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