Section 1 Interim results presentation

Transcription

1 Unaudited Group results for the six months ended 31 December 2013

2 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 profi tability 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 01 Section Section 1 Interim results presentation 02 2 Unaudited interim results Safety is paramount, never to be compromised in the pursuit of any objective Our values of safety, honesty and accountability underpin the way we expect employees to conduct business and interact with our stakeholders

3 1 Unaudited group results for the 6 months ended December 2013

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5 3 Today s presentation OVERVIEW FINANCIAL REVIEW OPERATIONAL REVIEW THE WAY FORWARD & OUTLOOK Unaudited group results for the six months ended 31 December

6 4 Unaudited group results for the six months ended 31 December

7 5 Operating environment» Modest growth experience in SA construction industry though impeded by delayed infrastructure-related spend and labour disruptions» Australian contracting market remains tough; good opportunities in transport, marine and oil & gas sectors» Steel industry affected by labour disruptions and subdued economic conditions; recent price increases bode well for 2H14» Despite project cancellations and delays caused by depressed commodity prices, the Group s mining order book continues to grow» Manufacturing sector demand remains flat» Opportunities in SE Asia and Africa, particularly for the construction and mining operations MARKET CONDITIONS REMAIN CHALLENGING Unaudited group results for the six months ended 31 December

8 6 Salient features» Revenue increase of 11%» Net operating earnings declined by 8%» EPS and HEPS declined by 22% and 21% respectively» Substantial progress made in stabilising Aveng Grinaker-LTA» QCLNG project in Australia substantially completed with milestones achieved» Claims related to QCLNG and the Gold Coast project remain unresolved» Strong performance by Aveng Manufacturing» Direct costs due to labour disruptions of R140m» Two-year order book strong at R36.7bn» Net cash stable at R2.4bn RECOVERY IN PERFORMANCE CONTINUES TO GAIN MOMENTUM Unaudited group results for the six months ended 31 December

9 7 Order book Duration of total order book» Two-year order book remains strong at R36.7bn SA Construction & Engineering order book increased by 22% McConnell Dowell s order book declined by 15% mths 8% >24 mths 19% < 6 mths 36% Aveng Mining s order book increased by 18%» Total order book increased by 16% to R46bn 6-18 mths 37% Two-year order book by client Public sector 15% STRONG TWO-YEAR ORDER BOOK Private sector 85% Unaudited group results for the six months ended 31 December

10 8 Safety Performance» Further improvement in the All Injury Frequency Rate (AIFR) to 3.9» Regrettably 2 fatalities at group operations (3 fatalities in 1H13) » Safety achievements: Kopermyn and Pembani coal washing plants completed - 6 years without a LTI Sadiola gold mine in Mali - 3.8m LTI free hours Aveng Steel Fabrication - 2.3m LTI free hours All Injury Frequency Rate 3.9 McConnell Dowell - Jurong Co. Jetty Works project - 1m LTI free hours FY09 FY10 FY11 FY12 FY13 1H14 SAFETY REMAINS A CORE VALUE OF THE GROUP Unaudited group results for the six months ended 31 December

11 9 Unaudited group results for the six months ended 31 December

12 10 Financial Review Statement of Comprehensive Earnings 1H14 Rm 1H13 Rm Change Revenue % Operating Earnings before other gain and losses (18%) 111 Net operating earnings (8%) 112 Income from equity-accounted and other investments % 3 Net finance (expense) / earnings (83) 12 n/a (42) Taxation expense (113) (159) (29%) (8) Earnings for the period (23%) 62 Headline earnings (22%) 74 Earnings per share (cents) (22%) Headline earnings per share (cents) (21%) Operating free cash flow (178) (521) 66% (1 010) Capital expenditure (17%) 702 Net cash position (28%) The internal and external revenue split is detailed in Appendix A. The revenue amount above eliminates internal revenue. 2. Refer to Appendix B 2H13 Rm WEAKER EARNINGS DESPITE REVENUE GROWTH Unaudited group results for the six months ended 31 December

13 11 Total Revenue: Segmental Analysis 1H14 Rm 1H13 Rm Change 2H13 Rm South Africa and rest of Africa 1, % Australasia and Asia % Total Construction and Engineering % Mining (9%) Manufacturing and Processing % Administration and Eliminations 1 (162) (263) 38% (230) Total % Adjusted as Concessions is now included in Administration 2. Aveng Steel Fabrication (ASF), Aveng Manufacturing Automation & Control Solutions (A&CS) and Aveng Manufacturing Facades business units are now reported under Manufacturing and Processing segment, compared to the Construction and Engineering : South Africa and rest of Africa segment in the prior year. Comparatives have been adjusted. 3. Total Revenue per segment includes internally generated revenue. Revenue has been reconciled to external revenue as part of Appendix A STRONG GROWTH IN CONSTRUCTION & ENGINEERING AND MANUFACTURING Unaudited group results for the six months ended 31 December

14 12 Net Operating Earnings - Segmental Analysis 1H14 Rm 1H13 Rm Change 2H13 Rm South Africa and rest of Africa 1,2 (334) (70) (377%) (826) Australasia and Asia (2%) 444 Total Construction and Engineering (143) 125 (382) Mining (24%) 319 Manufacturing and Processing % 159 Administration and Eliminations (47) 16 Total (8%) Adjusted as Concessions is now included in Administration 2. Aveng Steel Fabrication (ASF), Aveng Manufacturing Automation & Control Solutions (A&CS) and Aveng Manufacturing Facades business units are now reported under Manufacturing and Processing segment, compared to the Construction and Engineering : South Africa and rest of Africa segment in the prior year. Comparatives have been adjusted. EARNINGS IMPACTED BY LABOUR DISRUPTIONS AND LOW MARGINS Unaudited group results for the six months ended 31 December

15 13 Movement in cash and cash equivalents (Rm) 1H14 (Rbn) FY13 (Rbn) Cash South Africa Australia and other Debt South Africa Australia and other Cash 30 June 2013 Foreign Operations Investment Currency Income Impact Working Capital Finance cost Taxation Changes in Net assets investments purchased L/T borrowings Cash 31 December 2013 NET CASH POSITION MAINTAINED Unaudited group results for the six months ended 31 December

16 14 Working capital 1H14 Rm 1H13 Rm FY13 Rm 1H14¹ Days 1H13¹ Days FY13 Days Inventory Receivables Trade and other receivables Amounts due from contract customers Payables Trade and other payables Amounts due to contract customers Working Capital Revenue and Cost of sales relating to 1H14 and 1H13 have been annualised in the calculation of 1H14 and 1H13 days CONSTANT NET WORKING CAPITAL DESPITE 11% REVENUE GROWTH Unaudited group results for the six months ended 31 December

17 15 Amounts due from / (to) contract customers 1H14 Rm FY13 1 Rm Uncertified claims and variations (Under-claims) Progress billings received (Over-claims) (1 852) (1 690) Uncertified claims and variations less progress billings received Contract receivables Retention receivables Amounts received in advance (500) (677) Net amounts due from contract customers Disclosed on the statement of financial position as follows: Uncertified claims and variations Contract and retention receivables Amounts due from customers (current assets) Progress billings received (1 852) (1 690) Amounts received in advance (500) (677) Amounts due to customers (current liability) (2 352) (2 367) Net amounts due from contract customers December 2012 comparative not recorded to same granular level as recorded in 1H14 and FY13 and therefore may not be consistent with management s current categorisation practice, which is based on judgemental interpretations on a contract-by-contract basis. The exclusion of the disclosure of this information, for the six months ended 31 December 2012, does not have a quantitatively nor qualitatively material effect on the Group s interim results DRIVEN BY A FOCUS ON CASH COLLECTION Unaudited group results for the six months ended 31 December

18 16 Capital expenditure 1 1H14 Rm Replacement Expansion Total Depreciation, amortisation and impairment Multiple of depreciation spent H13 Rm 1. Comprising acquisitions of Property, Plant and Equipment and Intangible Assets PRUDENT CAPITAL MANAGEMENT Unaudited group results for the six months ended 31 December

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20 18 CONSTRUCTION & ENGINEERING South Africa and rest of Africa

21 19 Construction & Engineering: South Africa and rest of Africa» Revenue increased by 11% to R4.2bn Aveng Grinaker-LTA revenue increased by 10% : Nacala, Majuba and Kusile projects» Net operating loss of R334m mainly as a result of: Labour disruptions with direct costs of R96m Legacy contracts that are being executed at inadequate margins Fixed costs still too high Delays in the resolution of claims Revenue Rm H14 1H13 2H13 Net operating earnings Rm 1H14 1H13 2H » Improvement in project execution COMMERCIAL STABILISATION AND RECOVERY -826 Unaudited group results for the six months ended 31 December

22 20 Construction & Engineering: South Africa and rest of Africa - Revenue 1H14 Rm 1H13 Rm Change Aveng Grinaker-LTA Civil Engineering % 616 Aveng Grinaker-LTA Coastal (22%) 553 Aveng Grinaker-LTA Building (17%) Aveng Grinaker-LTA M&E % Aveng Engineering % 318 Total % H13 Rm 1. Total Revenue includes internally generated revenue. Revenue has been reconciled to external revenue as part of Appendix A 2. Disclosure of Aveng Grinaker LTA operations, previously disclosed between Construction and Specialised Products, has now been disclosed by discipline namely Civil Engineering, Coastal, Building and M&E. Comparatives have been adjusted. DRIVEN BY AVENG GRINAKER-LTA Unaudited group results for the six months ended 31 December

23 21 Construction & Engineering: South Africa and rest of Africa»Strengthened management at Aveng Grinaker-LTA»Interventions showing positive results»benefits of the fixed cost reduction programme expected in FY15»Improved project execution to ensure required margins are achieved»aveng Grinaker-LTA refocused into a discipline-led business FOUNDATION LAID FOR RECOVERY Unaudited group results for the six months ended 31 December

24 22 Construction & Engineering: South Africa and Africa - Order Book 2 year order book (Rbn) Order book by discipline Power Mining Water & Environmental Infrastructure Industrial & Commercial 1% 4% 9% 27% 9% 6% Oil & Gas Other 44% FY11 FY12 FY13 1H14 Order book by sector» Despite tough conditions, the two-year order book increased by 22% to R8.5bn Public sector» Cross-border diversification with 9% of WOH outside South Africa Private sector» Amount of public sector work continues to reduce 78%» Important contract awards: Strand Private Hospital, Sasol Head Office, Mall of the South IMPROVED ORDER BOOK DRIVEN BY PRIVATE SECTOR 22% Unaudited group results for the six months ended 31 December

25 23 Construction & Engineering: South Africa and Africa - Outlook»Market is expected to remain subdued in the short term: Challenging labour environment Slower than expected infrastructure spend in South Africa, but emerging opportunities in Africa Continued margin pressure»inward focused interventions continue: Focus on execution of large projects Further strengthen management capability and improve stability Align fixed costs to business requirements Selectively pursue opportunities in Africa IMPROVED OUTLOOK Unaudited group results for the six months ended 31 December

26 24 McCONNELL DOWELL South Africa and rest of Africa

27 25 Construction & Engineering: Australasia and Asia» Revenue increased 17% to R15bn, supported by strong growth in the Pipelines, Tunnelling and Electrical businesses Revenue Rm » Over 33% of revenue came from the QCLNG, APLNG and GCRT projects » 76% of revenue attributable to Australia, 11% to SE Asia and a further 12% to New Zealand» Claims resolution remains a priority» QCLNG substantially complete. Commercial resolution still poses a risk 1H14 1H13 2H13 Net Operating Earnings Rm REVENUE DRIVEN BY LARGE PIPELINE PROJECTS 1H14 1H13 2H13 Unaudited group results for the six months ended 31 December

28 26 Construction & Engineering: Australasia and Asia - Revenue H Rm H Rm Change H Rm Construction Australia Construction Offshore % Pipelines % Electrical % Tunnelling % 567 Eliminations (101) (75) (144) Total % Total Revenue includes internally generated revenue. Revenue has been reconciled to external revenue as part of Appendix A ASSISTED BY STRONG NON-CONSTRUCTION GROWTH Unaudited group results for the six months ended 31 December

29 27 Construction & Engineering: Australasia and Asia»Commercial update QCLNG Substantial completion with key project milestones achieved Judgement in the first arbitration received in December 2013 Second part of the commercial claims to be submitted Gold Coast Significant milestones achieved during 1H14 Claims still outstanding COMMERCIAL CLAIMS PROCESS REMAINS CHALLENGING Unaudited group results for the six months ended 31 December

30 28 Construction & Engineering: Australasia and Asia - Order book 2 year order book (Rbn) Order book by business unit Australia construction Overseas construction 11% Pipelines Tunnels 12% Electrical 46% Building 14% 2% 15% FY11 FY12 FY13 1H14 Order book by region» Order book replenishment, particularly offshore, remains a key focus» Total order book declined by 3% since June 2013 to R23.8bn Australia SE Asia NZ/Pacific Is. Middle East 16% 19% 1% 64% SUCCESSFUL DIVERSIFICATION AWAY FROM COMMODITIES Unaudited group results for the six months ended 31 December

31 29 Construction & Engineering: Australasia and Asia - Outlook» Revenue is expected to decline with QCLNG, APLNG and GCRT being substantially complete» Earnings and cash flow dependent on resolution of QCLNG and GCRT» Remains well positioned due to geographic spread and diverse product offering» Total order book strong at AUD2.6bn» AUD400m in new projects awarded since December 2013» Emphasis remains on: Claims recovery Project execution Securing new work at acceptable risk / margin CLAIMS RESOLUTION REMAINS A PRIORITY Unaudited group results for the six months ended 31 December

32 30 AVENG MINING

33 31 Aveng Mining» Revenue decreased by 9% to R3.5bn; operating margin narrowed to 8.5% from 10.3% Revenue (Rbn) 3.8» Performance reflects the temporary decline in the order books for both open-cut and underground mining » Margin declines impacted by: Aveng Moolmans Cancellation of the Zambian contract 1H14 1H13 2H13 Net Operating Earnings Rm Aveng Mining Shafts & Underground Higher than anticipated establishment costs at the commencement of projects Increased costs at project in Chile PROJECT CANCELLATIONS IMPACT REVENUE 1H14 1H13 2H13 Unaudited group results for the six months ended 31 December

34 32 Aveng Mining: Order book 2 year order book (Rbn) Aveng Mining's revenue by commodity 9.5 Nickel Platinum Gold Uranium 26% 5% 19% Copper 18% Coal Iron ore and waste 5% 7% 15% 5% Manganese FY11 FY12 FY13 1H14 Aveng Mining's revenue by geography» Order book has increased by 18% since June 2013 due to a number of significant contract wins by Aveng Moolmans Botswana Ghana Namibia Mali 1% 7% 19% 1%» Aveng Moolmans accounts for 70% of the order book» 47% of work is currently outside SA» Gold contracts in Africa not renewed Guinea RSA Tanzania Chile 53% 15% 2% 2% GROWTH IN ORDER BOOK GAINS MOMENTUM Unaudited group results for the six months ended 31 December

35 33 Aveng Mining: Outlook»Opportunities despite a difficult market»pressure on mining companies to reduce mining costs, with projects being downscaled and delayed»lower revenue expected, despite increased order book»focus remains on cash flow returns and the allocation of capital REASONABLE PERFORMANCE IN A CHALLENGING ENVIRONMENT Unaudited group results for the six months ended 31 December

36 34 MANUFACTURING and PROCESSING

37 35 Manufacturing and Processing» Steel environment negatively impacted by lower demand from the construction sector, labour disruptions and a generally competitive environment Revenue Rm » Steeledale recovery remains on track» Strong revenue growth achieved by the Manufacturing cluster» Improvement in margins achieved» Strong demand for concrete products bolstered Infraset s performance 1H14 1H13 2H13 Net Operating Earnings Rm H14 1H13 2H13 STEEL REVENUE DOWN, STRONG PERFORMANCE FROM INFRASET Unaudited group results for the six months ended 31 December

38 36 Manufacturing and Processing - Revenue H Rm H Rm Change H Rm Total Aveng Steel (3%) Aveng Manufacturing Infraset % 458 Aveng Manufacturing Duraset % 288 Aveng Manufacturing Dynamic Fluid Control % 215 Aveng Manufacturing Lennings Rail Services (1%) 423 Other & Eliminations % 233 Total Aveng Manufacturing % Total % Total Revenue includes internally generated revenue. Revenue has been reconciled to external revenue as part of Appendix A 2. Includes Aveng Manufacturing Automation & Control Solutions (A&CS) and Aveng Manufacturing Facades. IMPROVED REVENUE EXPECTED IN 2H14 Unaudited group results for the six months ended 31 December

39 37 Manufacturing and Processing - Outlook» Improvement expected on the back of steel price and volume increases» Manufacturing performance expected to remain strong on the back of: Rail related projects for Aveng Manufacturing Lennings Sleeper sales by Aveng Manufacturing Infraset in Africa Continued buoyant demand for concrete products» Commissioning of the Tete factory in Mozambique» Improved performance at Aveng Steel Fabrications and Aveng Steeledale» Operational synergies still to be realised SYNERGIES AND OFFSHORE OPPORTUNITIES ARE REALISED Unaudited group results for the six months ended 31 December

40 38 Unaudited group results for the six months ended 31 December

41 39 Two-year order book (Rbn) Year on year decrease of 8%; Six month decrease of 2% Jun 2008 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Jun 2011 Dec 2011 Jun 2012 Dec 2012 Jun 2013 Dec 2013 Confirmed two-year order book includes only that portion of revenue accruing to the Aveng Group Unaudited group results for the six months ended 31 December

42 40 Two-year group work on hand: Sector and regional splits Two-year order book by sector Two-year order book by region 53% 50% 31% 37% 10% 2% 4% Power Mining Water Oil & Gas General Infrastructure SA & Rand Monetary Area 8% 4% Africa SE Asia Australia & Pacific Total two-year order book R36.7bn at December % Middle East Unaudited group results for the six months ended 31 December

43 41 Aveng Grinaker-LTA - Key issues and report back Key issues» Stabilise and position for profitability» Improve management capacity and stability Report back» Strengthening of management at Aveng Grinaker-LTA» Improved project execution and commercial focus» Continued focus on fixed cost optimisation» Still targeting break-even position in FY15 Unaudited group results for the six months ended 31 December

44 42 Aveng Steel - Key issues and report back Key issues» Consolidate the steel assets and extract operational synergies» Return Steeledale and Aveng Steel Fabrication to profitability» Align fixed costs to business requirements Report back» Consolidation of Aveng Trident Steel, Aveng Steeledale and Aveng Steel Fabrications completed» Successful turnaround of underperforming steel businesses» Realising fixed cost reduction and synergies Unaudited group results for the six months ended 31 December

45 43 McConnell Dowell - Key issues and report back Key issues» Focus on problematic contracts and the resolution of outstanding claims» Diversify into non commodity-related infrastructure Report back» Problematic contracts continue» Growth in non-mining order book Mining - Key issues and report back Key issues» Order book replenishment Report back» Order book increase achieved Unaudited group results for the six months ended 31 December

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47 45 Outlook and Prospects» Improvement in Aveng Grinaker-LTA to continue» Commercial uncertainty around the QCLNG and the Gold Coast Rapid Transit projects remains» Positive outlook for Manufacturing and Processing» Revenue pressure within Mining despite improved order book» Focus on returns and cash generation Unaudited group results for the six months ended 31 December

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49 47 Unaudited group results for the six months ended 31 December

50 48 Appendix A: Reconciliation of Revenue External Revenue 1H14 (Rm) 1H13 (Rm) 2H13 (Rm) Internal Revenue Gross Revenue External Revenue Internal Revenue Gross Revenue External Revenue Internal Revenue Gross Revenue South Africa and rest of Africa Australasia and Asia Total Construction and Engineering Mining Manufacturing and Processing Administration and Elimination 132 (294) (162) 2 (265) (263) 133 (363) (230) 1 Total Restated as Concessions is now included in Administration Unaudited group results for the six months ended 31 December

51 49 Appendix B: Operating earnings before other gains and losses reconciled to Net Operating Earnings 1H14 Rm 1H13 Rm Change 2H13 Rm Operating earnings before other gains and losses (18%) 111 Other gains and losses % (2) Operating earnings after other gain and losses (18%) 109 Share of earnings / (loss) from equityaccounted investments 44 (16) 4 Earnings from available-for-sale investments (19%) (1) Net Operating Earnings (8%) 112 Unaudited group results for the six months ended 31 December

52 50 Appendix C: Selected major contract awards since 1 January 2014 Contract/Project Location Client Start date Duration Months McConnell Dowell Adco Pipeline Abu Dhabi Abu Dhabi Company for Onshore Oil Operations (ADCO) Jan mths APA VNIE Pipeline Australia (Vic) APA Group Jan-14 5 mths Hay Point ME&I Australia (Qld) BM Alliance Coal Operations P/L Jan mths Web-Dock Australia (Vic) Port of Melbourne Authority Jan mths Route 14 - Airport Road and Intersection Improvement Am Samoa ASG Department of Public Works Jan mths Aveng Moolmans Phoenix Tati Nickel Botswana Norilisk Jan mths Unaudited group results for the six months ended 31 December

53 51 Disclaimer This presentation contains forward-looking statements about the Company s operations and financial conditions. They are based on Aveng Limited s best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and contingencies many of which are beyond the control of the Company. Unanticipated events will occur and actual future events may differ materially from current expectations due to new business opportunities, changes in priorities by the Company or its joint operations as well as other factors. Any of these factors may materially affect the company s future business activities and its ongoing financial results. Unaudited group results for the six months ended 31 December

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55 Unaudited Group results for the six months ended 31 December 2013

56 Diverse operational capability: Group Structure The Aveng Group comprises the following operating groups: * * *Formerly consolidated as Aveng E + PC. Operating group structure as at 1 July 2013

57 Key features 1 Revenue improved by 11% to R27,6 billion (2012: R24,9 billion) 18% increase in the Mining two-year order book from June 2013 Net operating earnings down by 8% to R503 million (2012: R544 million) Headline earnings per share decreased by 21% to 82,1 cents (2012: 104,5 cents) 22% increase in the Construction and Engineering: South Africa and Rest of Africa twoyear order book from June 2013 Net cash position stable at R2,4 billion Net finance expenses R83 million (2012: net finance earnings R12 million)

58 2 Interim condensed consolidated statement of financial position as at 31 December December 31 December 30 June * 2013 (Unaudited) (Unaudited) (Audited) Note Rm Rm Rm ASSETS Non-current assets Investment property Property, plant and equipment Goodwill arising on consolidation Intangible assets** Equity-accounted investments Available-for-sale investments Deferred tax assets Current assets Inventories Trade and other receivables Amounts due from contract customers Cash and bank balances TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital and share premium Other reserves Retained earnings Equity attributable to equity-holders of the parent Non-controlling interests Liabilities Non-current liabilities Borrowings and other liabilities Deferred tax liabilities Provisions Current liabilities Borrowings and other liabilities Taxation payable Trade and other payables Provisions Amounts due to contract customers Bank overdrafts TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES * Comparatives have been amended, as detailed in the Change in disclosure note, refer to note 3. **Includes computer software and intangible assets with indefinite useful lives.

59 Interim condensed consolidated statement of comprehensive earnings for the six months ended 31 December Six months Six months Year ended ended ended 31 December 31 December 30 June * % 2013 (Unaudited) (Unaudited) change (Audited) Note Rm Rm Rm Revenue Cost of sales 1 (25 681) (22 852) 12 (48 233) Gross earnings (8) Operating expenses 2 (1 551) (1 619) (4) (2 844) Operating earnings before other gains and losses (18) 627 Other gains and losses Operating earnings after other gains and losses (18) 627 Earnings from available-for-sale investments (19) 41 Share of earnings / (losses) from equity-accounted investments 44 (16) (12) Net operating earnings (8) 656 Finance earnings (14) 132 Finance and transaction expenses (140) (54) 159 (162) Earnings before taxation (24) 626 Taxation 5 (113) (159) (29) (167) EARNINGS FOR THE PERIOD (23) 459 Items that may be subsequently recycled to earnings: Exchange differences on translating foreign operations Movement in insurance and other reserves 1 ** (2) Other comprehensive earnings for the period Total comprehensive earnings for the period (11) 653 * Comparatives have been amended, as detailed in the Change in disclosure note, refer to note 3. ** Amounts less than R1 million. 1 Cost of sales includes depreciation of R508 million (2012: R602 million). 2 Operating expenses includes depreciation of R56 million (2012: R60 million) and amortisation of R20 million (2012: R24 million). The total depreciation, amortisation and impairment expense included in the statement of comprehensive earnings amounts to R584 million (2012: R686 million).

60 4 Interim condensed consolidated statement of comprehensive earnings for the six months ended 31 December 2013 (continued) Earnings for the period attributable to: Equity-holders of the parent (22) 466 Non-controlling interests (1) 3 (7) (23) 459 Other comprehensive earnings for the period attributable to: Equity-holders of the parent Non-controlling interests (3) Total comprehensive earnings for the period attributable to: Equity-holders of the parent (11) 659 Non-controlling interests (1) * (6) (11) 653 Determination of headline earnings for the period: Earnings for the period attributable to equity-holders of the parent (22) 466 Adjusted for (net of tax): Profit on sale of property, plant and equipment (1) (2) (50) (1) Impairment of property, plant and equipment 1 Headline earnings (22) 466 Results per share (cents) Earnings 82,4 105,0 (22) 124,6 Headline earnings 82,1 104,5 (21) 124,6 Diluted earnings 76,6 98,0 (22) 115,9 Diluted headline earnings 76,3 97,5 (22) 115,9 Dividend Number of shares (millions) In issue 389,8 389,8 389,8 Weighted average 373,9 375,2 373,9 Diluted weighted average 402,1 402,1 402,1 *Amounts less than R1 million. Six months Six months Year ended ended ended 31 December 31 December 30 June % 2013 (Unaudited) (Unaudited) change (Audited) Rm Rm Rm

61 Interim condensed consolidated statement of cash flows for the six months ended 31 December Six months Six months Year ended ended ended 31 December 31 December 30 June * 2013 (Unaudited) (Unaudited) (Audited) Rm Rm Rm Cash retained from operating activities Cash retained from operations Depreciation and impairment Amortisation Non-cash items and other movements (455) Cash generated by operations Changes in working capital Increase in inventories (123) (158) (313) Increase in trade and other receivables and amounts due from contract customers (255) (1 191) (3 127) Increase in trade and other payables and amounts due to contract customers Cash generated by operating activities Finance earnings Finance and transaction expenses paid (140) (58) (164) Taxation paid (107) (302) (464) Cash inflow / (outflow) from operating activities (288) Investing activities Property, plant and equipment purchased expansion (271) (222) (459) replacement (320) (560) (925) Acquisition of investment property (71) Acquisition of intangible assets (58) (29) Changes in equity-accounted and available-for-sale investments (31) (2) (38) Proceeds from sale of property, plant and equipment 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 Cash outflow from investing activities (502) (717) (1 243) Operating free cash outflow (178) (521) (1 531) Financing activities with equity-holders Shares repurchased (47) Dividends paid (242) (242) Financing activities with debt holders Proceeds from borrowings (net of loans advanced) Net increase / (decrease) in cash and cash equivalents before foreign exchange movements on cash 859 (240) (1 217) Foreign exchange movements on cash Cash and cash equivalents at beginning of year** Cash and cash equivalents at end of year** Borrowings, excluding bank overdrafts Net cash position * Comparatives have been amended, due to the changes detailed in note 3. **Cash and cash equivalents is calculated by deducting Bank overdrafts from Cash and bank balances.

62 6 Notes to the interim condensed consolidated financial statements 1. Corporate information The interim condensed consolidated fi nancial statements of the Group for the six months ended 31 December 2013 ( interim results ) were authorised for issue in accordance with a resolution of the directors on 19 February 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 infl uenced by the nature and execution of the contracts currently in progress. Refer to the commentary on page 23 for a more detailed report on the performance of the different operating segments within the Group. 2. Basis of preparation and accounting policy The interim results have been prepared on the historical cost basis, except for certain fi nancial 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 Group s audited annual fi nancial statements as at 30 June The interim fi nancial statements have been prepared in accordance with IAS 34 Interim Financial Statements and the Listings Requirements of the JSE Limited. The accounting policies adopted are consistent with those of the previous year, except for the adoption of new and revised Standards and Interpretations that became effective during this reporting period. The external auditors have not reviewed the fi nancial results for the six months ended 31 December The interim results do not include all the information and disclosures required in the annual fi nancial statements, and should be read in conjunction with the Group s audited annual fi nancial statements as at 30 June The interim fi nancial results have been prepared under the supervision of the acting Group Financial Director, Mr HJ Verster.

63 Notes to the interim condensed consolidated financial statements (continued) 7 2. Basis of preparation and accounting policy (continued) 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 on or after 1 July Standards IFRS 7 Financial Instruments: Disclosure (Amendment) IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurements IAS 16 Property, Plant and Equipment (Improvement) IAS 19 Employee Benefi ts (Revised) IAS 27 Separate Financial Statements (Revised) IAS 28 Investment in Associates and Joint Ventures (Revised) IAS 34 Interim Reporting (Improvement) The adoption of these Standards and Interpretations did not have a material effect on the Group s interim results and related disclosures.

64 8 Notes to the interim condensed consolidated financial statements (continued) 2. Basis of preparation and accounting policy (continued) In addition, the following Standards and Interpretations have been issued but are not yet effective Standard Subject Effective date IFRS 9 Financial Instruments 1 January 2015 IFRS 10 Consolidated Financial Statements: Amendments for investment entities 1 January 2014 IFRS 12 Disclosure of Interests in Other Entities: Amendments for investment entities 1 January 2014 IAS 19 Employee Benefi ts (Amendment) 1 July 2014 IAS 27 Separate Financial Statements: Amendments for investment entities 1 January 2014 IAS 32 Financial Instruments: Presentation (Amendment) 1 January 2014 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, surveys of work performed and completion of a physical proportion of the contract work methods in accounting for its construction contracts. Use of these methods 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 and apply judgment on the contract progress and outstanding risks. 3. Change in disclosure Background As part of the Group s fi nancial reporting improvement initiatives, the structure, format and presentation of disclosures in the interim condensed consolidated fi nancial statements were reviewed. This resulted in the reallocation of certain comparative amounts as well as the introduction of certain changes in terminology. The initiative is an ongoing programme targeting the most appropriate disclosure and presentation practices, to best serve the interests of the Group s stakeholders. The resulting reallocations had no earnings or loss impact on the interim condensed consolidated fi nancial statements, and as such the reallocations are not regarded as having had a quantitatively nor qualitatively material effect on the information presented.

65 Notes to the interim condensed consolidated financial statements (continued) 9 3. Change in disclosure (continued) Reallocations affecting the 2012 comparatives: The reallocations for the 2012 comparative amounts are as follows: Interim condensed consolidated statement of financial position An amount of R77 million gross carrying amount and R67 million accumulated depreciation (net carrying amount R10 million), relating to computer software was reallocated from property, plant and equipment to intangible assets. Goodwill amounting to R1 400 million in 2012 was reallocated from Goodwill and other intangible assets to a separately disclosed line item, Goodwill arising on consolidation. Amounts due from contract customers of R9 258 million in 2012 was reallocated from Trade and other receivables to a separately disclosed line item, Amounts due from contract customers. An amount of R3 665 million in 2012 was reallocated from Trade and other payables to a separately disclosed line item, Amounts due to contract customers. The 31 December 2012 comparative information was not recorded to the same granular level as was recorded for the six months ended 31 December 2013 and for the year ended 30 June 2013, and therefore may not be consistent with management s current categorisation practice, which in turn is based upon judgemental interpretations on a contract-by-contract basis. The exclusion of the disclosure of this information, for the six months ended 31 December 2012, does not have a quantitatively nor qualitatively material effect on the Group s interim results. Other provisions of R234 million in 2012 were reallocated from Accruals (part of Trade and other payables) to the separately disclosed line item Provisions. Furthermore, the Provisions line item was reclassifi ed to refl ect the current and non-current portions of provisions raised. Interim condensed consolidated statement of comprehensive earnings The Group now includes the disclosure of Cost of sales and Gross earnings on the interim condensed consolidated statement of comprehensive earnings. This disclosure was not previously included in the interim report and resulted in the disclosure of R million relating to cost of sales and R2 135 million relating to gross earnings. Depreciation of R602 million directly attributable to cost of sales was previously disclosed as part of the Depreciation line item for This was reallocated to Cost of sales. Depreciation of R60 million previously disclosed as part of the Depreciation line item for This was reallocated to Operating expenses. Amortisation of R24 million previously disclosed as part of the Amortisation line item for This was reallocated to Operating expenses. Notes to the interim condensed financial statements The disclosure in the segment report, note 4, has been extensively expanded, including the disclosure of total revenue (being internal and external revenue) per operating segment and the separate disclosure of the elimination of internal revenue, resulting in total external revenue for the Group.

66 10 Notes to the interim condensed consolidated financial statements (continued) 3. Change in disclosure (continued) Terminology changes Statement of financial position New terminology used Retained earnings Borrowings and other liabilities Statement of comprehensive earnings New terminology used Earnings Finance earnings Finance and transaction expenses Statement of changes in equity New terminology used Retained earnings Earnings Statement of cash flows New terminology used Finance earnings Finance and transaction expenses Previously used terminology Distributable reserves Borrowings Previously used terminology Profi t/income Finance income Finance and transaction costs Previously used terminology Distributable reserves Profi t/income Previously used terminology Finance income Finance and transaction costs

67 Notes to the interim condensed consolidated financial statements (continued) 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 Group s 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 Group s 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 and Aveng Engineering. 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 and processing This operating segment comprises Aveng Manufacturing and Aveng Steel. 4. Administration and Eliminations This operating segment comprises concessions, 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.

68 12 Notes to the interim condensed consolidated financial statements (continued) 4. Segment information (continued) Construction and Engineering: Manu- Adminis- South Africa facturing tration December 2013 and the Rest Australasia and and Elimi- Rm of Africa* and Asia Mining Processing* nations Total External revenue Internal revenue (294) Gross revenue (162) Operating (loss) / earnings before other gains and losses (336) Other gains and losses 3 3 Operating (loss) / earnings after other gains and losses (336) Earnings from available-forsale investments Share of earnings / (losses) from equity-accounted investments Net operating (loss) / earnings (334) Net finance (expense) / earnings (finance earnings less finance and transaction expenses) (12) (34) (15) 2 (24) (83) (Loss) / earnings before taxation (346) Taxation 102 (45) (95) (52) (23) (113) (Loss) / earnings for the period (244) Investments** Segment assets (note 1) Segment liabilities (note 2) Capital expenditure*** Depreciation and impairment Amortisation * Aveng Steel Fabrication ( ASF ), Aveng Manufacturing Automation & Control Solutions ( A&CS ) and Aveng Manufacturing Facades business units are now reported under the Manufacturing and Processing segment, compared to the Construction and Engineering: South Africa and Rest of Africa segment in the prior year. Comparatives have been adjusted. ** Consists of equity-accounted investments and available-for-sale investments. *** Segment capital expenditure includes intangible asset expenditure of R58 million.

69 Notes to the interim condensed consolidated financial statements (continued) Segment information (continued) Construction and Engineering: Manu- Adminis- South Africa facturing tration December 2012 (Unaudited) and the Rest Australasia and and Elimi- Rm of Africa* and Asia Mining Processing* nations** Total External revenue Internal revenue (265) Gross revenue (263) Operating (loss) / earnings before other gains and losses (40) (105) 516 Other gains and losses (14) 16 2 Operating (loss) / earnings after other gains and losses (54) (89) 518 Earnings from available-forsale investments Share of earnings / (losses) from equity-accounted investments (17) 1 (16) Net operating (loss) / earnings (70) (47) 544 Net finance earnings / (expenses) (finance earnings less finance and transaction expenses) 12 (2) (12) (Loss) / earnings before taxation (58) (41) 556 Taxation 17 (53) (121) (22) 20 (159) (Loss) / earnings for the period (41) (21) 397 Investments*** Segment assets (note 1) Segment liabilities (note 2) Capital expenditure Depreciation and impairment Amortisation * Aveng Steel Fabrication ( ASF ), Aveng Manufacturing Automation & Control Solutions ( A&CS ) and Aveng Manufacturing Facades business units are now reported under the Manufacturing and Processing segment, compared to the Construction and Engineering: South Africa and Rest of Africa segment in the prior year. Comparatives have been adjusted. ** Comparatives have been adjusted as concessions is reported under the Administration and Eliminations operating segment, compared to the Construction and Engineering: South Africa and Rest of Africa segment in the 2012 year. *** Consists of equity-accounted investments and available-for-sale investments.

70 14 Notes to the interim condensed consolidated financial statements (continued) 4. Segment information (continued) Construction and Engineering: Manu- Adminis- South Africa facturing tration June 2013 (Audited) and the Rest Australasia and and Elimi- Rm of Africa* and Asia Mining Processing* nations Total External revenue Internal revenue (628) Gross revenue (493) Operating (loss) / earnings before other gains and losses (895) (64) 627 Other gains and losses Operating (loss) / earnings after other gains and losses (895) (64) 627 Earnings from available-forsale investments Share of earnings / (losses) from equity-accounted investments (1) (5) 2 (8) (12) Net operating (loss) / earnings (896) (31) 656 Net finance earnings / (expense) (finance earnings less finance and transaction expenses) 31 (23) (31) 2 (9) (30) (Loss) / earnings before taxation (865) (40) 626 Taxation 346 (157) (236) (79) (41) (167) (Loss) / earnings for the period (519) (81) 459 Investments** Segment assets (note 1) Segment liabilities (note 2) Capital expenditure*** Depreciation and impairment Amortisation * Aveng Steel Fabrication ( ASF ), Aveng Manufacturing Automation & Control Solutions ( A&CS ) and Aveng Manufacturing Facades business units are now reported under the Manufacturing and Processing segment, compared to the Construction and Engineering: South Africa and Rest of Africa segment in the prior year. Comparatives have been adjusted. ** Consists of equity-accounted investments and available-for-sale investments. *** Segment capital expenditure includes intangible asset expenditure of R29 million.

71 Notes to the interim condensed consolidated financial statements (continued) Segment information (continued) 31 December 31 December 30 June (Unaudited) (Unaudited) (Audited) Rm Rm Rm Note 1 Reconciliation of segment assets Total assets of the Group Goodwill arising on consolidation (1 443) (1 400) (1 425) Intangible assets (222) (163) (184) Equity-accounted investments (219) (91) (144) Available-for-sale investments (72) (147) (70) Deferred tax assets (1 379) (1 011) (1 347) Cash and bank balances (5 619) (5 263) (4 551) Segment assets Note 2 Reconciliation of segment liabilities Total liabilities of the Group Borrowings and other liabilities (2 568) (1 450) (1 531) Deferred tax liabilities (385) (255) (319) Taxation payable (181) (161) (210) Bank overdrafts (685) (508) (600) Segment liabilities The Group operates in five principal geographical areas: REVENUE Six months Six months Year ended ended ended 31 December 31 December 30 June (Unaudited) (Unaudited) (Audited) Rm Rm Rm South Africa Rest of Africa including Mauritius Australasia and the Pacific Islands* Southeast Asia* Middle East and other regions * Included in the Australasia and the Pacific Islands and Southeast Asia geographical segments is revenue derived by various operating segments.

72 16 Notes to the interim condensed consolidated financial statements (continued) 4. Segment information (continued) SEGMENT ASSETS 31 December 31 December 30 June (Unaudited) (Unaudited) (Audited) Rm Rm Rm South Africa Rest of Africa including Mauritius Australasia and the Pacific Islands Southeast Asia Middle East and other regions CAPITAL EXPENDITURE 31 December 31 December 30 June (Unaudited) (Unaudited) (Audited) Rm Rm Rm South Africa Rest of Africa including Mauritius Australasia and the Pacific Islands Southeast Asia Middle East and other regions

73 Notes to the interim condensed consolidated financial statements (continued) Income tax Six months Six months Year ended ended ended 31 December 31 December 30 June (Unaudited) (Unaudited) (Audited) Rm Rm Rm Current income tax charge Deferred tax 34 (57) (265) Income tax expense Effective tax rate 26,9% 28,6% 26,7% 6. Cash and cash equivalents 31 December 31 December 30 June (Unaudited) (Unaudited) (Audited) Rm Rm Rm Cash and bank balances Less: Bank overdrafts (685) (508) (600) Cash and cash equivalents Cash and bank balances at the end of the period include the following cash and bank balances that are restricted from immediate use: Group share of cash held by joint operations Guardrisk Life Fund Property, plant and equipment, Investment property and Intangible assets During the six months ended 31 December 2013, the Group acquired assets at a cost of R649 million (December 2012: R782 million).

74 18 Notes to the interim condensed consolidated financial statements (continued) 8. Amounts due from / (to) contract customers Six months Year ended ended 31 December 30 June (Unaudited) (Audited) Rm Rm Uncertified claims and variations (Underclaims) Progress billings received (Overclaims) 2 (1 852) (1 690) Uncertified claims and variations less progress billings received Contract receivables Retention receivables Amounts received in advance 5 (500) (677) Net amounts due from contract customers Disclosed on the statement of financial position as follows: Uncertified claims and variations Contract and retention receivables Amounts due from customers (current assets) Progress billings received (1 852) (1 690) Amounts received in advance (500) (677) Amounts due to customers (current liability) (2 352) (2 367) Net amounts due from contract customers Revenue not yet certified recognised based on percentage of completion/measurement and agreed variations. 2 Progress billings are amounts billed for work performed on a contract irrespective of payment from the customer. 3 Certified revenue invoiced. 4 Retentions are amounts of progress billings that are not paid until the payment conditions specified in the contracts are fulfilled or until defects have been rectified. 5 Advances are amounts received from the customer before the related work is performed.

75 Notes to the interim condensed consolidated financial statements (continued) Provisions IFRS 2 share-based payment Employee Leave pay Other obligation entitlements benefits provisions Total Balance as at 30 June Reallocated/recognised Utilised (297) (53) (350) Currency adjustment Balance as at 31 December Reallocated/recognised Utilised (17) (304) (321) Currency adjustment 27 (26) 1 Balance as at 30 June Reallocated/recognised 16 (25) Utilised (10) (289) (130) (327) (756) Currency adjustment Interest accretion Balance as at 31 December December 31 December 30 June Disclosed as: Non-current provisions Current provisions Related party transactions During the interim period Aveng Limited 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 There were no related party transactions with directors or entities in which the directors have a material interest. 11. Events after reporting date Mr HJ Verster was appointed as Group Chief Executive Officer (CEO) effective 11 February Mr Verster has not relinquished his statutory duties in terms of Section 3.84(g) of the JSE Listings Requirements and will continue in his capacity as acting Financial Director until a new Financial Director is employed. The directors are not aware of any matter or circumstance arising since the end of the reporting period not otherwise dealt with in the Group s interim condensed results, which significantly affects the financial position of the Group at 31 December 2013 or the results of its operations or cash flows for the period then ended. 12. Major acquisitions and disposals There have been no major acquisitions or disposals by the Group during the interim reporting period.

76 20 Interim condensed consolidated statement of changes in equity for the six months ended 31 December 2013 Foreign Total currency Share Share issued translation capital premium capital reserve Rm Rm Rm Rm Six months ended 31 December 2012 (Unaudited) Balance at 1 July Earnings for the period Other comprehensive earnings for the period 164 Total comprehensive earnings for the period 164 Dividends Total contributions and distributions recognised directly in equity Balance at 31 December Year ended 30 June 2013 (Audited) Balance at 1 July Earnings for the period Other comprehensive earnings for the period 195 Total comprehensive earnings for the period 195 Movement in treasury shares (47) (47) Equity settled share-based payment expense Transfer between reserves (14) Business combination acquisition of subsidiary Dividends Total contributions and distributions recognised directly in equity (47) (47) (14) Balance at 30 June Six months ended 31 December 2013 (Unaudited) Balance at 1 July Earnings for the period Other comprehensive earnings for the period 192 Total comprehensive earnings for the period 192 Acquisition of non-controlling interests Equity-settled share-based payment Total contributions and distributions recognised directly in equity Balance at 31 December *Amount less than R1 million

77 21 Total Equity-settled attributable share-based to equity- Nonpayment Insurance Total other Retained holders of controlling Total reserve reserves reserves earnings the parent interests equity Rm Rm Rm Rm Rm Rm Rm * (241) (241) (241) (241) (241) (241) (7) 459 (2) (2) (6) 653 (47) (47) (14) (241) (241) (1) (242) 21 7 (227) (267) 8 (259) (1) (1) 500 (1) (1) (1)

78 22 Other Group information for the six months ended 31 December 2013 Six months Six months Year ended ended ended 31 December 31 December 30 June Rm Rm Rm Capital expenditure Expansion Replacement Acquisition of investment property 71 Acquisition of intangible assets Commitment for future capital expenditure: Contracted Authorised, but not contracted for Net asset value (Rands per share) 35,39 33,91 34,10

79 COMMENTARY 23 OVERVIEW Salient features Revenue improved by 11% to R27,6 billion (2012: R24,9 billion). Net operating earnings down by 8% to R503 million (2012: R544 million). Net fi nancing expenses of R83 million against net fi nance earnings of R12 million in the comparative period. Headline earnings per share down 21% to 82,1 cents against the comparative period s 104,5 cents, a substantial improvement against the immediate preceding six months ended 30 June Mining and Construction and Engineering: South Africa and Rest of Africa operating segments order books increased by 18% and 22% respectively from June Net cash position remained stable at R2,4 billion compared to June Safety The Group remains fully committed to improving its safety culture by driving the safety vision, Home without harm, Everyone, Everyday across all our operations. Pleasingly, the All Injury Frequency Rate improved to 3,9 compared to 4,5 reported at 30 June Regrettably, the Group suffered two fatalities during the interim period. This remains unacceptable as Aveng strives towards fatality free operations. The Aveng Board and Management extend their sincere condolences to the families of our deceased employees. Operating environment The markets in which the Group operates continue to be challenging. There has been no material improvement in infrastructure spending in South Africa and Australia and this was aggravated by the adverse impact of labour disruptions in South Africa. Construction and Engineering: Australasia and Asia continues to compete well despite tough market conditions. Opportunities are being pursued in the transport, oil and gas, and marine sectors which have already resulted in successful contract awards in Australia and Singapore. The Queensland Curtis Liquefi ed Natural Gas ( QCLNG ) pipeline and facilities project in Australia, in which McConnell Dowell is a 50% joint venture partner, achieved substantial completion on 30 November The commercial claims resolution process remains challenging as described in the SENS announcement dated 16 January The Construction and Engineering: South Africa and Rest of Africa segment remains constrained by the ongoing delays in new public infrastructure projects. The Group has partly mitigated this by pursuing opportunities in the private sector. This has led to some signifi cant project awards in the interim period and has the potential for additional opportunities. Whilst the project pipeline is showing improvement, the operating results of businesses within this region remain constrained by labour disruptions, low margin major contracts and the high level of fi xed overhead expenses. Aveng Group is taking steps to reduce this impact through initiatives such as the introduction of a strengthened management team, improved project execution and a renewed focus on commercial oversight. The benefi ts from these initiatives are starting to refl ect in the results of the business and savings are expected from the 2015 fi nancial year.

80 24 The general downturn in the mining and commodity markets is refl ected in the lower levels of activity at some of the larger contracts in the Mining segment. The 18% growth in the two-year order book refl ects the award of new contracts and the renewal of existing contracts and is expected to have a positive impact on performance in the next fi nancial year. Despite the impact of labour disruptions which affected production in the Manufacturing and Processing segment, this segment s performance improved mainly as a result of expansion into new regions. The Group s two-year order book remains robust at R36,7 billion at 31 December 2013 with increased activity in the Mining and Construction and Engineering: South Africa and Rest of Africa operating segments, tempered somewhat by a decline in the Construction and Engineering: Australasia and Asia operating segment due to the completion of a number of large projects. FINANCIAL PERFORMANCE Revenue increased by 11% to R27,6 billion over the comparative period as a result of signifi cant activity on a number of large projects within the Construction and Engineering: Australasia and Asia operating segment. This was aided by the strengthening of the Australian Dollar against the Rand by 6%. The direct cost of labour disruptions on the Group s net operating earnings amounted to R140 million compared with R115 million in the comparative period, attributable as follows: Aveng Grinaker-LTA of R96 million (2012: R35 million); Manufacturing and Processing operating segment of R44 million (2012: R49 million); and The Mining operating segment was not affected by labour disruptions in the period under review (2012: R31 million). Net operating earnings of the Group decreased by 8% to R503 million, which was mainly attributable to a loss in Aveng Grinaker-LTA and a weaker performance by the Mining operating segment due to the cancellation of a contract in Zambia. The Manufacturing and Processing operating segment achieved signifi cant growth driven by increased volumes mainly due to the following factors: increased sleeper sales into new regions such as Mozambique and Zambia; new product lines within Duraset; and tile and paving sales increases due to low cost housing developments. Net fi nancing expenses were R83 million compared with net fi nance earnings of R12 million in the comparative period. This was mainly due to a higher borrowings position of R2,6 billion compared to R1,5 billion at December 2012 secured to improve the liquidity position of the Group and funding of working capital primarily on the large Queensland Curtis Liquefi ed Natural Gas and Gold Coast Rapid Transit projects in Australia. Earnings from equity-accounted investments increased to R44 million from a loss of R16 million due to earnings from McConnell Dowell s Middle East and Asian investments.

81 25 Earnings per share ( EPS ) of 82,4 cents and headline earnings per share ( HEPS ) of 82,1 cents decreased by 22% and 21% respectively (2012: EPS 105 cents and HEPS 104,5 cents per share). Given the operating environment, the Group was prudent with capital expenditure over the period. Accordingly, this reduced by 17% to R649 million of which R329 million related to expansion and R320 million to replacement outlay. The majority of the amount was spent as follows: R151 million in support of new projects at McConnell Dowell; R95 million relating to fl eet expansion at Aveng Moolmans; R87 million relating to fl eet replacement at Aveng Moolmans; R76 million at Aveng Steel comprising R61 million for new production facilities and R15 million for the implementation of the new ERP system; R60 million spent by Aveng Properties on the Kathu housing project for Aveng Moolmans employees; R55 million as part of the completion of the Infraset concrete pipe, culverts and sleeper factory in Tete, Mozambique; R39 million at Aveng Grinaker-LTA, comprising R17 million in plant replacement and R22 million for new plant for the Mozambique operations; and R20 million relating to the implementation of a centralised payroll system. Amounts due from contract customers remained largely fl at compared with June 2013, consisting mainly of work-in-progress and receivables within McConnell Dowell, Aveng Grinaker-LTA and Aveng Mining. On a comparative period basis, this amount remains high due to the signifi cant activity on the major projects within McConnell Dowell. Amounts due to contract customers have remained stable compared to June Progress billings constitute the majority of this balance, with McConnell Dowell contributing R1 billion. Included in other payables is an advance payment received from a customer within the Construction and Engineering: Australasia and Asia operating segment. The terms attaching to this advance payment do not permit its offset against project related costs. Operating free cash outfl ow of R178 million for the period under review was reported. This is compared with an outfl ow of R521 million for the comparative period and an outfl ow of R1 010 million for the immediate preceding six months ended 30 June This positive movement is mainly attributable to: optimisation of planned capital expenditure; improved receivable recoveries at Aveng Grinaker-LTA, McConnell Dowell and Aveng Steeledale; and success fees earned on the Gouda renewable energy project. The Group s net cash position remained stable at R2,4 billion, reversing the declining trend experienced in December 2012 and June The stable cash position was mainly a result of increased receivable recoveries during the reporting period, most notably at Aveng Grinaker-LTA, McConnell Dowell and Aveng Steeledale.

82 26 OPERATING REVIEW Construction and Engineering: Australasia and Asia This operating segment comprises McConnell Dowell Construction, Tunnelling, Electrix and Pipeline business units. Revenue increased by 17% to R14,9 billion (11% increase in Australian Dollar terms amounting to AUD1,6 billion) against the comparative period. This is refl ective of high activity on a number of large projects such as the QCLNG pipeline, Hay Point Berth ( Hay Point ), Australia Pacifi c Liquid Natural Gas Pipeline ( APLNG ) and Gold Coast Rapid Transit ( GCRT ). Performance in Rand terms was supported by a strong Australian Dollar. Net operating earnings decreased by 2% against the comparative period, having been impacted by continued uncertainty on the QCLNG project and the execution challenges experienced on the GCRT project. The Australian Construction business unit s performance is refl ective of the increased activity on major projects such as GCRT and Hay Point reporting revenue of R5,8 billion. The GCRT project, which involves the design, construction and delivery of a 13-kilometer light rail corridor along Australia s Gold Coast, is the fi rst of its kind in the State of Queensland. The project encountered access, services and weather-related delays during the fi nal quarter of the 2013 fi nancial year. However, the project is still on-track for completion by June The commercial claims on this project are signifi cant and complex and management is working on resolving these in the shortest possible timeframe. McConnell Dowell continues to work collaboratively with the EPCM (engineer, procure, construct and manage) contractor to complete the Hay Point project which was converted in the 2013 year to a cost plus basis contract. Inclement weather experienced during the interim period resulted in some delays; however the project is expected to be completed by the end of the fi nancial year. Overseas construction reported a marginal increase in revenue which is refl ective of competitive markets in South East Asia and the Middle East. Growth opportunities are being pursued in the transport, power and marine sector. The Vale Jetty in Malaysia was substantially completed on schedule in September The Pipelines business unit maintained strong growth, reporting revenue growth of 39% to R5 billion, as the large Liquefi ed Natural Gas (LNG) projects in Queensland progress toward completion. The APLNG (90% complete) and the Gladstone Liquefi ed Natural Gas Pipeline (70% complete) projects are progressing according to schedule and are expected to be completed by the end of the fi nancial year. The QCLNG project is substantially complete, with the fi rst gas transported in December Segment profi tability, however, continues to be impacted by the QCLNG project. Although the QCLNG joint venture met the project completion milestones successfully and the project achieved substantial completion on 30 November 2013, the commercial claims process remains challenging. The second part of the commercial claims arbitration is being prepared for submission to the arbitration board. The QCLNG joint venture was unsuccessful in the fi rst part of the commercial claims arbitration process and submitted its leave to appeal on 15 January 2014.

83 27 The Electrix business unit continued its good performance, reporting a 28% increase in revenue to R1,6 billion. Aveng Group anticipates a continuation of good results from the business into the second half of the fi nancial year due to the strong work in hand position of the division. The Tunnelling business unit is performing ahead of expectations, reporting revenue growth of 91%. This is a refl ection of high activity on the Waterview Project and the Beauty World Mass Rapid Transport Station project in Singapore. These projects are progressing well and are anticipated to be completed within schedule. Opportunities are being pursued in the infrastructure and transport sectors. The award of a signifi cant project in Singapore in September 2013 is an indication of growth in the transport sector. Construction and Engineering: South Africa and Rest of Africa This operating segment comprises the Aveng Grinaker-LTA and Aveng Engineering. This segment no longer includes Aveng Steel Fabrication, Aveng Manufacturing Facades and Aveng Manufacturing Automation & Control Solutions, effective 1 July Comparatives have been adjusted accordingly. Revenue increased by 11% to R4,2 billion, mainly due to commencement of major contracts at Aveng Grinaker-LTA and increased activity on the Sishen and Gouda renewable energy projects at Aveng Engineering. The operating segment reported a net operating loss of R334 million (R70 million loss in 1H 2013 and R826 million loss in 2H 2013) due to labour disruptions, execution of projects at lower margins and operational challenges on some major contracts experienced at Aveng Grinaker-LTA. This was partly offset by a marginal net operating earnings at Aveng Engineering as a result of cost optimisation strategies that were implemented. Aveng Grinaker-LTA Revenue increased by 10% to R3,8 billion. This increase was a result of major contracts that ramped up during the period under review. These include the Nacala rail contract in Mozambique and the Majuba Rail contract, contributing R352 million and R203 million respectively to revenue. The net operating loss emanated from: current projects executed at lower margins; labour disruptions; operational challenges on some major contracts; and high level of fi xed overhead costs relative to margins. Projects in the Lephalale area were impacted by labour disruptions, which negatively affected production, resulting in project delays. Despite the aforementioned labour disruptions and challenges in gaining access to work areas, focus continues on accelerating progress on the Medupi Power Station project. The Mokolo Crocodile pipeline project achieved good execution progress during the interim period, with the majority of the mainline pipes delivered and installed. In total 10km of pipe was installed between October and December 2013, a 100% increase on the pipe production for the life of the project to date. Currently 23km of pipe has been installed out of a total 43km. This major milestone means that the project is on schedule to complete the pipe installation by May 2014.

84 28 The Majuba Rail project was adversely affected by inclement weather and labour disruptions during the interim period. A revised programme was accepted by the customer and the project is on track for completion by August The Nacala contract in Mozambique is behind schedule largely due to delays experienced in clearing plant through customs and transportation of staff to site. Project completion is expected in August The following initiatives have been implemented to improve the performance of Aveng Grinaker-LTA: the strengthening of the new management team with strong experience within the construction industry, including a new Managing Director and experienced project and commercial managers; operating cost reduction; improved project execution to ensure projects achieve the required margin by: accelerating work programmes for critical areas that have impending milestones restructuring project teams to re-energise focus and increase production capacity on site formalising the claims strategy to achieve fi nalisation of current claims mitigating levying of delay damages a re-focus of Aveng Grinaker-LTA to a discipline-led business which will deliver its operations through four primary business units namely: Aveng Grinaker-LTA Civil Engineering, Aveng Grinaker-LTA M&E, Aveng Grinaker-LTA Building and Aveng Grinaker-LTA Coastal. emphasis has been placed on the reduction of operating expenses; although the impact for the 2014 year will be insignifi cant, savings will start refl ecting from 2015 onwards. Aveng Engineering This operating group consists of the previous businesses of Aveng E+PC and Aveng Water. The operating group has now been restructured to service specific requirements within the Minerals, Water and Power industries. This operating group includes the construction component of the Renewable Energy business which commenced operation during the second half of the 2013 financial year. Management of the Renewable Energy projects won by the Group under the Department of Energy Renewable Energy Feed-in-Tariff (REFIT) programme are included under the Power division. The revenue of Aveng Engineering increased by 24% to R402 million against the comparative period, mainly due to the increased activity on the Sishen and Gouda renewable energy projects. Lack of new work and delays experienced on the emalahleni Phase 2 Expansion Project still continues to negatively impact the Water division s revenue. Cost optimisation strategies have been implemented within the Aveng Engineering operating group which have resulted in a net operating earnings of R2 million compared to a loss of R19 million in the comparative period. Construction on the Gouda and Sishen projects were approximately 12% complete as of December 2013, with Gouda expected to be complete by May 2015 and Sishen by December Progress continues steadily on both projects.

85 29 Mining This operating segment comprises Aveng Moolmans and Aveng Mining Shafts & Underground. The segment reported a 9% decrease in revenue to R3,5 billion and a decline in net operating earnings of 24% to R295 million compared to the comparative period. This downturn in performance is primarily attributable to the general downturn in the mining and commodity market. Aveng Moolmans, although not reaching the levels of the comparative period, continued to deliver strong results. The reduction in earnings is attributable to lower revenue due to the cancellation of the contract in Zambia. Post 31 December 2013 it was announced that the Iduapriem contract in Ghana and the Star and Comet pit contract in Tanzania for AngloGold Ashanti will not be renewed, impacting negatively on the forecasted earnings for the second half of the fi nancial year. Aveng Moolmans was however successful in concluding one new project in South Africa and the extension of two existing contracts in southern Africa, which increased the two-year order book by 8%. Available fl eet will be utilised for the new and extended projects. Aveng Mining Shafts & Underground performed below expectations due to margin slippage at some South African projects and problems experienced on a mining contract in Chile. Two deep level shaft sinking contracts in the coal and platinum market delivered less than expected margins due to unforeseen geotechnical issues, which have now largely been resolved as a result of the contracts entering main-sink phase. The improvement in the two-year order book for this operating group is expected to only realise benefi ts in the next fi nancial year. Manufacturing and Processing This operating segment comprises Aveng Manufacturing and Aveng Steel, and now includes Aveng Steel Fabrication, Aveng Manufacturing Facades, and Aveng Manufacturing Automation & Control Solutions, effective 1 July Comparatives have been adjusted accordingly. Revenue increased by 6% to R5,3 billion and net operating earnings increased by 113% to R162 million from R76 million in the comparative period. Aveng Manufacturing The operating group consists of Aveng Manufacturing Facades, Aveng Manufacturing Duraset, Dynamic Fluid Control ( DFC ), Aveng Manufacturing Infraset, Aveng Manufacturing Automation & Control Solutions ( A&CS ), and Aveng Manufacturing Lennings Rail Services ( LRS ). This operating group no longer includes Steeledale, which now forms part of the Aveng Steel operating group, effective 1 July Comparatives have been adjusted accordingly. Revenue grew by 30% to R1,9 billion in relation to the comparative period, accompanied by a signifi cant increase in net operating earnings. The Facades division benefi ted from signifi cant projects such as the Sandton City s Atrium on 5th and the Pretoria Towers.

86 30 Revenue from DFC increased due to higher international sales volumes and was further boosted by the strengthening of the US Dollar against the Rand. New mining product lines within Duraset assisted in improving revenue. The division did not experience the level of labour disruptions in the platinum sector as in the previous year. The Infraset division performed particularly well due to increased sleeper sales into new regions, such as Mozambique and Zambia, as well as improved tile and paving sales into low cost housing developments. A&CS benefi ted from earlier than planned major shutdowns in the petrochemical industry. Revenue for LRS decreased due to the conclusion of the FMG Rail Construction project in Australia, the impact of which was partly mitigated by the commencement of the Nacala Section Two project. Aveng Steel The newly constituted operating group consists of Aveng Trident Steel, Aveng Steel Fabrication and Aveng Steeledale. All business units within the steel cluster were negatively impacted by reduced steel volumes due to labour disruptions in both the construction and automotive sectors during the interim period as sales volumes were adversely affected. This resulted in the operating group reporting a decline in revenue of 3% to R3,4 billion from R3,5 billion in the comparative period. Despite this the operating group benefi ted from the introduction of centralised steel procurement and inventory management. Labour impact was most acute at Aveng Trident Steel, which saw revenue for the period reduced by 5% against the comparative period. The lower sales volumes were partly mitigated by improved selling prices. Aveng Steeledale, which recorded a substantial loss in the previous fi nancial year, benefi tted from restructuring of activities, which have placed the business on a sound footing to return to profi tability in the second half of the fi nancial year. Aveng Steel Fabrication underwent a right-sizing process to align overheads to the current diminished activities within the structural steel sector. Additionally, the operating group exited from loss-making investments. The benefi ts of the aforementioned are expected to be seen in the second half of the fi nancial year. Administration Administration, which comprises concessions, corporate services, corporate-held investments including properties, and consolidation eliminations refl ected improved net operating earnings for the current period due to increased recovery of centralised corporate services offi ce costs.

87 31 The segment reported net operating earnings of R189 million compared to a net operating loss of R47 million in the comparative period. The improved performance is due to: R111 million net success fee earned on the Gouda renewable energy project which reached fi nancial close in July 2013; mark-to-market gains on hedging instruments; and a change in philosophy regarding the recovery of centralised administration costs to better refl ect usage of the support services. Two-year order book Increased activity in the Mining and Construction and Engineering: South Africa and Rest of Africa operating segments were experienced. However, a 15% decline in the Construction and Engineering: Australasia and Asia operating segment was reported due to subdued infrastructure markets. This resulted in a stable two-year order book of R36,7 billion reported for 31 December The substantial completion of major projects such as QCLNG and APLNG drove the decrease in the Construction and Engineering: Australasia and Asia operating segment s two-year order book. In Australian Dollar terms the order book decreased by 18% in December 2013 compared to 30 June The two-year order book was boosted in January 2014 with the award of projects totalling AUD 400 million, most notably the Melbourne Port Webb-dock project. The Mining operating segment s two-year order book increased by 18% to R7,1 billion at 31 December This increase is mainly attributable to contracts awarded in Namibia and Botswana in December 2013, which included the Langer Heinrich contract in Namibia and an extension of the Phoenix mine contract in Botswana. Lower revenue levels are expected despite the increasing two-year order book. The Construction and Engineering: South Africa and Rest of Africa operating segment s two-year order book increased by 22% to R8,5 billion from June 2013 refl ecting the award of some signifi cant projects during the interim period including the design and construction of the Strand Private Hospital, the construction of the Sasol Head Offi ce and the Mall of the South in South Africa. OUTLOOK AND PROSPECTS The Group will be seeking to optimise its current business portfolio focusing on cash management and fi nancial returns whilst signifi cantly reviewing its cost structures, operational effi ciency as well as improving project delivery. The impact of changes in foreign currency and possible future labour disruptions on the results of the Group cannot be quantifi ed. Key issues which will impact on the second half results are: the QCLNG and GCRT projects will remain a material fi nancial risk to both profi t and cash fl ow through to completion of the GCRT project and the outstanding claim processes and will continue to receive intense focus; under the leadership of the new Managing Director, Aveng Grinaker-LTA will continue with its turnaround initiatives;

88 32 Aveng Manufacturing should benefi t from the commissioning of the manufacturing plant in Tete in Mozambique with a specifi c focus on concrete sleeper products; Aveng Steel is expected to benefi t from the strengthening of steel prices and improved sales volumes; For Aveng Mining: the Aveng Moolmans business unit will continue to manage its reduced activity and consequently revenue levels, whilst advancing preparations to ramp up its new contract awards that will be commissioned in the new fi nancial year; the Aveng Mining Shafts & Underground business unit will focus on recovering margins at the two deep level shaft sinking contracts as well as preparing for its recent contract awards that will be commissioned in the new fi nancial year; Aveng Engineering will focus on the execution of its Renewable Energy projects. The Group anticipates improved trading conditions in the second half of the year against its comparative period. By order of the Board AWB Band (Chairman) HJ Verster (Chief Executive Offi cer, and acting Group Financial Director) 19 February 2014 Morningside, Sandton

89 DIRECTORS AWB Band*# (Chairman), HJ Verster (Chief Executive Officer and acting Group Financial Director), JJA Mashaba (Group Human Resources Director), DG Robinson (Australian), PJ Erasmus*#, MA Hermanus*#, MJ Kilbride*#, RL Hogben*#, TM Mokgosi-Mwantembe*#, MI Seedat*#, PK Ward*#, EK Diack*#, KW Mzondeki*# (*non-executive) (#independent) COMPANY SECRETARY M Nana AVENG LIMITED ( Aveng, the Company, the Group or Aveng Group ) (Incorporated in the Republic of South Africa) (Registration number: 1944/018119/06) ISIN: ZAE Share code: AEG REGISTERED OFFICE 204 Rivonia Road, Morningside, Sandton, 2057 PO Box 6062, Rivonia, 2128, South Africa Telephone Telefax REGISTRARS Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07) 70 Marshall Street, Johannesburg, 2001 PO Box 61051, Marshalltown, 2107, South Africa Telephone Telefax PO Box 61051, Marshalltown, 2107 SPONSOR J.P. Morgan Equities South Africa Proprietary Limited Registration number: 1995/011815/06 1 Fricker Road, cnr Hurlingham Road, Illovo, 2196, South Africa Telephone Telefax DISCLAIMER Certain Statements in this release that are neither reported financial results nor other historical information, are forward looking statements, including but not limited to, statements that are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives about the Company s operations and financial conditions. They are based on Aveng Limited s best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and contingencies many of which are beyond the control of the Company. Unanticipated events will occur and actual future events may differ materially from current expectations due to new business opportunities, changes in priorities by the Company or its joint operations as well as other factors. Any of these factors may materially affect the Company s future business activities and its ongoing results. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and Company plans and objectives to differ materially from those expressed or implied in the forward looking statements (or past results). BASTION GRAPHICS

90 REGISTERED OFFICE 204 Rivonia Road Morningside Sandton 2057 PO Box 6062 Rivonia 2128 South Africa Telephone Telefax