AEG 201411040026A
Aveng Group Chairman Angus Band's statement to shareholders at the Annual General Meeting held on 4 November 2014
AEG - Aveng Limited – Business Update
AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000111829
SHARE CODE: AEG
(“Aveng Group”, “Aveng” or "Group")
AVENG GROUP CHAIRMAN ANGUS BAND’S STATEMENT TO SHAREHOLDERS AT
THE ANNUAL GENERAL MEETING HELD ON 4 NOVEMBER 2014
BUSINESS UPDATE
In line with the general economic conditions experienced in the Group’s key markets of
South Africa and Australia, Aveng continues to experience difficult trading conditions. In a
continuation of the trends evidenced in the preceding financial year, the South African
market continues to be challenging due to the low levels of infrastructure-related spend,
the impact of lower mining activities and labour disruptions. Trading conditions in Australia
remain difficult with the general social and infrastructure-related projects not yet
compensating for the reduced mining infrastructure spend. Despite these market
challenges, the Mining and Manufacturing businesses yet again delivered solid
performances, whilst the execution of the recovery and stabilisation plan continued to
progress well.
Construction and Engineering - Australasia and Asia: The completion of multi-year major
mining and infrastructure contracts will result in, as anticipated, lower revenue for the
Australian business. However, McConnell Dowell is pursuing opportunities in the general
infrastructure environment, most notably rail, roads, pipeline and oil and gas opportunities.
South-East Asia and New Zealand continue to perform well. As previously reported,
McConnell Dowell continues to close-out the remedial work and undertake demobilisation
actions associated with the Gold Coast Rapid Transit (“Gold Coast”) contract. The process
to finalise and resolve claims with the affected counterparties has been intensified. The
arbitration process for the Queensland Curtis Liquid Natural Gas (“QCLNG”) contract is
progressing in line with the agreed timelines with no material change in the status thereof.
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It is expected that the commercial negotiations will be protracted, and thus the final
outcome remains an uncertain and material risk to the Group.
Construction and Engineering - South Africa and rest of Africa: This segment remains
constrained due to the lack of investment in infrastructure. Whilst the recovery and
stabilisation process within Aveng Grinaker-LTA is progressing, the pace thereof is slower
than planned. The completion of legacy contracts continues to negatively impact current
performance. Good progress is being made on the Nacala Rail Link, the Mall of the South
and the Sasol Corporate Head Office contracts. Given the soft trading conditions, it is
pleasing to note that Aveng Grinaker-LTA was able to increase its order book by 15%
from 30 June 2014 to 30 September 2014.
Mining: The mining business continues to deliver good results considering the general
downturn in the mining and commodity sector, assisted by efficiency initiatives to sustain
operating margins. Aveng Moolmans contracts’ have generally performed well, with the
Nkomati Nickel Mine contract commencing operations in the first quarter of the financial
year. The Chuquicamata Copper Mine in Chile continues to receive attention at the
highest level to resolve operational issues, and settle outstanding claims.
Manufacturing and Processing: Aveng Manufacturing is performing well due to strong
demand for concrete products, rail construction and maintenance services in Southern
Africa. This operating group will continue to benefit from increased rail opportunities
across Southern Africa. Aveng Steel was negatively impacted by the steel sector labour
disruptions and challenging market conditions, with no improvement in demand or prices
expected to materialise in the financial year.
The recovery and stabilisation plan implemented by the Board during the previous
financial year is progressing, most notably relating to actions to restore liquidity. The
repayment of advance payments associated with the QCLNG contract, the completion
activities on the Gold Coast contract, the second payment to the Competition Commission
in terms of the administrative levy settlement and working capital requirements associated
with major contracts continue to affect cash flow.
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In line with the Board’s plan to improve liquidity over the short term, the Group has
implemented the following:
- Successfully placed a R2 billion senior unsecured convertible bond, listed on the
Johannesburg Stock Exchange (“JSE”). Authority was granted at the General Meeting
on 19 September 2014 to equity-settle the bond conversion.
- Following the announcement on 19 September 2014, the sale and resulting receipt of
the associated consideration of Electrix has further strengthened Aveng’s liquidity
position by approximately R1,4 billion.
- The process of disposing of the majority of the Group’s property portfolio in South
Africa is well advanced. The transaction is expected to be finalised in the second half
of the financial year following the required regulatory approvals
The above actions will enable Aveng to concurrently pursue contract claims to a positive
conclusion whilst taking advantage of growth opportunities and combined with current
facilities, will assist in securing the liquidity of the Group.
Order book: the Group’s two year order book (excluding Electrix) decreased by 2% from
R37,2 billion (R40,9 billion including Electrix) at 30 June 2014, to R36,5 billion (excluding
Electrix) at 30 September 2014. The Construction and Engineering: Australasia and Asia
operating segment’s order book decreased by 9% in Australian dollar terms from AUD2,0
billion (excluding Electrix) to AUD1,8 billion. Construction and Engineering: South Africa
and rest of Africa’s order book increased by 13% from June 2014 to R8,3 billion. The
Mining order book increased by 13% to R9,7 billion with South Africa gaining significantly
relative to non-South African operations.
INTEGRATED REPORT
The Group issued its 2014 Annual Integrated Report to stakeholders on 22 September
2014. The consolidated annual financial statements and Integrated Report have been
published on the Group website, www.aveng.co.za.
REPORTING
The interim results for the six months to 31 December 2014 will be released on SENS on
17 February 2015 when the Group will be updating the market on its business in a
presentation in Johannesburg on the same day, and in Cape Town on 18 February 2014.
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The presentation will be available for all stakeholders on the Group’s website,
www.aveng.co.za
DISCLAIMER
This announcement includes forward-looking statements that reflect the current views or
expectations of the Board with respect to future events and financial and operational
performance. All statements other than statements of historical fact are, or
may be deemed to be, forward-looking statements, including, without limitation, those
concerning: the Group’s strategy; the economic outlook for the industry; use of the
proceeds of any rights offer; and the Group’s liquidity and capital resources and
expenditure.
These forward-looking statements speak only as of the date of this announcement and are
not based on historical facts, but rather reflect the Group’s current expectations
concerning future results and events. The Group undertakes no obligation to update
publicly or release any revisions to these forward looking statements to reflect events or
circumstances after the date of this announcement.
On behalf of the Board
Morningside, Sandton
04 November 2014
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
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