Aveng Limited · JSE:AEG

Aveng — FY2017 Earnings Presentation

49 slides from Aveng's earnings presentation, Sep 26, 2017

  1. Slide 1: 2017 Financial Year-End Results Presentation

    2017 FINANCIAL YEAR-END RESULTS PRESENTATION 26 September 2017

  2. Slide 2: Agenda

    OVERVIEW 2 AGENDA OVERVIEW FINANCIAL ANALYSIS OPERATIONAL REVIEW OUTLOOK Eric Diack Adrian Macartney Eric Diack Eric Diack Executive Chairman CFO Executive Chairman Executive Chairman AUDITED GROUP RESULTS FOR THE YEAR-ENDED 30 JUNE 2017 │ 26 SEPTEMBER 2017

  3. Slide 3: Overview

    OVERVIEW

  4. Slide 4: The Perfect Storm

    OVERVIEW 4 THE PERFECT STORM  QCLNG award and related write-down  Write-down of uncertified revenue  Poor operational performance and cash generation  Liquidity  Agreement with Australian banks  Agreement with major funding banks  Results delay  Changes to the Board and executive management

  5. Slide 5: Salient Features

    OVERVIEW 5 SALIENT FEATURES  Net loss of R6,7 billion and headline loss of R6,4 billion  Non-cash impairments and write-downs on long-outstanding uncertified revenue of R5,9 billion  Headline loss of R630 million excluding non-recurring write-downs and charges  QCLNG award of R508 million (AUD50

  6. Slide 6: Uncertified Revenue and Impairments

    OVERVIEW 6 UNCERTIFIED REVENUE AND IMPAIRMENTS  The reassessment of the long outstanding uncertified revenue was guided by:  The need to address the balance sheet risk  Unfavourable claims outcomes such as QCLNG, Kenmare Resources and Mokolo Crocodile Water Augmentation  Current economic climate

  7. Slide 7: Liquidity

    OVERVIEW 7 LIQUIDITY  Net debt of R1,070 billion (June 2016: R534 million)  Disposed of Aveng Capital Partners assets for R821 million  Operating cash flows not acceptable  Impairments, poor performance and the requirement to recapitalise McConnell Dowell necessitated discussions with major fund

  8. Slide 8: Strategic Review

    OVERVIEW 8 STRATEGIC REVIEW  A robust strategic review has been initiated in conjunction with independent consultants to address:  Optimal business portfolio  Identification of non-core assets  Creation of a sustainable balance sheet addressing :  optimal capital structure  sustainable funding

  9. Slide 9: Remedial Actions to Date

    OVERVIEW 9 REMEDIAL ACTIONS TO DATE  Addressed uncertified revenue and derisked the balance sheet  Improved process and controls for the recognition of uncertified revenue  Significantly down-sized overheads  Profit Improvement Programme at Aveng Manufacturing yet to yield full benefits  McConn

  10. Slide 10: Operational Review

    OVERVIEW 10 OPERATIONAL REVIEW  Aveng Manufacturing:  Improved top management bench-strength  Executive focus required on Profit Improvement Programme  Focussed on markets, procurement, production efficiency and rationalise production capacity in line with demand  Quantified targets to be repor

  11. Slide 11: Market Conditions

    OVERVIEW 11 MARKET CONDITIONS  Local infrastructure market remains subdued, with limited large projects in both public and private sector. Current public infrastructure spend is focussed on the transportation, energy and water segments.  Improved outlook for the mining sector resulting in increase

  12. Slide 12: Financial Analysis

    FINANCIAL ANALYSIS | te et © 2g

  13. Slide 13: Earnings and Adjusted Earnings

    FINANCIAL ANALYSIS 13 EARNINGS AND ADJUSTED EARNINGS Adjusted FY 2017 FY 2017 FY 2016 Rm Rm Rm Revenue 23 456 27 442 33 755 Gross margin % (13.4) 7.2 7.4 Operating expenses (2 305) (2 305) (2 808) Adjusted net operating earnings / (loss) (5 395) (113) 146 Net interest (444) (444) (341) Impairment of

  14. Slide 14: Adjusted Net Operating Earnings - Waterfall

    FINANCIAL ANALYSIS 14 ADJUSTED NET OPERATING EARNINGS - WATERFALL Full year ended 30 June 2017(Rm) 2 615 2 352 150 165 (113) (5 395) Settlement Agreement Adjusted earnings Earnings (pre-adjusted) Impairment of QCLNG Non-cash write-down Kenmare loss with South African 30 June 2017 30 June 2017 of unc

  15. Slide 15: Adjusted Segmental Results

    FINANCIAL ANALYSIS 15 ADJUSTED SEGMENTAL RESULTS Adjusted revenue Adjusted operating earnings /(loss) FY 2017 FY 2016 FY 2017 FY 2016 % change Rm Rm Rm Rm C&E South Africa and rest of Africa 6 080 7 344 (17) (188) (148) C&E Australasia and Asia 9 293 12 828 (28) (129) 14 Aveng Mining 4 184 5 026 (17

  16. Slide 16: Statement of Financial Position

    FINANCIAL ANALYSIS 16 STATEMENT OF FINANCIAL POSITION Jun’17 Dec’16 % Jun’16 Jun’17 Dec’16 % Jun’16 Rm Rm change Rm Rm Rm change Rm ASSETS 17 687 22 849 (23) 25 332 LIABILITIES & EQUITY 17 687 22 849 (23) 25 332 Goodwill and intangible LIABILITIES 613 662 (7) 667 assets Borrowings and liabilities 3

  17. Slide 17: Working Capital

    FINANCIAL ANALYSIS 17 WORKING CAPITAL Jun’17 Dec’16 change Jun’16 Rm Rm % Rm Inventory 2 085 2 159 (3%) 2 211 Trade and other receivables 1 840 1 721 7% 2 058 Amounts due from contract customers 4 468 8 483 (47%) 9 464 Current trade and other payables (5 909) (4 854) (22%) (5 886) Amounts due to con

  18. Slide 18: Uncertified Revenue and Claims

    FINANCIAL ANALYSIS 18 UNCERTIFIED REVENUE AND CLAIMS Jun’17 Dec’16 Jun’16 FY2017 Rm Rm Rm Rm C&E C&E Other & Manufacturing SA and Australia Mining elimination TOTAL & Processing Uncertified claims and ROA and Asia s 1 760 6 283 6 584 variations Contract claims 59 1 266 153 29 (358) 1 149 Contract co

  19. Slide 19: Movement in Net Debt

    FINANCIAL ANALYSIS 19 MOVEMENT IN NET DEBT 975 412 (182) (249) (316) (534) (536) (640) (1 070) Net debt 30 Cash from Working Net finance Taxation Net capital Proceeds on Other & Net debt 30 Jun ‘16 operations capital charges expenditure disposal of exchange Jun ‘17 change assets impact * Excludes re

  20. Slide 20: Liquidity

    FINANCIAL ANALYSIS 20 LIQUIDITY Jun’17 Dec’16 Jun’16 Jun’17 Dec’16 Jun’16 Rm Rm Rm Rm Rm Rm Cash 1 996 2 017 2 450 Cash 1 996 2 017 2 450 South African operations 759 864 1 009 Less: McConnell Dowell 1 237 1 153 1 441 Joint operations (625) (683) (696) Advance payments (146) (211) (308) Borrowings 3

  21. Slide 21: Safety

    SAFETY — AT 1 IDs

  22. Slide 22: Safety, Health & Environment

    FINANCIAL ANALYSIS 22 SAFETY, HEALTH & ENVIRONMENT SHE Overview 5 year AIFR trend (per 200 000 hours) Fatalities  All Injury Frequency Rate (AIFR) at 3.28, marginally weaker but longer term improvement trend maintained 6  Two fatalities recorded  Continued focus and efforts on road safety in Sout

  23. Slide 23: Operating Review

    OPERATING REVIEW

  24. Slide 24: Construction & Engineering - South Africa and Rest of Africa - Overview

    OPERATING REVIEW 24 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa │Overview Aveng Grinaker-LTA  Planned profitability not achieved, mainly due to:  Lower revenue than planned  Holding and retrenchment costs  Adverse Mokolo Crocodile settlement  Poor performance in the Civil Engin

  25. Slide 25: Construction & Engineering - South Africa and Rest of Africa

    OPERATING REVIEW 25 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa Adjusted FY 2017 FY2017 FY 2016 Rm Rm Rm % change Revenue 5 876 6 080 7 344 (17) Operating Expenses (481) (452) (632) 28 EBIT (392) (198) (148) (34) OFCF* 422 422 461 (8) * This includes the proceeds from the disposal o

  26. Slide 26: Construction & Engineering - South Africa and Rest of Africa

    OPERATING REVIEW 26 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa Two year Revenue Outlook order book secured FY18 (Rm) (%)  Subdued market conditions expected to persist in the medium-term Aveng Grinaker-LTA Building 2 126 92%  Secured order book of 93% for FY 18 Aveng Grinaker-LTA

  27. Slide 27: Construction & Engineering - Australasia and Asia - Overview

    OPERATING REVIEW 27 CONSTRUCTION & ENGINEERING │ Australasia and Asia │ Overview McConnell Dowell  Market remains attractive with a steady expansion in Australia and Asia Pacific construction industry over the past 12 months  Emerging markets of Southeast Asia will continue to invest in new infras

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

    OPERATING REVIEW 28 CONSTRUCTION & ENGINEERING │ Australasia and Asia Adjusted FY 2017 Adjusted FY 2016 FY 2017 FY 2016 % change FY 2017 % change Rm FY 2017 Rm Rm AUDm AUDm AUDm Revenue 6 183 9 293 12 828 (28) 589 906 1 264 (28) Operating (810) (810) (1 022) 21 (79) (79) (98) 19 Expenses EBIT (4 370

  29. Slide 29: Construction & Engineering - Australasia and Asia

    OPERATING REVIEW 29 CONSTRUCTION & ENGINEERING │ Australasia and Asia Two Year Revenue secured Outlook order book FY18 (AUDm) (%)  Strong growth in rail, roads and airports expected across Australia, Australia 675 >100% New Zealand and Southeast Asia as well as in public infrastructure in Southeast

  30. Slide 30: Aveng Mining - Overview

    OPERATING REVIEW 30 AVENG MINING │ Overview Aveng Mining  Significant improvement in the second half due to strong operational capability  Recent improvement in commodity prices resulted in substantial new work and some contract extensions in the open cut environment  This has led to the deployme

  31. Slide 31: Aveng Mining

    OPERATING REVIEW 31 AVENG MINING FY 2017 FY 2016 TWO YEAR ORDER BOOK BY COMMODITY % change Rm Rm Platinum; 3% Diamonds; 13% Revenue 4 184 5 026 (17) Manganese; 12% Operating Expenses (197) (235) 16 Gold; 13% Iron Ore & Waste; 14% EBIT 219 276 (21) Uranium; 3% Coal; 4% Cash flow from operating 458 23

  32. Slide 32: Aveng Mining Outlook

    OPERATING REVIEW 32 AVENG MINING Outlook Two Year Revenue secured order book FY18 (R’m) (%)  Strong revenue growth expected due to an improved and diversified order book Aveng Mining 7 754 98%  Maintain and improve operational performance on existing contracts and resolve operational performance i

  33. Slide 33: Manufacturing & Processing - Aveng Manufacturing - Overview

    OPERATING REVIEW 33 MANUFACTURING & PROCESSING │ Aveng Manufacturing │ Overview Aveng Manufacturing  South African manufacturing industry continues to experience headwinds, with low demand from water, construction, rail, mining and oil & gas  No major rail construction in SADC and reduced rail mai

  34. Slide 34: Manufacturing & Processing - Aveng Manufacturing

    OPERATING REVIEW 34 MANUFACTURING & PROCESSING │ Aveng Manufacturing FY 2017 FY 2016 REVENUE BY INDUSTRY FY2017 % change Rm Rm Power Other 2% Revenue 2 444 2 965 (18) 11% Rail / Mining Operating Expenses (298) (349) 15 28% Transport 19% EBIT 51 96 (47) OFCF (76) (29) (>100) General Water & Environme

  35. Slide 35: Aveng Manufacturing Outlook

    OPERATING REVIEW 35 MANUFACTURING & PROCESSING │ Aveng Manufacturing Outlook  Market conditions are not expected to materially improve in the short term  Rationalisation and consolidation of capacity and factories  Focus on cost containment and improve production efficiencies  Continue diversifi

  36. Slide 36: Manufacturing & Processing - Aveng Steel - Overview

    OPERATING REVIEW 36 MANUFACTURING & PROCESSING │ Aveng Steel │ Overview Aveng Steel  Weak South African economic environment resulted in minimal investment in large-scale local infrastructure particularly in construction and manufacturing sectors  Volumes remained flat, however the average steel p

  37. Slide 37: Manufacturing & Processing - Aveng Steel

    OPERATING REVIEW 37 MANUFACTURING & PROCESSING │ Aveng Steel FY 2017 FY 2016 % change Rm Rm Revenue 5 492 5 829 (6) Operating Expenses (305) (353) 14 EBITDA (22) (106) 79 EBIT (54) (166) 67 OFCF 59 304 (>100) Volumes (kt) 490 587 (23) Average price 11 000 10 000 10 (R) (P/ton) * Results shown above

  38. Slide 38: Aveng Steel Outlook

    OPERATING REVIEW 38 MANUFACTURING & PROCESSING │ Aveng Steel Outlook  Improved international steel prices expected despite over-capacity  South African steel demand hampered by a lack of infrastructure spend  Increased competition in South African primary steel market with commissioning of smalle

  39. Slide 39: Outlook

    (a a A Ee i eae

  40. Slide 40: Two Year Order Book & FY18 Secured Work

    OUTLOOK 40 TWO YEAR ORDER BOOK & FY18 SECURED WORK Two year order book Secured Work FY2017 HY2017 (%) Rm Rm FY2018 McConnell Dowell 15 250 14 781 % Aveng Grinaker-LTA 6 832 6 696 McConnell Dowell 105% Aveng Mining 7 754 6 011 Aveng Grinaker-LTA 93% Aveng Manufacturing 79 216 Aveng Mining 98% TOTAL 2

  41. Slide 41: Key Actions

    OUTLOOK 41 KEY ACTIONS  Complete strategic review and communicate results by half year  Complete operational review by half year  Interventions activated immediately  Implement short-term corrective measures and reporting  Non-core assets identified and disposal process commenced  Appoint mana

  42. Slide 42: Prospects and Outlook

    OUTLOOK 42 PROSPECTS AND OUTLOOK  Australasia, Southeast Asia and Mining markets should provide medium-term growth opportunities  South African infrastructure and industrial market is expected to remain muted for the medium-term  Growth opportunities expected in McConnell Dowell and Aveng Mining

  43. Slide 43: Question & Answer Session

    QUESTION & ANSWER SESSION

  44. Slide 44: 2017 Financial Year-End Results Presentation

    2017 FINANCIAL YEAR-END RESULTS PRESENTATION 26 September 2017

  45. Slide 45: Annexures

    ANNEXURES | De et © ff id

  46. Slide 46: Revenue before write-downs - Construction & Engineering

    ANNEXURE 46 REVENUE before write-downs │ Construction & Engineering South Africa and rest of FY 2017 FY 2016 Australasia FY 2017 FY 2016 % change % change Africa Rm Rm and Asia AUDm AUDm Aveng Grinaker-LTA Building 3 093 3 104 - Australia 328 525 (38) and Coastal Aveng Grinaker-LTA Civil New Zealand

  47. Slide 47: Revenue - Manufacturing & Processing and Mining

    ANNEXURE 47 REVENUE │ Manufacturing & Processing and Mining FY 2017 FY 2016 FY 2017 FY 2016 Aveng Manufacturing % change Aveng Steel % change Rm Rm Rm Rm Aveng ACS 408 441 (7) Aveng Trident Steel 4 988 4 546 10 Aveng DFC 481 469 3 Aveng Steeledale 504 1 153 (56) (sold)* Aveng Duraset 454 487 (7) Ave

  48. Slide 48: Construction & Engineering - South Africa and Rest of Africa

    ANNEXURE 48 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa TWO YEAR ORDER BOOK 2017 REVENUE BY GEOGRAPHY FY2017 HY2017 % Rm Rm change 8% Aveng Grinaker-LTA Building & Coastal 3 641 3 807 (4) South Africa Aveng Grinaker-LTA Civil Engineering 1 492 1 063 40 Rest of Africa Aveng Grinaker-

  49. Slide 49: Construction & Engineering - Australasia and Asia

    ANNEXURE 49 CONSTRUCTION & ENGINEERING │ Australasia and Asia TWO YEAR ORDER BOOK 2017 REVENUE BY GEOGRAPHY FY2017 HY2017 % Australia AUDm AUDm change 3% Australia 675 662 2 Southeast Asia 29% 43% New Zealand 213 233 (9) New Zealand Southeast Asia 408 408 - 25% Middle East Middle East & other 23 42

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