South Africa: Aveng cuts local staff and hires abroad

Aveng reduced its headcount by 350 people in the past year through a restructuring of its South African construction and manufacturing businesses, the listed construction and engineering group said yesterday.

Roger Jardine, Aveng’s chief executive, said the group had a net reduction in staffing levels in South Africa and a net gain outside the country, which was related to changes in the make-up of its business.

Jardine highlighted estimates by the SA Federation of Consulting Engineering Contractors that 109 000 jobs were lost in the civil construction industry in the past year or two, noting that “we are not immune to that”.

“The growth in our international business is not a conscious decision,” Jardine said.

“We fish where the fish are and we’ve seen a lot of activity in other markets. We are a ‘Proudly South African’ company with a global footprint. When the [government] infrastructure programme happens, we look forward to bidding competitively and being part of providing those solutions.”

Jardine said its headcount in Aveng Grinaker-LTA was reduced by about 150 people and in its manufacturing businesses by about 200 people.

However, Jardine stressed that not all these employees were retrenched and some had been reabsorbed elsewhere in the group’s business.

Aveng currently has a workforce of about 30 000, compared with about 35 000 at the height of the previous construction boom in 2008.

Jardine said the exposure of the group’s order book to the South African public sector was currently only 3.6%, compared with 13.3% in 2009 and 10.5% in 2010, but believed this profile would change as the government’s infrastructure expenditure programme gained momentum.

He said Aveng would prefer a 50/50 split between its public and private sector work, stressing that this was the split it had three to four years ago, but it believed the planned infrastructure programme contracts would come into order books only in the next 18 to 24 months.

The financial performance of the group in the year to June was dragged down by a R733 million operating loss at Aveng’s South African and African construction and engineering business, compared with a R443 million profit in the previous year, and some problematic contracts in South Africa and Australia.

Headline earnings slumped by 58% to R495 million, and diluted headline earnings a share dropped to R1.20 from R2.87.

Operating profit fell by 66 percent to R535 million even though revenue increased by 19% to R40.9 billion.

Cash generated by operating activities improved to R1.65 billion from R904 million. The group had net cash available of R3.9 billion at year-end.

A sharply lower full-year dividend of 60c a share was declared, down from R1.48.

Aveng’s two-year order book rose by 27% to R47 billion, driven by strong growth at its McConnell Dowell division on the back of several contracts in the oil and gas sector.

Jardine said 74% of the two-year order book came from outside South Africa compared with 65% in 2010. The South African construction order book fell by 20% to R6.5 billion year on year.

The shares fell 0.30% to R30.30 on the JSE yesterday.

Source: Business Report