Construction and engineering group Aveng has described the financial year ended June 30 as one of transition, characterised by a normalisation of operating activities as the group emerged from the global Covid-19 pandemic.

Highlights for the year included the rapid growth of McConnell Dowell as revenue, work-in-hand and people numbers grew; and the awarding of new contracts at Moolmans and the related investment in, delivery and commissioning of heavy mining equipment.

Both McConnell Dowell and Moolmans invested in systems in the areas of new business and human capital management.

The group continued its journey to develop both enterprise risk management and environmental, social and governance frameworks.

The sale of Trident Steel and settlement of the legacy term debt brought the 2018 restructuring strategy to a conclusion.

New financing facilities were arranged in support of the investment in new equipment and the partial funding of a project guarantee following its encashment, together with new general banking facilities for the South African operations.

Aveng says these activities provide the foundation for a focused business and balance sheet as it builds for the future.

Aveng grew its continuing operations revenue by 28% in the financial year under review, but delivered a “disappointing” operational performance.

The group incurred a considerable operating loss following substantial losses in the South East Asia business unit of McConnell Dowell, primarily from the Batangas liquified natural gas (BLNG) terminal project.

Both McConnell Dowell and the group reported operating losses as a result.

An operational underperformance at Moolmans further contributed to the operating loss.

The group’s revenue from continuing operations increased by 28% to R28.9-billion.

McConnell Dowell recorded revenue growth from R19-billion to R26-billion, which makes up 90% of revenue from continuing operations.

The group’s operating loss from continuing operations amounted to R1.06-billion, compared with earnings of R360-million in the prior financial year.

Aveng incurred a headline loss of R950-million, compared with headline earnings of R308-million reported for the 2022 financial year.

Following the disappointing results in McConnell Dowell, Aveng conducted a review of the BLNG project and a broader portfolio of current projects.

This led to the design and implementation of improved operational standards and governance procedures for tenders and projects at McConnell Dowell.

Aveng has delivered on its strategy announced in February 2018 to simplify its business, de-risk its balance sheet and reduce its debt. The strategy required Aveng to dispose of noncore assets and repay its debt to allow the group to focus on the core assets of McConnell Dowell and Moolmans.

Concluding the implementation of the Trident Steel disposal transaction enabled Aveng to continue its journey to a sustainable capital structure by fully extinguishing its South African legacy debt of R478-million and its short-term trade finance facility of R450-million.

With Trident Steel being a working capital-intensive business, the disposal allowed Aveng to further de-risk its balance sheet by terminating over R500-million in ancillary trade finance facilities including foreign exchange, promissory notes and letter of credit facilities.

The company continued to de-risk the balance sheet through the reduction of the South African guarantee exposure from R3.8-billion in 2018 to R82-million as at June 30.

Also, Aveng says it continues to settle major litigation, historical claims and contingent liabilities.

McConnell Dowell continued to win work within its areas of specialist disciplines. The business won R38-billion in new work and grew work-in-hand by 40%, from R27.8-billion the previous year to R44.2-billion. McConnell Dowell has secured 100% of its full-year 2024 planned revenue.

Moolmans grew its work-in-hand considerably to R8-billion after winning R9.4-billion of new work, including a new five-year contract at Tshipi é Ntle. Moolmans has secured 93% of its planned full-year 2024 revenue.

The total group work-in-hand at June 30 was R52.2-billion, representing a R21.4-billion increase.

OUTLOOK
Aveng posits that it is positioned and equipped to restore itself to sustainable, profitable growth.

The McConnell Dowell and Moolmans businesses are expected to return to profitability and generate positive operational cash flow. The group says it enters the 2024 financial year in a strong position, with combined work-in-hand of R52.2-billion. This supports 100% of next year’s expected revenue of R32-billion.

Moolmans’ growth agenda continues to be underpinned by investment in heavy mining equipment, people and systems. The current work-in-hand provides a solid revenue platform, with 93% of planned revenue for full-year 2024 secured.

Key areas of focus are to improve operational performance and cash generation. The continued investment in new equipment will support its strategy of selecting and entering into long-term and commercially viable contracts.

Moolmans’ total visible pipeline amounts to R65-billion, with R47-million worth of tenders in submission and awaiting adjudication.