson Mandela Bay (Port Elizabeth) soccer stadiums.
The South African building and civil engineering markets remain strong and will
result in an improved performance from Grinaker-LTA. The remainder of the
South African operations are expected to perform above current levels.
McConnell Dowell is expected to continue to benefit from strong trading
conditions in its target markets.
Dividend
It is group policy to consider paying a single annual dividend after the 30 June
year end.
For and on behalf of the board
RB Savage (Chairman)
C Grim (Chief executive)
DR Gammie (Director - Finance)
5 March 2007
Directors: RB Savage* (Chairman), AWB Band* (Deputy Chairman), C Grim (Chief
executive), DR Gammie, L Gcabashe*, JR Hersov*, VZ Mntambo*, DG Robinson,
MJD Ruck*, NL Sowazi*, BP Steele*
*Non-executive
Company secretary: G J 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
Registered office: Block B, 204 Rivonia Road, Morningside, Sandton, 2057
www.aveng.co.za
Sponsor: J.P.Morgan Equities Limited
Date: 05/03/2007 08:00:05 Produced by the JSE SENS Department.
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