Besides boasting a net cash pile of R1.1bn, Aveng has booked its first full-year profit in seven years, underscoring the progress of a turnaround that has seen the infrastructure and mining group move away from SA’s tough construction market.
The strategy the group embarked on in 2017 is not quite over, CEO Sean Flanagan told Business Day, but the group is now more focused on the future. It is still selling its remaining noncore businesses.
A new focus on the Australasian market paid off for Aveng in its year to end-June, with revenue jumping almost a quarter to R25.7bn, while headline earnings amounted to R751m compared with a loss of R950m previously.
Once one of SA’s largest construction companies, Aveng is among just a few left standing after an industrywide slump that led to the collapse of peers including Group Five and Basil Read.
It now focuses on Moolmans, which provides services such as shaft sinking and bulk earth moving, and is one of Africa’s largest open-cut mining contractors. Its other core business is Australasian engineering, construction and maintenance contractor McConnell Dowell, which generates two thirds of group revenue.
McConnell Dowell has at least “more than turned the corner”, said Flanagan, benefiting from an Australian economy that had outperformed during Covid-19, and further underpinned by that country’s support for infrastructure projects.
McConnell Dowell achieved 50% growth in revenue to A$1.5bn (R16bn), with the group saying 91% of its projects were profitable, and consistent project delivery helped with the strong results.
Work in hand rose to A$1.9bn from A$1.8bn, and the value of the group’s preferred tender status increased to $1.7bn from $1.4bn after converting A$900m to work in hand.
Moolmans met its profitability objective and recorded operating earnings of R239m, from R38m previously, which Flanagan said was pleasing given its 2019 loss of R372m.
The two-year-old turnaround at that business is not over; Aveng wants to see a consistently good performance from the business first, Flanagan said.
Moolman’s work in hand increased to R5.4bn, from R4.9bn, and Aveng said the global mining industry is on an upward trend thanks to a positive commodity price outlook for the medium and longer term.
Global mining financing hit an eight-year high in 2020 and funds raised by junior and intermediate companies increased 35% year on year.
Aveng had net cash of R1.1bn at the end of June compared with net debt of R1bn previously, and moved to tap shareholders and restructure debt during the period. It aimed for R300m in March but ultimately raised R392m.
The rights offer, aimed at settling debt at a discount and freeing up cash, was so well received Aveng completed a follow-on R100m rights offer earlier in June.
The group, valued at R4.36bn on the JSE, said on Tuesday it does need needs the cash its cash pile for its hefty working capital requirements, but also noted it is also interested in growth.
It also still owes about R865m to SA banks, amid total debt of R1.4bn, and will likely use the proceeds from the disposal of noncore Trident Steel to reduce this, which would also be viewed as another milestone in the turnaround.
With negotiations continuing, the disposal of Trident is expected to be completed in the 2022 financial year, but in the meantime Aveng said the business is expected to contribute to group liquidity. It generated R247m in operating earnings in 2021, up from R13m the year before.
Aveng Construction SA, formerly Aveng Grinaker-LTA, continued to wind down and finalise the remaining contracts not sold as part of the disposal process. The division reported net operating loss eased to R164m from R174m previously.
Aveng’s shares were up 16.67% to 7c in afternoon trade, though this is not an unusually large move. The stock reached a high of R24.41 in late 2007 when SA was still gearing up to host the 2010 Soccer World Cup. It fell to as low as 1c 2018, and spent most of 2019 and some of 2020 trading at 1c-2c.
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