Aveng’s shares slump 7.55 percent after reporting an anticipated loss

SHARES in construction group Aveng slumped by a further 7.55 percent on Friday to close at R5.51, after the group said it anticipated reporting a headline loss of between R550 million and R590m in the year to June.

However, Aveng said in an updated trading statement on Friday that despite the disappointing financial results, the group did not have any current need for additional capital.

Aveng said the group’s management considered its operating cash flow, future funding requirements and commitments, available facilities and related covenants “adequate at this time”.

It added that the Competi- tion Tribunal had last week approved the disposal of the group’s South African property portfolio, which was anticipated to be completed before the end of the first quarter of its 2016 financial year and would provide further support of the group’s liquidity position.

Aveng said it expected to report a headline loss a share of between 137c and 147c for the year to June, which was between 222 percent and 231 percent lower than the headline earnings a share of 112.5c in the previous year. The group will publish its annual financial results tomorrow .

Shares in Aveng slumped on June 11 by more than 16 percent to close at R7.55, their lowest level in almost 11 years, after the group forecast its headline earnings a share for the year to June were expected to be at least 50 percent lower than in the previous year at a maximum of 56.3c.

At the time, Aveng attributed this earnings decline to challenging economic conditions in domestic and foreign markets, labour disruptions in the mining and steel sectors and higher-than-expected costs to complete certain contracts.

Unforeseen events

Aveng also said on Friday that subsequent to the trading update in June, several events had impacted this trading guidance, including additional provisions that were raised related to long-standing commercial claims that were under negotiation in Aveng Grinaker-LTA.

These claims did not achieve sufficient progress by year end and while the group remained confident of an acceptable com- mercial outcome, the increased uncertainty associated with protracted negotiation processes, had resulted in the additional substantial provision.

Although the Gouda wind farm in the Western Cape achieved its scheduled physical completion date, the unexpected low wind pattern for the specific period in the year caused a significant delay to the testing and technical compliance and sign-off of the plant.

Aveng said it had continued to conservatively recognise any increases in the deferred taxation assets for its South African business, but in taking cognisance of the deterioration in market conditions during the budgeting and medium-term forecasting process, the group had taken a more prudent view.