Aveng Limited (Aveng) has announced its trading statement for the year ended 30 June 2016. Also announced today are agreements for the monetisation of four of its major infrastructure investments for a cash consideration of R860 million; and the sale of its Steeledale business to Kutana, a black women-owned investment group.
Kobus Verster, Aveng CEO and Albertinah Kekana, CEO of Royal Bafokeng Holdings.
Trading Statement
Headline loss per share (HEPS loss) for the 12 months ended 30 June 2016 will be between 45% and 55% better than the comparative period. The HEPS loss will be between 65 and 94 cents per share, compared to 144,3)cents per share in 2015, while the headline loss for the year will be between R260-million and R318-million, compared to R578-million in 2015.
The basic loss per share (EPS loss) will be between 75% and 85% better than the comparative period. The EPS loss will be between 17 and 29 cents per share, compared to 114,8 cents per share in 2015, with basic loss in earnings expected to be between R69-million and R115-million for the year, compared to R460-million in 2015.
This result is a material improvement on the prior year and is underpinned by:
- an improved financial performance from Aveng Grinaker-LTA on completion of loss-making and non-contributing contracts, an improvement in the ratio of contracts operating at tendered margins, strong performance in the building business, the resolution of some major commercial claims and a further reduction in fixed operating expenses
- realisation of cost savings initiatives previously implemented throughout the Group
- improved financial performance from Aveng Steel in the second half of the year
- fair value gains on the infrastructure investments though partially offset by:
- restructuring expenses incurred to further right-size the Group’s overhead structure in response to market conditions
- underperformance on certain contracts in McConnell Dowell
- additional expenses on a problematic water contract in Aveng Water
- contract cancellations and activity reductions in Aveng Mining
- Continuing difficult trading conditions in most of the markets in which the Group operates.
The basic loss for the year includes the profit on sale of the South African property portfolio of R577-million in the first half of the year, partially offset by the impairment of certain steel assets recognised in the second half of the year.
Proposed monetisation of the equity interests and loans held in four major infrastructure investments to Royal Bafokeng Holdings
Aveng has entered into a binding agreement with RBH who will acquire Aveng’s equity interests and loan in the following investments, for a cash consideration of R860 million:
- The 138MW Gouda wind farm, one of the largest wind farms in the Western Cape on which 46 wind turbines are erected.
- Imvelo Concession Company, which is the holder of a 27-year concession to build, operate and maintain the Department of Environmental Affairs’ office campus in Tshwane.
- N3 Toll Concessions, which entered into a 30-year concession agreement to design, construct, finance, operate and maintain the N3 toll road between the Cedara Interchange in KwaZulu-Natal to the Heidelberg South interchange in Gauteng.
- The 74MW Sishen Solar Photovoltaic Plant located in the municipality of Dibeng in the Northern Cape.
These sales are subject to the normal and customary terms and conditions, including the fulfilment of certain conditions precedent. The effective date is estimated to be on or about 31 October 2016.
Kobus Verster, Aveng CEO, said: “These investments have reached an appropriate maturity where we can transfer them to a strong investment company and realise value for the Group. Aveng Capital Partners will continue to pursue project development opportunities for the Group as our investment and structured financing arm.”
Albertinah Kekana, Royal Bafokeng Holdings CEO, commented: “This proposed agreement and its focus on renewable energy, property and road infrastructure is in line with our diversification strategy. As a long term investor, we are pleased to be partnering with Aveng Capital Partners, the investment and structured financing arm of Aveng, which has a very credible track record in originating, developing, structuring and investing in general infrastructure, power and real estate projects in South Africa. This proposed deal represents our long term investment approach and our commitment to the South African growth story.”
Proposed disposal of 70% interest in Aveng's steel reinforcing and mesh business
Aveng has reached an agreement with Kutana to acquire its steel reinforcing and mesh business (Steeledale) in terms of a phased exit strategy.
From the effective transaction date, which is estimated to be on or about 1 November 2016, Kutana will acquire 70% of the Steeledale business. Aveng can elect to sell the remaining 30% at any time after three years. The sale price is determined by way of a formula applicable at the effective date and the purchase consideration is expected to be approximately R252-million, of which between R93-million and R123-million will be paid in cash and the remainder paid on a deferred basis.
“The sale of 70% of Aveng Steeledale is in line with our medium term strategy to divest from steel and improve the Group’s returns. Kutana, as a black women-owned investment group, will improve market access and position the Steeledale business for growth in a difficult and competitive market environment”, said Verster.
Thoko Mokgosi-Mwantembe, CEO of Kutana, commented: “The Steeledale acquisition forms a cornerstone of our steel and construction business strategy. With our experience and focus, we are uniquely positioned to drive the growth of the business in South Africa and we look forward to creating significant value for all our stakeholders. Empowerment of the people of South Africa, in particular the communities in which we operate, is at the heart of the Kutana philosophy. The Steeledale acquisition is further testament to this and we will seek to create significant opportunities for our employees, partners and communities through this acquisition.”
This transaction is subject to the normal and customary terms and conditions, including the fulfilment of certain conditions precedent.
Conclusion
“I am pleased that both these transactions have been implemented in line with our strategy and previous announcements. In addition to realising value, we have also established partnerships with two exceptional empowered companies and I look forward to forging positive relationships,” concluded Verster.
Aveng is still in negotiations relating to the sale of its Aveng Trident Steel and Aveng Steel Fabrication business units, and the introduction of a B-BBEE partner to Aveng Grinaker-LTA. Further information will be announced in due course.
