Aveng raises impairments of R2.7bn, R272m

Group says they reduce risk and uncertainty

AVENG has raised an impairment of R2.7 billion on long-standing uncertified revenue in the year to June, which will reduce the listed construction and engineering group’s earnings a share and headline earnings a share by 667 cents for this reporting period.

It has also raised an impairment of R272 million on plant and equipment and intangible assets at Aveng Steel and decided on a R531m write-down of deferred tax assets in the group in line with expected future utilisation.

The group said yesterday that the impairment and writedown reduced risk and uncertainty from the group and McConnell Dowell’s balance sheets. Aveng said a number of factors had guided the assessment of long-outstanding uncertified revenue, including certain unfavourable claim settlement awards.

It said these most notably included the recent Queensland Curtis Liquefied Natural Gas (QCLNG) award in Australia, which realised substantially less than the carrying value, and the previously reported Kenmare Resources and Mokolo Crocodile Water Augmentation awards in South Africa.

Aveng said its headline loss a share for the year to June would be between 1 587c and 1 663c compared to the 75.2c loss in the previous year.

This equates to a headline loss for the year of between R6.3bn and R6.6bn, compared with the R299m loss in the previous year.

The group is scheduled to publish its annual financial results on Tuesday.

Operational Aveng said weak market conditions had negatively impacted the overall business performance, which combined with operational under performance at Aveng Grinaker-LTA and the negative impact of the continuing work on loss-making historic projects at McConnell Dowell had resulted in a decline in underlying operational performance.

It said McConnell Dowell and Aveng Grinaker-LTA were expected to return to profitability in the current financial year but the turnaround and restructuring of both these units had taken longer than anticipated.

Aveng added that its management was addressing certain residual matters, including the completion of work and commercial matters in relation to legacy and historic projects, project performance at Aveng Grinaker-LTA and the fundamental quality of the group’s balance sheet.

The group said it had reached agreement with its major funding banks for the renewal and extension of its existing facilities, some of which were due to reach maturity.

It said this would provide certainty following the previously reported A$50.5m (R508m) award and associated write-down of A$235m (R2.4bn) related to the QCLNG project and review of long-outstanding uncertified revenue.

Aveng yesterday also reported that the Dispute Adjudication Board (DAB) had ordered Genrec, a division of listed Murray & Roberts, to pay the group R123m plus simple interest of 15.5 percent from September 1, 2011 to the date of payment following the long-standing dispute between Genrec Engineering and the Aveng Steel fabrication division.

Aveng shares closed a whopping 20.69 percent higher on the JSE yesterday at R3.50.