AEG 201402250001A
Unaudited Group results for the six months ended 31 December 2013
AVENG LIMITED
(“Aveng”, “the Company”, “the Group” or “Aveng Group”)
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000111829
Share code: AEG
Unaudited Group results for the
six months ended 31 December 2013
Key features
- Revenue
improved by 11% to R27,6 billion (2012: R24,9 billion)
- 18% increase
in the Mining two-year order book from June 2013
- Net operating earnings
down by 8% to R503 million (2012: R544 million)
- 22% increase in the Construction and Engineering:
South Africa and Rest of Africa two-year order book from June 2013
- Net cash position
stable at R2,4 billion
- Headline earnings per share
decreased by 21% to 82,1 cents (2012: 104,5 cents)
- Net finance expenses
R83 million (2012: net finance earnings R12 million)
Interim condensed consolidated statement of financial position
as at 31 December 2013
31 December 31 December 30 June
2013 2012* 2013
(Unaudited) (Unaudited) (Audited)
Note Rm Rm Rm
ASSETS
Non-current assets
Investment property 7 71 - 71
Property, plant and equipment 7 6 864 6 812 6 789
Goodwill arising on consolidation 1 443 1 400 1 425
Intangible assets** 7 222 163 184
Equity-accounted investments 219 91 144
Available-for-sale investments 72 147 70
Deferred tax assets 1 379 1 011 1 347
10 270 9 624 10 030
Current assets
Inventories 2 903 2 625 2 780
Trade and other receivables 2 920 1 858 2 655
Amounts due from contract customers 8 10 387 9 258 10 397
Cash and bank balances 6 5 619 5 263 4 551
21 829 19 004 20 383
TOTAL ASSETS 32 099 28 628 30 413
EQUITY AND LIABILITIES
Equity
Share capital and share premium 1 388 1 435 1 388
Other reserves 996 767 802
Retained earnings 11 411 11 017 11 103
Equity attributable to equity-holders of the parent 13 795 13 219 13 293
Non-controlling interests 10 13 12
13 805 13 232 13 305
Liabilities
Non-current liabilities
Borrowings and other liabilities 1 738 1 289 1 312
Deferred tax liabilities 385 255 319
Provisions 9 1 166 1 091 1 105
3 289 2 635 2 736
Current liabilities
Borrowings and other liabilities 830 161 219
Taxation payable 181 161 210
Trade and other payables 9 405 7 083 9 052
Provisions 9 1 552 1 183 1 924
Amounts due to contract customers 8 2 352 3 665 2 367
Bank overdrafts 6 685 508 600
15 005 12 761 14 372
TOTAL LIABILITIES 18 294 15 396 17 108
TOTAL EQUITY AND LIABILITIES 32 099 28 628 30 413
* Comparatives have been amended, as detailed in the Change in disclosure note, refer to note 3.
** Includes computer software and intangible assets with indefinite useful lives.
Interim condensed consolidated statement of comprehensive earnings for the six months ended 31
December 2013
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2013 2012* % 2013
(Unaudited) (Unaudited) change (Audited)
Note Rm Rm Rm
Revenue 27 654 24 987 11 51 704
Cost of sales 1 (25 681) (22 852) 12 (48 233)
Gross earnings 1 973 2 135 (8) 3 471
Operating expenses 2 (1 551) (1 619) (4) (2 844)
Operating earnings before other gains and losses 422 516 (18) 627
Other gains and losses 3 2 50 -
Operating earnings after other gains and losses 425 518 (18) 627
Earnings from available-for-sale investments 34 42 (19) 41
Share of earnings / (losses) from equity-accounted investments 44 (16) (12)
Net operating earnings 503 544 (8) 656
Finance earnings 57 66 (14) 132
Finance and transaction expenses (140) (54) 159 (162)
Earnings before taxation 420 556 (24) 626
Taxation 5 (113) (159) (29) (167)
Earnings for the period 307 397 (23) 459
Items that may be subsequently recycled to earnings:
Exchange differences on translating foreign operations 192 164 17 196
Movement in insurance and other reserves 1 ** (2)
Other comprehensive earnings for the period 193 164 18 194
Total comprehensive earnings for the period 500 561 (11) 653
* Comparatives have been amended, as detailed in the Change in disclosure note, refer to note 3.
** Amounts less than R1 million.
1 Cost of sales includes depreciation of R508 million (2012: R602 million).
2 Operating expenses includes depreciation of R56 million (2012: R60 million) and amortisation of R20 million (2012: R24 million).
The total depreciation, amortisation and impairment expense included in the statement of comprehensive earnings amounts to R584 million (2012: R686 million).
Interim condensed consolidated statement of comprehensive earnings for the six months ended 31
December 2013 (continued)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2013 2012 % 2013
(Unaudited) (Unaudited) change (Audited)
Rm Rm Rm
Earnings for the period attributable to:
Equity-holders of the parent 308 394 (22) 466
Non-controlling interests (1) 3 (7)
307 397 (23) 459
Other comprehensive earnings
for the period attributable to:
Equity-holders of the parent 193 167 16 193
Non-controlling interests - (3) 1
193 164 18 194
Total comprehensive earnings for the period attributable to:
Equity-holders of the parent 501 561 (11) 659
Non-controlling interests (1) * (6)
500 561 (11) 653
Determination of headline earnings for the period:
Earnings for the period attributable to 308 394 (22) 466
equity-holders of the parent
Adjusted for (net of tax):
Profit on sale of property, plant and equipment (1) (2) (50) (1)
Impairment of property, plant and equipment - - 1
Headline earnings 307 392 (22) 466
Results per share (cents)
Earnings 82,4 105,0 (22) 124,6
Headline earnings 82,1 104,5 (21) 124,6
Diluted earnings 76,6 98,0 (22) 115,9
Diluted headline earnings 76,3 97,5 (22) 115,9
Dividend - - -
Number of shares (millions)
In issue 389,8 389,8 389,8
Weighted average 373,9 375,2 373,9
Diluted weighted average 402,1 402,1 402,1
*Amounts less than R1 million.
Interim condensed consolidated statement of cash flows
for the six months ended 31 December 2013
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2013 2012* 2013
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
Cash retained from operating activities
Cash retained from operations 425 518 627
Depreciation and impairment 564 662 1 181
Amortisation 20 24 50
Non-cash items and other movements (455) 55 540
Cash generated by operations 554 1 259 2 398
Changes in working capital
Increase in inventories (123) (158) (313)
Increase in trade and other receivables and amounts due
from contract customers (255) (1 191) (3 127)
Increase in trade and other payables and amounts due
to contract customers 338 587 1 256
Cash generated by operating activities 514 497 214
Finance earnings 57 59 126
Finance and transaction expenses paid (140) (58) (164)
Taxation paid (107) (302) (464)
Cash inflow / (outflow) from operating activities 324 196 (288)
Investing activities
Property, plant and equipment purchased (271) (222) (459)
- expansion
- replacement (320) (560) (925)
Acquisition of investment property - - (71)
Acquisition of intangible assets (58) - (29)
Changes in equity-accounted and available-for-sale
investments (31) (2) (38)
Proceeds from sale of property, plant and equipment 144 25 165
Proceeds from sale of intangible assets - - 2
Cash outflow on acquisition of subsidiary - - (9)
Proceeds from sale of available-for-sale investment - - 80
Dividend earnings 34 42 41
Cash outflow from investing activities (502) (717) (1 243)
Operating free cash outflow (178) (521) (1 531)
Financing activities with equity-holders
Shares repurchased - - (47)
Dividends paid - (242) (242)
Financing activities with debt holders
Proceeds from borrowings (net of loans advanced) 1 037 523 603
Net increase / (decrease) in cash and cash equivalents
before foreign exchange movements on cash 859 (240) (1 217)
Foreign exchange movements on cash 124 135 308
Cash and cash equivalents at beginning of year** 3 951 4 860 4 860
Cash and cash equivalents at end of year** 4 934 4 755 3 951
Borrowings, excluding bank overdrafts 2 568 1 450 1 531
Net cash position 2 366 3 305 2 420
* Comparatives have been amended, due to the changes detailed in note 3.
** Cash and cash equivalents is calculated by deducting Bank overdrafts from Cash and bank balances.
Notes to the interim condensed consolidated financial statements
1. Corporate information
The interim condensed consolidated financial statements of the Group for the six months ended
31 December 2013 (“interim results”) were authorised for issue in accordance with a resolution
of the directors on 19 February 2014.
Aveng Limited is a limited liability company incorporated and domiciled in the Republic of South
Africa whose shares are publicly traded. The Group operates in the construction, engineering and
mining environment and as a result the revenue is not seasonal in nature, but is influenced by
the nature and execution of the contracts currently in progress. Refer to the commentary below
for a more detailed report on the performance of the different operating segments within the Group.
2. Basis of preparation and accounting policy
The interim results have been prepared on the historical cost basis, except for certain financial
assets which are measured at fair value.
The accounting policies used in the preparation of these results are consistent in all material
respects with those used in the Group’s audited annual financial statements as at 30 June 2013.
The interim financial statements have been prepared in accordance with IAS 34 Interim Financial
Statements and the Listings Requirements of the JSE Limited. The accounting policies adopted are
consistent with those of the previous year, except for the adoption of new and revised Standards
and Interpretations that become effective during this reporting period. The external auditors have
not reviewed the financial results for the six months ended 31 December 2013.
The interim results do not include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the Group’s audited annual financial
statements as at 30 June 2013.
The interim financial results have been prepared under the supervision of the acting Group
Financial Director, Mr HJ Verster.
The Group has adopted the following new and revised Standards and Interpretations (issued by the
International Financial Reporting Interpretation Committee) of the IASB that became effective on
or after 1 July 2013.
Standards
IFRS 7 Financial Instruments: Disclosure (Amendment)
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurements
IAS 16 Property, Plant and Equipment (Improvement)
IAS 19 Employee Benefits (Revised)
IAS 27 Separate Financial Statements (Revised)
IAS 28 Investment in Associates and Joint Ventures (Revised)
IAS 34 Interim Reporting (Improvement)
The adoption of these Standards and Interpretations did not have a material effect on the
Group’s interim results and related disclosures.
In addition, the following Standards and Interpretations have been issued but are not yet effective.
Standard Subject Effective date
IFRS 9 Financial Instruments 1 January 2015
IFRS 10 Consolidated Financial Statements: Amendments for investment entities 1 January 2014
IFRS 12 Disclosure of Interests in Other Entities: Amendments for investment entities 1 January 2014
IAS 19 Employee Benefits (Amendment) 1 July 2014
IAS 27 Separate Financial Statements: Amendments for investment entities 1 January 2014
IAS 32 Financial Instruments: Presentation (Amendment) 1 January 2014
IAS 36 Impairment of Assets (Amendment) 1 January 2014
IAS 39 Financial Instruments: Recognition and Measurement (Amendment) 1 January 2014
The Group does not intend to early adopt any of the above Standards and Interpretations.
Contracting revenue
The Group uses the percentage-of-completion, surveys of work performed and completion of a
physical proportion of the contract work methods in accounting for its construction contracts. Use of these
methods requires the Group to estimate the construction services and activities performed to date
as a proportion of the total services and activities to be performed and apply judgment on the
contract progress and outstanding risks.
3. Change in disclosure
Background
As part of the Group’s financial reporting improvement initiatives, the structure, format and
presentation of disclosures in the interim condensed consolidated financial statements were reviewed.
This resulted in the reallocation of certain comparative amounts as well as the introduction of
certain changes in terminology.
The initiative is an ongoing programme targeting the most appropriate disclosure and presentation
practices, to best serve the interests of the Group’s stakeholders.
The resulting reallocations had no earnings or loss impact on the interim condensed consolidated
financial statements, and as such the reallocations are not regarded as having had a quantitatively
nor qualitatively material effect on the information presented.
Reallocations affecting the 2012 comparatives:
The reallocations for the 2012 comparative amounts are as follows:
Interim condensed consolidated statement of financial position
An amount of R77 million gross carrying amount and R67 million accumulated depreciation (net
carrying amount R10 million), relating to computer software was reallocated from property, plant and
equipment to intangible assets.
Goodwill amounting to R1 400 million in 2012 was reallocated from “Goodwill and other intangible
assets” to a separately disclosed line item, “Goodwill arising on consolidation”.
Amounts due from contract customers of R9 258 million in 2012 was reallocated from “Trade and
other receivables” to a separately disclosed line item, “Amounts due from contract customers”.
An amount of R3 665 million in 2012 was reallocated from “Trade and other payables” to a
separately disclosed line item, “Amounts due to contract customers”.
The 31 December 2012 comparative information was not recorded to the same granular level as was
recorded for the six months ended 31 December 2013 and for the year ended 30 June 2013, and therefore
may not be in a manner consistent with management’s current categorisation practice, which in turn is
based upon judgemental interpretations on a contract-by-contract and case-by-case basis. The exclusion
of the disclosure of this information, for the six months ended 31 December 2012 does not have a
quantitatively nor qualitatively material effect on the Group's interim results.
Other provisions of R234 million in 2012 were reallocated from “Accruals” (part of Trade and other
payables) to the separately disclosed line item “Provisions”. Furthermore, the “Provisions” line
item was reclassified to reflect the current and non-current portions of provisions raised.
Interim condensed consolidated statement of comprehensive earnings
The Group now includes the disclosure of “Cost of sales” and “Gross earnings” on the interim
condensed consolidated statement of comprehensive earnings. This disclosure was not previously included
in the interim report and resulted in the disclosure of R22 852 million relating to cost of sales and
R2 135 million relating to gross earnings.
Depreciation of R602 million directly attributable to cost of sales was previously disclosed as
part of the “Depreciation” line item for 2012. This was reallocated to “Cost of sales”.
Depreciation of R60 million previously disclosed as part of the “Depreciation” line item for 2012.
This was reallocated to “Operating expenses”.
Amortisation of R24 million previously disclosed as part of the “Amortisation” line item for 2012.
This was reallocated to “Operating expenses”.
Notes to the interim condensed financial statements
The disclosure in the segment report, note 4, has been extensively expanded, including the
disclosure of total revenue (being internal and external revenue) per operating segment and the separate
disclosure of the elimination of internal revenue, resulting in total external revenue for the Group.
Refer to note 4.
Terminology changes
Statement of financial position
New terminology used Previously used terminology
Retained earnings Distributable reserves
Borrowings and other liabilities Borrowings
Statement of comprehensive earnings
New terminology used Previously used terminology
Earnings Profit/income
Finance earnings Finance income
Finance and transaction expenses Finance and transaction costs
Statement of changes in equity
New terminology used Previously used terminology
Retained earnings Distributable reserves
Earnings Profit/income
Statement of cash flows
New terminology used Previously used terminology
Finance earnings Finance income
Finance and transaction expenses Finance and transaction costs
4. Segment information
The Group has determined four reportable segments that are largely organised and managed
separately according to the nature of products and services provided.
These operating segments are components of the Group:
a) that engage in business activities from which they earn revenues and incur expenses; and
b) whose operating results are regularly reviewed by the Group’s chief operating decision makers
to make decisions about resources to be allocated to the segments and assess their performance.
Segment assets exclude Goodwill arising on consolidation, Intangible assets, Equity-accounted
investments, Available-for-sale investments, Deferred tax assets and Cash and bank balances.
Segment liabilities exclude Borrowings and other liabilities, Deferred tax liabilities, Taxation
payable and Bank overdrafts.
The Group’s operating segments for the year are categoried as follows:
1. Construction and Engineering
1.1 Construction and Engineering: South Africa and Rest of Africa
This operating segment comprises Aveng Grinaker-LTA and Aveng Engineering.
1.2 Construction and Engineering: Australasia and Asia*
This operating segment comprises McConnell Dowell.
2. Mining
This operating segment comprises Aveng Moolmans and Aveng Mining Shafts & Underground.
3. Manufacturing and processing
This operating segment comprises Aveng Manufacturing and Aveng Steel.
4. Administration and Eliminations
This operating segment comprises concessions, corporate services, corporate-held investments including
properties, and consolidation eliminations.
* The Construction and Engineering: Australasia and Pacific operating segment has been renamed
to Construction and Engineering: Australasia and Asia.
4. Segment information (continued)
Construction and
Engineering: Manu- Adminis-
South Africa facturing tration
December 2013 and the Rest Australasia and and
Rm of Africa* and Asia Mining Processing* Eliminations Total
External revenue 4 104 14 933 3 459 5 026 132 27 654
Internal revenue 53 - 2 239 (294) -
Gross revenue 4 157 14 933 3 461 5 265 (162) 27 654
Operating (loss) / earnings before
other gains and losses (336) 165 295 162 136 422
Other gains and losses - - - - 3 3
Operating (loss) / earnings after
other gains and losses (336) 165 295 162 139 425
Earnings from available-for-sale
investments 1 - - - 33 34
Share of earnings / (losses) from
equity-accounted investments 1 26 - - 17 44
Net operating (loss) / earnings (334) 191 295 162 189 503
Net finance (expense) / earnings
(finance earnings less finance
and transaction expenses) (12) (34) (15) 2 (24) (83)
(Loss) / earnings before taxation (346) 157 280 164 165 420
Taxation 102 (45) (95) (52) (23) (113)
(Loss) / earnings for the period (244) 112 185 112 142 307
Investments** 9 135 4 - 143 291
Segment assets (note 1) 3 157 8 348 4 230 5 906 1 504 23 145
Segment liabilities (note 2) 2 470 7 489 1 801 1 905 810 14 475
Capital expenditure*** 57 151 197 124 120 649
Depreciation and impairment 46 203 231 73 11 564
Amortisation 7 - - 6 7 20
* Aveng Steel Fabrication (“ASF”), Aveng Manufacturing Automation & Control Solutions (“A&CS”) and Aveng Manufacturing
Facades business units are now reported under the Manufacturing and Processing segment, compared to the Construction and
Engineering: South Africa and Rest of Africa segment in the prior year. Comparatives have been adjusted.
** Consists of equity-accounted investments and available-for-sale investments.
***Segment capital expenditure includes intangible asset expenditure of R58 million.
Construction and
Engineering: Manu- Adminis-
South Africa facturing tration
December 2012 (Unaudited) and the Rest Australasia and and
Rm of Africa* and Asia Mining Processing* Eliminations** Total
External revenue 3 650 12 761 3 793 4 781 2 24 987
Internal revenue 93 - - 172 (265) -
Gross revenue 3 743 12 761 3 793 4 953 (263) 24 987
Operating (loss) / earnings
before other gains and losses (40) 195 390 76 (105) 516
Other gains and losses (14) - - - 16 2
Operating (loss) / earnings
after other gains and losses (54) 195 390 76 (89) 518
Earnings from available-for-sale
investments 1 - - - 41 42
Share of earnings / (losses) from
equity-accounted investments (17) - - - 1 (16)
Net operating (loss) / earnings (70) 195 390 76 (47) 544
Net finance earnings / (expenses)
(finance earnings less finance
and transaction expenses) 12 (2) (12) 8 6 12
(Loss) / earnings before taxation (58) 193 378 84 (41) 556
Taxation 17 (53) (121) (22) 20 (159)
(Loss) / earnings for the period (41) 140 257 62 (21) 397
Investments 66 138 1 - 33 238
Segment assets (note 1) 3 082 6 759 4 579 5 604 529 20 553
Segment liabilities (note 2) 2 298 6 825 2 033 1 289 577 13 022
Capital expenditure 5 181 453 142 1 782
Depreciation and impairment 49 210 321 73 9 662
Amortisation 5 - - 5 14 24
* Aveng Steel Fabrication (“ASF”), Aveng Manufacturing Automation & Control Solutions (“A&CS”) and Aveng Manufacturing
Facades business units are now reported under the Manufacturing and Processing segment, compared to the Construction
and Engineering: South Africa and Rest of Africa segment in the prior year. Comparatives have been adjusted.
** Comparatives have been adjusted as concessions is reported under the Administration and Eliminations operating segment,
compared to the Construction and Engineering: South Africa and rest of Africa segment in the 2012 year. Comparatives have
been adjusted.
*** Consists of equity-accounted investments and available-for-sale investments.
Construction and
Engineering: Manu- Adminis-
South Africa facturing tration
June 2013 (Audited) and the Rest Australasia and and
Rm of Africa* and Asia Mining Processing* Eliminations Total
External revenue 7 239 26 749 7 435 10 146 135 51 704
Internal revenue 219 - - 409 (628) -
Gross revenue 7 458 26 749 7 435 10 555 (493) 51 704
Operating (loss) / earnings
before other gains and losses (895) 644 707 235 (64) 627
Other gains and losses - - - - - -
Operating (loss) / earnings
after other gains and losses (895) 644 707 235 (64) 627
Earnings from available-for-sale
investments - - - - 41 41
Share of earnings / (losses) from
equity-accounted investments (1) (5) 2 - (8) (12)
Net operating (loss) / earnings (896) 639 709 235 (31) 656
Net finance earnings / (expense)
(finance earnings less finance and
transaction expenses) 31 (23) (31) 2 (9) (30)
(Loss) / earnings before taxation (865) 616 678 237 (40) 626
Taxation 346 (157) (236) (79) (41) (167)
(Loss) / earnings for the period (519) 459 442 158 (81) 459
Investments** 6 107 3 - 98 214
Segment assets (note 1) 3 428 8 149 4 285 6 310 520 22 692
Segment liabilities (note 2) 2 861 7 087 1 580 1 975 945 14 448
Capital expenditure*** 45 384 615 306 134 1 484
Depreciation and impairment 93 402 581 97 8 1 181
Amortisation 11 - - 10 29 50
* Aveng Steel Fabrication (“ASF”), Aveng Manufacturing Automation & Control Solutions (“A&CS”) and Aveng Manufacturing
Facades business units are now reported under the Manufacturing and Processing segment, compared to the Construction and
Engineering: South Africa and Rest of Africa segment in the prior year. Comparatives have been adjusted.
** Consists of equity-accounted investments and available-for-sale investments.
*** Segment capital expenditure includes intangible asset expenditure of R29 million.
31 December 31 December 30 June
2013 2012 2013
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
Note 1 - Reconciliation of segment assets
Total assets of the Group 32 099 28 628 30 413
Goodwill arising on consolidation (1 443) (1 400) (1 425)
Intangible assets (222) (163) (184)
Equity-accounted investments (219) (91) (144)
Available-for-sale investments (72) (147) (70)
Deferred tax assets (1 379) (1 011) (1 347)
Cash and bank balances (5 619) (5 263) (4 551)
Segment assets 23 145 20 553 22 692
Note 2 - Reconciliation of segment liabilities
Total liabilities of the Group 18 294 15 396 17 108
Borrowings and other liabilities (2 568) (1 450) (1 531)
Deferred tax liabilities (385) (255) (319)
Taxation payable (181) (161) (210)
Bank overdrafts (685) (508) (600)
Segment liabilities 14 475 13 022 14 448
The Group operates in five principal geographical areas:
REVENUE
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2013 2012 2013
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
South Africa 10 249 9 756 19 164
Rest of Africa including Mauritius 2 084 2 169 4 984
Australasia and the Pacific Islands* 13 467 11 753 24 661
Southeast Asia* 1 577 1 207 2 544
Middle East and other regions 277 102 351
27 654 24 987 51 704
* Included in the Australasia and the Pacific Islands and Southeast Asia geographical
segments is revenue derived by various operating segments.
SEGMENT ASSETS
31 December 31 December 30 June
2013 2012 2013
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
South Africa 11 869 11 049 11 870
Rest of Africa including Mauritius 2 497 2 585 2 320
Australasia and the Pacific Islands 7 360 5 852 7 274
Southeast Asia 1 033 1 012 989
Middle East and other regions 386 55 239
23 145 20 553 22 692
CAPITAL EXPENDITURE
31 December 31 December 30 June
2013 2012 2013
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
South Africa 355 431 776
Rest of Africa including Mauritius 144 169 257
Australasia and the Pacific Islands 136 147 327
Southeast Asia 14 35 57
Middle East and other regions - - 67
649 782 1 484
Notes to the interim condensed consolidated financial statements (continued)
5. Income tax
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2013 2012 2013
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
Current income tax charge 79 216 432
Deferred tax 34 (57) (265)
Income tax expense 113 159 167
Effective tax rate 26,9% 28,6% 26,7%
6. Cash and cash equivalents
31 December 31 December 30 June
2013 2012 2013
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
Cash and bank balances 5 619 5 263 4 551
Less: Bank overdrafts (685) (508) (600)
Cash and cash equivalents
4 934 4 755 3 951
Cash and bank balances
at the end of the period
include the following cash
and bank balances that are
restricted from immediate use:
Group share of cash held by
joint operations 1 375 966 935
Guardrisk Life Fund 48 45 40
1 423 1 011 975
7. Property, plant and equipment, Investment property and Intangible assets
During the six months ended 31 December 2013, the Group acquired assets at a cost of
R649 million (December 2012: R782 million).
8. Amounts due from / (to) contract customers
Six months Year
ended ended
31 December 30 June
2013 2013
(Unaudited) (Audited)
Rm Rm
Uncertified claims and variations (Underclaims) 1 5 535 4 181
Progress billings received (Overclaims) 2 (1 852) (1 690)
Uncertified claims and variations less progress billings received 3 683 2 491
Contract receivables 3 4 653 6 042
Retention receivables 4 199 174
8 535 8 707
Amounts received in advance 5 (500) (677)
Net amounts due from contract customers 8 035 8 030
Disclosed on the statement of financial position as follows:
Uncertified claims and variations 5 535 4 181
Contract and retention receivables 4 852 6 216
Amounts due from customers (current assets) 10 387 10 397
Progress billings received (1 852) (1 690)
Amounts received in advance (500) (677)
Amounts due to customers (current liability) (2 352) (2 367)
Net amount due from contract customers 8 035 8 030
1 Revenue not yet certified - recognised based on percentage of completion/measurement and agreed variations.
2 Progress billings are amounts billed for work performed on a contract irrespective of payment from the customer.
3 Certified revenue invoiced.
4 Retentions are amounts of progress billings that are not paid until the payment conditions specified in the
contracts are fulfilled or until defects have been rectified.
5 Advances are amounts received from the customer before the related work is performed.
9. Provisions
IFRS 2
share-based
payment Employee Leave pay Other
obligation entitlements benefits provisions Total
Balance as at 30 June 2012 34 978 499 660 2 171
Reallocated/recognised 10 13 135 252 410
Utilised - (297) (53) - (350)
Currency adjustment - 27 16 - 43
Balance as at 31 December 2012 44 721 597 912 2 274
Reallocated/recognised 11 235 382 447 1 075
Utilised - (17) (304) - (321)
Currency adjustment - 27 (26) - 1
Balance as at 30 June 2013 55 966 649 1 359 3 029
Reallocated/recognised 16 (25) 149 231 371
Utilised (10) (289) (130) (327) (756)
Currency adjustment - 32 28 - 60
Interest accretion - 2 3 9 14
Balance as at 31 December 2013 61 686 699 1 272 2 718
31 December 31 December 30 June
2013 2012 2013
Disclosed as:
Non-current provisions 1 166 1 091 1 105
Current provisions 1 552 1 183 1 924
2 718 2 274 3 029
10. Related party transactions
During the interim period Aveng Limited and its subsidiaries, in the ordinary course of business,
entered into various sale and purchase transactions with equity-accounted investments. There have
been no significant changes to the nature of related party transactions since 30 June 2013.
There were no related party transactions with directors or entities in which the directors have a
material interest.
11. Events after reporting date
Mr HJ Verster was appointed as Group Chief Executive Officer (CEO) effective 11 February 2014. Mr
Verster has not relinquished his statutory duties in terms of Section 3.84(g) of the JSE Listings
Requirements and will continue in his capacity as acting Financial Director until a new Financial
Director is employed.
The directors are not aware of any matter or circumstance arising since the end of the reporting
period not otherwise dealt with in the Group’s interim condensed results, which significantly affects
the financial position of the Group at 31 December 2013 or the results of its operations or cash
flows for the period then ended.
12. Major acquisitions and disposals
There have been no major acquisitions or disposals by the Group during the interim reporting
period.
Interim condensed consolidated statement of changes in equity for the six months ended 31 December
2013
Foreign Equity-settled
Total currency share-based
Share Share issued translation payment Insurance
capital premium capital reserve reserve reserves
Rm Rm Rm Rm Rm Rm
Six months ended 31 December 2012 (Unaudited)
Balance at 1 July 2012 19 1416 1435 546 - 56
Earnings for the period - - - - - -
Other comprehensive earnings for the period - - - 164 - 1
Total comprehensive earnings for the period - - - 164 - 1
Dividends - - - - - -
Total contributions and distributions recognised
directly in equity - - - - - -
Balance at 31 December 2012 19 1 416 1 435 710 - 57
Year ended 30 June 2013 (Audited)
Balance at 1 July 2012 19 1 416 1 435 546 - 56
Earnings for the period - - - - - -
Other comprehensive earnings for the period - - - 195 - (2)
Total comprehensive earnings for the period - - - 195 - (2)
Movement in treasury shares - (47) (47) - - -
Equity settled share-based payment expense - - - - 21 -
Transfer between reserves - - - (14) - -
Business combination - acquisition of
subsidiary - - - - - -
Dividends - - - - - -
Total contributions and distributions
recognised directly in equity - (47) (47) (14) 21 -
Balance at 30 June 2013 19 1 369 1 388 727 21 54
Six months ended 31 December 2013 (Unaudited)
Balance at 1 July 2013 19 1 369 1 388 727 21 54
Earnings for the period - - - - - -
Other comprehensive earnings for the period - - - 192 - 1
Total comprehensive earnings for the period - - - 192 - 1
Acquisition of non-controlling interests - - - - - -
Equity-settled share-based payment expense - - - - 1 -
Total contributions and distributions
recognised directly in equity - - - - 1 -
Balance at 31 December 2013 19 1 369 1 388 919 22 55
*Amount less than R1 million
Total
attributable
to equity- Non-
Total other Retained holders of controlling Total
reserves earnings the parent interests equity
Rm Rm Rm Rm Rm
Six months ended 31 December 2012 (Unaudited)
Balance at 1 July 2012 602 10 864 12 901 10 12 911
Earnings for the period - 394 394 3 397
Other comprehensive earnings for the period 165 - 165 * 165
Total comprehensive earnings for the period 165 394 559 3 562
Dividends - (241) (241) - (241)
Total contributions and distributions recognised
directly in equity - (241) (241) - (241)
Balance at 31 December 2012 767 11 017 13 219 13 13 232
Year ended 30 June 2013 (Audited)
Balance at 1 July 2012 602 10 864 12 901 10 12 911
Earnings for the period - 466 466 (7) 459
Other comprehensive earnings for the period 193 - 193 1 194
Total comprehensive earnings for the period 193 466 659 (6) 653
Movement in treasury shares - - (47) - (47)
Equity settled share-based payment expense 21 - 21 - 21
Transfer between reserves (14) 14 - - -
Business combination - acquisition of
subsidiary - - - 9 9
Dividends - (241) (241) (1) (242)
Total contributions and distributions
recognised directly in equity 7 (227) (267) 8 (259)
Balance at 30 June 2013 802 11 103 13 293 12 13 305
Six months ended 31 December 2013 (Unaudited)
Balance at 1 July 2013 802 11 103 13 293 12 13 305
Earnings for the period - 308 308 (1) 307
Other comprehensive earnings for the period 193 - 193 - 193
Total comprehensive earnings for the period 193 308 501 (1) 500
Acquisition of non-controlling interests - - - (1) (1)
Equity-settled share-based payment expense 1 - 1 - 1
Total contributions and distributions
recognised directly in equity 1 - 1 (1) -
Balance at 31 December 2013 996 11 411 13 795 10 13 805
*Amount less than R1 million
Other Group information for the six months ended
31 December 2013
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2013 2012 2013
Rm Rm Rm
Capital expenditure
Expansion 271 222 459
Replacement 320 560 925
Acquisition of investment property - - 71
Acquisition of intangible assets 58 - 29
649 782 1 484
Commitment for future capital expenditure:
Contracted 44 242 176
Authorised, but not contracted for 23 181 50
67 423 226
Net asset value (Rands per share) 35,39 33,91 34,10
Commentary
Overview
Salient features
• Revenue improved by 11% to R27,6 billion (2012: R24,9 billion).
• Net operating earnings down by 8% to R503 million (2012: R544 million).
• Net financing expenses of R83 million against net finance earnings of R12 million in the comparative period.
• Headline earnings per share down 21% to 82,1 cents against the comparative period’s 104,5 cents,
a substantial improvement against the immediate preceding six months ended 30 June 2013.
• Mining and Construction and Engineering: South Africa and Rest of Africa operating segments’
order books increased by 18% and 22% respectively from June 2013.
• Net cash position remained stable at R2,4 billion compared to June 2013.
Safety
The Group remains fully committed to improving its safety culture by driving the safety vision,
“Home without harm, Everyone, Everyday” across all our operations. Pleasingly, the All Injury
Frequency Rate improved to 3,9 compared to 4,5 reported at 30 June 2013.
Regrettably, the Group suffered two fatalities during the interim period. This remains
unacceptable as Aveng strives towards fatality free operations. The Aveng Board and Management extend
their sincere condolences to the families of our deceased employees.
Operating environment
The markets in which the Group operates continue to be challenging. There has been no material
improvement in infrastructure spending in South Africa and Australia and this was aggravated by the
adverse impact of labour disruptions in South Africa.
Construction and Engineering: Australasia and Asia continues to compete well despite tough market
conditions. Opportunities are being pursued in the transport, oil and gas, and marine sectors which
have already resulted in successful contract awards in Australia and Singapore. The Queensland
Curtis Liquefied Natural Gas (“QCLNG”) pipeline and facilities project in Australia, in which
McConnell Dowell is a 50% joint venture partner, achieved substantial completion on 30 November 2013.
The commercial claims resolution process remains challenging as described in the SENS announcement
dated 16 January 2014.
The Construction and Engineering: South Africa and Rest of Africa segment remains constrained by
the ongoing delays in new public infrastructure projects. The Group has partly mitigated this by
pursuing opportunities in the private sector. This has led to some significant project awards in
the interim period and has the potential for additional opportunities. Whilst the project pipeline
is showing improvement, the operating results of businesses within this region remain constrained
by labour disruptions, low margin major contracts and the high level of fixed overhead expenses.
Aveng Group is taking steps to reduce this impact through initiatives such as the introduction of a
strengthened management team, improved project execution and a renewed focus on commercial oversight.
The benefits from these initiatives are starting to reflect in the results of the business and savings
are expected from the 2015 financial year.
The general downturn in the mining and commodity markets is reflected in the lower levels of
activity at some of the larger contracts in the Mining segment. The 18% growth in the two-year
order book reflects the award of new contracts and the renewal of existing contracts and is
expected to have a positive impact on performance in the next financial year.
Despite the impact of labour disruptions which affected production in the Manufacturing and
Processing segment, this segment’s performance improved mainly as a result of expansion into
new regions.
The Group’s two-year order book remains robust at R36,7 billion at 31 December 2013 with increased
activity in the Mining and Construction and Engineering: South Africa and Rest of Africa operating
segments, tempered somewhat by a decline in the Construction and Engineering: Australasia and Asia
operating segment due to the completion of a number of large projects.
Financial performance
Revenue increased by 11% to R27,6 billion over the comparative period as a result of significant
activity on a number of large projects within the Construction and Engineering: Australasia and
Asia operating segment. This was aided by the strengthening of the Australian Dollar against the Rand
by 6%.
The direct cost of labour disruptions on the Group’s net operating earnings amounted to R140
million compared with R115 million in the comparative period, attributable as follows:
• Aveng Grinaker-LTA of R96 million (2012: R35 million);
• Manufacturing and Processing operating segment of R44 million (2012: R49 million); and
• The Mining operating segment was not affected by labour disruptions in the period
under review (2012: R31 million).
Net operating earnings of the Group decreased by 8% to R503 million, which was mainly attributable
to a loss in Aveng Grinaker-LTA and a weaker performance by the Mining operating segment due to the
cancellation of a contract in Zambia.
The Manufacturing and Processing operating segment achieved significant growth driven by increased
volumes mainly due to the following factors:
• increased sleeper sales into new regions such as Mozambique and Zambia;
• new product lines within Duraset; and
• tile and paving sales increases due to low cost housing developments.
Net financing expenses were R83 million compared with net finance earnings of R12 million in the
comparative period. This was mainly due to a higher borrowings position of R2,6 billion compared to
R1,5 billion at December 2012 secured to improve the liquidity position of the Group and funding of
working capital primarily on the large Queensland Curtis Liquefied Natural Gas and Gold Coast Rapid
Transit projects in Australia.
Earnings from equity-accounted investments increased to R44 million from a loss of R16 million due
to earnings from McConnell Dowell’s Middle East and Asian investments.
Earnings per share (“EPS”) of 82,4 cents and headline earnings per share (“HEPS”) of 82,1 cents
decreased by 22% and 21% respectively (2012: EPS 105 cents and HEPS 104,5 cents per share).
Given the operating environment, the Group was prudent with capital expenditure over the period.
Accordingly, this reduced by 17% to R649 million of which R329 million related to expansion and R320
million to replacement outlay. The majority of the amount was spent as follows:
• R151 million in support of new projects at McConnell Dowell;
• R95 million relating to fleet expansion at Aveng Moolmans;
• R87 million relating to fleet replacement at Aveng Moolmans;
• R76 million at Aveng Steel comprising R61 million for new production facilities and R15 million
for the implementation of the new ERP system;
• R60 million spent by Aveng Properties on the Kathu housing project for Aveng Moolmans’
employees;
• R55 million as part of the completion of the Infraset concrete pipe, culverts and sleeper
factory in Tete, Mozambique;
• R39 million at Aveng Grinaker-LTA, comprising R17 million in plant replacement and R22 million
for new plant for the Mozambique operations; and
• R20 million relating to the implementation of a centralised payroll system.
Amounts due from contract customers remained largely flat compared with June 2013, consisting
mainly of work-in-progress and receivables within McConnell Dowell, Aveng Grinaker-LTA and Aveng Mining.
On a comparative period basis, this amount remains high due to the significant activity on the
major projects within McConnell Dowell.
Amounts due to contract customers have remained stable compared to June 2013. Progress billings constitute
the majority of this balance, with McConnell Dowell contributing R1 billion.
Included in other payables is an advance payment received from a customer within the Construction
and Engineering: Australasia and Asia operating segment. The terms attaching to this advance payment
do not permit its offset against project related costs.
Operating free cash outflow of R178 million for the period under review was reported. This is
compared with an outflow of R521 million for the comparative period and an outflow of R1 010 million for
the immediate preceding six months ended 30 June 2013. This positive movement is mainly
attributable to:
• optimisation of planned capital expenditure;
• improved receivable recoveries at Aveng Grinaker-LTA, McConnell Dowell and Aveng Steeledale;
and
• success fees earned on the Gouda renewable energy project.
The Group’s net cash position remained stable at R2,4 billion, reversing the declining trend
experienced in December 2012 and June 2013. The stable cash position was mainly a result of
increased receivable recoveries during the reporting period, most notably at Aveng Grinaker-LTA,
McConnell Dowell and Aveng Steeledale.
OPERATING REVIEW
Construction and Engineering: Australasia and Asia
This operating segment comprises McConnell Dowell Construction, Tunnelling, Electrix and Pipeline
business units.
Revenue increased by 17% to R14,9 billion (11% increase in Australian Dollar terms amounting to
AUD1,6 billion) against the comparative period. This is reflective of high activity on a number
of large projects such as the QCLNG pipeline, Hay Point Berth (“Hay Point”), Australia Pacific
Liquid Natural Gas Pipeline (“APLNG”) and Gold Coast Rapid Transit (“GCRT”). Performance in Rand
terms was supported by a strong Australian Dollar.
Net operating earnings decreased by 2% against the comparative period, having been impacted by
continued uncertainty on the QCLNG project and the execution challenges experienced on the GCRT
project.
The Australian Construction business unit’s performance is reflective of the increased activity on
major projects such as GCRT and Hay Point reporting revenue of R5,8 billion.
The GCRT project, which involves the design, construction and delivery of a 13-kilometer light
rail corridor along Australia’s Gold Coast, is the first of its kind in the State of Queensland. The
project encountered access, services and weather-related delays during the final quarter of the 2013
financial year. However, the project is still on-track for completion by June 2014. The commercial claims
on this project are significant and complex and management is working on resolving these in the
shortest possible timeframe.
McConnell Dowell continues to work collaboratively with the EPCM (engineer, procure, construct and
manage) contractor to complete the Hay Point project which was converted in the 2013 year to a cost
plus basis contract. Inclement weather experienced during the interim period resulted in some
delays; however the project is expected to be completed by the end of the financial year.
Overseas construction reported a marginal increase in revenue which is reflective of competitive
markets in South East Asia and the Middle East. Growth opportunities are being pursued in the
transport, power and marine sector. The Vale Jetty in Malaysia was substantially completed on schedule in
September 2013.
The Pipelines business unit maintained strong growth, reporting revenue growth of 39% to
R5 billion, as the large Liquefied Natural Gas (LNG) projects in Queensland progress toward completion.
The APLNG (90% complete) and the Gladstone Liquified Natural Gas pipeline (70% complete) projects are
progressing according to schedule and are expected to be completed by the end of the financial year.
The QCLNG project is substantially complete, with the first gas transported in December 2013.
Segment profitability, however, continues to be impacted by the QCLNG project. Although the QCLNG
joint venture met the project completion milestones successfully and the project achieved
substantial completion on 30 November 2013, the commercial claims process remains challenging. The
second part of the commercial claims arbitration is being prepared for submission to the arbitration
board. The QCLNG joint venture was unsuccessful in the first part of the commercial claims arbitration
process and submitted its leave to appeal on 15 January 2014.
The Electrix business unit continued its good performance, reporting a 28% increase in revenue to
R1,6 billion. Aveng Group anticipates a continuation of good results from the business into the
second half of the financial year due to the strong work in hand position of the division.
The Tunnelling business unit is performing ahead of expectations, reporting revenue growth of 91%.
This is a reflection of high activity on the Waterview Project and the Beauty World Mass Rapid
Transport Station project in Singapore. These projects are progressing well and are anticipated to be
completed within schedule. Opportunities are being pursued in the infrastructure and transport
sectors. The award of a significant project in Singapore in September 2013 is an indication of growth in
the transport sector.
Construction and Engineering: South Africa and Rest of Africa
This operating segment comprises the Aveng Grinaker-LTA and Aveng Engineering.
This segment no longer includes Aveng Steel Fabrication, Aveng Manufacturing Facades and Aveng
Manufacturing Automation & Control Solutions, effective 1 July 2013. Comparatives have been
adjusted accordingly.
Revenue increased by 11% to R4,2 billion, mainly due to commencement of major contracts at Aveng
Grinaker-LTA and increased activity on the Sishen and Gouda renewable energy projects at Aveng
Engineering.
The operating segment reported a net operating loss of R334 million (R70 million loss in 1H 2013
and R826 million loss in 2H 2013) due to labour disruptions, execution of projects at lower margins
and operational challenges on some major contracts experienced at Aveng Grinaker-LTA. This was partly
offset by a marginal net operating earnings at Aveng Engineering as a result of cost optimisation
strategies that were implemented.
Aveng Grinaker-LTA
Revenue increased by 10% to R3,8 billion. This increase was a result of major contracts that
ramped up during the period under review. These include the Nacala rail contract in Mozambique and the
Majuba Rail contract, contributing R352 million and R203 million respectively to revenue.
The net operating loss emanated from:
• current projects executed at lower margins;
• labour disruptions;
• operational challenges on some major contracts; and
• high level of fixed overhead costs relative to margins.
Projects in the Lephalale area were impacted by labour disruptions, which negatively affected
production, resulting in project delays.
Despite the aforementioned labour disruptions and challenges in gaining access to work areas,
focus continues on accelerating progress on the Medupi Power Station project.
The Mokolo Crocodile pipeline project achieved good execution progress during the interim period,
with the majority of the mainline pipes delivered and installed. In total 10km of pipe was installed
between October and December 2013, a 100% increase on the pipe production for the life of the
project to date. Currently 23km of pipe has been installed out of a total 43km. This major milestone
means that the project is on schedule to complete the pipe installation by May 2014.
The Majuba Rail project was adversely affected by inclement weather and labour disruptions during the
interim period. A revised programme was accepted by the customer and the project is on track for
completion by August 2015.
The Nacala contract in Mozambique is behind schedule largely due to delays experienced in clearing
plant through customs and transportation of staff to site. Project completion is expected in August
2014.
The following initiatives have been implemented to improve the performance of Aveng Grinaker-LTA:
• the strengthening of the new management team with strong experience within the construction
industry, including a new Managing Director and experienced project and commercial managers;
• operating cost reduction;
• improved project execution to ensure projects achieve the required margin by:
- accelerating work programmes for critical areas that have impending milestones
- restructuring project teams to re-energise focus and increase production capacity on site
- formalising the claims strategy to achieve finalisation of current claims
- mitigating levying of delay damages
• a re-focus of Aveng Grinaker-LTA to a discipline-led business which will deliver its operations
through four primary business units namely: Aveng Grinaker-LTA Civil Engineering, Aveng
Grinaker-LTA M&E, Aveng Grinaker-LTA Building and Aveng Grinaker-LTA Coastal.
• emphasis has been placed on the reduction of operating expenses; although the impact for the
2014 year will be insignificant, savings will start reflecting from 2015 onwards.
Aveng Engineering
This operating group consists of the previous businesses of Aveng E+PC and Aveng Water.
The operating group has now been restructured to service specific requirements within the
Minerals, Water and Power industries.
This operating group includes the construction component of the Renewable Energy business which
commenced operation during the second half of the 2013 financial year. Management of the Renewable
Energy projects won by the Group under the Department of Energy Renewable Energy Feed-in-Tariff (REFIT)
programme are included under the Power division.
The revenue of Aveng Engineering increased by 24% to R402 million against the comparative period,
mainly due to the increased activity on the Sishen and Gouda renewable energy projects.
Lack of new work and delays experienced on the eMalahleni Phase 2 Expansion Project still
continues to negatively impact the Water division’s revenue.
Cost optimisation strategies have been implemented within the Aveng Engineering operating group
which have resulted in a net operating earnings of R2 million compared to a loss of R19 million in the
comparative period.
Construction on the Gouda and Sishen projects were approximately 12% complete as of December 2013,
with Gouda expected to be complete by May 2015 and Sishen by December 2014. Progress continues
steadily on both projects.
Mining
This operating segment comprises Aveng Moolmans and Aveng Mining Shafts & Underground.
The segment reported a 9% decrease in revenue to R3,5 billion and a decline in net operating
earnings of 24% to R295 million compared to the comparative period. This downturn in performance is
primarily attributable to the general downturn in the mining and commodity market.
Aveng Moolmans, although not reaching the levels of the comparative period, continued to deliver
strong results. The reduction in earnings is attributable to lower revenue due to the cancellation of
the contract in Zambia. Post 31 December 2013 it was announced that the Iduapriem contract in Ghana
and the Star and Comet pit contract in Tanzania for AngloGold Ashanti will not be renewed, impacting
negatively on the forecasted earnings for the second half of the financial year. Aveng Moolmans was
however successful in concluding one new project in South Africa and the extension of two existing
contracts in southern Africa, which increased the two-year order book by 8%. Available fleet will be
utilised for the new and extended projects.
Aveng Mining Shafts & Underground performed below expectations due to margin slippage at some
South African projects and problems experienced on a mining contract in Chile. Two deep level shaft
sinking contracts in the coal and platinum market delivered less than expected margins due to unforeseen
geotechnical issues, which have now largely been resolved as a result of the contracts entering
main-sink phase.
The improvement in the two-year order book for this operating group is expected to only realise benefits in
the next financial year.
Manufacturing and Processing
This operating segment comprises Aveng Manufacturing and Aveng Steel, and now includes Aveng Steel
Fabrication, Aveng Manufacturing Facades, and Aveng Manufacturing Automation & Control Solutions,
effective 1 July 2013. Comparatives have been adjusted accordingly.
Revenue increased by 6% to R5,3 billion and net operating earnings increased by 113% to
R162 million from R76 million in the comparative period.
Aveng Manufacturing
The operating group consists of Aveng Manufacturing Facades, Aveng Manufacturing Duraset, Dynamic
Fluid Control (“DFC”), Aveng Manufacturing Infraset, Aveng Manufacturing Automation & Control
Solutions (“A&CS”), and Aveng Manufacturing Lennings Rail Services (“LRS”).
This operating group no longer includes Steeledale, which now forms part of the Aveng Steel
operating group, effective 1 July 2013. Comparatives have been adjusted accordingly.
Revenue grew by 30% to R1,9 billion in relation to the comparative period, accompanied by a
significant increase in net operating earnings.
The Facades division benefited from significant projects such as the Sandton City’s Atrium on 5th
and the Pretoria Towers.
Revenue from DFC increased due to higher international sales volumes and was further boosted by
the strengthening of the US Dollar against the Rand.
New mining product lines within Duraset assisted in improving revenue. The division did not
experience the level of labour disruptions in the platinum sector as in the previous year.
The Infraset division performed particularly well due to increased sleeper sales into new regions,
such as Mozambique and Zambia, as well as improved tile and paving sales into low cost housing
developments.
A&CS benefited from earlier than planned major shutdowns in the petrochemical industry.
Revenue for LRS decreased due to the conclusion of the FMG Rail Construction project in
Australia, the impact of which was partly mitigated by the commencement of the Nacala Section Two project.
Aveng Steel
The newly constituted operating group consists of Aveng Trident Steel, Aveng Steel Fabrication and
Aveng Steeledale.
All business units within the steel cluster were negatively impacted by reduced steel volumes due
to labour disruptions in both the construction and automotive sectors during the interim period as
sales volumes were adversely affected. This resulted in the operating group reporting a decline in
revenue of 3% to R3,4 billion from R3,5 billion in the comparative period. Despite this the operating
group benefited from the introduction of centralised steel procurement and inventory management.
Labour impact was most acute at Aveng Trident Steel, which saw revenue for the period reduced by
5% against the comparative period. The lower sales volumes were partly mitigated by improved selling
prices.
Aveng Steeledale, which recorded a substantial loss in the previous financial year, benefitted
from restructuring of activities, which have placed the business on a sound footing to return to
profitability in the second half of the financial year.
Aveng Steel Fabrication underwent a right-sizing process to align overheads to the current
diminished activities within the structural steel sector. Additionally, the operating group exited from
loss-making investments. The benefits of the aforementioned are expected to be seen in the second half
of the financial year.
Administration
Administration, which comprises concessions, corporate services, corporate-held investments including
properties, and consolidation eliminations reflected improved net operating earnings for the current period
due to increased recovery of centralised corporate services office costs.
The segment reported net operating earnings of R189 million compared to a net operating loss of
R47 million in the comparative period. The improved performance is due to:
• R111 million net success fee earned on the Gouda renewable energy project which reached
financial close in July 2013;
• mark-to-market gains on hedging instruments;and
• a change in philosophy regarding the recovery of centralised administration costs to better
reflect usage of the support services.
Two-Year Order book
Increased activity in the Mining and Construction and Engineering: South Africa and Rest of Africa
operating segments were experienced. However, a 15% decline in the Construction and Engineering:
Australasia and Asia operating segment was reported due to subdued infrastructure markets. This
resulted in a stable two-year order book of R36,7 billion reported for 31 December 2013.
The substantial completion of major projects such as QCLNG and APLNG drove the decrease in the
Construction and Engineering: Australasia and Asia operating segment’s two-year order book. In
Australian Dollar terms the order book decreased by 18% in December 2013 compared to 30 June 2013. The
two-year order book was boosted in January 2014 with the award of projects totalling AUD 400 million,
most notably the Melbourne Port Webb-dock project.
The Mining operating segment’s two-year order book increased by 18% to R7,1 billion at 31 December
2013. This increase is mainly attributable to contracts awarded in Namibia and Botswana in December 2013,
which included the Langer Heinrich contract in Namibia and an extension of the Phoenix mine contract
in Botswana. Lower revenue levels are expected despite the increasing order book.
The Construction and Engineering: South Africa and Rest of Africa operating segment’s two-year
order book increased by 22% to R8,5 billion from June 2013 reflecting the award of some significant
projects during the interim period including the design and construction of the Strand Private
Hospital, the construction of the Sasol Head Office and the Mall of the South in South Africa.
OUTLOOK AND PROSPECTS
The Group will be seeking to optimise its current business portfolio focusing on cash management
and financial returns whilst significantly reviewing its cost structures, operational efficiency as
well as improving project delivery.
The impact of changes in foreign currency and possible future labour disruptions on the results of
the Group cannot be quantified.
Key issues which will impact on the second half results are:
• the QCLNG and GCRT projects will remain a material financial risk to both profit and cash flow
through to completion of the GCRT project and the outstanding claim processes and will continue to
receive intense focus;
• under the leadership of the new Managing Director, Aveng Grinaker-LTA will continue with its
turnaround initiatives;
• Aveng Manufacturing should benefit from the commissioning of the manufacturing plant in Tete in
Mozambique with a specific focus on concrete sleeper products;
• Aveng Steel is expected to benefit from the strengthening of steel prices and improved sales
volumes;
• For Aveng Mining:
- the Aveng Moolmans business unit will continue to manage its reduced activity and consequently
revenue levels, whilst advancing preparations to ramp up its new contract awards that will be
commissioned in the new financial year;
- the Aveng Mining Shafts & Underground business unit will focus on recovering margins at the
two deep level shaft sinking contracts as well as preparing for its recent contract awards that will
be commissioned in the new financial year;
• Aveng Engineering will focus on the execution of its Renewable Energy projects.
The Group anticipates improved trading conditions in the second half of the year against its comparative period.
By order of the Board
AWB Band HJ Verster
(Chairman) (Chief Executive Officer, and acting Group Financial Director)
19 February 2014
Morningside, Sandton
DIRECTORS
AWB Band*# (Chairman), HJ Verster (Chief Executive Officer and acting Group Financial Director),
JJA Mashaba (Group Human Resources Director), DG Robinson (Australian), PJ Erasmus*#, MA Hermanus*#,
MJ Kilbride*#, RL Hogben*#, TM Mokgosi-Mwantembe*#, MI Seedat*#, PK Ward*#, EK Diack*#, KW Mzondeki*#
(*non-executive) (#independent)
COMPANY SECRETARY
M Nana
REGISTERED OFFICE
204 Rivonia Road, Morningside, Sandton, 2057
PO Box 6062, Rivonia, 2128, South Africa
Telephone +27 11 779 2800
Telefax +27 11 784 5030
REGISTRARS
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107, South Africa
Telephone +27 11 370 5000
Telefax +27 11 370 5560
PO Box 61051, Marshalltown, 2107
SPONSOR
J.P. Morgan Equities South Africa Proprietary Limited
Registration number: 1995/011815/06
1 Fricker Road, cnr Hurlingham Road, Illovo, 2196, South Africa
Telephone +27 11 537 5333
Telefax +27 11 507 0770
DISCLAIMER
Certain Statements in this release that are neither reported financial results nor other
historical information, are forward looking statements, including but not limited to, statements that are
predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives
about the Company’s operations and financial conditions. They are based on Aveng Limited’s best
estimates and information at the time of writing. They are nonetheless subject to significant uncertainties
and contingencies many of which are beyond the control of the Company. Unanticipated events will
occur and actual future events may differ materially from current expectations due to new business
opportunities, changes in priorities by the Company or its joint operations as well as other factors. Any
of these factors may materially affect the Company’s future business activities and its ongoing
results. Undue reliance should not be placed on such statements because, by their nature, they are
subject to known and unknown risks and uncertainties and can be affected by other factors that could
cause actual results and Company plans and objectives to differ materially from those expressed or
implied in the forward looking statements (or past results).
www.aveng.co.za
Date: 25/02/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS. |