AEG 201303150002A<
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Unaudited Interim Group results for the six months ended 31 December 2012<
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AVENG LIMITED<
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(Aveng, the company, the Group or Aveng Group)<
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(Incorporated in the Republic of South Africa)<
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(Registration number: 1944/018119/06)<
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ISIN: ZAE000111829<
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SHARE CODE: AEG<
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Unaudited Interim Group results <
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for the six months ended 31 December 2012<
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Revenue<
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R25 billion <
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Increase of 30% from comparative period (1)<
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Operating profit<
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R518 million<
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Increase of 56% from comparative period (1)<
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Headline earnings<
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R392 million <
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Increase of 43% from comparative period (1)<
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Headline earnings per share<
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104,5 cents<
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Increase of 48% from comparative period (1)<
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Net asset value per share<
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R33,91 <
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increase of 4,5% from June 2012 (2)<
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Two Year Order book<
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R39,7 billion<
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decrease of 15,3% from June 2012(2)<
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(1) From the six month period ending 31 December 2011 (1 July 2011 31 December 2011)<
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(2) From the period ended 30 June 2012.<
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Interim condensed consolidated statement of financial position <
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31 December 31 December 30 June <
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2012 2011 2012 <
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(Unaudited) (Unaudited) (Audited) <
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Rm Rm Rm <
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ASSETS <
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Non-current assets <
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Property, plant and equipment 6 822 6 252 6 664 <
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Goodwill and other intangibles 1 553 1 530 1 549 <
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Equity-accounted investments 91 110 108 <
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Available-for-sale investments 147 149 143 <
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Deferred tax assets 1 011 445 1 373 <
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9 624 8 486 9 837 <
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Current assets <
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Inventories 2 625 2 550 2 467 <
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Trade and other receivables 11 116 9 515 10 442 <
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Cash and bank balances 5 263 5 260 5 202 <
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19 004 17 325 18 111 <
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TOTAL ASSETS 28 628 25 811 27 948 <
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EQUITY AND LIABILITIES <
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Capital and reserves <
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Share capital and share premium 1 435 1 883 1 435 <
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Foreign currency translation reserve 710 577 546 <
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Insurance and other reserves 57 72 57 <
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Distributable reserves 11 017 10 613 10 864 <
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Non-controlling interests 13 (6) 10 <
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13 232 13 139 12 912 <
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Non-current liabilities <
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Borrowings 1 289 53 748 <
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Deferred tax liabilities 255 163 674 <
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1 544 216 1 422 <
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Current liabilities <
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Trade and other payables 10 982 10 476 10 648 <
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Provisions 2 040 1 461 2 201 <
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Borrowings 161 41 180 <
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Bank overdrafts 508 368 343 <
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Taxation payable 161 110 242 <
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13 852 12 456 13 614 <
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TOTAL EQUITY AND LIABILITIES 28 628 25 811 27 948 <
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Net cash position to equity ratio (%) (25) (37) (30) <
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Net asset value per ordinary share (cents) 3 391 3 273 3 310 <
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Interim condensed consolidated statement of comprehensive income <
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Six months Six months Year <
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ended ended ended <
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31 December 31 December 30 June <
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2012 2011 2012 <
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(Unaudited) (Unaudited) % (Audited) <
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Rm Rm change Rm <
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Revenue 24 987 19 149 30 40 886 <
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Operating profit before depreciation and amortisation 1 202 1 066 13 2 020 <
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Depreciation 668 719 1 479 <
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Amortisation of intangibles 18 15 37 <
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Operating profit 516 332 55 504 <
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Other gains and losses 2 * 31 <
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Operating profit after other gains and losses 518 332 56 535 <
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Share of profits and losses from equity-accounted investments (16) 15 41 <
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Income from available-for-sale investments 42 40 37 <
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Operating income 544 387 41 613 <
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Finance income 66 93 189 <
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Finance and transaction costs 54 28 76 <
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Profit before taxation 556 452 23 726 <
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Taxation 159 182 203 <
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Profit for the period 397 270 47 523 <
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Other comprehensive income for the period <
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Exchange differences on translation of foreign operations 164 515 484 <
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Fair value movement * * (11) <
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Total comprehensive income for the period 561 785 (29) 996 <
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Profit attributable to: <
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Equity holders of Aveng Limited 394 274 521 <
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Non-controlling interests 3 (4) 2 <
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Profit for the period 397 270 47 523 <
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Total comprehensive income attributable to: <
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Equity holders of Aveng Limited 561 789 994 <
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Non-controlling interests * (4) 2 <
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Total comprehensive income for the period 561 785 (29) 996 <
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Determination of headline earnings <
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Profit for the year attributable to equity holders of Aveng Limited 394 274 521 <
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Adjusted for (net of tax) <
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Profit on sale of property, plant and equipment (2) * * <
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Profit on sale with change in ownership holding in subsidiary (26) <
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Headline earnings 392 274 43 495 <
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*Amounts are less than R1 million. <
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Interim condensed consolidated statement of cash flows <
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Six months Six months Year <
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ended ended ended <
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31 December 31 December 30 June <
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2012 2011 2012 <
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(Unaudited) (Unaudited) (Audited) <
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Rm Rm Rm <
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Cash retained from operating activities <
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Cash retained from operations 518 332 535 <
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Depreciation 668 719 1 479 <
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Amortisation 18 15 37 <
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Non-cash and other movements (210) (147) 173 <
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Cash generated by operations 994 919 2 224 <
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Changes in working capital <
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Increase in inventories (160) (543) (398) <
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(Increase)/decrease in receivables (687) 340 1 769 <
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Increase/(decrease) in payables 349 (483) (2 170) <
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Cash generated by operating activities 496 233 1 425 <
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Finance income 59 93 189 <
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Finance and transaction costs paid (57) (28) (76) <
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Taxation paid (302) (284) (567) <
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Cash inflow from operating activities 196 14 971 <
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Investing activities <
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Property, plant and equipment purchased expansion (222) (204) (1 220) <
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replacement (560) (640) (867) <
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Changes in equity-accounted and available-for-sale <
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investments (2) 26 30 <
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Proceeds on disposal of property, plant and equipment 25 46 149 <
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Purchase of subsidiaries (18) <
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Disposal/(acquisition) of other investments (18) <
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Dividends received 42 40 37 <
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Cash outflow from investing activities (717) (768) (1 871) <
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Operating free cash outflow (521) (754) (900) <
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Financing activities with equity holders <
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Shares repurchased (449) <
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Increase in shares by non-controlling interests in <
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subsidiary company 10 <
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Dividends paid (241) (561) (561) <
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Financing activities with debt holders <
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Long-term borrowings raised 523 11 845 <
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Net decrease in cash and cash equivalents before foreign <
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exchange movements on cash (239) (1 304) (1 055) <
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Foreign exchange movements on cash 135 796 514 <
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Cash and cash equivalents at beginning of year 4 859 5 400 5 400 <
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Cash and cash equivalents at end of year 4 755 4 892 4 859 <
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Borrowings, excluding Bank overdrafts (1 450) (94) (928) <
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Net cash position 3 305 4 798 3 931 <
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Interim condensed consolidated statement of changes in equity <
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Share Foreign Insurance <
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capital currency and Dis- Non- <
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and share translation other tributable contolling Total <
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premium reserve reserves reserves Total interests equity <
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Rm Rm Rm Rm Rm Rm Rm <
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Six months ended 31 December 2011 (Unaudited) <
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Balance at 1 July 2011 1 883 62 72 10 900 12 917 (2) 12 915 <
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Profit for the year 274 274 (4) 270 <
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Other comprehensive income <
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Foreign currency translation 515 515 515 <
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Fair value movement * * * <
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Total comprehensive income 515 * 274 789 (4) 785 <
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Dividends paid (561) (561) * (561) <
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Balance at 31 December 2011 1 883 577 72 10 613 13 145 (6) 13 139 <
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Year ended 30 June 2012 (Audited) <
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Balance at 1 July 2011 1 883 62 72 10 900 12 917 (2) 12 915 <
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Profit for the year 521 521 2 523 <
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Other comprehensive income/(loss) <
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Foreign currency translation 484 484 * 484 <
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Fair value movement (11) (11) (11) <
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Total comprehensive income 484 (11) 521 994 2 996 <
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Dividends paid (561) (561) * (561) <
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Shares issued 327 327 10 337 <
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Share repurchased programme (448) (448) (448) <
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Movement in treasury shares (327) (327) (327) <
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Transfers (4) 4 <
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Balance at 30 June 2012 1 435 546 57 10 864 12 902 10 12 912 <
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Six months ended 31 December 2012 (Unaudited) <
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Balance at 1 July 2012 1 435 546 57 10 864 12 902 10 12 912 <
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Profit for the year 394 394 3 397 <
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Other comprehensive income <
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Foreign currency translation 164 164 * 164 <
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Fair value movement * * * <
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Total comprehensive income 164 * 394 558 3 561 <
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Dividends paid (241) (241) * (241) <
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Balance at 31 December 2012 1 435 710 57 11 017 13 219 13 13 232 <
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*Amounts are less than R1 million. <
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Other information <
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Six months Six months Year <
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ended ended ended <
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31 December 31 December 30 June <
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2012 2011 2012 <
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Rm Rm Rm <
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Capital expenditure <
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Expansion 222 204 1 220 <
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Replacement 560 640 867 <
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782 844 2 087 <
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Commitments for future capital expenditure: <
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Contracted 242 362 269 <
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Authorised, but not contracted for 181 69 474 <
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423 431 743 <
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Earnings per share (cents) <
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Earnings 105,0 70,8 134,9 <
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Earnings Diluted 98,0 67,6 126,1 <
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Headline 104,5 70,6 128,1 <
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Headline Diluted 97,5 67,5 119,8 <
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Number of shares (millions) <
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In issue 389,8 401,6 389,8 <
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Weighted average 375,2 387,0 386,0 <
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Diluted weighted average 402,1 405,2 412,8 <
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Dividend per share (cents) Nil Nil 60,0 <
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Notes to the interim condensed consolidated financial statements<
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1. Corporate information <
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The interim condensed consolidated financial statements of the Group for the six months ended <
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31 December 2012 (interim results) were authorised for issue in accordance with a resolution <
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of the directors on 13 March 2012. <
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Aveng Limited is a limited liability company incorporated and domiciled in the Republic of South <
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Africa whose shares are publicly traded. The Group operates in the construction, engineering and <
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mining environment and as a result the revenue is not seasonal in nature but is influenced by <
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the nature of the contracts that are currently in progress. <
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Refer to commentary for a more detailed report on the performance of the different operating units <
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within the Group. <
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2. Statement of compliance <
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The interim results have been prepared in accordance with International Financial Reporting Standards <
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(IFRS) of the International Accounting Standards Board (IASB), the SAICA Financial Reporting Guides <
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as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the <
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Financial Reporting Standards Council, requirements of the South African Companies Act, 2008 as amended, <
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and the Listings Requirements of the JSE Stock Exchange South Africa. <
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3. Basis of preparation and accounting policies <
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The interim results have been prepared on the historical cost basis, except for certain financial <
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instruments, which includes listed investments, that are fairly valued by marking to market. The accounting <
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policies used in the preparation of the interim results are in accordance with IFRS and are consistent <
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in all material respects with those used in the Groups audited annual financial statements as at 30 <
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June 2012. <
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The interim results comply with IAS 34 Interim Financial Reporting and do not include all the information <
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and disclosures required in the annual financial statements, and should be read in conjunction with the <
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Groups audited annual financial statements as at 30 June 2012. <
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The interim results have been prepared under the supervision of the Chief Financial Officer, Mr HJ Verster. <
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The Group has adopted the following new and revised Standards and Interpretations (issued by the <
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International Financial Reporting Interpretation Committee) of the IASB that became effective before or <
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on 1 July 2012: <
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Standard Subject <
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IAS 1 Presentation of Other Comprehensive Income (Improvement) <
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IAS 12 Income Taxes Deferred Tax, Recovery of Underlying Assets (Amendment) <
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The adoption of these improvements and amendments did not have a material effect on the Groups <
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interim results. <
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In addition the following Standards and Interpretations have been issued but are not yet effective. <
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The effective date refers to periods beginning on or after, unless otherwise indicated: <
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Standard Subject Effective date <
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IFRS 9 Financial instruments: Classification and Measurement 1 January 2015 <
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IFRS 10 Consolidated Financial Statements 1 January 2013 <
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IFRS 11 Joint Arrangements 1 January 2013 <
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IFRS 12 Disclosure of Interest in Other Entities 1 January 2013 <
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IFRS 13 Fair Value Measurement 1 January 2013 <
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IAS 1 Presentation of Financial Statements (Amendment) 1 January 2013 <
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IAS 16 Property, Plant and Equipment (Improvement) 1 January 2013 <
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IAS 19 Employee Benefits (Amendment) 1 January 2013 <
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IAS 27 Separate Financial Statements (as revised in 2011) 1 January 2013 <
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IAS 28 Investment in Associate and Joint Ventures (as revised in 2011) 1 January 2013 <
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IAS 32 Financial Instruments: Presentation (Improvement) 1 January 2014 <
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IAS 34 Interim Financial Reporting (Improvement) 1 January 2013 <
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The Group does not intend early adopting any of the above Standards and Interpretations. <
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4. Segment information <
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The Group has determined five reportable segments that are largely organised and managed separately <
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according to the nature of products and services provided. These include the following operating <
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segments: Construction and Engineering: South Africa and rest of Africa; Construction and Engineering: <
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Australasia and Pacific; Mining; Manufacturing and Processsing; and Administration. <
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These operating segments are components of the Group: <
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a) that engage in business activities from which they earn revenues and incur expenses; and <
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b) whose operating results are regularly reviewed by the Groups chief operating decision makers <
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to make decisions about resources to be allocated to the segments and assess their performance. <
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Operating segments have consistently adopted the consolidated basis of accounting and there are no <
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differences in measurement applied. <
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The Group measures the performance of its operating segments through a measure of segment profit or <
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loss which is referred to as Operating Profit. <
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5. Income tax <
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The major components of income tax expense in the interim condensed consolidated statement of <
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comprehensive income are: <
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Six months Six months Year <
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ended ended ended <
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31 December 31 December 30 June <
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2012 2011 2012 <
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Rm Rm Rm <
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Current income tax <
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Current income tax charge 216 173 582 <
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Secondary Tax on Companies 57 57 <
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Deferred tax <
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Relating to origination and reversal of temporary differences (57) (48) (442) <
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Capital gains tax 4 <
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Tax charge related to equity-accounted investments 2 <
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Income tax expense 159 182 203 <
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6. Property, plant and equipment <
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During the six months ended 31 December 2012, the Group acquired assets at a cost of R782 million <
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(December 2011: R844 million). <
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7. Cash and cash equivalents <
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For the purpose of the interim condensed consolidated statement of cash flows, cash and cash <
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equivalents are comprised of the following: <
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Six months Six months Year <
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ended ended ended <
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31 December 31 December 30 June <
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2012 2011 2012 <
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Rm Rm Rm <
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Cash and bank balances 5 263 5 260 5 202 <
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Bank overdrafts (508) (368) (343) <
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4 755 4 892 4 859 <
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8. Contingent liabilities Competition Commission <
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Beyond the Performance Bonds and Guarantees as well as Other Contract claims the major contingent <
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liability relate to the Competition Commission. As previously reported the Aveng board supports <
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and has cooperated with the Competition Commission in its investigation into historic anti-competitive <
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practices in the South African construction industry in terms of the fast-track settlement process. <
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The Aveng Group has submitted a settlement offer to the Competition Commission and feedback is <
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awaited. There has been no subsequent increase in the provision raised as at 30 June 2012. <
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9. Related party transactions <
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During the year the Company and its subsidiaries, in the ordinary course of business, entered into <
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various sale and purchase transactions with equity-accounted investments. There has been no <
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significant changes to the nature of related party transactions since 30 June 2012. <
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There were no related party transactions with directors or entities in which the directors have <
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a material interest. <
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10. Dividend policy <
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There has been no changes to the dividend policy of the Group since 30 June 2012. <
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11. Events after reporting date <
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The directors are not aware of any matters or circumstances arising after the period ended 31 <
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December 2012, not otherwise dealt with in the Group\"s interim results, which could have a <
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material effect on the financial statements. <
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Segmental analysis <
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Business segmentation Six months Six months Year <
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ended ended ended <
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31 December 31 December 30 June <
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2012 2011 2012 <
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(Unaudited) (Unaudited) (Audited) <
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Rm Rm Rm <
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Revenue <
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Construction and Engineering <
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South Africa and rest of Africa (1) 3 973 4 080 7 931 <
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Australasia and Pacific 12 761 7 641 17 122 <
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Total Construction and Engineering 16 734 11 721 25 053 <
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Mining2 3 793 3 138 6 680 <
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Manufacturing and Processing 4 458 4 290 9 148 <
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Administration 2 * 5 <
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24 987 19 149 40 886 <
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Operating profit <
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Construction and Engineering <
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South Africa and rest of Africa1 (39) (123) (757) <
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Australasia and Pacific 195 128 360 <
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Total Construction and Engineering 156 5 (397) <
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Mining (2) 390 296 579 <
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Manufacturing and Processing 86 277 585 <
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Administration (114) (246) (232) <
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518 332 535 <
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*Amount is less than R1 million. <
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(1) Aveng Shafts and Underground Mining has been reclassified from Construction and Engineering: <
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South Africa and rest of Africa to Mining for periods ending June 2012 and December 2011. <
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(2) Includes Aveng Shafts and Underground Mining from 1 July 2012. <
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COMMENTARY<
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OVERVIEW <
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Despite difficult trading conditions in the South African and Australian construction and <
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engineering markets, the Group improved its operating performance with operating profit <
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increasing by 56% to R518 million after absorbing costs from the labour disruptions that <
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were prevalent in the second quarter of some R120 million. In addition to mitigating key <
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risks from challenging contracts in Australia, other McConnell Dowell (MacDow) projects <
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delivered strong results. The performance of Aveng Grinaker-LTA also improved inspite of <
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the impact of labour disruptions while Aveng Mining generated a strong performance.<
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Whilst the Groups order book declined by 15% to R39.7 billion between June and December <
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2012, mainly as a result of the softening infrastructure market in Australia, the order <
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book nevertheless remains strong. Generally, projects are taking much longer to conclude, <
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are more expensive and are more resource intensive. The decline comes off a high base as <
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in the comparative six months period ended 31 December 2011 (the comparative period or <
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2011), the order book grew by 24%. Aveng Grinaker-LTAs order book also declined during <
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the period but since January 2013, a number of significant new projects have been won. This <
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includes work at Nacala Section 2 Rail Project in Tete, Mozambique for Vale and the Majuba <
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Rail Link for Eskom Holdings. MacDow has also been awarded a number of significant projects <
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since the 8 November 2012 business update, such as the Airport Terminal for Perth Airport <
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and the Ocean Keys Shopping Centre for AMP in Perth. <
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The Group is pleased to announce that Aveng Concessions, together with its consortium <
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partners, has been identified as the preferred bidder in the Mauritius Road Decongestion <
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Project. Aveng Grinaker-LTA has a significant interest in the design and construct <
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subcontract.<
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Safety <
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The Groups safety vision, Home Without Harm, Everyone Everyday remains integral to the <
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manner in which the Group conducts business. Avengs six month All Injury Frequency Rate <
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(AIFR) remained stable at 4.7 against the performance reported at 30 June 2012. <
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However, the Group regrettably suffered three fatalities during the period, two of whom <
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were subcontractors. The Aveng Board and Management extends their sincere condolences to <
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the families of their deceased colleagues. <
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The Group is focusing attention on improving the management and control of high consequence <
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activities in particular subcontractors and transport.<
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OPERATING ENVIRONMENT<
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The South African construction and engineering market remained subdued, with limited <
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infrastructure spend taking place in the local market. However, it was pleasing that some <
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of the large infrastructure projects in Africa have now reached implementation stage.<
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The South African Governments renewable energy programme aimed to create 3 725 MW of <
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renewable energy to ensure the continued uninterrupted supply of electricity in the country, <
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has provided a considerable market opportunity for the local construction and engineering <
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sector. The Group is involved in the programme as a sponsor, developer, investor, <
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engineering, procurement and construction contractor, and operator. Together with its <
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investment partners, Aveng was awarded preferred bidder status for a wind farm project and <
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a solar photovoltaic facility in the second bid window of the programme during 2012. Both <
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projects are expected to reach financial close in April 2013 and construction work should <
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commence shortly thereafter.<
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Mining activities in Africa within the Groups focus area remains strong, while the Groups <
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Manufacturing and Processing operating segment is experiencing lower demand in a highly <
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competitive trading environment. <
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The Australian economy, although sound, has experienced a period of consolidation. The <
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construction and engineering operating environment in Australasia and the Pacific is slowing, <
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with large mining and gas projects unlikely to continue at the same pace and scale as <
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experienced over the last few years. Good road and rail opportunities do exist, though <
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generally government spending in the region is constraining the development of the <
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opportunities.<
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FINANCIAL PERFORMANCE<
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Revenue increased by 30% to R24 987 million compared to R19 149 million in the comparative <
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period, mainly due to the high levels of activity within MacDow and Aveng Mining.<
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Operating profit improved by 56% to R518 million (2011: R332 million) due to:<
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* improved profitability by MacDow, despite additional risk provisioning for the Queensland <
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Curtis Liquid Natural Gas Pipeline (QCLNG) and Hay Point Berth (Hay Point) projects; <
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* an improved, albeit still a loss-making, performance by Aveng Grinaker-LTA; <
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* a substantial improvement in the operating performance of Aveng Mining; and<
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* an enhancement of the Rand-denominated performance due to the weakening of the currency <
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against the US and Australian Dollar for non-Rand functional foreign operations.<
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These positive contributions were partially offset by a material decline in the Manufacturing <
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and Processing operating segment which was affected by slower demand, marginally lower steel <
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prices and steel supply constraints.<
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The operating profit was also adversely affected by R120 million in the second quarter of the <
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half year by the impact of the labour disruptions in the mining and transport sectors as well <
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as at the Medupi power station site, with Aveng Grinaker-LTA being the worst affected. The <
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Medupi disruptions have not yet been resolved and will have some additional impact in the <
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second half of the financial year. Claims will be lodged for the cost of the labour disruptions.<
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Headline earnings for the period increased by 43% to R392 million (2011: R274 million) due <
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to the following:<
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* the higher operating profit as described above; and<
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* the effective tax rate realised was lower due to the substitution of Secondary Tax on <
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Companies with Dividend Withholding Tax, combined with a shift in the geographical profit <
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mix for the period.<
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The increase was partly offset by:<
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* lower equity-accounted income due to weaker performances out of the Aveng Grinaker-LTAs <
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Mauritian investment and MacDows Middle East investments; and<
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* lower net interest income received when compared to the comparative period due to lower <
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average cash balances.<
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Undiluted and diluted headline earnings per share increased by 48% and 44% respectively <
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against the comparative period, benefitting from the share buy-back programme undertaken <
>
in the previous financial year.<
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Operating Free Cash Flow amounted to an outflow of R521 million for the period (2011: <
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outflow of R754 million) reflecting: <
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* higher inventory levels within the Manufacturing and Processing operating segment to <
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compensate for supply disruptions, especially from domestic steel suppliers;<
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* greater receivables due to the higher level of activity and unsettled claims within <
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MacDow; and<
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* capital expenditure by Aveng Mining, Aveng Manufacturing and MacDow of R782 million.<
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Consequently, the Groups net cash position has declined by R626 million on the 30 <
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June 2012 position of R3 931 million to R3 305 million.<
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The following key initiatives drove the capital expenditure for the period:<
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* equipment in support of Aveng Moolmans Northern Cape activities following contract <
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extensions particularly at Sishen;<
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* Aveng Manufacturings construction of a concrete pipe, culverts and sleeper factory in <
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Tete Mozambique, in order to take advantage of the infrastructural development <
>
opportunities in the region. This includes Malawi, South-Eastern Zambia and Northern <
>
Zimbabwe. Investments were also made in South Africa for machinery supporting train <
>
rail construction; and <
>
* plant and equipment replacement at MacDow in support of its revenue growth.<
><
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OPERATING REVIEW<
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The Construction and Engineering operating segments generated revenue growth of 43% to R16 734 <
>
million primarily driven by the major contracts in MacDow. Operating profit was R156 million, <
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which has been adversely effected by the provisioning made on the QCLNG and Hay Point projects <
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and the impact of labour disruptions on Aveng Grinaker-LTA as well as interruptions at Medupi. <
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Construction and Engineering: Australasia and Pacific<
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This operating segment comprises MacDow Construction, Tunneling, Electrical and Pipeline <
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business units.<
><
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Revenue increased by 67% (in Rand terms) to R12 761 million (49% increase to AUD1 459 million) <
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against the comparative period, being reflective of the strong work on hand position entering <
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the financial year and the high level of activity on a number of large projects particularly <
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on the QCLNG, Australia Pacific Liquid Natural Gas Pipeline (APLNG), and Hay Point projects. <
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There has been a marginal slow-down in the South East Asia business resulting from the tough <
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competitive environments in those markets.<
><
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Performance in Rand terms was supported by a strong Australian Dollar, which averaged R8.80 <
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compared to R7.85 in the comparative period.<
><
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Underlying operating profitability has been pleasing for the business increasing by 52%, despite <
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continued uncertainty on the QCLNG and Hay Point projects impacting profit recognition within the <
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Australia operations. The QCLNG project however will remain a material risk to both profit and <
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cash flow through to completion later in the 2013 calendar year.<
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Performance of the divisions may be summarised as follows:<
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The Australian Construction business unit maintained strong growth, reporting revenue growth of <
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67% over the comparative period from R3 473 million to R5 801 million.<
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The Adelaide Desalination Plant, the largest of its type in the world, which was initially delayed <
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by geotechnical and weather challenges, achieved full capacity of 100 gigaliters of desalinated <
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water per annum. The plant was officially handed over to the client, South Australian Water, in <
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December 2012. The commercial issues have been finalised with the client. The desalination plant <
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has been short-listed for the Global Water Intelligence Desalination Plant award of 2013 as one <
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of the most technically accomplished plants.<
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The Hay Point project in Queensland has been affected by significant changes to scope, difficult <
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ground conditions and inclement weather. MacDow is working with the client to mitigate the delays <
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with an accelerated work programme and to resolve the commercial position to eliminate further <
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downside exposure on this project, which is expected to be resolved shortly. <
><
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The Komo Airfield project which entails the construction of approximately 3 km of runway and apron <
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areas in a very remote and challenging environment has been subject to further construction delays <
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following a landslide on the southern end of the runway, these events are not expected to have an <
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adverse impact. MacDow expects to successfully complete this challenging project in the second half <
>
of the 2013 calendar year.<
><
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Work has progressed well on FMG Berth 4 in the Pilbara and the FMG Rail project in a joint venture <
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partnership with the Lennings Rail Services business unit within Aveng Manufacturing. The Seaford <
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Rail overpass was completed on time, while good progress continued to be made on the Gold Coast <
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Light Rail Public Private Partnership (PPP) project. <
><
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Built Environs successfully completed the Single Leap 2 Defence Housing PPP project and Walkerville <
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Marketplace.<
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Overseas Construction performed well, with New Zealand, the Pacific Islands and the Middle East <
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recording revenue growth, while South East Asias revenue has slowed which is reflective of the <
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competitive markets. Overall, the business unit experienced revenue growth of 10% to R1 802 million <
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however this was mainly the fact that a number of large contracts are only in the early stages of <
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completion. The business operates in New Zealand, the Pacific Islands, Singapore, Indonesia, <
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Thailand, Philippines, Malaysia, Hong Kong, UAE, Qatar, and Saudi Arabia. Significant projects <
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include the Te Mihi Geothermal Power Station and Christchurch Rehabilitation Projects in New Zealand, <
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the Vale Jetty in Malaysia, and the Donggi Liquid Natural Gas Terminal in Indonesia. <
><
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The Pipelines business unit reported a 179% increase in revenue to R3 584 million for the period. <
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Work on a number of significant contracts on coal seam methane projects secured in Queensland in <
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the previous financial year is in progress. <
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Work on the APLNG and Gladstone Liquid Natural Gas Pipeline (GLNG) projects has progressed well; <
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the projects are on schedule, just over a third complete and achieving acceptable overall <
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performance.<
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However, overall profitability continues to be impacted by the QCLNG project which is now 80% <
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complete. Further risk provisions have been taken on the project, which is being undertaken with <
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a joint venture partner and involves detailed design and construction work for a 540 km 42 inch <
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underground gas pipeline network. The recent extreme weather events in Queensland will extend the <
>
programme beyond the current 31 August 2013 schedule which represents additional commercial risks <
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for which provision has been made.<
><
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The Electrical business unit achieved significant growth across all of its key business sectors <
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in Australia and New Zealand increasing revenue by 43% to R1 218 million for the period. This <
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business unit continued to win long-term maintenance contracts whilst diversifying its business <
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into other utilities such as gas network maintenance.<
><
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The Tunneling business unit is currently performing below revenue expectations, which is a <
>
reflection of the current shortage of work. Revenue declined by 16% to R431 million on the <
>
comparative period, due primarily to the absence of new work secured during the 2012 financial <
>
year. This division is currently executing the Waterview Project in New Zealand, the Beauty World <
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Mass Rapid Transit Station in Singapore which is 80% complete and the Cable Tunnels in Abu Dhabi.<
><
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Order book <
>
Major contracts awarded since the 8 November 2012 business update, with a cumulative value of <
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R4 713 million include: <
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* Apron Replacement at Melbourne Airport for Australia Pacific Airport Corporation; <
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* Riverbank Pedestrian Bridge for the Department of Planning Transport and Infrastructure in <
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South Australia;<
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* Supermarket for the Coles Group in Western Australia; <
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* Ocean Keys Shopping Centre for AMP in Perth;<
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* Qatar Pot Relining Works for Qatar Aluminum;<
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* Bakan Gold Development for PT Resources;<
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* Airport Terminal for Perth Airport;<
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* Mt Gambier Hospital for the Department of Planning Transport and Infrastructure;<
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* Waitaki River Bridge Replacement in New Zealand;<
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* Kiribati Roads Rehabilitation Project for the Government of Kiribati; and<
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* Powercor Network Services Program to undertake the Armour Rod and Vibration Damper Retrofit <
>
Program across the Powercor electricity network.<
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Construction and Engineering: South Africa and rest of Africa<
><
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This operating segment comprises Aveng Grinaker-LTA, Aveng Water and Aveng E+PC business units. The <
>
Aveng Shafts and Underground Mining activities of the Group, previously reported under this operating <
>
segment, are now reported under the Mining operating segment. Comparatives have been restated.<
><
>
Revenue for the operating segment declined by 3% to R3 973 million from R4 080 million in the <
>
comparative period. The operating segment reported an operating loss of R39 million (2011: R123 million) <
>
after absorbing the impact of labour disruptions.<
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Aveng Grinaker-LTA <
>
Revenue declined by 2% to R3 648 million from R3 713 million. Operating profit remained marginally <
>
negative for the period, though an improvement against the comparative periods result.<
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This business generated a loss due to the following:<
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* slower realisation of the restructuring benefits; <
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* work performed on Medupi without recognising any margin;<
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* the impact of the labour disruptions; and<
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* the cost of retaining skills and related capacity in anticipation of improved market conditions.<
><
>
Aveng Grinaker-LTA is of the view that it should be compensated for the significant costs associated <
>
with the labour disruptions relating to the Medupi power station. The disruptions started in the <
>
latter part of the period, but escalated into the 2013 calendar year. Together with its joint venture <
>
partners, the Group intends to robustly protect its rights in this matter.<
><
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The Construction business unit, which now includes the Building, Civils and Earthworks, and Mechanical <
>
and Electrical businesses, reported a decrease in revenue of 4% to R2 979 million. The operating loss <
>
declined compared to the comparative period and was attributable to the partial realisation of benefits <
>
from the internal restructuring process which only impacted the last quarter. In addition, the Coastal <
>
division performed well, benefitting from the integration of the building operations with the civil <
>
operations. Certain higher margin large contracts were awarded during the period and should have a <
>
positive impact on results, however, the impact is primarily expected to be felt for the new financial <
>
year.<
><
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The Specialised business unit, comprising Rand Roads, Ground Engineering (GEL), Karenna, Automotive and <
>
Control Systems (ACS), Facades and DSE structural steel fabrication (DSE), continued to under-perform <
>
relative to expectations. Rand Roads largely performs most of its work with the Construction business <
>
unit, which is generally at lower margins. DSEs productivity and utilisation levels remain below capacity <
>
whilst the labour disruptions at Medupi delayed the delivery of DSEs contract work to the site. The steel <
>
contract concluded directly with Hitachi for structural work is progressing very well and is unrelated to <
>
the pipe welding difficulties recently reported in the national press. The contractual claims against Genrec <
>
relating to the DSE steel fabrication contract for Medupi continue to be pursued through legal and <
>
contractual channels.<
><
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Order book<
>
Aveng Concessions together with its consortium partners has been identified as the preferred bidder in the <
>
Mauritius Road Decongestion Project. Aveng Grinaker-LTA is a joint venture partner in the design and <
>
construct subcontract that will have a material and positive impact on Aveng Grinaker-LTAs <
>
order book. This PPP encompasses design, construction, financing,operation and maintenance.<
>
Major contracts awarded since the 8 November 2012 business update, with a combined contract value of <
>
R2 960 million, include: <
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* Majuba Rail Link for Eskom Holdings;<
>
* Nacala Section 2 Rail Project in Tete, Mozambique for Vale;<
>
* construction of an extension to the Rehau Polymer Facility for the Nelson Mandela Bay Logistics Park for <
>
the Coega Development Corporation;<
>
* construction and electrification of a 20 km new railway line for the Kalagadi Resources manganese mine;<
>
* Vodacom Data Centre for Coffey Projects; and<
>
* Sandton City Atrium Repositioning for Liberty Group Properties.<
><
>
Aveng E+PC and Aveng Water<
>
The tapering off of work on large contracts in the current year and delays in the start of new contracts <
>
adversely impacted the first six months of the financial year. The extension of certain existing contracts <
>
served to partially offset the impact of the delays. <
><
>
Both Aveng E+PC and Aveng Water experienced a shortage of work, and were thus adversely affected by the <
>
cost of retaining skills and related capacity in anticipation of improved market conditions. Revenue <
>
decreased by 11% to R325 million in relation to the comparative period. Aveng Waters HiPro Water Recovery <
>
Process serves to strengthen the Groups offering to the mine water treatment market but projects are very slow <
>
in being developed. <
><
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Mining<
>
This operating segment with effect from 1 July 2012 comprises Aveng Moolmans and Aveng Shafts and Underground <
>
Mining business units, collectively known as Aveng Mining. <
><
>
On a comparable basis, revenue for this operating segment increased by 21% to R3 793 million driven by strong <
>
growth from Aveng Moolmans.<
><
>
Aveng Moolmans revenue growth is attributable to growth in West Africa and South Africa, as well as <
>
extensions to existing contracts at Smaldeel, Kansanshi and additional work at Sishen. A heightened focus on <
>
operating efficiencies as well as the completion of some lower margin projects has driven the improved results <
>
within Aveng Moolmans. The depreciation in the Rand/US Dollar exchange rate from an average R7.54 in the <
>
comparative period to R8.48 enhanced Aveng Moolmans operating profit.<
><
>
The performance of the Aveng Shafts and Underground Mining business unit was hampered by project commencement <
>
delays on three new contracts and the impact of the labour disruptions, which all contributed to margin <
>
slippage. <
><
>
Operating profit grew by 32% to R390 million with the improved efficiencies and new business offsetting the <
>
impact of labour disruptions in the mining industry. <
><
>
Manufacturing and Processing<
>
This operating segment comprises Aveng Manufacturing and Aveng Trident Steel.<
><
>
Segmental revenue increased by 4% from R4 290 million in the comparative period to R4 458 million, with <
>
operating profit of R86 million (2011: R277 million), reflecting a very difficult trading environment.<
><
>
Revenue growth of 15% by Aveng Manufacturing over the comparative period was largely attributable to <
>
additional Australian rail construction revenue as well as an increase in infrastructure products, which was <
>
at an all-time low during the prior year. Aveng Manufacturings business units with high exposure to the <
>
mining industry, namely DFC and Duraset, were notably affected by the labour disruptions that impacted the <
>
platinum and gold mines in particular. Lennings Rail Services experienced a far greater percentage of lower <
>
margin maintenance contracts than planned <
>