Aveng Group Limited (JSE:AEG) News - Reviewed interim condensed consolidated financial statements for the six months ended 31 December 2021

AVENG LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000302618
SHARE CODE: AEG
("Aveng" or "the Group")

Short-form SENS Announcement

Reviewed interim condensed consolidated financial statements for the six months ended 31 December 2021

SALIENT FEATURES

     -    Group revenue increased to R13,0 billion (December 2020: R12,9 billion)
     -    Operating earnings for the period decreased to R215 million (December 2020: R280 million)
     -    Earnings for the period decreased from R438 million to R53 million
     -    Normalised earnings* for the period increased from R73 million to R82 million
     -    Earnings per share decreased to 43 cents per share from 909 cents per share(restated) in the comparative
          period
     -    Normalised earnings per share* decreased to 67 cents per share from a restated 151 cents per share in the
          prior period
     -    Headline earnings decreased to R17 million (14 cents per share) from a headline earnings of R109 million
          (226 cents per share, restated)
     -    Normalised headline earnings* increased to R172 million (December 2020: R109 million).
     -    Operating free cash flow of R490 million (December 2020: R1,4 billion)
     -    Cash and bank balances of R3,0 billion (June 2021: R2,5 billion)
     -    Net cash position of R1,1 billion (June 2021: R1,1 billion)
     -    Increase in work in hand to R29,1 billion from R25,3 billion in June 2021
     -    Net asset value per share increased to 2 855 cents per share from 2 663 cents per share (restated) at 30
          June 2021
     *Excludes significant non-recurring items

CLASSIFICATION OF TRIDENT STEEL AS CONTINUING OPERATIONS

Whilst the strategy to dispose of Trident Steel remains unchanged, Aveng is required to continue to consider the
application of IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (IFRS 5). Following a technical
evaluation, the criteria to disclose Trident Steel as Held for Sale and discontinued operations were not met at 31
December 2021. Consequently, Trident Steel has been reclassified as a continuing operation in the current period.

The reclassification required the recognition of prior periods depreciation of R155 million, partially offset by a reversal
of previously recognised impairments of R103 million, resulting in a net charge of R52 million in the current period.
This compares to a fair value gain of R415 million in the comparable period. These amounts have been included in the
reported earnings. The reclassification and related non-cash charges and gains did not impact the trading activities or
cashflow of Trident Steel.

Pro-forma financial information
The presentation of the pro-forma financial information and related reconciliation is the responsibility of the directors
of Aveng Limited. The pro-forma financial information has been prepared for illustrative purposes only and may not
fairly present the financial position, changes in equity, and results of operations or cash flows of Aveng Limited. The
pro-forma financial information is presented in accordance with the JSE Listings Requirements and the SAICA Guide on
Pro-Forma Financial information. This pro-forma financial information for the six months ended 31 December 2021
and comparative periods have not been reviewed or reported on by the Group’s auditors.
                                                                                                      Pro-       Pro-    Change
                                                                                                    forma      forma
                                                                                                                              Rm
                                                                                               HY 2022       HY 2021

                                                                                                      Rm          Rm

 Earnings for the period                                                                               53        438        (385)

 IFRS 5 adjustments relating to Trident Steel

 Fair value adjustment on disposal groups classified as Held for Sale                                    -      (415)         415
 Accumulated depreciation and amortisation previously not expensed
 under IFRS 5 – charged on reclassification to continuing operations                                  155            -        155
 Reversal of impairment loss previously recognised                                                  (103)            -      (103)
 Earnings for the period excluding IFRS 5 adjustments                                                 105          23          82
 Depreciation and amortisation for the period – Trident Steel                                          39           -*         39
 Normalised earnings                                                                                  144          23         121
*No depreciation and amortisation recognised whilst Trident Steel was classified as Held for Sale

REVENUE AND EARNINGS

Group revenue for the six month period was in line with the prior comparative period. Trading conditions continued
to be impacted by the effects of COVID-19, including travel restrictions and lockdowns. In addition, South Africa was
impacted by riots, a steel industry strike and a global shortage of semi-conductors affecting the automotive sector.

Operating earnings of R215 million (December 2020: R280 million) reduced mainly as a result of a once off gain on
project asset disposals in Moolmans in the prior period and depreciation of R39 million in Trident Steel with no
corresponding charge in the comparative period.

Earnings for the period of R53 million (December 2020: R438 million) were impacted by the reclassification of Trident
Steel as a continuing operation from discontinued in terms of IFRS 5: Non-current Assets Held for Sale and Discontinued
Operations (IFRS 5) as described above.

Aveng has presented normalised earnings of R82 million for the period in comparison to R73 million for the prior
period.

Pro-forma financial information
The presentation of the pro-forma financial information and related reconciliation as detailed below, is the
responsibility of the directors of Aveng Limited.

                                                                                          Pro-forma          HY 2021     FY 2021
                                                                                          HY 2022            Rm          Rm
                                                                                          Rm
 Earnings for the period                                                                           53             438         988
 Impairment loss on goodwill, intangibles and PPE                                                   -              54         241
 (Reversal of) / impairment loss on long-term receivables                                        (13)              45          26
 Loss / (gain) on disposals of Assets Held for Sale                                                 3            (40)        (28)
 Gain on sale of property, plant & equipment                                                     (13)              (9)       (10)
 Fair value adjustment of disposal groups classified as Held for Sale                              52           (415)       (611)
 Gain on early redemption of borrowings and other liabilities                                       -                -      (486)
 Normalised earnings for the period                                                                82              73         120


Headline earnings for the period was R17 million compared to R109 million in the prior period. The recognition of
depreciation and amortisation that would have been recognised had there been no Held for Sale classification of R155
million in the current period is included in headline earnings. The reversal of impairments of R103 million is excluded
from headline earnings. As a result normalised headline is R172 million.

The Group generated a positive operating free cash flow of R490 million as compared to R1,4 billion in the prior
comparative period. Cash generation was lower relative to the comparative period as a result of negative working
capital movements of R201 million in Trident Steel arising from the disruption associated with the steel industry strike
and the global shortage of semi-conductors. This compares to a positive working capital movement of R453 million
including the proceeds of R160 million from the sale of merchanting stock. The prior period was also enhanced by
proceeds of R93 million from a once-off sale of property, plant and equipment and the impact of working capital
changes of R178 million in Moolmans.

Cash and cash equivalents of R3,0 billion represents a R525 million increase from June 2021 mainly as a result of
upfront mobilisation costs in Australia. External debt reduced by R65 million in the period to R814 million.

Work in hand grew by 15% to R29,1 billion on the back of McConnell Dowell winning new work particularly in Australia,
partially offset by a decrease in the Moolmans work in hand on the back of contract terminations.

The Group disposed of Automation & Control Solution (ACS) and Infraset Effingham factory in the period for a
combined value of R89 million. Proceeds have been received.

About Aveng Limited

Aveng is an international infrastructure, resources and contract mining group operating in selected markets and
capitalising on the expertise and experience within McConnell Dowell and Moolmans.

The short-form announcement is the responsibility of the directors and is only a summary of information in the full
announcement which is available on the company’s website (www.aveng.co.za).

This announcement does not contain full or complete details and any investment decisions by investors and/or
shareholders should be based on consideration of the published SENS available on:
https://senspdf.jse.co.za/documents/2022/JSE/ISSE/AEG/HY2022.pdf

Review opinion
The interim results for the six-month period ended 31 December 2021 have been reviewed, excluding the pro-forma
financial information, by the company’s external auditors KPMG Incorporated, who expressed an unmodified review
conclusion, in accordance with International Standard on Review Engagements ISRE 2410 Review of Interim Financial
Information Performed by the Independent Auditors of the Entity (ISRE 2410).A copy of the auditor’s review report is
available for inspection at the company’s registered office.

The full announcement is available for inspection at the registered office and/or the sponsor’s office, at no charge
during office hours.


21 February 2022

Sponsors
UBS South Africa Proprietary Limited

Executive Directors
SJ Flanagan (Group Chief Executive Officer) | AH Macartney (Group Finance Director)

Non-Executive Directors
PA Hourquebie (Independent Non-executive Chair) | MA Hermanus (Lead Independent Non-executive) | MJ Kilbride
(Independent Non-executive) | B Modise (Independent Non-executive) | BC Meyer (Independent Non-executive) | B
Swanepoel (Independent Non-executive)

Registered office
3rd Floor, 10 The High Street, Melrose Arch, 2076

Date: 21-02-2022 05:50:00
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