To view the PDF file, sign up for a MySharenet subscription.

AVENG LIMITED - Trading Statement

Release Date: 05/08/2013 15:18
Code(s): AEG     PDF:  
Wrap Text
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”)

Monday, 5 August 2013

Trading Statement

In terms of the JSE Listing Requirements Section 3.4(b), shareholders are advised that Aveng
anticipates both headline earnings per share (“HEPS”) and earnings per share (“EPS”) for the year
ending 30 June 2013 to decline by up to 10% compared to the 128.1 cents per share and 134.9 cents
per share respectively for the comparative twelve month period ended 30 June 2012 (“the
comparative period”).

The primary reason for the material deterioration in performance during the second six months of the
2013 financial year was much higher losses from Aveng Grinaker LTA. Following the introduction of
new management at this operation a thorough project review was conducted, including utilising
external resources, which has resulted in a revision of the cost to completion estimates of a number of
projects and consequently the necessity to provide for these losses.

With the exception of the disappointing performance from Aveng Grinaker LTA, the results from the
other operations were broadly in line with management’s expectations.

OPERATIONAL AND SEGMENTAL UPDATE

Aveng Construction and Engineering: Australasia and Pacific

Revenue and earnings improved substantially, with a particularly strong earnings performance in the
second half of the financial year. The underlying performance of McConnell Dowell remains strong,
despite the impact of contract provisions on the overall financial performance, especially in the first
half of the financial year. Good progress has been made with the resolution of commercial issues on
previously reported problematic contracts.

The commercial issues on the Hay Point Berth project in Queensland have been resolved with the
client and McConnell Dowell will work on a collaborative basis with the EPCM contractor to complete
the works.

The QCLNG project is nearing completion with the overall project expected to be completed by the
end of calendar 2013. Commercial issues are still apparent on this project and will continue to remain
a material financial risk. McConnell Dowell continues to engage with the client on these matters.

Aveng Construction and Engineering: South Africa and rest of Africa

Revenue is well below expectations resulting in material margin compression, despite the initiatives to
reduce overheads during the financial year. This was compounded by the results of the review
conducted on major contracts which resulted in loss provisions being raised on a number of projects.
The impact of labour disruptions, the recoverability of which remains uncertain, has impacted the
completion dates of some projects as well as their profitability.
                                                                                                      1
Due to the combined effect of the adverse events mentioned above, it is expected that Aveng
Grinaker-LTA will post a significantly higher loss compared to the comparative period’s loss position.

Brian Wilmot, formerly Managing Director of Aveng Mining, assumed the position of Managing
Director of Aveng Construction Africa on 1 June 2013. Brian brings a wealth of construction and
contracting experience to his new role, having first spent 15 years in the civil engineering industry and
subsequently 22 years in contract mining. The new management team, strengthened by additional
commercial, technical and project management capacity, will focus on improving the overall operating
performance within Aveng Grinaker LTA.

Aveng Mining

The Mining operating segment continued its strong performance and is expected to deliver improved
revenue and earnings, despite a loss provision being raised as a result of a client being placed in
business rescue and the subsequent costs of the termination, by mutual consent, of a contract in
Zambia.

The benefit of a diversified client and country portfolio combined with continued focus on improved
plan efficiencies and higher utilisation rates added to the strong performance of Aveng Mining.

Manufacturing and Processing

The performance of this operating segment, which includes Aveng Trident Steel, decreased year-on-
year mainly due to the depressed domestic infrastructure market, labour disruptions and steel supply
and price volatility.

The Aveng Steeledale and Aveng Duraset businesses were the main contributors to the weak
performance of Aveng Manufacturing. Aveng Steeledale was negatively impacted by labour
disruptions, weak demand from the construction industry and inventory write-downs. The slow-down
and labour disruptions in the platinum and gold industries had a negative impact on Aveng Duraset.

Enhanced revenue growth, internal efficiency improvements and a continued focus on opportunities
within Mozambique and Australia have led to improved profitability for all other business units within
Aveng Manufacturing.

Although well down on a full year comparative basis, Aveng Trident Steel’s earnings performance for
the second half of the financial year improved substantially compared to the first half of the financial
year.

Despite a generally weaker domestic manufacturing and construction environment, steel volumes
increased during the financial year which was partially offset by lower steel prices and consequently
margins as well as the impact of domestic steel supply and labour disruptions.

As previously reported, Aveng Steeledale, Aveng Steel Fabrication (formally DSE) and Aveng Trident
Steel, have been combined to form the Aveng Steel Operating Group. Through increased customer
focus, the streamlining of operations, cost reductions and improved efficiencies, the combined
performance is expected to improve on a sustainable basis.

CONCESSIONS




                                                                                                         2
Aveng Concessions together with its consortium partners was identified as the preferred bidder in the
Mauritius Road Decongestion Project. The two Renewable Energy projects previously reported have
reached financial closure.

CASH FLOW

The working capital requirements of McConnell Dowell and Aveng Grinaker-LTA, combined with the
losses incurred in Aveng Grinaker-LTA have had an adverse impact on the Group’s net cash position
for the financial year.

ORDER BOOK

The Group’s two-year order book decreased by 6% to R37.4 billion at 30 June 2013 from R39.7 billion
at 31 December 2012. This was primarily due to a 28% reduction in the Aveng Mining order book
following the termination of a mining contract in Zambia and the run-off of still-to-be extended mining
contracts which come up for renewal in 2014. The successful renewal of these long-term contracts
will result in the normalisation of its order book.

The Construction and Engineering: Australasia and Pacific operating segment’s order book
decreased by 3% to R24.0 billion at 30 June 2013 from R24.7 billion at 31 December 2012 as a result
of large projects coming to an end. In Australian dollar terms the order book decreased by 7% to
AUD2.7 billion.

The Construction and Engineering: South Africa and Rest of Africa order book increased by 13% to
R7.5 billion reflecting the award of some significant projects during the past 6 months, including the
Nacala Rail Project in Tete, Mozambique and the Majuba Rail Line for Eskom. The unit is also
working on the financial close of the Mauritius Road Decongestion Project.

COMPETITION COMMISSION – FINAL SETTLEMENT

Following the SENS announcement released on 24 June 2013, shareholders have been advised that
the Competition Tribunal has confirmed the administrative penalty of R306.6 million, which is to be
paid in three equal instalments over two years.




This statement has not been reviewed or reported on by the company’s auditors. The financial results
for the year to 30 June 2013 are expected to be released on 10 September 2013.

By order of the Board

Rivonia

5 August 2013                              Sponsor: JP Morgan Equities South Africa (Pty) Ltd




                                                                                                      3

Date: 05/08/2013 03:18:00 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.

Share This Story