Aveng to reset as global group
Will restructure to focus on core operations
AVENG, the listed construction and engineering group, is to be restructured as an international infrastructure and resources group in selected fast-growing markets with a smaller footprint in the South African market.
This is to be achieved by simplifying and reducing complexity in the group’s portfolio by focusing on growing the core operations of McConnell Dowell – Aveng’s major engineering, construction and maintenance contractor for the infrastructure and resources sectors in Australia, southeast Asia, New Zealand and the Pacific islands – and Moolmans, the South African-based surface mining contractor with a footprint across Africa.
Eric Diack, the executive chairperson and acting chief executive of Aveng, said yesterday that McConnell Dowell had an annual turnover of about R15 billion and Moolmans of about R5bn, with the two large South African businesses from a turnover perspective, Grinaker-LTA and Aveng Steel, disappearing from the group over time.
The restructuring and refocusing of the group follows a strategic review and will result in the disposal of a number of businesses and initiatives to improve revenue growth and profitability and unlock shareholder value. It will be executed over two to three years in three phases.
Diack said management intended to ensure that Aveng Trident Steel and Aveng Grinaker-LTA were acquired by new shareholders who were better positioned to compete successfully in the South African marketplace.
Discussions
Aveng in December reported that it had terminated an agreement to sell a 51 percent stake in Grinaker-LTA to Kutana Construction for R756 million as part of a strategy to create opportunities for emerging black contracts in line with the Voluntary Rebuilding Programme agreement reached with the government.
Diack confirmed yesterday that they were in discussions with new parties on the sale of Grinaker-LTA.
Diack said Aveng had also decided to exit its manufacturing businesses.
He said these disposals would reduce the group’s overall exposure to bonds and guarantee lines and result in lower working capital requirements.
But Diack was not prepared to comment on how much the group hoped to raise from the disposals.
Diack said the group’s current debt levels were unsustainable and needed to be deleveraged, adding that the group’s R2bn convertible bond that matures in July next year created significant constraints on the group’s capital structure.
He said they intended to explore options to early settle all, or a portion, of the bond and commence work on the terms of a capital market transaction.
Aveng yesterday reported a narrowing of its headline loss to R335m in the six months to December from R391m in the prior comparative period.
The net loss reduced to R346m from R429m, while the headline loss a share decreased to 84.4 cents from 98.5c.
Driven by a 35 percent growth in revenue by McConnell Dowell, group revenue increased 13 percent to R16.1bn from R14.3bn.
There was an improvement and turnaround in group net operating earnings to a profit of R51m from a loss of R47m.
However, Grinaker-LTA reported an increased loss of R212m from a R62m loss in the previous corresponding period, largely due to project underperformance on major contracts in the civil engineering business.
Shares in Aveng fell 6.4 percent to close at R1.61 on the JSE yesterday.