Wrap Text
Summarised audited consolidated annual financial statements for the year ended 30 June 2016
Aveng Group
Company registration number
1944/018119/06
Share codes:
JSE: AEG
ISIN: ZAE 000111829
Summarised audited consolidated annual financial statements for the year ended 30 June 2016
Salient features - financial performance
Revenue
R33,8 billion
Decrease of 23% from R43,9 billion at June 2015
Net assets held for sale
R1 237 million
Headline loss
R299 million
Improvement of 48% from R578 million at June 2015
Loss per share
25,4 cents
Improvement of 78% from 114,8 cents at June 2015
Headline loss per share
75,2 cents
Improvement of 48% from 144,3 cents at June 2015
Two-year order book
R28,0 billion
June 2015: R28,9 billion
Gain on property transaction
R577 million
Net operating earnings/(loss)
R146 million
Improvement from R(288) million at June 2015
Operating free cash flow
R1 125 million outflow
June 2015: R1 027 million outflow
Net operating earnings/(loss) - segmental analysis
FY2016 FY2015 Change
Rm Rm %
South Africa and rest of Africa (187) (697) 73
Aveng Grinaker-LTA (69) (575) (88)
Africa Construction (39) (12) >(100)
Aveng Engineering (273) (291) (6)
Aveng Capital Partners 194 181 7
Australasia and Asia 14 112 (88)
Total Construction and Engineering (173) (585) 70
Mining 276 413 (33)
Manufacturing and Processing (70) 54 >(100)
Aveng Steel (166) (174) (5)
Aveng Manufacturing 96 228 (58)
Other and Eliminations 113 (170) >(100)
Total 146 (288) >(100)
Loss attributable to equity-holders of the parent (101) (460) 78
Headline loss (299) (578) 48
Summarised statement of financial position as at 30 June 2016
2016 2015
Notes Rm Rm
ASSETS
Non-current assets
Goodwill arising on consolidation 342 342
Intangible assets 325 339
Property, plant and equipment 4 843 5 626
Equity-accounted investments 8 100 151
Infrastructure investments 9 177 778
Deferred taxation 10 1 858 1 580
Derivative instruments - 6
Amounts due from contract customers 11 1 417 900
9 062 9 722
Current assets
Inventories 2 211 2 529
Derivative instruments 20 35
Amounts due from contract customers 11 8 047 9 394
Trade and other receivables 2 058 2 424
Cash and bank balances 2 450 2 856
14 786 17 238
Non-current assets held-for-sale 12 1 484 559
TOTAL ASSETS 25 332 27 519
EQUITY AND LIABILITIES
Equity
Share capital and share premium 2 009 2 023
Other reserves 1 821 1 162
Retained earnings 9 689 9 790
Equity attributable to equity-holders of parent 13 519 12 975
Non-controlling interest 37 23
TOTAL EQUITY 13 556 12 998
Liabilities
Non-current liabilities
Deferred taxation 10 266 221
Borrowings and other liabilities 13 1 770 2 037
Employee-related payables 379 468
2 415 2 726
Current liabilities
Amounts due to contract customers 11 1 322 2 562
Borrowings and other liabilities 13 1 214 426
Payables other than contract-related - 102
Employee-related payables 559 648
Derivative instruments 27 2
Trade and other payables 5 886 7 961
Taxation payable 106 94
9 114 11 795
Non-current liabilities held-for-sale 12 247 -
TOTAL LIABILITIES 11 776 14 521
TOTAL EQUITY AND LIABILITIES 25 332 27 519
Summarised statement of comprehensive earnings for the year ended 30 June 2016
2016 2015
Notes Rm Rm
Revenue 33 755 43 930
Cost of sales (31 260) (41 566)
Gross earnings 2 495 2 364
Other earnings 591 471
Operating expenses 15 (2 808) (3 063)
Loss from equity-accounted investments 8 (132) (60)
Net operating earnings / (loss) 146 (288)
Impairment / loss on derecognition of property,
plant and equipment and intangible assets 7 (333) (330)
Impairment of goodwill arising on consolidation - (291)
Profit on sale of subsidiary - 777
Profit on sale of property, plant and equipment 14 592 -
Earnings / (loss) before financing transactions 405 (132)
Finance earnings 211 177
Interest on convertible bonds (225) (167)
Other finance expenses (327) (316)
Earnings / (loss) before taxation 64 (438)
Taxation 16 (129) (80)
Loss for the period (65) (518)
Other comprehensive earnings
Other comprehensive earnings to be reclassified to earnings
or loss in subsequent periods (net of taxation):
Exchange differences on translating foreign operations 786 (372)
Other comprehensive loss released / (recognised) from
equity-accounted investments 9 - 28
Other comprehensive earnings / (loss) for the period, net of taxation 786 (344)
Total comprehensive earnings / (loss) for the period 721 (862)
Total comprehensive earnings / (loss) for the period attributable to:
Equity-holders of the parent 676 (804)
Non-controlling interest 45 (58)
721 (862)
Loss for the period attributable to:
Equity-holders of the parent (101) (460)
Non-controlling interest 36 (58)
(65) (518)
Other comprehensive earnings for the period, net of taxation
Equity-holders of the parent 777 (344)
Non-controlling interest 9 -
786 (344)
Results per share (cents)
Loss - basic (25,4) (114,8)
Loss - diluted (25,1) (114,4)
Headline loss - basic (75,2) (144,3)
Headline loss - diluted (74,4) (143,8)
Number of shares (millions)
In issue 416,7 416,7
Weighted average 397,4 400,6
Diluted weighted average 402,1 402,1
Summarised statement of changes in equity for the year ended 30 June 2016
Equity
Total Foreign Equity- settled
share currency accounted share-
capital trans- invest- based
Share Share and lation ments payment
capital premium premium reserve reserve reserve
Rm Rm Rm Rm Rm Rm
Balance at 1 July 2014 20 1 988 2 008 1 129 (28) 26
Loss for the period - - - - - -
Other comprehensive loss for the period
(net of taxation) - - - (372) 28 -
Total comprehensive loss for the period - - - (372) 28 -
Purchase of treasury shares - (7) (7) - - -
Equity-settled share-based payment release - 22 22 - - (22)
Equity-settled share-based payment charge - - - - - 11
Transfer of convertible bond option to
convertible bond equity reserve - - - - - -
Deferred transaction costs allocated
to convertible bond equity reserve - - - - - -
Increase in equity investment - - - - - -
Foreign currency translation movement - - - - - -
Dividends paid - - - - - -
Total contributions and distributions recognised - 15 15 - - (11)
Balance at 1 July 2015 20 2 003 2 023 757 - 15
(Loss) / earnings for the period - - - - - -
Other comprehensive earnings for the period
(net of taxation) - - - 777 - -
Total comprehensive loss for the period - - - 777 - -
Purchase of treasury shares - (23) (23) - - -
Equity-settled share-based payment release - 9 9 - - (9)
Equity-settled share-based payment charge - - - - - 13
Recognition of deferred tax on convertible bond - - - - - -
Decrease in equity investment - - - - - -
Dividends paid - - - - - -
Total contribution and distributions recognised - (14) (14) - - 4
Balance at 30 June 2016 20 1 989 2 009 1 534 - 19
Total
attri-
Conver- butable
tible to equity-
bond Total holders Non-
equity other Retained of the controlling Total
reserve reserves earnings parent interest equity
Rm Rm Rm Rm Rm Rm
Balance at 1 July 2014 - 1 127 10 250 13 385 11 13 396
Loss for the period - - (460) (460) (58) (518)
Other comprehensive loss for the period
(net of taxation) - (344) - (344) - (344)
Total comprehensive loss for the period - (344) (460) (804) (58) (862)
Purchase of treasury shares - - - (7) - (7)
Equity-settled share-based payment release - (22) - - - -
Equity-settled share-based payment charge - 11 - 11 - 11
Transfer of convertible bond option to
convertible bond equity reserve 402 402 - 402 - 402
Deferred transaction costs allocated
to convertible bond equity reserve (12) (12) - (12) - (12)
Increase in equity investment - - - - 76 76
Foreign currency translation movement - - - - 1 1
Dividends paid - - - - (7) (7)
Total contributions and distributions
recognised 390 379 - 394 70 464
Balance at 1 July 2015 390 1 162 9 790 12 975 23 12 998
(Loss) / earnings for the period - - (101) (101) 36 (65)
Other comprehensive earnings for the period
(net of taxation) - 777 - 777 9 786
Total comprehensive loss for the period - 777 (101) 676 45 721
Purchase of treasury shares - - - (23) - (23)
Equity-settled share-based payment release - (9) - - - -
Equity-settled share-based payment charge - 13 - 13 - 13
Recognition of deferred tax on convertible bond (122) (122) - (122) - (122)
Decrease in equity investment - - - - (29) (29)
Dividends paid - - - - (2) (2)
Total contribution and distributions recognised (122) (118) - (132) (31) (163)
Balance at 30 June 2016 268 1 821 9 689 13 519 37 13 556
Summarised statement of cash flows for the year ended 30 June 2016
Notes 2016 2015
Rm Rm
Operating activities
Cash retained / (utilised) from operations 529 (92)
Depreciation 793 929
Amortisation 30 21
Non-cash and other movements 17 (403) (457)
Cash generated by operations 949 401
Changes in working capital:
Decrease in inventories 150 201
Decrease in amounts due from contract customers 825 547
Decrease in trade and other receivables 206 357
Decrease in amounts due to contract customers (1 240) (43)
Decrease in trade and other payables (782) (1 953)
QCLNG repayment (1 072) -
Decrease / (increase) in derivative instruments 46 (101)
Decrease in payables other than contract-related (102) (102)
Decrease in employee-related payables (254) (258)
Total changes in working capital (2 223) (1 352)
Cash utilised by operating activities (1 274) (951)
Finance expenses paid (458) (361)
Finance earnings received 214 174
Taxation paid (316) (397)
Cash outflow from operating activities (1 834) (1 535)
Investing activities
Property, plant and equipment purchased
- expansion (175) (175)
- replacement (319) (649)
Proceeds on disposal of property, plant and equipment 161 245
Proceeds on disposal of investment property - 97
Proceeds on disposal of properties 14 1 127 -
Acquisition of intangible assets
- expansion (12) (52)
- replacement (4) -
Capital expenditure net of proceeds on disposal 778 (534)
Loans advanced to equity-accounted investments net of dividends received (63) (68)
Proceeds on disposal of equity-accounted investments - 5
Net loans advanced to infrastructure investment companies (13) (208)
Acquisition of subsidiary (net of cash acquired) - (23)
Net proceeds on disposal of subsidiary - 1 314
Dividend earnings 7 22
Cash inflow from investing activities 709 508
Operating free cash outflow (1 125) (1 027)
Financing activities with equity-holders
Shares repurchased (23) (7)
Loans (repaid) / advanced by non-controlling interest (20) 76
Dividends paid (2) (7)
Proceeds from convertible bonds issued - 1 947
Net proceeds from / (repayment of) borrowings 429 (2 066)
Net decrease in cash and bank balances before foreign exchange movements (741) (1 084)
Foreign exchange movements on cash and bank balances 315 (196)
Cash and bank balances at the beginning of the period 2 856 4 136
Cash related to assets held-for-sale 20 -
Total cash and bank balances at the end of the period 2 450 2 856
Borrowings excluding bank overdrafts 2 984 2 463
Net cash position (534) 393
Summarised accounting policies for the year ended 30 June 2016
1. Corporate information
The summarised audited consolidated financial statements (�results�) of Aveng Limited (the �Company�) and
its subsidiaries (the �Group�) for the period ended 30 June 2016 were authorised for issue in accordance
with a resolution of the directors on 19 August 2016.
Nature of business
Aveng Limited is a limited liability company incorporated and domiciled in the Republic of South Africa
whose shares are publicly traded. The Group operates in the construction, engineering and mining
environments and as a result the revenue is not seasonal in nature, but is influenced by the nature
and execution of the contracts currently in progress.
Change in directorate
Mr PA Hourquebie was appointed as a non-executive director effective from 5 August 2015.
Mr D Robinson retired as a non-executive director effective from 17 August 2015.
Mr SJ Flanagan was appointed as a non-executive director effective from 1 November 2015.
Mr PK Ward retired as a non-executive director effective from 30 June 2016.
Mr AWB Band retired as a non-executive director effective from 19 August 2016.
2. Presentation of consolidated financial statements
The accounting policies below are applied throughout the summarised consolidated financial statements.
Basis of preparation
The summarised audited consolidated financial statements have been prepared on a historical cost basis,
except for certain financial assets which are measured at fair value.
These summarised audited consolidated financial statements are presented in South African Rand (�ZAR�)
and all values are rounded to the nearest million (�Rm�) except where otherwise indicated. The summarised
audited consolidated financial statements are prepared in accordance with IAS 34 Interim Financial Statements
and the Listing Requirements of the Johannesburg Stock Exchange Limited (�JSE�). The accounting policies
adopted are consistent with those of the previous year, except as disclosed in note 3 relating to the adoption
of new and revised Standards and Interpretations that became effective during this reporting period.
The summarised audited consolidated financial results do not include all the information and disclosures
required in the consolidated financial statements, and should be read in conjunction with the Group�s audited
consolidated financial statements as at 30 June 2016 that are available on the Company�s website, https://protect-za.mimecast.com/s/G6ErBzhZEzOoF3.
The Company�s integrated report for the year ended 30 June 2016 will be available by 19 September 2016.
The financial results have been prepared by Clare Giletti CA(SA) under the supervision of the Group CFO,
Adrian Macartney CA(SA).
The summarised audited consolidated financial statements have been audited by Ernst & Young Incorporated
and the unqualified audit opinion is available on request from the company secretary at the Company�s
registered office.
Assessment of significance or materiality of amounts disclosed in these financial results
The Group presents amounts in these results in accordance with International Financial Reporting Standards
(�IFRS�). Only amounts that have a relevant and material impact on the results have been separately
disclosed. The assessment of significant or material amounts is determined by taking into account the
qualitative and quantitative factors attached to each transaction or balance that is assessed.
3. New accounting standards and interpretations adopted, changes in accounting policies and
other reclassification
As part of the Group�s financial reporting improvement initiatives, the structure, format and
presentation of disclosures in the financial statements were reviewed. This resulted in the reallocation
of certain comparative amounts. This initiative is an ongoing programme targeting the most appropriate
disclosure and presentation practices to best serve the interests of the Group�s stakeholders based on
interaction with them during the period.
The resulting reallocations had no impact on the earnings of the Group and as such the reallocations are
regarded as not having had a qualitatively significant effect on the information presented.
Deferred tax assets relating to historical assessed losses of Aveng (Africa) Proprietary Limited were
transferred to Aveng Corporate from the various segments as these losses are managed centrally.
Balance as
previously Segment Restated
reported reallocation balance
Rm Rm Rm
Segmental report as at 30 June 2015
Total assets
Construction and Engineering: South Africa and rest of Africa 5 767 (1 373) 4 394
Construction and Engineering: Australasia and Asia 11 097 - 11 097
Mining 4 548 (168) 4 380
Manufacturing and Processing 5 815 (109) 5 706
Other and Eliminations 292 1 650 1 942
27 519 - 27 519
Total liabilities
Construction and Engineering: South Africa and rest of Africa 2 439 - 2 439
Construction and Engineering: Australasia and Asia 6 295 - 6 295
Mining 2 027 - 2 027
Manufacturing and Processing 1 936 - 1 936
Other and Eliminations 1 824 - 1 824
14 521 - 14 521
4. Significant accounting judgements and estimates
The preparation of the summarised consolidated financial statements requires management to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from these estimates.
Impairment of cash generating units
Where indicators existed the Group assessed the recoverable amount (higher of its fair value less cost to dispose
and its value in use) of the relevant cash generating units. The value in use was used as the Group expects to
recover the economic benefits through operational use.
The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model, the expected
future cash inflows and the growth rates used for extrapolation and terminal value purposes.
The following assumptions were used in the calculations:
- The Group WACC was adjusted to take into account the risk specific to each cash generating unit; and
- Non-cash settled intercompany balances were excluded from the calculation of the Net Asset Value (�NAV�).
Refer to note 7 - Impairments for further detail.
5. Change in estimate
The Group reassessed the tax deductibility of the unwinding of the convertible bond equity option, through the
effective interest rate and as a result a deferred tax remeasurement of R122 million has been raised through
equity as required for compound instruments.
6. Segmental report
The Group has determined four reportable segments that are largely organised and managed separately according
to the nature of products and services provided.
These segments are components of the Group:
- that engage in business activities from which they earn revenues and incur expenses; and
- have operating results that are regularly reviewed by the Group�s chief operating decision-makers to make
decisions about resources to be allocated to the segments and in the assessment of their performance.
The Group�s reportable segments are categorised as follows:
6.1 Construction and Engineering
6.1.1 Construction and Engineering: South Africa and rest of Africa
This segment includes: Aveng Grinaker-LTA, Aveng Engineering and Aveng Capital Partners (�ACP�).
Aveng Engineering was discontinued during the year, the remaining portions of Water and operate & maintain
will now form part of Aveng Grinaker-LTA.
Revenues from this segment include the supply of expertise in a number of market sectors: power, mining,
infrastructure, commercial, retail, industrial and Oil & Gas.
Aveng Grinaker-LTA business units include: Civil Engineering, Mechanical & Electrical, Building & Coastal
and Aveng Water (and remaining work of Aveng Engineering).
6.1.2 Construction and Engineering: Australasia and Asia
This segment comprises McConnell Dowell.
This segment specialises in the construction and maintenance of tunnels and pipelines, railway infrastructure
maintenance and construction, marine and mechanical engineering, industrial building projects, Oil & Gas
construction and mining and mineral construction.
McConnell Dowell business units include: Australia, New Zealand and Pacific, Built Environs, Southeast Asia
and Middle East.
There has been a change in disclosure of business units as per discipline to geography, in relation to Australia,
New Zealand and Pacific and Southeast Asia.
6.2 Mining
This segment comprises Aveng Moolmans and Aveng Shafts & Underground.
Revenues from this segment are derived from mining-related activities.
6.3 Manufacturing and Processing
This segment comprises Aveng Manufacturing and Aveng Steel.
The revenues from this segment comprise the supply of products, services and solutions to the mining,
construction, Oil & Gas, water, power and rail sectors across the value chain, both locally and internationally.
During the current year Aveng Steeledale was classified as held-for-sale and Aveng Steel Fabrication
was closed. Subsequent to year-end 70% of Aveng Steeledale was sold to a related party subject to conditions
precedent. Refer note 12: Non-current assets held-for-sale.
Aveng Manufacturing business units include: Aveng Automation and Control Solutions (ACS), Aveng Fa�ades (which has
been closed), Aveng Dynamic Fluid Control (DFC), Aveng Duraset, Aveng Infraset and Aveng Rail. Aveng Steel business units
include: Aveng Steel Fabrication (which has been closed), Aveng Steeledale (held-for-sale) and Aveng Trident Steel.
6.4 Aveng Capital Partners
During the current year Aveng Capital Partners (�ACP�) reached the required threshold for it to be individually
disclosed. It is still included in the Construction and Engineering: South Africa and rest of Africa segment,
but also shown separately.
Revenues from this segment are derived from returns related to the Group�s investment in South African toll roads,
real estate and renewable energy concessions and investments.
6.5 Other and Eliminations
This segment comprises corporate services, corporate held investments, including properties and
consolidation eliminations.
Statement of financial position
Construction and
Engineering: South Africa
and rest of Africa
2016 2015
Excluding Excluding
ACP ACP ACP ACP 2016 2015 %
ASSETS
Goodwill arising on consolidation - - - - - - -
Intangible assets - - 2 - - 2 (100,0)
Property, plant and equipment 437 1 494 - 438 494 (11,3)
Equity-accounted investments 73 2 134 (3) 75 131 (42,7)
Infrastructure investments - 49 - 706 49 706 (93,1)
Deferred taxation* 48 2 77 13 50 90 (44,4)
Derivative instruments - - - - - - -
Amounts due from contract customers 1 124 37 2 256 - 1 161 2 256 (48,5)
Inventories 9 - 31 - 9 31 (71,0)
Trade and other receivables 235 34 312 157 269 469 (42,6)
Cash and bank balances 537 18 207 8 555 215 >100,0
Non-current assets held for sale - 860 - - 860 - 100,0
Total assets 2 463 1 003 3 513 881 3 466 4 394 (21,1)
LIABILITIES
Deferred taxation 46 105 67 32 151 99 52,5
Borrowings and other liabilities - - - - - - -
Payables other than contract-related - - 102 - - 102 (100,0)
Employee-related payables 194 6 208 3 200 211 (5,2)
Derivative instruments - - - - - - -
Trade and other payables 1 200 39 1 377 5 1 239 1 382 (10,3)
Amounts due to contract customers 435 - 543 71 435 614 (29,2)
Taxation payable (9) 6 30 1 (3) 31 >(100,0)
Non-current liabilities held for sale - - - - - - -
Total liabilities 1 866 156 2 327 112 2 022 2 439 (17,1)
* Comparatives have been restated in relation to deferred tax assets that have been reallocated between the segments.
Construction and
Engineering: Australasia
and Asia Mining
2016 2015 % 2016 2015 %
ASSETS
Goodwill arising on consolidation 100 100 - - - -
Intangible assets - - - 20 8 >100,0
Property, plant and equipment 805 799 0,8 2 294 2 506 (8,5)
Equity-accounted investments 56 56 - 4 4 -
Infrastructure investments - 72 (100,0) - - -
Deferred taxation* 940 617 52,4 129 27 >100,0
Derivative instruments - 15 (100,0) 19 - 100,0
Amounts due from contract customers 7 167 6 895 3,9 675 1 253 (46,1)
Inventories 10 7 42,9 244 225 8,4
Trade and other receivables 96 186 (48,4) 115 91 26,4
Cash and bank balances 1 441 2 350 (38,7) 452 266 69,9
Non-current assets held for sale 84 - 100,0 - - -
Total assets 10 699 11 097 (3,6) 3 952 4 380 (9,8)
LIABILITIES
Deferred taxation 104 72 44,4 257 182 41,2
Borrowings and other liabilities 905 250 >100,0 340 557 (39,0)
Payables other than contract-related - - - - - -
Employee-related payables 372 446 (16,6) 217 273 (20,5)
Derivative instruments - - - - - -
Trade and other payables 2 209 3 928 (43,8) 528 701 (24,7)
Amounts due to contract customers 753 1 588 (52,6) 70 272 (74,3)
Taxation payable 67 11 >100,0 13 42 (69,0)
Non-current liabilities held for sale - - - - - -
Total liabilities 4 410 6 295 (29,9) 1 425 2 027 (29,7)
* Comparatives have been restated in relation to deferred tax assets that have been reallocated between the segments.
Manufacturing and Other and
Processing Eliminations Total
2016 2015 % 2016 2015 % 2016 2015 %
ASSETS
Goodwill arising on consolidation 10 10 - 232 232 - 342 342 -
Intangible assets 142 152 (6,6) 163 177 (7,9) 325 339 (4,1)
Property, plant and equipment 976 1 326 (26,4) 330 501 (34,1) 4 843 5 626 (13,9)
Equity-accounted investments - - - (35) (40) 12,5 100 151 (33,8)
Infrastructure investments - - - 128 - 100,0 177 778 (77,2)
Deferred taxation* (74) (263) 71,9 813 1 109 (26,7) 1 858 1 580 17,6
Derivative instruments 1 9 (88,9) - 17 (100,0) 20 41 (51,2)
Amounts due from contract customers 223 472 (52,8) 238 (582) >100,0 9 464 10 294 (8,1)
Inventories 1 949 2 266 (14,0) (1) - (100,0) 2 211 2 529 (12,6)
Trade and other receivables 1 405 1 463 (4,0) 173 215 (19,5) 2 058 2 424 (15,1)
Cash and bank balances 424 271 56,5 (422) (246) (71,5) 2 450 2 856 (14,2)
Non-current assets held for sale 414 - 100,0 126 559 (77,5) 1 484 559 >100,0
Total assets 5 470 5 706 (4,1) 1 745 1 942 (10,1) 25 332 27 519 (7,9)
LIABILITIES
Deferred taxation 5 (54) >100,0 (251) (78) >(100,0) 266 221 20,4
Borrowings and other liabilities 7 5 40,0 1 732 1 651 4,9 2 984 2 463 21,2
Payables other than contract-related - - - - - - - 102 (100,0)
Employee-related payables 95 122 (22,1) 54 64 (15,6) 938 1 116 (15,9)
Derivative instruments 27 2 >100,0 - - - 27 2 >100,0
Trade and other payables 1 720 1 757 (2,1) 190 193 (1,6) 5 886 7 961 (26,1)
Amounts due to contract customers 47 88 (46,6) 17 - 100,0 1 322 2 562 (48,4)
Taxation payable (2) 16 >(100,0) 31 (6) >100,0 106 94 12,8
Non-current liabilities held for sale 263 - 100,0 (16) - (100,0) 247 - 100,0
Total liabilities 2 162 1 936 11,7 1 757 1 824 (3,7) 11 776 14 521 (18,9)
* Comparatives have been restated in relation to deferred tax assets that have been reallocated between the segments.
Statement of comprehensive income
Construction and
Engineering: South Africa
and rest of Africa
2016 2015
Excluding Excluding
ACP ACP ACP ACP 2016 2015 %
Gross revenue 7 188 156 8 343 12 7 344 8 355 (12,1)
Cost of sales (6 959) (158) (8 474) (17) (7 117) (8 491) 16,2
Gross earnings / (loss) 229 (2) (131) (5) 227 (136) >100,0
Other earnings 106 220 29 197 326 226 44,2
Operating expenses (658) (24) (727) (9) (682) (736) 7,3
Earnings from equity-accounted investments (58) - (50) (1) (58) (51) (13,7)
Net operating (loss) / earnings (381) 194 (879) 182 (187) (697) 73,2
Impairment of property, plant and equipment and
intangible assets - - (209) - - (209) 100,0
Impairment of goodwill arising on consolidation - - - - - - -
Profit on sale of subsidiary - - - - - - -
Profit on sale of property, plant and equipment - - - - - - -
(Loss) / earnings before financing transaction (381) 194 (1 088) 182 (187) (906) 79,4
Net finance expenses (10) 40 (18) 33 30 15 100,0
(Loss) / earnings before taxation (391) 234 (1 106) 215 (157) (891) 82,4
Taxation (2) (89) 122 (11) (91) 111 >(100,0)
(Loss) / earnings for the period (393) 145 (984) 204 (248) (780) 68,2
Capital expenditure 47 1 96 - 48 96 (50,0)
Depreciation (76) - (91) - (76) (91) 16,5
Amortisation (1) - (5) - (1) (5) 80,0
Earnings before interest, taxation, depreciation
and amortisation (EBITDA) (304) 194 (783) 182 (110) (601) 81,7
Statement of comprehensive income
Construction and
Engineering: Australasia
and Asia Mining
2016 2015 % 2016 2015 %
Gross revenue 12 828 20 912 (38,7) 5 026 5 956 (15,6)
Cost of sales (11 737) (19 678) 40,4 (4 586) (5 258) 12,8
Gross earnings / (loss) 1 091 1 234 (11,6) 440 698 (37,0)
Other earnings 18 45 (60,0) 72 1 >100
Operating expenses (1 022) (1 152) 11,3 (235) (286) 17,8
Earnings from equity-accounted investments (73) (15) >(100,0) (1) - (100,0)
Net operating (loss) / earnings 14 112 (87,5) 276 413 (33,2)
Impairment of property, plant and equipment
and intangible assets - (44) 100,0 (38) (32) (18,8)
Impairment of goodwill arising on consolidation - (291) 100,0 - - -
Profit on sale of subsidiary - 777 (100,0) - - -
Profit on sale of property, plant and equipment - - - - - -
(Loss) / earnings before financing transaction 14 554 (97,5) 238 381 (37,5)
Net finance expenses (109) (36) >(100,0) (10) (42) 76,2
(Loss) / earnings before taxation (95) 518 >(100,0) 228 339 (32,7)
Taxation 3 (14) >100,0 (123) (194) 36,6
(Loss) / earnings for the period (92) 504 >(100,0) 105 145 (27,6)
Capital expenditure 150 262 (42,7) 151 257 (41,2)
Depreciation (248) (286) 13,3 (336) (418) 19,6
Amortisation - - - - - -
Earnings before interest, taxation, depreciation
and amortisation (EBITDA) 262 398 (34,2) 612 831 (26,4)
Manufacturing and Other and
Processing Eliminations Total
2016 2015 % 2016 2015 % 2016 2015 %
Gross revenue 8 794 9 928 (11,4) (237) (1 221) 80,6 33 755 43 930 (23,2)
Cost of sales (8 289) (9 243) 10,3 469 1 104 (57,5) (31 260) (41 566) 24,8
Gross earnings / (loss) 505 685 (26,3) 232 (117) >100,0 2 495 2 364 5,5
Other earnings 130 164 (20,7) 45 35 28,6 591 471 25,5
Operating expenses (705) (795) 11,3 (164) (94) (74,5) (2 808) (3 063) 8,3
Earnings from equity-accounted investments - - - - 6 (100,0) (132) (60) >(100,0)
Net operating (loss) / earnings (70) 54 >(100,0) 113 (170) >100,0 146 (288) >100,0
Impairment of property, plant and equipment and
intangible assets (295) (32) >(100,0) - (13) 100,0 (333) (330) (0,9)
Impairment of goodwill arising on consolidation - - - - - - - (291) 100,0
Profit on sale of subsidiary - - - - - - - 777 (100,0)
Profit on sale of property, plant and equipment 22 - 100,0 570 - 100,0 592 - 100,0
(Loss) / earnings before financing transaction (343) 22 >(100,0) 683 (183) >100,0 405 (132) >100,0
Net finance expenses (21) (25) 16,0 (231) (218) (6,0) (341) (306) (11,4)
(Loss) / earnings before taxation (364) (3) >(100,0) 452 (401) >100,0 64 (438) >100,0
Taxation 120 (7) >100,0 (38) 24 >(100,0) (129) (80) (61,3)
(Loss) / earnings for the period (244) (10) >(100,0) 414 (377) >100,0 (65) (518) 87,5
Capital expenditure 139 180 (22,8) 22 81 (72,8) 510 876 (41,8)
Depreciation (123) (119) (3,4) (10) (15) 33,3 (793) (929) 14,6
Amortisation (13) (12) (8,3) (16) (4) >(100,0) (30) (21) (42,9)
Earnings before interest, taxation, depreciation
and amortisation (EBITDA) 66 185 (64,3) 139 (151) >100,0 969 662 46,4
The Group operates in five principal geographical areas:
2016 2015
2016 2015 Capital Capital
2016 2015 Segment Segment expen- expen-
Revenue Revenue assets assets diture diture
Rm Rm Rm Rm Rm Rm
South Africa 18 511 19 628 12 850 14 048 353 541
Rest of Africa including Mauritius 1 743 2 908 1 416 1 625 6 65
Australia 5 794 12 847 7 933 8 666 56 26
New Zealand 3 514 3 033 1 050 717 35 84
Southeast Asia 3 542 5 115 1 752 2 154 58 160
Middle East and other regions 651 399 331 309 2 -
33 755 43 930 25 332 27 519 510 876
7. Impairments
As at 30 June 2016, it was necessary to impair assets due to the subdued economic conditions affecting the Steel
business and assets abandoned in Aveng Mining. An impairment charge totalling R333 million was recognised against
ancillary operations comprising property, plant and equipment in the Manufacturing and Processing (R295 million charge)
and Mining (R38 million charge) segments respectively.
During the period ended 30 June 2015, the goodwill associated with the Built Environs business (R291 million) was
fully impaired within the Construction and Engineering: Australasia and Asia segment.
As at 30 June 2015, an impairment charge totalling R273 million was recognised against ancillary operations
comprising property, plant and equipment in the Construction and Engineering: South Africa and rest of Africa
(R198 million charge), Mining (R32 million charge), Manufacturing and Processing (R32 million charge) and
Construction and Engineering: Australasia and Asia (R11 million) segments respectively.
A further impairment charge totalling R57 million relating to intangible assets was recognised comprising the
Construction and Engineering: South Africa and rest of Africa (R11 million), Construction and Engineering:
Australasia and Asia (R33 million) segments and Other and Eliminations segments (R13 million) during the period
ended 30 June 2015.
Impairments recognised during the year
2016 2015
Rm Rm
Goodwill - (291)
Intangible assets - (57)
Property, plant and equipment (333) (273)
(333) (621)
8. Equity-accounted investments
Opening balance 151 306
Transfer to infrastructure investments held at fair value - (3)
Transfer of shareholder loans to infrastructure investments - (168)
Transfer to held-for-sale (17) -
Loans advanced 65 74
Obligation for Group share of Rehm Grinaker Construction losses* 26 -
Share of earnings after taxation and dividends (132) (44)
Amount recorded in the statement of comprehensive earnings (132) (60)
Excluding: Fair value adjustments on foreign exchange contracts
disclosed as derivative instruments - 16
Dividends received (2) (6)
Foreign currency translation movement 9 7
Impairment - (7)
Disposal - (5)
Other - (3)
100 151
* Losses have been transferred to trade and other payables, being our share of the
guaranteed losses.
% 2016 2015
Investments holding Rm Rm
Reconciliation of investments
Oakleaf Investment Holdings 86 Proprietary Limited 50 17 48
REHM Grinaker Property Co Limited 43 16 16
REHM Grinaker Construction Co Limited* 43 - 2
RPP Developments Proprietary Limited** 10 - 10
RPP JV Property Proprietary Limited** 40 - 7
Dutco McConnell Dowell Middle East Limited 49 56 56
Other 11 12
100 151
* Losses have been transferred to trade and other payables, being our share of the
guaranteed losses.
** Transferred to held-for-sale.
The following is summarised financial information for the Group�s interest in associates and joint ventures,
based on the amount reported in the Group�s consolidated financial statements:
2016 2015
Rm Rm
Aggregate carrying amount of associates 83 103
Aggregate carrying amount of joint ventures 17 48
100 151
The Group�s share of results of operations of equity-accounted investments are summarised below:
Associates
(Loss) / earnings for the year (101) 11
Joint ventures
Loss for the year (31) (55)
(31) (55)
Total loss from equity-accounted investments (132) (44)
Forward exchange contract losses* - (16)
Total share of loss from equity-accounted investments (132) (60)
* The underlying performance of renewable energy contracts housed within Oakleaf Investment
Holdings 86 Proprietary Limited was influenced by fluctuations in the ZAR exchange rate
against the USD and EUR. This was offset by the realised and unrealised fair value losses
on the forward exchange contracts (FEC) held within the contract within the Other and
Eliminations segment and presented as part of earnings from equity-accounted investments,
in order to reflect the true economic performance of the contract within the context of
the Group�s economic interest. The carrying amount of the FEC�s are recognised in
derivative instruments (refer to Derivative instruments note as detailed in the
consolidated financial statements available on the Group�s website).
Regulatory constraints
There are no regulatory constraints in South Africa, apart from the provision of the Companies Act 71 of 2008
(as amended) of South Africa, that restrict the distribution of funds to shareholders. There are also no
regulatory constraints in Australia apart from profits from associates not being distributed without the consent
of both the Group and the local shareholders.
Contingent liabilities
The Group�s share of bank guarantees issued by its joint ventures and associates is R476 million
(June 2015: R537 million). Other than as stated above, the Group did not incur any other contingent liabilities
with regard to associates and joint ventures.
For the full list of Group entities, refer to Group operating entities note as detailed in the consolidated
financial statements available on the Group�s website.
For detail on Commitments refer to the consolidated financial statement available on the Group�s website and note 18:
Contingent liabilities for the Group�s contingent liabilities relating to its associates and joint ventures.
2016 2015
Rm Rm
9. Infrastructure investments
South African infrastructure investments
Financial investments 177 706
177 706
Other infrastructure investments
Financial Investments - 72
Total infrastructure investments 177 778
South African infrastructure investments
Opening balance 706 -
Reclassification of equity investments from equity-accounted investments - 3
Reclassification of shareholder loans from equity-accounted investments - 168
Transfer to non-current asset held-for-sale (860) -
Recycling of equity-accounted earnings from other comprehensive earnings - 28
Reclassification from financial investments - 126
Fair value remeasurement through comprehensive earnings 251 173
Acquisition of interest in Dimopoint Proprietary Limited 67 -
Loans advanced 65 208
Loan repayment (52) -
177 706
Balance at the end of the year comprises:
Blue Falcon 140 Trading Proprietary Limited (�Gouda�)* - 217
Dimopoint Proprietary Limited (�Dimopoint�) 128 -
Imvelo Concession Company Proprietary Limited (�Imvelo�)* - 40
N3 Toll Concessions Proprietary Limited (�N3TC�)* - 128
Windfall 59 Properties Proprietary Limited (�Sishen�)* - 321
Firefly Investments 238 Proprietary Limited (�Firefly�) 49 -
177 706
Other infrastructure
Opening balance 72 -
Reclassification from financial investments - 64
Foreign currency translation movement 12 (4)
Fair value remeasurement through comprehensive earnings - 12
Transfer to held-for-sale (84) -
- 72
* Transferred to held-for-sale
10. Deferred taxation
Reconciliation of deferred taxation asset
At the beginning of the year 1 580 1 403
Recognised in earnings or loss - current year* 165 143
Recognised in earnings or loss - adjustment for prior year* 4 81
Effects of change in foreign tax rate* (7) -
Foreign currency translation movement 158 13
Restructuring - (1)
Disposal of subsidiary - (59)
Reallocation from deferred tax liability (42) -
1 858 1 580
Reconciliation of deferred taxation liability
At the beginning of the year (221) (257)
Recognised in earnings or loss - current year* 60 11
Recognised in earnings or loss - adjustment for prior year* (23) 25
Restructuring - 1
Accounted for directly in equity (122) -
Foreign currency translation movement (2) (1)
Reallocation to deferred tax asset 42 -
(266) (221)
Deferred taxation asset balance at the year-end comprises:
Accelerated capital allowances (5) (303)
Provisions 231 370
Contracts (93) (70)
Other (38) 358
Assessed losses carried forward 1 763 1 225
1 858 1 580
Deferred taxation liability balance at the year-end comprises:
Accelerated capital allowances (375) (327)
Provisions 16 29
Contracts 6 17
Other 74 22
Assessed losses carried forward 97 38
Convertible bond (84) -
(266) (221)
* The net movement on deferred taxation amounts to R199 million (2015: R260 million) in the statement
of comprehensive earnings.
The Group�s results include a number of legal statutory entities within a number of taxation jurisdictions.
As at June 2016 the Group had unused taxation losses of R7 480 million (2015: R5 603 million) available for offset
against future profits. A deferred taxation asset has been recognised in respect of R5 854 million
(2015: R4 116 million) of such losses. No deferred taxation asset has been recognised in respect of the remaining
R1 626 million (2015: R1 487 million) due to the uncertainty of future taxable profits in the related legal entities.
Unused tax losses
The Group performed a five-year forecast for the financial years 2017 to 2021 which is the key evidence that supports
the recognition of the deferred taxation assets. This forecast specifically focused on Aveng (Africa) Proprietary
Limited, including Aveng Grinaker-LTA. Given its financial performance in the past Aveng Grinaker-LTA contributed
significantly to the assessed losses in the Group.
The forecast includes certain restructuring and corporate actions, which will generate additional taxable income in
Aveng (Africa) Proprietary Limited. The proposed corporate actions include, the following:
- the proposed Aveng Grinaker-LTA transaction;
- the sale of 70% of Aveng Steeledale; and
- the sale of investments held by Aveng Capital Partners.
In addition the Group is making good progress in positioning Aveng for future profitability, including considerable
restructuring and right sizing of the business in line with current market conditions. Attention has been given to
the commercial and risk management processes and pre-tender assessments. This will enhance margins in the foreseeable
future.
2016 2015
Rm Rm
11. Amounts due from / (to) contract customers
Uncertified claims and variations (underclaims)**1 6 584 5 157
Contract contingencies** (390) (253)
Progress billings received (including overclaims)2 (1 014) (1 921)
Uncertified claims and variations less progress billings received 5 180 2 983
Contract receivables3 3 146 5 147
Provision for contract receivables (2) *
Retention receivables4 126 243
8 450 8 373
Amounts received in advance5 (308) (641)
Net amounts due from contract customers 8 142 7 732
Disclosed on the statement of financial position as follows:
Uncertified claims and variations** 6 584 5 157
Contract contingencies (390) (253)
Contract and retention receivables 3 272 5 390
Provision for contract receivables (2) *
Amounts due from contract customers 9 464 10 294
Progress billings received (1 014) (1 921)
Amounts received in advance (308) (641)
Amounts due to contract customers (1 322) (2 562)
Net amounts due from contract customers 8 142 7 732
* Amounts less than R1 million.
** Provisions have been netted off against uncertified claims and variations.
1 Includes revenue not yet certified - recognised based on percentage of completion / measurement
and agreed variations, less provisions and deferred contract costs.
2 Progress billings are amounts billed for work performed above revenue recognised.
3 Amounts invoiced still due from customers.
4 Retentions are amounts invoiced but not paid until the conditions specified in the contract are
fulfilled or until defects have been rectified.
5 Advances are amounts received from the customer before the related work is performed.
Provision
Uncertified Contract for
claims and contin- Contract contract Retention
variations gencies receivables receivables receivables Total
Rm Rm Rm Rm Rm Rm
2016
Amounts due to contract customers
Non-current assets 1 417 - - - - 1 417
Current assets 5 167 (390) 3 146 (2) 126 8 047
6 584 (390) 3 146 (2) 126 9 464
2015
Non-current assets 900 - - - - 900
Current assets 4 257 (253) 5 147 * 243 9 394
5 157 (253) 5 147 * 243 10 294
* Amounts less than R1 million.
Amounts due from contract customers includes R4,7 billion (2015: R3,7 billion) which is currently subject to
protracted legal proceedings.
12. Non-current assets held-for-sale
On 1 September 2015, the majority of the assets held-for-sale as at 30 June 2015 were effectively sold to Imbali Props
21 Proprietary Limited, a member of the Collins Property Group for R1,1 billion cash. The Group retained a 30% interest
in Dimopoint Proprietary Limited, a special purpose vehicle created for the purpose of holding the non-core properties
that were sold. The Group transferred additional properties to held-for-sale in the current year.
Furthermore, the Group took a decision to dispose of the majority of its infrastructure investments as well as the
Steeledale business.
Subsequent to year-end the Group announced the sale of four infrastructure investments (namely Gouda, Sishen, Imvelo and
the N3TC) and 70% of Steeledale, both subject to conditions precedent.
2016 2015
Rm Rm
Non-current assets held-for-sale 1 484 559
Non-current liabilities held-for-sale (247) -
1 237 559
Aveng
Movement during the year Properties Steeledale ACP GoldlinQ Other Properties
Opening balance 559 - - - - 607
Capitalised costs:
Environmental provision relating to property 15 - - - - -
Transferred from / (to):
Property, plant and equipment 163 35 - - - (48)
Equity-accounted investments - - - - 17 -
Infrastructure investments - - 860 84 - -
Loans to Group companies - 32 - - - -
Inventory - 169 - - - -
Amounts due from contract customers - 5 - - - -
Trade and other receivables - 165 - - - -
Cash and cash equivalents - 20 - - - -
Taxation receivable - 4 - - - -
Elimination of loan to Group companies - (32) - - - -
Sold (612) - - - - -
Total non-current assets held-for-sale 125 398 860 84 17 559
Loans from Group companies - (16) - - - -
Trade and other payables - (247) - - - -
Elimination of loan from Group companies - 16 - - - -
Total non-current liabilities held-for-sale - (247) - - - -
Net non-current assets held-for-sale 125 151 860 84 17 559
13. Borrowings and other liabilities
2016 2015
Rm Rm
Interest-bearing borrowings comprise:
Payment profile
- within one year 1 214 426
- between two to five years 1 770 2 037
2 984 2 463
13.1 Borrowings held at amortised cost 2016 2015
Description Terms Rate of interest Rm Rm
Convertible bond of R2 billion Interest coupon is payable Coupon of 7,25% 1 731 1 651
bi-annually until July 2019
Finance sale and lease back amounting to Monthly instalment ending in June 2018 Fixed interest rate of 34 91
AUD3 million* 5,52% to 6,08%
Hire purchase agreement amounting to AUD1 million* Monthly instalment ending in May 2018 Fixed interest rate of 11 -
1,60%
Hire purchase agreement amounting to AUD5 million* Monthly instalment ending in May 2018 Fixed interest rate of 51 -
5,90%
Short term facility of AUD10 million**** Repayable in November 2016 Bank bill swap rate 110 94
plus 0,70%
Short term facility of AUD60 million*** Repayable in November 2016 Bank bill swap rate plus 658 -
2,20%
Hire purchase agreement amounting to AUD4 million* Monthly instalment ending in August 2017 Fixed interest rate of 42 65
6,81%
Hire purchase agreement denominated in USD* Quarterly instalments ending June 2017 Fixed interest rate of 138 253
ranging 4,58% to 4,65%
Hire purchase agreement denominated in ZAR* Monthly instalment ending in December 2017 South African prime 46 74
less 2,00%
Hire purchase agreement denominated in ZAR* Monthly instalment ending in November 2019 South African prime less 101 148
1,70%
Hire purchase agreement denominated in ZAR* Monthly instalment ending in May 2018 Fixed interest rate of 49 69
9,70%
Finance lease facilities denominated in ZAR* Monthly instalment ending in March 2020 South African prime 11 13
Interest-bearing borrowings 2 982 2 458
Interest outstanding on interest-bearing borrowings** 2 5
Total interest-bearing borrowings 2 984 2 463
* These borrowings and other liabilities are finance leases.
** Interest outstanding in the current year relates to finance leases.
*** Backed by a bank guarantee.
**** Secured by cash collateral in South Africa.
13.1 Borrowings held at amortised cost
2016 2015
Rm Rm
Finance lease liabilities are payable as follows:
Minimum lease payments due
- within one year 321 369
- in two to five years 194 411
Less: future finance charges (30) (62)
Present value of minimum lease payments 485 718
The Australasia and Asia operating segment entered into a finance sale and leaseback arrangement in the 2012
financial year and in the current year entered into asset-based finance arrangements.
The arrangement amounting to AUD3 million R34 million (2015: R91 million) has been secured by plant and
equipment with a net carrying amount of R22 million (2015: R60 million).
The arrangement amounting to AUD4 million R42 million (2015: R65 million) has been secured by assets with
a net carrying amount of R44 million (2015: R49 million).
The arrangement amounting to AUD5 million R51 million has been secured by assets with a net carrying amount
of R22 million.
The Mining operating segment entered into various asset-based finance lease agreements to purchase operating
equipment denominated both in USD and ZAR. These arrangements are secured by the assets for which the funding
was provided and are repayable in monthly and quarterly instalments with the final repayment to be made in
November 2019. Equipment with a net carrying amount of R471 million (2015: R613 million) has been pledged as
security for the facility.
The Mining and Manufacturing and Processing operating segments entered into various vehicle lease arrangements.
Equipment with the net carrying amount of R7 million (2015: R10 million) has been pledged as security.
14. Profit on sale of property, plant and equipment
2016
Properties Vehicles Total
Rm Rm Rm
Held-for-sale assets sold 612 - 612
Transaction costs 5 - 5
Profit on sale of property, plant and equipment 577 15 592
Profit on loss of control 150 - 150
Profit on sale of properties 427 - 427
Profit on sale of vehicles - 15 15
Total 1 194 15 1 209
Acquisition of interest in Dimopoint Proprietary Limited (67) - (67)
Cash proceeds on sale of properties 1 127 15 1 142
Profit on sale of properties
Effective 1 September 2015, Dimopoint Proprietary Limited (�Dimopoint�) (a wholly owned subsidiary of Aveng),
issued additional shares to Collins Property Group. Prior to the issue of shares, Dimopoint held a portion of
the properties held-for-sale at 30 June 2015 (refer to note 12: Non-current asset held-for-sale). The issue of
the additional shares resulted in Aveng�s interest being diluted thereby resulting in a loss of control of
Dimopoint, with Aveng retaining a 30% non-controlling interest. A profit of R150 million resulted from the loss
of control of Dimopoint. The remaining 30% investment in Dimopoint is treated as a joint venture as Aveng
retains joint control of Dimopoint and is measured at fair value in terms of IFRS 9 in accordance with the IAS
28.18 (Investments in Associates and Joint Ventures) Venture Capital Organisation exemption.
Following the loss of control in Dimopoint the remaining held-for-sale properties were sold to Dimopoint for a
profit of R427 million.
Profit on sale of vehicles
A profit of R15 million was made on the sale and leaseback of trucks in Aveng Steel.
2016 2015
Rm Rm
15. Operating expenses
Operating lease charges 133 97
Rationalisation and restructuring 189 123
Depreciation of property, plant and equipment 41 47
Amortisation of intangible assets 30 21
Share-based payment expense 13 (20)
Employee costs 1 675 1 895
Employee benefits 23 65
Computer costs 128 105
Consulting fees 82 119
Other 494 611
2 808 3 063
2016 2015
Rm Rm
16. Taxation
Major components of the taxation expense
Current
Local income taxation - current period 20 25
Local income taxation - recognised in current taxation for prior periods 18 (4)
Foreign income taxation or withholding taxation - current period 346 377
Foreign income taxation or withholding taxation - prior periods (56) (58)
328 340
Deferred
Deferred taxation - current period (225) (154)
Deferred taxation - foreign rate change 7 -
Deferred taxation - arising from prior period adjustments 19 (106)
(199) (260)
129 80
2016 2015
% %
Reconciliation of the taxation expense
Effective taxation rate 201,0 (18,3)
Exempt income and capital profits* 328,5 (45,3)
Deferred taxation asset not recognised (144,6) 63,0
Disallowable charges** (303,1) 34,4
Prior-year adjustment 29,2 (11,8)
Foreign tax rate differential and other 130,8 6,0
Withholding taxation (213,8) 0,0
28,0 28,0
* The items impacting the tax rate in this regard relate mainly to the external dividends received
and foreign exchange differences recognised in other comprehensive income.
** This relates mainly to an Australian JV profit distribution that is not deductible for tax purposes.
South African income taxation is calculated at 28% (2015: 28%) of the taxable income for the year. Taxation in
other jurisdictions is calculated at rates the prevailing rates.
2016 2015
Rm Rm
17. Non-cash and other movements
Earnings from disposal of property, plant, equipment and vehicles (648) (61)
Impairment of goodwill, property, plant and equipment and intangible assets 333 628
Profit on disposal of subsidiary - (777)
Fair value adjustments (306) (196)
Movements in foreign currency translation 205 (62)
Movement in equity-settled share-based payment reserve 13 11
(403) (457)
18. Contingent liabilities
Contingent liabilities at the reporting date, not otherwise provided for in
the summarised consolidated financial statements, arise from performance
bonds and guarantees issued in:
South Africa and rest of Africa
Guarantees and bonds (ZARm) 3 615 3 721
Parent company guarantees (ZARm) 516 898
4 131 4 619
Australasia and Asia
Guarantees and bonds (AUDm) 409 647
Parent company guarantees (AUDm) 521 1 215
930 1 862
Contract performance guarantees issued by the parent company on behalf of the Group companies are disclosed
based on the probability of draw down.
Claims and legal disputes in the ordinary course of business
The Group is, from time to time, involved in various claims and legal proceedings arising in the ordinary
course of business. The Board does not believe that adverse decisions in any pending proceedings or claims
against the Group will have a material adverse effect on the financial condition or future operations of the
Group. Provision is made for all liabilities which are expected to materialise and contingent liabilities
are disclosed when the outflows are possible.
2016 2015
Gross of Net of Gross of Net of
taxation taxation taxation taxation
Rm Rm Rm Rm
19. Headline loss
Determination of headline earnings
Loss for the period attributable to equity holders of parent** (101) (460)
Impairment of goodwill - - 291 291
Impairment of property, plant and equipment 333 302 273 252
Impairment of intangible assets - - 57 57
(Profit) / loss on sale of property, plant and equipment (610) (500) 6 4
Profit on sale of subsidiary - - (777) (713)
Fair value adjustment on investment property - - (11) (9)
Headline loss** (299) (578)
** Earnings are circulated in accordance with IAS 33 Earnings per share. Headline earnings are calculated
in accordance with Circular 2/2015.
20. Fair value of assets and liabilities
The Group measures the following financial instruments at fair value:
- Infrastructure investments; and
- Forward exchange contracts.
The Group has reassessed the fair value of its infrastructure investments and those transferred to held-for-sale
as at 30 June 2016. A R251 million (2015: R185 million) of unrealised gains have been recognised during the year.
Refer to the Fair Value of Assets and Liabilities note as contained in the consolidated financial statements
available on the Group�s website for additional detail regarding the methodology, valuation parameters and
assumptions applied as well as the fair value hierarchy and the sensitivity analysis.
21. Events after the reporting period
Subsequent to year-end both the Aveng Capital Partners infrastructure investments and the Steeledale business sales
agreements were signed. Refer to note 12: Non-current assets held-for-sale. These transactions are subject to
various conditions precedent. The proceeds from these transactions will be used to primarily strengthen the statement
of financial position of the Group to support Aveng�s move to the next phase of its strategy, namely, positioning for
profitable growth.
Commentary
Overview
Salient features
- Strong improvement in safety performance
- Revenue declined by 23% to R33,8 billion (2015: R43,9 billion)
- Net operating earnings improved to a profit of R146 million (2015: loss of R288 million) with an improved gross margin
- Overheads reset for lower activity levels
- Headline loss per share improved by 48% to a loss of 75cps
- Substantial improvement in the performance of Aveng Grinaker-LTA, with strong cash generation
- Sale of property portfolio, infrastructure investments and Aveng Steeledale business concluded
Despite the fact that all the markets in which we operate remained subdued, Aveng was able to deliver improved
results.
Aveng reported a substantially reduced headline loss of R299 million or 75,2 cents per share for the year ended
30 June 2016, compared to a headline loss of R578 million or 144,3 cents per share for the preceding year.
Group revenue declined by 23% to R33,8 billion (2015: R43,9 billion), in line with expectations, due to�a weak
macro-economic climate, with McConnell Dowell being most significantly impacted. Net operating earnings increased to a profit
of R146 million from a loss of R288 million in 2015, driven primarily by a marked improvement in Aveng Grinaker-LTA and
an 8% reduction in Group overheads, despite incurring once-off restructuring costs of R189 million. This improved
performance was partially offset by contract underperformance at McConnell Dowell and once-off costs linked to a�problematic
water contract.
The Group generated a basic loss of R101 million (2015: R460 million), which included a gain on the property
transaction of R577 million, offset by impairments of R333 million predominantly relating to Aveng Steel.
Safety
Safety remains a core value of Aveng and is integral to the way the Group conducts its business. The Group remains
fully committed to driving its safety vision �Home without harm, Everyone, Everyday�.
During the year, the all injury frequency rate (�AIFR�) improved by 23% to 2,7 from 3,5. This indicator includes all
types of injuries and principally indicates broad personal injury trends. Aveng continues to see a strong year-on-year
improvement in its safety performance.
Our Board and management are concerned with current levels of road traffic safety and believe that extreme vigilance
is required across our South African operations given that we work on various public road projects. For this reason the
Group has extended its reporting to include �monitored incidents� so as to ensure that the fatal risks associated with
circumstances outside the control of Aveng, such as on public roads, are recognised and examined. Efforts to address such
risks include increasing controls on road closures, employee vigilance during work activities inside a road closure or
non-work activities near a road closure.
Regrettably, eight lives were lost in monitored incidents this year. The Aveng Board and management extend sincere
condolences to the families and friends who have suffered such a painful loss. We will continue our efforts to advert such
tragedies.
Strategy update
Recover and stabilise
Aveng continues to execute its strategy in three distinct phases. The initial �recover and stabilise� phase is mostly
complete with the following outcomes:
Aveng Grinaker-LTA
Performance has improved at Aveng Grinaker-LTA in a number of areas. Loss-making contracts have been closed out,
including the Grootgeluk Cyclic Pond project, while the Mokolo Pipeline project is in the process of being handed over.
The ratio of projects executed at tender margin has substantially improved. While not at optimal levels,
the achieved margin has improved significantly. The embedded margin in the Aveng Grinaker-LTA order book, continues to
recover through robust tendering and project selection processes.
Strong cash generation in the year has benefited from the resolution of significant claims and receivables, most notably
in the power sector. The overhead reduction programme has been completed, resulting in a lower overall cost base but
incurring once-off restructuring costs during the year.
Aveng Water is now under the management of Aveng Grinaker-LTA, while the remaining components of Aveng Engineering
were closed during the year. All previous construction contracts have been completed with the exception of one remaining
water purification project. This project has received attention and the outcome is now more certain. The estimated loss
for this contract has been accounted for in the current year, while the associated cash flows will impact the coming year
as rectification and commissioning are completed.
These outcomes have largely been a result of a stable management team and considerable improvements in the core skills
base within the business.
McConnell Dowell
During the year, McConnell Dowell underwent a comprehensive resetting of its business under new leadership. This
process has positioned the operating group to more effectively manage project delivery and reduce its fixed cost base to
align with lower revenue levels. Enhancing client relationships and more selective tendering in order to win quality work
has been a focus. Under the new organisational structure, lines of accountability and project performance measurement have
been significantly improved.
The order book has increased by 22% to AUD1,5 billion, benefiting from several large project awards in the last six
months, including the Solid Products Jetty in Malaysia, Tuas Bridges in Singapore, Amrun Export facility in Australia, and
Auckland�s City Rail Link in New Zealand.
While McConnell Dowell made good progress in finalising various large projects and underperforming contracts, its
financial performance remains disappointing. McConnell Dowell�s operating free cash flow was impacted primarily by cash
consumptive projects, where advance payments were received in the prior year.
Given the complexities of the QCLNG claims, the arbitrators have indicated the final outcome is likely to be delayed
to the first half of the 2017 calendar year, while the claims relating to the GCRT project remain on track with
conclusion anticipated in 2018. While claims settlements in the future will be cash accretive, they remain a material risk
to earnings.
Aveng Mining
The claims relating to the Chile shaft sinking contract have been resolved and the project has closed out earlier and
more favourably than anticipated. Contractual and commercial discussions continue regarding Wesizwe�s Bakubung Platinum
Mine. The Aveng Shafts & Underground business has been fully integrated with Aveng Moolmans and has returned to
profitability. This integration has already brought about cost savings, while additional reductions are expected in the
coming year.
Aveng Manufacturing
Aveng Manufacturing, like other operating groups, has been impacted by the economic downturn in southern Africa. Rail
maintenance spend has been significantly curtailed in South Africa, while the depressed mining sector has impacted most
business units. This prompted a fixed cost restructuring process to align to lower activity levels. This process will be
completed in the first quarter of the new financial year.
Aveng Steel
Aveng Steel contributed positively to the Group�s liquidity through improved working capital management. The operating
loss reflects the impact of global steel price volatility during the first half of the financial year as well as lower
local demand throughout the year, with an improved performance seen during the second half. In Aveng Steel, substantial
effort resulted in the alignment of the fixed cost base with future business needs.
The following strategic transactions have been or are being implemented:
Sale of the Group's South African property portfolio
In the first half of the year the Group concluded the sale of its non-core properties to the Collins Group and retained
a 30% share and joint control of these assets. This transaction resulted in a profit of R577 million and cash inflow of
R1,1 billion.
Aveng Capital Partners� infrastructure investments
As announced on 10 August 2016 the Group has concluded a binding agreement with Royal Bafokeng Holdings Proprietary
Limited, for the sale of all its interests in four major infrastructure investments for a cash consideration of R860
million. Conditions precedent to the disposal transaction include the waiver of the pre-emptive rights by current
shareholders, and compliance, regulatory, lender and shareholder approvals.
Aveng Steeledale
The Group has concluded a bidding agreement with Kutana Steel Proprietary Limited (�Kutana�) whereby Kutana will
effectively acquire a 70% interest in the Steeledale business, for approximately R252 million. The Group will have the option
to divest from the remaining 30% of its shareholding in the Steeledale business at any time after three years for the
fair value of its equity interest and loans at that time. The Kutana group of companies is a black women-owned investment
group, with Thoko Mokgosi-Mwantembe being the CEO. She is also an independent non-executive director of Aveng Limited
and other major South African listed companies. The sale to an affiliate of a director is a related party transaction and
hence shareholder approval is required to complete this transaction.
Aveng Grinaker-LTA and Aveng Trident Steel
Further to the renewal of the cautionary announcement on 10 August 2016 regarding Aveng Grinaker-LTA and Aveng Trident
Steel, the Group is still in discussions with parties on both of these transactions, and has not yet reached a stage
where an announcement can be made on either the value or the prospective buyers. The market will be kept informed once
there are material developments to report.
Position for profitable growth
The second phase of the strategy �position for profitable growth� has commenced and the Group has made some progress
on this phase. This is evidenced by the strengthening of its businesses in key domestic markets of both South Africa and
Australia. Aveng has continued to right size its business to align with current market conditions and has implemented
further substantial reductions in overheads, which will be fully realised in 2017.
In optimising the Group�s portfolio, the following actions have been implemented in addition to others mentioned in
this report:
- Aveng Engineering and Aveng Facades have been closed
- The business of Aveng Steel Fabrication has been rationalised and amalgamated with the operations of Aveng Trident
Steel
- Aveng Water has been repositioned and is set to leverage the advantage that Aveng has built in this market
- The Group�s Africa strategy has been reprioritised and will focus on specific sectors for select clients in the rest
of Africa.
Market review
Aveng�s key markets, being South Africa, SADC and Australia, remained weak. During the last 12 months the construction
industries in South Africa and Australia have faced slow growth in revenues, in line with lower economic growth in both
markets.
The South African construction industry has been influenced by the downturn in the market, however, growth opportunities
exist in the commercial building market in commercial, residential and healthcare. Continued low levels of public
sector expenditure on major projects as well as the impact of depressed commodity prices in the resource markets have
impacted the Civils, Mechanical & Electrical, Rail and Mining businesses.
The end of the decade-long resources boom in Australia was further evidenced in the completion of major Oil & Gas
projects. The reduced investment environment was only partially offset by increases in government expenditure in transport,
power and water infrastructure, leading to an overall construction market decline. The New Zealand construction market
has remained steady, with road and water project opportunities. Urbanisation and population growth continued to underpin
an improvement in the Southeast Asian infrastructure market. Stronger competition across all geographies and sectors
continued to make winning work difficult and negatively impacted on margins. Despite this, McConnell Dowell has been
successful in growing its order book by 22% and improving its embedded margin.
The manufacturing environment was impacted by weakness in traditional markets, slow demand from the construction and
mining sectors, and reduced maintenance spend on rail. Aveng Manufacturing added new product lines and restructured to
drive efficiency and optimisation within all operations.
The mining industry in South Africa and globally is under considerable pressure which has resulted in numerous mining
contract cancellations, scope reductions and client requests for price discounts. This decline appears to have
stabilised over the last quarter.
The South African domestic steel market was adversely impacted by lower priced imports from China, coupled with poor
domestic demand and excess capacity in international markets. Volumes stabilised in the second half of the year and some
recovery has been noted while an increase in domestic prices was announced during the second half of the financial year.
Financial performance
Statement of comprehensive earnings
Revenue decreased by 23% to R33,8 billion (2015: R43,9 billion). Revenue reduced in all segments in line with difficult
market conditions, partially offset by some growth in activity levels in Aveng�Grinaker-LTA Building and Coastal, New
Zealand and Pacific and certain lower margin manufacturing products. The�full impact of contract cancellations on Aveng
Mining�s revenue was not yet apparent in the current year and will further reduce the operating group�s revenue in the
coming year. The gross margin for the Group improved to a credible 7,4% compared to 5,4% in the prior year with
significantly more contracts meeting their tendered margins. This resulted in an improved operational performance at
Aveng Grinaker-LTA, but was partially offset by pricing pressures from clients in Aveng Mining.
Net operating earnings improved to a R146 million profit, from a R288 million loss in 2015, as a result of:
- An improved financial performance from Aveng Grinaker-LTA on completion of loss-making and non-contributing contracts,
an improvement in the ratio of contracts operating at tendered margins, strong performance in the Building business,
the resolution of some major commercial claims and a further reduction in fixed operating expenses
- Realisation of cost savings initiatives previously implemented throughout the Group
- An improved financial performance from Aveng Steel in the second half of the year
- Fair value gains on the infrastructure investments
Though partially offset by:
- Restructuring expenses incurred to further right-size the Group�s overhead structure in response to market conditions
- Underperformance on certain contracts in McConnell Dowell
- Additional expenses on a problematic water contract in Aveng Water
- Contract cancellations and volume reductions in Aveng Mining; and
- continued difficult trading conditions in most of the markets in which the Group operates.
EBITDA increased by 46% to R969 million from R662 million in 2015.
The gain on sale of property, plant and equipment of R592 million relates predominantly to the sale and leaseback of
the Group�s South African property portfolio.
An impairment charge of R295 million was recognised against underutilised niche assets in Aveng Steel. The remaining
R38 million relates to abandoned contract assets in Aveng Mining.
Net finance charges of R341 million (2015: R306 million) increased by 11% compared to the preceding year due to lower
convertible bond costs in the comparative period.
The taxation expense amounts to R129 million (2015: R80 million). The current year�s expense includes withholding tax
of R103 million payable on profit expatriated from Guinea following the completion of a project.
The headline loss improved to a loss of R299 million from R578 million in the comparative period. Items excluded from
the calculation of headline earnings include impairment charges and the gain on the property transaction.
The basic loss per share of 25,4 cents (2015: 114,8 cents) improved by 78% and a headline loss per share of 75,2 cents
was 48% lower than the 144,3 cents in the comparative year.
Statement of financial position
The Group reduced its capital expenditure to R510 million (2015: R876 million): applying R323�million (2015: R649 million)
to replace and R187 million (2015: R175 million) to expand property, plant and equipment. Net capital expenditure
for the year was R364 million (2015: R534�million). The majority of the amount was spent as follows:
- R150 million at McConnell Dowell, relating to specific projects in Australia and Southeast Asia;
- R126 million at Aveng Manufacturing to increase capacity and optimise efficiencies of its factories; and
- R151 million at Aveng Mining, mostly in Shafts & Underground relating to specific projects.
The reduced capital expenditure is in line with the Group�s current requirements.
Equity-accounted investments decreased by 34% to R100 million (2015: R151 million). This was primarily due to penalties on
the Gouda renewable energy project and underperformance in the McConnell Dowell Middle East business reducing the
carrying values.
Infrastructure investments decreased by 77% to R177 million (2015: R778 million) compared to 30 June 2015, after
reclassifying four of the investments as held-for-sale at year-end. Subsequent to year-end these investments were sold
subject to conditions precedent.
Amounts due from contract customers (non-current and current) decreased by 8% to R9,5 billion (2015: R10,3 billion).
There was an underlying decrease in this balance of R1,9 billion which was offset by a R1,1 billion foreign exchange
translation increase. Operationally, the receivables at McConnell Dowell and Aveng Mining decreased in line with contracting
revenue and settlements, while uncertified claims, variations and receivables decreased at Aveng Grinaker-LTA as a
result of various settlements.
Amounts due to contract customers decreased by 48% to R1,3 billion (2015: R2,6 billion), as a result of the
utilisation of advance payments at McConnell Dowell.
Inventories decreased by 12% to R2,2 billion (2015: R2,5 billion) as a result of inventory management to align to the
current market demand predominantly at Aveng Steel.
Trade and other receivables of R2,1 billion decreased by 17%, from R2,4 billion, as a result of reduced activity
levels throughout the Group.
Borrowings and other liabilities of R3,0 billion (2015: R2,5 billion) increased by R521 million against the
comparative period due to a AUD60 million facility drawn down to repay the QCLNG advance.
Trade and other payables decreased by 26% to R5,9 billion (2015: R8,0 billion). Excluding the foreign exchange impact,
the underlying reduction of R2,6 billion was primarily due to the repayment of the QCLNG advance payment of AUD112,5 million
as well as lower activity levels throughout the�Group.
Operating free cash flow for the period amounted to a R1,1 billion outflow after including:
- The repayment of the AUD112,5 million on the QCLNG contract
- Offset by R1,1 billion proceeds on the disposal of the properties portfolio
- Significant cash outflows for McConnell Dowell associated with the utilisation of advance payments, the completion of
large projects and remedial work on the GCRT contract
- Strong cash generation in Aveng Steel, Aveng Mining and Aveng Grinaker-LTA
- Net capital expenditure of R364 million
- The third and last payment of R102 million relating to the Competition Commission settlement in June 2013.
Cash and bank balances decreased to R2,4 billion (2015: R2,9 billion), resulting in a net debt position of R534
million compared to R393 million net cash at 30 June 2015. Foreign currency translations impacted cash favourably by R315
million at year-end.
Operating review
Construction and Engineering: South Africa and rest of Africa
This operating segment comprises Aveng Grinaker-LTA, Aveng Engineering and Aveng Capital Partners. Aveng Engineering
was discontinued during the year while Aveng Water, including the associated operate & maintain operations, will now form
part of Aveng Grinaker-LTA.
Revenue decreased by 12% to R7,3 billion (2015: R8,4 billion) primarily due to lower work volumes in the Civils,
Engineering and Mechanical & Electrical businesses.
Net operating losses for Aveng Grinaker-LTA decreased significantly by 88% to R69 million (2015: R575 million). After
adjusting for restructuring and holding costs incurred, Aveng Grinaker-LTA achieved a breakeven for the year.
Civil Engineering
Revenue decreased by 26% to R2,3�billion (2015: R3,1 billion) reflecting lower activity in the civil infrastructure
market. The business made an operating profit of R16 million compared to the operating loss of R367 million in 2015.
Significant progress was made on delivering contract margins as tendered. The Majuba Rail contract is in the final
stages of construction. Claims negotiations are ongoing on both the Mokolo Pipeline and Majuba Rail contracts.
Mechanical & Electrical
Revenue decreased by 17% to R1,5 billion (June 2015: R1,8 billion) due to lower activity in the various commodity and
resource markets. Higher revenues were achieved on the power projects compared to 2015, as a result of acceleration
measures taken in order to meet the power utility�s revised milestone dates. The operating margin was negatively affected by
losses incurred in closing out certain projects. The operating loss increased to R143 million (June 2015: R108 million).
Buildings & Coastal
Revenue increased by 15% to R3,1 billion (2015: R2,7 billion) with the net operating earnings reflecting a significant
improvement to R83 million, from R24 million in the comparative year. The improvement in revenue is due to a growing
order book, the successful completion of the Mall of the South project in September 2015 and peak production on the Sasol
Corporate Head Office as it nears completion. A number of new high rise projects in Sandton and the Hilton Hotel in
Swaziland were started.
The activity level in the Coastal operations is on target with major contracts, such as the Dr Pixley Ka Isaka Seme
Memorial Hospital in KwaZulu-Natal and extensions to the Cape Town International Convention Centre, in progress.
Aveng Water (and remaining work of Aveng Engineering)
Revenue decreased by 56% to R309 million (2015: R705 million) largely due to the completion of the construction works
on the water and power plants and the move to commissioning and operations. After encountering technical integration
issues and unfavourable weather conditions, the Gouda Wind Farm has now been commissioned and handed over. During the early
stages of commissioning, issues on the eMalahleni project were identified, arising out of work carried out by external
sub-contractors who have since been declared insolvent. As a result, remedial work was required and a loss on this
contract was recorded in the year. Additional costs on these two contracts impacted the operating earnings negatively,
resulting in a net operating loss of R273 million.
The focus of this business is now on leveraging the significant advantage held within the Aveng Water business in acid
mine drainage, water treatment processes and operational maintenance. The South African mining and municipal water
sectors offer attractive opportunities for growth.
Aveng Capital Partners
Aveng Capital Partners is responsible for managing the Group�s investments in South African toll roads, real estate
and renewable energy concessions and investments.
Net operating earnings increased by 7% to R194 million, from R183 million in 2015, as a result of higher revaluation
gains recognised compared to the prior year. Subsequent to year-end, four infrastructure investments were sold, at
carrying value, subject to conditions precedent.
Construction and Engineering: Australasia and Asia
During the year this operating segment was restructured into four new business units: Australia, New�Zealand and
Pacific, Southeast Asia and Built Environs. The Middle East business remains a joint venture operated in partnership
with Dutco. The comparatives have been restated.
Revenue decreased by 41% to AUD1,3 billion (2015: AUD2,2 billion) or R12,8 billion (2015: R20,9�billion), reflecting
lower levels of investment in infrastructure development, combined with the completion of multi-year pipelines and
infrastructure contracts. Net operating earnings decreased by 84% to AUD1,4 million (2015: AUD9,0 million) due to the weak
Australian construction market, the underperformance on some Australian contracts, and restructuring and tendering expenses
on tenders not awarded. New contracts were awarded in the transport, resources and Oil & Gas infrastructure sectors
during the second half of the year.
Australia
The revenue of the Australian business unit declined by 57% to AUD525 million (2015: AUD1,2�billion). The Webb Dock,
Melbourne Airport PUGs taxi lane reconstruction and Brisbane City Council Ferries and Boardwalk projects continued to
produce results exceeding expectations. Operating earnings were adversely impacted by cost overruns on a number of projects
and the impact of restructuring costs, legacy projects and high tendering costs.
Southeast Asia
Southeast Asian operations continued to perform strongly in all major regions, contributing a healthy profit and cash
contribution which offset disappointing results in Australia. This result was despite a revenue decline of 34% to AUD371
million (2015: AUD560 million). The decline in revenue was mainly due to the successful completion of major projects in
the prior year. Recent project awards in Singapore, Malaysia and Thailand have contributed to an improved order book.
New Zealand and Pacific
Revenue increased by 6% to AUD323 million (2015: AUD305 million).
The New Zealand & Pacific business experienced a mixed year. The New Zealand operations reported strong results from
most projects, partially offset by losses on two underperforming contracts. The Waterview Tunnel contract is progressing
well.
In the Pacific, the Tonga and Tuvalu runway projects were completed and a significant improvement was achieved in
McConnell Dowell�s position for the final outcome of the Kiribati project.
Built Environs
Revenue decreased by 65% to AUD45 million (2015: AUD132 million).
During the year, Built Environs secured and commenced work on two significant projects in South Australia, the Modbury
Hospital Redevelopment and the Urbanest Student Accommodation project. Work was completed on Perth Airport Terminal 1
which is now operational.
Aveng Mining
This operating segment comprises the merged businesses of Aveng Moolmans and Aveng Shafts & Underground.
The segment reported a decrease in revenue to R5,0 billion (2015: R6,0 billion). Net operating earnings decreased by
33% to R276 million (2015: R413 million). The operating margin declined to�6% (2015: 7%) largely due to discounts awarded
on various contracts and the unexpected cancellation of some contracts during the year as clients sought to reduce
operating costs in mines that became increasingly marginal in a falling commodity cycle. Despite this, most contracts
performed well operationally. Aveng Mining is working closely with clients to assist in reducing overall mining costs and
to regain some of the margins lost due to discounts through various productivity improvement and efficiency initiatives.
Aveng Mining will pursue opportunities to add to the geographic and commodity mix in its client portfolio in order to
strengthen its order book and improve shareholder returns. Given the project lead�times, Aveng Mining does not expect a
material change in the next 12 to 18 months.
Following the merger of both the open cut and underground mining businesses, there has been�extensive restructuring of
the overhead costs, the results of which will be realised in the next financial year.
Aveng Moolmans
The revenue of Aveng Moolmans decreased to R3,5 billion (2015: R4,6 billion). The pressures experienced by clients due
to the downturn in the commodity cycle is evident in this year�s results. The full effect of this decline will
materialise in 2017. The percentage of idle fleet has increased during the year. However, this offers us opportunities for
quick mobilisation in the future for new projects and capital replacement alternatives for existing contracts.
Contract extensions were granted at Klipbankfontein and Sadiola while contracts were awarded fairly late in the year
with Norgold (Burkina Faso and Guinea). Subsequent to year-end, the Khutala project for South 32 in South Africa was
awarded. These recent wins are in line with the operating group�s strategy to diversify geographically as well as within
commodities.
Aveng Shafts & Underground
The revenue of Aveng Shafts & Underground increased by 9% to R1,5 billion (2015: R1,4�billion) due to development work
on the new Black Rock contract. Although the Styldrift and Eland contracts were cancelled, revenue was generated prior
to these contract cancellations.
In comparison to the previous period, Aveng Shafts & Underground moved into a net operating profit position. This is
attributable to cost saving initiatives as a result of the consolidation of the Aveng Mining business units and improved
discipline in the commercial processes. The�Chuquicamata contract has progressed well with claims being resolved and the
shaft bottom being reached in mid-July 2016. The project is expected to be completed by October 2016. Despite rigorous
efforts to improve productivity and labour relationships at Wesizwe�s Bakubung Platinum Mine, the financial performance
of this contract remained unsatisfactory and an additional loss has been recorded. Extensive commercial discussions
continue with the client in parallel with the pursuit of contractual claims.
Manufacturing and Processing
This operating segment comprises Aveng Manufacturing and Aveng Steel.
Revenue decreased by 11% to R8,8 billion (2015: R9,9 billion). Net operating earnings decreased significantly to a
loss of R70 million (2015: R54 million profit).
Aveng Manufacturing
This operating group consists of Aveng Automation Control Solutions (�ACS�), Aveng Dynamic Fluid Control (�DFC�),
Aveng Duraset, Aveng Infraset and Aveng Rail.
Revenue decreased by 9% to R3,0 billion (2015: R3,3 billion). Net operating earnings decreased by 58% to R96 million
(2015: R226 million), reflecting the impact from the slowdown in the mining and Oil & Gas sector and materially reduced
rail maintenance activity in South Africa.
Aveng ACS performed well despite lower activity in the traditional Oil & Gas market. Revenue increased by 4% to
R441 million (2015: R425 million), due to increased product sales and diversification into non-traditional sectors.
Aveng DFC revenue decreased by 3% to R469 million (2015: R485 million) following low demand in the local market,
particularly from the mining sector. This was offset by growth in Europe and Australia.
Aveng Duraset revenue decreased by 9% to R487 million (2015: R535 million), driven by lower demand from the local
mining sector.
Aveng Infraset revenue decreased by 31% to R851 million (2015: R1,2 billion) due to a reduction in sleeper sales in
both the local and SADC markets. The decline in commodity prices has resulted in a slowdown in sleeper revenue and new
rail construction projects. Building products continue to enjoy solid demand locally and are performing as expected with
additional investment in capacity to be added in 2017.
Aveng Rail revenue increased by 14% to R770 million (2015: R676 million), mainly due to the Majuba, Rosmead and Black
Rock rail construction projects. Net operating earnings decreased to R40 million from R58 million due to materially
reduced rail maintenance-related revenue streams during the year.
Aveng Steel
This operating group consists of Aveng Trident Steel, Aveng Steeledale and Aveng Steel Fabrication.
Revenue decreased by 12% to R5,8 billion (2015: R6,7 billion) severely impacted by reduced international steel prices
and lower domestic demand. A loss of R166 million was incurred, compared to a loss of R172 million in the previous year.
The current year includes the impact of restructuring costs.
During the second half of the year, volumes stabilised, and higher selling prices were achieved. Post the restructuring,
the focus is on achieving a positive result in difficult trading conditions. This resulted in an improved performance
in the second half of the year.
The Vanderbijlpark site of the Aveng Steel Fabrication business was mothballed at the end of the financial year with
the capabilities and resources transferred to the Roodekop site. Despite challenging trading conditions the operating
group, contributed significant positive operating free cash flow.
Two-year order book
The Group�s two-year order book amounted to R28,1 billion at 30 June 2016, remaining relatively unchanged from the
R28,9 billion reported at 30 June 2015. This, however, includes a 42% (22% in�dollars) or R4,9 billion increase in
McConnell Dowells� book as a result of its increased success rate in the second half of this year and the weakening of the Rand.
The Aveng Mining order book reduced by R3,0 billion in line with a weak commodities sector. Aveng Grinaker-LTA�s order
book reduced primarily due to lower available projects in the local market for civil and mechanical & electrical work.
The focus remains on securing quality work at targeted margins.
The geographic split of the order book at 30 June 2016 was 59% Australasia and Asia (June 2015: 40%), 37% South Africa
(June 2015: 56%) and 4% other (June 2015: 4%).
Recent significant project awards include the 129 Rivonia Road, Shelley Beach Hospital and a Virgin Active (Windhoek)
for Aveng Grinaker-LTA. A pipeline (Thailand), Rapid 12B Solid Project Jetty (SPJ) (Malaysia), the Christchurch Southern
Motorway Stage 2 (New Zealand), Amrun (Australia), as well as the Tuas Bridges (Singapore) for McConnell Dowell.
Outlook and prospects
Challenging economic conditions are expected to continue in the short term, although with more positive medium term
opportunities in Australia. Aveng is a more focused business and well positioned for improved performance. We expect the
benefits of business optimisation to further contribute to this improved performance in the next financial year. This
allows the business to position itself for profitable growth within the second phase of our strategy.
The claims settlement process on QCLNG is expected to be concluded in 2017 and on Gold Coast in 2018.
The Group continues to investigate and pursue transformational alternatives for Aveng Grinaker-LTA. The divestment of
Aveng Trident Steel remains an objective; however, the achievement of acceptable value under current market conditions
is likely to be challenging.
Directors
Mr Peter Ward retired from the Board on 30 June 2016 and Mr Angus Band retired from the Board on 19 August 2016. The
Board extends its appreciation to Mr Band and Mr Ward for their contributions over the many years and wishes them well in
their retirement.
Disclaimer
The financial information on which any outlook statements are based has not been reviewed or reported on by the external
auditors. These forward looking statements are based on management�s current belief and expectations and are subject
to uncertainty and changes in circumstances. The forward looking statements involve risks that may affect the Group�s
operations, markets, products, services and prices.
By order of the Board
M Seedat HJ Verster
Chairman Chief executive officer
Date of release: 23 August 2016
Corporate information
Directors
MI Seedat*# (Chairman), EK Diack*#, HJ Verster (Chief Executive Officer), PJ Erasmus*#, SJ Flanagan*#, MA Hermanus*#,
PA Hourquebie*#, MJ Kilbride*#, AH Macartney (Group CFO), JJA Mashaba (Group Executive Director), TM Mokgosi-Mwantembe*#,
KW Mzondeki*#
(*non-executive)(#independent)
Company Secretary
Michelle Nana
Business address and registered office
Aveng Park
1 Jurgens Street, Jet Park
Boksburg, 1469
South Africa
Telephone +27 (0) 11 779 2800
Telefax +27 (0) 11 784 5030
Website
https://protect-za.mimecast.com/s/G6ErBzhZEzOoF3
Auditors
Ernst & Young Inc.
Registration number: 2005/002308/21
102 Rivonia Road
Sandton, Johannesburg, 2194
Private Bag X14
Northlands, 2116
South Africa
Telephone +27 (0) 11 772 3000
Telefax +27 (0) 11 772 4000
Principal bankers
Absa Bank Limited
Australia and New Zealand Banking Group Limited
Barclays Bank plc
Commonwealth Bank of Australia Limited
FirstRand Bank Limited
HSBC Bank plc
Investec Bank Limited
Nedbank Limited
The Standard Bank of South Africa Limited
Corporate legal advisers
Baker & McKenzie
Cliffe Dekker Hofmeyr
Norton Rose Fulbright
Webber Wentzel
Sponsor
J.P. Morgan Equities South Africa Proprietary Limited
Registration number: 1995/011815/07
1 Fricker Road, cnr Hurlingham Road
Illovo, 2196
South Africa
Telephone +27 (0) 11 537 0300
Telefax +27 (0) 11 507 0351/2/3
Registrars
Computershare Investor Services Proprietary Limited
Registration number: 2004/003647/07
70 Marshall Street, Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
South Africa
Telephone +27 (0) 11 370 5000
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Date: 23/08/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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