Aveng chief says struggling firm is on road to recovery
AVENG chief executive Sean Flanagan said yesterday that the struggling international infrastructure and contract mining group was on the road to recovery.
Flanagan said Aveng’s main subsidiaries of McConnell Dowell and Moolmans were profitable and cash generative in the year to June 30. Flanagan said McConnel Dowell had an order book of A$1.8 billion (about R20.23bn), and this was expected to grow by A$1bn shortly, and the award of contracts was continuing.
He said the Australian government was spending significantly to improve infrastructure, which presented opportunities for the group such as on roads, bridges and water infrastructure, and new work in renewable energy was also being gained.
Flanagan said continued growth and optimisation of work in hand was planned, as well as the management of liquidity, a reduction in group costs, the complete disposal of non-core assets and the close out of the project management office (PMO) function.
He said the PMO office, which was set up to finalise residual contract obligations and performance bonds, was expected to be shut down completely next year.
The main operations still to be sold were Trident Steel, for which the group had received “four creditable offers” and the ACS automotive control business, where agreements were being finalised, said Flanagan.
Contract mining group Moolmans turned around to a R38 million profit from a loss of R327m, and the improvement had continued into the first half of the new financial year, with R100m of operating profit in the first three months.
A R300m rights issue at 1.5 cents a share is planned, as is the settlement of R400m of debt.
The group operating loss of R532m represents a 52 percent decrease in losses, which Flanagan said was a remarkable achievement, considering that many of its listed peers were slipping from profit to loss.
“The restructuring and recapitalisation represent a significant watershed for the group,” he said in a telephone interview.
Group revenue was R20.9bn from R25.7bn in 2019, following asset sales of R247m and the impact of Covid-19.
Work-in-hand came to R26.8bn, 82 percent international, 18 percent South Africa, with 60 percent at McConnell Dowell.
The headline loss improved to R950m from a R1.5bn loss in 2019. Net asset value per share decreased to 9.5 cents per share from 12.7c per share.
In the year ahead the restructure and recapitalisation plan was expected to continue, as would the operational improvement in the two subsidiaries.
Among the cost savings measures during the past period the group corporate headcount was reduced from 200 to under 30.
There was R1.3bn of cash at year end, with most of it held in McConnell Dowell for covenants, bonding and working capital.
Net operating earnings in the quarter to September 30 amounted to R124m. Revenue at McConnell Dowell at the end of the quarter was at 5-year highs, and Moolmans had reported a solid operating performance.
South African lender debt and overdraft facility had been reduced to R1.1bn from R2.1bn, and the balance sheet restructuring had provided a sustainable capital structure and a platform from which the group could execute its growth strategy, said Flanagan.
Aveng shares closed unchanged at R0.02 on the JSE yesterday.