Fitch affirms Aveng's rating at 'A'/'F1'

Posted On Tuesday, 22 November 2005 02:00 Published by Commercial Property News
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Fitch Ratings has affirmed construction group Aveng Limited's National ratings at Long-term A and Short-term F1

Aveng Grinaker LTAFitch Ratings has affirmed construction group Aveng Limited's (AEG) National ratings at Long-term 'A(zaf)' and Short-term 'F1(zaf)'. The Outlook is Stable.

The affirmation is based on Aveng's risk-adjusted approach to projects and restructuring efforts that are starting to pay off, as well as improved results from its construction business, although the latter is still loss- making, Fitch said.

"The order book for the various construction activities, bar Grinaker- LTA, is very strong with an emphasis on margin improvement rather than business volume gains. Aveng's diversified strategy has proven to be successful as the Steel & Allied business and 46%-held cement interests via Holcim (South Africa) (Pty) Limited have produced improved results."

"The outlook for the industry is positive considering the capital expenditure programmes announced by the government and parastatals Eskom and Transnet. However, a slower-than-expected pace of implementation by the government will result in reduced earnings at the construction business," Fitch stated.

Net debt declined by nearly 16% to 1.166 billion rand at FYE05, resulting in improved net debt-to-equity of 39.8% (FY04: 54.0%), which is closer to the company's target of 35% in the longer term. The group successfully converted short-term debt into long-term debt via the issue of a 1 billion seven-year 6.125% convertible bond.

The short-term portion (R605m) is now only 30% of gross debt. Non-current borrowings of 1.720 billion rand (FY04: R907.1m) has a good maturity profile with the majority being the bonds payable in March 2012.

"The recent shareholder approval to convert all bonds into equity means that Aveng has the option to convert them on or after March 2009, eliminating all risks relating to repayment of the principal amount.

Fitch regards the conversion approval as positive, given that pressures on cash flows are eliminated.

In addition, the fixed semi-annual interest is rand- denominated, thus leaving no exposure to fluctuating interest rates or currency movements. Interest cover, including income from associates, is considered strong.

In addition the group announced improved order books for both construction subsidiaries Grinaker-LTA and McConnell Dowell Corporation Limited since June 2005."

Last modified on Friday, 21 June 2013 22:59

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