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Johannesburg - Some investors in construction group Aveng were disappointed by the group's final dividend of 145 cents per share announced on Wednesday, arguing its strong cash position could have been used to increase the dividend.
The dividend was the same as that at the end of the 2008 financial year.
"Management is sitting on a lot of cash and don't seem to have a plan on whether to buy something or give it back to shareholders," said one analyst. Cash and cash equivalents at end of the 2009 financial year stood at R7.6bn, down 17% from the previous year.
Cannon Asset Managers chief investment officer, Adrian Saville, said: "Yes, they maintained their dividend, but having said that, it was maintained against an earnings decline [diluted headline earnings per share] from 535c to 477c. So, it really is positive."
Saville said Aveng's peers had "meaningful cash power" like Wilson Bayly Holmes-Ovcon (R4bn), Group Five (R3bn) and Murray & Roberts (R5.5bn).
"But in the case of Aveng, one could argue it had a cash surplus in relation to its needs. It's disappointing that it didn't increase its dividend declared or declare another special dividend," said Saville. "I think it could have comfortably declared a special dividend in the same region of the ordinary dividend."
Explaining why the group didn't declare a special dividend and why it was holding such a strong cash position, CEO Roger Jardine said: "In this sort of market, we're not out of the woods yet. Liquidity is tight and a strong balance sheet is important. The strong cash balance is going to help us take on very big projects."
Jardine, however, said the group was pursuing no acquisitions at the moment.
For the year to end-June, revenue grew 14% to R33.7bn, operating profit fell 13% to R2.13bn and profit for the period was 9% lower at R2.1bn. Its operating margin declined from 8.2% in 2008 to 6.3%.
Headline earnings per share pulled back 11% to 477.6 cents.
Shortly before noon on Wednesday, Aveng's share price was 2.72% higher at 3 929 cents. At the same time, the JSE's All-Share index was down 0.62% and the Industrial 25 index was 0.41% lower.
- Fin24.com
