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Aveng Group FY 2013 presentation

Aveng Group FY 2013 presentation

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Aveng Group FY 2013 financial results presentation Presentation Transcript

  • 1. Audited group results for the 12 months ended June 2013
  • 2. Introduction Angus Band 2
  • 3. Today’s presentation Introduction Overview and Financials Angus Band Chairman Kobus Verster Acting CEO & CFO Audited group results for the year ended 30 June 2013 Operational Review The Way Forward Divisional MD’s Kobus Verster Acting CEO & CFO 3
  • 4. Overview » A disappointing FY13 » Competition Commission » Leadership change » Group Structure change » Order book » Risk management Audited group results for the year ended 30 June 2013 4
  • 5. A disappointing FY13 » Solid performance from the Australian construction and the mining operations » Poor result from the South African construction operations • Strike action intensified into 2H13, particularly in the Lephalale region • Contract review process which led to a major loss provision » Manufacturing and Processing broadly in line with expectations • Poor result from Aveng Steeledale Audited group results for the year ended 30 June 2013 5
  • 6. Competition Commission » In terms of the Fast-Track Settlement Process, construction firms were encouraged to fully disclose historical collusive conduct » A settlement agreement with the Commission was concluded in the amount of ZAR306.6mn. In terms of the process, Aveng has no further outstanding matters » The agreement was confirmed by the Competition Tribunal in July 2013. Aveng was commended by the Commission in its submissions for the cooperation, disclosure and assistance to the Commission during the course of the investigation » The confirmation of the settlement results in a full and final settlement of all of the collusive matters as defined in the agreement » Aveng has a well defined programme to ensure that any potential anti-competitive conduct does not recur Audited group results for the year ended 30 June 2013 6
  • 7. Leadership change » Leadership change • Resignation of Roger Jardine and the appointment of Kobus Verster as Interim CEO • Appointment of Brian Wilmot as MD of Aveng Grinaker-LTA Audited group results for the year ended 30 June 2013 7
  • 8. Group structure Audited group results for the year ended 30 June 2013 8
  • 9. Order book » Aveng continues to report a two-year construction order book » Order book declined by 6% since December 2012 • Solid at ZAR37.4bn • Awaiting the award of mining contracts and construction contracts in Africa • Slow down in commodity-related infrastructure projects in Australia is being replaced by social infrastructure related projects and by contracts outside Australia Audited group results for the year ended 30 June 2013 9
  • 10. Risk management » Risk framework in place » Implementation and improvements made during the year • 20% peer review • Oversight function created • Risk tender committee assuming additional responsibilities Audited group results for the year ended 30 June 2013 10
  • 11. Overview Kobus Verster 11
  • 12. Market conditions » South African infrastructure spend remains soft, with construction margins still under pressure » Significant growth opportunities in rest of Africa » Steel environment remains competitive » Australian economy has started to weaken, but there are significant opportunities in South-East Asia » Global commodity market subdued but opportunities for contract mining remain strong Audited group results for the year ended 30 June 2013 12
  • 13. Salient features » Revenue increase of 27% on comparative period last year » Headline earnings and HEPS declined by 6% and 3% respectively » Disappointing performance by Aveng G-LTA; revenue increased by 2%, but with a net operating loss of ZAR950mn » With the exception of Aveng G-LTA and Aveng Steeledale, the businesses performed reasonably and within the constraints of their respective operating environments. Aveng Trident Steel delivered a much improved 2H performance » Significant progress made in resolving the problematic Australian contracts » A solid underlying performance of MacDow » Strong performance of open-cut mining » Two-year order book still robust at ZAR37.4bn » Net cash declined by 27% to ZAR2.4bn since December 2012 Audited group results for the year ended 30 June 2013 13
  • 14. Safety Performance » Regrettably 6 fatalities at group operations of which two involved service provider employees (12 fatalities in FY12) 5,8 5,3 5,2 » Further improvement in the All Injury Frequency Rate (AIFR) to 4.5 • Batam fabrication facility in Indonesia completed 8 Million LTI free hours • Komo project in Papua New Guinea completed 7 million LTI free hours 4,5 All Injury Frequency Rate » Safety achievements include: 4,7 • Siguiri gold mine in Guinea completed 5 million LTI free hours • Mokolo crocodile project completed 2 million LTI free hours Audited group results for the year ended 30 June 2013 FY09 FY10 FY11 FY12 FY13 14
  • 15. Financial Overview Kobus Verster 15
  • 16. Financial Review Abridged extracts from Statement of Comprehensive Earnings FY 2013 ZARmn FY 2012 ZARmn Change 51 704 40 886 27% 627 504 24% 656 613 7% 29 78 (63%) (30) 113 N/A (167) (203) (18%) Earnings for the period 459 523 (12%) Headline earnings 466 495 (6%) Earnings per share (cents) 124.6 134.9 (8%) Headline earnings per share (cents) 124.6 128.1 (3%) (1 531) (900) (71%) Capital expenditure 1 413 2 087 (32%) Net cash position 2 420 3 932 (38%) 1 Revenue Operating Earnings before other gains and losses Net operating earnings 2 Income from equity-accounted and other investments Net finance (expense) / earnings Taxation expense Operating free cash flow 1 2 Total Revenue includes internally generated revenue. Revenue has been reconciled to external revenue in Appendix A Refer to Appendix B Audited group results for the year ended 30 June 2013 16
  • 17. Total Revenue: Segmental Analysis FY 2013 ZARmn South Africa and rest of Africa 8 294 FY 2012 ZARmn 1,2 8 198 Change 1% Australasia and Asia 26 749 17 122 56% Total Construction and Engineering 35 043 25 320 38% Mining 7 435 6 680 Manufacturing and Processing 9 735 9 326 4% Eliminations (509) (440)2 (16%) 51 704 40 886 26% Total3 1 2 3 1 11% Restated as Aveng Mining Shafts and Underground and Aveng Moolmans are now included in Mining Restated as Concessions is now included in Administration Total Revenue includes internally generated revenue. Revenue has been reconciled to external revenue as part of Appendix A Audited group results for the year ended 30 June 2013 17
  • 18. Construction and Engineering Revenue: South Africa and rest of Africa FY 2013 ZARmn FY 2012 ZARmn Change Aveng G-LTA – Construction 6 053 6 208 (2%) Aveng G-LTA – Specialised products 1 598 1 272 26% 643 718 (10%) 8 294 8 198 1% Aveng E+PC & Water Total1 1 Total Revenue includes internally generated revenue. Revenue has been reconciled to external revenue as part of Appendix A Audited group results for the year ended 30 June 2013 18
  • 19. Construction Revenue: Australasia and Asia FY 2013 ZARmn FY 2012 ZARmn Change Construction – Australia 11 799 7 850 50% Construction – Offshore 3 637 3 658 (1%) Pipelines 7 959 2 846 180% Electrical 2 575 1 884 37% 998 1 042 (4%) (219) (158) (39%) 26 749 17 122 56% Tunnelling Eliminations Total 1 1 Total Revenue includes internally generated revenue. Revenue has been reconciled to external revenue as part of Appendix A Audited group results for the year ended 30 June 2013 19
  • 20. Manufacturing and Processing Revenue FY 2013 ZARmn FY 2012 ZARmn Change 6 012 5 743 5% Aveng Manufacturing Infraset 875 729 20% Aveng Manufacturing Duraset 594 634 (6%) 1 193 1 390 (14%) Dynamic Fluid Control 392 402 (2%) Aveng Manufacturing Lennings Rail Services 761 428 78% Eliminations (92) - N/A 9 735 9 326 4% Aveng Trident Steel Aveng Manufacturing Steeledale Total1 1 Total Revenue includes internally generated revenue. Revenue has been reconciled to external revenue as part of Appendix A Audited group results for the year ended 30 June 2013 20
  • 21. Net Operating Earnings - Segmental Analysis FY 2013 ZARmn South Africa and rest of Africa Australasia and Pacific Total Construction and Engineering (914) FY 2012 ZARmn 1,2 (861) Change (6%) 639 406 57% (275) (455) 40% 1 Mining 711 Manufacturing and Processing 269 585 (54%) Administration (49) (96)2 50% Net Operating Earnings 656 613 7% 1 2 579 23% Restated as Aveng Mining Shafts and Underground and Aveng Moolmans are now included in Mining Restated as Concessions is now included in Administration Audited group results for the year ended 30 June 2013 21
  • 22. Movement in cash and cash equivalents (ZARmn) FY13 (ZARbn) FY12 (ZARbn) Cash South Africa Australia and other 0.8 3.2 2.5 2.7 Debt South Africa Australia and other 0.4 1.1 1.0 0.3 2 398 4 860 41 308 2 184 38 464 603 242 3 951 1 331 Cash 30 June 2012 Foreign Currency Impact Operations Investment Income Audited group results for the year ended 30 June 2013 Working Capital Finance cost Taxation Dividends Net assets L/T Cash 30 purchased borrowings June 2013 22
  • 23. Working capital FY 2013 ZARmn FY 2012 ZARmn FY 2013 Days FY 2012 Days 2 780 2 467 21 24 13 052 9 925 92 89 2 655 2 683 19 24 10 397 7 242 73 65 11 419 10 165 86 99 Trade and other payables 9 052 7 894 68 77 Amounts due to contract customers 2 367 2 271 18 22 4 413 2 227 Inventory Receivables Trade and other receivables Amounts due from contract customers Payables Working Capital Audited group results for the year ended 30 June 2013 23
  • 24. Capital expenditure1 FY 2013 ZARmn FY 2012 ZARmn Replacement 925 867 Expansion 559 1 220 1 484 2 087 1 181 1 479 1.3 1.4 Total Depreciation and impairment 2 Multiple of depreciation spent 1 Comprising acquisitions of Property, Plant and Equipment and Intangible Assets 2 This figure comprises depreciation of ZAR1 179mn and impairment of ZAR2mn Audited group results for the year ended 30 June 2013 24
  • 25. Dividend » The board has resolved not to declare a dividend due to • Adverse cash flow which was mainly as a result of working capital outflow on QCLNG • Losses at Aveng Grinaker-LTA Audited group results for the year ended 30 June 2013 25
  • 26. Construction and Engineering South Africa and rest of Africa 26
  • 27. Construction and Engineering – South Africa and rest of Africa Performance » Leadership change in June 2013 Revenue (ZARbn) 10,8 9,6 » Construction market in South Africa continues to be very competitive 8,2 8,3 FY12 FY13 » Segment revenue increased by 1.2% to ZAR8.3bn, but Aveng G-LTA’s revenue increased by 2.3% to ZAR7.7bn » Operational performance is unacceptable as last year’s loss increased to ZAR914mn » Operating structure enhancement, with effect of 1st July 2013, will move Specialised business (ACS, Facades, DSE) to other operating entities FY10 FY11 Operating Profit (ZARmn) 668 432 » Stabilisation and recovery process continues -760 FY10 Audited group results for the year ended 30 June 2013 FY11 FY12 -914 FY13 27
  • 28. Construction and Engineering – South Africa and rest of Africa » Gross margins under pressure » Overheads remain too high relative to revenue expectations » Large contract losses, specialised businesses underperformed » Direct strike action impact on EBIT is estimated at ZAR270mn » Negative cash flow Audited group results for the year ended 30 June 2013 28
  • 29. Construction and Engineering – South Africa and rest of Africa Major Projects Nacala – Tete (Mozambique) Medupi Power Station - Limpopo Mokolo Water Augmentation Project - Limpopo Cradlestone Mall - Gauteng Audited group results for the year ended 30 June 2013 29
  • 30. Construction – South Africa and Africa: Order Book 2 year order book (ZARbn) Order book by discipline Power 9,2 9% Mining 8,0 10% Water & Environmental 6,6 7,0 6,5 9% 2% Infrastructure 5% 42% Industrial & Commercial 5,7 Oil & Gas 23% Other Order book by sector 1H11 FY11 1H12 FY12 1H13 FY13 » Market conditions remain soft, slight increase in order book Public sector » Cross-border diversification with 13% of WOH outside RSA Private sector 55% 45% » Important contract wins: Majuba Rail Link, Nacala Section 2 Rail Project, Pavilion Shopping Centre, Shondoni Mine Audited group results for the year ended 30 June 2013 30
  • 31. Construction – South Africa and Africa: Outlook Internal factors » Immediate actions being implemented will • Focus on the execution of large projects • Strengthen management and delivery capability • Align overheads to business requirements / opportunities • Enhance risk management processes • Focus on management stability • Pursue profitable growth in Africa (Mozambique and Mauritius) External factors » Challenging labour environment » Slower than expected infrastructure spend in RSA, but emerging opportunities in Africa » Continued margin pressure Audited group results for the year ended 30 June 2013 31
  • 32. Construction Australasia and Asia
  • 33. Construction – Australasia and Asia Performance Revenue (ZARbn) 26,7 » Strong revenue increase on back of large projects » Revenue increased 38% to AUD2.9bn, helped by strong growth in the Australia construction and pipelines operations. Over 31% of revenue came from QCLNG, Hay Point and GCRT » Operating margin increased to 2.4% compared to 2.1 last year despite substantial provisions created in 2013 on QCLNG. ROE increased to 15% from 12% last year » Over 75% of revenue was attributable to Australia, with a further 10% to SE Asia and 15% to New Zealand 17,1 13,0 13,3 FY10 FY11 FY12 FY13 Operating Profit (ZARmn) 644 595 360 291 » Substantial progress made in resolving problem contracts FY10 Audited group results for the year ended 30 June 2013 FY11 FY12 FY13 33
  • 34. Construction – Australasia and Asia » Komo Airport project now successfully completed » Commercial resolution of Hay Point Berth was achieved in May 2013 and we continue to work collaboratively with the client to complete the project in 2014 » Adelaide Desal handed over to client - insurance claims are still outstanding » Work on the GLNG and APLNG pipelines in Queensland remains on track » Built Environs continues to perform well and has a good order book which includes the Perth Airport Terminal » QCLNG now over 85% completed, but project execution and commercial risks still remain Audited group results for the year ended 30 June 2013 34
  • 35. Construction – Australasia and Asia Major Projects QCLNG Natural Gas Project - Australia Hay Point Coal Terminal Expansion Project Australia Komo Airfield - PNG Seaford Rail – South Australia Audited group results for the year ended 30 June 2013 35
  • 36. Construction – Australasia and Asia: Order book 2 year order book (ZARbn) Order book by business unit 2% 30,6 29,9 Australia construction 15% Overseas construction 24,7 24,0 Pipelines 41% 9% Tunnels 18,9 Electrical 15,6 13% Other 20% Order book by region 1H11 FY11 1H12 FY12 1H13 1% FY13 » Order book replenishment a key focus Australia 30% SE Asia » Management continues to secure work outside of the slowing Australian market NZ/Pacific Is. 60% Middle East 9% » Promising tunnelling opportunities in SE Asia will provide further geographical diversification Audited group results for the year ended 30 June 2013 36
  • 37. Construction – Australasia and Asia: Outlook » Following the slow down of investment in resources infrastructure in Australia, a shift in focus to social and transport infrastructure projects continues » Remains well positioned due to geographic spread and diverse product offering » MacDow remains well positioned with a total order book of AUD2.7bn » Off the high base set in FY13, revenue in FY14 is expected to decline given the lower level of work on hand » Pursuing good opportunities in the transport sector including the North West rail PPP and have recently secured a tunnel and station contract in Singapore » Strong focus on growing the contribution from offshore businesses, in particular Asia » Earnings and cash flow dependent on resolution of QCLNG Audited group results for the year ended 30 June 2013 37
  • 38. Aveng Mining
  • 39. Aveng Mining Performance » Strong performance by open-cut mining (Aveng Moolmans) which largely offset a disappointing performance from Aveng Mining Shafts & Underground Revenue (ZARbn) 7,4 6,7 5,6 4,9 » Revenue increased by 11% to ZAR7.4bn, and the operating margin increased to 9.5% from 8.7% » Aveng Moolmans works across eight countries, for nine clients and mines seven commodities. The majority of work is outside South Africa » Aveng Mining Shafts & Underground has closed two unprofitable operations and continues to work on three shafts FY10 FY12 FY13 Operating Profit (ZARmn) 708 512 580 405 FY10 Audited group results for the year ended 30 June 2013 FY11 FY11 FY12 FY13 39
  • 40. Aveng Mining Wesizwe Platinum Mine, South Africa Sadiola Gold Mine, Mali Iduapriem Gold Mine, Ghana Star and Comet Mine, Tanzania Audited group results for the year ended 30 June 2013 40
  • 41. Aveng Mining: Order book 2 year order book (ZARbn) Aveng Mining's revenue by commodity 9,5 Nickel 9% 8,3 7,6 8,3 7,8 Platinum 11% 13% 12% Gold 9% 6,0 Uranium 26% 13% Copper 8% Coal Aveng Mining's revenue by geography 1H11 FY11 1H12 FY12 1H13 FY13 Botswana Ghana » Order book has declined 28% since December 2012, but new projects are being pursued 2% 11% Guinea 7% Mali 6% Namibia 10% RSA » 68% of the current order book pertains to Aveng Moolmans, 41% is outside SA and there is no exposure to the public sector Audited group results for the year ended 30 June 2013 2% 11% Tanzania 43% 8% Zambia Chile 41
  • 42. Aveng Mining: Outlook » Aveng Moolmans continues to focus on growth opportunities in Africa, in particular West Africa » Solid reputation in Africa with robust growth opportunities » Still good opportunities for contract mining in Africa » Order book replenishment is expected over the short term » Focus on ROIC and the allocation of capital Audited group results for the year ended 30 June 2013 42
  • 43. Manufacturing and processing
  • 44. Manufacturing and Processing Performance » Operating environment negatively impacted by lower demand from the construction sector, strikes and pricing pressures Revenue (ZARbn) 9,1 9,3 9,7 FY11 FY12 FY13 7,3 » Revenue increased by 4.4%. Aveng Trident’s revenue increased slightly by 4.7% and Aveng Manufacturing’s revenue increased by 3.9% » The operating margin declined to 2.8% compared to 6.3% last year, impacted by lower profitability at Trident and Manufacturing » Apart from Aveng Steeledale, all of the business units were profitable FY10 Operating Profit (ZARmn) 585 478 » Aveng Manufacturing Lenning’s is in the process of successfully completing the FMG contract in Western Australia and Aveng Manufacturing Infraset is benefitting from growth in low-cost housing in South Africa 336 269 FY10 Audited group results for the year ended 30 June 2013 FY11 FY12 FY13 44
  • 45. Manufacturing and Processing: Outlook » Operating structure enhancement implemented with effect 1st July 2013, creation of Aveng Steel (Aveng Trident Steel, Aveng Steeledale and DSE) and transfer of ACS and Facades to Aveng Manufacturing from Aveng Grinaker-LTA » The automotive and construction labour strikes in August will have a negative impact on volumes and turnover » Optimisation initiatives underway to improve profitability through synergies within the steel business » Construction of a manufacturing plant in Tete (Mozambique) to be commissioned by January 2014 » Manufacturing performance expected to improve on the back of • Rail related projects for Aveng Manufacturing Lennings and Aveng Manufacturing Infraset in Africa • Growth opportunities for Aveng Manufacturing DFC in the Americas and Australia • Continued buoyant demand for our low cost housing products • Expansion of ACS in the oil and gas markets in Southern Africa Audited group results for the year ended 30 June 2013 45
  • 46. The Way Forward Kobus Verster 46
  • 47. Construction two year order book Total opportunity pipeline in market: > ZAR111bn Year on year decrease of 20%; Six month decrease of 6% 45,9 46,9 39,7 37,0 32,7 29,2 30,4 31,1 37,4 30,7 25,8 Jun 2008 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Jun 2011 Dec 2011 Jun 2012 Dec 2012 Jun 2013 Confirmed two year order book includes only that portion of revenue accruing to the Aveng Group Audited group results for the year ended 30 June 2013 47
  • 48. Two year group work on hand: Sector and regional splits Two year order book by sector Two year order book by region 42% 38,2 28% 26,7 19,3 12% 12% 8,4 5,9 6% 0,7 Power Mining Water Oil & Gas General Infrastructure SA & Rand Monetary Area Africa SE Asia Australia 0,8 Middle East Chile New Zealand and Pacific Total two year order book; ZAR37.4bn at Jun 2013 Audited group results for the year ended 30 June 2013 48
  • 49. Conclusion Aveng Grinaker LTA McConnell Dowell » New leadership is in place » Our aim is for continued growth in operating margin » The recovery programme continues and is likely to result in a substantial improvement in FY14 » QCLNG still represents a risk » Good opportunities outside South Africa are being pursued Manufacturing & Processing » An improvement from this cluster is expected due to the realisation of synergies in the steel cluster and the growth opportunities in the manufacturing business units Aveng Mining » The renewal of existing contracts will be order book enhancing » A further improvement in equipment utilisation and productivity is expected In summary, a solid improvement in performance from Aveng is expected in FY14 Audited group results for the year ended 30 June 2013 49
  • 50. Appendix
  • 51. Appendix A: Reconciliation of Revenue FY 2013 ZARmn External Internal Gross Revenue Revenue Revenue South Africa and rest of Africa FY 2012 ZARmn External Internal Gross Revenue Revenue Revenue 1,2 8 059 235 8 294 7 931 267 Australasia and Asia 26 749 - 26 749 17 122 - 17 122 Total Construction and Engineering 34 808 235 35 043 25 063 267 25 320 Mining 7435 - 7 435 6 680 - Manufacturing and Processing 9 326 409 9 735 9 148 178 9 326 Administration and elimination 135 (644) (509) 5 (445) (440)2 51 704 - 51 704 40 886 - 40 886 Total 1 2 8 198 1 6 680 Restated as Aveng Mining Shafts & Underground and Aveng Moolmans is now included in Aveng Mining Restated as Concessions now included in Administration Audited group results for the year ended 30 June 2013 51
  • 52. Appendix B: Operating earnings before other gains and losses reconciled to Net Operating Earnings FY 2013 ZARmn FY 2012 ZARmn Change 627 504 24% - 31 N/A Operating earnings after other gains and losses 627 535 17% Share of (loss) / earnings from equity-accounted investments (12) 41 N/A 41 37 11% 656 613 7% Operating earnings before other gains and losses Other gains and losses Earnings from available-for-sale investments Net Operating Earnings Audited group results for the year ended 30 June 2013 52
  • 53. Appendix C: Selected major contract awards to July 2013 Contract/Project Location Client Start date Duration Months Tweefontein Mine Package A – SMP South Africa Xstrata Sep-12 18 Nacala Corridor Project - Railway Section 2 Mozambique Vale Mozambique Feb-13 18 Majuba Rail Project South Africa Eskom Feb-13 30 Aspen Pharmacare - High Containment Facility South Africa Aspen Pharmacare Jun-13 18 Shondoni Mine - Surface Infrastructure and buildings South Africa Sasol Jul-13 23 Strand Private Hospital South Africa Moonland Trading Aug-13 16 Sandton City Repositioning - Atrium on 5th South Africa Liberty Group Properties Feb-13 19 Pavilion Shopping Centre South Africa Pareto Ltd May-13 11 Audited group results for the year ended 30 June 2013 53
  • 54. Appendix C: Selected major contract awards to July 2013 – McConnell Dowell Start date Duration Months Vic Roads May-13 13 Indonesia Oil Tanking May-13 19 APLNG Irrigation Pump Station Australia (Qld) Australia Pacific LNG Jul-13 5 Christchurch rebuild New Zealand Christchurch City Council Jul-13 48 Wheatstone LNG Singapore BAM Clough Jul-13 7 Mereenie Gas Field Works Australia (Vic) Santos Ltd Jul-13 5 Contract/Project Location Client Springvale Rd Grade Separation Australia (Vic) Karimun Jetty Audited group results for the year ended 30 June 2013 54
  • 55. Disclaimer This presentation contains forward-looking statements about the company’s operations and financial conditions. They are based on Aveng Limited’s best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and contingencies many of which are beyond the control of the company. Unanticipated events will occur and actual future events may differ materially from current expectations due to new business opportunities, changes in priorities by the company or its joint ventures as well as other factors. Any of these factors may materially affect the company’s future business activities and its ongoing financial results. Audited group results for the year ended 30 June 2013 55