Our opinion on the current state of AVENG(AEG)The once-massive construction company, Aveng (AEG), which traded at R69 a share in 2008, was reduced to a penny stock. This sad demise was brought about by a number of factors. Among these, the reduction in construction spending following the sub-prime crisis has been critical. The government ceased infrastructure development after the 2010 World Cup, which had a further detrimental impact. This was then followed up by the Competition Commission's R1,4bn fines in the construction industry. The difficult operating environment was made worse by losses on various construction contracts, which have required extensive write-downs and impairments.
Aveng's objective has been to focus on McConnell Dowell in Australia and the mining contractor Moolmans, both of which are now profitable. On 26th January 2021, the company announced the terms of a fully underwritten rights issue to raise R300m by selling about 20 billion shares at 1,5c each. Shareholders were offered 103.122 rights for every 100 shares held. This obviously substantially diluted the existing shareholders. On 12th October 2021, the company announced a 500-for-1 consolidation effective 8th December 2021, which resulted in the share price rising to around R28.
The company announced the sale of Trident Steel on 3rd May 2023 for R1,2bn, which effectively leaves the company debt-free. In its results for the six months to 31st December 2023, the company reported revenue of A$1,5bn and headline earnings of A$11,3m. The company also announced its intention to report in Australian dollars in the future, not rands, because it said 91% of its income was now received in Australian dollars. Headline earnings per share improved from 5,2c to 8,8c.
The company said, "At 31 December 2023, Aveng grew its revenue from continuing operations, which excludes Trident Steel, by 39% to A$1.5 billion. In the current period, McConnell Dowell accelerated their repayments and repaid A$10 million of the term debt facility. The remaining balance of A$13 million is expected to be settled by June 2024."
In a trading statement for the year to 30th June 2024, the company estimated that it would report a positive HEPS compared with the loss of 61,6c (A$) in the previous year. The company said, "McConnell Dowell is expected to report a positive performance for the year ended 30 June 2024. Operating earnings are expected to reflect an improvement on the prior year. Moolmans is expected to report marginal operating earnings for the year ended 30 June 2024. Operating margins remain under pressure, primarily associated with the Tshipi contract."
Technically, the share has been moving up since mid-May 2024 and looks to be entering a new upward trend.
