Thursday 11th December, 2014
Trading Statement and Witdrawal of Cautionary
Aveng shareholders are advised that in respect of the unaudited financial results for the six months ended 31 December 2014, the Group anticipates headline earnings and headline earnings per share (?HEPS?) to decline by at least 45% in relation to the comparative period's R307 million and 82.1 cents per share respectively. This translates to headline earnings and HEPS of at most R169 million and 45.2 cents per share respectively. Further guidance will be provided to shareholders once the Group is in a position to determine the range of the expected decrease in headline earnings and HEPS ahead of the release of its interim results for the period ending 31 December 2014.
Headline earnings and HEPS excludes the profit on the sale of Electrix (treated as a disposal group and not a discontinued operation) of an anticipated R713 million after taxation, resulting in a net cash inflow of R1,4 billion. The withdrawal of the cautionary announcement pertaining to the sale of Electrix is described further below.
As reported to shareholders in the business update of 4 November 2014, the challenging economic conditions in the Group's key markets, steel sector labour disruptions and the extended impact of legacy contracts in South Africa are expected to adversely impact the operating earnings for the period ended 31 December 2014.
Most notably, the legacy contracts affecting the performance of the Construction and Engineering ? South Africa and rest of Africa segment are:
*Mokolo Crocodile Pipeline contract: Higher than anticipated costs associated with lower productivity resulting in an extended close-out of the contract. This was not anticipated after the earlier weather-related damages. The construction activity is largely complete and commissioning has commenced, with hand-over to the client scheduled for February 2015; and
*Water purification contract: Increased cost and penalties associated with remedial action to address the under- performance of a Water asset.
As anticipated, headline earnings is also expected to be negatively affected by a substantially higher net finance expense due to the lower net cash position, increased commitment fees in support of the Group's liquidity position and a higher effective interest rate applied to the convertible bond.
Notwithstanding the above challenges, McConnell Dowell, Aveng Moolmans and Aveng Manufacturing are performing within expectations.
The order book update and the large commercial claims position remains unchanged from the report to shareholders in the business update of 4 November 2014.
Withdrawal of cautionary announcement
Further to the cautionary announcement on 19 September 2014, Aveng hereby provides the relevant financial effects of the Group's disposal of its wholly owned Electrix business to VINCI Energies through a share sales transaction. The net assets of the Electrix business at 30 June 2014 amounted to R398 million, and the business contributed R115 million to the after-taxation profit of the Group for the 12 months then ended. As noted above, the Group expects to realise a profit on disposal of R713 million after taxation.
Shareholders are advised that they no longer need to exercise caution in their dealings in Aveng shares.
The above information has not been reviewed or reported on by the Aveng Group's auditors. The Group's interim results for the six months ended 31 December 2014 will be released on SENS on 17 February 2015 when the Group will be updating the market on its business in a presentation in Johannesburg on the same day, and in Cape Town on 18 February 2015. The presentation will be available for all stakeholders on the Group's website, www.aveng.co.za.