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TRADING STATEMENT
AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000111829
SHARE CODE: AEG
("Aveng" or "the Company" or “the Group”)
TRADING STATEMENT
Overview
Shareholders are advised that the Aveng Group anticipates that earnings per share
(“EPS”) and headline earnings per share (“HEPS”) for the financial year ended 30
June 2012 will be between 50% and 60% lower than that of the comparative twelve
month period ended 30 June 2011 (“the comparative period”). (June 2011: EPS 302.9
cents; and HEPS 306.4 cents).
The Group’s operating segments reflected either steady or improved financial
performances compared with the comparative period, other than for Construction
and Engineering: South Africa which incurred a substantial loss. Encouraging
progress was made on previously reported problem contracts in both the Australian
and South African construction businesses. Further additional provisions to de-risk
some new loss-making construction contracts were considered necessary.
Segmental Review
Against the backdrop of the disappointing performance of the depressed South
African construction sector and delays in the South African Government’s
infrastructure development programme, the substantial losses in Construction and
Engineering: South Africa were attributable to:
- losses and loss provisions on the previously reported DSE steel fabrication
contract (as described more completely below);
- losses on a number of other contracts within the South African construction
segment;
- the cost of restructuring the business;
- the cost of maintaining skills and related capacity in anticipation of improved
market conditions; and
- provision for a potential Competition Commission fast-track settlement.
The previously reported losses and risks pertaining to the historical claims against
Genrec on the Group’s DSE steel fabrication sub-contract for the Medupi and Kusile
power plants have not as yet been resolved. DSE has since contracted directly with
Hitachi on the outstanding steel volumes. The Group is pursuing its contractual
rights and continues discussion with the parties involved on the historical claim with
a view to a settlement.
In response to the Competition Commission’s investigations into the construction
industry and in terms of its fast-track policy, a provision has been raised for a
potential settlement.
Revenue growth and profitability of Construction and Engineering: Australia has
improved substantially in the current financial year, with a strong performance from
its offshore construction and electrical businesses. The problematic projects
identified in June 2011, being the Adelaide Desalination plant and the Komo Airfield
have both made good progress during the financial year, contributing positively
toward earnings. A significant aspect of the 2012 financial year is that this segment’s
results have been impacted by substantial provisions in respect of the QCLNG Export
Pipeline and the Hay Point Berth projects.
Good progress has been made on the welding, trenching and pipe-lowering
productivities on the QCLNG Pipeline project, which is now approximately 60%
complete, but timely project execution remains a significant risk to the project. The
target date for completion of the project is September 2013.
The Hay Point Berth project has experienced delays with substantial design changes,
start-up delays and difficult ground conditions. Although at an early stage, these
delays increase the projects risk profile. McConnell Dowell is working with the client
with a view to an accelerated work programme to partly mitigate the delays.
The performance of the Aveng Manufacturing and Processing businesses, which
includes Aveng Trident Steel, improved significantly year-on-year, despite the
depressed domestic infrastructure market, steel supply shortages and labour
disruptions during the first half of the year. Enhanced revenue growth and internal
efficiency improvements have led to a pleasing improvement in profitability.
The opencut mining business, Aveng Moolmans, has delivered a solid performance,
with both revenue and profitability enhancements due to the previously reported
turnaround of underperforming contracts, improved efficiencies and plant
utilisation.
Capital Structure and Financial Position
The Group repurchased 11.75 million ordinary shares at a cost of R449 million from
the market. The Group’s balance sheet remains robust with a healthy net cash
position and adequate banking facilities available.
Order Book
The Group’s two year order book increased by 2% from R46 billion at 31 December
2011 to R47 billion at 30 June 2012. This increase emanates primarily from the
Group’s South African construction business. The Australian order book decreased
by 2% from R30.6 billion to R29,9 billion. In Australian dollar terms the order book
decreased by 3% to AU$3.55 billion.
This statement has not been reviewed or reported on by the Company’s auditors.
The financial results for the year to 30 June 2012 are expected to be released on
Wednesday, 05 September 2012.
By order of the board
Rivonia
15 August 2012
Sponsor:
J.P. Morgan Equities Limited
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