Aveng interim results for the half year ended 31 December 2018

Mon, 25th February 2019

“Our strategy remains firmly focused on improving and optimising the performance of our two core businesses. McConnell Dowell has shown improvement in the consistency of project execution and is well positioned to secure additional work in the near term. While there have been some challenges at the Group’s mining business in the first half of the year, we are confident that the Group-led turnaround intervention at Moolmans is starting to deliver results with remedial actions underway and a strong focus on optimising and extending current contracts to restore planned operational and financial performance.

“Further, management is focused on completing the disposal of the majority of non-core assets by June 2019 to realise acceptable value for shareholders and strengthen the Group’s balance sheet.”

Eric Diack, Aveng Executive Chairman



In February 2018, following the completion of a strategic review, Aveng embarked on a focused strategy to become an international infrastructure and resources group operating in selected markets and capitalising on its considerable knowledge and experience.

A strategic action plan to create a robust and sustainable organisation is being implemented and involves ensuring a sustainable long-term capital structure, improving the performance of the identified core assets and creating liquidity by disposing of non-core assets.

The longer-term goal is to provide acceptable returns for the providers of capital and a sustainable future for employees, customers, suppliers and other stakeholders.


Regrettably, one fatality was recorded in the first half of the year. A fatal incident occurred at Grinaker-LTA’s N1 Ventersburg road project in the Free State on 23 November 2018. The deceased, Mr Daniel Mathule, a labour hire worker for a V-drain and kerb subcontractor, succumbed to injuries incurred when he was struck by a public motorcycle while crossing the N1 highway. Aveng extends its sincere condolences and sympathy to the family and colleagues of the deceased. Efforts to address road safety risks include increasing safety controls on road crossing and enhancing employee vigilance during work activities within a road closure or near to public vehicles.

The total recordable injury frequency rate (TRIFR) for the reporting period was 0.77. This indicator is in line with industry standards and includes fatalities, lost time injuries, restricted workday cases and medical treatment cases. The TRIFR demonstrates a positive downward trend consistent with the improvement over the past three years.

The Group remains committed to its safety vision of “Home Without Harm, Everyone, Everyday”.


Aveng reported a headline loss of R770 million (2017: R335 million loss) and a net loss of R920 million (2017: R346 million loss). Basic loss per share was 7.2 cents, compared to a 64.2 cents loss per share (restated) in the comparative period and the headline loss per share decreased to 6.1 cents from a 62.2 cents loss per share (restated) at December 2017. This was due to the significant increase in the weighted average number of shares in the period as a result of the shares issued in the rights issue in July 2018 as well as the shares issued in relation to the redemption of the convertible bond in September 2018.

Revenue decreased by 17% to R13.4 billion (2017: R16.1 billion), primarily due to lower order books in the construction segments at the start of the financial year.

Net operating earnings decreased from a profit of R94 million in December 2017 to a loss of R484 million, due to:

These were partially offset by:

An impairment charge of R163 million was recognised against aged plant and equipment at Moolmans.

Capital expenditure of R302 million (2017: R350 million), of which R247 million was for replacement and R55 million for expansion, included R36 million at McConnell Dowell, R171 million at Moolmans primarily as a result of investment in existing fleet, and R67 million at Aveng Manufacturing and Processing.

Operating free cash flow for the period amounted to an outflow of R710 million while cash and bank balances (net of bank overdrafts) increased to R2.3 billion (June 2018: R2.1 billion) resulting in a net debt position of R35 million, compared to R1.2 billion net debt at 30 June 2018.


Aveng’s two-year order book increased by 9% to R19.5 billion at 31 December 2018, compared to the R17.9 billion reported at 30 June 2018. The geographic split of the order book at 31 December 2018 was 59% Australasia and Asia (June 2018: 43%), 37% South Africa (June 2018: 51%) and 4% other (June 2018: 6%).

The order book for the Group’s core assets amounted to R15,6 billion at 31 December 2018, increasing by 20% since 30 June 2018. This was largely as a result of a 50% increase in McConnell Dowell’s two-year order book to AUD1,14 billion (June 2018: AUD0,76 billion). The business is well-positioned to secure additional work in the near term as more than AUD1 billion worth of tenders have ECI status.

The Moolmans order book decreased by 24% or R1.3 billion, due largely to completion and termination of projects during the previous year. Although current market conditions remain competitive, Moolmans is pursuing several near orders which the Group expects to announce during the second half of the year. These will have a positive impact on Moolmans’ two-year order book.

Grinaker-LTA’s order book at 31 December 2018 compared to 27% since June 2018. Subsequently, the Mtentu Bridge contract was terminated on 30 January 2019.


A positive outlook for McConnell Dowell is supported by growing markets that will sustain robust demand for new infrastructure. The economies of Australia and New Zealand are expected to be strong and stable in 2019 and 2020 as a result of several large-scale infrastructure projects that are underway and strong demand in the road and rail transport infrastructure sectors along the east coast of Australia, driven largely by higher levels of public spending by the Australian Government.

Against this background, McConnell Dowell is expected to grow and diversify its order book in selected markets. The ECI status ensures that McConnell Dowell is well positioned to secure additional work in the near term. The business continues to focus on improving the consistency of its project execution.

Moolmans’ immediate focus is on fully implementing the remedial actions of the Group-led turnaround intervention. The mining business is also focused on optimising and extending contracts in its current portfolio to restore planned operational and financial performance. Moolmans continues to pursue selected new opportunities in improving market conditions.

Grinaker-LTA has a limited order book and prospects for the acquisition of new work in subdued operating conditions remain challenging. Businesses within the operating group continue to be right-sized to achieve the financial objectives of potential new shareholders.
Based on a low GDP growth outlook for 2019, the manufacturing businesses are not forecast to grow significantly in the second half of the financial year.

Trident Steel continues to focus on sales optimisation and efficiency improvements to strengthen profitability. The business expects to benefit from sound prospects in the automotive market.

Management is focused on completing the disposal of the majority of the non-core assets by June 2019 and equipping the core businesses to execute the Group’s longer-term strategy.

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