Aveng surpassed by its industry peers
WHILE SA’s construction sector as a whole seems to be recovering from the slump after the 2010 Soccer World Cup, some key companies are still performing poorly. And their near future isn’t looking great either. Fines have been levied for collusion relating to the World Cup stadiums, but there could be more to come, stemming from other projects.
Construction and engineering group Aveng on Monday posted a weak set of results for the year to June, leaving some analysts disappointed.
Headline earnings came in at R1.16 a share, whereas many analysts had forecast something closer to R2.90. Net income slipped from R523m to R459m.
The order book was down 20% year on year at R37.4bn.
Aveng was cash flush a few years back and there was talk of a special dividend being paid. The subject was not even raised this year.
Aveng is noted for specialising in public sector projects, but it said in the results presentation that public infrastructure spending was expected to remain subdued. That did not impress the market, with the group’s share price falling more than 4%. The biggest drag on performance was the local construction industry. Its domestic construction unit, Grinaker LTA, was hurt by sporadic strikes, including those at Eskom’s Medupi and Kusile coal power stations.
Aveng CEO Roger Jardine stepped down from the company during the year under review, saying the competition probe had placed him under stress despite the fact that the incidents in question occurred before his time. The board is searching for a replacement who will be able to take a stalled company that remains under scrutiny and help it regain momentum.
THE merger of Metropolitan and Momentum in December 2010 to form MMI has created good value for shareholders, says CEO Nicolaas Kruger. On listing, MMI’s share price was R15-R16. Today it trades at about R23.
In addition, the group has paid more than R5.5bn in dividends including two special dividends since the merger. This excludes the annual dividend of 127c a share for the year to June 30. Mr Kruger said this adds up to returns in excess of 20% a year for shareholders.
Could they have benefited more by investing elsewhere? Yes, he says, “but they certainly could have done worse than investing in MMI”.
The share price has risen 15% in the past year, although competitors Liberty, Sanlam and Discovery’s shares have done even better — Liberty is up about 26%, Sanlam by 28% and Discovery by a whopping 67%.
But MMI has switched its focus from the merger to growth. A priority will be short-term insurance, with a team of programmers in India working on an innovative approach to market to MMI’s existing client base of 7-million to 9-million (depending on how it’s measured).
Dave Marrs edits Company Comment (marrsd@bdfm.co.za)