| Tue 10 Sep 2013, 7:54 | | AVENG LIMITED - Audited Group results for the 12 m |
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AEG 201309100001A
Audited Group results for the 12 months ended 30 June 2013
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
Audited Group results for the 12 months ended 30 June 2013
Vision
The Aveng Group aims to be a leading infrastructure development company providing a diverse range of construction,
infrastructure and engineering products, services and solutions for customers, sustainable profitability for shareholders
and a great place to work for employees.
Mission
Building a positive and lasting legacy of which our stakeholders, their families and future generations will be proud.
Achieved through
- Our ongoing involvement in building iconic structures, landmark buildings, bridges, dams, airports, roads and power
stations which form the backbone of many economies in developing countries
- Our dedication to a values-based culture of safety, honesty and accountability across all levels of the group
- Our commitment to prioritising people, equality and fairness in all relationships and partnerships we forge with
stakeholders
- Our active contribution to social development and sustainability
Within its broad exposure across the infrastructure value chain, the Aveng Group has the capability to deliver complex
multi-disciplinary projects in key industry sectors
- Public Infrustructure
- Water
- Power
- Commercial and Industrial
- Mining
- Concessions
- Rail
Highlights
- Revenue
R52 billion
increase of 27% from June 2012
- Operating earnings
R627 million
increase of 24% from June 2012
- Headline earnings
R466 million
decrease of 6% from June 2012
- Earnings per share
124,6 cents
decrease of 8% from June 2012
- Headline earnings per share
124,6 cents
decrease of 3% from June 2012
- Dividends per share
No dividend was declared for the full year
- Net asset value per share
R34,12
increase of 5% from June 2012
- Two year order book
R37,4 billion
decrease of 20% from June 2012
Condensed consolidated statement of financial position as
at 30 June 2013
2013 2012*
Audited Audited
Note Rm Rm
ASSETS
Non-current assets
Investment property 6 71 -
Property, plant and equipment 6 6 789 6 666
Goodwill arising on consolidation 1 425 1 384
Intangible assets 184 165
Equity-accounted investments 6 144 105
Available-for-sale investments 70 146
Deferred tax assets 1 347 998
10 030 9 464
Current assets
Inventories 2 780 2 467
Trade and other receivables 2 655 2 683
Amounts due from contract customers 10 397 7 242
Cash and bank balances 7 4 551 5 203
20 383 17 595
TOTAL ASSETS 30 413 27 059
EQUITY AND LIABILITIES
Equity
Share capital and share premium 1 388 1 435
Other reserves 802 602
Retained earnings 11 103 10 864
Equity attributable to equity-holders of the parent 13 293 12 901
Non-controlling interests 12 10
13 305 12 911
Liabilities
Non-current liabilities
Borrowings and other liabilities 1 312 748
Deferred tax liabilities 319 299
Provisions 1 105 918
2 736 1 965
Current liabilities
Borrowings and other liabilities 219 180
Taxation payable 210 242
Trade and other payables 9 052 7 894
Provisions 1 924 1 253
Amounts due to contract customers 2 367 2 271
Bank overdrafts 7 600 343
14 372 12 183
TOTAL LIABILITIES 17 108 14 148
TOTAL EQUITY AND LIABILITIES 30 413 27 059
*Comparatives have been amended, as detailed in the Change in disclosure note, refer
to note 3.
Condensed consolidated statement of comprehensive earnings
for the year ended 30 June 2013
2013 2012*
Audited Audited
Note Rm Rm
Revenue 51 704 40 886
Cost of sales1 (48 233) (37 396)
Gross earnings 3 471 3 490
Operating expenses2 (2 844) (2 986)
Operating earnings before other gains and losses 627 504
Other gains and losses - 31
Operating earnings after other gains and losses 627 535
Earnings from available-for-sale investments 41 37
Share of (loss) / earnings from equity-accounted
investments (12) 41
Net operating earnings 656 613
Finance earnings 132 189
Finance and transaction expenses (162) (76)
Earnings before taxation 626 726
Taxation 5 (167) (203)
Earnings for the period 459 523
Other comprehensive earnings for the period:
Items that may be subsequently recycled to earnings
Exchange differences on translating foreign operations 196 485
Movement in insurance and other reserves (2) (12)
194 473
Total comprehensive earnings for the period 653 996
1 Cost of sales includes depreciation of R1 090 million (2012: R1 343 million).
2 Operating expenses includes depreciation of R89 million (2012: R136 million),
amortisation of R50 million (2012: R37 million) and an impairment of R2 million
(2012: R nil).
The total depreciation and impairment expense included in the Statement of
comprehensive earnings amounts to R1 181 million (2012: R1 479 million).
Total comprehensive earnings for the period attributable to:
Equity-holders of the parent 659 993
Non-controlling interests (6) 3
653 996
Earnings for the period attributable to:
Equity-holders of the parent 466 521
Non-controlling interests (7) 2
459 523
Other comprehensive earnings for the period attributable
to:
Equity-holders of the parent 193 472
Non-controlling interests 1 1
194 473
Determination of headline earnings for the period:
Earnings for the period attributable to equity-holders of the
parent 466 521
Adjusted for (net of tax):
Profit on sale -change in holding in subsidiary - (26)
Profit on sale of property, plant and equipment (1) -
Impairment of property, plant and equipment 1 -
Headline earnings 466 495
Results per share (cents)
Earnings 124,6 134,9
Headline earnings 124,6 128,1
Diluted earnings 115,9 126,1
Diluted headline earnings 115,9 119,8
Dividend - 60,0
Number of shares (millions)
In issue 389,8 389,8
Weighted average 373,9 386,0
Diluted weighted average 402,1 412,9
*Comparatives have been amended, as detailed in the Change in disclosure note, refer to note 3.
Condensed consolidated statement of cash flows
for the year ended 30 June 2013
2013 2012
Audited Audited
Rm Rm
Cash retained from operating activities
Cash retained from operations 627 535
Depreciation and impairment 1 181 1 479
Amortisation 50 37
Non-cash items and other movements 540 173
Cash generated by operations 2 398 2 224
Changes in working capital
Increase in inventories (313) (398)
(Increase) / decrease in trade and other receivables
and amounts due from contract customers (3 127) 1 769
Increase / (decrease) in trade and other payables and
amounts due to contract customers 1 256 (2 170)
Cash generated by operating activities 214 1 425
Finance earnings 126 189
Finance and transaction expenses paid (164) (76)
Taxation paid (464) (567)
Cash (outflow) / inflow from operating activities (288) 971
Investing activities
Property, plant and equipment purchased -expansion (459) (1 220)
-replacement (925) (867)
Acquisition of investment property (71) -
Acquisition of intangible assets (29) -
Changes in equity-accounted and available-for-sale
investments (38) 30
Proceeds from sale of property, plant and equipment 165 149
Proceeds from sale of intangible assets 2 -
Cash outflow on acquisition of subsidiary (9) -
Proceeds from sale of available-for-sale investment 80 -
Dividend earnings 41 37
Cash outflow from investing activities (1 243) (1 871)
Operating free cash outflow (1 531) (900)
Financing activities with equity-holders
Shares repurchased (47) (448)
Increase in shares by non-controlling interests of
subsidiary company - 10
Dividends paid (242) (561)
Financing activities with debt holders
Proceeds from borrowings 603 845
Net decrease in cash and cash equivalents before
foreign exchange movements on cash (1 217) (1 054)
Foreign exchange movements on cash 308 514
Cash and cash equivalents at beginning of year 4 860 5 400
Cash and cash equivalents at end of year 3 951 4 860
Borrowings, excluding bank overdrafts 1 531 928
Net cash position 2 420 3 932
Notes to the condensed consolidated annual financial statements
1. Corporate information
The condensed consolidated annual financial statements of the Group for the twelve months ended 30 June 2013
(results) were authorised for issue in accordance with a resolution of the directors on 6 September 2013.
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 currently in progress. Refer to the
commentary for a more detailed report on the performance of the different operating segments within the Group.
2. Basis of preparation and accounting policy
The results have been prepared on the historical cost basis, except for certain financial assets which are measured at
fair value.
The accounting policies used in the preparation of these results are consistent in all material respects with those
used in the Groups audited annual financial statements as at 30 June 2012.
The condensed annual financial statements for the year ended 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, IAS 34: Interim Financial Reporting, requirements of the South African Companies Act
71 of 2008 as amended, and the Listings Requirements of the JSE Limited.
The full year financial results have been prepared under the supervision of the Group Financial Director, Mr HJ
Verster.
The results have been audited by Ernst & Young Incorporated and the unqualified audit opinion is available on request
from the Company Secretary at the Companys registered office.
The Groups integrated report will be available by the end of September 2013.
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 Financial Statements -Other Comprehensive Earnings (Amendment) and Classification of
the Requirements for Comparative Information (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 full year 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 1 First Time Adoption of IFRS -Borrowing Costs (Improvement) 1 July 2013
IFRS 7 Financial Instruments: Disclosure (Amendment) 1 January 2013
IFRS 9 Financial Instruments: Recognition 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 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 (Amendment) 1 January 2014
IAS 34 Interim Financial Reporting (Improvement) 1 January 2013
IAS 36 Impairment of Assets (Amendment) 1 January 2014
IAS 39 Financial Instruments: Recognition and Measurement (Amendment) 1 January 2014
The Group does not intend to early adopt any of the above Standards and Interpretations.
Contracting revenue
The Group uses the percentage-of-completion method in accounting for its construction contracts. Use of the
percentage-of-completion method requires the Group to estimate the construction services and activities performed to date as a
proportion of the total services and activities to be performed. In addition, judgments are required when recognising and
measuring any variations or claims on each contract.
3. Change in disclosure
As part of the Groups financial reporting improvement initiatives, the structure, format and presentation of
disclosures in the financial statements were reviewed. This resulted in the reallocation of certain comparative amounts as well
as the introduction of certain terminology changes.
4. Segment information
The Group has determined four reportable segments that are largely organised and managed separately according to the
nature of products and services provided.
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.
Segment assets exclude Goodwill arising on consolidation, Intangible assets, Equity-accounted investments,
Available-for-sale investments, Deferred tax assets and Cash and bank balances.
Segment liabilities exclude Borrowings and other liabilities, Deferred tax liabilities, Taxation payable and Bank
overdrafts.
The Groups operating segments for the year are categoried as follows:
1. Construction and Engineering
1.1 Construction and Engineering: South Africa and rest of Africa
This operating segment comprises Aveng Grinaker-LTA, Aveng Engineering and Projects Company (Aveng E+PC) and Aveng
Water.
1.2 Construction and Engineering: Australasia and Asia*
This operating segment comprises McConnell Dowell.
2. Mining
This operating segment comprises Aveng Moolmans and Aveng Mining Shafts & Underground.
3. Manufacturing
This operating segment comprises Aveng Manufacturing and Aveng Trident Steel.
4. Administration and Eliminations
This operating segment comprises Corporate Services, corporate-held investments including properties, and
consolidation eliminations.
* The Construction and Engineering: Australasia and Pacific operating segment has been renamed to Construction and
Engineering: Australasia and Asia.
Construction and
Engineering: Manu- Adminis-
South Africa facturing tration
2013 and the rest Australasia and and Elimi-
Rm of Africa** and Asia Mining*** Processing nations** Total
External revenue 8 059 26 749 7 435 9 326 135 51 704
Internal revenue 235 - - 409 (644) -
Gross revenue 8 294 26 749 7 435 9 735 (509) 51 704
Operating earnings before other gains and losses (916) 644 708 269 (78) 627
Other gains and losses - - - - - -
Operating earnings after other gains and losses (916) 644 708 269 (78) 627
Earnings from available-for-sale investments - - - - 41 41
Share of earnings / (loss) from equity-accounted
investments 2 (5) 2 - (11) (12)
Net operating earnings (914) 639 710 269 (48) 656
Net finance earnings (finance earnings less
finance and transaction expenses) 32 (23) (31) 1 (9) (30)
Earnings before taxation (882) 616 679 270 (57) 626
Taxation 354 (157) (276) (82) (6) (167)
Earnings for the period (528) 459 403 188 (63) 459
Investments* 6 107 3 - 98 214
Segment assets (note 1) 4 082 8 149 4 285 5 739 437 22 692
Segment liabilities (note 2) 3 043 7 087 1 580 1 788 950 14 448
Capital expenditure 46 384 615 305 105 1 455
Depreciation and impairment 107 402 581 83 8 1 181
Amortisation 11 - 10 29 50
Construction and
Engineering: Manu- Adminis-
South Africa facturing tration
2012 and the rest Australasia and and Elimi-
Rm of Africa** and Asia Mining*** Processing nations** Total
External revenue 7 931 17 122 6 680 9 148 5 40 886
Internal revenue 267 - - 178 (445) -
Gross revenue 8 198 17 122 6 680 9 326 (440) 40 886
Operating earnings before other gains and losses (894) 360 579 588 (129) 504
Other gains and losses 38 - - (3) (4) 31
Operating earnings after other gains and losses (856) 360 579 585 (133) 535
Earnings from available-for-sale investments - - - - 37 37
Share of earnings / (loss) from equity-accounted
investments (5) 46 - - - 41
Net operating earnings (861) 406 579 585 (96) 613
Net finance earnings (finance earnings less
finance and transaction expenses) 34 42 2 1 34 113
Earnings before taxation (827) 448 581 586 (62) 726
Taxation 270 (104) (184) (204) 19 (203)
Earnings for the period (557) 344 397 382 (43) 523
Investments* 4 133 1 - 113 251
Segmental assets (note 1) 3 383 5 610 4 491 5 280 294 19 058
Segmental liabilities (note 2) 2 391 5 961 2 086 1 407 491 12 336
Capital expenditure 176 611 1 087 198 15 2 087
Depreciation and impairment 119 618 586 127 29 1 479
Amortisation 7 - - 13 17 37
* **Consists of equity-accounted investments and available-for-sale investments.
*** Concessions are reported under the Administration and Eliminations segment in the 2013 financial year, compared to the
Construction and Engineering: South Africa and rest of Africa segment in the 2012 financial year. The Comparatives have been adjusted.
*** Aveng Mining Shafts & Underground is reported under the Mining segment in the 2013 financial year, compared to the Construction
and Engineering: South Africa and rest of Africa segment in the 2012 financial year. The Comparatives have been adjusted.
2013 2012
Rm Rm
Note 1 -Reconciliation of segment assets
Total assets of the Group 30 413 27 059
Goodwill arising on consolidation (1 425) (1 384)
Intangible assets (184) (165)
Equity-accounted investments (144) (105)
Available-for-sale investments (70) (146)
Deferred tax assets (1 347) (998)
Cash and bank balances (4 551) (5 203)
Segment assets 22 692 19 058
Note 2 -Reconciliation of segment liabilities
Total liabilities of the Group 17 108 14 148
Borrowings and other liabilities (1 531) (928)
Deferred tax liabilities (319) (299)
Taxation payable (210) (242)
Bank overdrafts (600) (343)
Segment liabilities 14 448 12 336
The Group operates in five principal geographical areas:
2013 2012 2013 2012
2013 2012 Segment Segment Capital Capital
Revenue Revenue assets assets expenditure expenditure
Rm Rm Rm Rm Rm Rm
South Africa 19 164 18 485 11 870 11 114 747 976
Rest of Africa including Mauritius 4 984 4 971 2 320 2 267 257 499
Australasia and the Pacific Islands* 24 661 14 738 7 274 4 748 327 565
Southeast Asia* 2 544 2 581 989 891 57 46
Middle East and other regions 351 111 239 38 67 1
51 704 40 886 22 692 19 058 1 455 2 087
*Included in the Australasia and the Pacific Islands and Southeast Asia georaphical segments is revenue
derived by various operating segments.
5. Income tax
2013 2012
Rm Rm
TAXATION
Major components of the tax expense
Current
Local income tax -current period 131 213
Local income tax -recognised in current tax for prior periods (5) -
Dividend Witholding Tax 1 57
Capital Gains Tax - 4
Foreign income tax or withholding tax -current period 348 386
Foreign income tax or withholding tax -recognised in current tax for prior periods (43) (15)
Current tax expense 432 645
Deferred
Deferred tax -current period (176) (382)
Deferred tax -foreign rate exchange 1 9
Deferred tax -arising from prior period adjustment (90) (69)
Deferred tax movement in statement of comprehensive earnings (265) (442)
Total tax expense 167 203
Effective tax rate 26,7% 28,0%
6. Property, plant and equipment, Investment property and Intangible assets
During the twelve months ended 30 June 2013, the Group acquired assets at a cost of R1 484 million (2012: R2 087
million). Assets with a net carrying amount of R135 million (2012: R78 million) have been disposed of in the current year.
There was a decrease of R50 million to the consolidated depreciation expense of property, plant and equipment in the
current financial year due to the estimated change in useful lives. Depreciation, amortisation and impairment amounted to
R1 179 million (2012: R1 479 million), R50 million (2012: R37 million) and R2 million (2012: R Nil) respectively
7. Cash and cash equivalents
2013 2012
Rm Rm
Cash and bank balances 4 551 5 203
Bank overdrafts (600) (343)
3 951 4 860
Cash and bank balances at the end of the year include
the following bank balances ad cash that are restricted from immediate use:
Group share of cash held by joint ventures 935 1 156
Guardrisk Life Fund 40 29
975 1 185
8. Competition commission
Aveng has proactively engaged and co-operated with the Competition Commission in its investigation into historic
anti-competitive practices in the South African construction industry. In June this year, Aveng entered into a settlement
agreement with the Competition Commission with respect to the above mentioned investigations, levying an administrative
penalty against the Group of R307 million. This represents a full and final settlement of all alleged collusive conduct as
defined in the Consent Agreement, confirmed by the Competition Tribunal. This penalty has been provided for in full at
year-end.
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 have 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. Dividends
The Board has reviewed the current periods financial performance, and given the adverse cash flow which was mainly as
a result of working capital outflow on the Queensland Curtis Liquid Natural Gas Pipeline project (QCLNG) and the
losses at Aveng Grinaker-LTA and has resolved not to declare a dividend.
11. Events after the reporting date
Mr Roger Jardine resigned as Group Chief Executive Officer (CEO) and director of the company effective 31 August
2013. Mr Kobus Verster, the Group Financial Director, will be acting CEO from 1 September 2013 until a replacement for Mr
Jardine is appointed.
The directors are not aware of any matter or circumstance arising since the end of the reporting period not otherwise
dealt with in the Groups condensed consolidated annual financial statements which significantly affects the financial
position of the Group and the Company as at 30 June 2013 or the results of its operations or cash flows for the year then
ended.
12. Major acquisitions and disposals
Acquisition of investment property
The Group acquired a 15% undivided share in the Goldfields Mall Shopping Centre for R71 million in June 2013. This
property is being held to earn rentals and as such has been classified as an investment property.
Acquisition of subsidiary
The Group acquired 51% of the equity (and voting rights) of EESTech Africa (Proprietary) Limited for AUD1 million (R9
million) in February 2013.
Disposal of available-for-sale investment
The Group disposed of their 15% shareholding in Goldfields Mall (Proprietary) Limited, which was held as an
available-for-sale investment, and was sold for its carrying amount of R80 million in June 2013.
Statement of changes in equity for the year ended 30 June 2013
Foreign Equity-settled
Total currency share-based
Share Share issued translation payment Insurance Total other
capital premium capital reserve reserve reserves reserves
Rm Rm Rm Rm Rm Rm Rm
Balance at 1 July 2011 19 1 864 1 883 62 - 72 134
Earnings for the period - - - - - - -
Other comprehensive earnings for the period - - - 484 - (12) 472
Total comprehensive earnings for the period - - - 484 - (12) 472
Shares issued - 327 327 - - - -
Share repurchase programme - (448) (448) - - - -
Movement in treasury shares - (327) (327) - - - -
Transfer between reserves - - - - - (4) (4)
Dividends - - - - - - -
Total contributions and distributions recognised
directly in equity - (448) (448) - - (4) (4)
Balance at 1 July 2012 19 1 416 1 435 546 - 56 602
Earnings for the period - - - - - - -
Other comprehensive earnings for the period - - - 195 - (2) 193
Total comprehensive earnings for the period - - - 195 - (2) 193
Movement in treasury shares - (47) (47) - - - -
Equity settled share-based payment expense - - - - 21 - 21
Transfer between reserves - - - (14) - - (14)
Business combination -acquisition of subsidiary - - - - - - -
Dividends - - - - - - -
Total contributions and distributions - (47) (47) (14) 21 - 7
recognised directly in equity
Balance at 30 June 2013 19 1 369 1 388 727 21 54 802
Total
attributable
to equity- Non-
Retained holders of controlling Total
earnings the parent interests equity
Rm Rm Rm Rm
Balance at 1 July 2011 10 900 12 917 (3) 12 914
Earnings for the period 521 521 2 523
Other comprehensive earnings for the period - 472 1 473
Total comprehensive earnings for the period 521 993 3 996
Shares issued - 327 10 337
Share repurchase programme - (448) - (448)
Movement in treasury shares - (327) - (327)
Transfer between reserves 4 - - -
Dividends (561) (561) - (561)
Total contributions and distributions recognised
directly in equity (557) (1 009) 10 (999)
Balance at 1 July 2012 10 864 12 901 10 12 911
Earnings for the period 466 466 (7) 459
Other comprehensive earnings for the period - 193 1 194
Total comprehensive earnings for the period 466 659 (6) 653
Movement in treasury shares - (47) - (47)
Equity settled share-based payment expense - 21 - 21
Transfer between reserves 14 - - -
Business combination -acquisition of subsidiary - - 9 9
Dividends (241) (241) (1) (242)
Total contributions and distributions (227) (267) 8 (259)
recognised directly in equity
Balance at 30 June 2013 11 103 13 293 12 13 305
Other Group information
for the year ended 30 June 2013
2013 2012
Audited Audited
Rm Rm
Capital expenditure
Expansion 459 1 220
Replacement 925 867
Acquisition of investment property 71 -
Acquisition of intangible assets 29 -
1 484 2 087
Commitment for future capital expenditure:
Contracted 176 269
Authorised, but not contracted for 50 474
226 743
Results per share (cents)
Earnings 124,6 134,9
Diluted earnings 115,9 126,1
Headline 124,6 128,1
Diluted headline earnings 115,9 119,8
Number of shares (millions)
In issue 389,8 389,8
Weighted average 373,9 386,0
Diluted weighted average 402,1 412,9
Dividend per share (cents) - 60,0
Commentary
Overview
Salient features
- Revenue improved by 27% to R51,7 billion (2012: R40,9 billion).
- Net operating earnings up by 7% to R656 million (2012: R613 million).
- Headline earnings per share decreased by 3% to 124,6 cents (2012: 128,1 cents).
- Order book decreased by 6% to R37,4 billion compared to 31 December 2012.
- Net cash position of R2,4 billion (2012: R3,9 billion).
- Solid contribution by Construction and Engineering: Australasia and Asia1 and Mining operating segments.
- Losses in the Construction and Engineering: South Africa and rest of Africa operating segment.
Safety
The Groups safety vision, Home without harm, Everyone Everyday remains integral to the manner in which the Group
conducts business. There has been continuous improvement in the All Injury Frequency Rate to 4,52 in comparison with 4,65
in the prior year.
However, the Group regrettably suffered six fatalities during the period, two of whom involved service provider
employees. The Aveng Board and Management extend their sincere condolences to the families of our deceased colleagues.
The Group is focused on improving the management and control of high consequence activities, in particular those
involving service providers, subcontractors and transport.
Operating environment
The Group experienced a difficult year with a very disappointing performance from Aveng Grinaker-LTA offsetting a much
improved result from McConnell Dowell as well as sustained performance from Aveng Mining. The impact of labour
disruptions on the South African operations was material, both in terms of direct cost and loss of productivity. In addition,
loss provisions were required on some major projects which adversely impacted the results. The finalisation of the
Competition Commission Fast-Track settlement process is welcomed and hopefully provides a base for the industry to restore its
reputation in the future.
The construction and engineering operating environment in Australasia and Asia is slowing, with large mining and gas
projects unlikely to continue at the same pace and scale as experienced over the past few years. Despite a softer trading
environment and contract loss provisions impacting on the overall financial performance, McConnell Dowell produced a
solid set of results. Good progress has been made with the resolution of commercial issues on previously reported
problematic contracts, however, the QCLNG project remains a material financial risk.
The South African construction and engineering market remained subdued, with slower than anticipated infrastructure
spend taking place. Operating results were adversely affected by labour disruptions experienced in the construction and
mining sectors and material projected contract losses, including the Mokolo Crocodile Pipeline project (Mokolo). These
factors, as well as some contract management issues on some contracts, resulted in further operating losses compared to
the prior year.
Within the Mining operating segment, Aveng Moolmans delivered a strong performance from an improved operational
performance favourably impacting on margins, especially in South Africa and West Africa, partly offset by underperformance
from Aveng Mining Shafts & Underground due to project delays and the impairment of a significant receivable relating to
Great Basin Gold Limiteds Burnstone Mine project.
The Group order book of R37,4 billion has decreased by 6% from R39,7 billion at 31 December 2012, mainly as a result
of the reduction in the Mining order book as well as the softening infrastructure market experienced by the Construction
and Engineering: Australasia and Asia operating segment. The Group order book nevertheless remains strong.
Financial performance
Revenue increased by 27% to R51,7 billion over the comparable period as a result of significant activity on a number
of large projects aided by currency weakness within the Construction and Engineering: Australasia and Asia operating
segment, and significant growth in revenue achieved by the Mining operating segment.
The direct cost of labour disruptions on the Groups net operating earnings amounted to R350 million. Of this amount,
R270 million was in respect of Aveng Grinaker-LTA, with the remaining R80 million affecting the Mining and Manufacturing
and Processing operating segments. Of the above, the direct costs of strike action on the Groups Lephalale projects
amounted to R250 million.
Despite the aforementioned impact, the Groups net operating earnings increased by 7% to R656 million in relation to
the prior year. This was primarily due to a substantial improvement in the operating performance of McConnell Dowell and
Mining, offset by a weaker performance by the Manufacturing and Processing operating segment and a substantial loss at
Aveng Grinaker-LTA.
The Manufacturing and Processing operating segment delivered acceptable results in a challenging operating
environment, except for losses at Steeledale which were due to lower selling prices, inventory write-downs and labour disruptions.
Net financing expenses were R30 million compared to net finance earnings of R113 million in 2012 as a result of the
lower net cash position. Earnings from equity-accounted investments declined by R53 million to a loss of R12 million due
to losses emanating from McConnell Dowells Middle East investments. The effective tax rate reduced to 26,7% from 28,0%
due to a more advantageous mixture of lower-rate tax jurisdictions compared to 2012. Consequently, the 7% increase in net
operating earnings translated into a 6% decline in headline earnings, to R466 million.
Undiluted and diluted headline earnings reduced by 3% to 124,6 cents per share (2012: 128,1 cents per share) and 115,9
cents per share (2012: 119,8 cents per share) respectively.
Operating free cash flow culminated in an outflow of R1,5 billion which is mainly attributable to the following:
- capital expenditure of R1,5 billion, for Aveng Mining as a result of the Sishen Mine expansion and three new shaft
sinking contracts; Aveng Manufacturing as a result of the construction of Infrasets Tete factory in Mozambique; and
McConnell Dowells replacement investment to support its revenue growth;
- increase in receivables, mainly being a reflection of higher revenues at McConnell Dowell; and
- increased inventory levels, primarily steel in support of automotive customers.
The Groups net cash position of R2,4 billion declined by 38% in relation to the R3,9 billion reported in the prior
year. The Group is pursuing outstanding claims, especially at McConnell Dowell, to recover the negative working capital
movement whilst optimising the planned capital expenditure programme to improve overall cash flow.
Operating review
Construction and Engineering: Australasia and Asia
This operating segment comprises McConnell Dowell Construction, Tunnelling, Electrix and Pipeline business units.
Revenue increased by 56% to R26,7 billion (38% increase to AUD 2,9 billion) against the comparative period, reflective
of the strong work-on-hand position at the beginning of the financial year and high project activity on a number of
large projects such as the QCLNG, Hay Point Berth (Hay Point), Australia Pacific Liquid Natural Gas Pipeline (APLNG),
Gladstone Liquid Natural Gas Pipeline (GLNG) and Gold Coast Rapid Transport (GCRT). The solid earnings increase was
enhanced by good contributions from the Electrix business unit and marine projects in Australia.
There has been a marginal slow-down in the Southeast Asia business resulting from the tough competitive environment in
those markets.
Performance in Rand terms was supported by a strong Australian Dollar, which averaged R9,08 compared to R8,01 in the
comparative period (13% increase).
Underlying net operating earnings has been strong and has increased by 57% from R406 million in the comparative period
to R639 million in the current period, despite continued uncertainty on the QCLNG project impacting profit recognition
within the Australian operations. The QCLNG project will remain a material financial risk to both profit and cash flow
through to completion at the end of the 2013 calendar year.
The Australian Construction business unit maintained strong growth, reporting revenue growth of 49% over the
comparative period from R7,7 billion to R11,5 billion.
The Adelaide Desalination Plant, one of the most advanced and energy efficient plants in the world, which was
initially delayed by geotechnical and weather challenges, achieved full capacity of 100 gigaliters of desalinated water per
annum in December 2012. The commercial issues have been finalised with the client. The desalination plant has won a number
of industry awards including the Desalination Plant of the year award at the Global Water Awards held in Spain.
The Hay Point project in Queensland has been affected by significant changes to scope, difficult ground conditions and
inclement weather. The commercial issues on the project have been resolved. The client and McConnell Dowell will work
on a collaborative basis with the EPCM (engineer, procure, construct and manage) contractor to complete the project.
The Komo Airfield project, which entailed the construction of approximately 3km of runway and apron areas in a very
remote and challenging environment, has been completed and the commercial issues have been resolved.
Work has progressed well on Fortescue Metals Group (FMG) Berth 4 and FMG Rail Construction project in a joint
venture arrangement with the Lennings Rail Services (LRS) business unit within Aveng Manufacturing. The Seaford Rail
Overpass was completed on time, while operational challenges have been encountered on the GCRT project, but remedial action has
been implemented.
Built Environs successfully completed the LEAP 2 Defense Housing Public Private Partnership (PPP) project and
Walkerville Marketplace project.
Overseas Construction reported a 1% decrease in revenue, from R3,7 billion to R3,6 billion as revenue from Southeast
Asia has slowed, which is reflective of the competitive markets. New Zealand, the Pacific Islands and the Middle East
reached revenue levels consistent with the prior year. Growth opportunities are expected in the transport, power and water
sectors. Work has progressed well on projects in Singapore, Indonesia and the Vale Jetty in Malaysia. The mechanical
projects in Saudi Arabia are close to completion and have progressed well. Winning work remains a challenge, however, there
are positive signs in growth markets going forward including Southeast Asia, Qatar and Saudi Arabia.
The Pipelines business unit reported a considerable increase in revenue to R8,0 billion compared to R2,9 billion in
the comparative period. Work on a number of significant coal seam methane projects secured in Queensland in the previous
financial year are still in progress. Work on the APLNG (approximately 70% complete) and GLNG (approximately 60%
complete) projects have progressed according to schedule and are performing well overall.
However, profitability continues to be impacted by the QCLNG project, which is now 88% complete, primarily due to
adverse weather conditions and commercial issues with the client.
As a result, further loss provisions have been recognised on the project. The project is being undertaken with a joint
venture partner, and involves the detail
