Aveng Limited

• Shareholders are advised that the Group expects to report an earnings loss per share and a headline loss per share for the year ended 30 June 2023, in comparison to earnings per share of 106 cents and headline earnings of 252 cents per share in the prior year.
• The financial information on which this trading statement is based has not been reviewed or reported on by the Group’s external auditors.
• A further trading statement will be released providing shareholders with ranges for earnings per share and headline earnings per share, as required by the JSE Listings Requirements, in due course.
• McConnell Dowell’s Australian and New Zealand & Pacific business units are expected to report increased operating earnings in comparison to the prior year (FY2022: R777 million (AUD70 million)). This improved performance is overshadowed by the losses in Southeast Asia, primarily from the Batangas LNG terminal project (“BLNG project”).
• Despite the improved performance in the Australian and New Zealand & Pacific business units, McConnell Dowell is expected to report an operating loss in the order of R820 million (AUD65 million) for the year. The BLNG project is expected to report a total operational loss of R1 350 million (AUD114 million) after providing for costs to date and costs to complete.
• Moolmans focus during the year was investment in equipment, people and systems to aid efficient project execution. With the new five-year Tshipi é Ntle project secured, Moolmans committed to a R900 million investment in new heavy mining equipment. The majority of this equipment is now on site and is either in deployment or awaiting commissioning.
• The Group is expected to report a net cash position of R1,3 billion, excluding IFRS16, after taking into account positive cash on hand of R2,3 billion and debt of R1 billion. The current debt is made up of c.R700 million in new asset backed finance in Moolmans and c.R286 million in McConnell Dowell incurred on the BLNG project. McConnell Dowell’s debt will be settled in FY2024.

Highlights:

• Aveng provided a R210 million loan as part of the Trident Steel disposal transaction, allowing them to acquire a 30% equity stake in the new Trident Steel Business.
• The option holder has exercised the call option on Aveng’s 30% holding, leading Aveng to call upon the demand guarantee. Aveng received R210 million payment, including interest, contributing to the Group’s liquidity, balance sheet strength, and supporting its McConnell Dowell and Moolmans businesses.

Highlights:

• Aveng Africa Proprietary Limited has completed the sale of Trident Steel for a total cash inflow of R1,222 million, which includes R700 million in purchase consideration, R264 million net cash retained by Aveng, and R183 million of additional liquidity refund.
• Aveng Africa Proprietary Limited provided a short-term BBBEE loan of R210 million to subscribe for 30% in the equity of the Business, and the loan will be recognised by Aveng as a short-term receivable.
• The sale of Trident Steel has allowed Aveng Africa Proprietary Limited to de-risk its balance sheet by terminating over R500 million in ancillary trade finance facilities, fully settle its remaining South African legacy debt of R278 million, and fully settle the Trident Steel short-term trade finance facility of R450 million.

• Aveng reported a loss due to underperforming Batangas LNG terminal project in the Southeast Asia business unit of McConnell Dowell, resulting in the client calling on project guarantees for AUD 43 million.
• The BLNG project suffered significant delay and disruption caused by the COVID-19 pandemic, related supply chain disruptions, and the Russia-Ukraine war, with negotiations ongoing with the client for completion later in 2023.
• McConnell Dowell’s Australian and New Zealand & Pacific business units continue to perform well with high levels of work in hand, representing 92% of planned revenue for the next financial year, providing a strong platform for continued profit generation.

Highlights:

• Mr. Bernard Swanepoel has resigned as an independent non-executive director of Aveng to pursue his personal business interests on a full-time basis, effective March 31, 2023.
• Mr. David Noko has been appointed as an independent non-executive director of Aveng, effective March 31, 2023, and will serve on the Risk Committee, Safety, Health and Environment Committee, and the Tender Risk Committee.
• Mr. Noko is an internationally renowned business leader with extensive experience in senior and executive roles at Air Chefs, De Beers Consolidated Mines Limited, and AngloGold Ashanti Limited, and has served on the boards of Royal Bafokeng Platinum Limited, Harmony Gold, and Astrapak Limited and Tongaat Hulett Limited as a non-executive director.

Highlights:

• Arrowhead is updating its coverage on Aveng Limited (“Aveng” or “the Company”) with a fair value bracket of ZAR 26.13 – ZAR 31.94 (Share Price on March 27, 2023: ZAR 13.40) based on Discounted Cash Flow Valuation and Comparable Company Valuation.
• Aveng is a diversified business group providing infrastructure development, contract mining, steel beneficiation, and a wide range of related products and services through its subsidiaries. The Group is headquartered in South Africa and its projects are primarily in Australasia, South-East Asia, and Africa. The Company is listed on the Johannesburg Stock Exchange – (JSE: AEG).
• Aveng reports its revenue under four segments, namely Construction and Engineering (Australasia and Asia), Mining, Construction, & Engineering (South Africa and the rest of Africa), Manufacturing and Processing, and Other & Eliminations. The Construction & Engineering and Mining business divisions accounted for approximately 85% of the Group’s Total Revenue in H1’23. These two businesses are undertaken by group entities McConnell Dowell and Moolmans, respectively.
• Until 2018, Aveng had several business units providing manufacturing, construction & engineering, and steel beneficiation services across several countries. However, the large number of businesses led to inefficiencies and the Group faced significant challenges in its operations and was unprofitable from FY’14 to FY’20.
• To achieve profitability and deleverage its balance sheet, the Group devised a comprehensive plan in 2018, whereby it decided to focus exclusively on its key operating units and dispose of its unprofitable business verticals. Since the implementation of this plan, the Group has started emerging from the significant challenges that it faced in recent years.
• The Group is progressing well with the restructuring plan initiated in 2018 to dispose of the unprofitable units and reduce debt on its balance sheet. To continue being profitable and focus on its potentially viable and profitable business units, the Group will be focusing exclusively on McConnell Dowell and Moolmans and selling all the other entities. Pursuant to its strategy to narrow down its focus, on October 4, 2022, the Group announced that it has entered an agreement to sell Trident Steel. Trident Steel’s disposal is expected to be completed by the end of June 2023.
• Aveng has ZAR 353 million of South African legacy debt on its balance sheet and plans to pay it off using the proceeds from the sale of Trident Steel.
• Moolmans incurred losses on its initial contract with Tshipi é Ntle which was terminated in H1’23. After prolonged negotiations, the company entered a new five-year contract with Tshipi é Ntle which is valued at ZAR 7 billion.

Highlights:

Strong balance sheet:

• South African legacy debt has reduced from R3,3 billion in 2018 to R353 million at 31 December 2022
• Remainder of the South African legacy debt to be settled on receipt of proceeds from sale of Trident Steel
• Short-term Trade Finance Facility of R450 million raised to support growth in Trident Steel and to be settled on sale
• Aveng will be debt free ensuring a sustainable capital structure and a platform for growth

Disposals of underperforming businesses:

• Following the sale of Grinaker-LTA in November 2019, the Group is no longer exposed to the South African construction industry
• Total proceeds from disposals – R 1,1 billion to date

Disposal of Trident Steel:

• Significantly progressed with an envisaged implementation date during the 2023 financial year
• Purchase price of R691 million and cash of R273 million to be retained
• New investment in BEE SPV including a loan of R207 million from Aveng to facilitate a future BEE transaction that will be repaid within a maximum of one year from closing

Settlement of legacy claims and contingent liabilities close-out:

• Continued settlement of major litigation and historical claims and contingent liabilities
• Guarantees reduced from R3,8 billion in 2017 to R156 million at HY 2023

Highlights:

• Group revenue increased to R15,0 billion (December 2021: R13,0 billion)
• Earnings before non-recurring items (“operating earnings”) for the period – R181 million (December 2021: R215 million)
• Earnings for the period remained flat at R48 million (December 2021: R53 million)
• Earnings per share – flat at 38 cents per share (December 2021: 43 cents per share)
• Headline earnings increased to R77 million (61 cents per share) from a headline earnings of R17 million (14 cents per share)
• Operating free cash outflow of R20 million (December 2021: R490 million inflow)
• Cash and bank balances of R2,8 billion (June 2022: R2,6 billion)
• Net cash position excluding IFRS 16 of R2,1 billion (June 2022: R2,1 billion)
• Increase in work in hand to R53,3 billion* from R30,8 billion in June 2022
• Net asset value per share increased to 2 980 cents per share from 2 873 cents per share at 30 June 2022

We cordially invite you to attend the results presentation for the six-month period ended 31 December 2022

Sean Flanagan, Group CEO, and Adrian Macartney, Group FD, will deliver the presentation at 09:00 on Tuesday, 21 February 2023 and will be available to answer questions thereafter The SENS announcement, presentation, media release and other related material will be published on the Aveng Investor Relations page www.aveng.co.za

Aveng will present its results via webcast. Stakeholders are invited to attend by logging on to the Company’s Investor Relations page A replay of the webcast will be available on our website. Simply log on to: www.aveng.co.za/interim–results.php