AVENG LIMITED - Updated Pro Forma Financial inform17 Mar 2017
AEG 201703170072A
Updated Pro Forma Financial information of the Aveng Group

AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000111829
SHARE CODE: AEG
("Aveng", "the Company" or “the Group”)



UPDATED PRO FORMA FINANCIAL INFORMATION OF THE AVENG GROUP


Aveng shareholders (“Shareholders”) are referred to the announcement dated 27 February 2017 advising that the
Company had posted a circular to Shareholders (“Grinaker-LTA Circular”, “Circular”). The purpose of the Circular was to
provide Shareholders with information relating to the proposed disposal of a 51% beneficial interest in the Grinaker-LTA
business, owned and operated by Aveng Africa Proprietary Limited, to Kutana Construction Proprietary Limited (“Kutana
Construction”) and the subsequent issue of the non-voting equity instrument by Kutana Construction to Aveng Africa
resulting in Aveng disposing of an effective 45% economic interest in the Grinaker-LTA business to Kutana Construction
(“Disposal”). The purpose of the Circular was to provide information to enable Aveng shareholders to make an informed
decision in respect of the relevant resolutions contained in the Circular and to convene a general meeting at which
shareholders will be requested to vote on the resolutions to approve the Disposal.
Following the announcement of the Group’s interim financial results for the six months ended 31 December 2016, Aveng
is required to update the pro forma financial information contained in the Circular using the most recently published
financial results. Updated pro forma financial information is now provided for the six months ended 31 December 2016
below and should be considered in conjunction with the details included in the previously published Circulars.



Basis of preparation



The pro forma financial Information has been prepared to provide details of how the Steeledale, ACP and Grinaker-LTA
Transactions, might affect the financial position and results of operations of the Aveng Group for the six month period
ended 31 December 2016. The pro forma financial information is based on the interim results of Aveng for the six month
period ended 31 December 2016, adjusted for the pro forma financial effects of the Steeledale Transaction, cumulatively
the Steeledale and ACP Transactions and cumulatively the Steeledale, ACP and Grinaker-LTA Transactions. The details
of the Steeledale and ACP Transactions are included in the relevant circulars to shareholders dated Wednesday, 12
October 2016 while the details of the Grinaker-LTA Transaction is included in the Circular dated Monday, 27 February
2017. The pro forma financial effects are provided for illustrative purposes only.


The Directors are responsible for the preparation of the pro forma financial information. The pro forma statement of
financial position of the Aveng Group at 31 December 2016 has been prepared on the assumption that each of the
Steeledale Transaction, ACP Transaction and Grinaker-LTA Transaction, was effected on 31 December 2016. The pro
forma statement of comprehensive earnings has been prepared on the assumption that each of the Steeledale
Transaction, ACP Transaction and Grinaker-LTA Transaction was effected on 1 July 2016.


Because of its nature, the pro forma financial information may not fairly present the Aveng Group’s statement of financial
position and results of operations after each of the Steeledale Transaction, ACP Transaction and Grinaker-LTA




                                                                                                                        1
Transaction. The pro forma financial information has been prepared in accordance with the Group’s accounting policies
and the revised SAICA Guide on Pro forma Financial Information.


The pro forma financial information, as set out below, should be read in conjunction with the circulars to Aveng
Shareholders relating to the Steeledale, ACP and Grinaker-LTA Transactions. A copy of the reporting accountant’s report
on   these   pro    forma   financial   effects   can   be   obtained    from   the   company’s     registered   office.




                                                                                                                      2
Pro forma statement of comprehensive earnings of the Aveng Group for the six months ended 31 December 2016

                                  31                     Steeledale Transaction                     ACP Transaction                   Grinaker-LTA Transaction               Total
                                  December
                                  2016

                                              Transaction     Steeledale          After         Transaction     After      IFRS 2     Managem       Dilution     Transacti
                                                 Costs        operations                          Costs                    Charge      ent fee &                 on Costs
                                                                                                                                        Kutana
                                                                                                                                      Executive
                                                                                                                                       Remuner
                                                                                                                                         ation

                                               Column 1        Column 2       Column 3           Column 4     Column 5    Column 6     Column 7    Column 8      Column 9    Column 10

ZARm                              Reviewed     Pro forma      Pro forma      Pro forma          Pro forma     Pro forma   Pro forma   Pro forma    Pro forma     Pro forma   Pro forma

Revenue                            14,296                        (502)            13,794                       13,794                                                         13,794

Cost of sales                      (13,336)                       510         (12,826)                         (12,826)                                                       (12,826)

Gross earnings                         960         -               8               968               -           968                                                            968

Other earnings                         77                        (27)               50                           50                                                             50

Operating expenses                 (1,039)        (7)             29              (1,017)           (2)        (1,019)       (9)          (4)                       (3)       (1,035)

Loss from equity-accounted               3                         -                3                             3                                                              3
investments

Operating earnings / (loss)              1        (7)             10                4               (2)           2          (9)          (4)                       (3)         (14)

South Africa government             (165)                          -              (165)                         (165)         -            -           -             -         (165)
settlement

Net operating earnings / (loss)     (164)         (7)             10              (161)             (2)         (163)        (9)          (4)          -            (3)        (179)




                                                                                            3
                                                    Column 1    Column 2    Column 3      Column 4    Column 5    Column 6    Column 7    Column 8    Column 9    Column 10

ZARm                                     Reviewed   Pro forma   Pro forma   Pro forma     Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma

Impairment of property, plant and          (5)                      -          (5)                       (5)                                                         (5)
equipment and intangible assets

Profit on sale of property, plant and       3                                  3                         3                                                           3
equipment

Earnings / (loss) before financing        (166)        (7)         10         (163)          (2)        (165)        (9)         (4)          -          (3)        (181)
transactions

Finance earnings                            98                     (1)         97                        97                                                          97

Interest on convertible bonds             (117)                               (117)                     (117)                                                       (117)

Other finance expenses                    (207)                     -         (207)                     (207)                                                       (207)

Earnings / (loss) before taxation         (392)        (7)         9          (390)          (2)        (392)        (9)         (4)          -          (3)        (408)

Taxation                                   (37)                     -         (37)                      (37)                     1                                  (36)

Loss for the period                       (429)        (7)         9          (427)          (2)        (429)        (9)         (3)          -          (3)        (444)

Other comprehensive earnings

Other comprehensive earnings to                                                                                                                                       -
be reclassified to earnings or loss
in subsequent periods (net of
taxation):

Exchange differences on                   (709)         -                     (709)           -         (709)                                                       (709)
translating foreign operations

Other comprehensive earnings /            (709)         -           -         (709)           -         (709)         -           -           -           -         (709)
(loss) for the period, net of taxation




                                                                                      4
                                                    Column 1    Column 2    Column 3       Column 4    Column 5    Column 6    Column 7    Column 8    Column 9    Column 10

ZARm                                     Reviewed   Pro forma   Pro forma   Pro forma      Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma

Total comprehensive earnings /            (1,138)      (7)         9         (1,136)          (2)       (1,138)       (9)         (3)          -          (3)       (1,153)
(loss) for the period

Total comprehensive earnings /                                                                                                                                         -
(loss) for the period attributable to:

Equity-holders of the parent              (1,102)      (7)         9         (1,100)          (2)       (1,102)       (9)         (3)          -          (3)       (1,117)

Non-controlling interest                   (36)         -                     (36)             -         (36)                                                        (36)

                                          (1,138)      (7)         9         (1,136)          (2)       (1,138)       (9)         (3)          -          (3)       (1,153)

(Loss) / earnings for the period                                                                                                                                       -
attributable to:

Equity-holders of the parent              (392)        (7)         9          (390)           (2)        (392)        (9)         (3)          -          (3)        (407)

Non-controlling interest                   (37)         -           -         (37)             -         (37)                                                        (37)

                                          (429)        (7)         9          (427)           (2)        (429)        (9)         (3)          -          (3)        (444)

Other comprehensive earnings for                                                                                                                                       -
the period, net of taxation:

Equity-holders of the parent              (710)         -           -         (710)            -         (710)         -           -           -           -         (710)

Non-controlling interest                    1           -           -          1               -           1           -           -           -           -          1

                                          (709)         -           -         (709)            -         (709)         -           -           -           -         (709)

Results per share (cents)

Headline earnings                         (391)        (7)         9          (389)           (2)        (391)        (9)         (3)          -          (3)        (406)

Loss - basic                              (98.8)                             (98.4)                      (98.9)                                                     (102.6)


                                                                                       5
                                         Column 1    Column 2    Column 3      Column 4    Column 5    Column 6    Column 7    Column 8    Column 9    Column 10

ZARm                          Reviewed   Pro forma   Pro forma   Pro forma     Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma

Loss - diluted                 (97.5)                             (97.1)                     (97.6)                              (1.7)                  (102.8)

Headline loss - basic          (98.5)                             (98.1)                     (98.6)                                                     (102.3)

Headline loss - diluted        (97.2)                             (96.8)                     (97.3)                              (1.7)                  (102.6)

Net asset value                12,436                             12,429                    13,549                                                      12,410

Tangible net asset value       9,904                              11,024                    11,024                                                       9,878

NAV per share                   31.3                               31.3                      34.1                                                        31.3

TNAV per share                  25.0                               27.8                      27.8                                                        24.9



Number of shares (millions)

In issue                       416.7                               416.7                     416.7                               416.7                   416.7

Weighted Average               396.8                               396.8                     396.8                               396.8                   396.8

Diluted weighted average       402.1                               402.1                     402.1                               402.1                   402.1




                                                                           6
Notes to the pro forma statement of comprehensive earnings of the Aveng Group for the six months ended 31
December 2016:

1.     The “31 December 2016” column presents the financial information relating to the Aveng Group, which has been
       extracted from the published results of the Aveng Group for the six months ended 31 December 2016;

Steeledale Transaction


2.      Column 1 and 2 present the following adjustments relating to the Steeledale Transaction that was approved by
        shareholders at a general meeting on Monday, 14 November 2016 and is effective 1 January 2017. For the purposes
        of this pro forma statement of comprehensive earnings it has been assumed that the selling price of the Business
        adjusts with its net asset value as at 31 December 2016.

       a)   Column 1: the estimated costs associated with this transaction of R7 million which will be expensed and is not
            expected to continue;
       b)   Column 2: the deaggregation of Steeledale's trading results for the six months ending 31 December 2016. No tax
            adjustment is assumed as Aveng Africa is in a tax loss position on which further deferred tax assets are limited.
            This adjustment is expected to be ongoing.
3.      Column 3 presents the pro forma financial effects of Aveng subsequent to the Steeledale Transaction.



ACP Transaction

4.     Of the original sale of the ACP Investment Portfolio, comprising the Blue Falcon Equity Interest, the Imvelo Equity
       Interest, the Windfall Equity Interest and the N3TC Sale Shares, only the N3TC Share disposal was effective before
       31 December 2016.
5.     Column 4 presents the following adjustment relating to the ACP transaction that was approved by shareholders at a
       general meeting on Monday, 14 November 2016 and was partially effective at 31 December 2016:
            a)   Column 4: the estimated costs associated with this transaction is R4 million of which R2 million had been
                 expensed as at 31 December 2016 and R2 million will still be expensed. This adjustment will not have an
                 ongoing effect on Aveng’s statement of comprehensive earnings.
6.     Column 5 presents the pro forma financial effects of Aveng subsequent to both the Steeledale and the ACP
       Transactions, the details of which are included in the relevant circulars to Aveng Shareholders both dated Wednesday,
       12 October 2016.

Grinaker-LTA Transaction

7.     Column 6 presents the following pro forma adjustment:

            a)   In terms of paragraph 3.5 of the Grinaker-LTA Circular, this Grinaker-LTA Transaction will be recognised as
                 the issue of a synthetic instrument with a right in favour of Kutana Construction’s shareholders to acquire a
                 45% economic interest in the Business, once the Deferred Payment is settled. This synthetic instrument is
                 accounted for as an equity-settled share-based payment in terms of IFRS 2: Share Based Payments, the
                 value of which was calculated using an option pricing model. The key assumptions applied in the model are
                 as follows:
                  •         The 31 December 2016 equity value of the 45% economic interest in Grinaker Holdco was
                            determined on a discounted cash flow basis, using a weighted average cost of capital of 28.84%
                            and a volatility of 41%;
                  •         An implied strike price was calculated in terms of the formula, detailed in the Sale of Shares
                            Agreement and adjusted for the 45% economic interest;
                  •         The present value of the above benefit was then reduced with the Net Upfront Payment to arrive at
                            the IFRS 2 expense. The actual IFRS 2 charge will be determined at the Effective Date of the
                            transaction. The current estimate of the present value of the benefit amounts to R29 million which
                            equates to a R9 million expense after deducting the R20 million Net Upfront Payment. No tax
                            adjustment is assumed as Aveng Africa is in a tax loss position on which further deferred tax assets
                            are limited. This adjustment will not have an on-going effect on Aveng’s statement of
                            comprehensive earnings.


8.   Column 7 presents the following pro forma adjustments:

         a)   Payment by Grinaker Holdco of a management fee for strategic management services which will be
              determined on an annual basis, as stipulated in Clause 14 of the Shareholders Agreement, amounting to R6
              million (R3 million for six months) and which will be allocated in the following proportions:

                       I.            55% to Aveng Africa (R3.3 million per annum and R1.65 million for the six months)

                      II.            45% to Kutana Construction (R2.7 million per annum and R1.35 for the six months)

                            A tax credit is assumed in EPC as the amount would be recovered. This adjustment will have an
                            on-going effect on Aveng’s statement of comprehensive earnings. As Aveng will consolidate
                            Grinaker Holdco, the pro forma adjustment includes only the portion payable to Kutana
                            Construction.

         b)   As stated in the Shareholder Agreement, EPC will establish an ongoing profit share plan for the benefit of its
              employees which will take the form of a discretionary short-term incentive pool to which EPC will contribute
              a percentage of EBITDA or a fixed rand amount which would be used to attract and retain black executives
              in EPC. There is no pro forma adjustment in this regard due to the terms of this scheme not yet having been
              finalised and any potential incentive would be based on annual results.

         c)   As stated in the Shareholder Agreement, Kutana Construction will appoint certain executives who will be
              remunerated by EPC. The pro forma amount of R4 million (R2 million for the six months) represents the
              directors’ best estimate. A tax credit is assumed in EPC as the amount would be recovered. This adjustment
              is expected to have an ongoing effect on Aveng’s statement of comprehensive earnings.

9.   Column 8 presents the following pro forma adjustment:

         a)   As stated in the Shareholder Agreement, Kutana Construction is entitled to their share of any dividends that
              are declared by EPC. This has a dilution impact on earnings and headline earnings per share relating to
              Kutana’s 45% of EPC’s earnings. This adjustment is expected to be ongoing. (There was no pro forma
               adjustment in this regard in the Grinaker-LTA Circular due to the losses incurred by the business to 30 June
               2016.)

10.   Column 9 presents the following pro forma adjustment:

          a)   In terms of IAS 32 Financial Instruments: Presentation, transaction costs of an equity transaction are
               accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the
               equity transaction that otherwise would have been avoided. Of the total transaction costs it is estimated that
               R3 million is not directly attributable to the equity transaction and is therefore not reflected as a deduction
               from equity. The transaction costs will be recognised on effective date. No tax adjustment is assumed as
               Aveng Africa is in a tax loss position on which further deferred tax assets are limited. The adjustment is not
               expected to have an ongoing effect on Aveng’s statement of comprehensive earnings.

11.   The pro forma financial information as included in the Grinaker-LTA Circular dated Monday, 27 February 2017
      included a pro forma adjustment relating to the derecognition of a portion of the deferred tax asset. The deferred tax
      asset assessment was updated for the half-year ending 31 December 2016 with the result that this pro forma
      adjustment is no longer required.

12.   Column 10 presents the pro forma statement of comprehensive earnings subsequent to the Steeledale Transaction,
      ACP        Transaction        and       Grinaker-LTA         Transaction        on       a       collective      basis.
Pro forma statement of financial position of the Aveng Group as at 31 December 2016


                             31                 Steeledale Transaction                        ACP Transaction                     Grinaker-LTA Transaction            Total
                         December
                            2016


                                       Intercompan    Disposal &         After    Disposals     Transaction       After      IFRS 2     Manageme      Transaction
                                            y          transactio                                 Costs                     Charge &     nt fee &       Costs
                                                         n fees                                                             disposal      Kutana
                                                                                                                                        ExecutiveR
                                                                                                                                        emuneratio
                                                                                                                                            n


                                        Column 1       Column 2     Column 3      Column 4       Column 5       Column 6    Column 7     Column 8      Column 9     Column 10


ZARm                     Reviewed       Pro forma      Pro forma    Pro forma     Pro forma    Pro forma        Pro forma   Pro forma   Pro forma      Pro forma    Pro forma


ASSETS


Non-current assets


Goodwill arising on          342                                         342                                      342                                                  342
consolidation


Intangible assets            320                                         320                                      320                                                  320


Property, plant and         4,513                                        4,513                                    4,513                                               4,513
equipment

Equity-accounted             118                          37             155                                      155                                                  155
investments


Infrastructure               200                                         200                                      200                                                  200
investments
                                      Column 1    Column 2    Column 3    Column 4     Column 5   Column 6    Column 7    Column 8    Column 9    Column 10


ZARm                       Reviewed   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma


Deferred taxation           1,870                               1,870                               1,870                                           1,870


Derivative instruments        -                                   -                                   -                                               -


Long term receivable          -                      62          62                                  62                                              62


Amounts due from            1,305                               1,305                               1,305                                           1,305
contract customers


                            8,668         -          99         8,767         -            -        8,767         -           -           -         8,767


Current assets


Inventories                 2,159                               2,159                               2,159                                           2,159


Derivative instruments        5                                  5                                   5                                               5


Amounts due from            7,178                               7,178                               7,178                                           7,178
contract customers


Trade and other             1,721                    (6)        1,715                               1,715                               (17)        1,698
receivables


Cash and bank balances      2,017                    93         2,110       639           (2)       2,747        20          (4)        (17)        2,746


                            13,080        -          87        13,167       639           (2)      13,804        20          (4)        (34)       13,786


Non-current assets held-    1,101        6          (323)       784         (665)                   119                                              119
for-sale


TOTAL ASSETS                22,849       6          (137)      22,718       (26)          (2)      22,690        20          (4)        (34)       22,672
                                      Column 1    Column 2    Column 3    Column 4     Column 5   Column 6    Column 7    Column 8    Column 9    Column 10


ZARm                       Reviewed   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma


EQUITY AND                                                                                                                                            -
LIABLITIES


Equity                                                                                                                                                -


Share capital and share     2,009                               2,009                               2,009                                           2,009
premium


Other reserves              1,118                               1,118                               1,118        29                     (31)        1,116


Retained earnings           9,297                    (7)        9,290                     (2)       9,288        (9)         (3)         (3)        9,273


Equity attributable to      12,424        -          (7)       12,417         -           (2)      12,415        20          (3)        (34)       12,398
equity-holders of parent


Non-controlling interest      12                                 12                                  12                                              12


Total Equity                12,436        -          (7)       12,429         -           (2)      12,427        20          (3)        (34)       12,410


Liabilities


Non-current liabilities


Deferred taxation            242                                242                                 242                                              242


Borrowings and other        1,851                               1,851                               1,851                                           1,851
liabilities


Employee-related             329                                329                                 329                                              329
payables


Trade and other              126          -                     126                                 126                                              126
payables


                            2,548         -           -         2,548         -            -        2,548         -           -           -         2,548
                                     Column 1    Column 2    Column 3    Column 4     Column 5   Column 6    Column 7    Column 8    Column 9    Column 10


ZARm                      Reviewed   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma   Pro forma


Current liabilities


Amounts due to contract    1,338                               1,338                               1,338                                           1,338
customers


Borrowings and other       1,103                               1,103                               1,103                                           1,103
liabilities

Employee-related            299                                299                                 299                                              299
payables


Derivative instruments       26                                 26                                  26                                              26


Trade and other            4,854        5                      4,859       (26)                    4,833                                           4,833
payables


Taxation payable            116                                116                                 116                      (1)                     115


                           7,736        5            -         7,741       (26)           -        7,715         -          (1)          -         7,714


Non-current liabilities     129         1          (130)         -                                   -                                               -
held-for-sale


TOTAL LIABLITIES           10,413       6          (130)      10,289       (26)           -       10,263         -          (1)          -        10,262


TOTAL EQUITY AND           22,849       6          (137)      22,718       (26)          (2)      22,690        20          (4)        (34)       22,672
LIABILITIES
Notes to the pro forma statement of financial position of the Aveng Group as at 31 December 2016:




1.      The “31 December 2016” column presents the financial information relating to the Aveng Group, which has been
        extracted from the published results of the Aveng Group for the six months ended 31 December 2016;

Steeledale Transaction

2.      Column 1 and 2 present the following adjustments relating to the Steeledale transaction that was approved by
        shareholders at a general meeting on Monday, 14 November 2016 and is effective 1 January 2017.

        a)   The intercompany balances that are eliminated on consolidation are re-instated as these amounts are due and
             payable post the transaction.
        b)   For the purposes of this pro forma statement of financial position a purchase consideration of R193 million has
             been calculated as at 31 December 2016 using the Sale Price formula in the sales agreement. Per the terms of
             the sales agreement the pro forma reflects are 1) the receipt of the cash proceeds amounting to R94 million, 2)
             recording the 30% remaining interest of R37 million, 3) recording the deferred purchase price of R62 million and
             4) the reversal of the non-current assets held-for-sale. The R37 million investment in associate represents the
             fair value of the Steeledale Proprietary Limited in which Aveng will hold a 30% interest. This fair value is
             calculated based on Aveng’s interest in this new entity including the discounting effect on the payment of the
             purchase consideration.
        c)   Of the estimated total transaction costs of R7 million, R6 million was pre-paid at 31 December 2016 with the
             remaining R1 million still to be paid.

3.      Column 3 presents the pro forma financial effects of Aveng subsequent to the Steeledale Transaction;

ACP Transaction

4.      Of the original sale of the ACP Investment Portfolio, comprising the Blue Falcon Equity Interest, the Imvelo Equity
        Interest, the Windfall Equity Interest and the N3TC Sale Shares, only the N3TC Share disposal was effective before
        31 December 2016.
5.      Column 4 and 5 present the following adjustments relating to the ACP transaction that was approved by shareholders
        at a general meeting on Monday, 14 November 2016 and was partially effective at 31 December 2016:


        a) Column 4: The receipt of cash proceeds amounting to R639 million relating to 1) the Blue Falcon Equity Interest
             (R295 million), 2) the Imvelo Equity Interest (R39 million) and 3) the Windfall Equity Interest (R331 million)
             disposals as obtained from the Share Sale agreement and the reversal of the non-current assets held-for-sale of
             R665 million. R26 million had been received as a result of Aveng’s equity interest in these entities prior to 31
             December 2016 which will be payable to RBH on the effective date. The Aveng Africa Loans are included in the
             non-current assets held-for-sale amounting to R665 million at a value of ZAR1.
        b) Column 5: the estimated costs associated with this transaction is R4 million of which R2 million had been paid as
             at 31 December 2016 and R2 million will still be paid.
6.     Column 6 presents the pro forma financial effects of Aveng subsequent to both the Steeledale and ACP Transactions,
       the details of which are included in the relevant circulars to Aveng Shareholders both dated Wednesday, 12 October
       2016;




Grinaker-LTA Transaction

7.     Column 7 presents the following pro forma adjustment:

           a)   In terms of paragraph 3.5 of the Grinker-LTA Circular, the Grinaker-LTA Transaction will be recognised as
                the issue of a synthetic instrument with a right in favour of Kutana Construction’s shareholders to acquire a
                45% economic interest in the Business, once the Deferred Payment is settled. This synthetic instrument is
                accounted for as an equity-settled share-based payment in terms of IFRS 2: Share Based Payments, the
                value of which was calculated using an option pricing model. The key assumptions applied in the model are
                as follows:

                     •          The 31 December 2016 equity value of the 45% economic interest in Grinaker Holdco was
                                determined on a discounted cash flow basis, using an appropriate weighted average cost of capital
                                of 28.84% and a volatility of 41%;
                     •          An implied strike price was calculated in terms of the formula, detailed in the Sale of Shares
                                Agreement and adjusted for the 45% economic interest;


           b)   A Net Upfront Payment of R20 million will be received from Kutana Construction in terms of the Sale of
                Shares Agreement.

           c)   The present value of the above benefit was then reduced with this Net Upfront Payment to arrive at the IFRS
                2 expense. The actual IFRS 2 charge will be determined at the Effective Date of the Grinaker-LTA
                Transaction. The current estimate of the present value of the benefit amounts to R29 million which, as an
                equity settled share based payment in terms of IFRS 2 Share Based Payment, will be credited to an equity
                reserve. The R9 million expense is arrived at after deducting the R20 million Net Upfront Payment. No tax
                adjustment is assumed as Aveng Africa is in a tax loss position on which further deferred tax assets are
                limited.


           d)   The non-controlling interest of the 45% economic interest in Grinaker HoldCo will only be accounted for
                once the sale is recognised (Upon recognition of the Deferred Payment).

8.     Column 8 presents the following pro forma adjustment:

           a)   Payment by Grinaker Holdco of a management fee for strategic management services which will be
                determined on an annual basis, as stipulated in Clause 14 of the Shareholders Agreement, amounting to R6
                million (R3 million for six months) and which will be allocated in the following proportions:

                         III.           55% to Aveng Africa (R3.3 million per annum and R1.65 million for the six months)
                         I.           45% to Kutana Construction (R2.7 million per annum and R1.35 for the six months)

                              As Aveng will consolidate Grinaker Holdco, the pro forma adjustment includes only the portion
                              payable to Kutana Construction. A tax credit is assumed in EPC as the amount would be recovered.

             b)   As stated in the Shareholder Agreement, Kutana Construction will appoint certain executives who will be
                  remunerated by EPC. The pro forma amount of R4 million (R2 million for the six months) represents the
                  directors’ best estimate. A tax credit is assumed in EPC as the amount would be recovered.



9.       Column 9 presents the following pro forma adjustment:

             a)   In terms of IAS 32 Financial Instruments: Presentation, transaction costs of an equity transaction are
                  accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the
                  equity transaction that otherwise would have been avoided. The estimated total transaction costs are R34
                  million as detailed in paragraph 16 of the Grinaker-LTA Circular. Of this amount, it is estimated that R31
                  million are costs directly attributable to the equity transaction, which are therefore recognised against an
                  equity reserve. It is estimated that R3 million are not costs directly attributable to the equity transaction
                  which are therefore expensed. No tax adjustment is assumed as Aveng Africa is in a tax loss position on
                  which further deferred tax assets are limited. Of the estimated total transaction costs of R34 million, R17
                  million were pre-paid at 31 December 2016.

10.     The pro forma financial information as included in the Grinaker-LTA Transaction Circular dated Monday, 27 February
        2017 included a pro forma adjustment relating to the derecognition of a portion of the deferred tax asset. The
        deferred tax asset assessment was updated for the half-year ending 31 December 2016 with the result that this pro
        forma adjustment is no longer required.

11.     Column 10 presents the pro forma statement of financial position subsequent to the Steeledale Transaction, ACP
        Transaction and Grinaker-LTA Transaction on a collective basis.



Advisors’ Consents


The auditor and independent reporting accountant has consented in writing to act in the capacity as stated. The auditor and
independent reporting accountant, has consented to the reference to their report in the form and context in which they appear,
and have not withdrawn their consents prior to the publication of the SENS announcement.




Renewal of Cautionary Announcement


As previously stated, Aveng is still in discussions in relation to the sale of the Aveng Trident Steel business unit and
shareholders are advised to continue to exercise caution when dealing in Aveng Limited securities until a further
announcement is published.
Forward-looking statements

This announcement includes forward-looking statements that reflect the current views and 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; 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.




JSE Sponsor

UBS South Africa Proprietary Limited




Transaction Sponsor to Aveng

KPMG Services (Pty) Ltd




By Order of the Board


17 March 2017

Jet Park




Michael Canterbury

Group Executive: Strategy & Investor Relations

Tel: 011 779 2979

Email: michael.canterbury@avenggroup.com

Date: 17/03/2017 04:22:00 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
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 information disseminated through SENS.