Aveng confident in its turnaround after Covid-19 hit

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Infrastructure and mining group Aveng, the share of which has lost 99% of its value in the past three years, is still confident the diversification of its services and operating regions will pay off, even after the Covid-19 pandemic caused a liquidity crunch.

Disruptions due to the pandemic caused a R400m liquidity shortfall in SA during the group’s year to end-June, which was solved, partially by R168m in salary cuts by the group’s staff, management and directors.

Aveng’s current liabilities also exceeded its current assets at the end of its year to end-June by R900m, but the group has embarked on a balance sheet restructuring programme, with its largest shareholder, iNguza Investments, agreeing to underwrite a rights offer that will inject a minimum of R300m of capital.

After this restructure, which includes new terms with lenders, the group said on Monday it believes its debt pile will be sustainable, and this will allow it to focus on growing its core businesses.

The group had net debt of R1bn at end-June, almost double that of the prior comparative period, though this was mostly due to accounting changes. The group’s debt compares unfavourably with its R388m market capitalisation as of Monday morning.

The group said Covid-19 restrictions caused a R380m operating profit hit during the second half of its year, but its two key subsidiaries have since returned to profitability and remain cash generative.

Aveng, previously one of SA’s largest construction companies, is among the few infrastructure companies left standing after an industry-wide slump led to the collapse of peers including Group Five and Basil Read. Aveng has pursued geographic diversification and a sharper focus on providing services to mines.

This has seen a focus on mining contractor Moolmans and infrastructure contractor McConnell Dowell.

McConnell Dowell now accounts for almost half of the group’s revenue. The business unit was consistently profitable and continues to focus on specialised projects in Australia, New Zealand and Pacific Islands and Southeast Asia, Aveng said.

“Though Aveng’s external environment remains unpredictable due to Covid-19, the board and management are committed to the group’s strategy and confident that its leadership and core businesses will continue to achieve their growth plans,” the company said.

The group narrowed its headline loss to R950m, from R1.54bn previously, while revenue fell 18.6% to R20.88bn.

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