Aveng Limited · JSE:AEG

Aveng — FY2016 Earnings Presentation

48 slides from Aveng's earnings presentation, Aug 23, 2016

  1. Slide 1: 2016 Financial Year-End Results Presentation

    2016 FINANCIAL YEAR-END RESULTS PRESENTATION 23 August 2016

  2. Slide 2: Agenda

    OVERVIEW 2 AGENDA OVERVIEW STRATEGY FINANCIAL OPERATIONAL OUTLOOK ANALYSIS REVIEW Kobus Verster Kobus Verster Adrian Macartney Kobus Verster Kobus Verster CEO CEO CFO CEO CEO AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2016 │ 23 AUGUST 2016

  3. Slide 3: Overview

    MWENG Leaders in infrastructure

  4. Slide 4: Overview | Salient features

    OVERVIEW 4 OVERVIEW | Salient features  Strong improvement in safety performance  Revenue decreased by 23% to R33.8 billion  Gross margin improved from 5.4% to 7.4% and net operating earnings to a profit of R146 million  Overheads reset for lower activity levels  Headline loss per share improve

  5. Slide 5: Market Conditions

    OVERVIEW 5 MARKET CONDITIONS SOUTH AFRICA AND REST OF AFRICA AUSTRALASIA AND SOUTHEAST ASIA  Local infrastructure market remains subdued  Adverse impact from the declining  Limited large civil engineering and mechanical mining and Oil & Gas industries & electrical projects coming to market contin

  6. Slide 6: Safety, Health & Environment

    OVERVIEW 6 SAFETY, HEALTH & ENVIRONMENT  Improved performance in the All Injury Frequency Rate (AIFR) AVENG FIVE-YEAR AIFR TREND reduced to 2.7 (PER 200 000 HOURS) 4,7 4,5  Continued focus on road safety in South Africa 3,8 3,5  Employee Wellness Programme engagement is 2.7 performing above indus

  7. Slide 7: Strategy

    MWENG Leaders in infrastructure

  8. Slide 8: Strategic Process

    STRATEGY 8 STRATEGIC PROCESS 01 02 Recover Position for and stabilise profitable growth 2014 - 2016 2016 - 2019 Realise growth and sustain profitability 2018 - onwards 03 AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2016 │ 23 AUGUST 2016

  9. Slide 9: Strategic Process | Recover and stabilise largely complete

    STRATEGY 9 STRATEGIC PROCESS | Recover and stabilise largely complete Aveng McConnell Aveng Aveng Aveng Aveng Capital Grinaker-LTA Dowell Mining Manufacturing Steel Partners Turnaround N/A N/A Quality of order book N/A N/A N/A Liquidity and cash flow Claims resolution N/A N/A N/A Underperforming con

  10. Slide 10: Strategic Process | Aveng Capital Partners Monetisation

    STRATEGY 10 STRATEGIC PROCESS | Strategic initiative update Aveng Capital Partners Monetisation  Four major infrastructure investments had reached a position and a time where meaningful value could be extracted  All had moved significantly up the value curve  Competitive bidding process followed

  11. Slide 11: Strategic Process | Aveng Steeledale Disposal

    STRATEGY 11 STRATEGIC PROCESS | Strategic initiative update Aveng Steeledale Disposal  Bidding process through corporate advisors  Focused on identifying the right deal partners and structures mindful of Aveng’s obligations to its shareholders, staff and other stakeholders  Empowerment important

  12. Slide 12: Strategic Process | Short term focus

    STRATEGY 12 STRATEGIC PROCESS | Short term focus Positioning Aveng for profitable growth  Close-out strategic transactions  Embedding new relationships, which are key to growth and opportunity aspirations  Investigate and pursue transformational options for Aveng Grinaker-LTA  Divestment of Aven

  13. Slide 13: Financial Analysis

    FINANCIAL ANALYSIS

  14. Slide 14: Snapshot of Results

    FINANCIAL ANALYSIS 14 SNAPSHOT OF RESULTS FY2016 FY2015 FY2014 FY2013 FY2012 Rm Rm Rm Rm Rm Revenue 33 755 43 930 52 959 51 704 40 886 Gross margin 7.4% 5.4% 6.8% 6.7% 8.5% Operating expenses (2 808) (3 063) (3 171) (3 274) (2 986) Net operating profit / (loss) 146 (288) 799 656 613 Capital profits

  15. Slide 15: Revenue | Construction & Engineering

    FINANCIAL ANALYSIS 15 REVENUE │ Construction & Engineering 30 June 30 June 30 June 30 June SOUTH AFRICA AND REST OF AFRICA 2016 2015 AUSTRALASIA AND ASIA 2016 2015 Rm Rm AUDm AUDm Aveng Grinaker-LTA Building and Coastal 3 104 2 705 Australia 525 1 147 Aveng Grinaker-LTA Civil Engineering 2 322 3 150

  16. Slide 16: Revenue | Mining

    FINANCIAL ANALYSIS 16 REVENUE │ Mining AVENG MINING 30 June 2016 30 June 2015 Rm Rm Aveng Moolmans 3 510 4 563 Aveng Shafts & Underground 1 516 1 393 TOTAL 5 026 5 956 16% AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2016 │ 23 AUGUST 2016

  17. Slide 17: Revenue | Manufacturing & Processing

    FINANCIAL ANALYSIS 17 REVENUE │ Manufacturing & Processing 30 June 30 June 30 June 30 June AVENG MANUFACTURING 2016 2015 AVENG STEEL 2016 2015 Rm Rm Rm Rm Aveng ACS 441 425 Aveng Steeledale 1 153 1 312 Aveng DFC 469 485 Aveng Trident Steel 4 546 5 178 Aveng Duraset 487 535 SUB-TOTAL 5 699 6 490 Aven

  18. Slide 18: Earnings Update for 30 June 2016

    FINANCIAL ANALYSIS 18 EARNINGS UPDATE FOR 30 JUNE 2016 30 June 2016 30 June 2015 NET OPERATING EARNINGS Rm Rm Construction & Engineering: South Africa and rest of Africa (187) (697) Aveng Grinaker-LTA (69) (575) Construction & Engineering: Australasia and Asia 14 112 Aveng Mining 276 413 Aveng Manuf

  19. Slide 19: Working Capital

    FINANCIAL ANALYSIS 19 WORKING CAPITAL FY2016 FY2015 change FY2016 FY2015 Rm Rm % Days Days Inventory 2 211 2 529 (13) 26 days 22 days Trade and other receivables 2 058 2 424 (16) 22 days 20 days Amounts due from contract customers 9 464 10 294 (8) Current trade and other payables (5 886) (7 961) 26

  20. Slide 20: Uncertified Revenue and Claims

    FINANCIAL ANALYSIS 20 UNCERTIFIED REVENUE AND CLAIMS FY2016 FY2015 FY2016 Rm Rm Rm Uncertified claims and variations 6 584 5 157 TOTAL Contract claims 227 1 104 - - 24 1 355 Contract contingencies (390) (253) QCLNG and Gold Coast claims - 4 246 - - - 4 246 Contract and retention receivables 3 270 5

  21. Slide 21: Movement in Net Cash and Liquidity

    FINANCIAL ANALYSIS 21 MOVEMENT IN NET CASH AND LIQUIDITY FY2016 Year ended 30 June 2016 OPERATING FREE CASH FLOW Rm Rm Construction & Engineering: Net cash as at 30 June 2015 393 364 South Africa and rest of Africa Cash from operations 949 Construction & Engineering: (2 583) Australasia and Asia Pro

  22. Slide 22: Net Cash

    FINANCIAL ANALYSIS 22 NET CASH FY2016 FY2015 FY2016 FY2015 Rm Rm Rm Rm Cash 2 450 2 856 Cash 2 450 2 856 South African operations 1 009 506 Less: McConnell Dowell 1 441 2 350 Joint operations (696) (675) Advance payments (308) (641) Borrowings 2 984 2 463 QCLNG advance payment - (1 055) Convertible

  23. Slide 23: Operational Review

    IQWAAVENG | Leaders in infrastructure

  24. Slide 24: Construction & Engineering | South Africa and rest of Africa

    CONSTRUCTION & ENGINEERING | South Africa and rest of Africa

  25. Slide 25: Construction & Engineering | South Africa and rest of Africa | Overview

    OPERATIONAL REVIEW 25 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa│ Overview Aveng Grinaker-LTA Aveng Water Aveng Capital Partners  Marginal loss, includes R69 million of  Aveng Engineering discontinued  Disposal of 70% of the industrial property restructuring and holding costs po

  26. Slide 26: Construction & Engineering | South Africa and rest of Africa

    OPERATIONAL REVIEW 26 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa FY2016 FY2015 % OPERATIONAL PERFORMANCE Rm Rm change  Substantial improvement in ratio of new contracts operating at tender margin Revenue 7 344 8 355 (12)  Uncertified revenue reduced  Projects completed: Operatin

  27. Slide 27: Construction & Engineering | South Africa and rest of Africa | Outlook

    OPERATIONAL REVIEW 27 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa │ Outlook Outlook  Improved order book margin  Focus on positive cash flow, cost control, and project execution  Acquiring profitable work in Civil Engineering and Mechanical & Electrical remains a priority  Aveng

  28. Slide 28: Construction & Engineering | Australasia and Asia

    CONSTRUCTION & ENGINEERING | Australasia and Asia

  29. Slide 29: Construction & Engineering | Australasia and Asia | Overview

    OVERVIEW 29 CONSTRUCTION & ENGINEERING │ Australasia and Asia │ Overview McConnell Dowell  Restructuring completed  Senior management changes  Flat structure focuses on delivery and predictability  Business cost base aligned with lower revenue  Overheads down by 18% in FY2016  More selective p

  30. Slide 30: Construction & Engineering | Australasia and Asia | Claims update

    OVERVIEW 30 CONSTRUCTION & ENGINEERING │ Australasia and Asia │ Claims update McConnell Dowell  Arbitration hearings complete  Award date delayed QCLNG  Award will be cash accretive  Earnings remain at risk  Arbitration process update Gold  Anticipated timeline Coast  Award will be cash accre

  31. Slide 31: Construction & Engineering | Australasia and Asia

    OVERVIEW 31 CONSTRUCTION & ENGINEERING │ Australasia and Asia FY2016 FY2015 % FY2016 FY2015 OPERATIONAL PERFORMANCE AUDm AUDm change Rm Rm  Completion of numerous projects including:  4th transmission pipeline project in Thailand Revenue 1 264 2 202 (43) 12 828 20 912  Singapore Land Transit Auth

  32. Slide 32: Construction & Engineering | Australasia and Asia | Outlook

    OVERVIEW 32 CONSTRUCTION & ENGINEERING │ Australasia and Asia │ Outlook Outlook  Significant opportunities in all business units  Substantial infrastructure spend in the road, rail, water and power sectors in Australia  The Southeast Asian infrastructure markets continue to offer strong opportuni

  33. Slide 33: Mining

    eaders in infrastructure

  34. Slide 34: Mining | Overview

    OVERVIEW 34 MINING │ Overview Aveng Moolmans and Aveng Shafts & Underground  2016 characterised by contract cancellations and price reductions  Swift response:  Contract costs brought down  Reduced overhead costs  Restructured and fully integrated the two businesses Nkomati Mine, Mpumalanga  R

  35. Slide 35: Mining

    OVERVIEW 35 MINING FY2016 FY2015 % OPERATIONAL PERFORMANCE Rm Rm change  Underground business returned to profitability Revenue 5 026 5 956 (16)  Kalagadi Manganese Mine project largely Operating expenses (235) (286) 18 completed  Open cut business profitable and cash flow Operating profit 276 41

  36. Slide 36: Mining | Outlook

    OVERVIEW 36 MINING │ Outlook Outlook  Lower activity levels are expected to continue in the short term  Pursue work in South Africa, rest of Africa and beyond Africa to improve the geographical and commodity mix  Three new contracts won - full impact to be realised in H2 FY2017  Idle fleet offer

  37. Slide 37: Manufacturing & Processing

    MANUFACTURING & PROCESSING

  38. Slide 38: Manufacturing & Processing | Aveng Manufacturing | Overview

    OVERVIEW 38 MANUFACTURING & PROCESSING │ Aveng Manufacturing │ Overview REVENUE BY GEOGRAPHY Aveng Manufacturing 4% 1% 2016  Weak manufacturing, mining and construction market adversely 1% 2% 9% South Africa affected its performance mainly in the second half Rest of Africa & Indian Ocean Islands Au

  39. Slide 39: Manufacturing & Processing | Aveng Manufacturing | Outlook

    OVERVIEW 39 MANUFACTURING & PROCESSING │ Aveng Manufacturing │ Outlook FY 2016 FY 2015 % Rm Rm change Outlook Revenue 2 965 3 271 (9)  Local market expected to remain under pressure  Pursue increased international valves sales volumes and Operating expenses (349) (360) 3 rail opportunities in SADC

  40. Slide 40: Manufacturing & Processing | Aveng Steel | Overview

    OVERVIEW 40 MANUFACTURING & PROCESSING │ Aveng Steel │ Overview Aveng Steel  Most difficult trading conditions in decades  Weak international steel price and low domestic demand  Significantly impacted by price reductions in the first half of the year  Restructuring and cost saving initiatives e

  41. Slide 41: Manufacturing & Processing | Aveng Steel | Outlook

    OVERVIEW 41 MANUFACTURING & PROCESSING │ Aveng Steel │ Outlook FY 2016 FY 2015 % Rm Rm change Outlook Revenue 5 829 6 657 (12)  Volume and prices are expected to continue to be under pressure Operating expenses (353) (435) 19  Benefits from restructuring and optimisation will contribute to improve

  42. Slide 42: Outlook

    OUTLOOK

  43. Slide 43: Two Year Order Book

    OUTLOOK 43 TWO YEAR ORDER BOOK Target EBIT range Revenue % FY2016 FY2015 McConnell Dowell 3 – 5% Rm Rm Aveng Grinaker-LTA McConnell Dowell 16 510 11 629 Building and Coastal 2 – 4% Aveng Grinaker-LTA (incl. Water) 6 558 7 354 Aveng Mining 4 906 7 902 Civil Engineering 2 – 4% Aveng Manufacturing 122

  44. Slide 44: Key Takeaways

    OUTLOOK 44 KEY TAKEAWAYS  Aveng is a more focused business, well positioned for improved profitability  The strategic initiatives are receiving intense focus both in terms of closing out the transactions announced thus far as well as investigating transformational options for Aveng Grinaker-LTA an

  45. Slide 45: Question & Answers

    QUESTION & ANSWERS

  46. Slide 46: Construction & Engineering | South Africa and rest of Africa

    ANNEXURE 46 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa 2016 REVENUE BY GEOGRAPHY TWO YEAR ORDER BOOK FY2016 FY2015 % Rm Rm change 5% Aveng Grinaker-LTA Building & Coastal 3 641 3 547 3 South Africa Aveng Grinaker-LTA Civil Engineering 1 104 1 482 (26) Rest of Africa Aveng Grinaker-

  47. Slide 47: Construction & Engineering | Australasia and Asia

    ANNEXURE 47 CONSTRUCTION & ENGINEERING │ Australasia and Asia 2016 REVENUE BY GEOGRAPHY TWO YEAR ORDER BOOK FY2016 FY2015 % Australia AUDm AUDm change 2% Australia 704 416 69 Southeast Asia 26% 45% New Zealand 282 426 (34) New Zealand Southeast Asia 447 361 24 27% Middle East Built Environs 72 26 >1

  48. Slide 48: Mining

    ANNEXURE 48 MINING ORDER BOOK TWO YEAR ORDER BOOK  Extensions received at various other mines, albeit at lower margins FY2016 FY2015 %  New initiatives are paying off with contract award Rm Rm change in Burkina Faso Aveng Moolmans 4 363 5 802 (25) 2016 REVENUE BY GEOGRAPHY Aveng Shafts & Undergrou

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