Aveng order book quizzed

Johannesburg - Construction giant Aveng's order book for the new financial year has grown by 18%, bucking the downward trend of its listed peers which have fallen victim to the clutches of a global recession.

During the past week, Murray & Roberts reported its order book at June 30 was 27% lower than the year before, while WBHO's book was down 16%.

Even though Aveng's reported book consists of contracts for two years, compared to 12 months for its competitors, CEO Roger Jardine on Wednesday said 80% of the R30.4bn book will have been realised by end-June 2010.

This came as a surprise to analysts.

Imara SP Reid analyst Stephen Meintjes said the improved order book came in spite of R12bn's tender cancellations and delays in the year to end-June.

"This shows that despite the tight environment, the group maintained its ability to secure new projects," he said.

However, Cannon Asset Managers chief investment officer Adrian Saville said the order book's quality has to be questioned.

"An 18% increase is meaningful, and it's quite a large gain of contracts over Aveng's peers," Saville said.

"But one has to ask whether business is being written to develop the order book which might compromise margins."

Jardine said the order book consists mainly of contracts such as the Trekopje desalination plant in Namibia and other similar plants in Australia, as well as contracts for government, mines, shopping malls and roads.

For the year to end-June 2009, Aveng's revenue grew 14% to R33.7bn, operating profit fell 13% to R2.13bn and profit for the period was 9% lower at R2.1bn. The company's operating margin declined to 6.3% from 8.2% in 2008.

Headline earnings per share pulled back 11% to 477.6c and Aveng declared a dividend of 145c per share.

During late morning trade on Wednesday, Aveng traded 2.22% higher at 3 910c/share.

- Fin24.com