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Johannesburg - Construction group Aveng [JSE:AEG] on Monday
reported a 35% drop in its diluted earnings per share, after difficult trading
conditions in South Africa and project challenges in Australia pulled earnings
lower.
The company reported diluted headline earnings of 286.6
cents per share for the 12 months to end-June 2011, compared to diluted
headline earnings of 444.4c/share a year ago.
Profit for the year declined 37% to R1.17bn from R1.87bn the
year before as the settlement of administrative penalties in Competition
Commission matters impacted on earnings.
The company, however, maintained its dividend at 145c/share.
Revenue of R34.3bn was in line with the previous year, but
operating profit fell by 29.0% to R1.5bn resulting in an operating profit
margin of 4.3% for the year, compared to 6.2% in 2010.
This company said this decline was attributable to the
generally difficult trading environment, the impact of delays on a number of
contracts on profit recognition, rand strength 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 R347m.
Cash generated by operations was down by 24% to R2.4bn as a
result of the lower profitability.
Nonetheless, the company said its order book was at a record
high of R37.0bn and the balance sheet remains robust.
The national planning commission 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 company said.
The group's two-year South African construction and
engineering order book is now weighted 80:20 in favour of the private sector,
despite that sector not materially lifting its 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," the company said.
Looking ahead, the group said it anticipated that
infrastructure investment by the public sector over the next two years would
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, it said.
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.
But the group said it expected a difficult trading environment in the coming year.
Aveng's main rival Murray & Roberts Holdings [JSE:MUR] said last week that it had sunk to a full-year loss after making provisions for contract completion costs and possible regulatory penalties.
Aveng's shares have fallen precipitously this year, shedding nearly a quarter of their value, but they have slightly outperformed the sector index which is down 29%.
