Aveng Limited · JSE:AEG

Aveng — H1 2017 Earnings Presentation

40 slides from Aveng's earnings presentation, Feb 21, 2017

  1. Slide 1: 2017 Interim Financial Results Presentation

    2017 INTERIM FINANCIAL RESULTS PRESENTATION 21 February 2017

  2. Slide 2: Agenda

    OVERVIEW 2 AGENDA OVERVIEW FINANCIAL ANALYSIS OPERATIONAL REVIEW OUTLOOK Kobus Verster Adrian Macartney Kobus Verster Kobus Verster CEO CFO CEO CEO 2017 INTERIM FINANCIAL RESULTS│ 21 FEBRUARY 2017

  3. Slide 3: Overview

    OVERVIEW

  4. Slide 4: Salient Features

    OVERVIEW 4 SALIENT FEATURES  Improved market conditions in mining and Australasia, but South African infrastructure and manufacturing sectors remain weak  Revenue down 21%, yet improved adjusted gross margin and adjusted headline loss of R76 million achieved  Aveng Grinaker-LTA improved performan

  5. Slide 5: Market Conditions

    OVERVIEW 5 MARKET CONDITIONS South Africa and rest of Africa  Sharp improvement in the mining sector off improved commodity prices, notably coal, iron ore and gold  Building environment remains relatively strong led by commercial properties, and more building plans passed  Local infrastructure ma

  6. Slide 6: Market Conditions

    OVERVIEW 6 MARKET CONDITIONS Australasia and Southeast Asia  Australian infrastructure market remains strong mainly in rail, roads and water though mining activities still at low levels  Low activity in the Oil & Gas sector in Australia  Increased building activity in residential, commercial and

  7. Slide 7: Safety, Health & Environment

    OVERVIEW 7 SAFETY, HEALTH & ENVIRONMENT 6 5 year AIFR trend (per 200 000 hours) Aveng five-year AIFR trend (per 200 000 hours) Fatalities 5  All Injury Frequency Rate (AIFR) 3.1 4  AIFR marginally weaker but longer term improvement trend continues  Continued focus on road safety in South Africa 3

  8. Slide 8: Financial Analysis

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  9. Slide 9: Earnings and Adjusted Earnings

    FINANCIAL ANALYSIS 9 EARNINGS AND ADJUSTED EARNINGS H1 2017 H2 2016 H1 2016 H2 2015 Adjusted results Rm Rm Rm Rm Revenue 14 446 15 757 17 998 20 066 Gross margin 7.7% 7.7% 7.2% 4.0% Operating expenses (1 039) (1 416) (1 392) (1 567) Adjusted net operating earnings / (loss) 151 94 52 (701) Net intere

  10. Slide 10: Adjusted Segmental Results

    FINANCIAL ANALYSIS 10 ADJUSTED SEGMENTAL RESULTS H1 2017 H2 2016 H1 2016 H2 2015 H1 2017 H2 2016 H1 2016 H2 2015 Rm Rm Rm Rm Rm Rm Rm Rm OPERATING EARNINGS/(LOSS) 3 420 3 487 3 857 4 061 (62) (37) (111) (468) REVENUE 4 912 5 780 7 048 9 108 (47) 6 8 (71) 2 001 2 058 2 968 2 982 91 78 198 172 1 311 1

  11. Slide 11: Statement of Financial Position

    FINANCIAL ANALYSIS 11 STATEMENT OF FINANCIAL POSITION Dec’16 Jun’16 % Dec’15 Dec’16 Jun’16 % Dec’15 Rm Rm change Rm Rm Rm change Rm ASSETS 22 849 25 332 (10) 27 193 LIABILITIES & EQUITY 22 849 25 332 (10) 27 193 Goodwill and Intangible LIABILITIES 662 667 (1) 674 assets Property, plant and Borrowing

  12. Slide 12: Working Capital

    FINANCIAL ANALYSIS 12 WORKING CAPITAL Dec’16 Jun’16 change Dec’16 Jun’16 Rm Rm % Days Days Inventory 2 159 2 211 (2%) 30 days 26 days Trade and other receivables 1 721 2 058 (16%) 22 days 22 days Amounts due from contract customers 8 483 9 464 (10%) Current trade and other payables (4 854) (5 886) 1

  13. Slide 13: Uncertified Revenue and Claims

    FINANCIAL ANALYSIS 13 UNCERTIFIED REVENUE AND CLAIMS Dec’16 Jun’16 HY2017 Rm Rm Rm Uncertified claims and variations 6 283 6 584 TOTAL Contract claims 299 1 267 139 33 - 1 738 Contract contingencies (286) (390) QCLNG and Gold Coast claims - 3 863 - - - 3 863 Contract and retention receivables 2 488

  14. Slide 14: Movement in Net Debt / Adjusted Net Debt

    FINANCIAL ANALYSIS 14 MOVEMENT IN NET DEBT ADJUSTED NET DEBT Six months ended 31 Dec 2016 (Rm) 600 298 200 67 50 (55) (150) (204) (220) (216) (276) (534) (937) Net debt Cash from Working Perth Net finance Net capital Assets held Other & Net debt ACP Moma Steeledale Adjusted 30 June operations capita

  15. Slide 15: Liquidity

    FINANCIAL ANALYSIS 15 LIQUIDITY Dec’16 Jun’16 Dec’16 Jun’16 Rm Rm Rm Rm Cash 2 017 2 450 Cash 2 017 2 450 South African operations 864 1 009 Less: McConnell Dowell 1 153 1 441 Joint operations (683) (696) Advance payments (211) (308) Borrowings 2 954 2 984 Short term facilities (693) (768) Convertib

  16. Slide 16: Operating Review

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  17. Slide 17: Construction & Engineering: South Africa and Rest of Africa Overview

    STRATEGIC AND OPERATING REVIEW OPERATING REVIEW 17 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa │Overview Aveng Grinaker-LTA  Turnaround and stabilisation complete and planned profitability achieved  Domestic market subdued with order book bias towards building  Substantial and su

  18. Slide 18: Construction & Engineering: South Africa and Rest of Africa

    STRATEGIC AND OPERATING REVIEW 18 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa H1 2017 H2 2016 H1 2016 H2 2015 Rm Rm Rm Rm Revenue 3 270 3 487 3 857 4 061 Operating Expenses (220) (320) (312) (392) EBIT (62) (37) (111) (456) OFCF 153 213 248 (227) Projects completed and in progress:

  19. Slide 19: Construction & Engineering SA: Outlook and Order Book

    STRATEGIC AND OPERATING REVIEW 19 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa Outlook 2 year order book R6.7bn Up 2%  No material improvement in market expected in short term TWO YEAR ORDER BOOK BY PUBLIC & PRIVATE SECTOR (RM)  Improve profitability through improved delivery and p

  20. Slide 20: Construction & Engineering: Australasia and Asia Overview

    STRATEGIC AND OPERATING REVIEW 20 CONSTRUCTION & ENGINEERING │ Australasia and Asia │ Overview McConnell Dowell  Recovery is slower then planned with operational performance below expectations  Cost base adjusted to lower activity levels  Order book reduced marginally in AUD and tender discipline

  21. Slide 21: Construction & Engineering: Australasia and Asia

    STRATEGIC AND OPERATING REVIEW 21 CONSTRUCTION & ENGINEERING │ Australasia and Asia H1 2017 H2 2016 H1 2016 H2 2015 H1 2017 H2 2016 H1 2016 H2 2015 Rm Rm Rm Rm AUDm AUDm AUDm AUDm Revenue 4 912 5 780 7 048 9 108 465 538 726 971 Operating (386) (524) (498) (534) (37) (47) (51) (57) Expenses EBIT (47)

  22. Slide 22: Construction & Engineering Australasia: Outlook and Order Book

    STRATEGIC AND OPERATING REVIEW 22 CONSTRUCTION & ENGINEERING │ Australasia and Asia Outlook 2 year order book AUD1.5bn Down 2%  Most markets in which McConnell Dowell operates offer good TWO YEAR ORDER BOOK BY GEOGRAPHY (AUDM) opportunities although extremely price competitive 795 775  Ability to

  23. Slide 23: Aveng Mining Overview

    STRATEGIC AND OPERATING REVIEW 23 AVENG MINING │ Overview Aveng Mining  Response to the sharp decline in mining activities in the previous financial year has paid off  Strong financial and operational performance  Problematic contract with Wesizwe’s Bakubung mine settled  Market recovery faster

  24. Slide 24: Aveng Mining

    STRATEGIC AND OPERATING REVIEW 24 AVENG MINING H1 2017 H2 2016 H1 2016 H2 2015 HY2017 REVENUE BY COMMODITY Rm Rm Rm Rm Gold Revenue 2 001 2 058 2 968 2 982 Iron Ore 24% 28% Manganese Operating Nickel (95) ( 106) (129) (144) Expenses 7% Platinum 11% 18% Coal EBIT 91 78 198 172 9% Zinc 3% OFCF 47 186

  25. Slide 25: Aveng Mining Outlook

    STRATEGIC AND OPERATING REVIEW 25 AVENG MINING Outlook TWO YEAR ORDER BOOK BY COMMODITY  Improving commodity prices provide further opportunities Gold  Maintain and improve operational performance on existing 5% Iron Ore contracts and ensure solid start on new projects 16% 7% Manganese 8%  Pursui

  26. Slide 26: Aveng Manufacturing Overview

    STRATEGIC AND OPERATING REVIEW 26 MANUFACTURING & PROCESSING │ Aveng Manufacturing │ Overview Aveng Manufacturing  Impacted by the general slowdown in manufacturing activities across all the businesses  Limited rail construction and reduced rail maintenance work in SADC adversely affected the conc

  27. Slide 27: Aveng Manufacturing

    STRATEGIC AND OPERATING REVIEW 27 MANUFACTURING & PROCESSING │ Aveng Manufacturing 2% HY2017 H1 2017 H2 2016 H1 2016 H2 2015 Rm Rm Rm Rm 11% Power Revenue 1 311 1 340 1 625 1 459 28% Mining 19% Water & Environmental Operating (140) (169) (175) (190) 6% General Infrastructure Expenses Rail / Transpor

  28. Slide 28: Aveng Manufacturing Outlook

    STRATEGIC AND OPERATING REVIEW 28 MANUFACTURING & PROCESSING │ Aveng Manufacturing Outlook  Improved revenue expected for H2 due to  Improved pricing on selected products and product mix  Some return of sleeper volumes  Improved export sales in Europe and Americas for valve products  Profit imp

  29. Slide 29: Aveng Steel Overview

    STRATEGIC AND OPERATING REVIEW 29 MANUFACTURING & PROCESSING │ Aveng Steel │ Overview Aveng Steel  Market remains extremely difficult  Price increases in H2 on the back of improved international steel prices  Volume stabilised at lower levels  Improved financial performance but still loss-making

  30. Slide 30: Aveng Steel

    STRATEGIC AND OPERATING REVIEW 30 MANUFACTURING & PROCESSING │ Aveng Steel H1 2017 H2 2016 H1 2016 H2 2015 Rm Rm Rm Rm Revenue 2 989 3 058 2 771 3 216 Operating (167) (178) (183) (231) Expenses EBITDA (52) 9 (115) (99) EBIT (68) (18) (147) (107) OFCF 163 177 481 (463) Volumes tonnes 276 897 310 671

  31. Slide 31: Aveng Steel Outlook

    STRATEGIC AND OPERATING REVIEW 31 MANUFACTURING & PROCESSING │ Aveng Steel Outlook  Global overcapacity to continue, limiting further international price increases  RSA demand hampered by a lack of large infrastructure projects and general weak manufacturing – requires urgent government prioritisa

  32. Slide 32: Outlook

    OUTLOOK

  33. Slide 33: Two Year Order Book

    OUTLOOK 33 TWO YEAR ORDER BOOK Target EBIT range Revenue % HY2017 FY2016 McConnell Dowell 3 – 5% Rm Rm Aveng Grinaker-LTA McConnell Dowell 14 781 16 510 Building and Coastal 2 – 4% Aveng Grinaker-LTA (incl. Aveng Water) 6 696 6 558 Civil Engineering 2 – 4% Aveng Mining 6 011 4 906 Aveng Manufacturin

  34. Slide 34: Strategy Overview

    OUTLOOK 34 Strategy Overview RECOVERY AND STABILISE: REALISE GROWTH AND SUSTAIN COMPLETED PROFITABILITY: LONG TERM OBJECTIVES REALISE GROWTH  Confirmed our portfolio RECOVER STRATEGIC AND SUSTAIN AND STABILISE PHASES PROFITAILITY  Achieve a leadership position in all  Closed or turn-around under-

  35. Slide 35: Key Takeaways

    OUTLOOK 35 KEY TAKEAWAYS  No material improvement in the SA market expected in the short term  Mining sector and infrastructure in Australasia and Southeast Asia offer good opportunities  SA businesses to improve profitability through better project execution and profit improvement programmes  I

  36. Slide 36: Question & Answers

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  37. Slide 37: Revenue: Construction & Engineering

    ANNEXURE 37 REVENUE │ Construction & Engineering SOUTH AFRICA AND H1 2017 H2 2016 H1 2016 H2 2015 AUSTRALASIA H1 2017 H2 2016 H1 2016 H2 2015 REST OF AFRICA Rm Rm Rm Rm AND ASIA AUDm AUDm AUDm AUDm Aveng Grinaker-LTA 1 783 1 638 1 466 1 482 Australia 178 217 306 316 Building and Coastal Aveng Grinak

  38. Slide 38: Revenue: Manufacturing & Processing and Mining

    ANNEXURE 38 REVENUE │ Manufacturing & Processing and Mining AVENG H1 2017 H2 2016 H1 2016 H2 2015 H1 2017 H2 2016 H1 2016 H2 2015 AVENG STEEL MANUFACTURING Rm Rm Rm Rm Rm Rm Rm Rm Aveng ACS 209 204 237 203 Aveng Trident Steel 2 485 2 440 2 106 2 488 Aveng DFC 237 223 246 260 Aveng Steeledale 504 571

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

    ANNEXURE 39 CONSTRUCTION & ENGINEERING │ South Africa and rest of Africa TWO YEAR ORDER BOOK HY2017 REVENUE BY GEOGRAPHY HY2017 FY2016 % Rm Rm change 5% Aveng Grinaker-LTA Building & Coastal 3 807 3 641 5 South Africa Aveng Grinaker-LTA Civil Engineering 1 063 1 104 (4) Rest of Africa Aveng Grinaker

  40. Slide 40: Construction & Engineering: Australasia and Asia

    ANNEXURE 40 CONSTRUCTION & ENGINEERING │ Australasia and Asia TWO YEAR ORDER BOOK HY2017 REVENUE BY GEOGRAPHY HY2017 FY2016 % AUDm AUDm change Australia Australia 662 704 (6) 33% 43% Southeast Asia New Zealand 233 281 (17) Southeast Asia 408 429 (5) 24% New Zealand Middle East & other 42 20 >100 Bui

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