JSE-listed development and engineering group Aveng is exhibiting indicators that it’s rising from its latest financially troubled previous and is poised for stronger growth.
The group on Tuesday reported an nearly 23% improve in work in hand to R30.8 billion within the 12 months to end-June 2022, pushed by its Australian subsidiary McConnell Dowell and a robust pipeline of alternatives.
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McConnell Dowell
Aveng CEO Sean Flanagan mentioned McConnell Dowell’s work in hand elevated by 33% to Au$ 2.5 billion at end-June, which helps additional growth within the 2023 monetary 12 months.
It secured an extra Au$883 million of latest work submit the group’s year-end, together with the brand new Bridgewater Bridge challenge in Tasmania.
Flanagan mentioned McConnell Dowell can also be the present most well-liked bidder on tenders valued at Au$1.7 billion, has Au$2.5 billion in submitted tenders excellent, and has a complete challenge pipeline of Au$8.7 billion.
“Ninety-one percent of its revenues for its 2023 financial year are already secured. That is the best position I have seen in a construction environment in my 40 years in the industry.”
Flanagan added that McConnell Dowell has 88 energetic tasks, 85% of that are acting at or above tendered margin.
He mentioned 63% of Aveng’s work in hand is out of the enterprise unit in Australia, which has been an incredible performer prior to now 12 months.
“We continue to see that as our growth engine,” he mentioned.
Moolmans
Moolmans, the group’s southern African open-pit mining enterprise, had R3.1 billion in work in hand at end-June, representing 78% of its budgeted income for the 12 months forward.
Post year-end, Moolman was awarded a brand new rehabilitation challenge at Klipspruit mine.
Flanagan mentioned Aveng additionally sees important alternative for growth within the group’s mining enterprise, with Moolmans’ whole pipeline of R55.6 billion.
This consists of R11.4 billion in tenders the place Moolmans is the popular bidder.
Moolmans additionally has tenders value R23.3 billion awaiting a choice and is making ready to submit tenders for contracts valued at R17.4 billion.
Flanagan mentioned Moolmans’ important challenge pipeline consists of present and new prospects in gold, copper, lithium and uranium tasks in west and sub-Saharan Africa.
Trident Steel
The CEO mentioned the growth prospects of Trident Steel, the group’s solely remaining non-core enterprise, stay optimistic and are supported by important new element provide awards and growing manufacturing with present authentic gear producers (OEMs).
He mentioned it’s presently making ready its operations for the brand new Ford Ranger and Volkswagen Amarok fashions, which can be launched later this 12 months.
“Negotiations for the disposal of Trident Steel remain at an advanced stage and management remains confident of closing this sale,” he mentioned.
The numbers
The group reported improved revenues, gross margins and working earnings mixed with robust money era underpinned by a stronger capital base within the 12 months to end-June.
“Aveng has completed its transition from recovery and turnaround to profitability and the group is now in a position to focus on significant long-term growth prospects,” Flanagan mentioned.
Group income rose 1.9% to R26.2 billion from R25.7 billion.
Earnings earlier than non-recurring gadgets improved by 7.5% to R576 million from R536 million.
Flanagan mentioned the group’s gross margin elevated to eight.1% from 7.6% within the earlier 12 months, demonstrating the sustained enchancment within the high quality of the group’s operational efficiency.
Headline earnings per share of 252 cents have been decrease than the restated 1 016 cents per share within the earlier 12 months. A dividend was not declared.
External debt was decreased by R398 million to R481 million, whereas the historic bond assure publicity dropped 37% to R350 million.
“The balance of our external debt will be repaid with the proceeds from the sale of Trident Steel, which will create additional liquidity in our business,” mentioned Flanagan.
“We are satisfied with our performance this year and look forward to continuing on our upward growth trajectory, while remaining alert to the risks and opportunities in our external environment.”
Listen: CFO Adrian McCarthy and Fifi Peters focus on Aveng’s annual outcomes
Analyst’s take
Rowan Goeller, an analyst at Chronux Research, mentioned it seems like Aveng “is emerging from the trenches” and beginning to function in a reasonably normalised atmosphere for a development firm.
He mentioned McConnell Dowell is beginning to ship respectable revenues and earnings and the order ebook is wanting pretty robust, whereas Moolmans is regular and now on the level the place it’s reinvesting in fleet.
“The core enterprise[es] of McConnell Dowell and Moolmans look regular and searching for growth within the order ebook going ahead.
“This means Aveng might be coming through a couple of rough years, with the core businesses starting to show growth and stability,” says Goeller.
“Like Murray & Roberts, Aveng has an enormous order ebook in Australasia by McConnell Dowell and the execution of that must be worthwhile.
“However, if you look at McConnell Dowell’s track record over a couple of years, its execution has been good.”
Shares in Aveng declined 4.44% on Tuesday to shut at R16.15.
