Aveng’s shares plunge to 16-year low

Net operating earnings fall to a loss of R288 million

AVENG shares yesterday plunged to a 16-year low after the listed construction and engineering group announced it had tumbled to a loss in its latest financial year.

The group’s stock on the JSE fell as low as R4.62, which was the company’s lowest level since July 1999, before closing down 2.73 percent down at R4.98, which valued the company at R2.1 billion.

Aveng yesterday reported a headline loss a share of 144.3c in the year to June, compared with headline earnings a share of 112.5c in the previous year. Revenue dropped by 17 percent to R43.9bn from R53bn.

Net operating earnings slumped to a loss of R288 million from a profit of R799m.

This was largely attributable to the R585m net operating loss by the total construction and engineering group, with the South Africa and the rest of Africa segment reporting a net operating loss of R697m.

Aveng had net cash of R393m at end-June compared to R1.27bn in the previous year.

The group’s two-year order book declined by 22 percent to R28.9bn from R37.1bn.

Economic slowdown

Aveng shed a total of 6 000 people in its past financial year to June because of the economic slowdown in its key South Africa and Australian markets.

Kobus Verster, Aveng chief executive, said yesterday about 885 of these job losses were permanent staff and 1 600 in its Australian and south east Asia operations, with the balance in South Africa.

Group Five on Monday reporting that 2 600 employees had been retrenched in its financial year to June, of which 232 were permanent employees and the remainder limited duration contract workers.

Verster said the job losses were almost equally shared among Aveng’s Australia and south east Asia business, South African construction business Grinaker LTA and the group’s mining and steel businesses.

He said Aveng has closed its engineering, procurement and construction business in the past year, its steel business was under review and a break even position was being targeted for Grinaker LTA for the current financial year.

However, Verster stressed that to achieve break even, Grinaker LTA needed to secure work in the first half of its new financial year to December.

If the company was unable to secure additional work at appropriate margins, the overheads of the company would have to be further resized to adjust to this new project level, he said.

Verster said Aveng had made inroads in delivering on its recovery and stabilisation strategy, but the improved operational performance of the group was overshadowed by the economic slowdown in key markets.

Confidence

Verster expressed confidence Aveng did not need to raise further funds to improve the group’s liquidity.

The big cash consumers in the past three years were the Gold Coast Rapid Transit and Queensland Curtis Liquefied Natural Gas (QCLNG) pipeline projects and the losses made by Grinaker LTA, but the cash flow demands for the QCLNG and Gold Coast projects were completed although they still had commercial issues to resolve.

“We are confident of getting Grinaker LTA to a break even position (in the 2016 financial year).

“All our other operations are very strong cash flow generative and if you look at our cash position, we are cash flow positive and our only debt is a five-year bond that does not require short term settlement,” he said.

The group’s two-year order book declined by 22% to R28.9bn from R37.1bn.