Moolmans and McConnell Dowell help Aveng shrink losses
The return to profitability of mining contractor Moolmans has boosted Aveng’s fortunes as the listed infrastructure and resources group narrowed losses in the six months to end-December 2019.
Aveng’s headline loss improved from the previous R703m to R205m while loss per share was 0.9c, compared to the previous 7.2c.
Aveng, previously one of SA’s largest construction companies, has reduced its focus to core businesses Moolmans and infrastructure contractor McConnell Dowell. The two subsidiaries make up Aveng’s two-year order book of R17.9bn, up from the previous R17.7bn. McConnell Dowell accounts for 72% of the order book.
Aveng reported a R14m operating profit, compared to a loss of R484m in the previous period.
The company said McConnell Dowell and Moolmans were both profitable, generated cash and had secured more than 90% of 2020 budgeted revenues in the first half of the financial year. Alongside focusing on the two companies, Aveng’s 2018 strategic plan triggered a sale of several noncore assets.
“As we enter the final stages of the strategic plan, our focus has now shifted to attaining consistent performance, sustainable long-term profitability and value creation for all stakeholders,” Aveng CEO Sean Flanagan said.
Flanagan said Moolmans, which is one of Africa’s largest open-cut mining contractors, swung from a R166m loss to a profit of R117m in the six months. “We are pleased with that turnaround,” he said.
He attributed the improved performance to the changes Aveng made at Moolmans. These included the appointment of Jerome Govender as MD and the renegotiation of the Gamsberg open-pit zinc mine contract in the Northern Cape.
Flanagan said the company had made “significant” progress in the sale of noncore assets and was on course to meet the target of finishing the sales by June 30 2020. To date Aveng has announced disposals valued at more than R1bn, with cash receipts of R750m.
“Aveng has established a project management office to manage and implement the significant task of closing out the noncore disposals and ensuring that the group complies with all statutory, legal, technical, commercial and human resources obligations,” Aveng said.
Flanagan said Aveng had given priority to improving its financial position and recent steps towards this included the early redemption of the R2bn convertible bond, a R493m rights offer, the restructuring of bank debt and the issuance of a new term and revolving credit facility note.
To date, R450m of the debt has been repaid.
Aveng’s shares were unchanged at 2c on Monday.