Presentation of annual results for the year ending June Presented by: Carl Grim Chief executive Dennis Gammie Financial director

Transcription

1 Presentation of annual results for the year ending June 2002 Presented by: Carl Grim Chief executive Dennis Gammie Financial director

2 Year ending June 2002 Revenue up 28% Operating income up 50% Earnings up 35%

3 Geographical revenue : 2002 South Africa & CMA (55%) Australia & SE Asia (27%) Africa & Middle East (18%) R13,2 billion

4 Africa and Middle East

5 Australia and S.E. Asia

6 Aveng : Strategic clusters Construction : order-book-driven Steel & Allied : trading and processing Cement : manufacturing

7 Corporate office AVENG Carl Grim FD Dennis Gammie 100% 100% 46% Operating groups Grinaker-LTA Frank Crowley Dep Howard Jones Trident Steel Ernie Behr Dep Ben Fourie Alpha Mike Doyle Business units 63% McConnell Dowell Corporation David Robinson Civil Engineering Mechanical Engineering Electrical Engineering Pipelines Building Civil & Earthworks Mechanical & Electrical Process Engineering Opencast Mining Properties Infrastructure & Mining Services 30% Trident Service Centres Trident Sterling Tube Trident Midrand Steel Tshipi Steel S A Cement Operations 62.5% Tanga Cement 33% 33% 25% Natal Portland Cement Slagment Ash Resources Strategic clusters : Construction Steel & Allied Cement (Order book driven) (Trading & processing) (Manufacturing)

8 Cluster operating income : R644 million Construction (59%) Steel & Allied (41%) Construction (54%) Steel & Allied (46%)

9 Shareholders by type of fund : 2002 Insurance companies (30%) Pension funds (35%) Foreign shareholding (6,4%) Unit trusts (14%) Other funds (11,5%) Private investors (8%) Employees (1,5%)

10 Did you know? The Sasol Pipeline project has to date delivered pipes, each 18m long, requiring 4000 truck loads to a 450km long trench in the middle of nowhere

11 Financial presentation : Basis of preparation The AFS have been prepared in accordance with SA GAAP Accounting policies are consistent with those of the previous year, except for the implementation of the following statements effective 1 July 2001 Employee benefits (AC 116) Investment properties (AC 135) No effect on the results

12 Equity based compensation The dilutive effect, if any, of outstanding shares and options is recognised in the computation of diluted earnings per share. The group bears the cost of the difference between the option price and the market value of the share when the right to the share or option transfers to the employee. This cost is expensed as an operating expense in the income statement.

13 Financial performance Rm % change Revenue Operating income Net finance costs Tax Earnings Headline earnings

14 Number of shares Millions % change In issue 396,1 356, Weighted 378,6 328, Diluted weighted 392,3 383,4 + 2

15 Share performance (per share) cents % change Diluted - headline earnings 107,3 86, earnings 92,4 71, Headline 111,2 99, Earnings 95,7 81,6 + 17

16 Balance sheet Rm % change Equity Net assets Net interest bearing debt Current assets Current liabilities

17 Borrowings Rm Interest bearing debt - SA - Foreign Total Cash Net Fixed - 1 year to 6 mths Floating % 34% 7% % 32% 8%

18 Cash flow Rm Money out Net fixed assets Net subsidiaries and businesses Interest Taxation Dividends Loans repaid Money in From operations From borrowings raised From disposal of shares From repayment of capital and loans Net money in/(out) (1 180)

19 Capital expenditure Rm Replacement Expansion Total additons Depreciation Disposals Net increase (364) (169) (292) (195) 49

20 Capital expenditure Rm Capex Depreciation

21 Cash flow per share cents Unadjusted Debenture conversion effect Capex in excess of depreciation Net finance costs Adjusted ,8 7,1 85,6 54,5 222, ,4 68,5 31,3 206,2

22 Working capital relative to revenue % Debtors Stock 9 9 Creditors 27 22

23 Ratios Return on capital employed % 19,1 20,8 Interest cover times 3,9 4,8 Asset turnover times 2,8 2,8 Decr/(incr) in net borrowings Rm 5,0 (1 825,1)

24 Working capital Working capital Days Days effect Rm Stock days 41,0 38,8 (67) Debtors days 83,6 61,1 (813) Creditors days 115,2 94,8 621 Net cash outflow (259)

25 Margins and tax rates % Effect in Rm Gross profit margin 15,7 16,1 (53) Operating income 4,9 4, Tax rate 23,7 21,8 (5) Effective tax rate 26,6 24,6 (5)

26 Segmental analysis : 2002 Operating margin % Construction 3,6 3,4 Steel & Allied 8,2 6,3 Aveng 4,9 4,2

27 Segmental analysis : 2002 Ebit/Asset % Construction 7,5 7,4 Steel & Allied 11,8 10,2 Aveng 9,1 8,3

28 Objectives Return on average equity: 20% % Target 20% 16% 16.2% 17.2% 18.4% 12.1%

29 Objectives Growth in diluted HEPS : 20% % % Target 20% 19.9% 23.6% % 3.3%

30 Objectives Hard currency revenue: 50% % 50 Target 50% 44.7% 40 35% % 4.1% 3%

31 Objectives Net debt to equity ratio: 35% % % 42.4% Target 35% -16.2% -26.7% -33.6%

32 Did you know.? That if our opencast mining people had to dump the soil and rock that they handle on the Ellis Park rugby field, the pile would fill the field and be as high as a twenty storey building after only one day s work

33 ROE : 20% Debt/equity :35% Diluted HEPS growth :20% Hard currency revenues :50% Objectives

34 Integrity Values Quality Entrepreneurial spirit

35 Construction-related skills & assets Capabilities Developing world advantage

36 ROE : 20% Debt/equity :35% Diluted HEPS growth :20% Objectives Hard currency revenues :50% Construction-related skills & assets Integrity Capabilities Vision Values Quality Developing world advantage Entrepreneurial spirit

37 Vision A South African construction-related group : generating substantial hard currency revenue in the developing world; employing people widely respected for their integrity, quality of work and entrepreneurial spirit; and delivering consistent long-term value for all stakeholders

38 Consistent long-term value Unconsolidated operating income of currently held subsidiaries

39 Did you know? That one of our 789c dump trucks.. - when laden weighs more than 250 C class Merc s. - has wheels twice as high as an average adult. - can have six Corollas parked in its bin.

40 Vision Strategy Corporate office Business units Operating groups

41 Strategy : balancing risk To maximise value by balancing risk and opportunity throughout the group.

42 Balancing risk : Corporate office Construction Manufacturing (Cement) Trading & processing (Steel & Allied) Hard currency (45%) South Africa Rand (55%) Construction (54%) Steel & Allied (46%) Skills Currency Operating income

43 Balanced earnings : 2002 Steel & Allied Construction Cement R420 million

44 Strategy : balancing risk To maximise value by balancing risk and opportunity throughout the group. The corporate office balances local cash generating businesses against higher risk hard currency opportunities.

45 Balancing risk : Operating groups Mining & Energy Projects Infrastructure Projects Manufacturing clients (39%) Construction clients (61%) Larger industrial clients (Bulk sales) (43%) Smaller cement consumers (Bag sales) (57%) Construction Steel & Allied Cement

46 Strategy : balancing risk To maximise value by balancing risk and opportunity throughout the group. The corporate office balances local cash generating businesses against higher risk hard currency opportunities. Operating groups mitigate risk further by spreading their work between businesses having different levels of capital intensity and different revenue streams.

47 Balancing risk Business units Risk WALK-AWAY projects or clients SPECULATIVE projects or clients BASE-LOAD projects or clients TARGETED projects or clients Profit potential

48 Strategy : balancing risk To maximise value by balancing risk and opportunity throughout the group. The corporate office balances local cash generating businesses against higher risk hard currency opportunities. Operating groups mitigate risk further by spreading their work between businesses having different levels of capital intensity and different revenue streams. Business units seek to balance low risk base-load work and higher profit margin opportunities.

49 Balancing risk : Objectives Capitalising on opportunities (Maximising the upside) 1. Return on average equity: 20% 2. Headline eps growth: 20% 3. Hard-currency revenues: 50% 4. Debt to equity ratio: 35% Reducing the risk (Minimising the downside)

50 A rattle snake may bite us every now and again, but we knew it was there and how much it might hurt Rick Buy, EVP and Chief Risk Officer, Enron

51 Aveng : Construction cluster Operating group Grinaker-LTA Frank Crowley Dep Howard Jones Business units 63% McConnell Dowell Corporation David Robinson Civil Engineering Mechanical Engineering Electrical Engineering Pipelines Building Civil & Earthworks Mechanical & Electrical Process Engineering Opencast Mining Properties

52 Did you know? In the past year we built 1000 kilometres of road and poured half a million tons of concrete

53 Construction cluster revenue : 2002 Building (17%) Process Engineering & Pipelines (15%) Mining & Earthworks (26%) Civil Engineering (21%) R9,6 billion Mechanical & Electrical Engineering (21%)

54 Construction order book : 2002 R (billion) 10 R8,2b R8,7b 9,8b R6,56bn 5 0 Dec 2000 June 2001 Dec 2001 June 2002 % of Revenue 90% 109% 102% 103%

55 Construction - domestic market shares : 2001/2002 Aveng 8% Competitor 5% Other listed groups 9% Unlisted building and construction companies 78% Market : R52 billion Source: LHA

56 Order book, risk & profit The greater the perceived project risk, the higher the profit % mark up necessary to offset that risk Profit The larger the order book, and the less important it is to win work, the higher the profit % mark up Risk The larger the order book, the easier it becomes to walk away from overly risky projects Order book

57 Construction cluster : Geographic analysis South Africa & CMA (44%) Australia & SE Asia (25%) Africa & Middle East (31%) R9,6 billion

58 Did you know? Grinaker-LTA has won 10 of the 20 civil engineering Fulton Awards and 7 of the 18 Building Fulton Awards since the inception of these prestigious awards in 1980

59 ENR top 225 International contractors : 2001 Rank Company Country of origin Local subsidiary Revenue outside home country ($m) 1 Skanska Sweden Cementation Hochtief Germany Concor Vinci France Subsidiaries Bouygues France Basil Read CCC Greece Dragados Spain Leightons Australia Grinaker-LTA South Africa (50 th in 2000)

60 Operating margin : % 5% 4% 6.1% 5.5% Utopia 4.2% 4.9% 3% 2.5% 2% 1% 0.8% 0.2% Dragados Amec Vinci Bilfinger Skanska Aveng Aveng & Berger

61 Construction : Strategy To streamline Grinaker-LTA 90% To improve MDC profitability 50% To build a world-class construction group 10%

62 Temane to Secunda pipeline

63 Temane to Secunda pipeline

64 Nam Con Son Gas, Vietnam

65 Opencast mining

66 VLCC project, Singapore

67 Nelson Mandela Bridge

68 Aveng : Steel & Allied cluster Corporate office AVENG Carl Grim FD Dennis Gammie Operating group Trident Steel Ernie Behr Dep Ben Fourie Business units Trident Service Centres Trident Sterling Tube Grinaker-LTA Infrastructure & Mining Services 30% Trident Midrand Steel Tshipi Steel

69 Did you know? that Trident-Sterling Tube manufactured enough pipe last year to go around the world at the equator

70 Steel - domestic market shares : 2001/2002 Aveng 21% Other 63% Competitor 16% Market: 3,9 million tons Source: LHA

71 Steel & Allied revenue : 2002 Export (15%) 20.4 Light Manufacturing (21%) Trading (19%) Manufacturing (20%) Construction & Mining (46%) 27.4 Exports (15%) Motor (9%) Processing (45%) Clients Skills

72 S A motor industry : 2001 Imported blanks (8%) Imported formed blanks (47%) Locally produced blanks (45%) tons (coil equivalents) p.a.

73 Locally produced blanks : 2001 Other (18%) Trident (82%) tons (coil equivalents) p.a.

74 Steel & Allied : Motor strategy Coil Flat sheet de-coiler Rectangular angled blanks cut to length line Aveng interest Shaped blanks and tool cuts press feed line Formed blanks stamping plant Vehicle body assembly line

75 Did you know? Trident Steel presses doors every month BMW, Mercedes Benz and Toyota

76 Steel and Allied : Strategy To acquire group company minority interests To rationalise business units To broaden range of specialised steels To move to next level of beneficiation (shaped blanks and tool cuts) for motor industry To grow local market share 50%

77 Aveng : Cement Operating group Alpha Mike Doyle Business units 62.5% S A Cement Operations Tanga Cement 33% Natal Portland Cement 33% Slagment 25% Ash Resources

78 Cement: Industry daily volumes Domestic cumulative ,000 36,000 34,000 32, ,000 28,000 26,000 24,000 22,000 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

79 Cement : Geographic consumption Export 6% CMA & Botswana 11% Gauteng 31% Southern Areas 13% Southern KZN 8% Northern Areas 21% Western Cape 10%

80 Cement : Client sectors Concrete products (18%) Merchants & blenders (53%) Construction & Mining (16%) Readymix Concrete (13%)

81 Cement : Key strengths 35% market share in a concentrated market Stable market with world #1 & #2 One of the lowest ex-mill prices in the world Successful 3 year Alpha 2000 efficiency project Capacity for 3% p.a. market growth for 10 years

82 Cement strategy : 2002 Three year Alpha 2000 project to improve efficiency and enhance profitability Sale of non-core interest in Omnia Resolve jointly held operations 50% Capex based efficiency projects (R340 m over 3 years) 15%

83 Did you know? That one of our RH200 face shovels - Can lift 80 City Golfs into the air - Is the height of a 5 storey building - Each bucket load moves the equivalent of 385 wheelbarrows

84 Prospects Unless there is a substantial change to our operating environment, Aveng should be able to repeat the past year s diluted headline eps growth move closer to a 20% return on average equity better the 35% net debt to equity target.

85 Targeting consistent long-term value