Aveng, South Africa’s biggest construction and engineering company, is considering a major acquisition, which would be funded from the proceeds of its R6.8 billion sale of its shareholding in Holcim South Africa.
But Aveng expressed confidence yesterday that it would be able to return R3.5 billion of capital to shareholders in the short term, and R5 billion if its assessments of prospects in the construction industry did not result in significant incremental capital requirements.
The company proposes to return the R3.5 billion to shareholders through a voluntary share buy-back. It said the total amount of capital to be returned depended on organic and acquisitive growth prospects as well as the company’s balance sheet capacity.
Chief executive Carl Grim said yesterday that the acquisition Aveng was looking at would require a significant amount of money. The time it took to finalise depended on “the other party and a whole host of things – and we might not do it”. It hoped to make significant progress this year.
“Whether we can agree on a price is another issue. In principle, there is a very strong fit with Aveng,” said Grim.
Aveng reported yesterday that diluted headline earnings a share improved 100 percent to R2.896 in the year to June. Revenue grew 38 percent to R22.1 billion as the group benefited from the boom in all areas of domestic and international construction. Operating profit increased to R7.4 billion from R613 million.
A dividend of 85c a share was declared, more than double last year’s 38c.
Steve Meintjes, an analyst at Imara SP Reid, said Aveng’s results were “a little” better than market expectations.
The engineering and construction cluster, comprising opencast mining specialist Moolmans, engineering unit E+PC and construction-focused Grinaker-LTA, was profitable for the first time in three years, growing revenue 27 percent to R9.5 billion.
Grim said this cluster contributed 43 percent of group revenue and reported operating profit of R175 million, compared with a loss of R5 million in the previous year.
The two-year construction order book grew 70 percent to R19.1 billion at the end of June.
Grim said all operations were now trading profitably. Group operating margins were at the top end of the short-term range at 5.9 percent. The task for the year ahead was to continue to lift margins towards the medium-term target of 8 percent and to identify strategic growth opportunities.