Picture: 123RF/THAM KC
Picture: 123RF/THAM KC

Infrastructure and mining group Aveng is aiming to tap shareholders for an amount approaching its market capitalisation, saying it is still confident the diversification of its services and operating regions will pay off, even after the Covid-19 pandemic caused a liquidity crunch.

The group is currently engaging with shareholders over a balance sheet restructure that offers to be a “watershed” moment for the group, offering the prospect of halving debt, and putting Aveng in a position to consider additional growth opportunities, CEO Sean Flanagan said on Monday.

Aveng’s current liabilities 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, Highbridge Capital, agreeing to underwrite a rights offer that will inject a minimum of R300m of capital.

Along with this, the group also wants to settle R400m through share issuance, and the early payment of R660m of debt, at a discount, is expected to save it R450m.

Support from other large shareholders — in total about 40% — had already been forthcoming, said Flanagan. Once this consultation is complete, the group will then determine the size of the rights offer.

The group had also conducted a R493m rights offer in June 2018 that saw the number of shares in issue grow more than tenfold. 

Turnaround

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, 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.

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.

McConnell Dowell's order book stood at A$1.3bn (R14.7bn) at the end of June, a 12% increase from the prior year.

Flanagan said on Monday both McConnell Dowell and Moolmans was in line for other opportunities, and the group could announce new contracts secured by the businesses to the tune of billions of rand in coming months.

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.

Excluding the effects of accounting changes that bring leases onto the balance sheet, debt increased to R552m, from R540m previously.

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

In afternoon trade on Monday, Aveng’s share was up 50% to 3c, although this is not an unusual move for its share, which began 2020 at 2c.​

Correction: November 30 2020
An earlier version of this article incorrectly said Aveng's largest shareholder was iNguza Investments, when it is in fact Highbridge Capital

gernetzkyk@businesslive.co.za

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