Aveng Limited · JSE:AEG
Aveng — H1 2015 Earnings Presentation
47 slides from Aveng's earnings presentation, February 2015
Slide 1: Unaudited Group results
2015 Unaudited Group results For the six months ended December 2014
Slide 2: Today's presentation
TODAY’S PRESENTATION Unaudited Group results for the six months ended 31 December 2014 2
Slide 3: Today's presentation
Today’s presentation THE WAY FINANCIAL OPERATIONAL OVERVIEW FORWARD & REVIEW REVIEW OUTLOOK Unaudited Group results for the six months ended 31 December 2014 3
Slide 4: Overview
OVERVIEW 4
Slide 5: Operating environment
Operating environment » Australasia and Asia • Market conditions remain difficult with competitive pressures • Lower commodity prices have resulted in declining resource-related opportunities • Good opportunities in social and transport-related infrastructure projects • Mixed activity levels in New
Slide 6: Salient features
Salient features » Revenue decreased by 14% to R23,9 billion (2013: R27,7 billion) » Net operating earnings declined by 19% to R413 million (2013: R510 million) » Headline earnings per share declined by 58% to 34,5 cents (2013: 82,1 cents) » Aveng Grinaker-LTA turnaround » QCLNG and Gold Coast claim
Slide 7: Safety performance
Safety performance » Further improvement in the All Injury Frequency Rate (AIFR) to 3,5 5,8 » Regrettably, two fatalities occurred at group 5,3 5,2 operations 4,7 » Safety achievements: 4,5 • M&E Sapref Durban - 7,1 million Lost Time All Injury Frequency Rate 3,8 Injury (LTI) free man-hours 3,5 • M&
Slide 8: Financial overview
FINANCIAL OVERVIEW IW in infrastructure
Slide 9: Financial review
Financial review H1 2015 H1 2014 H2 2014 Statement of Comprehensive Earnings Change Rm Rm 1 Rm Revenue 23 864 27 654 (14%) 25 305 Net operating earnings 413 5101 (19%) 289 Profit on sale of subsidiary / impairments 240 - n/a (831) Net finance (expense) / earnings (166) (83) (100%) (100) Taxation exp
Slide 10: Total revenue – Segmental analysis
Total revenue – Segmental analysis H1 2015 H1 2014 H2 2014 Change Rm Rm Rm 2 South Africa and rest of Africa 4 294 4 284 0% 4 393 Australasia and Asia 11 804 14 933 (21%) 13 236 Total Construction and Engineering 16 098 19 217 (16%) 17 629 Mining 2 974 3 461 (14%) 3 121 Manufacturing and Processing
Slide 11: Net operating earnings – Segmental analysis
Net operating earnings – Segmental analysis H1 2015 H1 2014 H2 2014 Change Rm Rm Rm 2 South Africa and rest of Africa (229) (202) (13%) (232) Australasia and Asia 183 191 (4%) 80 Total Construction and Engineering (46) (11) (318%) (152) Mining 241 295 (18%) 234 Manufacturing and Processing 79 162 (5
Slide 12: Movement in cash and bank balances
Movement in cash and bank balances H1 2015 H2 2014 FY 2014 (Rbn) (Rbn) (Rbn) Cash South Africa 1,3 1,4 1,3 Australia and other 3,0 3,5 2,8 Total 4,3 4,9 4,1 Debt South Africa 2,3 1,7 2,0 Australia and other 0,3 0,9 0,8 Net cash 1,7 2,3 1,3 Operating free cash flow 0,2 (0,2) (1,4) (Rm) 1 947 (1 900)
Slide 13: Working capital
Working capital H1 2015 H1 2014 FY 2014 Change Change Rm Rm Rm Inventories 3 056 2 903 5% 2 793 9% Receivables 12 531 12 252 2% 14 136 (11%) Trade and other receivables 2 433 2 999 (19%) 2 785 (13%) Amounts due from contract customers 10 098 9 253 9% 11 351 (11%) Payables 12 374 13 389 (8%) 14 255 (
Slide 14: Amounts due from / (to) contract customers
Amounts due from / (to) contract customers H1 2015 H1 2014 FY 2014 Change Change Rm Rm Rm Disclosed on the statement of financial position as follows: Uncertified claims and variations 6 495 5 535 17% 6 763 (4%) Provision for amounts due from contract customers (964) (1 083) 11% (1 102) 13% Contract
Slide 15: Capital expenditure
Capital expenditure H1 2015 H1 2014 Change Rm Rm Replacement 456 320 43% Expansion 101 271 (63%) Property, plant and equipment 557 591 (6%) Intangible assets 26 58 (55%) Total capital expenditure 583 649 (10%) Capital expenditure net of proceeds on disposal 244 505 (52%) Depreciation and amortisatio
Slide 16: Capital structure review
Capital structure review » Objectives: • Diversification of funding sources • Extension of debt maturity profile • Reduction of the Group’s overall debt levels • Continue pursuing outstanding claims to a positive conclusion and to take advantage of growth opportunities » Initiatives: • Convertible b
Slide 17: Operational overview
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Slide 18: McConnell Dowell
Po McCONNELL DOWELL
Slide 19: Construction & Engineering: Australasia and Asia
Construction & Engineering: Australasia and Asia » Revenue decreased by 21% to R11.8 billion as Revenue (Rbn) several multi-year pipeline and building contracts were completed 13,2 14,9 11,8 » Improved revenue was achieved by the Australia Construction and Tunnelling business units » Net operating e
Slide 20: Construction & Engineering: Australasia and Asia – Revenue
Construction & Engineering: Australasia and Asia – Revenue H1 2015 H1 2014 H2 2014 Revenue Change Rm Rm Rm Australia Construction 6 028 4 423 36% 4 997 Pipelines 1 135 4 983 (77%) 2 134 Offshore Construction 1 791 1 851 (3%) 1 758 Buildings 842 1 393 (40%) 1 251 Electrical 1 155 1 559 (26%) 1 829 Tu
Slide 21: Australasia and Asia - Order book
Construction & Engineering: Australasia and Asia - Order book 2 year order book (Rbn) Order book by business unit * Excludes Electrix 19,6* 20,4* Australia construction 16.0* 4% 16% 13,5* Overseas construction 8% Pipelines 43% Tunnels 29% Building FY13 1H14 FY14 1H15 Order book by region » Decrease
Slide 22: Australasia and Asia - Key issues and report back
Construction & Engineering: Australasia and Asia - Key issues and report back Key issues » Focus on problematic contracts and the resolution of outstanding claims » Diversify into non-commodity related infrastructure and increase contribution from outside Australia Report back » Commercial process o
Slide 23: Australasia and Asia - Outlook
Construction & Engineering: Australasia and Asia - Outlook » Revenue expected to decline following the completion of major projects and the generally subdued outlook in the region » Continued focus on growth in New Zealand and South East Asia » Pursuing attractive opportunities in non-traditional se
Slide 24: Construction & Engineering: South Africa and rest of Africa
CONSTRUCTION & ENGINEERING South Africa and rest of Africa
Slide 25: Construction & Engineering: South Africa and rest of Africa
Construction & Engineering: South Africa and rest of Africa » Revenue flat at R4,3 billion due to on-going activity on Revenue (Rbn)* renewable energy projects, new building contracts and ramp-up of a rail project 4,4 » Net operating loss of R229 million reflects an improved performance by Aveng Gri
Slide 26: South Africa and rest of Africa - Revenue
Construction & Engineering: South Africa and rest of Africa - Revenue H1 2015 H1 2014 H2 2014 Revenue Change Rm Rm Rm Aveng Grinaker-LTA : Civil Engineering 1 632 1 348 21% 1 747 : Mechanical and Electrical 954 1 003 (5%) 662 : Building and Coastal 1 223 1 404 (13%) 1 352 Aveng Engineering 477 402 1
Slide 27: South Africa and rest of Africa - Order Book
Construction & Engineering: South Africa and rest of Africa - Order Book 2 year order book (Rbn) Order book by discipline 8,5 8,0 7,0 7,4 Power 7% 3% Mining 18% Water & Environmental 7% Infrastructure 40% Industrial & Commercial 25% Oil & Gas FY13 1H14 FY14 1H15 » Increased by 8% after securing cont
Slide 28: South Africa and rest of Africa - Key issues and report back
Construction & Engineering: South Africa and rest of Africa – Key issues and report back Key issues » Improve management capacity and stability » Stabilisation and positioning for profitability » Operational and commercial challenges experienced by legacy contracts » Continued focus on fixed cost op
Slide 29: South Africa and rest of Africa - Outlook
Construction & Engineering: South Africa and rest of Africa - Outlook » Despite slow infrastructure related investment, Aveng is pursuing attractive opportunities in the private and public sectors » Overcapacity will continue to suppress margins in South Africa » Improved performance expected from A
Slide 30: Aveng Mining
Po AVENG MINING
Slide 31: Aveng Mining
Aveng Mining » Revenue decreased by 14% to R3,0 billion mainly due Revenue (Rbn) to the continued downturn in the commodities market 3,5 » Despite lower earnings, the mining operations continued to perform well in a tight market 3,1 3,0 » Earnings declined by 18% due to: • Lower activity levels • La
Slide 32: Aveng Mining - Revenue
Aveng Mining - Revenue H1 2015 H1 2014 H2 2014 Revenue Change Rm Rm Rm Aveng Mining : Moolmans 2 245 2 505 (10%) 2 216 : Shafts & Underground 729 956 (24%) 905 Total 2 974 3 461 (14%) 3 121 Revenue by commodity Revenue by geography Coal 10% 6% 5% 11% Copper Botswana 6% 5% 11% Chile 1% Gold 5% Iron o
Slide 33: Aveng Mining - Order Book
Aveng Mining - Order Book 2 year order book (Rbn) Order book by commodity 10,3 Copper 3% 11% 3% 8,6 Gold 7,1 21% 6,0 Iron ore Manganese 32% Nickel 22% Platinum 8% FY 13 1HY14 FY 14 1HY15 Uranium » Increased by 20% from June 2014, with South Africa gaining relative Order book by geography to rest of
Slide 34: Aveng Mining - Key issues and report back
Aveng Mining - Key issues and report back Key issues » Order book replenishment in Aveng Moolmans » Impact of industrial action on operations » Operational and commercial challenges experienced on foreign contracts Report back » Order book replenishment despite a depressed market » Aveng Moolmans un
Slide 35: Aveng Mining - Outlook
Aveng Mining - Outlook » Flat revenue anticipated in FY15 with recent contract wins expected to fully contribute in FY16 » Pressure on mining companies to reduce mining costs, with projects being downscaled and delayed » Focus remains on: • Diversification of order book • Cash flow returns • Utilisa
Slide 36: Manufacturing and Processing
MANUFACTURING and PROCESSING
Slide 37: Manufacturing and Processing
Manufacturing and Processing » Revenue flat at R5,3 billion: Revenue (Rbn) • Strong demand for precast concrete products especially 5,3 5,3 5,3 in Mozambique and Zambia • Aveng Infraset performed well as a result of sleeper and pipe sales • Strong demand for rail services » Net operating earnings fe
Slide 38: Manufacturing and Processing - Revenue
Manufacturing and Processing - Revenue H1 2015 H1 2014 H2 2014 Revenue Change Rm Rm Rm Aveng Steel 3 440 3 415 1% 3 743 Aveng Manufacturing 1 813 1 850 (2%) 1 604 1 Total Aveng Manufacturing and Processing 5 253 5 265 0% 5 347 1. Total revenue includes internally generated revenue Unaudited Group re
Slide 39: Manufacturing and Processing - Key issues and report back
Manufacturing and Processing - Key issues and report back Key issues » Steel prices and demand » Sector-wide labour disruptions » Align fixed costs to business requirements » Return to profitability of Aveng Steeledale and Aveng Steel Fabrication Report back » Steel prices and demand continue to be
Slide 40: Manufacturing and Processing - Outlook
Manufacturing and Processing - Outlook » Manufacturing • Railway development remains a key growth market • Better performance expected due to: • Rail-related projects for Aveng Manufacturing Lennings Rail Services • Sleeper sales by Aveng Manufacturing Infraset in Africa • Buoyant demand for concret
Slide 41: The way forward
THE WAY FORWARD IW in infrastructure
Slide 42: Two-year order book (Rbn)
Two-year order book (Rbn) Decrease of 12% since June 2014 Two-year order book by sector Flat against December 2013 Including Electrix 42% 41% Excluding Electrix 40,9 37,4 36,7 37,1 36,3 32,4 32,5 6% 7% 4% Power Mining Water Oil & Gas General Infrastructure Two-year order book by region 53% 32% 5% 8%
Slide 43: Outlook
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Slide 44: Outlook and Prospects
Outlook and Prospects »Improved performance expected from Aveng Grinaker-LTA »Commercial uncertainty around QCLNG and the Gold Coast projects remains »Positive outlook for Mining, and Manufacturing and Processing »McConnell Dowell performance dependant on order book replenishment »Realise benefits o
Slide 45: Questions and Answers
QUESTIONS AND ANSWERS Unaudited Group results For the six months ended December 2014
Slide 46: Appendix
APPENDIX IN Leaders in infrastructure
Slide 47: Amounts due from / (to) contract customers
Amounts due from / (to) contract customers H1 2015 H1 2014 H2 2014 Change Rm Rm Rm 1 Uncertified claims and variations (under-claims) 6 495 5 535 17% 6 763 Provision for amounts due from contract customers (964) (1 083) 11% (1 102) 2 Progress billings received (over-claims) (1 728) (1 852) (7%) (1 7