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AEG - Aveng Group Limited - Unaudited group results for the six months ended
31 December 2011
AVENG GROUP LIMITED
Leaders in infrastructure development
Registration number 1944/018119/06
Share code: AEG
ISIN code: ZAE000111829
Unaudited group results for the six months ended 31 December 2011
Revenue up 13,4%
Headline earnings down 34%
Two year order book growth up 49,2%
Strong balance sheet with net cash of ZAR4,8bn
Interim consolidated statement of financial position
31 December 31 December 30 June
2011 2010 2011
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 6 252 5 563 6 021
Goodwill and other intangibles 1 530 1 436 1 481
Investment in associates and 110 97 92
joint ventures
Available-for-sale investments 149 125 131
Deferred tax 445 461 1 019
8 486 7 682 8 744
Current assets
Inventories 2 550 1 877 2 067
Trade and other receivables 9 515 6 345 8 132
Taxation receivable 53
Cash and cash equivalents 5 260 6 146 5 611
17 325 14 421 15 810
TOTAL ASSETS 25 811 22 103 24 554
EQUITY AND LIABILITIES
Capital and reserves
Equity attributable to ordinary 13 145 11 895 12 917
shareholders of Aveng Limited
Non-controlling interests (6) 5 (2)
13 139 11 900 12 915
Non-current liabilities
Interest-bearing borrowings 53 2 48
Deferred tax 163 188 832
216 190 880
Current liabilities
Trade and other payables 11 937 9 323 10 349
Interest-bearing borrowings 409 690 246
Taxation payable 110 - 164
12 456 10 013 10 759
TOTAL EQUITY AND LIABILITIES 25 811 22 103 24 554
Net debt to equity ratio (%) (37) (46) (41)
Net asset value per ordinary 3 273 3 017 3 287
share (cents)
Interim consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2011 2010 2011
(Unaudited) (Unaudited) % (Audited)
Rm Rm change Rm
Revenue 19 149 16 892 13% 34 324
Operating profit before 1 066 1 053 1% 2 615
depreciation and
amortisation
Depreciation 719 531 1 101
Amortisation of 15 9 24
intangibles
Operating profit before 332 513 (35%) 1 490
non-trading items
Non-trading items * * (14)
Operating profit 332 513 (35%) 1 476
Share of profits and 15 7 (7)
losses from associates
and joint ventures
Income from investments 133 197 347
Operating income 480 717 (33%) 1 816
Finance cost 28 20 59
Profit before taxation 452 697 (35%) 1 757
Taxation 182 281 584
Profit for the period 270 416 (35%) 1 173
Other comprehensive
(loss)/income for the
period
Exchange differences on 515 (97) 209
translation of foreign
operations
Total comprehensive 785 319 146% 1 382
income for the period
Profit attributable to:
Equity holders of Aveng 274 416 1 177
Limited
Non-controlling (4) * (4)
interests
Profit for the period 270 416 (35%) 1 173
Total comprehensive
income attributable to:
Equity holders of Aveng 789 319 1 386
Limited
Non-controlling (4) * (4)
interests
Total comprehensive 785 319 146% 1 382
income for the period
*Amounts less than R1
million
Determination of
headline earnings
Profit for the year 274 416 1 177
attributable to equity
holders of Aveng
Limited
Non-trading items net * * 14
of taxation
Surplus on disposal of
property, plant and
equipment
Headline earnings 274 416 (34%) 1 191
Interim consolidated statement of cash flows
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2011 2010 2011
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
Operating activities
Cash retained from 332 513 1 476
operations
Depreciation and 734 540 1 125
amortisation
Non-cash items (147) (146) (171)
Cash generated by operations 919 907 2 430
Income from investments 133 197 347
(Increase)/Decrease in (686) (805) (1 873)
working capital
Cash generated by operating 366 299 904
activities
Finance cost (28) (20) (59)
Taxation paid (284) (440) (455)
Cash available from 54 (161) 390
operating activities
Dividends paid (561) (565) (565)
Net cash flows (utilised (507) (726) (175)
in)/from operating
activities
Investing activities
Property, plant and
equipment purchased
- expansion (640) (206) (1 140)
- replacement (204) (728) (678)
Proceeds on disposal of 46 43 88
property, plant and
equipment
Purchase of subsidiaries (18) (285) (285)
Purchase of other (18) (31)
investments
Investment in associate 26 14 15
companies
Net cash flows utilised in (808) (1 193) (2 000)
investing activities
Financing activities
Borrowings advanced/(repaid) 11 (159) (254)
Shares repurchased (74) (117)
Net cash flows utilised in 11 (233) (371)
financing activities
Net decrease/(increase) in (1 304) (2 152) (2 546)
cash and cash equivalents
Cash and cash equivalents at 5 400 7 631 7 631
beginning of year
Foreign currency translation 796 106 315
reserve movement
Cash and cash equivalents at 4 892 5 585 5 400
end of period
Cash and cash equivalents as 5 260 6 146 5 611
per balance sheet
Overdrafts disclosed under (368) (561) (211)
short term borrowings
Cash and cash equivalents at 4 892 5 585 5 400
end of period
Interim consolidated statement of changes in equity
Year ended 30 June 2010 (Audited)
Foreign
Share capital currency Other non-
And Trans- Distri-
share lation butable
premium reserve reserve
Rm Rm Rm
Balance at 1 July 2010 2 001 (145) 68
Foreign currency
translation
Profit for the year (97)
Total comprehensive income - (97) -
Dividends paid
Share repurchase programme (74)
Balance at 31 December 2010 1 927 (242) 68
Balance at 1 July 2010 2 001 (145) 68
Profit for the year
Other comprehensive 207 2
income/(loss)
Total comprehensive income - 207 2
Dividends paid
Share repurchase programme (118)
Acquisition during the year
Transfers 2
Balance at 30 June 2011 1 883 62 72
Six months ended 31
December 2011 (Unaudited)
Balance at 1 July 2011 1 883 62 72
Profit for the year
Other comprehensive
income/(loss)
- Foreign currency 515 *
translation
Total comprehensive income - 515 *
Dividends paid
Shares issued
Balance at 31 December 2011 1 883 577 72
Interim consolidated statement of changes in equity (continued)
Year ended 30 June 2010 (Audited)
Non-
Retained controlling Total
income Total interest equity
Rm Rm Rm Rm
Balance at 1 July 2010 10 291 12 215 5 12 220
Foreign currency 416 416 * 416
translation
Profit for the year (97) (97)
Total comprehensive 416 319 - 319
income
Dividends paid (565) (565) * (565)
Share repurchase (74) * (74)
programme
Balance at 31 December 10 142 11 895 5 11 900
2010
Balance at 1 July 2010 10 291 12 215 5 12 220
Profit for the year 1 177 1 177 (4) 1 173
Other comprehensive 209 209
income/(loss)
Total comprehensive 1 177 1 386 (4) 1 382
income
Dividends paid (566) (566) * (566)
Share repurchase (118) (118)
programme
Acquisition during the - (3) (3)
year
Transfers (2) - -
Balance at 30 June 2011 10 900 12 917 (2) 12 915
Six months ended 31
December 2011 (Unaudited)
Balance at 1 July 2011 10 900 12 917 (2) 12 915
Profit for the year 274 274 (4) 270
Other comprehensive
income/(loss)
- Foreign currency 515 515
translation
Total comprehensive 274 789 (4) 785
income
Dividends paid (561) (561) * (561)
Shares issued
Balance at 31 December 10 613 13 145 (6) 13 139
2011
*Amounts less than R1 million.
Capital expenditure
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2011 2010 % 2011
Rm Rm change Rm
Expansion 204 206 1 140
Maintenance 640 728 678
844 934 1 818
Commitments for future
capital expenditure:
Contracted 362 40 525
Authorised, but not 69 63 541
contracted for
431 103 1 066
Share performance
Earnings per share
(cents)
Earnings 70,8 107,0 (34%) 302,9
Earnings - diluted 67,6 98,2 (31%) 283,3
Headline 70,6 106,9 (34%) 306,4
Headline - diluted 67,5 98,2 (31%) 286,6
Number of shares
(millions)
In issue 401,6 394,3 393,0
Weighted average 387,0 388,8 388,7
Diluted weighted 405,2 423,2 415,5
average
Dividend per share Nil Nil 145,0
(cents)
Segmental analysis
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2011 2010 2011
(Unaudited) (Unaudited) (Audited)
Rm Rm Rm
Business segmentation
Revenue
Construction and Engineering
South Africa and Africa 5 084 4 993 9 575
Australasia and Pacific 7 641 6 419 13 281
Total Construction and 12 725 11 412 22 856
Engineering
Opencut mining 2 134 1 788 3 656
Manufacturing and Processing 4 290 3 690 7 807
Administration * 2 5
19 149 16 892 34 324
Operating profit
Construction and Engineering
South Africa and Africa (61) 253 443
Australasia and Pacific 128 133 291
Total Construction and 67 386 734
Engineering
Opencut mining 234 208 414
Manufacturing and Processing 277 (24) 321
Administration (246) (57) 7
332 513 1 476
Notes to the interim condensed consolidated financial statements
1. Corporate information
The interim consolidated financial statements of the Group for the six months
ended 31 December 2011 were authorised for issue in accordance with a
resolution of the directors on 12 March 2012.
Aveng Limited is a limited liability company incorporated and domiciled in
the Republic of South Africa whose shares are publicly traded.
2. Basis of preparation and accounting policies
Basis of preparation
The interim consolidated financial statements for the six months ended 31
December 2011 have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the Listing Requirements of the JSE Securities
Exchange South Africa.
The interim condensed consolidated financial statements comply with IAS 34
Interim Financial Reporting and do not include all the information and
disclosures required in the annual financial statements, and should be read
in conjunction with the Group`s annual financial statements as at 30 June
2011.
The preparation of the Group`s condensed consolidated reviewed results were
supervised by the Chief Financial Officer, HJ Verster.
Significant accounting policies
The accounting policies adopted are consistent with those of the previous
financial year.
Amendments resulting from Improvements to IFRSs to the following standards
did not have any impact on the accounting policies, financial position or
performance of the Group:
- IAS 24 Related party disclosures (Amendment) - 1 January 2011
- IFRIC 14 Prepayments of a minimum funding requirement (Amendment)
- Improvements to IFRSs (issued in May 2010)
3. Segment Information
Revenue and expenses are attributed directly to the segments to which they
relate. Segment assets include all operating assets used by a segment, and
consist principally of property, plant and equipment, as well as current
assets. Segment liabilities include all operating liabilities and consist
principally of trade and other payables. These assets and liabilities are all
directly attributable to the segments.
Management monitors the operating results of its business units separately
for the purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on operating profit or
loss which in certain respects is measured differently from the operating
profit or loss in the consolidated financial statements.
Transfer prices between operating segments are on an arm`s length basis in a
manner similar to transactions with third parties.
4. Impairments
The carrying amounts of assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, or when annual impairment testing of an asset is required,
the recoverable amount is estimated as the higher of the fair value less
cost to sell and the value in use.
In determining fair value less costs to sell, an appropriate valuation model
is used. In assessing value in use, the expected future cash flows are
discounted to the present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset. An impairment loss is recognised whenever the carrying amount
exceeds the recoverable amount. Impairment losses and reversal of impairment
losses are separately disclosed in the profit or loss, above the income
before tax subtotal.
For an asset that does not generate cash inflows that are largely independent
of those from other assets, the recoverable amount is determined for the cash
generating unit to which the asset belongs. An impairment loss is recognised
whenever the carrying amount of the cash generating unit exceeds its
recoverable amount.
A previously recognised impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount, however,
not to an amount higher than the carrying amount that would have been
determined (net of depreciation) had no impairment loss been recognised in
prior years.
Goodwill impairment losses are not reversed.
5. Income tax
The major components of income tax expense in the interim consolidated
statement of comprehensive income are:
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2011 2010 2011
Rm Rm Rm
Current income tax
Current income tax charge 173 150 382
Secondary tax on companies 57 57 57
Deferred tax
Relating to origination and (48) 74 145
reversal of temporary
differences
Income tax expense 182 281 584
6. Property, plant and equipment
During the six months ended 31 December 2011, the Group acquired assets with
a cost of R844,1 million (December 2010: R933.6 million).
7. Cash and cash equivalents
For the purpose of the interim consolidated statement of cash flows, cash and
cash equivalents are comprised of the following:
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2011 2010 2011
Rm Rm Rm
Deposits and cash 5 260 6 146 5 611
Bank overdraft (368) (561) (211)
4 892 5 585 5 400
8. Related party transactions
During the year the company and its subsidiaries, in the ordinary course of
business, entered into various sale and purchase transactions with associated
companies and joint ventures. Those transactions occurred under terms that
are no less favourable than those arranged with third parties.
There were no related party transactions with directors or entities in which
the directors have a material interest.
OVERVIEW
Safety
The Aveng Group remains committed to the pursuance of its safety vision;
`Home Without Harm, Everyone Everyday`. Over this period, a further
improvement in the recordable injury frequency rate (RIFR) was recorded, with
RIFR decreasing from 1,22 for the year ended June 2011 to 1,14 for the half
year to December 2011 (December 2010: 1,3).
The Group regrets that it has to report five fatalities during the period
under review. The Aveng Group Board and Management extend their sincere
condolences to the families of our deceased colleagues.
Operating environment
The South African construction and engineering market continued to be
subdued, with further delays in infrastructure spend and limited large
project opportunities. The construction and engineering operating environment
in Australia and Pacific Rim remained buoyant, supported by strong global
demand for commodities and energy which drove significant growth in the
mining and energy related sectors.
The Group`s diversified geographical footprint and broad product offering
served to mitigate some of the effects of the weak domestic infrastructure
market. Improved operating conditions in both the Opencut Mining and the
Manufacturing & Processing segments bolstered Group profitability and
partially offset the impact of low margins and project losses within the
Construction & Engineering segments.
Unresolved claims and execution difficulties on a number of large projects
adversely affected the performance of the Construction & Engineering
segments, contributing to a 34% decline in earnings for the period.
The Group`s two year order book increased by 24% from R37 billion at 30 June
2011 to R46 billion as of 31 December 2011, driven primarily by demand from
the mining and energy related sectors in Australia.
FINANCIAL PERFORMANCE
Revenue for the six months increased by 13% to R19,1 billion (2010: R16,9
billion). The Opencut Mining, Manufacturing & Processing, and Construction &
Engineering: Australia and Pacific business segments all recorded solid
revenue growth while Construction & Engineering: South Africa`s revenue
performance was in line with the prior period.
Despite the higher revenue, the impact of problematic contracts resulted in a
35% decline in operating profit to R332 million (2010: R513 million. A
resultant operating profit margin of 1,7% was recorded for the half year
(2010:3,0%).
The Group`s net income from investments reduced by 32% to R133 million (2010:
R197 million) as a consequence of lower cash balances and prevailing low
interest rates.
Cash generated from operating activities increased to R366 million (2010:
R299 million). Net working capital reflected an outflow of R686 million
(2010: R805 million). The large movement in accounts payable and receivable
was largely as a consequence of non-cash items, arising from the translation
of the Groups foreign balance sheets. The movement in the net working
capital was due to increased project receivables, a decision to increase
inventory levels within the Manufacturing and Processing segment and
movements in project related provisions, which are included in Trade and
other payables. Major cash outflows included a dividend payment of R561
million, a tax payment of R284 million and capital expenditure of R844
million. The largest investment in capital was by McConnell Dowell and Aveng
Moolmans. R306 million was invested by McConnell Dowell on project specific
expenditure, including project capital for the QCLNG, Australia Pacific LNG
Pipeline and Vale Jetty projects. Aveng Moolmans invested R261 million, to
equip the Chimiwugu contract and for the maintenance of its current fleet of
equipment.
With a net cash position of R4,9 billion (2011: R5,4 billion) the Group`s
financial position remains solid. It is well positioned to take advantage of
impending growth prospects. Liquidity management continues to be a key
priority, with a focus on converting unresolved claims into cash and reducing
inventories in line with greater reliability in steel supply.
Headline earnings declined by 34% from R416 million to R274 million,
translating into headline earnings per share of 70,6 cents (2010: 106,9
cents).
OPERATIONAL REVIEW
Construction and Engineering: South Africa
This business segment comprises Aveng Grinaker LTA Building, Civil
Engineering, Earthworks Engineering, Mechanical & Electrical, Mining, Aveng
Water and Aveng E+PC divisions.
Revenue for this segment was consistent with last year at R5 billion. The
segment however reported an operating loss for the period of R61 million
(2010: Profit R253 million) due to contract provisions and unresolved claims
on major contracts. The South African construction two year order book, which
is comprised primarily of private sector contracts, contracted by 24%. This
is as a result of a difficult and competitive local infrastructure market and
project delays, on projects such as the KCM Konkola CRO plant in Zambia.
Revenue from the Building and Mechanical & Electrical divisions improved by
16% and 15% respectively, despite project delays and continued difficulties
experienced on the sub-contracted steel fabrication projects for the Medupi
and Kusile power plants. Unresolved claims, within the Mechanical &
Electrical division, on these two projects adversely impacted both
profitability and liquidity during the period.
The Group is aware of the reported settlement between Genrec, the main sub-
contractor and the main contractor and is pursuing entitlements against the
sub-contractor in terms of the contractual framework. The Group will engage
all parties in this regard and pursue all contractual and legal remedies
available.
Revenue generated by the Civil Engineering and Earthworks Engineering
divisions declined by 15% and 29% respectively. The Civil Engineering
division of Aveng Grinaker-LTA continued work on the Medupi and Kusile power
stations. As previously reported, the terms and complexity of the Medupi
power station contracts have resulted in numerous claims and additional
entitlements which have caused material delays in revenue and profit
recognition. Discussions with the client are currently underway to reach a
settlement in respect of these issues.
Revenue at Earthwork Engineering was affected by the shortage in bitumen and
asphalt, the slow start-up of the Mokolo project and the high revenue base
recorded on the Gauteng Improvement Project in the comparative period.
Underground mining revenue improved by 5% to R1,0 billion on the comparative
period as a result of both shaft sinking and development contracts secured
during the previous financial year now being in full production. The
resolution of underperforming mining contracts resulted in an improved
earnings contribution.
Construction and Engineering: Australasia & Pacific
This business segment comprises McConnell Dowell Construction, Tunnelling,
Electrical and Pipeline divisions.
McConnell Dowell`s revenue increased by 19%, to R7,6 billion, boosted by an
Australian dollar that has strengthened by 17% against the Rand over the
comparable period. In Australian dollar terms the growth was relatively flat
at 2%, despite a strong level of work in hand caused by delays in project
start up. The McConnell Dowell business reported a record work in hand of R30
billion and continue to experience good project opportunities, particularly
off the resources sector growth in Australia and Asia. The Company is well
placed, given its geographical and capability profile to win a significant
amount of this work, in spite of tougher commercial conditions and increased
competition.
After experiencing site access delays and adverse weather conditions, the
QCLNG export pipeline project has not yet reached planned productivity.
McConnell Dowell has made provision to cover the expected financial impact of
the project during the six month period. The project is still in an early
phase of completion and therefore continues to pose a material risk.
The Adelaide Desalination project is nearing completion with physical work
largely complete by July 2012 progressing to full commissioning by December
2012. The further delay in completion has resulted in an additional loss
provision during the six months period. The Group does not anticipate any
further losses on this project, during the period, R15 billion of new work
was secured, which includes:
- Australia Pacific LNG Pipeline & facilities, Queensland
- GLNG Upstream Roma Hub, Queensland
- Vale Jetty, Malaysia
- Waterview Connection Project, New Zealand
- Stronger Christchurch Infrastructure Rebuild, New Zealand
Revenue in Construction Australia was down 6,0%, in AUD terms, on the
comparative period. The Australian business experienced a reduction in
reported revenue due to delays in project commencements, delayed revenue
recognition and the `knock-on` effect of the previous year`s flooding.
Offshore Construction increased revenue by 35% due to strong performance from
South East Asia, New Zealand and the Pacific Islands. Markets in the Middle
East remain highly competitive. McConnell Dowell`s offshore revenue was
negatively impacted by the significant appreciation in the Australian dollar.
Although Pipeline revenue was up by 15% the slower than expected progress on
the QCLNG pipeline project has limited profit recognition. A number of large
projects will go into full activities in the fourth quarter with strong
revenue expected for the rest of the year into 2013.
Electrix`s revenue was up 15% and the business unit is experiencing a strong
workload across all areas in both New Zealand and Australian operations,
resulting in good top-line growth. They have renewed maintenance contracts
with most of their long-term customer base in the electrical sector and have
continue to successfully diversify into gas maintenance.
Tunneling was successful as part of the Well Connected Consortium in winning
New Zealand Transport Agencies` largest ever transport project, the Waterview
Connection Alliance. Revenue for the period was down by 34% reflecting a lack
of new work secured in 2011 and the slow start to the Waterview Alliance
project, which is expected to contribute to earnings in the 2014 financial
year.
Aveng Moolmans
Aveng Moolmans increased its revenue by 19% to R2,1 billion (2010: R1,8
billion) and operating profit by 13%. The improvement in performance is not-
withstanding the once off Marikana (Aquarius Platinum) settlement receipt of
R87,5 million in the previous reporting period. The turnaround of
underperforming contracts, improved plant utilisation and efficiencies also
contributed to a solid performance from the opencut mining operations.
While the order book has remained flat in comparison to June 2011, the
outlook is positive given the ongoing demand for minerals. The Group awaits
the award of two large projects which will improve the work on hand.
Manufacturing & Processing
This business segment comprises Aveng Manufacturing and Aveng Trident Steel
(Pty) Limited.
The performance of the Aveng Manufacturing and Processing businesses, which
includes Aveng Trident Steel, improved significantly despite a soft domestic
infrastructure market, steel supply constraints and labour disruptions.
Revenue increased by 16% to R4,3 billion (2010: R3,7 billion). Operating
profit for the period improved substantially to R277 million, following last
year`s reported loss of R24 million which included the provision for a
Competition Commission administrative penalty of R129 million.
With the exception of Aveng Manufacturing: Infraset, revenue and
profitability improved in all other units within the Aveng Manufacturing &
Processing cluster. The operating results benefited from various efficiency
improvements, asset rationalisation and optimisation initiatives implemented
during the past 12 months.
Aveng Trident Steel`s revenue improved by 19% to R2,8 billion (2010:R2,3
billion) on the back of improved steel prices. Steel volumes were however
negatively affected by the two week labour strike in July, as well as various
domestic steel supply disruptions. The impact on customers and financial
performance was lessened by the Group`s decision to increase imports from
various international suppliers.
Aveng Water
July 2011 saw the official launch of the Aveng Water division. Aveng Water`s
offering includes the design, construction, operation and maintenance of mine
water treatment plants (AMD), municipal water treatment, waste water
rehabilitation, sea water desalination and industrial effluent treatment.
Market interest indicates a growing demand for mine water treatment plants.
Aveng Water`s HiPro water recovery process serves to strengthen the Group`s
offering to the mine water treatment market. Recent projects awarded include
the eMalahleni phase 2 expansion and the Kromdraai Treatment plant.
Renewable Energy
The South African Department of Energy`s sponsored renewable energy
procurement programme presents a significant opportunity for Aveng. Together
with its international partner, Acciona Energy, and broad-based empowerment
partners, the Group has submitted a bid for two projects in response
to the Department`s second bid invitation for a wind and solar facility.
These projects, with a high local content, will impact positively on the
Group`s domestic order book.
Administration
The administration segment reported an operating cost of R246 million for the
six month period (2010: R57 million). This increase is attributed to an
unrealized foreign exchange loss on the translation of inter group loans for
the period of R99 million (2010: profit R45 million), the "turn around"
effect of the R45 million profit included in the segment for the comparative
period and an interim portfolio provision of R50 million.
COMPETITION COMMISSION
The Aveng Group remains committed to cooperating and engaging with the
Competition authorities to resolve all historical anti-competitive practices,
and to eradicate any such practices from the industry. Subsidiary company,
Aveng (Africa) Limited submitted comprehensive applications in terms of the
Competition Commission`s Fast Track Settlement Process, which are currently
under review by the Competition Commission. This process is expected to
culminate in clarity on this sector-wide issue during 2012. At this stage it
remains premature to speculate on the quantum of any possible settlement and
no provision has been raised.
BUSINESS OPTIMISATION
The Aveng Group is in the process of reorganising the business structure of
both its South African construction and mining businesses with a view to
improving its market approach and service to its customers. To this end, the
deep shaft sinking and underground mining operations, previously part of
Aveng Grinaker LTA, have been combined with Aveng Moolmans to form Aveng
Mining. The new consolidated mining division with its combined capabilities
of open cut, shaft sinking, incline development and underground mining is
well positioned to pursue opportunities in the fast growing mining sector
both locally
and internationally.
The appointment of key internationally experienced executives to drive a
focused growth strategy within Aveng Grinaker-LTA has been initiated and a
reorganisation process is under consideration which will ensure that the
business is optimally positioned for sustainable growth.
OUTLOOK AND PROSPECTS
The Aveng Group anticipates that the domestic infrastructure environment will
remain under pressure over the short to medium term until meaningful public
sector spend is more evident. The Group`s two year order book indicates that
approximately 77% of the work over the period will be generated by its
foreign operations.
The Australian and Pacific Rim infrastructure market is expected to remain
strong on the back of continued infrastructure investment in the mining, oil
and gas sectors. This is reflected by a 62% increase in the McConnell Dowell
two year order book of R31 billion, which underpins the 24% increase in the
Groups construction order book to R46 billion.
The Manufacturing & Processing segment is well positioned to participate in
the anticipated increase in mining activity and rail infrastructure spend in
South and Southern Africa and is expected to continue its improved
performance over the short and medium term. Steel price volatility and the
general state of the domestic infrastructure market will also continue to
impact on the overall performance of this part of the business.
Aveng Mining is expected to build on its current performance. The recent
combination of the Group`s open-cut mining, deep shaft sinking and
underground mining services capabilities into a single division is aimed at
improving both product and service offerings to its customers in the mining
sector.
Aveng remains well positioned both domestically and internationally to
participate in key infrastructural growth areas, including water technology,
power, rail and renewable energy.
By order of the Board
AWB Band WR Jardine HJ Verster
(Chairman) (Chief Executive Officer) (Financial Director)
14 March 2012
DISCLAIMER
This commentary contains forward-looking statements 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
ventures as well as other factors. Any of these factors may materially affect
the company`s future business activities and its ongoing financial results.
DIRECTORSAWB Band* (Chairman), WR Jardine (Chief Executive Officer),
HJ Verster (Financial Director), JJA Mashaba,
DG Robinson (Australian), PJ Erasmus*#, MA Hermanus*#,
RL Hogben*#, TM Mokgosi-Mwantembe*#, MJD Ruck*#,
NL Sowazi*, PK Ward*# K Rumble - Resigned 1 December 2011(*non-executive)
(#independent)
COMPANY SECRETARY
iThemba Governance and Statutory Solutions (Pty) Ltd
REGISTERED OFFICE
204 Rivonia Road, Morningside, Sandton, 2057
REGISTRARS
Computershare Limited
(Registration number 2000/006082/06)
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
www.aveng.co.za
Sponsor
J.P. Morgan Equities Limited
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