Aveng Limited · JSE:AEG

Aveng — H1 2019 Earnings Presentation

40 slides from Aveng's earnings presentation, Feb 26, 2019

1. Slide 1: 2019 Interim Results Presentation

   2019 INTERIM RESULTS PRESENTATION 26 February 2019

2. Slide 2: Agenda

   AGENDA 2 OVERVIEW & FINANCIAL OPERATIONAL OUTLOOK STRATEGIC REVIEW ANALYSIS REVIEW Eric Diack & Eric Diack Adrian Macartney Sean Flanagan Eric Diack Executive Chairman Chief Financial Officer Chief Executive Officer Executive Chairman REVIEWED 2019 INTERIM RESULTS | 26 February 2019

3. Slide 3: Overview & Strategic Review

   OVERVIEW & STRATEGIC REVIEW

4. Slide 4: Salient Features

   SALIENT FEATURES 4  Financial results  Revenue decreased by 17% to R13,4 billion  Net operating loss increased by more than 100% to R484 million  Operating free cash flow – outflow R710 million  Core operational performance  McConnell Dowell performance on track – new orders of AUD862 million

5. Slide 5: Strategic Plan Status

   STRATEGIC PLAN | Status 5 Capital markets 1 Rights offer  R493m of new capital raised in rights offer transaction  Early redemption of R2bn convertible bond Capital Early bond  R1,4bn of new shares issued to equity settle the convertible bond restructure redemption  New debt instrument of R460m

6. Slide 6: Non-Core Asset Disposals

   NON-CORE ASSET DISPOSALS 6  August 2018 - Properties R228m  October 2018 - Aveng Rail R133m Reported – R682m  January 2019 - Aveng Water R95m  February 2019 - Aveng Infraset R180m  Smaller properties and investments R46m  Trident Steel Under Negotiation  Grinaker-LTA - Building, Civils, M&E,

7. Slide 7: Financial Analysis

   FINANCIAL ANALYSIS

8. Slide 8: Financial Performance

   FINANCIAL PERFORMANCE 8 H1 2019 H1 2018 Results Rm Rm Revenue 13 367 16 111 Gross margin % 4,5 7 Operating expenses (1 125) (1 060) Net operating (loss)/earnings (484) 94 Net interest (255) (141) Impairment of PPE, intangibles and FV adjustment (163) (21) Loss for the period (920) (346) Headline los

9. Slide 9: Segmental Results

   SEGMENTAL RESULTS 9 Revenue Net operating (loss) / earnings H1 2019 H1 2018 HY 2019 H1 2018 Rm Rm Rm Rm McConnell Dowell 4 818 6 566 55 51 Moolmans 2 035 2 478 (166) 104 Aveng Grinaker-LTA 2 705 3 228 (160) (212) Aveng Manufacturing 1 086 1 119 (31) (57) Aveng Steel 2 792 2 503 14 (13) Other & elimi

10. Slide 10: Financial Position

    FINANCIAL POSITION 10 Dec’18 Jun’18 Dec’18 Jun’18 Rm Rm Rm Rm ASSETS 13 255 15 070 LIABILITIES & EQUITY 13 255 15 070 LIABILITIES Goodwill and intangible assets 144 147 Borrowings and liabilities 2 345 3 287 Property, plant and equipment 2 852 3 010 Working capital 3 385 4 098 Investments 196 215 De

11. Slide 11: Working Capital

    WORKING CAPITAL 11 Core Assets Non-core Assets Dec’18 Jun’18 Dec’18 Jun’18 Rm Rm Rm Rm Inventory 190 255 1 813 1 790 Trade and other receivables 236 180 1 087 1 400 Amounts due from contract customers 2 528 3 310 292 654 Current trade and other payables (2 511) (2 958) (2 312) (2 764) Amounts due to

12. Slide 12: Uncertified Revenue and Claims

    27 UNCERTIFIED REVENUE AND CLAIMS 12 Dec’18 * Jun’18 HY2019 Rm * Rm Rm C&E C&E Manufacturing Other & SA and Australia Mining & Processing eliminations TOTAL Uncertified claims and variations** 1 358 1 646 ROA and Asia Contract contingencies (520) (490) Contract claims 16 959 - - - 975 Uncertified va

13. Slide 13: Movement in Net Debt

    MOVEMENT IN NET DEBT 13 1 376 493 26 (35) (35) (111) (157) (230) (186) (1 211) Net debt Cash from Working Net finance Taxation Net capital Rights issue Bond Other & Net debt 30 Jun ‘18 operations capital charges expenditure proceeds conversion exchange 31 Dec ‘18 change and loans impact REVIEWED 201

14. Slide 14: Liquidity

    LIQUIDITY 14 Dec’18 Jun’18 Rm Rm Net Cash 2 310 2 076 South African operations 1 072 633 McConnell Dowell 1 238 1 443 Borrowings 2 345 3 287 Convertible bond - 1 929 South African operations 2 154 1 154 McConnell Dowell 191 204 Net (debt) (35)* (1 211) *Unutilised facilities of R306 million Dec’18 R

15. Slide 15: Operational Review

    OPERATIONAL REVIEW

16. Slide 16: Safety, Health & Environment

    SAFETY, HEALTH & ENVIRONMENT 16 SHE overview 3 year TRIFR trend (per 200 000 hours) Fatalities  Mr Daniel Mathule fatally injured at N1 Ventersburg road project in November  Total Recordable Injury Frequency Rate (TRIFR) of 0.77 indicating an improvement 2  Enhanced focus on employee health and w

17. Slide 17: McConnell Dowell Overview

    MCCONNELL DOWELL │ Overview 17 McConnell Dowell  Profitability maintained for third consecutive period  Revenue below expectation due to lower order book at the start of FY2019  Improved performance from a number of active projects mitigated revenue decline  New work secured of AUD862m – 50% gro

18. Slide 18: McConnell Dowell

    MCCONNELL DOWELL 18 H1 2019 H1 2018 H1 2019 H1 2018 Rm Rm AUDm AUDm Revenue 4 818 6 566 479 628 Operating expenses (418) (421) (42) (40) EBIT 55 51 5 5 OFCF (198) 574* (18) 48* *Includes once off QCLNG claim of AUD50,5m Industry accolades:  Hirepool Construction Excellence, Mangere  Pukekohe Waste

19. Slide 19: McConnell Dowell Outlook

    19 MCCONNELL DOWELL 19 TWO-YEAR ORDER BOOK BY GEOGRAPHY Outlook (AUD million)  Outlook remains positive  Buoyant market conditions in all geographies and sectors 374 357  Two-year order book AUD1,14bn  Well positioned to grow order book in selected markets 257  Maintained over AUD1bn in ECI sta

20. Slide 20: Construction & Engineering Overview

    CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa │Overview 20 Grinaker-LTA  Reduced revenue due to lower levels of work  Ongoing consolidation of Buildings and Civils businesses  Profitability impacted by:  Further provisions in Civil Engineering  Underperformance in Building  Mten

21. Slide 21: Construction & Engineering South Africa

    CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa 21 H1 2019 H1 2018 Rm Rm Revenue 2 705 3 228 Operating expenses (170) (165) EBIT (160) (212) OFCF (300) 147 Contract status and extensions Buildings New contract awards  129 Rivonia Road, Shelly Beach hospital and Centrepoint  Electrical

22. Slide 22: Construction & Engineering Outlook

    CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa 22 Outlook  Market conditions remain subdued  Actively pursuing work in new building markets  Majority of road contracts reaching completion and focus shifting to profitable civil works  Secured two-year order book reduced to R3,0bn af

23. Slide 23: Moolmans Overview

    MOOLMANS │ Overview 23 Moolmans  Group-led turnaround intervention to address underperformance  Detailed review of key projects  Root causes identified and being addressed  Senior management changes  Enhanced performance monitoring against KPIs  Contract-wide client and staff interactions held

24. Slide 24: Moolmans

    MOOLMANS 24 H1 2019 H1 2018 TWO‐YEAR ORDER BOOK BY COMMODITY Rm Rm Platinum 5% Gold 13% Revenue 2 035 2 478 Manganese Operating expenses (91) (106) 24% Zinc 18% EBITDA 142 285 EBIT (166) 104 Capital expenditure 171 233 Iron Ore & Waste Nickel 14% 23% Coal 3% OFCF (145) (87) HY2019 REVENUE BY GEOGRAP

25. Slide 25: Moolmans Outlook

    MOOLMANS 25 TWO-YEAR ORDER BOOK Outlook  Appointment of new MD imminent 5 273  Turnaround plan continues in second half of FY19  Organisational design and cost structure review approaching completion 3 990  Resolution of outstanding commercial issues in progress  Gamsberg recovery plan in place

26. Slide 26: Aveng Manufacturing Overview

    MANUFACTURING & PROCESSING │ Aveng Manufacturing │ Overview 26 Aveng Manufacturing  Revenue remained flat  ACS profitable in H1  Increased capacity in traditional oil & gas sector  Continued diversification into non-traditional sectors  DFC remained profitable as reasonable export performance o

27. Slide 27: Aveng Manufacturing

    MANUFACTURING & PROCESSING │ Aveng Manufacturing 27 H1 2019 H1 2018 REVENUE BY INDUSTRY Rm Rm Power Other 7% 13% Revenue 1 086 1 119 Rail / Mining Transport 32% Operating expenses (152) (156) 15% HY2019 EBIT (31) (57) General Infrastructure Water & OFCF (38) (91) 26% Environmental 7% Power Other 2%

28. Slide 28: Aveng Manufacturing Outlook

    MANUFACTURING & PROCESSING │ Aveng Manufacturing 28 Outlook  Complete the sale of ACS, DFC and Duraset  Infrastructure and mining sectors remained subdued  Two-year track maintenance contract awards expected to contribute to marginal performance improvement for Rail  Increased demand for sleeper

29. Slide 29: Aveng Steel Overview

    MANUFACTURING & PROCESSING │ Aveng Steel │ Overview 29 Trident Steel  Solid first half performance delivered by a strong management team  Good working capital management  SA automotive market continues to improve  Average steel price increased by 11% since Dec 2017 on static volumes Trident Stee

30. Slide 30: Aveng Steel

    MANUFACTURING & PROCESSING │ Aveng Steel 30 H1 2019 H1 2018 Rm Rm Revenue 2 792 2 503 Operating expenses (136) (136) EBIT 14 (13) OFCF 179 39 Volumes (kt) 217 214 Average price (R per ton) 13 225 11 913 Trident Steel REVIEWED 2019 INTERIM RESULTS | 26 February 2019

31. Slide 31: Aveng Steel Outlook

    MANUFACTURING & PROCESSING │ Aveng Steel 31 Outlook  Performance is subject to international steel prices and exchange rates  Ongoing focus on sales mix  Continued efficiency improvements and operational cost management  Sustained focus on working capital and cash management  Sound prospects in

32. Slide 32: Outlook

    OUTLOOK

33. Slide 33: Two-Year Order Book & FY19 Secured Work

    TWO-YEAR ORDER BOOK & FY19 SECURED WORK 33 TWO-YEAR ORDER BOOK TWO-YEAR ORDER BOOK BY GEOGRAPHY HY2019 FY2018 Southeast Asia Rm Rm Australasia 19% 40% McConnell Dowell 11 584 7 704 Moolmans 3 990 5 273 3 406 4 682 Rest of Africa & Indian South Africa Grinaker-LTA Ocean Islands 37% 4% Manufacturing 5

34. Slide 34: Outlook and Prospects

    OUTLOOK AND PROSPECTS 34  Focus on equipping core businesses to execute the Group’s longer-term strategy McConnell Dowell • Continue to grow and diversify order book in selected markets • Improve consistency in project execution Moolmans • Complete turnaround intervention and restore planned operat

35. Slide 35: Annexures

    ANNEXURES

36. Slide 36: Revenue: Continuing Operations

    REVENUE │ Continuing operations 36 H1 2019 H1 2018 H1 2019 H1 2018 McConnell Dowell Moolmans AUDm AUDm Rm Rm Australia 219 372 Total 2 035 2 478 New Zealand and Pacific 94 91 Southeast Asia 110 113 Middle East 12 18 Built Environs 44 51 Total (AUDm) 479 645 Total (Rm) 4 818 6 566 REVIEWED 2019 INTER

37. Slide 37: Revenue: Discontinued Operations

    REVENUE │ Discontinued operations 37 H1 2019 H1 2018 H1 2019 H1 2018 Aveng Grinaker-LTA Aveng Manufacturing Rm Rm Rm Rm Building & Coastal 1 292 1 842 ACS 285 215 Civil Engineering 538 588 DFC 230 228 Duraset 199 232 Mechanical & Electrical 598 458 Infraset 288 370 Water 150 151 Rail 84 76 Aveng Cap

38. Slide 38: McConnell Dowell

    MCCONNELL DOWELL 38 HY2019 REVENUE BY GEOGRAPHY TWO-YEAR ORDER BOOK HY2019 FY2018 % AUDm AUDm change Australia 0% Australia 357 310 15 45% 23% Southeast Asia New Zealand 257 150 71 New Zealand Southeast Asia 374 234 60 32% Middle East Built Environs 154 67 130 TOTAL 1 142 761 50 HY2019 REVENUE BY SE

39. Slide 39: Construction & Engineering South Africa and Rest of Africa

    CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa 39 HY2019 REVENUE BY GEOGRAPHY TWO-YEAR ORDER BOOK HY2019 FY2018 % Aveng Grinaker-LTA Rm Rm change 5% Building & Coastal 1 052 2 072 (49) South Africa Civil Engineering (*incl. Mtentu R391m) 815* 1 176 (31) Rest of Africa Mechanical & Elec

40. Slide 40: Annexure: Earnings per Share

    ANNEXURE | Earnings per share 40 Dec’17 Dec’17 Dec’17 Dec’17 Dec’18 Jun’18 Dec’18 Jun’18 Restated Reported Restated Reported Earnings per share Total number of weighted average shares Loss for the period attributable to (918) (3 523) (347) (347) Opening number of shares 416,7 416,7 416,7 416,7 equit

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