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AEG - Aveng Group - Audited group results for the 12 months ended 30 June 2011
AVENG LIMITED
Incorporated in the Republic of South Africa
Registration number 1944/018119/06
Share code: AEG
ISIN code: ZAE000111829
Aveng Group
Leaders in infrastructure development
Audited group results for the 12 months ended 30 June 2011
Headline earnings down by 36,9%
Dividend maintained at 145 cents per share
Order book grew by 19% to R37,0 billion
Net cash position remains strong at R5,4 billion
Consolidated statement of financial position
at 30 June 2011 2011 2010
Audited Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 6 021 5 146
Goodwill and other intangibles 1 481 1 085
Investments 223 211
Deferred tax 1 019 982
8 744 7 424
Current assets
Inventories 2 066 2 027
Trade and other receivables 8 132 6 863
Cash and cash equivalents 5 611 7 828
15 809 16 718
TOTAL ASSETS 24 553 24 142
EQUITY AND LIABILITIES
Capital and reserves
Equity attributable to ordinary shareholders of 12 918 12 215
Aveng
Non-controlling interests (3) 5
Total equity 12 915 12 220
Non-current liabilities
Borrowings 48 28
Deferred tax 832 655
880 683
Current liabilities
Trade and other payables 10 348 10 720
Borrowings 246 339
Taxation payable 164 180
10 758 11 239
TOTAL EQUITY AND LIABILITIES 24 553 24 142
Consolidated statement of comprehensive income
for the year ended 30 June 2011 2011 2010
Audited Audited %
Rm Rm change
Revenue 34 324 33 981 1
Operating profit before depreciation 2 615 3 171
and amortisation
Depreciation 1 101 1 063
Amortisation of intangibles 24 17
Operating profit before non-trading 1 490 2 091 (29)
items
Non-trading items (14) (13)
Operating profit 1 476 2 078 (29)
Share of profits and losses from (7) 61
associates and joint ventures
Income from investments 347 472
Operating income 1 816 2 611
Finance cost 59 17
Profit before taxation 1 757 2 594
Taxation 584 722
Profit for the year 1 173 1 872
Other comprehensive income for the year
Exchange differences on translation of 209 1
foreign operations
Total comprehensive income for the year 1 382 1 873
Profit for the year attributable to:
Equity holders of Aveng Limited 1 177 1 873
Non-controlling interests (4) (1)
Profit for the year 1 173 1 872
Total comprehensive income attributable
to:
Equity holders of Aveng Limited 1 386 1 874
Non-controlling interests (4) (1)
1 382 1 873
Determination of headline earnings
Profit attributable to equity holders 1 177 1 873
of Aveng Limited
Non-trading items net of taxation 14 13
Headline earnings 1 191 1 886 (37)
Consolidated statement of cash flows
for the year ended 30 June 2011 2011 2010
Audited Audited
Rm Rm
Cash retained from operating activities
Cash retained from operations 1 476 2 078
Depreciation and amortisation 1 125 1 079
Non-cash items (171) 41
Cash generated by operations 2 430 3 198
Income from investments 347 472
Increase in working capital (1 873) (1 026)
Cash generated by operating activities 904 2 644
Finance cost (59) (17)
Taxation paid (455) (834)
Cash available from operating activities 390 1 793
Dividend paid (565) (579)
(175) 1 214
Investing activities
Property, plant and equipment purchased - (1 140) (926)
expansion
- replacement (678) (253)
Investment in associate companies 15 47
Proceeds on disposal of property, plant and 88 62
equipment
Purchase of subsidiaries (285) (23)
Purchase of other investments (82)
(2 000) (1 175)
Financing activities
Long-term borrowings repaid (254) (90)
Shares repurchased (117)
(371) (90)
Net decrease in cash and cash equivalents (2 546) (51)
Cash and cash equivalents at beginning of year 7 631 7 601
Foreign currency translation reserve movement 315 81
Cash and cash equivalents at beginning of year 7 945 7 682
Cash and cash equivalents at end of year 5 400 7 631
Segmental information
for the year ended 30 June 2011 2011 2010
Audited Audited
Rm % Rm %
Operational segmentation
Revenue
Construction and Engineering South 9 575 28 10 782 32
Africa and Africa
Construction and Engineering 13 281 39 12 981 38
Australasia and Pacific
Open cast mining 3 656 11 3 261 10
Manufacturing and Processing 7 807 23 6 937 20
Administration 5 20
34 324 100 33 981 100
Operating profit
Construction and Engineering South 443 30 673 32
Africa and Africa
Construction and Engineering 291 20 595 29
Australasia and Pacific
Open cast mining 414 28 365 18
Manufacturing and Processing 321 22 458 22
Administration 7 (13) -1
1 476 100 2 078 100
Assets
Construction and Engineering South 3 904 22 3 742 25
Africa and Africa
Construction and Engineering 4 532 26 3 485 23
Australasia and Pacific
Open cast mining 3 035 17 2 786 18
Manufacturing and Processing 5 740 32 5 044 33
Administration 489 3 65
17 700 100 15 122 100
Current liabilities
Construction and Engineering South 2 770 27 4 498 42
Africa and Africa
Construction and Engineering 4 446 43 3 845 36
Australasia and Pacific
Open cast mining 1 075 10 995 9
Manufacturing and Processing 1 487 14 1 253 12
Administration 570 6 129 1
10 348 100 10 720 100
Capital expenditure
Construction and Engineering South 232 13 255 21
Africa and Africa
Construction and Engineering 473 26 343 29
Australasia and Pacific
Open cast mining 711 39 213 18
Manufacturing and Processing 438 24 280 24
Administration (36) (2) 87 7
1 818 100 1 178 100
Depreciation
Construction and Engineering South 170 15 137 13
Africa and Africa
Construction and Engineering 320 29 359 34
Australasia and Pacific
Open cast mining 468 43 436 41
Manufacturing and Processing 123 11 114 11
Administration 20 2 17 2
1 101 100 1 063 100
Geographical segmentation
Revenue
Republic of South Africa 17 503 51 18 001 53
Rest of Africa and Mauritius 3 415 10 2 973 9
Australasia and Pacific islands 10 656 31 10 720 32
South East Asia 2 680 8 2 271 7
Middle East and other 70 16
34 324 100 33 981 100
Assets
Republic of South Africa 10 833 61 9 763 65
Rest of Africa and Mauritius 2 294 13 1 867 12
A and Pacific islands 3 537 20 2 569 17
South East Asia 1 013 6 923 6
Middle East and other 23
17 700 100 15 122 100
Capital expenditure
Republic of South Africa 967 53 750 64
Rest of Africa and Mauritius 378 21 86 7
A and Pacific islands 452 25 343 29
South East Asia 21 1 (1)
Middle East and other
1 818 100 1 178 100
Consolidated statement of changes in equity
Attributable to equity holders
of Aveng Limited
Non-distributable
reserves
Foreign Other non-
Share Share currency distributable
capital Premium translation reserves
Rm Rm Rm Rm
Balance at 1 July 20 1 981 (188) 63
2009
Profit for the year
Other comprehensive 43 1
income/(loss)
Total comprehensive 43 1
income
Dividends paid
Acquisition of non-
controlling
interest
Transfers 5
Balance at 1 July 20 1 981 (145) 69
2010
Profit for the year
Other comprehensive 207 2
income/(loss)
Total comprehensive 207 2
income
Dividends paid
Acquisition of non-
controlling
interest
Share repurchase * (117)
programme
Transfers 2
Balance at 30 June 20 1 864 62 73
2011
*Amounts less than R1 million.
Consolidated statement of changes in equity (continued)
Attributable to equity holders
of Aveng Limited
Non-
Retained controlling Total
income Total interest equity
Rm Rm Rm Rm
Balance at 1 July 8 990 10 865 21 10 886
2009
Profit for the year 1 873 1 873 (1) 1 872
Other comprehensive 44 44
income
Total comprehensive 1 873 1 917 (1) 1 916
income/(loss)
Dividends paid (567) (567) (13) (580)
Acquisition of non- (2) (2)
controlling interest
Transfers (5)
Balance at 1 July 10 291 12 215 5 12 220
2010
Profit for the year 1 177 1 177 (4 ) 1 173
Other comprehensive 209 209
income
Total comprehensive 1 177 1 386 (4) 1 382
income/(loss)
Dividends paid (565) (565) * (565)
Acquisition of non- (4) (4)
controlling interest
Share repurchase (117) (117)
programme
Transfers (2)
Balance at 30 June 10 901 12 919 (3) 12 916
2011
*Amounts less than R1 million.
Other group information
2011 2010
Audited Audited %
Rm Rm change
Non-trading items:
Net loss on disposal of properties, 1
plant and equipment
Impairment of goodwill (13)
Impairment of investments (15)
Loss on non-trading items (14) (13)
Goodwill and other intangibles
At beginning of year 1 086 1 093
Acquired in business combination 382 29
Amortisation of intangibles (24) (17)
Impairment of goodwill (13)
Foreign exchange movements 38 (6)
Total goodwill and other intangibles 1 481 1 086
EARNINGS PER SHARE (cents)
Earnings 302,9 480,3 (37)
Headline earnings 306,4 483,6 (37)
Diluted earnings 283,3 441,3 (36)
Diluted headline earnings 286,6 444,4 (35)
DIVIDEND PER SHARE 145,0 145,0
Number of shares (millions)
In issue 393 396
Weighted average 389 390
Diluted weighted average 416 424
NOTES
Accounting policies
These results have been compiled in accordance with IAS 34 (Interim financial
reporting). The presentation of these results also conform to the Listings
Requirements of the JSE Limited and the South African Companies Act, 2008. The
accounting policies used in the preparation of the results are consistent in all
material respects with the prior year. New, revised and adopted standards as
effective for the current year, had no impact on the financial position and the
financial results.
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 preparation of the financial statements requires management to make
judgments, estimates and assumptions that affect the reported amounts in the
financial statements. Management continually evaluates its judgments and
estimates in relation to assets, liabilities, contingent liabilities, revenue
and expenses. Management bases its judgments and estimates on historical
experience and on other various factors, including expectations of future events
that may have an impact on the Group. All judgments, estimates and assumptions
made are believed to be reasonable based on the most current set of
circumstances available to management, the result of which form the basis of the
carrying values of assets and liabilities that are not readily apparent from
other sources. Revisions to estimates are recognised in the period in which the
estimate is revised.
Preparation of financial statements
These condensed consolidated financial statements have been prepared under the
supervision of HJ Verster, Director Finance.
OVERVIEW
The Aveng Group`s commitment to safety and ensuring that "Home
without harm, everyone, everyday" becomes a reality is reflected in the
recordable injury frequency rate, which decreased from 1.30 to 1.22, a 6%
improvement in the period under review. Regrettably, our operations recorded
eight fatalities, four of which were subcontractors. Our stated objective is
zero fatalities and we will continue to strengthen our on-site safety training
activities and sub-contractor safety protocols to achieve this goal.
Difficult trading conditions in the South African construction and
infrastructure environment, project execution challenges in Australia and the
settlement of administrative penalties in respect of Competition Commission
matters resulted in a very challenging year for the group. As a result, earnings
declined by 37% to R1.2 billion. Nonetheless, the order book is at a record high
of R37.0 billion and the balance sheet remains robust.
The National Planning Commission of South Africa has indicated that public
sector infrastructure spending has declined by 30% since 2008. This is
concerning in light of South Africa being the Aveng Group`s largest earnings
contributor. The group`s two year South African Construction and Engineering
order book is now weighted 80:20 in favor of the private sector, despite that
sector not materially lifting it`s spending.
The group`s South African Construction and Engineering segment experienced a
poor year. Lower turnover and delays on some major projects resulted in a
sharply reduced operating profit. In light of the current market conditions and
pressure on operating
margins, the South African Construction and Engineering segment remains focused
on profitable order book growth, robust cost management and internal efficiency
improvements.
Construction and Engineering: Australasia and the Pacific Rim`s McConnell Dowell
(MacDow) operated in a very competitive market. This was despite large private
sector investments in the mining and gas sectors. Massive flooding in Australia
impacted on the Australian government`s infrastructure development plans, with
the focus shifting to immediate flood relief projects. The floods caused delays
on a number of MacDow`s large projects. Although the order book increased
substantially over the year, profitability declined due to project losses, a
strong currency and provisions taken on some technically challenging contracts.
The Manufacturing and Processing segment recorded higher revenue for the year,
mostly as a result of the acquisition of Dynamic Fluid Control (Pty) Limited and
a recovery in steel volumes, particularly in the second half of the financial
year. However, steel price volatility, increased competition due to
the constrained infrastructure environment, and the settlement of a Competition
Commission administrative penalty placed pressure on overall operating
performance.
Although Aveng Moolmans won a number of new contracts, the impact of a strong
Rand and two difficult contracts adversely affected its operating performance.
The successful settlement of the Marikana dispute resulted in R87.5 million
being included in the current year`s results.
FINANCIAL REVIEW
Revenue of R34.3 billion was in line with the previous year. However, operating
profit decreased by 29.0% to R1.5 billion resulting in an operating profit
margin of 4.3% for the year, compared to 6.2% in 2010. This decline was
attributable to the generally difficult trading environment, the impact of
delays on a number of contracts on profit recognition, the strength of the Rand
and the Competition Commission`s administrative penalty payable by Aveng
Manufacturing. Due to the prevailing interest rate environment and lower cash
balances, the Aveng Group`s net income from investments reduced by 26.5% to R347
million.
Cash generated by operations was down by 24% to R2.4 billion as a result of the
lower profitability. Capital expenditure of R1.8 billion (2010: R1.2 billion)
and acquisitions of R 285 million together with a large working capital
investment in current projects resulted in a reduction in cash and cash
equivalents from R7.6 billion to R5.4 billion in 2011.
Capital expenditure of R1,8bn comprised of R1.1 billion in expanding the group`s
current capability and R700 million on replacement items. Aveng Moolmans spent
R711 million to maintain equipment and to equip two new projects, namely
Chimiwungo in Zambia and Star & Comet in Tanzania. MacDow invested R473 million
to gear-up for large new contracts including the Queensland Curtis LNG (QCLNG)
pipeline, the Vector maintenance contract in New Zealand and the Komo Airfield
project in Papua New Guinea. Aveng Trident Steel invested R160 million in a
Schuler blanking press to service the automotive industry.
The effective tax rate increased to 33.2% (2010: 27.8%) as a result of the
payment of secondary tax on companies (STC) of R57 million, non-deductible
expenses mainly relating to the Competition Commission penalty and a foreign tax
rate differential of 2.7%.
Headline earnings declined by 37% from R1.9 billion to R1.2 billion, translating
into headline earnings per share of 306.4 cents (2010: 483.6 cents). The number
of shares in issue has reduced by 3 million to 393 million. The 30 June 2011
revaluation of contingently issuable shares in respect of the Qakazana
empowerment transaction and shares repurchases, resulted in the diluted weighted
average number of shares in issue reducing by 9 million to 416 million.
OPERATIONAL REVIEW
CONSTRUCTION AND ENGINEERING
The Construction and Engineering segment comprises Aveng Grinaker-LTA, Aveng
E+PC, Aveng Water and MacDow. Difficult operating conditions and project
execution challenges resulted in a revenue decline of 3.8% to R22.9 billion and
an operating profit margin of 3.2% (5.3% in 2010).
Aveng Grinaker-LTA`s operating performance was affected by the slowdown in
infrastructure spend and project commencement dates being delayed on certain
projects. Accordingly, overall revenue for the business decreased by 11.5% to
R8.9 billion. Double digit revenue growth recorded by the Mechanical and
Electrical divisions and Mining Services was offset by lower revenue within
Building, Civil Engineering and Earthworks Engineering.
Profitability for the period was impacted by unresolved project claims and
variations within the Civil Engineering and Mechanical & Electrical divisions as
well as problematic contracts in Mining Services.
Building was affected by lower industry margins driven by competitive pressures,
limited work availability and delays in the awarding of projects by the public
sector. Margins remain under intense pressure as the industry competes fiercely
for available work.
Civil Engineering is a joint venture partner on Eskom`s Medupi power station
which has started to progress well following a slow start. The terms and
complexity of the contract have resulted in numerous claims and additional
entitlements. These are currently under discussion with the client and have
caused delays in profit recognition. This division is also involved in the
construction of Eskom`s Medupi and Kusile multi-flue chimneys. These projects
are performing in accordance with expectations.
Mining`s performance was impacted by two loss making projects in South Africa
which are now on track. Aveng Grinaker-LTA: Mining is now one of four recognised
deep level shaft sinkers, having recently executed a deep level shaft project at
Konkola copper mine in Zambia.
Mechanical & Electrical focused its efforts on opportunities within the oil and
gas industries and sub-contracted steel fabrication projects for the Medupi and
Kusile power plants currently under construction. Unresolved claims against the
contractor on these projects impacted adversely on both the profitability and
liquidity of this division. The group is currently engaged in a contractually
provided dispute resolution process with a view to a timely resolution of these
claims.
Earthworks Engineering successfully led the group`s participation on the Gauteng
Freeway Improvement Project. Revenue has been affected by increased market
competition in the road sector as well as delayed and cancelled projects in the
mining sector.
During 2011 Aveng E+PC was restructured into Aveng E+PC and Aveng Water. Aveng
Water will focus on growing the group`s position in acid mine drainage and
desalination water treatment solutions. The new business unit delivered
Gauteng`s first modular water treatment plant and executed an acid mine drainage
project in Australia. The division also extended its operations and management
contracts at the Erongo Desalination Plant and eMalahleni water treatment
facility. Aveng E+PC looked to the SADC region for mineral processing projects,
securing a project in Mozambique (Moma Sands) and re-establishing its presence
in Zambia with Ndola Lime. The business unit is also well positioned to
participate in the local renewable energy market.
MacDow grew revenue by 2.3% to R13.3 billion. Margins were impacted by the
strong Australian dollar, project delays caused by weather and some loss making
projects. Consequently operating profit decreased by 51.1% to R291 million for
the period. The impact of the project delays on profit recognition and a
conservative approach to provisioning on some challenging contracts in Australia
offset a very good performance from MacDow`s offshore operations.
Although the Adelaide desalination project in southern Australia produced its
first desalinated water from the initial facility, the project has been subject
to completion delays due to inclement weather and geotechnical and design
issues, resulting in a material loss for the year.
The Pinkenba malting facility in Queensland Australia was affected by numerous
design issues, cost overruns and scope changes, leading to substantial project
losses.
Progress on the Komo Airport in Papua New Guinea and the QCLNG pipeline and
marine crossing in Queensland were subject to significant delays due to lack of
access and weather. Consequently, no profit has been recognised to date on these
two projects.
MacDow is well placed to benefit from the surge in mining and gas related
infrastructure investment in Australia. The operating group closed the year with
a record R18.9 billion of work on hand, having won significant infrastructure
projects in Queensland and Western Australia. The increasing strategic focus on
Public Private Partnerships resulted in a Macdow consortium being awarded the
Gold Coast Light Rail PPP, which includes design and construction work as well
as a minority equity position.
OPEN CAST MINING
Aveng Moolmans increased revenue by 12.1% to R3.7 billion. Operating profit
increased to R414 million, inclusive of the Marikana settlement of R87.5
million. Two difficult contracts offset a much improved South African
performance, whilst the strength of the Rand continued to adversely impact the
conversion of foreign earnings. Aveng Moolmans currently operates in eight
different countries in Africa and has secured new contracts at the Chimiwungo
Mine in Zambia and the Star & Comet Pit in Tanzania. The business unit`s order
book of approximately R10 billion, together with its geographical
diversification, places this business in a strong position for the future.
MANUFACTURING AND PROCESSING
Revenue at Aveng Manufacturing and Processing (which comprises Aveng
Manufacturing and Aveng Trident Steel) increased by 12.5% to R7.8 billion in
2011 following the acquisition of Dynamic Fluid Control (Pty) Limited in October
2010. The infrastructure market was soft domestically and this was compounded by
erratic steel supplies and price volatility which continued to constrain
margins. The provision for an administrative penalty of R129 million in respect
of Competition Commission matters also compounded the challenges to the
operating performance of this segment. Operating profit declined by 29.9% to
R321 million net of the settlement referred to above.
Aveng Manufacturing`s revenue growth of 8.5% to R2.7 billion was driven by the
inclusion of the results of Dynamic Fluid Control (Pty) Limited and a solid
performance by the rail businesses in the public and private sectors. This
business comprises five
units, which offer various services in the value chain. Performance for the
period was as follows:
Aveng
Manufacturing: Duraset improved revenue by 6.1% due to better performance in all
the business areas with the exception of mining support and geotechnical
products.
Aveng Manufacturing: Infraset. Despite the 6.4% decline in revenue, this
business unit performed well under the prevailing market conditions.
Aveng Manufacturing: Lennings Rail Services benefitted from higher
activity levels in the rail sector, having recently been awarded two new
mechanised rail contracts in Mozambique.
Aveng Manufacturing: Steeledale`s performance was negatively affected by lower
demand from the infrastructure sector and the Competition Commission
administrative penalty.
Dynamic Fluid Control (Pty) Limited was acquired with effect 1 October 2010. The
company performed within expectations and did not have a material impact on the
operating profit of the group for the reporting period.
The benefits of implementing various cost reduction and efficiency improvement
initiatives were evident in the second half of the year. Going forward, this
business segment is anticipated to show continued growth stemming from an
internal restructuring exercise and growth initiatives.
Mill supply concerns and steel price volatility constrained Aveng Trident
Steel`s profit performance despite recovering market demand during the latter
part of the year. Revenue increased by 14.8% to R5.1 billion supported by 19%
higher volumes year-on-year. The volume impact was partially offset by average
price reductions of 5%. The operating profit performance was much improved and
increased by 28.8%, although off a low base. The new leadership team at Aveng.
Trident Steel is focused on strengthening the positioning of the business as the
premier steel processing and merchanting service provider in the market.
The business will benefit from the installation and refitting of upgraded
packing and handling equipment capability at the Roodekop facility and the
purchase of a Schuler blanking press line, which is expected to result in cost
benefits and increased volumes for the local automotive manufacturing industry.
STRATEGY REVIEW
The Aveng Group continues to consolidate its leadership position in the
infrastructure value chain in all the markets in which it operates. This focus
is reflected in the 19% growth in the two year order book to R37.0 billion. The
group has continued to expand its footprint in high growth developing
territories as well as industries in the infrastructure value chain that show
potential such as power, water, transport and mining. Aveng Water was created
during the year and will focus on the growth and development of the group`s
water treatment capabilities. The acquisition of leading water and mining valve
manufacturer Dynamic Fluid Control (Pty) Limited during the year also opens up
new opportunities for the group.
The power sector has been identified as a strategic focus for the group. During
2011 the Aveng Group was involved in construction work at Eskom`s Medupi and
Kusile power stations and the Te Mihi Geothermal power station in New Zealand,
as well as the development of renewable energy projects. The group has invested
in capabilities to deliver renewable energy to the South African power grid and
is well positioned for the bidding process recently announced by the South
African government. Through MacDow`s Electrix business, the Aveng Group is also
positioning itself as a leading player in the power maintenance and services
sector in New
Zealand and Australia.
The group remains focused on improving its operational efficiencies and managing
costs.
Initiatives implemented include re-organising some business units,
rationalising factories and a greater focus on group procurement.
The management team was enhanced during the year with the following
appointments: Kobus Verster took up the position of
Financial Director; Hercu Aucamp joined as MD of Aveng Trident Steel, Khungeka
Njobe became the founding MD of Aveng Water and with effect from 1 August
Grahame McCaig became the MD of Aveng Grinaker-LTA.
COMPETITION COMMISSION MATTERS
In early 2009, the Competition Commission announced that it was investigating
the construction industry. Prior to that, Aveng had already embarked on a
thorough internal compliance investigation, with the assistance of external
advisors, aimed at uncovering any and all evidence of anti-competitive conduct.
These internal investigations have led to a number of leniency applications in
terms of which Aveng Group has been granted immunity from prosecution in return
for its cooperation with the Competition Commission as well as the conclusion of
settlements in respect of certain conduct by Aveng Manufacturing`s Infraset,
Steeledale and Duraset divisions.
On 1 February 2011, the Commission published details of a "Fast Track Settlement
Process" inviting construction firms to come forward with information pertaining
to any collusive conduct in which they have been involved. In return, the
Competition Commission has undertaken to engage in comprehensive settlement
negotiations with such firms on financially advantageous terms.
To this end, the group submitted a comprehensive application to the Competition
Commission in terms of its Fast Track Settlement Process.
We anticipate that through constructive engagement and continued cooperation
with the Competition Commission, we will reach an acceptable settlement. At this
stage it is premature to speculate on the quantum of any settlement and
accordingly no provision has been recognised in the results for the 2011 year.
The Aveng Group recognises that a speedy and comprehensive resolution of the
allegations against it is a necessary step in moving forward as a fully
competitive and valued contributor to the national economy.
EMPOWERMENT TRANSACTION
The board is pleased to advise that it has successfully concluded negotiations
with the Kagiso Tiso Holdings group which, subject to shareholder and regulatory
approval where required, will facilitate an extension of the current empowerment
relationship, which has been of significance to both parties, to 2014. Details
pertaining to this transaction will be contained in the notice to the Annual
General meeting.
BOARD OF DIRECTORS
Mr. Vincent Mntambo retired from the board on 22 October 2010 having served for
three terms. The board thanks Mr. Mntambo for his contribution to the group
during his tenure. During the period under review, Ms. Thoko Mokgosi-Mwantembe
and Mr. Peter Erasmus were appointed as independent non-executive directors. Mr.
Kobus
Verster, the Financial Director, also joined the board as an executive director.
OUTLOOK AND PROSPECTS
The Aveng Group anticipates that infrastructure investment by the public sector
over the next two years will remain under pressure given the current environment
of global economic uncertainty. Private sector growth will continue to be driven
primarily by the demand for commodities and energy fuelled largely by China. The
Australian infrastructure market continues to maintain its resilience in the
global economic slowdown, supported by its ongoing growth in both public and
private sector spend.
The 19% growth in the two year order book to R37 billion reflects a favourable
outlook for the Aveng`s construction businesses with the two year order books of
Aveng Grinaker-LTA and MacDow having increased by 8.5% and 18% respectively. The
total project opportunity pipeline remains stable at R112 billion.
Steel price volatility and supply constraints are anticipated as a result of
production difficulties at the domestic steel suppliers and will continue to
present challenges for our Manufacturing and Processing segment. The group will
remain focused on driving efficiency improvements, reducing costs and providing
higher value added products and services for its customers during this period
and anticipate an improved performance from this operating group in the short to
medium term.
Through the renewal of existing contracts and a strong commodity market, Aveng
Moolmans was able to increase its order book to approximately R10 billion and,
having completed its problematic projects, is well placed to deliver a much
improved performance. The division`s outlook is strongly tied to the fortunes of
the increasing demand in a wide range of commodities and the growing market
segments on the African continent.
The Aveng Group has a well balanced portfolio, geographic diversity and multi-
disciplinary capabilities across the infrastructure value chain. All group
operations have been focused on business improvement initiatives during the
year, which should have a favourable impact in the new year. Together with the
completion of some challenging projects and a solid order book, these should
position the group well in, what we believe, will remain a difficult trading
environment.
DECLARATION OF DIVIDEND
The Groups dividend practice remains to declare 25% of headline earnings as an
annual dividend. After consideration of the group`s cash and working capital
requirements and order book, the Board declared a final dividend of 145 cents
per share in respect of the financial year ended 30 June 2011 which constitutes
a dividend payment ratio of 47% of the groups headline earnings per share for
the period.
Detail pertaining to the dividend payment is as follows:
Dividend number: 13
SA cents per share: 145
Last Date to Trade Cum Div: Friday, 7 October 2011
Trading ex div commences: Monday, 10 October 2011
Record date to receive dividends: Friday, 14 October 2011
Payment date: Monday, 17 October 2011
(Shares may not be dematerialised/rematerialised from Monday, 10 October 2011
and Friday, 14 October 2011, both days included).
By order of the board
AWB Band WR Jardine HJ Verster
(Chairman) (Chief Executive) (Financial Director)
05 September 2011
DISCLAIMER
This commentary contains forward looking statements about the company`s
operations and financial conditions. They are based on Aveng Limited`s best
estimates and information at the time of writing. They are nonetheless subject
to significant uncertainties and contingencies many of which are beyond the
control of the company. Unanticipated events will occur and actual future events
may differ materially from current expectations due to new business
opportunities, changes in priorities by the company or its joint ventures as
well as other factors. Any of these factors may materially affect the company`s
future business activities and its on-going results.
DIRECTORS
AWB Band*# (Chairman), WR Jardine (Chief Executive Officer),
HJ Verster (Financial Director), JJA Mashaba, DG Robinson (Australian), P
Erasmus*#, MA Hermanus*#, RL Hogben*#, TM Mokgosi-Mwantembe*#, MJD Ruck*#, KC
Rumble*#, NL Sowazi*, PK Ward*#
(*non-executive) (#independent)
COMPANY SECRETARY
K Robinson
AVENG LIMITED
Incorporated in the Republic of South Africa
Registration number 1944/018119/06
Share code: AEG
ISIN code: ZAE000111829
REGISTERED OFFICE
204 Rivonia Road, Morningside, Sandton, 2057
REGISTRARS
Computershare Investor Services (Pty) Limited
(Registration number 2000/006082/06)
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
www.aveng.co.za
Date: 05/09/2011 07:30:01 Supplied by www.sharenet.co.za
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